The National Environmental Policy Act: When Is A SEIS Just Not Enough?

Posted on February 25, 2011 by Thomas M. Hnasko

The Los Alamos Study Group (the “Study Group”) is presently challenging the United States Department of Energy (“DOE”) and the National Nuclear Security Administration’s (“NNSA”) efforts to construct the new Chemistry and Metallurgy Research Replacement Nuclear Facility (“CMRR-NF”) at Los Alamos, New Mexico.


The Study Group’s complaint, in federal district court in Albuquerque, asserts that the project has changed so dramatically that an eight-year old environmental impact statement (“EIS”) does not begin to adequately analyze the environmental impacts of the present iteration of the CMRR-NF, and that defendants’ offer to conduct a supplemental environmental impact statement (“SEIS”) is merely a fait accompli to continue with the detailed planning and initial construction of the massive venture.


In considering the original Nuclear Facility, the federal defendants issued an EIS in 2003, and followed it with a Record of Decision (“ROD”) in 2004. The 2003 EIS addressed a Nuclear Facility to be built no deeper than 50-75 feet below grade. In the years that followed, however, seismic conditions underlying Los Alamos became better understood, and the federal defendants were faced with a project that arguably did not take into account those conditions. There was no discussion in the 2003 EIS of deeper excavation and no reference to a layer of volcanic ash known to underlie the site that would greatly complicate plans to construct at a greater depth, or meet then-known seismic safety criteria. The ROD stated that: “[B]ased on the CMRR EIS, the environmental impacts of the preferred alternative” (built 50 feet or less deep) would be “minimal” and “small.”
 

Moreover, since 2004, the project has seen further fundamental changes. The original budget for the Nuclear Facility was estimated at $350-$500 million. In 2003, the estimate, as reported to Congress, was $600 million. The EIS stated that construction would be completed in 2009; now, it is estimated to conclude in 2022, at a cost approaching $6 billion.


In 2003, NNSA reported that the Nuclear Facility would have 60,000 square feet of Hazard Category 2 space within 200,000 square feet of gross area. The CMRR-NF has now changed from a structure to be built to a depth of 50 feet, to a structure requiring an excavation to 125 feet, with the bottom 50-60 feet of the hole filled with concrete. As a result, the total volume of excavation for the CMRR-NF has increased from about 167,000 cubic yards in 2003, to 579,000-704,000 cubic yards in 2010, a three-to-four fold increase in construction equipment, spoilage, and disposal needs. The volume of soil now remaining to be excavated has increased six-fold.


Additionally, changes in the basic concept of the Nuclear Facility have expanded to include the introduction of the so-called “hotel concept” that would accommodate various unknown future missions, but would require large open floor areas and significant increases in concrete and steel. The concrete now needed is 371,000 cubic yards, up from 3,194 cubic yards. This is more concrete than was used for the Big-I Interchange in Albuquerque, or for the Elephant Butte Dam in southern New Mexico. The steel needed is now 18,539 tons, up from 242 tons. That is roughly the equivalent of the Eifel Tower. In short, the Nuclear Facility dwarfs the Manhattan Project and would be the largest construction project in the history of the State of New Mexico.


The Los Alamos Study Group case is one of first impression, as it is the first to contest the federal defendants’ decision to perform a SEIS as opposed to a new EIS altogether. Unlike a SEIS, an EIS must consider all available alternatives, including refurbishment of existing, under-utilized buildings at Los Alamos, and any other alternative besides the construction of the present iteration of the $6 billion CMRR-NF. Many of those alternatives, rejected in the original 2004 Record of Decision, may now be viable given the significant cost increases in the present version of the Nuclear Facility.


The federal defendants have filed a motion to dismiss based on prudential mootness and other grounds. All pleadings and other filings in the case may be obtained on the Study Group’s website.

Liability Under State Law After BNSF

Posted on February 23, 2011 by William Hyatt

As we all know by now, in Burlington Northern and Sante Fe Railway Co. v. United States, decided in May, 2009 (BNSF I), the Supreme Court surprised us yet again by interpreting CERCLA differently than the lower courts and Superfund practitioners had come to understand the statute to mean. The Court held (a) that “arranger” liability under Section 107(a)(3) of CERCLA is triggered only if there is an intent to dispose of hazardous substances, and (b) that joint and several liability under CERCLA may be avoided if there is a reasonable basis for apportioning harm among the “covered persons,” affirming divisibility on facts that most practitioners would not have expected to prevent joint and several liability. Since then, the lower courts have been wrestling with the application of these rulings under CERCLA. Meanwhile, however, the state courts have begun to address these issues under state law counterparts to CERCLA. Recently, the Supreme Court of Montana did just that. State of Montana v. BNSF Railway Co. (BNSF II)


Montana, like many other states, has its own version of CERCLA, called the Comprehensive Environmental Cleanup and Responsibility Act (“CECRA”). CECRA has its own categories of liable parties, including a broad class of “arrangers,” but unlike CERCLA, explicitly provides for joint and several liability. These differences result in greater potential exposure for defendants in hazardous waste cases.
 

BNSF II involved three adjoining properties north of Kalispell, MT, all of which had been listed as state Superfund sites. One of the sites, called the Reliance site, was a former crude oil refinery. BNSF transported petroleum products into and out of the Reliance site, using railroad cars that sometimes leaked badly. The trial court found that “[r]efinery workers occasionally ‘got a soaking’ when unloading crude oil” from BNSF railcars and that “when shipments of crude oil arrived and the holding tanks were full, the crude oil was dumped onto the ground in pools on BNSF property in the area.” The trial court found that BNSF “had been involved in dumping petroleum products onto the surface of the earth.”


The Montana Department of Environmental Quality (DEQ) sued seven parties, six of whom settled, with the result that a Final Unified Abatement Order was entered, holding BNSF jointly and severally liable for the Reliance site, as an “arranger” under CECRA, even though the trial court made no finding that BNSF intended to release a hazardous substance at the site.


Arranger Liability


Like CERCLA, CECRA contains no definition of an “arranger.” Instead, Section 75-10-715(1)(c) of CECRA includes among the list of liable parties “a person who generated, possessed, or was otherwise responsible for a hazardous or deleterious substance and who, by contract, agreement, or otherwise, arranged for disposal or treatment of the substance or arranged with a transporter for transport of the substance for disposal or treatment,” language that differs somewhat from Section 107(a)(3) of CERCLA.


The trial court held BNSF liable as an “arranger” under CECRA because of its “involvement” with Reliance in the dumping of petroleum on the Reliance site. The trial court relied on the Ninth Circuit decision in BNSF I, adopting a broad form of “arranger” liability, and refused to reconsider its ruling when the Ninth Circuit was reversed by the Supreme Court.


The Montana Supreme Court began its review of the trial court decision by noting that Section 114(a) of CERCLA provides that nothing prevents a State from imposing additional liability beyond those imposed by CERCLA. The Court then held that “an entity need not specifically ‘intend’ to dispose of a hazardous substance for imposition of ‘arranger’ liability ” It was enough that BNSF “possessed or was otherwise responsible for the materials it shipped” and that “[a] necessary and foreseeable consequence of shipping the material was unloading the material.” Since BNSF employees moved full tank cars of crude oil to the Reliance site so Reliance employees could dump the crude oil on the ground, “BNSF participated in the unloading process which resulted in the release of the materials it possessed.” In holding that the trial court did not err in holding BNSF liable as an “arranger,” the Court set a low bar for “arranger” liability under CECRA.


Apportionment


Unlike CERCLA, which is silent as to whether or not “covered persons” are jointly and severally liable under the statute, CECRA provides, in relevant part, that “notwithstanding any other provision of law,*** the following persons are jointly and severally liable for a release or threatened release of a hazardous or deleterious substance***” .


Notwithstanding this statutory language, the trial court entered a pretrial order that once the state proved that BNSF is a liable party, “BNSF must come forward with evidence to show it was only responsible for a portion of the contamination at the site to avoid the possibility of joint and several liability for all the surface contamination.” When BNSF failed to make such a showing, the trial court held BNSF jointly and severally liable. Because BNSF had failed to prove the factual basis for apportionment, the Supreme Court declined to rule on whether apportionment would ever be possible under the statutory language. Thus, BNSF II leaves unanswered the question of whether liability can ever be apportioned under a statute that explicitly provides for joint and several liability, no matter how distinct the harms may have been.


Conclusion


As the United States Supreme Court continues to read CERCLA narrowly, state statutes, like CECRA, may become more important in the development of hazardous waste law. BNSF II may very well represent the beginning of a trend.

NEW STORMWATER PERMIT CAN TRAP UNWARY LENDERS

Posted on February 22, 2011 by Richard Horder

Today, a drive through Georgia will present dozens of half-developed abandoned residential subdivisions, many having been graded and with various degrees of erosion control in place. However, the erosion control devices have not been maintained and are in disrepair. Such protection measures, if they even exist, fail to prevent Georgia red clay and other soils from rushing down the streets, causing damage to the proposed development as well as to neighboring down-gradient properties, and running off into nearby streams causing elevated turbidity and other problems.

Both federal and state environmental agencies are struggling to address this problem and have begun to develop regulations and guidelines to assign responsibility for reconstruction and continued maintenance of the soil and erosion control devices. Under a standard stormwater regime such as Georgia’s, prior to land disturbance activities, a developer must submit a Notice of Intent (NOI) to discharge stormwater under the state’s General Permit. Such permit is required for land disturbance of greater than one acre due to construction activities. Failure to obtain coverage under the General Permit or violation of the requirements of the Permit may result in daily fines. Typically, the developer is responsible for any violations or resulting fines. However, due to current economic conditions, many developers have abandoned their projects and are nowhere to be found, or have filed bankruptcy.

Thus, lenders are finding themselves left with loans secured by these properties and if they hope to recover on the collateral, they will have to confront the problems associated with them. The standard Phase I assessment does not consider stormwater compliance. Yet, many lenders foreclose on such properties without considering the consequences. The Clean Water Act under which the General Permit is issued does not have a secured creditor exemption and therefore, after foreclosure, lenders may be responsible as either an owner or operator. Lenders can then be liable for any permit violations and fines, which can range from hundreds to thousands of dollars. In addition, lenders may face the cost of maintaining continued compliance with soil and erosion control requirements and claims from down-stream property owners. Perhaps most importantly, savvy buyers will not relieve lenders of these problems, resulting in steep discounts at sale that may over-penalize relative to the real risk.
 

Georgia is in the lead among states in taking specific steps to impose stormwater liability upon lenders. In 2008, Georgia EPD issued new General Permits for Storm Water Discharges Associated with Construction Activity for Stand Alone Projects, Infrastructure Projects, and Common Developments. Under these new General Permits, a lender who acquires title to the construction site is directed to file a new NOI either seven days before beginning work at the construction site or thirty days from acquiring legal title to the property, whether the lender intends to carry out any land disturbance construction activities at the property or not. Under the permit and related regulations, EPD’s position is that a foreclosing lender essentially steps into the shoes of the former Permitee, assumes that Permitee’s obligations and must continue to comply with the General Permit. Obviously, this has serious implications for lenders, which are all too often discovered after it is too late.


However, it can be argued that these provisions of the new Permits stretch the boundaries of EPD’s authority. A defense to this broad assertion of liability for lenders lie in the fact that the lender (which may have to hold the property for years) does not intend to conduct any “land disturbance of one acre or more” on the property. It is that activity which would make the provisions of the General Permit applicable. Further, the General Permit does not specifically impose such obligation on a successor purchaser of the property who does not intend to carry out land disturbance activity. Why, then, should a foreclosing lender be treated differently than any other entity in Georgia solely because it has foreclosed on a property to protect its financial investment. The validity of this new provision has not been tested in court, but arguably would be subject to legal challenge.


Obviously, a lender who finds itself in this position would ideally undertake appropriate due diligence before foreclosing. The lender should determine what the actual status of the property is and whether foreclosing, and stepping into the shoes of the Permitee as EPD asserts, is worth the risk. For low value properties it may be better for the lender not to foreclose but instead to implement other strategies to realize on the collateral like note sales. On the other hand, if the lender does foreclose it certainly should take appropriate steps to protect itself from a number of risks, particularly claims from downstream property owners. Regardless of whether taking title makes sense, it may also be appropriate to take certain actions to stabilize the property, which could have the twin benefits of defusing regulatory scrutiny and removing a topic for negotiation with potential purchaser. In any event, following the General Permit provisions by filing an NOI and voluntarily stepping into the shoes of the previous Permitee may not be the wisest decision. A lender who does not take steps to preserve the ability to assert its defenses may be left holding a property for many years before it can be sold, and having to maintain soil and erosion control installations and continually monitor such devices for a significant period of time at a substantial cost. At a minimum, appropriate analysis needs to take place prior to foreclosure regarding which approach to use for recovery against the collateral in order for a lender to assess its risk and determine the best course of action.

Secretary Salazar Announces New Guidance for Development of Renewable Energy on Public Lands

Posted on February 18, 2011 by Paul D. Phillips

On February 8, 2011, Secretary of the Interior Ken Salazar announced a number of long-anticipated initiatives designed to address development of renewable energy on public lands. The draft guidance from the United States Fish and Wildlife Service (“FWS”) and the final guidance from the Bureau of Land Management (“BLM”) provide direction to the agencies and industry on navigating the many permitting and compliance requirements faced by solar and wind energy developers. These guidance documents will have significant implications for renewable energy development on public lands throughout the nation.

 

The FWS released two draft guidance documents for public comment. The first, “Draft Land-Based Wind Energy Guidelines,” is designed to provide wind energy developers with information to consider in selecting sites for wind energy facilities to avoid and minimize negative effects to fish, wildlife, plants, and their habitats. Click here to view these guidelines on the FWS website. The second, “Draft Eagle Conservation Plan Guidance,” explains the FWS approach to issuing programmatic eagle “take” permits under the Bald and Golden Eagle Protection Act (“BGEPA”), and provides guidance on conservation practices and adaptive management recommended to facilitate issuance of these permits and compliance with BGEPA. Click here to view this guidance on the FWS website. Both draft guidance documents are subject to public comment for 90 days following publication in the Federal Register.

 

Both the Eagle Conservation Plan Guidance and the Land-Based Wind Energy Guidelines create significant new requirements for wind energy developers planning wind facilities on public lands. The new guidance calls for increased consultation with the FWS and greater planning to avoid and minimize impacts to fish, wildlife, plants, and their habitats at all stages of wind energy development and operation. Wind energy developers, renewable energy proponents, environmental groups and others concerned about the potential consequences of the new guidance, both on renewable energy development and the environment, should carefully review and consider commenting on these significant proposals. Click here for a more detailed summary of both FWS draft guidance documents.

 

In addition, BLM issued three final policy memoranda to provide guidance to field managers in evaluating, screening, and processing applications for utility-scale solar and wind energy projects on BLM-managed lands. Click here to view these memoranda on the Bureau of Land Management website. Instruction Memorandum No. 2011-059, “National Environmental Policy Act Compliance for Utility-Scale Renewable Energy Right-of-Way Authorizations,” reiterates and clarifies existing BLM National Environmental Policy Act (“NEPA”) policy for analyzing the potential environmental impacts of utility-scale renewable energy projects. Instruction Memorandum No. 2011-60, “Solar and Wind Energy Applications – Due Diligence,” provides updated guidance on the due diligence requirements of right-of-way applicants for solar and wind energy development projects on BLM-managed lands. Finally, Instruction Memorandum No. 2011-061, “Solar and Wind Energy Applications – Pre-Application and Screening,” provides updated guidance on the pre-application and screening processes BLM will employ in review of right-of-way applications for solar and wind energy development projects on BLM-managed lands. These policies – developed in response to “lessons learned” from last year’s fast-track renewable energy initiatives – are not subject to review and comment.

 

Paul Phillips (with full credit to Sandi Snodgrass & Andy Irvine) all of Holland & Hart LLP.

Fight Over Bill to Bar EPA Regulation of GHG to Slow 2011 Approval of Appropriations Bill?

Posted on February 18, 2011 by Michael Hockley

On February 2, 2011, representatives Fred Upton (R–MI) and Ed Whitfield (R–KY) released Discussion Draft Bill, H.R.____ “Energy Tax Prevention Act of 2011” (the Bill) which would amend the Clean Air Act to prohibit EPA from regulating greenhouse gas (GHG) emissions. In general, the Bill prohibits EPA from taking action to regulate GHG emissions to address climate change and would repeal certain rules and previous EPA actions, including EPA’s December 15, 2009 GHG endangerment findings under the Clean Air Act, the Prevention of Significant Deterioration (PSD) GHG Tailoring Rule, the authority to issue PSD permits containing GHG emissions limitations, or any other federal action applying a stationary source permitting requirement for GHG emission standards relating to climate change concerns.


The House Energy and Commerce Committee’s Subcommittee on Energy and Power quickly moved the Draft Discussion Bill to a hearing on February 9. The testimony included many supporters of the Bill, but predictably, EPA administrator Jackson testified in opposition.
In her testimony, Administrator Jackson came out swinging, stating that the Bill is part of an effort by Congress “to delay, weaken, or eliminate Clean Air Act protections of the American public.” Moreover, she pointed out that in passing this bill, politicians would be overruling scientists on a “scientific question” by repealing the GHG endangerment finding that GHGs contribute to endangerment of American’s health and welfare. Although the Republicans may have sufficient votes to pass the Bill out of the House, it is clear from the Administrator’s reaction that if presented to the President for signature, it will be vetoed.


This veto likelihood raises the specter of whether the GOP will attempt to include the Bill or similar prohibitions against regulation of GHG emissions as a part of the pending 2011 budget authorization bill. If a budget authorization bill is not passed or extended by March 4, 2011, all federal funding will be cut off, and the federal government will be forced to close for business until an authorization bill is signed. Including a provision prohibiting EPA from regulating GHG emissions would force the President’s hand on whether to sign the bill and keep the government’s doors open, or veto it and shut down the government.


In a February 11, 2011 interview, representative Mike Simpson (R–Idaho), the head of the House Interior and Environment Appropriations Subcommittee, said that he doubts whether spending legislation would be held up if it does not include language preventing EPA regulation of GHGs. E&E News PM (02/11/2011). Nevertheless, other Republican colleagues, including some freshmen, may offer amendments to insert such prohibitions when the appropriations bill comes to the House floor because including provision prohibiting regulation of GHG emissions to the appropriations bill could reduce the likelihood of a Presidential veto. Id.


For now, it seems more likely that any bill limiting EPA’s authority to regulate GHG emissions will move through the normal committee process responsible for environmental legislation. Whatever the result, however, the fight between the GOP to limit GHG regulation and the current administration’s efforts to regulate GHGs promises to be a no holds barred donnybrook.
 

EPA THREATENS TO TAKEOVER PERMITTING

Posted on February 18, 2011 by Fournier J. Gale, III

Last month, the Alabama Department of Environmental Management (“ADEM”) gained the Environmental Protection Agency’s (“EPA”) long-awaited approval of its proposed stormwater pollution regulations. EPA’s approval ends the looming threat it would take over Alabama’s stormwater permitting in the event ADEM did not cure certain deficiencies contained in previous draft regulations. EPA’s primary concern with ADEM’s previous draft regulations was that the regulations did not make clear exactly what obligations a local government had with respect to stormwater management. This issue has sparked intense debate from various groups over the last several months. One constituency, primarily builders and developers, argued that increasing local governments’ role in stormwater pollution prevention is unnecessary and wholly duplicative in light of ADEM’s existing regulations. On the other hand, various environmental groups contended that ADEM is simply ill-equipped to handle monitoring and enforcement responsibilities at the local level. Under the proposed regulations recently accepted by EPA, local governments must adopt local regulations to control runoff, conduct site inspections, and must have enforcement authority. EPA’s recent approval settles this dispute for the time being, but just as importantly, ends the threat that it would take over stormwater permitting in Alabama. It should be noted that the proposed regulations will not become final until ADEM has completed its review of and responded to the comments received during the rule making process.

 

Although EPA’s threat to take over Alabama’s permitting could be viewed as a strategic maneuver designed to hasten ADEM’s action, such a threat should not be taken lightly given EPA’s recent actions in Texas. EPA issued a series of rules and regulations that would bring greenhouse gases under the permitting programs of the Clean Air Act beginning January 2, 2011. To bring about these changes, EPA asked each state to revise and submit new state implementation plans to account for greenhouse gases. Several states publicly voiced their concern and disagreement with the rulemakings, but only Texas persisted in completely refusing to cooperate with EPA. After Texas failed to meet EPA’s deadline for submitting a revised plan, EPA sent Texas a letter stating that it would proceed with taking over Texas’s air permitting program. In response, Texas filed two petitions asking the Fifth Circuit Court of Appeals and the U.S. Circuit Court of Appeals for the District of Columbia to stay the EPA takeover. On December, 25, 2010, the Fifth Circuit denied Texas’s request for an immediate stay. While the D.C. Circuit issued a short-lived administrative stay, the court lifted the stay on January 12, 2011, determining that Texas had failed to meet “the stringent standards required for a stay pending court review.” While these rulings represent just one battle in the war between EPA and Texas, it remains to be seen how they will shape Texas’s strategy moving forward. Regardless of the ultimate outcome in this litigation, one thing is clear – the current EPA has demonstrated that it is not adverse to stepping in to take over state environmental regulatory programs in circumstances where EPA determines that the state agency is either unwilling or unable to implement federal law.

 

HOW MUCH MORE ARE YOU WILLING TO PAY FOR ELECTRICITY TO SAVE FISH FROM COOLING WATER INTAKE STRUCTURES?

Posted on February 17, 2011 by William Green

EPA MAY SOON BE ASKING YOU!

 

 

On January 21, 2011, EPA published a final information collection request (ICR) as the first step in assessing the benefits of imposing what industry fears to be severe and costly measures to control fish being crushed against cooling water intake screens (impingement) or trapped in the cooling water as it flows through an electrical facility’s cooling water system (entrainment). 76 Fed. Reg. 3883. In early life stages, many fish that support commercial and sport fisheries are small enough to pass through screens installed to prevent the entrainment of larger individuals. The ultimate impact upon fish stocks, caused by the loss of juvenile and larval forms of many fish species, may be incalculable.

BACKGROUND
 

Long prior to the Clean Water Act and the existence of EPA, much of the nation’s energy needs was met through waterfront electrical facilities with large pipes and pumping systems referred to as cooling water intake structures (CWIS). The 1972 amendments to the Federal Water Pollution Control Act addressed the issues of impingement and entrainment with a single sentence requiring that “the location, design, construction and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impacts.” 33 U.S.C. § 1326(b); CWA § 316§(b). When EPA or an approved state issued a point source discharge permit under the National Pollutant Discharge Elimination System (NPDES), the permit writer would apply best professional judgment (BPJ) to assure that the CWIS of an electrical facility met that narrative standard in § 316(b) of the Clean Water Act. Some facilities were allowed to offset the presumed impacts upon fish populations with programs designed to restore fisheries such as constructing hatcheries and stocking juvenile sport fish species into nearby waters. Always at issue was the fundamental tension between growing energy needs and the potential impact the CWIS would have upon fish populations.
 

In 1993, environmental interests filed a citizen suit alleging that EPA had violated the Clean Water Act by failing issue regulations implementing § 316(b). Cronin, et. al. v. Reilly, 93 Civ. 0314 (S.D.N.Y 1993). EPA resolved that case by consent decree (and amendments) which ultimately allowed EPA to perform three phases of rulemaking: Phase I addressing new facilities, Phase II addressing existing facilities, and Phase III which applied to existing facilities not captured within the scope of Phase II. EPA’s Phase I and Phase II rules were challenged by Riverkeeper, Inc., and others, resulting in the Riverkeeper I decision of February 2004 and Riverkeeper II decided in January of 2007. Riverkeeper, Inc. v. EPA, 358 F.3d 174 (2d Cir. 2004); Riverkeeper, Inc. v. EPA, 475 F.3d 83 (2d Cir. 2007).

EPA’s Phase I rule, for the most part, survived judicial challenge. A provision that would continue to allow restoration measures to offset potential losses was struck down as inconsistent with the Clean Water Act. Very little of the Phase II rule survived the Riverkeeper II litigation, with the court remanding the rule back to EPA for another try. A key issue in that case, whether EPA was precluded from weighing environmental benefit against costs in implementing § 316(b), was taken to the United States Supreme Court. On April 1, 2009, a majority of the Court ruled that § 316(b) of the Clean Water Act does not preclude EPA from comparing costs to environmental benefit in determining the best technology available for minimizing adverse environmental impact from cooling water intake structures. Entergy, Inc. v. Riverkeeper, Inc., 129 S.Ct. 1498 (2009).

To date, EPA has not issued its new Phase II rule. In November of 2010, EPA executed a settlement agreement with parties to the original 1993 matter (“Cronin Plaintiffs”) and the Riverkeeper II parties dismissing the cases so long as EPA proposes new Phase II regulations by March 14, 2011, and then issues its final rule by July 27, 2012.

QUESTIONNAIRES


The ICR published January 21, 2011 will ask individuals from U. S. households whether or not they would support policies that would increase their cost of living “in exchange for specified multi-attribute changes” in (a) impingement and entrainment losses, (b) commercial fish populations, (c) long-term populations of all fish, and (d) condition of aquatic ecosystems. EPA estimates that is will poll 9,533 respondents by telephone while another 2,288 will be mailed questionnaires. EPA asserts that statistical analysis will result an estimate of Willingness-To-Pay (WTP) “for the quantified environmental benefits of the 316(b) rulemaking.” In a nation of approximately 312 million individuals, EPA intends to poll less than 12,000 respondents. There is no guarantee that all of those who are asked will participate in EPA’s survey. How this information will translate as support for EPA’s Phase II rule remains to be seen. Another round of litigation come July 2012, when EPA issues its final rule, may be on the horizon. 
 

 

Written by: William Green and Winston Borkowski.

Are we willing to pay for environmental protection?

Posted on February 16, 2011 by Kenneth F. Gray

I am sure that the many supporters of greenhouse gas regulation are depressed at the apparent failure of a comprehensive climate change law at the federal level, and guess that many of them blame corporate America and “misguided” conservatives, based on my read of the popular press. Climate change legislation has carried a substantial price tag.

“If the American people only knew how bad it was and is likely to get, the public would be willing to pay a lot,” climate change advocates might object. “And they ‘got it’ in California, and rejected the proposed suspension of the 2006 Global Warming Solutions Act until the unemployment rate fell.”

But is it the state of the national economy – a temporary phenomenon -- or is it a reflection of lack of national consensus that the costs of a climate change law are currently perceived as unbearable under most circumstances? How much are we willing to pay for environmental protection anyway?
 

Putting aside the very important questions of whether we have accurate information on risks and costs, we typically make personal decisions based on perceived risk -- and guess at costs. And we are able to do so as a society when we have consensus on those perceived risks and general cost estimates.

My view is that Americans decide to pay for environmental protection only when we are pretty confident it won’t adversely affect us economically and even then only when it is an apparent crisis. It is pretty clear there is no consensus we are in crisis over climate change, but there is a broader question on whether Americans are willing to pay costs for environmental protection even when the risks are generally acknowledged as real.

The major national environmental laws were passed when there was a national consensus that action was absolutely necessary. The Clean Air Act was adopted when air was visibly dirty and pollution inversions were not uncommon, the Clean Water Act when significant rivers were polluted or catching fire, and TSCA when PCBs were deemed an actionable threat. Costs were significant but bearable overall in the robust national economy, and there were large gains in pollution control obtainable even though the cost significantly impacted some businesses and industries. Climate change legislation has seemingly threatened significant cost increases for most consumers – you can even find blogs on it. Consumers happen to be voters, and (outside of California) until convinced there is a real problem and a solution they can afford, my guess is that national climate change legislation won’t get popular support. (The author hales from California, and therefore feels free to acknowledge that the state has only a passing similarity to, and relationship with, the other 49 states.)

What about requiring vehicle emissions testing and certifications of efficiency? Some states have such programs as required under the CAA, consistent with the fact that cost-effective air emission reductions are achieved, compared to the hammering local industry further to lower pollution. A number of states do not have vehicle emissions testing, and three states (including Florida and Minnesota) have discontinued testing. Maine tried a program years ago, but quickly abandoned it when consumers protested that they had to wait in lines, pay for testing, and in some cases got inconsistent results. No such legislation has been reproposed in the Pine Tree State. Ironically, many Mainers are proud of their (otherwise) stringent environmental laws.

Indoor radon gas has been widely recognized as a serious health issue by environmental professionals where it exists, but there is no comprehensive radon testing requirement, much less a remediation requirement. The risks are real, but how do you perceive a threat from an invisible, odorless gas?

Lead paint exposures have long been perceived as posing local but material risks for anyone living in housing stock of a certain age, given the historic use of lead paint and depending upon its condition. Most states don’t require testing or remediation or encapsulation of lead paint. Just a guess: it will cost some real money.

Watch the national environmental debate, and see if Americans are making decisions based on the condition of the family budget.
 

A New Twist on Potential to Emit

Posted on February 15, 2011 by Michael L. Hardy

Seasoned Clean Air Act lawyers have grappled with the application of the concept of "potential to emit" in permit applications and in other regulatory settings. In virtually every decade since the 1970's, there has been a significant judicial ruling, codified regulation or guidance document that attempts to elucidate the principles of "potential to emit" for purposes of permitting and enforcement.

A recent decision of the Court of Appeals of Ohio, Tenth Appellate District (which sits in Columbus, Ohio) undertook a review of the significant case and regulatory developments on the topic. State of Ohio ex rel Ohio Atty. Gen. v. The Shelly Holding Co, et. al., resulted from an appeal of a lengthy enforcement case over the alleged failure to secure the proper permits for asphalt plants. The concept of "potential to emit" played a significant role in the enforcement case at the trial court.

 

Ohio alleged that Shelly violated the air pollution laws at a number of its asphalt plants and portable generators by failing to obtain appropriate Title V "major source" permits before commencement of operations, among other things. Shelly, on the other hand, maintained that these plants were minor sources by reason of the restrictions Shelly voluntarily imposed on operations to keep emission levels below the regulatory triggers. After a lengthy bench trial leading to a record of over 2000 pages, the court found in favor of the State on 13 of 20 counts and assessed a civil penalty of $350,123.52 against Shelly. Nevertheless, Ohio appealed on several grounds, including the trial court's application of the "potential to emit" to the defendants' facilities.

According to Ohio, "potential to emit" requires a stationary source's potential emissions to be calculated on the basis of the source's maximum capacity to generate emissions – that is, worst case conditions 24 hours per day, 365 days per year, or 8,760 hours per year, unless there was a federally enforceable permit that imposed temporal or capacity limits on the operations. The trial court accepted Shelly's self-imposed limits, which it had placed in its permit applications, as effective limits for determining the "potential to emit" and rejected Ohio's insistence that federally enforceable limitations represent the only exception to the maximum design capacity as the basis for "potential to emit." Under Ohio's argument, "federally enforceable" limits as the only exception would arise through a permits issued through Title V notice and comment procedures.

The Court of Appeals reversed on the grounds that a source owner's voluntary restrictions are insufficient. While the restrictions need not be federally enforceable, they must be legally or practically enforceable by the state. Thus, they could arise from a duly granted permit to install or permit to operate under state law. The problem in this case is that Ohio's permit backlog meant there were periods of operation without formal permits to operate. But the Court of Appeals decided that "…an owner cannot be penalized for the Ohio EPA's failure" and delays. The appellate court remanded the case to the trial court to reconsider the scope of the penalties in light of its instructions. The state agency's delay in properly processing the state issued permits could affect the amount of penalties.

Another interesting issue arose from Shelly's failure to pass a stack test. The trial court accepted Shelly's argument that a stack test does not represent normal operating conditions, but rather is "snap test and does not relate to day-to-day operations, so that only the day of the (failed) stack test should constitute a violation and warrant a fine." Failing at high load conditions does not mean that it would fail at lower load levels. Rejecting the trial court's conclusion, however, the appellate court directed the trial court, in determining the number of days of violation, to presume that the violation continued until a subsequent stack test passed. Thus, the appellate court seems to disregard other ways, like engineering calculations, to show compliance during normal day-to-day operations.

Shelly has not sought to appeal this decision to the Ohio Supreme Court, but is currently preparing to do so.

Upcoming Federal Trade Commission Revised "Green Guides"

Posted on February 14, 2011 by Joseph Manko

The Federal Trade Commission (FTC) Act prohibits “unfair and deceptive acts or practices.” 15 U.S.C. § 45. In 16 CFR § 260.2, unfair and deceptive acts or practices are defined as being a representation, omission or practice that (1) is likely to mislead consumers acting reasonably under the circumstances and (2) is material to a consumer’s decision. In essence, the FTC evaluates marketing from the consumers’ perspective and in the words of its Chairman Jon Leibowitz: “What companies think green claims mean and what consumers really understand are sometimes two different things.”

In the environmental area such claims can attach to a product, package or service in its labeling, advertising, promotional materials or other forms of marketing or sales paraphernalia, in any medium, expressed or implied, and including words, symbols, logos, depictions, brand names, etc. To avoid being deceptive, there has to be a reasonable basis to substantiate a claim which often requires competent, reliable scientific evidence, often based on tests, analyses, research or studies.

The original Green Guides were issued in 1992, and were amended in 1996 and 1998. The FTC began its current review of the Guides in 2007, proposed revisions in October 2010 and closed the public comment period on December 10, 2010.

Although the proposed Green Guides are voluminous and people should refer to the proposal in the October 15 Federal Register, suffice to say that they now intend to cover not only the products and services within a building, but the proposed Guides, if adopted in their current form, would be interpreted to apply to buildings themselves, which was contrary to the former belief that product liability did not attach to buildings. According, in addition to concern for environmental disclosures, regulated by the Securities Exchange Commission, the FTC would now constitute a second regulatory review agency.
 

Transboundary Water Quality Disputes -- What Once Was Old Is New Again

Posted on February 11, 2011 by Allan Gates

There is nothing new about transboundary water quality disputes under the Clean Water Act. Introductory classes on environmental law commonly trace the history of Supreme Court decisions arising from Milwaukee’s battles with Illinois over sewer discharges into Lake Michigan, the challenge Vermonters’ raised against New York paper mill discharges into Lake Champlain, and Oklahoma’s objections to a permit EPA issued to a sewage treatment plant in Arkansas. Given the length of time that the Clean Water Act program has been in place and the large number of instances in which upstream discharges drain into and therefore arguably affect water quality in downstream states, one would expect that most of the relevant legal questions would be well-settled. Recently, however, transboundary water quality disputes have arisen with increasing frequency.


Coal bed methane development in Wyoming has given rise to disputes with Montana over salinity impacts in the Powder and Tongue Rivers. Efforts by the state of Washington to protect dissolved oxygen levels in Spokane Lake have prompted a dispute over Washington’s attempt to impose wasteload allocations that would limit nutrient discharges by upstream sources in Idaho. Oklahoma’s efforts to restore the Illinois River to pristine scenic river conditions have resulted in recurrent and steadily intensifying disputes with agricultural interests on both sides of the border and point sources located predominantly in the headwaters on the Arkansas side. EPA’s imposition of nutrient water quality standards in Florida could have direct effects on discharges originating in Georgia; and the agency’s showcase multi-state TMDL for the Chesapeake Bay has recently precipitated challenges by state and national agricultural interests. In what undoubtedly is the most dramatic transboundary claim under the Clean Water Act, environmental groups have filed a petition with EPA asking the Agency to impose nutrient water quality standards and adopt TMDLs for the main stem of the Mississippi River, all of its tributaries, and certain related coastal waters in the Gulf of Mexico.
 

These recent disputes have recurring themes that arise out of weaknesses or unresolved questions regarding the Clean Water Act program. The statute empowers each state to exercise sovereign independence in adopting water quality standards that apply within the state’s own borders (so long as minimum federal standards are met), but the statute does little to address or even give consideration to the interests of other states that may be directly affected by those standards. Transboundary disputes frequently involve situations in which the regulatory burdens fall disproportionately on interests in one state while the resulting environmental benefits are realized largely or entirely in another state, but the Clean Water Act does nothing to address questions of transboundary fairness. Transboundary disputes frequently involve regulatory decisions that have enormous financial and long term planning consequences, but the decisions are often based upon limited factual data, imperfect scientific analysis, and less than comprehensive computer modeling. The Clean Water Act offers no process for seeking to assure that the quality of the decision making will be commensurate with the gravity of the consequences at stake. Indeed, the program largely makes the magnitude of financial consequences simply irrelevant. Disparities between the magnitude of the consequences and the limited quality of analysis and data supporting the regulatory decision are particularly problematic when the regulatory decision is being made by one jurisdiction that has no political accountability to the other.


It is perhaps no surprise that most of the recent transboundary water quality disputes are arising out of efforts to regulate the discharge of nutrients. Nutrient pollution is the largest unresolved water quality issue nationally; and the adverse effects of excess nutrients frequently occur at locations far downstream from the original source. The fact that most of the current transboundary water quality disputes involve nutrient pollution probably makes the disputes even more difficult than normal to resolve. Nutrient pollution has no simple, universally accepted means of measurement. It is costly and time consuming to establish a clear causal link between a given discharge of nutrients and an observed adverse effect; and many of the most important sources of nutrient pollution are non-point sources which are beyond direct control under the Clean Water Act. Unfortunately, this appears to be a recipe for increased frustration and controversy.
Transboundary water quality disputes may not be a new phenomenon, but it does not appear that we are any closer to finding a good way to resolve them.
 

New Rapanos Guidance Coming--Third Time's the Charm?

Posted on February 10, 2011 by Rick Glick

On December 20, the Environmental Protection Agency and the U. S. Army Corps of Engineers submitted draft guidance to the Office of Management and Budget to determine when wetlands are subject to regulation under the Clean Water Act. This will be the third attempt to provide guidance on implementing the conflicting standards announced by a fractured Supreme Court in Rapanos v. United States.


In an opinion written by Justice Scalia, a plurality of the Court declared that Clean Water Act jurisdiction extended only to wetlands of a semi-permanent nature that abut open water. This is a test that many wetlands, previously thought to be jurisdictional, would fail to meet. A concurring opinion offered by Justice Kennedy announced a wholly different standard: A water or wetland is jurisdictional if there is a “significant nexus” between the wetlands and navigable waters, focusing on whether there is “a reasonable inference of ecological connection” between the two. The dissent written by Justice Stevens and joined by three others, finds both tests wanting and suggests that jurisdiction is present when either is met.
 

Agencies and courts have since strained to reconcile these opposing views. EPA and the Corps have attempted to provide guidance on when and how to apply each test, the first in June 2007 and the second in December 2008. Courts have dutifully tried to discern clarity in the Court’s opinions and have given the joint agency guidance Skidmore deference, meaning they use the guidance to the extent it is persuasive. Considerable uncertainty remains in determining when permits are needed in many cases, causing obvious problems for the development community.
 

The Obama Administration favors a legislative fix, but Clean Water Act reform seems unlikely just now . . . or during my lifetime. There have been a lot of cases decided since the 2008 guidance was released, so the new guidance perhaps will distill that experience and give us something useful to work with. OMB review can take up to 90 days, so look for the guidance no later than the end of March.

Hydraulic Fracturing: The Media Campaign and Federal Initiatives

Posted on February 9, 2011 by Pamela Giblin

The natural gas boom generated by advances in drilling technology making economic production of unconventional resources like shale gas possible has generated increasing public attention as environmental advocacy groups and the media continue to attack the process and point to hydraulic fracturing as the cause of everything from natural methane migration to earthquakes. These dramatic allegations take center stage in the documentary, Gasland, by director Josh Fox. With its recent academy award nomination, Gasland continues to push hydraulic fracturing issues into the national and international spotlight.


Hydraulic fracturing is an oil and gas production service that involves injecting a mixture — comprised primarily of water and sand — into a targeted geologic formation at pressures sufficient to create small fractures in the rock thousands of feet below ground. These fractures are held open by the sand or other “proppants” used in the fracturing fluid and allow the natural gas to more effectively flow out from the hard rock formation and into the wellbore. Small concentrations of chemical additives are used in fracturing fluids in enhance the fluid performance. Hydraulic fracturing is only one part of the exploration, drilling and production process. It occurs after the well is drilled but before the well is completed and begins production. Hydraulic fracturing has been labeled the “technological key” to recovery of unconventional oil and gas resources like shale, coalbed methane and tight sands. Experts estimate that 90% of all oil and gas wells utilize hydraulic fracturing. Without hydraulic fracturing, efficient and economic development of the nation’s vast shale gas reserves would be impossible.
 

In the past few years, hydraulic fracturing has seemingly become the target for all environmental and health impacts associated with exploration and production activities. In response to heightened public concern — particularly fears that the fluid mixtures used in hydraulic fracturing could seep or migrate upward into underground sources of potable water — the federal government began taking steps to increase its oversight and regulation of the process. The last Congress introduced bills in both the House and Senate to enact the Fracturing Responsibility and Awareness of Chemicals Act  (the “FRAC Act”), which would have subjected hydraulic fracturing to federal regulation under the Safe Drinking Water Act Underground Injection Control (UIC) program and required full disclosure of chemicals used in hydraulic fracturing fluids. Whether proponents of the FRAC Act or other similar legislation will introduce such legislation in the 112th Congress remains unclear.


In the meantime, the U.S. Environmental Protection Agency (EPA) has taken several steps to increase its oversight of hydraulic fracturing. First, at the direction of Congress, EPA has initiated a study of hydraulic fracturing and drinking water resources. EPA recently announced its selection of experts for the study review panel, which notably excluded all experts nominated by industry or environmental advocacy groups, resulting in a purely academic review panel. The Agency plans to submit the draft study plan to the Science Advisory Board for peer review in early 2011 and expects to have initial study results by late 2012.


Second, the EPA announced by way of a website posting  that it would regulate hydraulic fracturing utilizing diesel additives under the Safe Drinking Water Act. The website posting indicated that “Any service company that performs hydraulic fracturing using diesel fuel must receive prior authorization from the UIC program. Injection wells receiving diesel fuel as a hydraulic fracturing additive will be considered Class II wells by the UIC program.” Industry groups have challenged the website posting as an improper rulemaking without notice or comment.


Most recently, on December 7, 2010, EPA issued an Emergency Administrative Order (the “Order”) to a natural gas company to take measures intended to mitigate methane contamination in drinking water supplies in Parker County, Texas, near Fort Worth, in the Barnett Shale area. According to the Order's cover letter, EPA "ha[d] data to indicate" that at least two private drinking water wells were impacted by methane contamination "directly related to oil and gas production facilities." The Order was an unprecedented use of the “imminent and substantial endangerment” authority the Agency has under Section 1431 of the Safe Drinking Water Act, 42 U.S.C. § 300(i) and has been followed by a January 2011 suit to enforce the Order and an appeal of the Order by the company. The Order was issued while a concurrent investigation of the matter is still pending before the state agency charged with oversight of oil and gas operations in Texas. The company has maintained that there is no connection between its operations and the methane detected in the water wells. The outcome of EPA’s exercise of authority in the case remains uncertain.


In the midst of heightened attention on hydraulic fracturing and drilling operations from the federal government, state governments have moved quickly to amend, promulgate, enact or revise state laws and regulations on hydraulic fracturing in order to preempt the need for any federal regulation of oil and gas production operations, which traditionally have been primarily governed by state law. For example, the New York State Department of Environmental Conservation (NYSDEC) is currently in the process of completing a “Supplemental Generic Environmental Impact Statement on the Oil, Gas and Solution Mining Regulatory Program: Well Permit Issuance for Horizontal Drilling and High-Volume Hydraulic Fracturing to Develop the Marcellus Shale and Other Low-Permeability Gas Reservoirs” (“SGEIS”). After receiving extensive public comment on the initial draft SGEIS, the NYSDEC was ordered by then-Governor Paterson to issue a revised draft SGEIS on or about June 1, 2011 and conduct an additional public comment period. In the interim, the NYSDEC has taken the position that it may not issue any permits for horizontal drilling or high-volume hydraulic fracturing until the SGEIS is finalized — creating a de facto moratorium on Marcellus Shale developments in New York. Other states have moved forward in efforts to update their existing oil and gas regulations to address key issues such as well construction standards and hydraulic fracturing chemical disclosure requirements.


Some regulators and environmental groups have begun to better understand the science involved in defining the risk of environmental impacts associated with hydraulic fracturing. With this understanding, they have shifted their focus away from the idea of subsurface upward migration of fracturing fluids to surface spill prevention and well construction requirements. Nevertheless, the media frenzy and NGO campaign against hydraulic fracturing remains strong and will continue to place the process and the oil and gas industry in both the public and regulatory spotlight.

ARE THE NAAQS AN OBSOLETE CONCEPT?

Posted on February 8, 2011 by Roger Ferland

* My thanks to Gary E. Marchant, J.D., Ph.D., Lincoln Professor of Emerging Technologies, Law & Ethics, Center for Law, Science & Innovation at Arizona State University. He is the brains behind this blog entry.

 

One of the founding principles of the Clean Air Act is the National Ambient Air Quality Standards or NAAQS. Attainment and preservation of the NAAQS is the goal of State Implementation Plans, the permit system is intended to protect the NAAQS and most of the technology-based emission limitations are for the control of NAAQS-based pollutants. However, several of the premises for setting the NAAQS are no longer either scientifically or legally supportable.

After almost forty years, the criteria for establishing the NAAQS are settled.

  • The level of the NAAQS must protect public health with "an adequate margin of safety."
  • In setting NAAQS, EPA cannot consider the cost or feasibility of achieving it.
  • The NAAQS must not only protect the general public, but also there must be an absence of adverse effects on "susceptible" or "sensitive" subgroups and individuals.
  • According to EPA, "susceptible" subgroups and individuals can be defined by:
    • Life stages, e.g., children, the elderly or pregnant women
    • Prior immune reactions
    • Disease state, e.g., asthmatics
    • Prior damage to cells or all systems
    • What is called "genetic polymorphism," the small, but significant percentage of the population who have genetic susceptibilities to certain toxins

 

The problem is that if EPA declares that the NAAQS must prevent adverse health impacts on this range of susceptible subgroups and individuals, the only level that can prevent adverse effects across the range is zero.

For the last three decades the achievement of no adverse clinical effects with an adequate margin of safety has caused the NAAQS to be set at lower and lower concentrations. Indeed, the controversy over a more and more stringent ozone NAAQS was heightened by a recent EPA study that showed decreased lung functions among even healthy individuals at 0.060 µ/m3. These, however, are only clinical adverse effects. If all toxcogenomic or gene expression changes that are indicative of a toxic response are considered, it is hard to justify any concentration but zero for the NAAQS. As EPA has acknowledged in criteria documents for the PM-10, lead, ozone and NOx NAAQS, genomic susceptibility plays an adverse role in responses to inhalation of these pollutants, particularly with respect to specific individuals or certain groups. For these individuals or groups there is no concentration of NAAQS pollutants that will guarantee an adequate margin of safety. For example, 100,000 Americans have a condition called an alpha-1 antitrypsin deficiency. People with this condition are predisposed to emphysema and other serious lung diseases from exposure to any level of smoke or dust. Similar genetic susceptibility to any level of certain pollutants above zero can be shown for a wide range of pollutants, individuals and genetically sensitive groups.

The point in all of this is that if we continue to require a no adverse effects with an adequate margin of safety as a minimum criterion for the NAAQS with no consideration of cost or practicable achievability, the inevitable result will eventually be a scientific train wreck.
 

I DON'T WANT TO SCARE YOU . . . BUT BE WARNED

Posted on February 7, 2011 by Stephen E. Herrmann

The Problem
In the world of environmental claims, there are numerous ways that a duty to preserve documents and particularly e-documents can arise before litigation is filed.


The Problem Becomes a Sanction
E-discovery sanctions have reached an all-time high after three decades of litigation over alleged discovery wrongdoing. “Sanctions motions and sanction awards for e-discovery violations have been trending every-upward for the last 10 years and have now reached historic highs,” according to a King & Spalding study published at 60 Duke Law Journal 789 (2010).


King & Spalding lawyers analyzed 401 cases before 2010 in which sanctions were sought and found 230 sanctions awarded, including often severe sanctions of case dismissal, adverse jury instructions and significant money awards. Sanctions of more than $5 million were ordered in five cases, and sanctions of $1 million or more were awarded in four others. Before 2009, the highest number of sanctions awarded against lawyers in a single year was five. However, 46 sanctions were awarded in 2009, the last year covered by the study.
 

Defendants and their lawyers were sanctioned for e-discovery violations nearly three times more often than plaintiffs. When sanctions were awarded, the most common misconduct was failure to preserve electronic evidence.


That is why prospective environmental litigants and their counsel must be aware of the issue. Even if the client does not realize that the duty to preserve has attached, and electronic information disappears, the client and its lawyers are subject to spoliation claims, and increasingly sanctions.
 

Pinpointing The Problem Is Not Easy
A duty to preserve represents a legal requirement to maintain relevant records for litigation. Hence, identifying the trigger of the duty to preserve is essential. The duty to preserve arises before a complaint is filed when a party reasonably should know that the evidence may be relevant to anticipated litigation. When that time occurs is anything but certain.


Unlike the paper world where documents are often maintained in central storage, in the electronic world, every employee is a file keeper. E-mails can disappear with the stroke of a key. A company’s records management system may provide for relatively short timeframes for e-mails in mailboxes to eliminate data clutter. Be aware that storage systems used for disaster recovery are periodically recycled.


So, when should environmental lawyers instruct their clients on preserving documents, and particularly e-documents, for litigation? It is not at all easy to pinpoint. But, the courts have made it increasingly clear through sanctions that lawyers must figure it out. Making it even tougher are the differing views among judges on such issues as:

 

  1. Can a prospective plaintiff or defendant have a duty to preserve if counsel has not been retained to explain the duty?
  2. Must a client’s lawyer have knowledge of a claim before a duty to preserve can be triggered?
  3. If an environmental agency is pursuing other entities in an industry but not your client, does that trigger a duty to preserve?
  4. Does a notice of violation sent by a regulatory agency represent “anticipation” of litigation.

Conclusion

I repeat -- In the world of environmental claims, there are numerous ways that a client’s duty to preserve documents, and particularly e-documents, can arise before litigation is actually filed.
 

Be careful out there!

GIVING PRPs THEIR DUE: GENERAL ELECTRIC'S DUE PROCESS CHALLENGE TO CERCLA UNILATERAL ADMINISTRATIVE ORDERS HEADS TO THE SUPREME COURT

Posted on February 1, 2011 by Donald Fowler

Over the past three decades, EPA has issued more than 1,700 CERCLA UAOs to roughly 5,400 PRPs ordering the performance of response actions at CERCLA sites costing in aggregate in excess of $5 billion. Only a small handful of those orders, however, have ever been challenged in court, and vanishingly few have been subject to any independent third party review whatsoever.
 

 

Why is that? Well, as even EPA might agree, it is not because the Agency is infallible. No, the reason for EPA’s essentially unreviewed exercise of its UAO authority is the CERCLA statute itself, which (a) by operation of Section 113(h), precludes any challenge to a UAO order until the ordered response action has been completed (typically many years later at an average cost of $4 million dollars) and (b) by operation of Sections 106 and 107, subjects any PRP who elects to defy a UAO to treble punitive damages and additional penalties of $37,500 per day, which accumulate until EPA, at its sole discretion, brings an enforcement action.
 

In this regard, CERCLA is an outlier in administrative law. Though instances are common where federal statutes give agencies the power to issue administrative orders, virtually every other comparable scheme affords recipients of such orders either a prior hearing or the prompt opportunity for independent review after the order is issued. CERCLA, of course, provides neither.

 


So what justifies this unusual approach? It has been suggested on occasion that due process must be dispensed with because UAOs are needed to address emergency conditions. They can only be issued, after all, where an imminent and substantial endangerment to public health or the environment is shown. There are two problems with that rationale, however. First, the courts have largely upheld EPA’s position that “imminent and substantial endangerment” doesn’t really mean “imminent” or “substantial” – there really is no site involving a hazardous substance and a release (actual or threatened) that doesn’t meet the statutory criteria for UAO issuance. Second, as EPA has conceded in litigation, the fact is that EPA doesn’t issue UAOs in true emergencies; in those circumstances, it does the work itself and seeks to recover its costs later.

 


Okay, so even if true emergencies are not implicated, it’s still the case that EPA has a need to act quickly and that allowing pre- (or prompt post-) issuance review would unduly impede cleanup of hazardous sites, right? Well, as it turns out, that’s not true, either. Analysis of EPA’s CERCLIS database reveals an average 8-year lag-time between identification of a site and issuance of a UAO and a 4-year lag between remedy selection and UAO issuance. Obviously, there’s plenty of time in the system for a little due process.

 


So why haven’t past procedural due process challenges to this UAO scheme (and there have been a number of them) succeeded? The courts that have rejected those challenges have commonly concluded that the challenging PRPs couldn’t show a pre-hearing deprivation of property, as is required to trigger Fifth Amendment protections. Those courts reasoned that a PRP could simply refuse to comply with and wait for EPA to sue to enforce the UAO, and in that event would suffer no pre-hearing deprivation of property since penalties and damages could only be awarded following a court hearing.

 


Though the conclusion is facially appealing, its fallacy is demonstrated by the record of the most recent constitutional challenge brought by GE. There, following extensive discovery from EPA and expert testimony on both sides, GE was able to demonstrate empirically that a PRP that elected to defy a UAO would be immediately punished by the equity and capital markets, which would recognize the massive contingent liability such defiance would create and account for it by lowering the PRP’s stock value and increasing its cost of financing, with consequent impacts on its ability to bid for new projects or to hire additional employees, among other things. Indeed, although he took issue with GE’s assessment of the magnitude of the impact, even EPA’s economic expert agreed that defiance would occasion such harmful effects and that they would be significant. And the District Court agreed, as well, that defiance would not avoid a deprivation of property, though it ultimately ruled against GE on the basis that the burden to EPA of providing hearings outweighed the private party interests favoring such hearings.

 


On appeal the D.C. Circuit rejected the district court’s finding of a pre-hearing property deprivation, however, and ruled instead that such harmful impacts did not involve constitutionally protected property rights and so dismissed GE’s constitutional challenge on that predicate ground without reaching the District Court’s balancing analysis. The potential implications of that holding – which GE believes is inconsistent with Supreme Court precedent – extend well beyond CERCLA confines, and so GE has sought certiorari review.  The government’s response to GE’s petition is due February 4.


Stay tuned.