Voluntary Cleanup – A Bluesy Ballad

Posted on March 29, 2013 by Parthenia Evans

At the time when Superfund was flexing its muscle and impacting the ability of successful completion of property transfers, most states developed some form of voluntary cleanup program or “VCP”.  Those programs were supposed to allow for rapid and effective assessment and remediation, and furnish liability releases or covenants with liability protection.  Sounded good huh?

And how many of our clients have a small collection of such sites that they volunteered to assess and address with the sweet promise of walking away, and quickly?  Some used the voluntary cleanup program as a risk allocation tool in property transfers.  Others wanted the promised release or covenant in order to obtain an environmentally worry-free, and thus more valuable, property that was theirs to sell.

Some states have had the fortitude to reform their voluntary cleanup programs by privatizing the process.  In those states licensed professionals determine whether property investigations and remediation are necessary and when they are complete.  They then issue some form of certification that leads to a covenant not to sue or a release. [See "New Jersey Follows Massachusetts into the World of Licensed Environmental Consultants and Privatized Cleanup Oversight", David Farer ,July 9, 2009]. 

In other states the agencies have not overcome their dependence on the fees generated by voluntary cleanup programs, utilizing those fees to pay the salaries of agency personnel engaged in the oversight of voluntary cleanup activities.  In these states "voluntary" really means "hooked and can't get out."  Let's look at a familiar ballad - best read while listening to Eric Clapton's Voodoo Chile (Live from Madison Square Garden):

Well on the day I signed up
For the Voluntary Cleanup Plan
Well I was promised fast and efficient
Get you out of a jam
It gives you certainty and freedom
And you'll be able to transfer worry free

Lord I'm a VCP chump
Oh Lord, I'm a VCP chump

Well I had a grain elevator
With a little dab of carbon tet
Oh Yeah, just a little dab
In the shallow soil
VCP had me test it
Oh, just a little dab at low levels

Lord I'm a VCP chump
Oh Lord, I'm a VCP chump

And I said I am finished
But VCP said not so fast
So I started on the groundwater
Even though it was 200 feet down
Yeah I started drilling
And haven't hit bottom yet

Now it's 10 years later
From the time I began
Yeah, it's 10 years later
And I haven't found that carbon tet yet
But I 'm gonna keep goin
Cause I'm in the money so deep

My heirs and assigns ask me
Say – what's goin on?
I have to tell them
My sad, sad song

Lord I'm a VCP chump
Oh Lord, I'm a VCP chump

So, most ballads eventually come to an end.  How can we continue VCP reform in states where the VCP Bluesy Ballad still is being sung?

Agenda 21: A Guide for the Perplexed

Posted on March 27, 2013 by John Dernbach

At a local government meeting on a land use plan, officials hear opposition based on the claim that it is tainted by Agenda 21.  A state public utility commission considering smart meters hears similar claims.  They are confused: what is Agenda 21 and why does it matter?

A well organized campaign against Agenda 21, spread by the Tea Party, Glenn Beck, and the John Birch Society, exists well outside the realm of ordinary environmental law work.  But it is beginning to affect that work.  The real target of this campaign, moreover, is not Agenda 21 but sustainable development—a common sense approach to reconciling environment and development that provides the basis for our environmental and land use laws.  Environmental lawyers thus need a basic understanding of what Agenda 21 is and what it is not.     

Agenda 21 is a comprehensive public strategy for achieving sustainable development. It was endorsed by the U.S. (under the presidency of George H.W. Bush) and other countries at the U.N. Conference on Environment and Development in 1992.  Agenda 21 stands for two broad propositions: 1) environmental goals and considerations need to be integrated into all development decisions, and 2) governments and their many stakeholders should work out the best way to integrate environment and development decisions in an open and democratic way. 

Agenda 21 contains an almost encyclopedic description of the best ideas for achieving sustainable development that existed in 1992.  On land use, it specifically counsels respect for private property.    It contains a detailed description of the role that many nongovernmental entities, including business and industry, farmers, unions, and others, should play in achieving sustainability. 

Agenda 21 endorses, and to a great degree is based upon, ideas that were already expressed in U.S. environmental and natural resources laws.  Its core premise is espoused in the National Environmental Policy Act of 1969.  Long before Agenda 21, NEPA set out “the continuing policy of the Federal government” to “create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans” (42 U.S.C. § 4331). 

Ironically, Agenda 21 was never taken seriously as such in the United States; there has never been much enthusiasm here for following international agreements.  It is not a legally binding treaty; it contains no provisions for ratification, for example.  Agenda 21 also says nothing about new ideas like green building, smart growth, and smart meters.  But sustainable development as an idea—achieving economic development, job creation, human wellbeing, and environmental protection and restoration at the same time—is gaining traction. 

In response, opponents are attacking sustainability by making false statements about Agenda 21.  They say that Agenda 21 is opposed to democracy, freedom, private property, and development, and would foster environmental extremism.  For many opponents, the absence of a textual basis in Agenda 21 for such claims (in fact, the text explicitly contradicts all of these claims) is not a problem.  First, they are attacking a document that is not well known, and so they count on not being contradicted.  Second, the false version of Agenda 21 fits a well known narrative that is based on fear of global governance and a perceived threat of totalitarianism, and on distrust of the United Nations.  Indeed, the absence of information to support such fears only deepens their perception of a conspiracy.  According to this view, moreover, people who talk about sustainable development without mentioning Agenda 21 are simply masking their true intentions.  

Far-fetched, you say?  Well, consider this: in 2012, Alabama adopted legislation that prohibits the state or political subdivisions from adopting or implementing policies “that infringe or restrict private property rights without due process, as may be required by policy recommendations originating in, or traceable to ‘Agenda 21’” (Ala. Code § 35-1-6).  This, of course, could chill a variety of otherwise ordinary state and local decisions.  Similar bills are pending in state legislatures across the country. 

In a variety of other places, elected officials and professional staff who have worked with stakeholders for years to produce specific land use and energy proposals find their work mischaracterized as the product of Agenda 21, even though they have never heard of it.   Agenda 21’s lack of direct relevance to the specific proposals should, but does not always, provide an answer to such claims. 

The campaign against Agenda 21 has no serious empirical or textual foundation.  But it can work against sustainability and good decisions—and cost time and money—when clients and their lawyers don’t recognize it for what it is.

EPA Loses Another Battle in the War Over Guidance: The Eighth Circuit Vacates EPA Policies on Mixing Zones and Bypasses

Posted on March 26, 2013 by Seth Jaffe

On Monday, EPA lost another battle in the war over guidance.  In Iowa League of Cities v. EPA, the 8th Circuit Court of Appeals vacated two letters that EPA had sent to Senator Charles Grassley concerning biological mixing zones and bypass of secondary treatment units at POTWs (also referred to as “blending”, because the POTWs blend wastewater that has not be subject to biological secondary treatment with wastewater that has, prior to discharge).  The Court concluded that both letters constituted promulgation by EPA of effluent limits under the Clean Water Act and that they constituted legislative, rather than interpretive rules (I refuse to refer to “interpretative” rules; sorry).  As a result, the Court vacated the letters due to EPA’s failure to follow notice and comment requirements applicable to promulgation of legislative rules.  Finally, the Court concluded that a duly promulgated rule concerning biological mixing zones might be valid under Chevron, but that a rule barring bypasses of secondary treatment would exceed EPA’s authority under the Clean Water Act.

In first determining whether the letters constituted “promulgation” of an effluent standard, the Court looked to whether the letters were binding on the regulated community.  Relying in part on Appalachian Power Co., the Court concluded that the letters were binding:

If an agency acts as if a document issued at headquarters is controlling in the field, if it treats the document in the same manner as it treats a legislative rule, if it bases enforcement actions on the policies or interpretations formulated in the document, if it leads private parties or State permitting authorities to believe that it will declare permits invalid unless they comply with the terms of the document, then the agency’s document is for all practical purposes “binding.”

As the Court noted with respect to the mixing zone issue, the “letter instructs state permitting authorities to reject certain permit applications, regardless of the state’s water quality standards.”  With respect to the bypass issue, EPA stated that “it will insist State and local authorities comply with” a never-issued policy that precludes the types of bypass at issue.  To try to suggest that words such as “insist” are not binding did not go over well with the Court.  “Just as it did in Appalachian Power, the EPA dissembles by describing the contested policy as subject to change.”

After concluding that the letters constituted promulgation of effluent standards, the Court went on to conclude that the letters constituted legislative, rather than interpretive, rules, and thus were subject to notice and comment rulemaking.  The following is the key paragraph for those of us attempting to beat back the kudzu that is EPA’s reliance on such informal guidance as a substitute for notice and comment rulemaking:

Identifying where a contested rule lies on the sometimes murky spectrum between legislative rules and interpretative rules can be a difficult task, but it is not just an exercise in hair-splitting formalism. As agencies expand on the often broad language of their enabling statutes by issuing layer upon layer of guidance documents and interpretive memoranda, formerly flexible strata may ossify into rule-like rigidity. An agency potentially can avoid judicial review through the tyranny of small decisions. Notice and comment procedures secure the values of government transparency and public participation, compelling us to agree with the suggestion that “[t]he APA’s notice and comment exemptions must be narrowly construed.”

“Layer upon layer of guidance.”  The “tyranny of small decisions.”  I couldn’t have said it better myself.

Logging Road Runoff Does Not Require an NPDES Permit: The Supreme Court (For Now) Defers to EPA’s Interpretation of Its Own Regulations

Posted on March 22, 2013 by Seth Jaffe

On Wednesday, in Decker v. Northwest Environmental Defense Center, the Supreme Court ruled that runoff from logging roads does not constitute a discharge from a point source that requires an NPDES permit.  The decision upholds EPA’s interpretation of its own regulations and overturns – what a surprise! – a 9th Circuit decision which had held that permits were necessary for logging runoff.

While EPA got the result that it wanted here, the decision may come back to haunt it in the long run.  The decision was largely based on what is commonly known as Auer deference, the rule that courts will defer to an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.” After a thorough review of the various relevant regulations and a dip or two into the Oxford American Dictionary, and after noting that the agency’s interpretation need not be “the best one”, the Court found EPA’s interpretation “permissible.”

So, why should EPA be concerned?  Justice Scalia, at his most curmudgeonly, dissented on the ground that Auer should be overturned because it grants too much authority to agencies.  Justice Scalia rejected out of hand what I would have thought would be the simplest and most obvious defense of Auer:  that if courts defer to agency interpretation of statutes under Chevron, shouldn’t they, a fortiori, defer to agency interpretation of the agency’s own rules?  Apparently not.  To Justice Scalia, Chevron deference merely allocates to agencies, rather than courts, the primary duty of interpreting statutes, but allowing agencies to interpret their own regulations has the dangerous result of concentrating both the writing and interpretation function in one branch of government.

I don’t buy it, but it’s important to note that, while Justice Scalia was the sole dissenter, Justice Roberts wrote a concurring opinion, joined by Justice Alito, stating that, while Decker was not the proper case to reassess Auer (a cynic might say that Justice Roberts reached that conclusion because EPA was aligned with industrial interests, rather than the environmental NGOs, in Decker), they were both open to reviewing Auer in the proper case.

Sounds like three votes to me.  Somewhat surprisingly, Justice Thomas joined neither the concurrence nor the dissent.  Justice Kennedy wrote the majority opinion, so he clearly still believes in Auer.  Without Kennedy and with Thomas a cypher at this point, the votes to revisit Auer may not be there.  In any case, it is worth noting that Justice Breyer, who is Justice Scalia’s frequent sparring partner on administrative law issues, took no part in the decision.  I look forward to his spirited defense of Auer when the time comes.

New Changes to CISWI Final Rule Reflect EPA’s Response to Comments from the Regulated Community

Posted on March 21, 2013 by Karen Crawford

The EPA issued its long-awaited CISWI Rule in the Federal Register on February 7, 2013.  78 FR 9112.  The final rule, entitled “Commercial and Industrial Solid Waste Incineration Units; Reconsideration and Final Amendments; Non-Hazardous Secondary Materials That Are Solid Waste,” contains the provisions in EPA’s 2011 rule, vacated in January 2012, that EPA agreed to reconsider.  The 2011 final rule in turn superseded EPA’s 2000 CISWI rule.  The new CISWI Rule amends 40 CFR part 60 subparts CCCC and DDDD and part 241.  The amendments to 40 CFR part 60 subpart DDDD, along with certain incorporations by reference, were effective on the promulgation date; amendments to part 60 subpart CCCC are effective August 7, 2013, and those to 40 CFR part 241 are effective April 8, 2013.

In response to both the court’s vacatur of a Notice of Delay issued in 2011 and the numerous petitions for reconsideration and comments submitted by the regulated community and the public, the final rule includes three subcategories of ERUs (energy recovery units) and two subcategories for waste-burning kilns based on design-type differences, with separate carbon monoxide (CO) limits for the latter.  Certain limits were also revised based on comments regarding the CO span methodology and on incorporation of additional data.  The rule establishes stack testing and continuous monitoring requirements and allows for the use of  continuous emissions monitoring systems (CEMS), setting levels based on a 3 hour block or 30-day rolling average (depending on the parameter and subcategory of CISWI). 

The rule addresses and preserves a source’s choice to cease or start combusting solid waste at any time due to market conditions or other reasons, and to switch from one set of applicable emission standards to another pursuant to CAA section 112, thereby amending the original "once in always in" approach reflected in the earlier versions of this rule. This in turn will provide an incentive to the regulated community to continue operating incinerators.

The deadline for compliance with the CISWI Rule by existing sources depends primarily on when the state implementation plan incorporating the final rule is approved, with such approval required no later than five years after the February 7, 2013 Federal Register publication date.  The effective date for new source compliance is August 7, 2013 or the date of startup, whichever date is later.  New sources are defined as sources that began construction on or after June 4, 2010, or commenced reconstruction or modification after August 7, 2013.

Investors Filing More Shareholder Proposals on Environmental Issues, and More Companies are Listening

Posted on March 20, 2013 by Christopher Davis

Investors, including public, labor and religious pension funds and socially responsible investment (SRI) funds, are filing increasing numbers of shareholder resolutions on environmental, social and governance (ESG) issues.  Each spring, investors vote their proxies on these shareholder proposals, including many focused on environmental matters.  The average number of votes on environmental proposals are increasing as well.  In addition, a growing number of such resolutions are “withdrawn”, based on an agreement that the company will take specified actions consistent with the proposal.  Ceres tracks ESG resolutions filed by members of its investor network, and nearly 40% have been withdrawn by agreement in recent years.

ESG proposals generally call for reports, policy changes or actions by companies to address ESG-related business risks and opportunities, such as filing a sustainability report, setting a greenhouse gas emission reduction target, improving energy efficiency or linking executive compensation to ESG metrics.  As outlined in a recent Bloomberg BNA article, emerging topics featured in 2013 resolutions include physical risks from climate change, risks from hydraulic fracturing including methane emissions, “stranded asset” risks associated with energy companies’ fossil fuel reserves and sourcing sustainable palm oil to reduce deforestation. According to a recent analysis, investors now file about 50% more shareholder proposals on environmental and social issues than they did a decade ago, with nearly 400 filed each year.

But there has not been as dramatic an increase in the number of proposals voted on because proponents have withdrawn an increasing number of their proposals, generally after reaching agreements with the company.  Such negotiated “withdrawals” are a sign that corporate America is increasingly willing to adopt new practices to address social and environmental concerns.  Although votes on shareholder proposals are legally nonbinding, companies now appear to pay more attention to them.

One likely reason for greater corporate responsiveness is that the shareholder resolutions are garnering higher votes – the average vote on such proposals has grown from 11.9% in 2003 to 18.5% in 2012, according to As You Sow.  In addition,  according to a recent study by the IRRC Institute entitled “Growing Traction for Environmental and Social Proposals at U.S. Companies”, the number E&S resolutions grew by one-third between 2005 and 2011 to about 40 percent of all shareholder proposals going to a vote, and the number of votes above 30% on such proposals grew from 3% in 2005 to 31% in 2011.

Investors who have filed the most ESG resolutions during the 2013 proxy season to date are:  socially responsible investment firms (29%), pension funds (26%), and faith-based institutional investors (18%).  Surprisingly, philanthropic foundations have filed only 7%, while unions have filed 8%, and individual investors 6%.  Special interest groups such as animal rights organizations accounted for the remaining 6%. 

The fastest growing type of resolution filed over the last several years has related to political spending disclosure, representing 33% of 2013 resolutions so far, with ‘sustainable governance’ resolutions representing another 14% of this year’s resolutions.  Sustainable governance resolutions include those asking for annual sustainability reports, as well as requests linking executive compensation to ESG metrics, such as reduced pollution or improved worker safety.  Climate change and other environmental issues are the focus of 26% of the 2013 resolutions. 

As ESG filings and average votes continue to grow, companies are increasingly faced with the question of how best to respond to a shareholder resolution.  Corporate managers nearly always oppose these resolutions, and frequently ask for the SEC’s approval to exclude them from their proxy statement, although the resolutions often serve as early warnings for emerging financial risks such as climate change.  The Society of Corporate Secretaries of Governance Professionals recommends that companies:  1) meet with the filer to discuss the request; and 2) consider whether and to what extent the company can implement the proposal or take other actions that will satisfy the filer.

Companies receiving resolutions should keep in the mind that the shareholder filer’s ultimate goal is not to get a high vote, but rather for the company to address the issue raised in the resolution, which the shareholder believes presents an important risk or otherwise affects the value of their investment.  And filers are generally willing to negotiate in good faith and build a productive working relationship with the company.  Some banks that received resolutions about predatory lending practices prior to the financial crisis probably wish they had paid more attention to the risks raised in the resolutions.  Nearly all companies and investors would have been better off if they had done so, and the same lesson may very well apply to resolutions on environmental issues.

Preserving Conservation Gains – The Issue of Exit

Posted on March 18, 2013 by Jonathan Z. Cannon

Governmental and non-governmental actors in the conservation field increasingly face the issue of “exit” from initiatives that they have undertaken.  This is good news, because the issue of exit typically arises when their interventions have achieved their conservation goals and they respond to the need to register wins and move scarce regulatory, technical, and financial resources to new problems.  For example, upon recovery of a species listed as threatened or endangered under the Endangered Species Act, the Fish and Wildlife Service will consider delisting the species, thus removing the strict legal protections afforded by the Act.  Similarly, non-governmental organizations that have intervened to ensure or provide funding or expert assistance for protection of species or ecosystems will want to move on when their goals have been met.

But success leaves a tough question: what happens when they withdraw?  Will their successes persist, or will their withdrawal lead to the same failure that brought them to intervene in the first place?  What factors affect the “stickiness” of successes achieved through governmental or philanthropic involvement?  The challenge is to ensure that conservation initiatives generate durable institutional arrangements that continue to yield success after the initial movers have left or reduced their presence.  And the challenge is pervasive.  For example, it is estimated that 80% of listed species are “conservation-reliant,” requiring ongoing conservation effort after delisting because threats to the species’ existence cannot be wholly eliminated. 

Conservation practitioners and scholars are beginning to tackle this issue in earnest and are coming together to discuss it in forums such as a recent conference at the University of Virginia on Making Conservation Sustainable: Institutional Design and the Natural Environment.  The work of designing sustainable conservation arrangements is inherently interdisciplinary, involving lawyers, economists and finance experts, social psychologists, political scientists, and ecologists.  It is further complicated by the wide variety of physical, biological, economic, political, and social settings in which conservation occurs.  Experts agree that there is no one-size-fits-all solution, with well-tailored arrangements likely to include a mix of approaches.  For example, some level of residual government involvement may be combined with collaborative community-based institutions, such as “friends” groups or landowner cooperatives.  The long-term success of these institutions will require that they be compatible with the history, economy, and values of the affected communities. 

Confronting the challenges of exit may lead to improved understanding of the potential of private and public-private undertakings to provide long-term solutions to conservation challenges.  And that understanding could help usher in a new generation of environmental law and policy.

Will Sage Grouse Conservation Efforts Fly?

Posted on March 15, 2013 by Mike Brennan

The clock is ticking on the U.S. Fish & Wildlife Service’s 2015 deadline to decide whether to list the Greater sage grouse under the Endangered Species Act.  In the states where the grouse still exists - Washington, Oregon, California, Nevada, Idaho, Montana, Wyoming, Colorado, Utah and the Dakotas - ambitious efforts seek to protect the species and make an ESA listing unnecessary.  Wyoming – uniquely blessed with some 54% of the remaining sage grouse in the world, spread across 32 million acres of sagebrush habitat – is both ground zero for and the leader in a landscape-scale experiment in collaborative wildlife conservation.

This saga began in January 2005, when FWS decided not to list the species.  Since then, sage grouse lawsuits have flown fast and furiously.  Litigation was highly predictable, given the history of the ESA, the magnitude of the impacts associated with a potential listing, and the setting; conflict regarding wildlife conservation needs, goals and opportunities runs deep in the West, particularly in the “Sagebrush Sea,” where distrust of the federal government and its institutions often seems learned from birth.  The most remarkable aspect of the sage grouse saga is that history and location notwithstanding, it has brought together federal, state and private sector interests across much of the western United States who seek to conserve the species and thereby make listing unnecessary.

Beginning in 2007, the landscape of sage-grouse conservation began to change, led by the State of Wyoming and its “Core Area Policy,” which was designed to identify, maintain, and enhance sage-grouse habitat and populations within the species’ core habitat areas.  The pace quickened in 2011, when Oregon followed with a similar core-area approach.  Wyoming Governor Matt Mead and Secretary of the Interior Ken Salazar hosted a sage-grouse conservation meeting in Cheyenne involving federal and state representatives, that. focused on the development of a coordinated, landscape-level conservation strategy, seeking a collaborative conservation effort at the state, federal and local levels.

Following the Cheyenne summit, the states of Utah, Idaho and Nevada initiated new efforts to develop their own sage grouse management plans, while various federal agencies are vigorously pursuing their own sage grouse conservation efforts.  The Bureau of Land Management and the U.S. Forest Service are revising their management plans in Wyoming, Colorado, North and South Dakota, Utah, Montana, Idaho, Nevada, Oregon, and California to incorporate consistent sage grouse conservation objectives and measures.  The Natural Resource Conservation Service’s Sage-Grouse Initiative is focusing on conservation grant and technical assistance programs to improve sage-grouse habitat and rangelands productivity.  The Department of Agriculture announced an additional $18.2 million Grassland Reserve program in 2011 to help ranchers in Wyoming, Idaho and Utah conserve critical sage-grouse habitats.

 And on March 8, 2012, Agriculture Secretary Vilsack and Secretary of the Interior Salazar announced the establishment of the Working Lands for Wildlife partnership program, a $33 million program to conserve sage grouse and six other species.

In addition to state and federal conservation efforts, ranching, mining, oil and gas and other interests are developing Candidate Conservation Agreements with Assurances (CCAAs) to provide for sage grouse conservation on private and other nonfederal lands in Wyoming, Idaho, and elsewhere.  FWS has recently published a draft sage grouse CCAA to be available for Wyoming landowners, and numerous other local efforts are ongoing.

Whether these and other efforts can make an ESA listing unnecessary only time will tell.  Sage grouse still occupy some 160 million acres of land, making this a landscape conservation effort of heroic scale.  Skeptics, and history, would bet against it.  But if the state, federal, and private sector efforts are successful, it will stand as an historical moment in wildlife conservation, and as validation of the West’s author and historian laureate, Wallace Stegner, who wrote:

“This is the native home of hope.  When it fully learns that cooperation, not rugged individualism, is the pattern that most characterizes and preserves it, then it will have achieved itself and outlived its origin.  Then it has a chance to create a society to match its scenery.”
Wallace Stegner, The Sound of Mountain Water 38 (1980).

Less Lessee Liability – A Critique of EPA’s New Superfund BFPP Guidance

Posted on March 14, 2013 by Jeff Civins

In December 2012, EPA issued revised enforcement guidance to assist agency personnel in exercising enforcement discretion regarding the treatment of tenants under Superfund’s bona fide prospective purchaser (BFPP) defense.  This guidance expands some of the protections provided by the prior, 2009 guidance. Though recognizing that “[l]easehold interests play an important role in facilitating the cleanup and reuse of contaminated properties,” the agency chose a relatively ineffectual tool for addressing prospective tenant liability and encouraging re-use of Brownfield properties.  The agency could have better encouraged Brownfield development by providing tenants with guidance on how to avoid Superfund liability in the first place.

Under Superfund, a tenant's status and activities may give rise to "owner or operator" liability -- for the costs of investigating and remediating a contaminated site and for natural resource damages.  The guidance does not flesh out the contours of tenant liability as an owner or operator, but instead assumes that tenant liability exists and explains how the BFPP defense under section 107(r) of Superfund might then be available. 

To take advantage of the BFPP defense, an owner or operator of contaminated property must satisfy three statutory prerequisites. It must show: (1) it conducted all appropriate inquiry or AAI, e.g., by having conducted a phase I environmental assessment; (2) it has no affiliation with a potentially responsible party or PRP; and (3) it is satisfying specified continuing obligations, including, among other things, complying with applicable regulatory requirements and not impeding remedial actions.

In brief, the December 2012 guidance confirms that a tenant may receive protection as a BFPP derivatively from its landlord if the landlord conducted AAI, provided that all disposal occurred prior to the landlord’s acquisition of the property and the tenant satisfies the continuing obligations requirement.  It also expands EPA's use of enforcement discretion for a tenant who relied upon its landlord for the BFPP defense to include situations in which the landlord loses the BFPP defense, provided the tenant meets the requirements of the BFPP defense other than having performed AAI.   In addition, it makes clear that a lease will not disqualify a tenant from the BFPP defense for failure to have satisfied the "no affiliation" prerequisite.  Furthermore, it confirms that EPA will use its enforcement discretion for a tenant who independently meets the BFPP prerequisites, including having performed AAI prior to execution of the lease.

The new guidance notes the obvious: all bets are off if the tenant itself engages in an activity that independently creates liability, e.g., by creating or exacerbating contamination.  It also notes that, except as otherwise provided, the tenant itself must satisfy the BFPP prerequisites. 

The agency explains that it generally will not proactively make determinations as to the availability of the BFPP defense in connection with any particular transaction, e.g., by issuing a comfort letter, though there may be limited circumstances where it might do so.  And, of course, the agency’s exercise of prosecutorial discretion provides no comfort where the Superfund claim is brought by a third party, though the agency’s guidance may be persuasive to the court in which the claim is brought.

The problem with the BFPP defense is that it’s a defense, which must be asserted in response to a Superfund claim, and the tenant has burden of proof.  Moreover, as far as defenses go, it’s not even the best.  The third party defense, which doesn’t require AAI, generally should be available as long as the lease does not relate to the act or omission giving rise to the contamination.  SeeThe Third Party and Transaction-Related Defenses,” J. Civins, M. Mendoza, and C. Fernandez, ABA-SEER Environmental Litigation and Toxic Torts Committee Newsletter, July 2005.

More significantly, as EPA recognizes, “the mere execution of a lease does not necessarily make a tenant liable as an owner or operator,” and the agency and the regulated community would have been better served had the agency issued guidance establishing safe harbors for tenants.  A tenant’s first line of defense to Superfund liability should not be a defense, BFPP or other, but rather should be an assertion that it is not a Superfund owner or operator, placing the burden of proof on the plaintiff rather than on the tenant.  And case law provides a good basis for EPA issuance of such guidance.

Arguably, a tenant should not be liable and have need of a defense as an owner unless it virtually stands in the shoes of its owner, e.g., by entering into a 99-year lease or by subleasing the property to one who contaminates it.  Similarly, a tenant should not be liable as an operator, unless its action caused or exacerbated contamination.  Regardless of whether case law adequately fleshes out the contours of a tenant’s owner or operator liability under Superfund, it would have been more useful for the agency to have issued guidance with respect to such liability rather than on the BFPP defense.

SHOULDN’T WE BE WATCHING AFRICA’S ENERGY CONSUMPTION?

Posted on March 13, 2013 by Eileen Millett

We’ve all seen the head shaking over how energy conservation efforts in the United States are dwarfed by energy consumption increases in India and China.  But, what about Africa? 
 
The African continent, with close to 600 million people, 15% of the world’s population, now consumes about 3% of world energy production.  However, Africa’s energy picture is changing rapidly due to growing investment, upgraded infrastructure, and success in tackling corruption.  Africa always rich in natural resources, is expected to replace more basic energy sources with more efficient and environmentally friendly sources like oil and gas. However, huge areas in Africa — the Sudan, Uganda and even Kenya lack national electricity grid systems.  But improving infrastructure and abundant energy resources hold promise for the future. 

Most of Africa is not flicking a switch for lights, but instead is using matches to light a kerosene lamp or igniting a charcoal stove for heating or cooking.  This will continue for the foreseeable future, which means more tree-cutting for fuel, more wood burning, and thus, more harmful air emissions.  Using kerosene lanterns and charcoal stoves correlates directly with increased respiratory disease.  Unfortunately, environmental health and safety will, in the short term, take a back seat to the need to rely on fossil fuels.

Renewables?  Why shouldn’t a continent known for its hot sun be a natural for solar power?  In Africa, questions about reliability and the lack of trained personnel are being taken seriously.  So for the foreseeable future, the more likely result is that fossil fuels will increase, and renewables will take aback seat.  The developing world views energy/environment trade-offs as part of the price for advancement, particularly in nations where energy resources and infrastructure is so underdeveloped.  Opportunities are enormous, but so are the challenges and risks.  Africa’s test will be how much financing, regulation and environmental mitigation is needed to propel the continent forward. 

French Government Requires Annual Reporting of Nanoparticles

Posted on March 12, 2013 by Leslie Carothers

Over a year ago, I commented on the continuing discovery of new commercial uses for nanomaterials—particles at the scale of one billionth of a meter—and the continuing delay in developing better means of governmental oversight to manage any health and environmental risks.  Since then, several new steps in regulatory oversight have been taken, most notably in Europe. 

Here in the United States, EPA has employed the significant new use rule or SNUR under Section 5 of the Toxic Substances Control Act with respect to a number of nanomaterials undergoing premanufacture (PMN) review, its most recent pronouncement being the proposed application of SNURs to 14 carbon nanotube materials as published in the February 25, 2013 Federal Register.  78 Fed. Reg. 12684-12701.  Such SNURs can impose restrictions and conditions on the production, import, and use of a pmn chemical containing nanomaterials.  These requirements generally address worker protection and may also limit production unless releases to water are prevented or further testing of health or environmental impacts is performed.  See, e.g. the December 28, 2011 proposed rule establishing SNURs for seven nanomaterials.  76 Fed.Reg. 81447-81462.     

European regulators have traditionally been less reluctant to request chemical information or regulate chemical constituents than their U.S. counterparts.  The European Union’s REACH law governing chemicals, both new and in use, illustrates the EU’s willingness to impose significant information reporting.  The EU is also more inclined to require broader disclosure of information to the public in the form of product labeling, and the European Commission has set labeling requirements for the use of nanomaterials in food.  The new rule, effective in 2014, adds a definition for “engineered nanomaterials” at Article 2(t), and Article 18.3 requires that all ingredients in the form of engineered nanomaterials be clearly indicated with the word “nano” in brackets after the ingredient name.  Paragraph 25 of the rule’s preamble also notes the possibility that nanomaterial content will result in a “novel food” under the current rule generally known for its coverage of genetically modified organisms.  (Revision of the novel food rule has been delayed by an interesting dispute over whether food from the offspring of cloned animals should be categorized as “novel.”  Further delay is likely while EU regulators grapple with exotic equine ingredients.)

France has taken another step in the regulation of nanomaterials by adopting the first mandatory reporting scheme beginning in January 2013, with the initial annual report due May 1.  The French decree (Decree No. 2012-232) requires manufacturers, importers, distributors, and research and development laboratories using quantities of 100 grams or more to submit an annual declaration identifying the quantity and use of substances with “nanoparticle status” under the EC’s definition set forth in the REACH (Registration, Evaluation, Authorization and Restriction of Chemical Substances) regulations.  Companies exporting to France presumably will have to provide the information so that importers can comply with the new requirement.

Implementation of the French reporting program may well provide valuable information to U.S. regulators on whether and how a reporting rule can strengthen governmental oversight without unduly burdening commercial introduction of new and potentially beneficial materials.

Expanded Access to Environmental Information – The New Era of Transparency and Its Risks and Opportunities

Posted on March 11, 2013 by Dean Calland

Over the past several years, EPA has created or upgraded a number of new informational tools that enable the public to gain access to environmental data.  This is part of the agency’s efforts to increase “transparency” regarding private and public sector environmental compliance and enforcement efforts.  As expressed in a recent press release, EPA believes that “transparency and access to information at all levels help to drive improvements in environmental performance.” 

A couple of very recent examples are worth noting.  Earlier this year, EPA announced the creation of new interactive state dashboards and comparative maps.  These online tools are components of EPA’s Enforcement and Compliance History Online (ECHO) website, and contain air, water and hazardous waste data for the previous five years.  According to EPA, such information includes “the number of completed inspections, types of violations found, enforcement actions taken, and penalties assessed by state.”  Users of the site can customize their searches to view just state activity, EPA activity, or both.  

A second example is EPA’s program to increase the transparency of chemical information under the Toxic Substances Control Act (TSCA).  Just last month, EPA released the 2012 Chemical Data Reporting (CDR) information for more than 7,600 chemicals.  The data can be used to identify important trends and analyses, such as determining the number of workers exposed to a particular chemical, the top 20 chemicals used in children’s products, the top 20 chemicals used in consumer products and the top industrial sectors that processed and used reportable chemicals.  EPA modified the CDR rule (formerly known as the Inventory Update Reporting rule) in 2011 to require that manufacturers and importers submit CDR information electronically.  Accordingly, the CDR information is added to the agency database and made publicly available much faster than ever before.  Stakeholders such as the American Chemistry Council and the Environmental Defense Fund applauded the recent changes to the CDR rule to increase the amount of information available to the public and thereby improve public understanding and confidence.

With appropriate controls, greater transparency is laudable for a variety of readily apparent reasons, and there is little doubt that federal and state agencies will increase both the number of tools available to the public and the usability of these tools to interpret data in the coming years.  Environmental stakeholders should evaluate these new tools and determine the risks and opportunities presented by them. 

For example, industry practitioners are quite familiar with the increasing scrutiny that has been placed on corporate decision-making in recent years by major investors and shareholders regarding such matters as the impact of the corporation’s activities on issues like greenhouse gas emissions and sustainability.  Some of these entities are using the new information tools and others like them to identify trends and determine how the corporation “measures up” against industry norms and political or governmental expectations.  Similarly, corporations are finding that their outside financial auditors are reviewing environmental databases to “check on” the environmental and safety disclosures that the companies are putting forth during the audit period.  Indeed, company management and counsel have sometimes been surprised by their auditors’ independently-gathered information that one or more of the company’s plants are listed on EPA or state databases as “non-compliant” with environmental requirements. 

In the same way, increased access to environmental and safety information brings with it new opportunities to gather meaningful information that can be extremely useful in preparing business plans for future activities and for claims and litigation related to environmental exposures.  Manufacturers and suppliers of environmental products and services, plaintiffs’ counsel, expert witnesses, environmental groups, public and governmental relations firms and insurance companies are just a small subset of the universe of interested parties for whom easier access to environmental and safety information can be helpful.  And now such data can be gathered more quickly and at a fraction of the costs that would have been required in the past.  Environmental stakeholders would do well to monitor the development of these transparency tools and to assess the risks and opportunities that they present.

Last Dance / Last Chance…?

Posted on March 8, 2013 by LeAnne Burnett

Is the Lesser Prairie Chicken (“LPC”) dancing its last dance?  The little grouse, noted for stomping its feet and inflating the bright orange air sacs at the side of its neck, while emitting an eerie “booming” sound that echoes across the short grass prairie, has seen its numbers drop sharply in recent years.  On November 30, 2012, the U.S. Fish and Wildlife Service ("USFWS") proposed listing the LPC as "threatened" under the Endangered Species Act of 1973 ("Act").  Read Donald Shandy's December 13 post on possible impacts of the listing on the energy industry.  The LPC 's range, includes tens of thousands of acres in Oklahoma, Texas, New Mexico, Colorado and Kansas.

The Act prohibits all activities that would harm ("take") a species listed as endangered, unless the activities are otherwise exempted or permitted by the USFWS.  For threatened species, Section 4(d) of the Act gives the USFWS authority to tailor the take prohibitions to the particular conservation needs of the species.  Typically, that tailoring involves addressing habitat preservation.  Habitat fragmentation, modification and degradation within the species' range are the major threats to the LPC.  Historic agricultural and livestock grazing land use, and more recent land uses related to wind energy, transmission development, and oil and gas production present challenges to the LPC.  Uncontrollable forces, such as the persistent drought in the area, also impact the LPC’s habitat. 

For more than a decade impacted stakeholders have created and used voluntary tools to implement conservation actions that preserve the LPC’s range hoping to avoid a listing.  A Candidate Conservation Agreement ("CCA") is a voluntary conservation agreement with the USFWS to identify and implement measures designed to address threats to the candidate species.  Candidate Conservation Agreements with Assurances ("CCAAs") provide non-federal landowners with assurances that, as long as the landowners continue habitat conservation efforts, they will not be asked to undertake more than the agreed-upon conservation measures even if the candidate species is later listed or the CCAA is later modified.  The USFWS recently approved a CCAA for Oklahoma which is available through the Oklahoma Department of Wildlife.  The CCAA is free and voluntary, not dependent on the presence of LPCs on the enrolled property, and landowners may opt out at any time

CCAs and CCAAs may help avoid the listing, but if the LPC is listed, then the conservation measures undertaken through these agreements are already tailored to the particular conservation needs of the species and can become Section 4(d) requirements.  Either way, enrolling in voluntary programs and taking advantage of the opportunity to provide public comment and new ideas for preservation of the LPC may allow the LPC to keep on dancing.

Hydraulic Fracturing Fluid Balancing Act: Disclosure Versus Protection of Trade Secrets

Posted on March 7, 2013 by Linda Bullen

One of the many controversies surrounding hydraulic fracturing involves the protection of trade secrets in an evolving regulatory environment hungry for more information about every aspect of operations.  Regulators, litigants and the public press for disclosure of the composition of hydraulic fracturing fluids while manufacturers and operators resist full disclosure to protect proprietary formulas believed to be valuable secrets.  
 
In a pre-rulemaking decision draft of hydraulic fracturing regulations released on December 18, 2012, California addressed the tension between protecting trade secrets and the public's right to obtain information under California's Public Records Act ("Act").   Under the draft regulations, operators are not required to disclose the chemical composition of hydraulic fracturing fluid prior to drilling.  After fracking, operators must disclose the chemicals in their fracturing fluid by chemical family and by percent of the fluid.  Disclosure of precise chemicals and formulas is not required.  Operators must also provide contact information for the person or entity that possesses the information withheld as a trade secret.
 
The California draft regulations reflect a national trend.  Alaska, however, bucks this trend with draft regulations released in December which require full disclosure of each fluid additive type by chemical name, CAS registry number and concentration.  The issue is far from resolved and we can certainly expect more regulation and litigation.

Will EPA Expand TRI to the Oil and Gas Extraction Sector?

Posted on March 1, 2013 by Molly Cagle

The Environmental Protection Agency (EPA) is planning a rulemaking to expand its Toxic Release Inventory (TRI) program in March 2013. Will the oil and gas extraction sector be included in the program’s expansion?

As part of the Emergency Planning and Community Right-to-Know Act (EPCRA), the TRI program gathers and makes public information about chemical and waste management activities at a wide variety of facilities. EPA touts TRI reporting as one mechanism to reduce the release of chemicals into the environment. It claims that the information gathered helps companies keep up with competitors’ efforts to reduce and recycle waste, and that the public dissemination of information can lead to citizen and EPA enforcement.

EPA considered including the oil and gas extraction sector in TRI in 1997, but decided against it due to technical issues in determining whether individual wells spread out over large geographic areas would be considered a “facility” under EPCRA. A petition filed by environmental groups claims these technical issues are resolved and points to the basin-level definition of facility in EPA’s greenhouse gas (GHG) reporting rule as an example of how oil and gas production operations can be aggregated. Meanwhile, the GHG reporting rule is still under administrative reconsideration and the definition of facility under that rule is a key point of contention between EPA and industry.

As recently as last week, EPA’s Inspector General “recommend[ed] that EPA develop and implement a comprehensive strategy for improving air emissions data for the oil and gas production sector.” If oil and gas production is included in TRI, how will it affect the sector? Will it be a way to get at chemical ingredients used in hydraulic fracturing that are otherwise protected from disclosure as trade secrets? Will the aggregation of data for TRI purposes spill over into air and waste permitting decisions? At a minimum, TRI would require industry to gather more information on chemicals, wastes and emissions and make it publicly available. Thus, industry should prepare for the corresponding public attention and regulation that may accompany TRI expansion.