DOE Conditionally Approves Second Natural Gas Export License

Posted on May 30, 2013 by Deborah Jennings

On Friday, May 17, the Department of Energy (DOE) announced it had conditionally authorized Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (collectively Freeport) to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from the Freeport LNG Terminal on Quintana Island, Texas.  This marks only the second time that the DOE has granted a natural gas export license to non-FTA countries, and only the first after DOE ceased action on all applications pending a study of the economic impacts of LNG exports.  The Freeport approval marks a noticeable, but likely incremental shift in US policy towards increased export of natural gas to non-FTA nations, opening up new markets for the boom in domestic natural gas production.

The DOE rejected opponents’ arguments that the project would be inconsistent with the public interest.  Among other reasons, the DOE found that the proposed exports are likely to yield net economic benefits to the US, would enhance energy security for the US and its allies, and were unlikely to affect adversely domestic gas availability, prices or volatility. Accordingly, DOE conditionally granted Freeport’s Application, subject to satisfactory completion of an environmental review pursuant to the National Environmental Policy Act (NEPA) by the Federal Energy Regulatory Commission (FERC) and DOE.  FERC will serve as the lead NEPA review agency. DOE will subsequently reconsider the conditional order in light of the NEPA analysis led by FERC and include the results in any final opinion and order.

Environmental issues will now take center stage as interested stakeholders seek to influence the government’s conclusions in the NEPA review.  In support of its application, Freeport extolled the following environmental benefits of the project:

•    Natural gas, the cleanest burning fossil fuel, would replace coal-fired power resulting in substantial reductions in greenhouse gas and traditional air pollutants. 
•    Compared to the average coal-fired plant, natural gas fired plants emit half as much carbon dioxide (CO2), less than a third of the nitrogen oxides, and one percent of the sulfur oxides. 
•    Natural gas, if used as a transportation fuel, also produces approximately 25 to 30 percent less CO2 than gasoline or diesel when used in vehicles, and is not a significant contributor to acid rain or smog formation.

Opponents of the project, however, are less convinced of its environmental benefits.  These include the Sierra Club, the Delaware Riverkeeper Network (consisting of 80 organizations), NRDC, among others.  Specifically, they assert that LNG exports will increase demand for natural gas, thereby increasing negative environmental and economic consequences associated with fracking, the process used for shale gas production.  They argue that the DOE’s two-part study of the economic impacts of LNG exports, upon which DOE relied in conditionally granting Freeport’s application, failed to consider the cost of the environmental externalities that would follow such exports, which include:

•    Environmental costs associated with producing more shale gas to support LNG exports;
•    Opportunity costs associated with the construction of natural gas production, transport, and export facilities, as opposed to investing in renewable or sustainable energy infrastructure;
•    Costs and implications associated with eminent domain necessary to build new pipelines to transport natural gas; and
•    Potential for switching from natural gas-fired electric generation to coal-fired generation, if higher domestic prices cause domestic electric generation to favor coal-fired generation at the margins.

Sierra Club and other organizations have previously challenged the adequacy of FERC’s and DOE’s NEPA determinations in other LNG export applications.  In the first LNG export license approval for Sabine Pass Liquefaction, LLC (DOE Docket. No. 10-111-LNG), Sierra Club, as an intervener in the FERC proceeding, challenged the adequacy of FERC’s NEPA compliance, and the lawfulness of the FERC’s determination to authorize the Project facilities. The FERC addressed these concerns and found that if a series of 55 enumerated conditions were met, the Project would not constitute a major Federal action significantly affecting the quality of the human environment. 

After FERC authorized the Liquefaction project, Sierra Club filed a motion to intervene out of time before DOE , again challenging FERC’s NEPA determinations.  DOE rejected Sierra Club’s motion, and granted the final order approving the LNG export on August 7, 2012.  Sierra Club subsequently sought a rehearing on the final order which was also rejected by the DOE in a January 25, 2013 order

Similarly, earlier this month, Sierra Club and other environmental organizations objected to the proposed Dominion Cove Point LNG export terminal in Maryland, arguing the project would harm the Chesapeake Bay’s economy and ecology, increase air pollution, and hasten fracking and drilling in neighboring states.  On May 3, 2013, the coalition filed public comments and a timely motion to intervene in the proceedings calling on FERC to conduct a thorough environmental review, or prepare an EIS, of the project.  The proposed terminal will be the only LNG export facility in the east coast, providing foreign markets with access to natural gas from the Marcellus Shale.

BSSE Issues Final Safety Culture Policy Statement

Posted on May 24, 2013 by Ronald R. Janke

When an environmental lawyer is asked to draft or review a corporate environmental, health and safety program, the question arises as to what elements should be included. In the post-mortem evaluation of an accident, spill or some near-miss, it is often apparent that the corporate culture has played an important role, whether for good or for ill, in the employees’ implementation of the company’s program or in their immediate reactions to an unanticipated event. New guidance by the Bureau of Safety and Environmental Enforcement (BSSE) should help to shape a positive corporate culture toward compliance and environment protection. BSSE was created as part of the Department of Interior’s response to the Deep Horizon incident.

In a short notice issued in the May 10, 2013 Federal Register, the BSEE has issued its Final Safety Culture Policy Statement. This Statement briefly describes what BSEE regards as nine foundational characteristics of a positive safety culture -- one that embodies a commitment to conducting business in a safe and environmentally responsible way. These nine characteristics are: Leadership Commitment to Safety Values and Actions; Hazard Identification and Risk Management; Personal Accountability; Work Processes; Continuous Improvement; Environment for Raising Concerns; Effective Safety and Environmental Communication; Respectful Work Environment; and Inquiring Attitude. BSEE adds that additional traits can amplify or extend these basic characteristics.

Virtually all of these characteristics are familiar to an experienced environmental compliance counselor. Indeed, BSEE credits the Nuclear Regulatory Commission, the Federal Aviation Administration and other organizations for their input. Accordingly, the BSEE’s concise listing of these characteristics should be recognized for their application not only to BSEE’s focus on improving safety culture for Outer Continental Shelf activities, but also to environmental, health and safety programs in general. Hence, the BSEE Safety Culture Policy Statement is worth considering and perhaps citing when environmental lawyers are asked to develop or comment upon such corporate programs.

Surprise, Surprise, Surprise: An Agency Cannot Revise Regulations In a Consent Decree

Posted on May 22, 2013 by Seth Jaffe

In a decision that should not have come as a surprise to anyone, the 9th Circuit Court of Appeals ruled late last month, in Conservation Northwest v. Sherman, that the Bureau of Land Management and other agencies implementing the Northwest Forest Plan could not amend the NFP without complying with the procedural requirements of the Federal Land Policy Management Act.  The rationale of the decision should apply far more broadly than just the FLPMA, however.  It should apply to any action by any agency purporting to amend agency regulations that would otherwise be subject to procedural requirements, such as notice-and-comment rulemaking, without complying with those procedural protections.

The history of the case itself it tortuous and not really relevant here.  The short version is that the agency defendants sought to resolve citizen litigation regarding the “Survey and Manage” provisions of the NFP by entering into a consent decree that would amend certain elements of Survey and Manage.  It was uncontested that, if the agencies had sought to do so outside the context of litigation, they would have had to follow FLPMA requirements.  The agencies – and the District Court which upheld entry of the consent decree – argued that, because approval of a consent decree is a “judicial act”, it is not subject to the FLPMA procedures.

I’ve got to say, that argument just seems like a non sequitur to me.  In any case, the 9th Circuit rejected it, concluding that:

"a district court abuses its discretion when it enters a consent decree that permanently and substantially amends an agency rule that would have otherwise been subject to statutory rulemaking procedures."

Well, yeah.

.

Fifth Circuit Shuts Down Climate Tort Plaintiffs Again

Posted on May 21, 2013 by Robert Wyman

Climate tort plaintiffs cannot catch a break in the Fifth Circuit Court of Appeals.  In a May 14, 2013, decision, the Fifth Circuit found—once again—that a group of Mississippi Gulf Coast property owners is barred from suing energy companies for tortiously emitting greenhouse gases (“GHGs”). 

The case, Ned Comer, et al. v. Murphy Oil USA, et al., has a long and twisting history.   At one point the case was widely viewed as in the vanguard of a handful of cases with the potential to radically realign the legal framework under which companies emit GHGs. 

Comer was originally filed in the Southern District of Mississippi in 2005.  Plaintiff coastal property owners alleged that the defendant companies’ emissions exacerbated climate change, which intensified Hurricane Katrina, which in turn damaged the plaintiffs’ property.  Invoking the federal courts’ diversity jurisdiction, the plaintiffs sought compensatory and punitive damages, asserting state law claims of nuisance, trespass, and negligence, among other claims. The district court dismissed the claims on the grounds that the plaintiffs lacked standing and that the matter was not justiciable under the political question doctrine. 

In November 2009, a Fifth Circuit panel reversed, in part, the district court’s dismissal of the claims.  The Fifth Circuit panel found that plaintiffs had standing to bring the state law claims, which the court found did not present political questions. 

The Fifth Circuit panel’s decision came in the wake of the Second Circuit’s precedent-setting September 2009 decision in State of Connecticut, et al. v. American Electric Power Company Inc., et al., in which the Second Circuit recognized the validity of federal common law public nuisance claims challenging the emission of GHGs, found that a number of states and private environmental groups had standing to press such claims, and rejected the argument that the claims are nonjusticiable.  Together, these cases were viewed as potentially ushering in a new era in which companies emitting GHGs would need to contend not just with EPA’s regulations but also with common law climate tort claims seeking injunctive relief or money damages.

The new era was not to be.  As to Comer, before the panel opinion’s mandate issued, a majority of the Fifth Circuit’s active, unrecused judges voted to rehear the case en banc.  Under Fifth Circuit rules at the time, this vacated the panel opinion reversing the district court’s dismissal.  Before the Fifth Circuit reheard the case en banc, however, another Fifth Circuit judge was recused, leaving the court with only eight active, unrecused judges.  Five of the remaining eight judges then determined that, with the additional recusal, the court lacked a quorum to proceed, and the judges issued in May 2010 an order dismissing the plaintiffs’ appeal from the district court’s decision for lack of a quorum. 

Plaintiffs petitioned the Supreme Court, seeking review of the Fifth’s Circuit dismissal of their appeal.  The Supreme Court denied the petition in January 2011, at which point one might have expected the case to be over. 

However, the same group of property owners proceeded to file a new complaint in May 2011 alleging many of the same nuisance, trespass, and negligence claims against the same energy company defendants.  The District Court again dismissed the claims, finding them to be barred by res judicata and the applicable statute of limitations, and also to fail to establish proximate causation and be preempted by the Clean Air Act.  In addition, as it had in Comer I, the court found that the plaintiffs lacked standing and that the claims raised nonjusticiable political questions. 

The Fifth Circuit’s May 2013 decision in Comer II upholds the district court’s dismissal of the climate tort claims.  The Fifth Circuit agreed the case is barred by res judicata, and did not address the district court’s other grounds for dismissal.  Despite the procedural quirks of Comer I, the Fifth Circuit found the district court’s decision in that case to represent a final judgment, never modified on appeal.  In addition, the Fifth Circuit found the district court’s final judgment to be on the merits because it adjudicated the jurisdictional issues of standing and justiciability. 

Fall of 2009 may turn out to have been an apogee of sorts for climate tort claims.  In June 2011, the Supreme Court issued a decision in Connecticut v. American Electric Power, holding that the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of GHG emissions.  Climate tort plaintiffs in a third case, Native Village of Kivalina v. Exxon Mobil Corp., et al., were also on the losing end of a September 2012 Ninth Circuit panel decision which found the plaintiffs’ claims that climate change would result in erosion and flooding of the island where they live to be a matter that should be left to the legislative and executive branches of government.  The Kivalina plaintiffs petitioned the Supreme Court in February for a writ of certiorari. 

As GHG levels in the atmosphere approach their highest levels in hundreds of thousands of years or longer, the prospects for new legislative or executive branch action are uncertain.  Although California recently implemented an economy-wide GHG cap and trade scheme, which began imposing compliance obligations earlier this year, that program is being challenged in the courts and there appears to be little appetite for comprehensive federal climate change legislation.  EPA proposed in April 2012 a GHG performance standard for new power plants pursuant to its Clean Air Act authority, but the timing for action with respect to existing power plants and other emitting sectors is unclear.  In light of the uncertainty on the regulatory and legislative fronts, and given the massive alleged harms involved, it may be too early to say if the climate tort is essentially finished or will in the future be resuscitated in a new and more potent guise.

Another Blow to the Divisibility of Harm Defense to Joint and Several Liability

Posted on May 20, 2013 by William Hyatt

When the Supreme Court issued its 2009 decision in Burlington N. & Santa Fe RR. Co. v. United States (Burlington Northern), Superfund practitioners were encouraged to think that CERCLA joint and several liability could be avoided by arguing that the harm is divisible and therefore capable of being apportioned.  Subsequent decisions in the lower courts have dampened that encouragement.  The most recent case in point is the May 1, 2013 decision by the U.S. District Court for the Eastern District of Wisconsin in United States v. NCR Corp. (NCR Corp.), the latest in a long line of decisions involving the Fox River Superfund Site..  After an eleven day trial, the District Court permanently enjoined NCR and the other defendants to comply with a unilateral administrative order requiring them to clean up PCB-contaminated sediments in the Fox River. 

The court had previously issued a preliminary injunction to the same effect, which was affirmed by the Court of Appeals for the Seventh Circuit on interlocutory appeal.  The District Court had also held that EPA’s remedy selection was not arbitrary, capricious or otherwise unlawful and that NCR was not entitled to contribution, decisions not yet reviewed by the Court of Appeals, leaving NCR with apportionment as its best argument in the District Court to avoid having to bear the entire burden of the cleanup.

In the latest decision, the District Court rejected attempts by NCR (and the other defendants) to prove that the “harm” in one of the operable units of the Fox River was divisible and could therefore be apportioned.  The Seventh Circuit had ruled that “harm,” for this purpose, “was best defined with reference to the contamination, as set forth in the government’s remediation rules.”  The District Court began its analysis of apportionment by pointing out that exceptions to joint and several liability will be “rare.”  According to the District Court, to demonstrate that the harm is divisible, a defendant bears the burden of proving two things: first, that the harm is theoretically capable of being divided, a question of law, and second, that there is a reasonable basis for an apportionment, a question of fact.  Burlington Northern, the District Court observed, involved only the second of these elements (“Yet, even though it is undeniable that Burlington Northern loosened the rules governing how a given harm might be apportioned, it did not address the key issue here, which is whether the harm is theoretically divisible in the first place” [emphasis in original]). 

Applying the analysis of Sections 433A and 875 of the Restatement (Second) of Torts, both Burlington Northern and the Seventh Circuit concluded that some harms will not be theoretically capable of apportionment.  Thus, if one of the causes is “sufficient” in and of itself to bring about the result, the harm will not be divisible and apportionment will not be appropriate.  The question is “whether one polluter should be considered such a significant cause of the harm that the harm attributable to that cause is incapable of being divided.”  Further, some kinds of harms will simply be unsuitable for divisibility by their very nature, as when a chemical is deemed to be harmful when it “surpasses a certain amount” or when a chemical becomes harmful only when mixed with other chemicals. 

It is interesting that the courts continue to follow the Second Restatement even though there is a more recent Third Restatement of Torts (2000).  While the courts have not provided any basis for their continued reliance on the Second Restatement, some commentators have opined that the Third Restatement can be read as trending away from joint liability and encouraging apportionment.

The District Court observed that whether a harm is theoretically capable of apportionment, although a question of law, is heavily dependent upon the underlying facts.  In this case, after an exhaustive review of the evidence, the District Court concluded that NCR had not met its burden of rebutting the government’s contention that the NCR discharges were a “sufficient cause” of the harm.  The District Court defined the “harm” as contamination in the sediments above 1 ppm of PCBs.  The Court found that NCR had not meaningfully disputed that the remedy for the sediments would have been the same even if NCR had been the only contributor.  In other words, because of NCR’s discharges, the same remedial measures would have been required regardless of whether or not discharges from others had occurred.  Since NCR’s discharges would, on their own, “require roughly the same remedial measures that are now being undertaken, [NCR] could be deemed a sufficient cause of the harm.”  Under those circumstances, the District Court concluded, the harm could not be deemed divisible and apportionment would be inappropriate.  

The District Court then went on to conclude that joint and several liability should attach even if NCR had not been a “sufficient cause” of the harm, “so long as the party is necessary to the harm.”  Thus, for example, if one party’s discharge produces a concentration below action levels, such that it is not a “sufficient cause” of the harm, when that discharge is combined with other discharges that cause the concentration to exceed the action level, the first discharge is a “necessary” cause and joint and several liability should attach.

The District Court concluded that the “harm” was not theoretically capable of apportionment, thereby avoiding the necessity of determining how apportionment might be accomplished.  This decision suggests that the battleground in the apportionment arena is likely to shift from how apportionment is conducted (the issue addressed by Burlington Northern) to the question of whether apportionment is appropriate in the first place.  This decision provides a useful guide for practitioners regarding how courts may evaluate this threshold question, and highlights the importance of how courts define the “harm” at issue.

Still Unclear Whether Twiqbal is Game Changer for Pleading Environmental Claims

Posted on May 15, 2013 by Richard Horder

What lessons can environmental litigators take from the Supreme Court’s recent jurisprudence on pleadings?  As most of the legal community is aware, the Court retired the “no set of facts” standard for a motion to dismiss under Rule 12(b)(6) and installed a “new” plausibility pleading standard in its 2007 decision, Bell Atlantic Corp. v. Twombly and 2009 decision, Ashcroft v. Iqbal.  Together, these cases are often affectionately called “Twiqbal” and have caused both the courts and plaintiffs a great deal of angst over the years since their pronouncement.  Yet, in the midst of the confusion, the greater question remains whether these decisions, as a practical matter, actually represent a game changer for pleading.

According to the latest Report to the Judicial Conference Advisory Committee on Civil Rules, there has been no increase in the rate of courts granting motions to dismiss following Twiqbal.  However, a recent study from the University of California Hastings College of Law disputes this conclusion and finds that dismissal rates of all claims have, in fact, increased since Twiqbal.  More importantly, the Hastings study finds a greater likelihood that a claim will be dismissed for factual insufficiency following the Supreme Court’s decisions.

Such studies raise the question of what impact, if any, Twiqbal has today on pleading environmental claims.  Thus far, although several courts have addressed environmental claims under the Twiqbal plausibility standard, the results have not been consistent.  Like the antitrust and civil rights claims addressed in Twombly and Iqbal, courts have often elevated the pleading standard for environmental claims due to their complexity, which often requires expensive discovery to flesh out the facts after filing the complaint.  An early dismissal in such circumstances stands to avoid substantial litigation costs.  Thus, if a court believes Twiqbal indeed represents a heightened pleading requirement, it is likely to require more specific facts to support the relevant environmental claims.

Accordingly, the environmental plaintiff should hedge its bets and take care in crafting its complaint if it is filing in federal court.  Specifically, the plaintiff may want to take more time to investigate prior to filing to better describe the defendant, it’s link to the site, the types of hazardous substances released, and how specifically the defendant’s actions caused the release and the damages incurred.  Depending on the circumstances, the plaintiff may want to avoid federal court altogether and rely on state claims as most states have yet to adopt the Twiqbal plausibility pleading standard.  On the other side of the field, the environmental defendant should more carefully consider the value of filing a motion to dismiss for factual insufficiency and attack any gaps between the facts alleged and the formulaic recitations of the elements of the claim.

Cheap Natural Gas Prices: Prelude to Energy Unreliability and Price Volatility

Posted on May 14, 2013 by Michael Hockley

Cheap gas prices driven by a boom in new shale gas development, coupled with more stringent emissions controls for coal fired plants, are causing a shift from coal to natural gas as the primary source of electric power in the United States.  In the short term, most welcome this shift because natural gas produces significantly fewer greenhouse gas (“GHG”) emissions.  But it appears increasingly certain that in the long run, this shift will result in decreased energy grid reliability and significantly higher electricity costs due to natural gas price volatility.

A recent Duke University study concludes that the cost of compliance with new emissions standards could make almost two-thirds of existing coal fired plants “as expensive as natural gas even if natural gas prices rise.”  This combination of low gas prices and the high cost of coal emissions compliance already has resulted in replacement of many coal plants instead of retro-fitting them with expensive environmental controls.  Add to that the uncertainty of potential future GHG emissions standards, and construction of new coal fired power plants is at a near standstill.  

The Rocky Mountain Coal Mining Institute (“RMCMI”) estimates that these factors will combine to force closure of up to 100 gigawatts of coal plant capacity, or approximately one third of the coal-fired fleet, resulting in a net increase of 32 gigawatts of gas capacity in the next three years. By 2020, RMCMI estimates that gas generating capacity will exceed that of coal, nuclear, and hydroelectric combined.  The RMCMI further projects that the shift to natural gas generation will cause the demand for natural gas to exceed even the most rosy new shale gas production predictions, causing volatile natural gas price swings.  

Grid reliability problems and gas price volatility were highlighted by Gordon van Welie, the head of New England’s power grid, during recent testimony before Congress.  He observed that more than half of New England's electricity is generated from natural gas, which has displaced a more diversified mix of oil, coal, gas and nuclear power over the past ten years.  

He testified that even though natural gas generally is plentiful, New England’s inadequate gas pipeline capacity limits supplies during peak usage.  For example, during a recent extreme cold snap in New England, “natural gas prices in late January spiked to $34/MMBtu, in contrast to prices below $4/MMBtu across most of the country.” The high gas prices caused wholesale electricity price spikes of more than 100% in January and 300% in February 2013 compared with 2012.  There also were “multiple instances where generators could not get fuel to run,” including one instance when more than 6,000 MW were offline due to fuel shortages.  Testimony at 7.  To avoid even worse problems in the future, he urges increased construction of pipeline infrastructure, but construction of gas pipelines will take time.  In the short and intermediate term, he predicts continued price volatility and grid reliability problems during peak usage.  

In addition to pressures from increased usage of natural gas in the United States, there also is increasing support within the Obama Administration to side with those seeking to export liquefied natural gas because prices in foreign markets are much higher.  If the export of natural gas becomes a reality, then domestic gas prices likely will increase even more.  

Although the vast shale gas reserves are fueling a shift to natural gas power generation with a corresponding reduction in GHGs, over-reliance on natural gas will almost certainly have the unintended consequence of causing grid reliability problems and volatile price spikes.  This likelihood argues for a more balanced energy portfolio with a broad mix of power from renewable, hydropower, coal, oil, nuclear, and natural gas.  To insure future stable energy prices and reliable energy production, electric utilities and state and federal regulators should take a long term view when deciding whether to shift to natural gas generation and decommission existing coal and nuclear plants.

Tenth Circuit to Decide Whether NEPA Requires Impacts from Water Diversion Project to Be Analyzed Based On Maximum Achievable Diversions

Posted on May 13, 2013 by Thomas Hnasko

On February 11, 2013, the United States District Court for the District of New Mexico denied a Motion for Preliminary Injunction filed by the Village of Logan, seeking to compel the Bureau of Reclamation (“BOR”) to perform an environmental impact statement (“EIS”) for the Ute Lake Diversion Project in eastern New Mexico.  The BOR issued an environmental assessment (“EA”), which analyzed the impacts from the diversion project based on the withdrawal of only 16,450 acre-feet per year (“af/yr”), despite the fact that the intake structure capacity is 24,000 af/yr.  The BOR contended that the intake structure did not have sufficient pumping capacity and other infrastructure to achieve 24,000 af/yr.

At the preliminary injunction hearing, Logan presented evidence that the Interstate Stream Commission of New Mexico (“ISC”), as the putative owner of the water rights within Ute Lake, had contracted to sell 24,000 af/yr and that the engineering analysis demonstrated sufficient existing capacity within the intake structure to accommodate withdrawals of 24,000 af/yr.  Consequently, similar to analyses required under other environmental laws, including the Clean Air Act, Logan argued that the impacts from the proposed project must be analyzed based on the maximum achievable withdrawal capacity of the intake structure.

The difference in the severity of impacts, based on 24,000 acre-feet withdrawals and 16,450 acre-feet withdrawals, was significant.  The EA conceded that, at 24,000 acre-feet per year, the minimum fisheries pool in Ute Lake – established to provide a minimum necessary habitat for recreational fishing – would be breached at least 20% of the time over a 30-year period.  Allowing the fisheries pool to be breached for at least 6 years over the life of the project created inter-related economic impacts, including significantly decreased property values on the shoreline, decreased tax receipts for the community, lost jobs, and significantly declining revenue for the New Mexico Department of Game and Fish.

The district court ruled that the EA, together with its finding of no significant impact (“FONSI”), was not arbitrary and capricious based on the assumption that the withdrawals would only reach 16,450 af/yr.  The Court stated that, “If in the future, more infrastructure is added to facilitate further withdrawals, primary analysis of the environmental impact may be undertaken then.”  The Court did not state whether such a “primary analysis” would occur within or outside of NEPA, and who would be responsible for initiating such an analysis.  Moreover, assuming that the Court meant an analysis of “direct impacts” by the phrase “primary analysis,” it is unclear how such an analysis would not suffer from predetermination under NEPA.  After all, the intake structure would already be built and there could not be any serious consideration of viable alternatives to the project.

The central issue on appeal is whether a federal agency may postpone part of its NEPA analysis to some unspecified time in the future, despite the fact that the capacity of the project, and the ability to withdraw 24,000 af/yr, is likely a “foreseeable” impact as defined in the Council on Environmental Quality regulations.

Energy Resources Exports: Good for America? Good for the Environment?

Posted on May 10, 2013 by Sheila Slocum Hollis

Proposals to export liquefied natural gas (“LNG”) produced in large part from shale gas recovered by hydraulic fracturing techniques or “fracing” continue the public debate about the desirability of exports of other energy resources.  This political, regulatory, environmental and trade debate engages powerful politicians, lobbyists, environmental groups, trade associations, developers, producers, state regulatory authorities, consultants, academics, and landowners, and a broad spectrum of the press and public. 

On its face, the notion of substantial exports of LNG to both countries with which the U.S. has free trade agreements (FTA) in place and those it does not, seems highly attractive.  Such exports would improve the balance of trade deficits, create new jobs associated with the production; and produce tax revenue.  And, from the broad environmental perspective, LNG exports would lower greenhouse gas emissions (GHG) in countries with heavy reliance now and in the future on coal or oil for electric generation, or in countries with need for replacement of nuclear facilities.

Query then, what are the factors that engender the impassioned debate on energy resource export policy?  Key are:  (1) fears of massive development of “frac” gas, freighted with concern over impacts on water, air, and use.  Analogous to the Keystone XL battle, another concern is development of the unconventional gas for the benefit of foreign interests, particularly those without an FTA in place with the U.S. (export to those countries with FTA agreements with the U.S. is deemed by law to be in the public interest).  (2) A second issue in contention on LNG is the impact on domestic energy prices if significant LNG exports limit availability of natural gas for domestic industrial and other uses.  (This issue harkens back to the energy crises of the 1970s when natural gas availability was tight and energy prices sky high.) 

So, although not explicitly an environmental-based objection, such opponents of LNG exports  find friendly bedfellows with the environmental objectors and the commercial interests concerned about their ability to rely upon and benefit from increased gas supply.  Industrial interests argue that stopping exports to non-FTA countries, particularly the insatiable Asian markets, will result in an industrial renaissance with jobs and development growing significantly.  And, some opponents of LNG exports to non-FTA countries ironically, (to this blogger at least) express little regard for overall environmental benefit to potential importing countries and thus the globe.  Rather, the impact on the United States from development of unconventionally sourced gas supply has been their focus point.  Yet, LNG is only part of the energy export debate.

Further complicating this analysis is the parallel potential increase in the export of U.S. coal to energy hungry nations, particularly in Asia.  As noted above, there is a broader questioning on the entire topic of U.S. energy resources exports: LNG, oil or refined products and coal.  In addition to the Keystone XL pipeline standoff, many environmentally oriented players (e.g., the Sierra Club) and political leaders have expressed reservations about the export of U.S. coal for two primary reasons – the impact on the U.S. of new infrastructure for storage, transportation and increased mining activities, and the increase in GHG emissions worldwide as a result of heavier coal-fired electric generation.  And in the past months, several proposed coal export projects have been scrapped. This energy export issue makes for a complicated stew of federal, local and regional politics.  What makes the entire public war of words (and the behind the scenes maneuvering) so fascinating is the question of who or what decides where and with what restrictions U.S. energy resources are to be marketed to the world – the federal agencies, the state and local governmental entities, or the market?  The next few months may provide guidance on LNG and perhaps the Keystone XL pipeline, however, the national and international implications of these decisions are so important that it is unlikely that peace will settle on these matters for decades.

EU Carbon Permits Cheaper Than A Cup of Starbuck’s Cappuccino!

Posted on May 9, 2013 by Stephen Herrmann

The world’s biggest carbon permit market was left in disarray after the European Parliament on April 16, 2013 rejected an emergency plan that would have forced companies to pay more for polluting.

Permits are a key part of the EU Bloc’s cap-and-trade plan to tackle global warming.  The European Parliament rejected a proposal to reduce the short-term supply of carbon permits as a way of pushing up the price.  At the launch of permits in 2005, the cost of a permit was nearly €30 for each ton of carbon emitted.  Following the vote on April 16, 2013, the price plummeted to a little over €2.5 a ton.

Making matters worse, following the vote, the European Parliament’s Environment Committee coordinators failed to set a date for a vote on an amended version.

Not only is the collapse of the cornerstone of its climate policy an embarrassment to the EU, but its failure resonates in other areas of the world.  Australia has fixed a carbon price of $23 a ton until moving to a floating market price following the EU model in 2015.  But, that is being reconsidered.  The EU situation, coupled with the U. S. Senate’s rejection on March 22, 2013 of a bill to impose a fee on carbon, means that the Obama Administration will have an uphill battle for any future proposals for a fee or tax on carbon emissions.

Decommissioning Power Plants: A Process Without a Standard Regulatory Framework

Posted on May 7, 2013 by Pamela Giblin

The confluence of aggressive new EPA regulations targeted at coal-fired power plants and low natural gas prices has made the decommissioning of older coal-fired plants substantially more likely in the coming years. Decommissioning a plant does not occur within a specific regulatory framework. In many cases, unless there is a suspected public health threat, potential environmental conditions at the plant do not have to be reported to government agencies. For that reason environmental remediation of a plant site is often addressed in the property sale and redevelopment process.

But the shut down and decommissioning of power plants nonetheless has significant regulatory implications, and the reality is that analysis of regulatory obligations and advance planning, including a proactive strategy for interacting with agencies and other stakeholders, is essential. Understanding obligations requires review of existing permits and the underlying regulatory landscape. And that landscape may shift under your feet – for example, new regulations for coal combustion residuals on the horizon may implicate the closure of certain waste management units.

The regulatory landscape may also provide opportunities to maximize value. There are a wide variety of emission credit programs that vary by jurisdiction. Identifying and capturing emission credits brings value to the table. Similarly, water rights, to the extent they are marketable in a particular jurisdiction, could be a source of revenue.

On the practical front, laying out a smooth decommissioning path through careful planning may help avoid stoking the fire of agency, local or public ire. The agency may have a formal role to play depending on the permit conditions or applicable regulations, but there may also be extensive agency oversight exercised through pursuit of enforcement actions. Particularly where community interest is high, local, state or federal agencies may have a heightened interest and enforcement provides them an avenue for involvement in the site that might not otherwise exist. So it is important to recognize the key stakeholders early and to understand how their interest may translate to pressure on an agency to leverage any violations.

If the site is one with good redevelopment potential, finding and working with a credible and savvy purchaser may keep the focus on the end game and allow for appropriate risk-based standards to be deployed against a more concrete vision for the future of the site. Once there is a well-developed understanding of the regulatory obligations associated with the particular plant and the overall objective for the site after decommissioning, it may be the moment to reach out to the state and federal agencies, and perhaps key stakeholders, with early, accurate and contextualized information.

Because there is not a standard regulatory framework to apply, experience over the coming years as plants come offline will be telling – it is that experience that will provide useful frameworks for up front, comprehensive analysis and strategic outreach for a smooth path through decommissioning.

Vapor Intrusion -- EPA Offers Guidance for Comment, but Now More Issues than Ever

Posted on May 3, 2013 by Kenneth Gray

After being taken to task by states and its own Inspector General for lack of final guidance on Vapor Intrusion, EPA has just released draft guidance documents for hazardous substances and petroleum products for comment.  The guidance documents are already generating discussion on the blogosphere, with comments due to EPA by May 24th.  Below are some of the issues EPA will have to address for its guidance for hazardous substances, and those of us addressing vapor intrusion for our clients.

Will the guidance collapse under its own weight?  EPA’s recommended framework relies upon collecting and evaluating multiple lines of evidence to support risk management decisions, detailed investigation of vapor intrusion including rigorous data quality objectives and recognition of seasonal/temporal variability in levels, consideration of options for building mitigation and subsurface remediation, decisions on how institutional controls can be crafted and monitored, and how the public will be involved.  The practical question is how much evidence and process is enough for a rational decision, and how costly and time-consuming an evaluation effort is justified?  Rarely are actions taken quickly in the CERCLA or RCRA world, but if there are risks, then they should be acted upon, and applying the guidance in other contexts will be challenging.  There already appears to be a consensus that EPA’s approach will be costly, and give vapor intrusion a life of its own in remedial decision-making.  EPA will have to address this issue, or find its guidance bypassed or ignored, given the need for timely decisions.

Should we all buy stock in fan manufacturers and makers of synthetic vapor barriers?  EPA offers (only on page 125 of 143) the question of weighing relative costs of characterization vs. engineered exposure controls.  If EPA guidance is followed, the cost of implementing the guidance will at times greatly exceed the cost of engineering controls.  Clients want the deal “done” and are not likely to wait for a lengthy deliberative process.

What role will EPA acknowledge for OSHA standards?  EPA proposes guidance for residential and non-residential buildings, but as a practical daily matter, there are separate standards and approaches for workplace and non-workplace scenarios.  EPA doesn’t directly address that issue in the 2013 guidance, even though the Agency had helpful statements in its 2002 proposal.  The issue gets even more complicated given the unsurprising obligation to consider potential future land uses.  If the default scenario is residential use, will the workplace vs. non-workplace distinction disappear?    

Déjà vu all over again?  Yogi Berra may have been commenting on repeats of the Mickey Mantle/Roger Maris back-to-back home runs, but it is pretty clear we will be reopening sites that may have had vapor intrusion issues, and assessing old sites at which the issue was never raised, or addressed following different procedures.  EPA settled the question in November 2012 for CERCLA five-year reviews by declaring vapor intrusion a mandatory topic, and plans to adopt final Hazard Ranking System amendments for vapor intrusion.  The guidance document applies to RCRA sites as well, but EPA knows that the guidance will surely find application at many types of sites where volatile chemicals may have been present.  Although the document is limited to CERCLA/RCRA guidance, its general purpose is to be helpful, and EPA should probably re-emphasize that not only are all sites different, the recommended framework may not even be practical when applied through other state programs.  At risk of over-generalizing, practitioners have learned to recognize the advantages of not following CERCLA and RCRA approaches. 

EPA will receive many comments, and there is some cleanup work to be done on the guidance documents, but look for the final documents to be completed in months, not years. 

Thanks to Jeff Carnahan, LPG, EnviroForensics, for sharing with me his expertise on vapor intrusion.  However, the thoughts expressed here are solely mine.

“Whenever”: EPA’s Continuing Power to Withdraw Dredge-and-Fill Permits

Posted on May 1, 2013 by Lisa Heinzerling

On April 23, a panel of the D.C. Circuit unanimously held in Mingo Logan Coal Co. v. EPA that the Clean Water Act gives EPA the authority to withdraw permits previously granted under section 404 of the Act.  The case emerged from EPA’s determination that the discharge of mining waste from the Spruce No. 1 mine in West Virginia into certain streams and tributaries would have an unacceptable adverse effect on environmental resources.  Based on this determination, EPA withdrew the Army Corps of Engineers’ prior specification of these streams and tributaries as disposal sites for the waste from mountaintop removal.

Several features of the case are striking.  First, the decision has obvious – and obviously important – implications for the ongoing debate over mountaintop removal and its irredeemable environmental impacts.  No longer can the argument be made that a permit, once issued, gives the permittee the power, in perpetuity, to blast the tops off of mountains and dump them into streams.

Second, the decision rested, for the most part, on a single word: “whenever.”  The Clean Water Act states that the Administrator of the EPA may withdraw the specification of a disposal site for dredge-and-fill material “whenever” she determines that it will have an “unacceptable adverse impact” on certain environmental resources.  The court took Congress, literally, at its word, and held that “whenever” means whenever – that is, even if EPA finds unacceptable adverse impacts after a permit has issued, the agency has the authority to pull the permit.

Third, as if to make certain its own holding is unambiguous, too, the court five times stated that the Clean Water Act unambiguously authorizes EPA to withdraw permits after they are issued.  EPA’s current interpretation of the Act is thus not changeable by a future administration.

Should permittees fear that “whenever” will become wherever?  It is worth remembering that EPA’s decision on the Spruce No. 1 mine was the first time EPA had – ever! – withdrawn a previously issued permit, in the 40-year history of the Clean Water Act.  Whether EPA will be emboldened by this decision, or will continue to mostly allow existing permits to stand, remains to be seen.