More than Indemnity?

Posted on September 8, 2009 by Brian Rosenthal

Is an indemnity for a third party’s liabilities just an indemnity and not a right of direct action? Yes, says the District Court for the Eastern District of Pennsylvania because the indemnitor avoided words like “assume,” “become liable for,” or “assume all of the liabilities and obligations.” 

 

Here, the United States argued the indemnitor had crossed the line of indemnity into the land of assumption. The federal government pointed to a settlement agreement where the indemnitor agreed to provide remediation required by “law, regulation, order, judgment, or settlement agreement.” Finding the question one of contractual intent, the court found the language to defend and hold harmless does not sound in assumption and is only triggered when an indemnitee suffers a claim or pays damages on a claim. Finding the agreement lacking in the standard words of assumption, the indemnitor prevailed by summary judgment. United States v. Sunoco, Inc. No. 05-633 (E.D. Pa. 2009).

NATIVE AMERICAN WATER RIGHTS IN OKLAHOMA - CHAPTER 2

Posted on September 3, 2009 by Linda C. Martin

On March 9, 2009, we posted an article regarding issues raised in the United States District Court for the Northern District of Oklahoma, State of Oklahoma v. Tyson Foods, Inc., et al., Case No. 05-CV-329-GFK regarding the Cherokee Nation ownership interests in the Illinois River and its watershed. In this case, the Attorney General for the State of Oklahoma sued several poultry companies for polluting the Illinois River and its watershed in eastern Oklahoma as the result of the disposal of poultry litter in the watershed. The suit alleges claims under CERCLA, RCRA, trespass and nuisance, among other things. The State of Oklahoma sought money damages and injunctive relief against the poultry companies.

The Poultry Defendants filed a Motion to Dismiss for Failure to Join the Cherokee Nation as a Required Party under Rule 19, or in the Alternative, Motion for Judgment on the Pleadings alleging the State lacks standing to prosecute the case. The Poultry Defendants alleged the Cherokee Nation possessed significant, legally protected interests in the Illinois River and it’s Watershed that would be impaired or impeded by its absence from the litigation, and further that the Court should grant judgment as a matter of law to the defendants because the State did not have standing to bring the suit.

 

In an apparent response to the Motion, the State of Oklahoma filed a “Notice of Filing of Document” to which was attached an agreement between the Cherokee Nation and the State of Oklahoma (Agreement). The Agreement, dated May 19, 2009, acknowledged, among other things, that the Cherokee Nation “has substantial interests in . . . water and other natural resources located within the Illinois River Watershed though the extent of those interests has not been fully adjudicated.”

The Agreement stated that the Cherokee Nation “to the extent of its interests in lands, water and other natural resources in the Illinois River . . . delegates and assigns to the State of Oklahoma any and all claims it has or may have against Defendants named in the [Tyson litigation] for their alleged pollution of the lands, water and other natural resources of the Illinois River Watershed resulting from poultry waste.” The Agreement purported to have a retroactive effective date of June 13, 2005, and was signed by the Attorneys General of the Cherokee Nation and the State of Oklahoma. 

The Poultry Defendants immediately challenged the Agreement by filing a “Counter-Notice” the following day, raising several issues as to the procedural and substantive validity of the Notice and Agreement under Oklahoma Law. The Court did not allow further briefing on the issues. 

Instead, the Court ruled on the Defendants’ Motions in a recent Opinion and Order. ___F.R.D.___ 2009 WL 2176337 (N.D. Okla. July 22, 2009)  The Court held that Oklahoma law explicitly sets forth the requirements the State must follow when entering into agreements such as the purported Agreement with the Cherokee Nation, which procedures were not followed in this instance. After examining other issues negating the validity of the Agreement, the Court concluded that that the Agreement was invalid and does not resolve or moot the Rule 19 Motion to Dismiss raised by the Poultry Defendants.  Id. at **3-4.

The Court undertook a Rule 19 analysis to determine if the Cherokee Nation is a required party to the action. Under Rule 19(a)(1), the Court analyzed (1) whether the Cherokee Nation claims an interest relating to the subject of the action, and (2) is so situated that disposing of the action in the Cherokee Nation’s absence may impair or impede its ability to protect the interest or leave an existing party subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations. 

The Court stated that Rule 19 does not require an absent party to possess an interest; it only requires that it claim an interest in the subject matter of the action. Id. at *4. Thus, the Court did not actually rule on the Cherokee Nation’s rights in the Illinois River watershed. It did, however, determine that the Cherokee Nation claims rights to the Illinois River and its watershed. The Court also noted that the Agreement operates as an admission by Oklahoma of the Cherokee Nation’s interest in the action. Id. at *5.

In addition, the Court examined portions of the Cherokee Nation Code, and noted that it evidences the Cherokee Nation’s interest in protecting the Illinois River and in vindicating its rights for pollution of the Illinois River watershed. It further claims an interest in recovering for itself civil remedies, including damages, for the same injuries to the watershed which are claimed in this action. The Court noted other provisions of the Cherokee Nation Code which evidence the Cherokee Nation’s substantial interest in the subject matter of the instant action. 

The Court noted: “The claimed interests of the Cherokee Nation in the water rights portion of the subject matter of this action are substantial and are neither fabricated nor frivolous.” (citation omitted) Id. at *6. Thus, the Court concluded that the Cherokee Nation claims an interest relating to the subject matter of the instant case for Rule 19 purposes. Id. at *7.

Under the second prong of Rule 19 analysis, the Court reviewed, among other things, whether the Cherokee Nation was so situated that disposing of the action in the Cherokee Nation’s absence might impair or impede its ability to protect its interest or leave an existing party subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations. After conducting its analysis of the foregoing factors, the Court concluded that proceeding with the case in the absence of the Cherokee Nation would subject the defendants to a substantial risk of incurring double, multiple or otherwise inconsistent obligations with respect to the claims for monetary damages, and would potentially cause prejudice to the Cherokee Nation’s sovereign interests, among other things. Id. at *9 (The parties had agreed that the joinder of the Cherokee Nation in the case was not feasible because of sovereign immunity. Id. at *9.

The Court also noted that the State had an adequate remedy if the damage claims were dismissed in that it could dismiss and refile the action after the State and the Cherokee Nation entered into a legally binding agreement under Oklahoma law authorizing the State to assert the Cherokee Nation’s CERCLA and other damage claims. Id. at *11.

The Court concluded that the State lacked standing to assert the claims of the Cherokee Nation, Id. at *12, and that the Cherokee Nation is a necessary party under Rule 19 with respect to the State’s claims for damages. Id. at *13. (The Poultry Defendants did not seek dismissal of the claims for injunctive relief.) The Court held that the Cherokee Nation is not a required party to the claims for violation of state environmental and agricultural regulations. Id.

On September 2, 2009, the Cherokee Nation filed its Motion to Intervene in the case, only two weeks prior to trial, and one day prior to the Pretrial Conference. 

Stay tuned, we’ll keep you updated.

2009 AMERICAN COLLEGE OF ENVIRONMENTAL LAWYERS ANNUAL MEETING

Posted on August 11, 2009 by Rachael Bunday

Portland, Maine - October 1-3, 2009

****THIS MEETING OPEN TO MEMBERS ONLY****

It's finally that time of year! The American College of Environmental Lawyers is having its Annual Meeting in Portland, Maine, October 1-3, 2009 at The Portland Regency http://www.theregency.com. Conference fees may be paid online below.  Please note that dress attire is business casual. The agenda is as follows:

THURSDAY

6 PM: Welcome Reception hosted by Bernstein Shur at the Portland Museum of
Art. Open to College members and their spouses/significant others.

 
FRIDAY

7:30-9:00 AM: Breakfast at the hotel (For members and spouses/significant others, in a large room)

9:00 - 9:15: Presidential Welcome and other announcements

9:15 - 10:30: Round the room member introductions: a quick 20 seconds of  info and humor to introduce yourself and describe what you do in the area of environmental law.
 
10:30 - 10:45: Break

10:45 - 11:50: Business Meeting: 1) Election and Induction of New Fellows (5 minutes); 2) Discussion and Vote on by-law changes (5-10 minutes); 3) Election of Officers and Board of Regents (5 minutes); 4) Plans for 2009-10 from incoming President (15 minutes); 5) Announcement of Committee Chairs and Duties of Committees—Nominating and Membership, Program and Education, Website, and Policy Committees; (5 minutes); 4) Committees each break into separate rooms have a preliminary meeting; those who have not previously selected a Committee can sit in on any meeting (45-50 minutes)

12:00 PM: College lunch at the hotel, guest speaker former Maine Governor Angus King

1:30-4:30: College member presentations/program

 

Session 1:

Climate Change Legislation and Regulation

Panelists:

Carol Dinkins – Vinson & Elkins, LLP

Bradley Marten – Marten Law Group PLLC

Stephen Ramsey – Yale Law School and Yale School of Forestry & Environmental Studies

Moderator:

David Farer – Farer Fersko

Session 2:

Climate Change Litigation

Panelists:

Linda Bullen – Lionel Sawyer & Collins

John Cruden – U.S. Department of Justice

Michael Gerrard – Columbia University Center for Climate Change Law

Jeffrey Thaler – Bernstein Shur

Moderator:

Karen Crawford –Nelson Mullins Riley & Scarborough LLP

 

Friday Excursion to Freeport

For those not attending the conference, enjoy a half-day trip to Freeport, Maine. Freeport is home to L.L. Bean’s famous flagship store, several dozen designer factory stores (Burberry, Coach, and Cole Haan to name a few), cafes, and a quaint historic district. Also nearby is Wolfe’s Neck State Park for anyone wanting to hike mild trails and enjoy the foliage, or possibly a stop in at the Delorme Map Store and visit “Eartha” the world’s largest to-scale and revolving globe

Cost $40 per person, minimum of 8 people needed

http://www.freeportusa.com/index.html

Saturday Lobster Bake

Take a short scenic ferry trip across Casco Bay to Peak’s Island. Once there, you will take a short walk to the historic Fifth Maine Regiment for a classic New England Lobster Bake, including fresh Maine lobsters, steamers, corn on the cob, blueberry cake, and more. The Fifth Maine Regiment sits atop Peak’s rocky coast, overlooking Cushing Island,  with quaint garden featuring breathtaking views, and  a wraparound porch (weather permitting) or dining hall. After the lobster bake, you can explore the island and return to Portland at your convenience (or come early and explore!); ferries run hourly through the evening. The bake will start at 12:30, so you’ll want to make the 11:15 (or earlier) ferry from the Casco Bay Ferry Terminal.

Cost $75 per person, minimum of 25 people needed

 
HOTEL

We have reserved a block of rooms at The Portland Regency, http://www.theregency.com, (207) 774-4200. There are a limited number of rooms still available. Please make sure to mention you are with the American College of Environmental Lawyers to get our discounted rate.

 

REGISTER HERE - http://acoel.eroievent.com/

 

PAY HERE - 
To add multiple items you will need to select one item at a time, add to your cart, then select "Continue Shopping".

 

ACOEL Meeting Fee and Optional Additions

 Friday and Saturday Night Dinner Options

Portland is Bon Appetit’s  2010 Foodiest Small Town (article here), and Food & Wine’s Kate Krader has written that Portland’s culinary scene is “all-around terrific.” While there is no shortage of great restaurants in Portland, most of the dining venues are small and intimate. For Friday night's No Host Dinner, we have secured reservations at the most talked (and written) about restaurants in Portland that are within walking distance of The Portland Regency (the conference hotel). Please e-mail acoel@bernsteinshur.com with your first and second choices for Friday (and Saturday, if applicable) night’s dinner. Please have your selection in no later than September 23.

 

555

Five Fifty-Five classifies its cuisine as modern American and New England fare. Chef Steve Corry changes the menu frequently, but keeps some signature dishes on the menu year-round, such as truffled lobster mac n’ cheese, pepper crusted diver scallops with butter and vanilla emulsion, and Bangs Island mussels.

http://fivefifty-five.com/

Reservations: Availability for 30 at 8:00

 

Hugos

Hugo’s chef/owner Rob Evans is this year’s recipient of the prestigious James Beard Foundation’s Best Chef Northeast. Hugo’s passion lies in its love for creative food, good wine and wholesome Maine ingredients. The culinary team at Hugo’s, under Rob’s direction, delivers regional cuisine that is both unexpected yet ultimately familiar. The menu will be a blind tasting menu (prix fixe, $85 per person).

http://hugos.net/

Reservations: 2 tables of 4 at 6:15

1 table of 4, 1 table of 6 at 6:30

 

Fore Street Grill

Fore Street’s menu changes daily is founded upon the very best raw materials from a community of Maine farmers, fishermen, foragers, and cheesemakers, who are also our friends and neighbors. Most of these Maine foods are organically grown or harvested wild, each brought to us at the peak of its season. Fore Street was one of five national finalists for the James Beard Outstanding Restaurant category.

http://www.forestreet.biz/en/Home

Reservations: 2 tables of 10 at 6:00; 1 table of 10 at 9:00

 

Street & Company

Street & Company specializes in fresh, local seafood dishes and is considered by many to be Portland’s best seafood restaurant. In fact, they serve only seafood based dishes. It is a local’s favorite that is in its 20th year of operation. Like most of the menus on this list, it changes daily, but there are a few specialty items that are always available.

http://www.streetandcompany.net/home

Reservations: 2 tables of 6 at 8:00

 

Cinque Terre

Cinque Terre serves “old school” Northern Italian cuisine, using produce grown on its owners’ farm. They were named in the “Top Ten Farm-to-Table Restaurants in the U.S.” by epicurious.com.

http://www.cinqueterremaine.com/main.html

Reservations: 2 tables of 10 at 6:30

 

Vignola

Vignola is the sister restaurant to Cinque Terre, and also serves Italian cuisine, in a more relaxed and casual atmosphere. It has an extensive beer and wine menu. Like Cinque Terre, the produce is grown by the owners for farm-to-table freshness.

http://www.vignolamaine.com/

Reservations: 2 tables of 10 at 6:30

 

Emilitsa

Emilitsa boasts a contemporary and casual atmosphere and brings a wide array of Mezethes (small plates), Megala Piata (large plates), and pristinely fresh seafood to the seacoast area. They take pride in honoring the breadth of traditional cuisine from all regions of Greece and prepare their dishes with as many local, fresh, organic, and natural ingredients as are available.

http://www.emilitsa.com/index.htm

Reservations: 16 seats at 7:00

 

Grace

Portland’s newest fine dining establishment is housed in a breathtaking restored church. The eclectic menu draws inspiration from all parts of the globe, using seasonal local ingredients.

http://www.restaurantgrace.com/

Reservations: 1 table for 10 at 7:00

 

For those of you staying for the weekend, also have the following reservations for Saturday night. Please note Saturday and your first and second choices in your response.

 

Fore Street Table for 10 at 6:00

Hugo’s Table for 6 at 8:30

Grace Table for 10 at 6:30

555 Table for 10 at 6:00

Stormwater Discharges From Construction Activity: What Next From EPA?

Posted on August 10, 2009 by Seth Jaffe

Construction and development companies praying for an economic recovery next year have something else to worry about: pending new EPA regulations regarding stormwater discharges from construction activities – and claims from environmental groups that EPA’s proposal isn’t stringent enough.

EPA issued a proposal on November 28, 2008. That proposal is complex, but the aspect of it that has received the most attention is the requirement that certain construction sites greater than 30 acres meet numerical turbidity limits (specifically, 13 nephelometric turbidity units (NTUs), which I had to include in this post just because it sounds so cool). Developers have opposed the numeric limits; the National Association of Home Builders estimates that the cost to comply would be $15,000 to $45,000 per acre.

On the other hand, the NRDC and Waterkeeper Alliance have threatened to sue EPA if EPA does not revise the propose rule to include post-construction controls as part of the rule. EPA has stated that it is not planning to do so. It’s not obvious that NRDC and Waterkeeper Alliance have the better of this specific debate, but the argument regarding post-construction controls is similar to the ongoing discussion in Massachusetts and elsewhere regarding the need for ongoing stormwater controls at properties other than industrial facilities that are already regulated.

The issue is not going to go away.  EPA is under a deadline to issue the rule by December 1, 2009.

MIXED RESULTS FOR OREGON CLIMATE CHANGE LEGISLATION

Posted on August 3, 2009 by Rick Glick

In my February 23, 2009 posting, I described Oregon Governor Ted Kulongoski’s ambitious agenda for state action to reduce green house gases (GHG). But then the tumbling economy got in the way and GHG lost its position at center stage. Still, some things did get done in the session that ended last month.

 

Oregon had already adopted renewable energy portfolio standards (RPS) for its electric utilities, adopted California automotive emissions standards and had the nation’s most generous business energy tax credit (BETC). This year the plan was to add a GHG cap and trade program and establish fuel standards, among other things.   Some of it passed, some didn’t, and the Governor has said little as to which he will sign into law.

 

SB 80 would have established the cap and trade program, in line with the Western Climate Initiative, but failed. The principle reason seems to be that a federal bill may be imminent. That legislation, the Waxman-Markey bill (HR 2454) passed the House on June 26 by a razor thin vote along party lines (219-212). The bill includes a provision pre-empting state legislation. Its fate is in the Senate, where it will need at least 60 votes to survive a filibuster, and the final shape of the bill is anyone’s guess. If it appears a federal cap and trade bill is not achievable or indefinitely delayed, SB 80 is likely to be reintroduced in Oregon in some form.

Other climate bills did pass. 

 

  • SB 38 authorizes a rulemaking to require registration and reporting for import to the state of electricity or fossil fuels. 
  • SB 101 establishes a GHG standard for electricity generation and prohibits utilities from long-term financial commitments for resources that do not meet the standard, effectively banning import of coal fired plant output. 
  • HB 2186 calls for development of a standard to reduce GHG emissions from transportation fuel 10% by 2020 and to conduct a study on retrofitting of trucks to make them more efficient; this element was proposed as mandatory, but a compromise calling for the study was adopted. This provision is intended to piggy-back on a California study of improving existing truck efficiency. HB 2186 also established a task force to look at reducing GHG emissions through integrated land use and transportation planning. 
  • HB 3039 promotes solar energy and provides a 2:1 RPS credit for each kWh produced from a qualifying facility operational before January 1, 2016 and that generates at least 500 kW. The bill sets a limit of 20 MW of capacity for the RPS credit. 

 

  • HB 2940 allows RPS credits for biomass facilities in place before 1995, capped at 100 MW. There are 8 biomass plants and one garbage burner in the state. This controversial bill was not proposed by the utilities, rather it was driven by the Oregon forest products industry in the interest of maintaining jobs and to provide a source of income for declining mills. Thought the bill had broad bi-partisan support among legislators, many observers see it as inappropriate to give RPS credits to old generating plants, predicting that existing hydropower will be right behind. The concept behind RPS for many is to offer an incentive for new development of renewable resources, not to reward existing ones. As of this writing the Governor has not acted on the bill but is known to be considering a veto.

 

  • HB 2472 modifies the BETC to include manufacture of electric vehicles among the industries eligible for the credit, along with renewable energy facilities and manufacturers of equipment for renewable energy production. The BETC was reduced to match budget concerns, and the Governor is also considering a veto of this bill in the interest of keeping Oregon competitive to attract clean tech business.

All eyes now shift to the U. S. Senate to see if there will be federal GHG controls enacted. It may take a while, these things take time.

MIXED RESULTS FOR OREGON CLIMATE CHANGE LEGISLATION

Posted on August 3, 2009 by Rick Glick

In my February 23, 2009 posting, I described Oregon Governor Ted Kulongoski’s ambitious agenda for state action to reduce green house gases (GHG). But then the tumbling economy got in the way and GHG lost its position at center stage. Still, some things did get done in the session that ended last month.

 

Oregon had already adopted renewable energy portfolio standards (RPS) for its electric utilities, adopted California automotive emissions standards and had the nation’s most generous business energy tax credit (BETC). This year the plan was to add a GHG cap and trade program and establish fuel standards, among other things.   Some of it passed, some didn’t, and the Governor has said little as to which he will sign into law.

 

SB 80 would have established the cap and trade program, in line with the Western Climate Initiative, but failed. The principle reason seems to be that a federal bill may be imminent. That legislation, the Waxman-Markey bill (HR 2454) passed the House on June 26 by a razor thin vote along party lines (219-212). The bill includes a provision pre-empting state legislation. Its fate is in the Senate, where it will need at least 60 votes to survive a filibuster, and the final shape of the bill is anyone’s guess. If it appears a federal cap and trade bill is not achievable or indefinitely delayed, SB 80 is likely to be reintroduced in Oregon in some form.

Other climate bills did pass. 

 

  • SB 38 authorizes a rulemaking to require registration and reporting for import to the state of electricity or fossil fuels. 
  • SB 101 establishes a GHG standard for electricity generation and prohibits utilities from long-term financial commitments for resources that do not meet the standard, effectively banning import of coal fired plant output. 
  • HB 2186 calls for development of a standard to reduce GHG emissions from transportation fuel 10% by 2020 and to conduct a study on retrofitting of trucks to make them more efficient; this element was proposed as mandatory, but a compromise calling for the study was adopted. This provision is intended to piggy-back on a California study of improving existing truck efficiency. HB 2186 also established a task force to look at reducing GHG emissions through integrated land use and transportation planning. 
  • HB 3039 promotes solar energy and provides a 2:1 RPS credit for each kWh produced from a qualifying facility operational before January 1, 2016 and that generates at least 500 kW. The bill sets a limit of 20 MW of capacity for the RPS credit. 

 

  • HB 2940 allows RPS credits for biomass facilities in place before 1995, capped at 100 MW. There are 8 biomass plants and one garbage burner in the state. This controversial bill was not proposed by the utilities, rather it was driven by the Oregon forest products industry in the interest of maintaining jobs and to provide a source of income for declining mills. Thought the bill had broad bi-partisan support among legislators, many observers see it as inappropriate to give RPS credits to old generating plants, predicting that existing hydropower will be right behind. The concept behind RPS for many is to offer an incentive for new development of renewable resources, not to reward existing ones. As of this writing the Governor has not acted on the bill but is known to be considering a veto.

 

  • HB 2472 modifies the BETC to include manufacture of electric vehicles among the industries eligible for the credit, along with renewable energy facilities and manufacturers of equipment for renewable energy production. The BETC was reduced to match budget concerns, and the Governor is also considering a veto of this bill in the interest of keeping Oregon competitive to attract clean tech business.

All eyes now shift to the U. S. Senate to see if there will be federal GHG controls enacted. It may take a while, these things take time.

GLOBAL WARMING: PROBABLY AN INCREMENTAL SUCCESS STORY

Posted on July 31, 2009 by Stephen E. Herrmann

On July 8, 2009, at the meeting of G8 world leaders, the United States agreed to a benchmark to limit climate change. It joined some other industrialized countries by agreeing that the globe should not warm up more than 2º Celsius (that is 3.6º Fahrenheit). A limit of 2º Celsius arose out of a scientific consensus. Scientists assembled by the United Nations in 2007 said that the world could face significant dangers if we warmed it up more than 2º Celsius. But David Archer at the University of Chicago said that it’s not a hard and fast danger point, more of a judgment call.

 

The results left some Western leaders cheering. British Prime Minister Gordon Brown called the group’s statement a “historic agreement.” Germany Chancellor Angela Merkel said it was “a clear step forward.” However, White House Press Secretary Robert Gibbs was a little less definite, saying: “I think in many ways success for us is going to be getting something through Congress and to [the President’s] desk. It puts in place a system, a market-base system, that lessens the amount of greenhouse gases in the air. Look, that’s going to be the true measure of things.” 

So what was agreed to on July 8? Michael Forman, Obama’s chief negotiator at the Summit said: [The G8 countries] pledged to confront the challenges of climate change and committed to seek an ambitious global agreement. They agreed to join with other countries to achieve a 50% reduction in global emission by 2050 and a goal of 80% reduction by developed countries by 2050.” 

 

But, we should realize that there is a hitch. The 50%and 80% reductions do not refer to the same starting number. The language in the G8 declaration is that there will be an 80% reduction from 1990 or later years. In other words, nations could pick their own starting point. In the United States, emissions have increased nearly 16% since 1990 so there is quite a bite of room in deciding where to start. Also, much of the world’s population is in non-G8 countries. China, India, Mexico and Brazil feel the better-established nations are not doing enough in the short term. They also worry that major reduction commitments on their parts, even if below the 80% target of rich nations, would hamper their economic growth.

 

But, it would certainly appear that the G8 accord is probably an incremental success. Until now, the United States has resisted embracing a target because it implied a commitment to dramatically change the way the world generates electricity, fuels its cars and builds its houses. The long range goals over the coming decades may be easier to agree upon when what the short-term action should be to start moving in the right direction. We all need to hope for the best.

 

DC CIRCUIT UPHOLDS US EPA'S PM 2.5 NON-ATTAINMENT DESIGNATIONS

Posted on July 17, 2009 by David Flannery

On July 7, 2009, the United States Court of Appeals for the D.C. Circuit rendered its decisions in the PM2.5 Designations Litigation, Catawba County, NC v. EPA, No. 05-1064 and consolidated cases (D.C. Cir. July 7, 2009). Applying the standard of review set forth in Section 307(d)(9) of the Clean Air Act, which “requires the Court to set aside EPA’s final actions when they are excess of the agency’s statutory authority or otherwise arbitrary and capricious,” the Court denied all of the petitions for review except Rockland County, New York and remanded the designation of Rockland County to EPA for a “coherent explanation of its designation”. Slip op. at 3, 9, 53-56. 

 

Overall, the Court complimented EPA on its handling of “the complex task of identifying those geographic areas that contribute to fine particulate matter pollution”. Id. The Court concluded “EPA both complied with the statute and, for all but one of the 225 counties or partial counties it designated as nonattainment, satisfied – indeed, quite often surpassed – its basic obligation of reasoned decisionmaking.” Id. (emphasis added).

 

The Court rendered two decisions: a published per curiam opinion and an unpublished memorandum attached to the judgment. In the per curiam opinion, the Court explains its holdings rejecting the following general challenges to the designations: (1) EPA violated the Administrative Procedure Act (APA) by failing to publish both the Designations Rule and the Holmstead Memo for notice and comment; (2) EPA violated the section of the Clean Air Act governing designations, § 107(d), by applying the C/MSA presumption and nine-factor test to identify areas that contribute to nearby PM2.5 violations; (3) EPA’s analysis contained such serious “methodological deficiencies and inconsistencies,” including the carbon error, as to render the entire Designations Rule arbitrary and capricious; and (4) EPA acted arbitrarily and capriciously in making particular designations.  Id. at 10. The court in its opinion discusses in detail the New York county designations, rejects the petition as to all of the New York counties except Rockland County, and dismisses all of the other county-specific challenges in one paragraph concluding that “none of them has merit” Id. at 55. The memorandum, which will not be published pursuant to D.C. Circuit Rule 36, sets forth the Court’s rationale for rejecting the other county-specific challenges: Oakland County, Michigan; Anderson, Greenville, and Spartanburg Counties, South Carolina; Catawba County, North Carolina; Guilford County, North Carolina; Catoosa County, Georgia; Porter County, Indiana; Randolph County, Illinois; and the Ohio Townships.

 

On its own motion, the Court ordered the Clerk to withhold issuance of the mandate until after issuance of any timely petition for rehearing or petition for rehearing en banc. However, “any party may move for expedited issuance of the mandate for good cause shown.” Under Rule 40 of the Federal Rules of Civil Procedure, any petition for panel rehearing is due within 14 days after entry of judgment. The judgment was filed July 7, 2009. 

 

Among the highlights of the decision are the following:

 

  1. Speciation data is useful for the area designation process. It reveals the kinds of particles (carbon, sulfate, nitrate, crustal particles, etc.) that account for an area’s PM2.5 problem and suggests, by extrapolation, the kinds of sources most responsible for the problem. Id. at 11. 
  1. No petitioner challenged EPA’s decision that a county boundary would determine the extent of an area reflected by a violating PM2.5 monitor. Id. at 13. 
  1. The Court upheld the C/MSA presumption to identify those areas that, although deemed to be meeting the standard themselves, are contributing to nearby violations.
  1. Weighted emissions scores (WESs) only provide a measure for comparing counties within the same C/MSA. “Importantly, because these scores scale a county’s raw emissions based on attributes specific to individual C/MSA – i.e., the urban excess number and total level of metropolitan emissions – [WESs] only provide a measure for comparing counties within the same C/MSA.”   Id. at 15.
  1. PM2.5 designations are exempt from notice-and-comment rulemaking. Id. at 15-18.
  1. The mandate in § 107(d)(4) that EPA apply the C/MSA presumption in ozone and carbon monoxide designations, while the section pertaining to PM2.5 designations says nothing about the C/MSA presumption and instead provides that PM2.5 designations must be “based on air quality monitoring data,” does not prove that Congress intended to preclude EPA from using the C/MSA presumption in PM2.5 designations. Id. at 22-24.
  1. The word “contribute” in § 107(d)(1)(A)(i) is ambiguous. “Contribute” does not necessarily connote a significant causal relationship. EPA may not designate a county as contributing to nonattainment even if “corrective measures in [the county] will do nothing to address the problem or help achieve compliance in the nonattainment area.” Id. at 29. A contribution may simply exacerbate a problem rather than cause it. Id. 
  1. EPA “is free to adopt a totality-of-the-circumstances test to implement a statute that confers broad discretionary authority, even if that test lacks a definite ‘threshold’ or ‘clear line of demarcation to define an open-ended term’.” Id. (citations omitted). To be reasonable such an “all-things-considered standard” must simply define and explain the criteria the agency is applying. The Holmstead Memo and the Technical Support Document satisfied this test “in spades”.  Id. at 30-31.
  1. EPA does not owe to the states “substantive deference”. EPA has “no obligation to give any quantum of deference to a designation that ‘it deems necessary’ to change.” Id. at 32. 
  1. EPA did not err in refusing to consider emissions reductions from CAIR and the NOx SIP Call. With respect to CAIR, there was no “assurance” when EPA promulgated its PM2.5 designations in December 2004 as to “which power plants would reduce SO2 and NOx emissions and how they would do so,” i.e., installation of controls or trading, “near term,” and the NOx SIP Call “has nothing to do with reducing SO2”. Id. at 37-39. EPA may account for future emissions reductions in contribution designations only when “it is evident that federally enforceable pollution controls will yield significant near-term reductions in emissions.”  Id. at 37.
  1. The carbon error did not render the designations arbitrary and capricious because EPA “used the best available information”. Id. at 39. “EPA was not obligated to upend the designation process when it discovered a mistake in its speciation profile for certain power plants. EPA used the best information available in making its designations, and that is all our precedent requires.” Id. at 41.

MORE CLEAN WATER ACT SUITS ON THE WAY?

Posted on July 14, 2009 by Fournier J. Gale, III

Part II

And now for the rest of the story…

As reported in this blog in January, the Eleventh Circuit’s recent decision in Black Warrior Riverkeeper, Inc. v. Cherokee Mining, LLC, 548 F.3d 986 (11th Cir. 2008), left an opening for Clean Water Act citizen suits to proceed despite an enforcement action being filed by the state environmental agency on the heels of the issuance of a plaintiffs’ 60-day notice letter. However, the recent dismissal of the Cherokee Mining case upon its return to District Court may give some pause to those who file citizen suits in the future.

As reported in more detail in January, the defendant in Cherokee Mining originally filed a Motion to Dismiss plaintiff’s Clean Water Act citizen suit for lack of subject matter jurisdiction arguing that the suit was barred under Section 309 because the state environmental agency had commenced enforcement subsequent to the plaintiff’s issuance of a 60-day notice letter. The plaintiff successfully defeated the Motion to Dismiss in the District Court by relying on what was a largely overlooked provision of Section 309 stating that the bar to citizen suits does not apply to actions filed “before the 120th day after the date on which…notice is given.” 33 U.S.C. § 1319(6)(B)(ii). The Eleventh Circuit, which is still the only Court of Appeals to address this issue, affirmed the District Court’s decision. See also Black Warrior Riverkeeper v. Birmingham Airport Authority, 561 F. Supp. 1250 (N.D. Ala. 2008) (applying the 120th-day exception to the citizen suit bar and allowing the same plaintiff to go forward in a separate case filed against other defendants).

 

However, upon Cherokee Mining’s return to District Court, the plaintiff’s case was dismissed on mootness grounds—arguably the same grounds on which Congress based the statutory bar to citizen suits filed after a state enforcement action. Specifically, the United States District Court for the Northern District of Alabama dismissed plaintiff’s claims for injunctive relief and civil penalties as moot because the issuance of a consent order by the state environmental agency adequately addressed the plaintiffs’ alleged violations. Indeed, despite allegations of additional violations subsequent to the issuance of the consent order, the District Court concluded that the plaintiff had failed to demonstrate that there was a serious prospect that the alleged violations would continue to occur. The District Court further held that because the consent order required Cherokee Mining to pay a penalty of $15,000, the Court was reluctant to second guess the state agency enforcement action. Thus, the Court dismissed plaintiff’s claims as moot. Black Warrior Riverkeeper v. Cherokee Mining, No. 07-AR-1392-S (N.D. Ala. Jun. 5, 2009).

Notwithstanding the ultimate outcome of Cherokee Mining, the back door to citizen suits opened by the Eleventh Circuit’s opinion is still available. In other words, at least in Alabama, Florida, and Georgia, a plaintiff can proceed with a Clean Water Act citizen suit despite enforcement action taken by the state environmental agency as long as the plaintiff files suit within 120 days of its 60-day notice letter. However, the entry of an administrative order by the state may quickly make the citizen suit moot. As aptly noted by the District Court, “[i]f there is a lesson to be learned from this case, it is that a citizen who admittedly has a right to file a citizen suit seeking to remedy a perceived water violation, although knowing, as a matter of law, that ADEM has concurrent jurisdiction over the issue, is taking the risk that he will be headed off at the pass by subsequent appropriate ADEM enforcement action.” Cherokee Mining, No. 07-AR-1392-S at 14-15.

New Jersey Follows Massachusetts into the World of Licensed Environmental Consultants and Privatized Cleanup Oversight

Posted on July 9, 2009 by David Farer

On May 7, 2009, New Jersey enacted the Site Remediation Reform Act (S.1897/A.2962). SRRA, with its new Licensed Site Remediation Professional (“LSRP”) Program, is having a far-reaching impact on the way transactions and redevelopment projects are being planned and handled in New Jersey.

 

Following the Massachusetts Licensed Site Professional program, SRRA establishes a licensing procedure for consultants and contractors to be certified as LSRPs and overseen by a licensing board. 

 

In most cases New Jersey DEP will no longer be required or authorized to review and approve investigation and cleanup plans in advance, or to issue No Further Action letters and Covenants Not To Sue when cleanups have been wrapped up. Instead, LSRPs will determine the propriety and conclusion of investigations and cleanups, and will issue the final sign-off document, which is now to be known as a "Response Action Outcome" ("RAO"). LSRPs – rather than DEP – will determine the required amount of any financial assurance, and will determine when and to what extent the financial assurance can be reduced as a cleanup progresses. 

 

Once the LSRP issues the RAO, the party conducting the cleanup will be deemed to have received a Covenant Not to Sue by operation of law. Following an LSRP’s issuance of an RAO, DEP will have three years to audit the LSRP’s work, though the bases for DEP to invalidate an RAO are limited.

 

By August 7, 2009, a temporary licensing program must be operational, and by November 7, DEP must issue interim rules for implementing the new law. Once the interim rules and temporary licensing program are in place, all new projects subject to the state's cleanup laws – including transaction-triggered investigations and cleanups under the state's Industrial Site Recovery Act – will be overseen by LSRPs rather than DEP, unless they fall into specific exceptions such as sites ranked most highly on a new ranking system to be established by DEP under the reform law.

Parties currently under DEP oversight for existing cases will have up to three years to switch over to the LSRP program.

 

Pursuant to the reform law, DEP is directed to establish a permitting program for institutional and engineering controls, with specific financial assurance requirements. (New Jersey has not adopted the Uniform Environmental Covenants Act.)

 

The state's innocent purchaser protections are modified so that LSRP-certified work is deemed equivalent to that overseen and approved by DEP.

 

DEP is directed to establish, within a year, "presumptive remedies" for cleanups of residential properties, schools and day care facilities. Such projects are to be cleaned up to unrestricted use standards, or pursuant to a presumptive remedy, with certain exceptions available on a case-by-case basis.

 

The reform law also alters reporting obligations in situations where spills and discharges are discovered. Until now, it has been the responsibility of a property owner or operator – not a third party such as a consultant or potential purchaser – to report discovery of contamination to DEP, except as to spills or discharges from regulated underground storage tank systems. Under SRRA, however, LSRPs will now have specific affirmative obligations to report knowledge of contamination directly to DEP in a variety of settings. 

DEP has been gearing up for the new program. Aside from its current efforts in development of the interim rules and temporary licensing procedures, DEP is also in the process of developing standard operating procedures, applications, fees and forms, and guidance documents covering subjects such as mandatory timeframes and presumptive remedies.

KANSAS RENEWABLE ENERGY ACT: UNUSUAL COMPROMISE RESURRECTS COAL PLANT CONSTRUCTION; LIMITS AUTHORITY OF STATE ENVIRONMENTAL AGENCY

Posted on July 9, 2009 by Charles Efflandt

With the May 2009 enactment of comprehensive energy legislation, Kansas joined a majority of states establishing renewable and clean energy requirements. Although a significant step in the development of renewable energy, the story receiving the most attention was that the new law, ironically, resurrected a presumed-dead coal-fired power plant project. That project, which involved two proposed 700 megawatt coal-fired generating units, had previously been denied a construction permit solely due to concerns over the climate change impact of perceived excessive emissions of carbon dioxide. The legislature further enacted limitations on the broad regulatory authority relied on by the state environmental agency to deny the coal plant project a permit. The question now being asked is whether the complex political compromise that enabled the passage of the legislation was a “win-win” or a “no-win” result.

KANSAS RENEWABLE ENERGY ACT: UNUSUAL COMPROMISE RESURRECTS COAL PLANT CONSTRUCTION; LIMITS AUTHORITY OF STATE ENVIRONMENTAL AGENCY

Posted on July 9, 2009 by Charles Efflandt

With the May 2009 enactment of comprehensive energy legislation, Kansas joined a majority of states establishing renewable and clean energy requirements. Although a significant step in the development of renewable energy, the story receiving the most attention was that the new law, ironically, resurrected a presumed-dead coal-fired power plant project. That project, which involved two proposed 700 megawatt coal-fired generating units, had previously been denied a construction permit solely due to concerns over the climate change impact of perceived excessive emissions of carbon dioxide. The legislature further enacted limitations on the broad regulatory authority relied on by the state environmental agency to deny the coal plant project a permit. The question now being asked is whether the complex political compromise that enabled the passage of the legislation was a “win-win” or a “no-win” result.

Tenth Circuit Holds Collateral Source Rule Inapplicable to CERCLA 113 Actions

Posted on July 8, 2009 by Delmar Ehrich

Friedland v. Indus. Co, No. 08-1042, 2009 U.S. App. LEXIS 11660 (10th Cir. May 29, 2009). 

 

The United States Court of Appeals for the Tenth Circuit has held that the collateral source rule is inapplicable in CERCLA actions, affirming the district court’s grant of summary judgment to defendants on the ground that Mr. Friedland already recouped all of his recoverable costs from other persons and therefore had no damages to recover. 

 

The plaintiff, Mr. Friedland, is the former director and president of the Summitville Consolidated Mining Company, Inc. (“SCMCI”). SCMCI operated a gold mine from 1984 to 1992. Defendants-appellees helped construct the mine and provided quality assurance regarding the heap leaching system – where cyanide solution was sprayed on gold-bearing ore to remove the gold. 

 

SCMCI declared bankruptcy and abandoned the mine in 1992. EPA thereafter undertook actions to address acid mine drainage and other conditions at the facility. In 1996, the United States and the State of Colorado sued Mr. Friedland under CERCLA § 107 to recover the costs of these measures. Mr. Friedland settled the governments’ claims against him for approximately $20 million, after incurring legal fees in excess of $28 million. 

 

Mr. Friedland brought several actions against contractors that had built the mining facility. He entered into a series of settlement agreements with these parties or their insurance companies pursuant to which he recovered in excess of the $20 million he agreed to pay to settle the cost-recovery claims by the State of Colorado and the United States. In the latest action, Friedland sued The Industrial Company and another defendant. The defendants moved for summary judgment on the ground that Mr. Friedland had no damages or right to contribution under CERCLA § 113(f) because he had recovered in an amount exceeding the payment made to the United States and State of Colorado. The district court granted summary judgment and Mr. Friedland appealed, arguing that: (1) the collateral source rule prohibits crediting the defendants in the amount of the settlement money he received from the insurance companies; and (2) the settlement money should be credited toward the $28 million in legal fees as opposed to the $20 million settlement amount. 

 

The Tenth Circuit upheld the district court’s ruling, holding that the collateral source rule does not apply to CERCLA contribution actions. The Tenth Circuit differentiated CERCLA contribution action which involves “two or more culpable tortfeasors” from personal injury actions where innocent plaintiffs seek to be made whole. The Tenth Circuit held that allowing a CERCLA contribution plaintiff to recover more than the response costs he paid out of pocket “flies in the face of CERCLA’s mandate to apportion those costs equitably among the parties” and would create a windfall for those responsible for the pollution. CERCLA § 9613(f)(1).

 

The Tenth Circuit also held that under Hess Oil Virgin Islands Corp. v. UOP, Inc., 861 F.2d 1197 (10th Cir. 1988) and Burlington Northern Railroad, 200 F.3d 679 (10th Cir. 1999), the defendant-appellees were entitled to a full credit in the amount of the settlements Mr. Friedland received if the damages he alleged against defendant-appellees were the same as those addressed the settlements. The settlements did not expressly allocate the settlement money between settling the underlying litigation or to legal defense. The Tenth Circuit held that Mr. Friedland’s failure to allocate the settlement monies between legal fees and response costs was fatal to his contention that the defendants-appellees were not entitled to a credit in the settlement amount. Therefore, the Tenth Circuit upheld the district court’s finding that there was no basis to allocate the settlement money between the clean-up costs and legal fees, and defendants-appellees were entitled to a full credit in the amount of the settlements.

Coeur Alaska, Inc. v. Southeast Alaska Conservation Council et al

Posted on June 24, 2009 by Theodore garrett

On June 22, 2009, the Supreme Court held 6-3 that the Corps, rather than EPA, has authority to permit the discharge of a rock and water mixture called “slurry” from a mine froth flotation process to a nearby lake, reversing the Ninth Circuit’s decision that the proposed discharge would violate the EPA’s performance standard and §306(e) of the Clean Water Act.  Coeur Alaska, Inc. v.. Southeast Alaska Conservation Council et al., __U.S.__ (No.  No. 07–984, June 22, 2009).  Section §402(a) of the Clean Water Act forbids the EPA to issue permits for fill materials falling under the Corps’ §404 authority. Because §404(a) empowers the Corps to “issue permits . . . for the discharge of . . . fill material,” and the agencies’ joint regulation defines “fill material” to include “slurry . . . or similar mining-related materials” having the “effect of . . . [c]hanging the bottom elevation” of water, 40 C.F.R. §232.2, Justice Kennedy's opinion for Court states, the slurry Coeur Alaska wishes to discharge into the lake falls within the Corps’ §404 permitting authority.  The Clean Water Act is ambiguous on the question whether §306 applies to discharges of fill material regulated under §404, however EPA’s internal “Regas Memorandum” states that the performance standard applies only to the discharge of water from the lake into the downstream creek, and not to the initial discharge of slurry into the lake.  The dissent , written by Justice Ginsburg, takes the view that a discharge covered by a performance standard must be authorized, if at all, by EPA.

BIOFUELS AND CLIMATE CHANGE

Posted on June 23, 2009 by Christopher Davis

Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.  

 Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
 

 

While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels. 

Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.

Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy.   Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.

Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny. 

Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown.    In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.

It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.

Posted by Christopher P. Davis, Goodwin Procter LLP

BIOFUELS AND CLIMATE CHANGE

Posted on June 23, 2009 by Christopher Davis

Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.  

 Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
 

 

While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels. 

Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.

Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy.   Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.

Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny. 

Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown.    In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.

It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.

Posted by Christopher P. Davis, Goodwin Procter LLP

Interior Secretary Salazar Demonstrates True Commitment to Renewable Energy

Posted on June 15, 2009 by Linda Bullen

On May 2, 2009, Secretary of the Department of the Interior, Ken Salazar held a public meeting just outside Las Vegas, in the Red Rock Canyon National Recreation Area, to announce the opening of four new BLM offices to handle renewable energy permitting. The offices will be located in Nevada, Arizona, California and Wyoming, and have been designed to address the backlog of pending renewable energy project applications. The DOI estimates that 200 solar applications and over 25 wind projects are pending with the BLM in the western states.

 

            I was one of the 25 or so attendees lucky enough to have the honor and privilege to be invited to a meeting with Secretary Salazar prior to the public meeting where this announcement was made. This earlier meeting was attended by developers of solar, wind and geothermal projects and others in the renewable energy industry. I was impressed by Secretary Salazar’s level of knowledge about both renewable projects and the BLM permitting process, as demonstrated by his comments and questions. Secretary Salazar also announced that $305 million in American Recovery and Reinvestment Act(ARRA) monies will be used for BLM projects to restore landscapes, spur renewable energy development on public lands, and create jobs. I left the meeting with confidence in the Secretary’s commitment to renewable energy and to the implementation of changes, policies and programs that will convert renewable energy from a noble goal to a reality.

 

Linda M. Bullen

Interior Secretary Salazar Demonstrates True Commitment to Renewable Energy

Posted on June 15, 2009 by Linda Bullen

On May 2, 2009, Secretary of the Department of the Interior, Ken Salazar held a public meeting just outside Las Vegas, in the Red Rock Canyon National Recreation Area, to announce the opening of four new BLM offices to handle renewable energy permitting. The offices will be located in Nevada, Arizona, California and Wyoming, and have been designed to address the backlog of pending renewable energy project applications. The DOI estimates that 200 solar applications and over 25 wind projects are pending with the BLM in the western states.

 

            I was one of the 25 or so attendees lucky enough to have the honor and privilege to be invited to a meeting with Secretary Salazar prior to the public meeting where this announcement was made. This earlier meeting was attended by developers of solar, wind and geothermal projects and others in the renewable energy industry. I was impressed by Secretary Salazar’s level of knowledge about both renewable projects and the BLM permitting process, as demonstrated by his comments and questions. Secretary Salazar also announced that $305 million in American Recovery and Reinvestment Act(ARRA) monies will be used for BLM projects to restore landscapes, spur renewable energy development on public lands, and create jobs. I left the meeting with confidence in the Secretary’s commitment to renewable energy and to the implementation of changes, policies and programs that will convert renewable energy from a noble goal to a reality.

 

Linda M. Bullen

National Advanced Conference on Natural Resource Damages Litigation

Posted on June 11, 2009 by Rachael Bunday

Dear Friends:


On behalf of Richard Curley (Golden, CO) and myself, I am writing to extend a personal invitation to attend the July 9 & 10 Santa Fe, New Mexico “National Advanced Conference on Natural Resource Damages Litigation.”  The course will be held at the La Fonda Hotel in Santa Fe.

The course features national leaders in environmental litigation including:

  •  

      ·       Deputy Assistant Attorney General John Cruden (Washington, DC)
      ·       US Department of Interior attorney John Carlucci (Washington, DC)
      ·       Colorado Senior Assistant Attorney General Vicky Peters (Denver, CO)
      ·       Massachusetts NRD Director Dale Young (Boston, MA)
      ·       Exxon Mobil Chief Attorney Robert Johnson (Houston, TX)
      ·       BP Senior Attorney Jean Martin (Houston, TX)
      ·       Nationally renowned plaintiffs’ environmental attorneys Allan Kanner
      (New Orleans, LA) and John Dema (St. Croix, VI)
      ·       Environmental toxicologist Ken Jenkins (Petaluma, CA)
      ·       Environmental economists William Desvousges (Raleigh, NC) and
      Robert Unsworth (Cambridge, MA)

As well as widely respected environmental attorneys:

  •  

      ·       Brian Cleary (Hayden, ID)
      ·       Donald Fowler (Washington, DC)
      ·       Ira Gottlieb (Newark, NJ)
      ·       Brian Israel (Washington, DC)
      ·       Angus Macbeth (Washington, DC)
      ·       Bradley Marten (Seattle, WA)
      ·       Deborah Tellier (San Francisco, CA)
      ·       Michael Thorp (Seattle, WA)

The course agenda is packed with vital information of high value to any attorney who is, or may someday be, involved in the expanding world of NRD litigation.  Attendees will also get a chance to meet and interact with this extraordinary faculty in a selective and intimate environment, including a catered, cost-free reception on the evening of July 9.

Please take a moment to review the brochure from program sponsor Law Seminars International (see http://www.lawseminars.com/detail.php?SeminarCode=09NRDNM).  If, as I hope, you are able to join us, please take advantage of the $150 discount offered to friends and clients of Farella Braun + Martel LLP.  To do so, please mention the “FBM Discount” in the comments box of the registration page or when registering by phone at (800) 854-8009.

This is an exciting opportunity to see this august assemblage of environmental experts at one national program.  The atmosphere of Santa Fe is an added bonus.  We hope to see you there.

With best regards,
James A. Bruen

Derivatives Trading in Climate Change Legislation

Posted on June 2, 2009 by Stephen M. Bruckner

ACES & Eights? Swaps and Other Derivatives in Climate Change Legislation

 

By

 

Stephen M. Bruckner

 

            On May 21, 2009, the House Energy and Commerce Committee approved H.R. 2454, the American Clean Energy & Security Act (ACES), by a 33-25 vote. As the Committee touts its efforts on the much-examined markup of H.R. 2454 (aka, “Waxman-Markey discussion draft”), coalitions from each side of the ideological spectrum assail the legislation as toothless and watered-down, or a disaster for the American economy.  The bill has a long way to go, including review by other House committees and, of course, the Senate, so it may be premature for Committee Chairman Henry Waxman to bestow the mantle of “decisive and historic action.

Buried within ACES’ cap-and-trade emissions plan are a series of provisions that detail how big banks, hedge funds, and traders can use complex securities and derivatives to profit from the new carbon allowance market.  We all watched aghast as “credit default swaps” and similar financial alchemy led to the melt down of Wall Street and the credit markets. Do these types of investments have a proper role in climate change and energy legislation?  In a bill that already has plenty of political and policy hurdles, why add financial regulation?

Title III, Subtitle D of ACES, entitled “Carbon Market Assurance”, amends the Federal Power Act to create a financial instrument known as a “regulated allowance derivative”, which can include a “swap agreement”, and directs the Federal Energy Regulatory Commission to establish regulations for these financial vehicles.  Title III, Subtitle E of ACES, entitled "Additional Market Assurance", addresses transactions in derivatives involving energy commodities such as coal, gasoline, and natural gas. These provisions open the door for financial institutions to partake in the new market created by ACES’ emission allowances.  It allows companies, funds, and traders to purchase and trade emission allowances, and to devise complex derivative instruments to sell and trade, picking up commissions and charging fees along the way.  As a result, the theoretical value of the allowances and their derivatives will be determined, in large part, by the manipulation and speculation of financial parties with little or no concern for carbon emission standards or federal climate policy beyond immediate monetary gain. 

Simply put, the emerging market for new carbon allowances created by the bill could be (at best) undermined or (at worst) commandeered by financial contrivances that are already partially responsible for the nation’s current financial instability.  The fundamental value of the new cap-and-trade 'products' will necessarily fluctuate as the emissions market adjusts and stabilizes.  If big banks and hedge funds can use puts, swaps, options and other speculative instruments, which the federal government has yet to capably regulate, the stability of emissions allowances and carbon trading could be placed at risk.  The chaos visited upon the economy at large by these and other financial instruments should cause hesitation and serious consideration as to whether they belong in Congress' first attempt at comprehensive climate change legislation. 

Derivatives Trading in Climate Change Legislation

Posted on June 2, 2009 by Stephen M. Bruckner

ACES & Eights? Swaps and Other Derivatives in Climate Change Legislation

 

By

 

Stephen M. Bruckner

 

            On May 21, 2009, the House Energy and Commerce Committee approved H.R. 2454, the American Clean Energy & Security Act (ACES), by a 33-25 vote. As the Committee touts its efforts on the much-examined markup of H.R. 2454 (aka, “Waxman-Markey discussion draft”), coalitions from each side of the ideological spectrum assail the legislation as toothless and watered-down, or a disaster for the American economy.  The bill has a long way to go, including review by other House committees and, of course, the Senate, so it may be premature for Committee Chairman Henry Waxman to bestow the mantle of “decisive and historic action.

Buried within ACES’ cap-and-trade emissions plan are a series of provisions that detail how big banks, hedge funds, and traders can use complex securities and derivatives to profit from the new carbon allowance market.  We all watched aghast as “credit default swaps” and similar financial alchemy led to the melt down of Wall Street and the credit markets. Do these types of investments have a proper role in climate change and energy legislation?  In a bill that already has plenty of political and policy hurdles, why add financial regulation?

Title III, Subtitle D of ACES, entitled “Carbon Market Assurance”, amends the Federal Power Act to create a financial instrument known as a “regulated allowance derivative”, which can include a “swap agreement”, and directs the Federal Energy Regulatory Commission to establish regulations for these financial vehicles.  Title III, Subtitle E of ACES, entitled "Additional Market Assurance", addresses transactions in derivatives involving energy commodities such as coal, gasoline, and natural gas. These provisions open the door for financial institutions to partake in the new market created by ACES’ emission allowances.  It allows companies, funds, and traders to purchase and trade emission allowances, and to devise complex derivative instruments to sell and trade, picking up commissions and charging fees along the way.  As a result, the theoretical value of the allowances and their derivatives will be determined, in large part, by the manipulation and speculation of financial parties with little or no concern for carbon emission standards or federal climate policy beyond immediate monetary gain. 

Simply put, the emerging market for new carbon allowances created by the bill could be (at best) undermined or (at worst) commandeered by financial contrivances that are already partially responsible for the nation’s current financial instability.  The fundamental value of the new cap-and-trade 'products' will necessarily fluctuate as the emissions market adjusts and stabilizes.  If big banks and hedge funds can use puts, swaps, options and other speculative instruments, which the federal government has yet to capably regulate, the stability of emissions allowances and carbon trading could be placed at risk.  The chaos visited upon the economy at large by these and other financial instruments should cause hesitation and serious consideration as to whether they belong in Congress' first attempt at comprehensive climate change legislation. 

Eleventh Circuit Wades into the Everglades on ESA Issues, Miccosukee Tribe v. United States, No. 08-10799

Posted on May 21, 2009 by Patricia Barmeyer

The Eleventh Circuit has waded, again, into the ongoing debates over restoration of the Everglades. In addressing yet another lawsuit filed by the Miccosukee Tribe, the Court largely upheld the Fish & Wildlife Service’s delicate balance between the competing and inconsistent habitat needs of the Cape Sable seaside sparrow and the Everglade Snail kite, both endangered species. The seaside sparrow needs stable low water levels below a certain water control structure; the kite’s habitat is destroyed by the resulting rising water levels in the impoundment. The FWS issued a biological opinion allowing the Corps of Engineers to operate the structure to avoid extinction of the sparrow and to conduct an incidental take of the kite. While largely affirming the agency, the Eleventh Circuit reversed on the issue of the trigger that would require initiation of consultation under Section 7 and, along the way, made new law in this circuit on several important issues.

First, the court rejected the tribe’s argument, often advanced by conservation groups in ESA litigation, that the ESA requires that FWS “give the benefit of the doubt to the species.” The court held that this language, taken from a conference committee report, does not mean that the FWS is required to issue a jeopardy opinion if the evidence is evenly balanced between likely jeopardy and likely no jeopardy. Rather, the Eleventh Circuit explained, the language was intended to prevent FWS from shirking its consultation duties by relying on scientific uncertainty, but did not require any substantive result. The court held that “the need to give a species the benefit of the doubt cannot stand alone as a challenge to a biological opinion.”

 

Second, the court held that the FWS Consultation Handbook, which is not a formal rule, is nevertheless entitled to Chevron deference because it was adopted after notice and comment, citing Nw. Ecosystem Alliance v. United States Fish & Wildlife Service, 475 F.3d 1136, 1142-43 (9th Cir. 2007).

Third, the court rejected the argument that negative impacts on a species’ critical habitat must be permanent to amount to “adverse modification” under the ESA. Writing for the court, Judge Carnes noted: “It is not enough that the habitat will recover in the future if there is a serious risk that when that future arrives the species will be history.”

Finally, the Eleventh Circuit invalidated the incidental take statement because it used a habitat indicator -- specific water levels-- as a proxy to establish the trigger that would require the agency to reinitiate the Section 7 consultation process. The court held that the FWS’ use of a habitat indicator as a proxy, as provided for in the Consultation Handbook, fails Chevron step one, based on its conclusion that the legislative history of the ESA clearly indicates Congressional intent that actual population data must be used as the trigger for re-consultation, unless the agency demonstrates that it is impracticable to do so. Further, even if the agency can demonstrate the need to use a habitat proxy, the habitat proxy trigger must be addressed to the specific habitat needs of the species.

This decision, reviewing the FWS’ attempt to manage challenging species protection problems and breaking new ground on ESA legal issues, is sure to be much-cited and widely debated.

CLEAN WATER ACT PERMITTING REQUIRED FOR PESTICIDE APPLICATIONS

Posted on May 19, 2009 by Kevin Beaton

It is well known that EPA rules developed under the Bush Administration have not fared well in the federal courts. Earlier this year, a 2006 EPA rule that exempted the application of pesticides to surface waters from Clean Water Act NPDES permitting requirements suffered a similar fate in Nat’l Cotton Council v. EPA, 553 F.3d 927 (6th Cir. 2009). The effect of this ruling will likely require any person or governmental entity throughout the United States that applies pesticides and insecticides near or onto waters to first obtain an NPDES permit.           

            A.        The History of Pesticide Regulation under the Clean Water Act.

            In Nat’l Cotton Council of America v. EPA, the court evaluated the legality of a 2006 EPA rule which provided that the application of pesticides and herbicides to and over surface water to control pests, weeds and insects consistent with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) does not require an NPDES Permit. 

 

How EPA came to promulgate the 2006 rule is a familiar scenario to environmental lawyers. The operative provisions in the Clean Water Act relied on by the court in Nat’l Cotton Council to vacate EPA’s rule have been in place since 1972. For some thirty years, farmers, irrigation districts, foresters, local health agencies, fishery agencies and others have applied pesticides and herbicides to and above waters to control pests, weeds, insects and other undesireable species believing that all that was required under federal law was to follow the FIFRA labeling requirements. During this time EPA never definitively took a position whether NPDES Permits were or were not required for such applications. 

The assumption that compliance with FIFRA exempted pesticide applicators from the Clean Water Act permitting was dashed in 2001 in the case of Headwaters, Inc. v. Talent Irrigation Dist., 243 F.3d 526 (9th Cir. 2001). In Headwaters,the court found that the application of an herbicide to a canal to control weeds required an NPDES Permit. Critical to the Court’s decision in Headwaters was the fact that a chemical residue which was toxic to fish remained in the water days after application. Therefore the Court found that the residue was a “chemical waste” and therefore a “pollutant” under the Clean Water Act. The Court rejected the idea that compliance with FIFRA labeling requirements obviated the need for an NPDES Permit finding that the two federal statutes served different purposes. The court’s finding on this point was based, in part, on an amicus brief filed by EPA in the case which took the position at that time that compliance with FIFRA did not exempt an applicator of pesticides from obtaining an NPDES Permit. Shortly after Headwaters, the Ninth Circuit issued another decision on whether the application of pesticides from an airplane above surface waters required an NPDES Permit in League of Wilderness Defenders v. Forsgren, 309 F.3d 1181 (9th Cir. 2002). Forsgren was another citizen suit, this time brought against the United States Forest Service (USFS) for unlawfully discharging insecticides from airplanes to control moths which infect and kill trees on national forest lands without an NPDES Permit. In Forsgren, the Court found that the aerial application of insecticides over national forest lands (including surface waters) required an NPDES Permit. The USFS argued such spraying was covered by an EPA rule exempting certain “silvicultural activities” from NPDES Permit requirements. The Court found that the USFS’ application of pesticides clearly involved the discharge of a pollutant (insecticide) from a point source (airplane) to jurisdictional waters. The Court also found that EPA’s silvicultural rules did not (and could not) exempt activities Congress clearly required to be subject to NPDES Permit requirements under the Clean Water Act.

            The Headwaters and Forsgren cases created a major stir not only in the West but around the United States. Now activities that nobody ever believed required an NPDES Permit were subject to Clean Water Act permitting. For example, during this time the spread of West Nile Virus associated with water borne vectors were causing illness and deaths around the United States. Local agencies around the United States were facing citizen suit liability for unlawfully spraying insecticides on waters without an NPDES Permit or were potentially forced to go through a lengthy permit process (if a permit was even available) to undertake an activity that required immediate action. Some states with NPDES Permit programs such as Washington and California acted quickly and issued general NPDES Permits to authorize application of pesticides and herbicides into waters to address this untenable situation. EPA chose not to issue any type of general permits, but rather adopted an “interim guidance document” in 2003. See 65 Fed. Reg. 48385. EPA opined in the Guidance Document application of pesticides and herbicides to surface waters consistent with FIFRA requirements were not “pollutants” under the Clean Water Act since such application did not involve the discharge of a chemical “waste” but rather a chemical “product” and therefore no NPDES Permit was required. EPA then went forward with a proposed rule which resulted in publication of a final rule at 40 CFR § 122.3(h) in 2006 that closely followed their interim guidance document.

            B.        The Cotton Council Decision.

After the EPA published the final rule in late 2006, a host of environmental advocacy groups, groups opposed to the use of pesticides, and industries filed challenges to the rule in numerous federal courts throughout the United States. Each group sought to have their challenge heard in a favorable forum. All of the challenges were consolidated before the Sixth Circuit Court for decision. The court in Cotton Council rejected much of the rationale offered by EPA in support of the rule. EPA’s principal position in supporting the exemption was that the application of pesticides to and above waters in accordance with FIFRA is the application of a product and not a “chemical waste” or a “biological material” and therefore not a “pollutant” under the NPDES Permit program. The court in Cotton Council focused on the definition of “pollutant” in the Clean Water Act which included the terms “chemical waste” and “biological materials.”

            The court accepted EPA’s position that some chemical pesticides that are intentionally applied to waters for a beneficial purpose are chemical products and not a “chemical waste” as long as there does not remain any chemical residue after application. This finding was consistent with an earlier Ninth Circuit case that found the discharge of a pesticide to waters with the intent of eradicating a certain species of fish and which did not leave any remaining chemical residue in the water was not a discharge of a pollutant requiring an NPDES Permit. See Fairhurst v. Hagener, 422 F.3d 1146 (9th Cir. 2005). The court in Cotton Council, however, disagreed with EPA as it relates to pesticides that leave a “residue” in the water. The court in Cotton Council agreed with the Ninth Circuit’s analysis in Headwaters that such residues were clearly a “chemical waste” and therefore a pollutant.

            The court rejected EPA’s attempt to subtly overturn Headwaters by suggesting that even if chemical residues (toxic or otherwise) remained in the water after application of chemical pesticides an NPDES Permit was still not required because at the time of discharge the pesticide was still a “product” and only turned into a waste after it was in the water. According to EPA this meant that the chemical waste was not discharged from a point source but rather was now a “nonpoint” pollution source and not subject to NPDES Permit requirement. The court rejected EPA’s logic and found the Clean Water Act did not support EPA’s “temporal” interpretation that material could be lawfully discharged without a permit but later turn into a pollutant.

            The court also found that a variety of other pesticides which utilize “biological materials” such as viruses, bacteria, fungi, and plant material were pollutants and therefore could not be exempted from NPDES Permit requirements if they were discharged to or above surface waters. The court found that the plain meaning of the term “biological materials” in the definition of “pollutant” did not require such material to be a “waste.” Therefore the court concluded that the application of any biological pesticide to jurisdictional waters from a point source whether it left a residue or not required an NPDES Permit.

            C.        Aftermath of Nat’l Cotton Council.

            EPA has requested a two-year stay of the ruling to allow the agency sufficient time to develop a general NPDES Permit authorizing pesticide application on, near or above surface waters. Industry parties may seek rehearing or request review of the ruling before the United States Supreme Court. A change in the Clean Water Act is also possible but seems unlikely in the current political environment. At this point it is clear that any chemical pesticide that is applied to or above waters from a point source that leaves any type of chemical residue in the water requires an NPDES Permit. Also the application of any biological pesticide to or above waters from a point source also requires an NPDES Permit. 

For those who are not familiar with actually obtaining an NPDES Permit from EPA, it is no simple task. For example, it is not unusual for EPA to take years to issue an NDPES Permit for a new facility or years to reissue an NPDES Permit for an existing facility whose permit has expired. Most states (approximately forty-six states) issue NPDES Permits in lieu of EPA. Often state permitting decisions are faster than EPA, but not always. General permits are authorized for certain categories of discharges. See 40 CFR § 122.28. Typical general permits issued by EPA include stormwater discharges from construction sites, stormwater discharges from industrial facilities, and discharges from confined animal feeding operations. States often mirror EPA general permits in administering state programs. 

Because of the varied water applications of various pesticides, insecticides, and fungicides to and near waters throughout the United States, it is likely that issuance of a general permit covering all of these activities will be a challenge, which explains EPA’s request to stay the decision for two years. Likely permit conditions will include instream monitoring and a variety of pesticide application management practices. No matter what happens to EPA’s stay request or any further appeals by industry, one thing is certain: the regulatory uncertainty under the Clean Water Act associated with pesticide applications to or near waters over the past seven years will continue.

The Burlington Northern Decision

Posted on May 19, 2009 by John Barkett

The Supreme Court’s decision in Burlington Northern was not unexpected from my vantage point especially given the literal interpretation of CERCLA by the Court in Aviall and Atlantic Research and the flow of the oral argument. 

I was a little surprised that Justice Stevens was assigned the task of writing the opinion since Justice Thomas wrote Aviall and Atlantic Research.  But with 7-2 (Justices Ginsburg and Stevens dissented in Aviall because the Court would not decide the issue of entitlement to sue under Section 107), 9-0 (Atlantic Research decided the Section 107 private of action question left unresolved in Aviall), and 8-1 (Justice Ginsburg was the lone dissenter in Burlington Northern) votes in these three opinions, the Court is not going out of its way to fix CERCLA’s language. Section 113(f)(1) means what it says. Section 107 means what it says. An arranger must have an intent to dispose. And joint and several…

 

Wait a second. The statute says nothing about “joint and several liability.” It does not set a liability standard at all. In fact in 2007, in note 7 of Atlantic Research, the Court wrote, “We assume without deciding that §107(a) provides for joint and several liability.”

Two years later, the Court appears to have deftly answered this question, albeit indirectly. It called the holding in Chem-Dyne the “seminal opinion on the subject of apportionment in CERCLA actions …written in 1983 by Chief Judge Carl Rubin of the United States District Court for the Southern District of Ohio.” Quoting Judge Rubin, the Court said that joint and several liability is not mandated in every CERCLA cost recovery action and that Congress intended the scope of liability to “’be determined from traditional and evolving principles of common law[.]’”

As the entire environmental world now knows, the Court held that the district court’s findings should not be disturbed: “The District Court’s detailed findings make it abundantly clear that the primary pollution at the Arvin facility was contained in an unlined sump and an unlined pond in the southeastern portion of the facility most distant from the Railroads’ parcel and that the spills of hazardous chemicals that occurred on the Railroad parcel contributed to no more than 10% of the total site contamination, some of which did not require remediation.”

Going forward, the facts will dictate the outcome. The Court blessed the use of basic allocation or apportionment principles that have been applied in numerous CERCLA cases and numerous consent decree approval orders over the past 25 years. Indeed, it was mildly critical of the Ninth Circuit for talking out of both sides of its mouth: “Although the Court of Appeals faulted the District Court for relying on the ‘simplest of considerations: percentages of land area, time of ownership, and types of hazardous products,’ 520 F. 3d, at 943, these were the same factors the court had earlier acknowledged were relevant to the apportionment analysis. See id., at 936, n.18 (‘We of course agree with our sister circuits that, if adequate information is available, divisibility may be established by ‘volumetric, chronological, or other types of evidence,’ including appropriate geographic considerations’ (citations omitted)).”

In cases where there is no orphan share and multiple parties, it will behoove EPA and the parties to work on apportionment issues up front to save litigation costs. Yes, I relate “apportionment” to “allocation” in saying this, but after Burlington Northern, it will be the rare case that will lack the facts to make a reasonable basis for apportionment. Volumetric waste-in information may be controlling. Or varying toxicities of released hazardous substances may be. Or geography or time of ownership or operation. There may be equitable factors as between or among jointly and severally liable parties, e.g., cooperation, that may not relate to apportionment, but not that many cases have utilized this allocation factor, and most judges engage in an allocation exercise that is indistinguishable from an apportionment exercise, as was the case in Burlington Northern. Cf. Restatement of the Law (Third) Torts, §1, cmt. a., §26 cmt. a. (focusing on the role that comparative responsibility now plays in tort law).

Where there is an orphan share, the stakes are much higher after Burlington NorthernCf. United States v. Newmont USA Limited, 2008 WL 4612566 (E.D. Wash. Oct. 17, 2008) (after a six day trial, submission of dozen depositions or deposition excerpts and 1,600 exhibits, finding the two defendants—one of which was alleged to be an orphan--jointly and severally liable but then finding for the defendants on their counterclaim in contribution against the United States, and then equitably allocating response costs 1/3 to the United States and 1/3 each to the two defendants).

It will still behoove the regulator and the regulated to work things out. If EPA becomes the “bank” (funds the work) at a site, post Burlington Northern, it may find itself absorbing the orphan share or at least not knowing whether it will until after a trial on the merits. (Time will tell but presumably summary judgments will become rare on apportionment issues given the fact-intensive nature of the exercise.) A PRP may be reluctant to become the bank where there is a large orphan share if it does not receive assurance that the orphan share will be addressed fairly, and that may mean more than what EPA is currently offering in its orphan share policy. See, generally, Barkett, Orphan Shares, 23 N.R.E. 46  (2008). Consent order and decree negotiations should become less one-sided in the future. But budget constraints may result in more contention (trials), especially in cases where the orphan share potentially is quite large.

Arrangers of used but useful products can take comfort in Burlington Northern. The entity that recycles solvents or used oil, for example, will embrace the decision especially if reclamation wastes are disposed of at a location other than the recycler’s facility. Sellers of used but useful products will as well. Again, the facts will dictate the outcome.

EPA REQUESTS VOLUNTARY REMAND OF ITS DESERT ROCK ENERGY PROJECT PSD PERMIT DECISION

Posted on May 7, 2009 by Jarry Ausherman

In the desert of New Mexico, the effect of another of the new Administration's shifts in previous federal environmental policy is being felt. As difficulties in permitting and building new coal-fired power plants have become more substantial, many power plant projects across the United States that were on the drawing board several years ago have fallen off of it. A notable exception is the Desert Rock Energy Plant, a joint project of the Navajo Nation's Diné Power Authority and Houston-based Sithe Global LLC that would be built on lands of the Navajo Nation. A significant step forward for that project had been EPA's issuance of the PSD permit in July of 2008. But recently, that step forward in air permitting has been followed by an administrative step back.

 

The Desert Rock Energy Project would involve construction of a 1500 megawatt coal-fired power plant on the Navajo Reservation. EPA's Region 9 had issued a final PSD permit for the project on July 31, 2008. The plant incorporates sophisticated, state of the art air pollution control technology, but it does not employ the coal gasification process known as "integrated gasification combined cycle" technology. Opponents to the project filed petitions with EPA's Environmental Appeals Board for review of the decision issuing the final PSD permit. The opponents raised greenhouse gas issues as well as other air quality and endangered species issues. Project opponents included the State of New Mexico.


In January, Region 9 filed its brief responding to the issues raised by the petitioners except the issue of whether the permit must contain an emissions limit for carbon dioxide. It withdrew the permit's response to comments explaining the basis for not evaluating carbon dioxide emissions in the BACT analysis. Region 9 requested the opportunity to file a Surreply Brief by April 27, 2009 to give EPA officials under the Obama Administration opportunity to consider more fully the positions previously advocated by EPA under the Bush Administration.

 

The EPA Administrator's office requested that Region 9 reconsider its permitting decision with respect to use of PM10 as a surrogate for PM2.5 to satisfy PSD requirements; consideration of IGCC in the BACT analysis; ESA consultation issues; MACT analysis for hazardous air pollutants; and the sufficiency of additional impact analysis. In response, on April 27, 2009, Region 9 asked the Environmental Appeals Board to remand the PSD permit for reconsideration and development of additional information by EPA. If the motion to remand is granted, the PSD permit will be sent back to EPA for further analysis, which could take many months and trigger another round of public comment.


The request for voluntary remand of this key permit for the high profile Desert Rock Energy Project is evidence of the degree to which the EPA under the current administration is reevaluating previous policy. In the case of Desert Rock, the EPA seeks to reevaluate a permit that it had already issued and defended in an appeal by opponents to permit issuance. If EPA's request for remand is granted, the extent to which EPA changes its permit decision remains to be seen. But the process itself presents the prospect for significant delays and additional public comment at a minimum.