The IOGCC Issues Its Model Program For The Geologic Sequestration of CO2

Posted on November 27, 2008 by David Flannery

 On September 25, 2007, the Interstate Oil and Gas Compact Commission (IOGCC) issued its model program for the storage of carbon dioxide in geologic formations. The full text of the model program can be found here.

          OVERVIEW - Even though USEPA has announced that it will undertake the development of regulatory program for such activities under the Safe Drinking Water Act, the IOGCC model program is premised on the belief that the regulation of CO2 geological storage should be left to regulation by the states, rather than USEPA. Equally significant is the IOGCC view that the storage of CO2 in geological formations should be viewed as the storage of a commodity - not waste disposal. While the IOGCC proposes its CCS program in anticipation of a national program that would constrain the emission of CO2 to the atmosphere, the IOGCC avoids making recommendations about how CO2 should be constrained.

          PROPERTY RIGHTS - The model program provides that an applicant for any such project should acquire the property rights to use pore space in the geologic formation for storage. While much of the IOGCC’s model program addresses the need to acquire property rights through negotiation, eminent domain or unitization of oil and gas rights, the model program specifically states that the IOGCC is less concerned about what mechanism is used to acquire those rights and is more concerned that all necessary property rights be acquired by valid, subsisting and applicable state law. The IOGCC goes on to recognize that states might develop alternative mechanisms to acquire property rights, such as adapting the concept of the forced unitization of oil and gas industry rights to other property interests. An applicant must demonstrate that a good-faith effort has been made to obtain the consent of a major of owners "having property interest affected by the storage facility." The program provides for an applicant to have the power of eminent domain and provides that an applicant will be deemed to have necessary property rights to the extent that the applicant has initiated unitization or eminent domain proceedings and have thereby gained the right a of access to the property.

          COVERED FACILITIES - The definition of "storage facility", includes the reservoir, wells and related surface facilities but apparently not pipelines used to transport carbon dioxide from capture facilities to the storage and injection site. The IOGCC has stated its intent to consider over the next year, how its model program might best be expanded to include pipelines.

          LIABILITY RELEASE - Following completion of the project an operator would be obligated to monitor the project to assure its integrity. At the completion of that period, title to the facility would be transferred to the state and the operator and all generators of CO2 injected would be released for all regulatory liability and any posted performance bonds would also be released. Over the next year, the IOGCC has stated that it will consider the possibility of expanding the liability release to include common law tort liability. As part of the inducement for a state to allow liability transfer, the program establishes a trust fund which would assess a fee on each ton of CO2 injected. The trust fund provides the financial resources for the state to take title to project at the end of its operating life.

          COOPERATIVE AGREEMENTS - Cooperative agreements are authorized for use in connection with projects that extend beyond state boundaries.

          EOR PROJECTS - Enhanced Oil Recovery projects are not covered by the model program, although agencies are encouraged to develop rules on how enhanced recovery operations would be converted to carbon dioxide storage projects.

          PERMIT REQUIREMENTS - The program provides detailed requirements for completing an application for approval of a CCS project. Among other things maps accompanying a permit application would be required to identify existing oil and gas and coal mining operations. Public notice is completed upon mailing. The agency shall issue a permit to drill and operate once it has completed a review of the application. The permit would expire within twelve months from the date of issuance if the permitted well had not been drilled or converted. The program also sets forth detailed well operational standards, including requirements for safety plans, leak detection, and corrosion monitoring and prevention.

This article was authored by David M. Flannery, Jackson Kelly PLLC. For more information on the author see here.

SALMON WARS IN THE PACIFIC NORTHWEST

Posted on November 24, 2008 by Kevin Beaton

Each year thousands of salmon and steelhead protected under the Endangered Species Act (“ESA”) migrate up and down the Columbia River and its tributaries and into the Pacific Ocean as part of the species’ cycle of life. Seemingly, each year armies of lawyers migrate to federal court to argue whether the federal government is carrying out its obligations to protect these species under the ESA. “As part of the modern cycle of life in the Columbia River system, each year brings litigation to the federal courts of the Northwest over the operation of the Federal Columbia River System (“FRCPS”) and, in particular, the effects of system operation on the anadromous salmon and steelhead protected by the Endangered Species Act.” National Wildlife Federation v. National Marine Fisheries Service, 422 F.3d 782 (9th Cir. 2005).

            2008 is no exception as the National Wildlife Federation, the state of Oregon and the Nez Perce Tribe have again filed a lawsuit in the United States District Court of Oregon against the federal government for allegedly failing to carry out their obligations under the ESA in the operation of the FRCPS. The precipitating event for the 2008 lawsuit, is a 2008 Biological Opinion authored by NOAA Fisheries pursuant to Section 7 of the ESA opining that if the action agencies, the U.S. Army Corps of Engineers (“COE”) and U.S. Bureau of Reclamation (“BOR”) carry out a comprehensive reasonable and prudent alternative (“RPA”) then jeopardy to the listed species and adverse modification to critical habitat will be avoided.

 

The portion of the FRCPS that is at issue in the 2008 litigation is a series of fourteen (14) federal hydropower dams authorized by Congress on the Columbia and Lower Snake Rivers which are operated by the COE and BOR. Congress has directed that the dams are for multiple uses including providing power to the Northwest, irrigation, transportation, recreation, flood control and protection of fish. The stakes are high in the litigation, if some of the dams are substantially modified, or breached as some Plaintiffs are advocating, industries, rate-payers and communities reliant upon the multiple uses of the FRCPS will be significantly affected. Thirteen separate salmon and steelhead species that live out a portion of their life cycle in the Columbia River and its tributaries have been listed as endangered or threatened under the ESA.

            The federal government’s attempt to operate the FRCPS in compliance with ESA has been mired in litigation for some 15 years. The science and the law surrounding the FRCPS’ compliance with the ESA is complex. Like 2008, the precipitating event for past litigation has been a § 7 consultation between NOAA fisheries and the COE and BOR and a Biological Opinion (BiOp) and Incidental Take Statement. In recent litigation the federal government has not fared well. For example the 2000 BiOp found that the FRCPS operation did jeopardize certain listed species but that jeopardy could be avoided if off-site mitigation and hatchery initiatives were implemented. The court found the 2000 BiOp was invalid as NOAA could not rely upon off-site and non-federal actions that were not reasonably certain to occur as an RPA. See NWF v. NMFS, 254 F.Supp. 2d 1196 (D.Or 2003).

            The federal government tried again with a 2004 BiOP which found no jeopardy to listed species and no adverse modification to critical habitat. The 2004 BiOp was different from prior BiOps in so far as NOAA Fisheries attempted to segregate the effects of the existence of the 14 dams from the operation of the dams claiming that only the operation of the dams was discretionary and subject to Section 7 consultation. The lower Court struck down the 2004 BiOp on a variety of grounds finding that NOAA improperly separated the existence and operation of the dams in their § 7 consultation, NOAA did not properly take into consideration how the operation of the dams would affect recovery of the listed species and their critical habitat and that the actions relied upon were too uncertain to occur. The Ninth Circuit affirmed the lower Court decision in its entirety. See National Wildlife Federation v. National Marine Fisheries Service, 524 F.3d 917 (9th Cir. 2008). The Ninth Circuit did note that in considering the affect of the agency action on the potential recovery of the species in connection with a Section 7 consultation, NOAA Fisheries did not have to first develop a recovery plan consistent with the requirements of Section 4(f) of the ESA.

            While the appeal was pending before the Ninth Circuit, NOAA Fisheries under some prodding from the lower Court embarked upon an unprecedented collaboration with the four affected states (Washington, Oregon, Idaho and Montana) and eight Indian tribes to reach consensus on the appropriate methodologies to evaluate the effects of the FRCPS on listed species, operational modifications focusing on each of the listed species and hundreds of millions of dollars in funding commitments to the Tribes to carry out mitigation. In developing the 2008 BiOp and RPA, NOAA Fisheries also adopted a “trending to recovery standard” in order to fulfill the directive from the Court concerning the evaluation of survival and “recovery” in a Section 7 consultation. The 2008 BiOp finds that operation of the FRCPS for the next ten (10) years with implementation of the comprehensive RPA will avoid jeopardy to the thirteen species, avoid adverse modification to critical habitat and future recovery of the protected species will not be compromised by implementation of the RPA.

            The Plaintiffs quickly challenged the 2008 BiOp arguing it is legally and technically flawed and more of the same. The federal defendants, a trade association, three states (Washington, Idaho and Montana) and one Tribe argue that based on Court directives the 2008 BiOp got it right this time. The Defendants argue that Plaintiffs challenge is nothing more than a disagreement on the science and that the court should defer to NOAA Fisheries on these issues. Of interest to Clean Water Act attorneys, one of the Plaintiffs (“NWF”) argues that the incidental take statement (“ITS”) issued as part of the 2008 BiOp is equivalent to a “permit” under § 401 of the Clean Water Act and therefore requires water quality certification from the states. If the Plaintiff prevails on this novel theory, it means that potentially four states and three Tribes would need to issue a 401 certification that the ITS will comply with state and tribal water quality standards before the ITS would go into effect.

            A preliminary injunction and summary judgment hearings are set in January 2009. If the Court finds that the disputes surrounding 2008 BiOp are basically scientific disputes a recent Ninth Circuit case could be beneficial to the federal defendants. See, Lands Council v. McNair, 537 F.2d 981 (9th Cir. 2008). In Lands Council, the court noted that federal courts should defer to the scientific judgments of a federal agency when reviewing agency action under the Administrative Act Procedures. Stay tuned to the outcome of this litigation to see if the “cycle of life” of litigation in FRCPS continues or takes a breather to give the federal government, the states and tribes a breather to implement the 2008 BiOp.

EMERGING CLIMATE CHANGE ISSUES: Impacts on Disclosure Obligations of U.S. Public Companies

Posted on November 14, 2008 by Patricia Barmeyer

 Public companies are feeling pressure to make disclosure of the risks posed by climate change. The SEC has to date declined to issue any climate change-specific guidance, but existing SEC regulations are broad enough to require disclosure, if the information would be important to the “reasonable investor.” Investors and shareholders are increasingly vocal about their desire to have that information.

            In the absence of SEC action, New York Attorney General Cuomo has used state law to obtain settlements from Xcel Energy and Dynegy that require specific disclosures regarding the financial risks from probable climate change regulation and from the physical impacts of climate change. Even more significant is the pressure coming from major purchasers. Wal-Mart, for example, is requiring all its suppliers to report on their GHG emissions and their strategies to reduce their carbon footprints. 

            The timing, scope and details of the anticipated national program to regulate GHG emissions are still unknown, making it difficult to predict the risks and implications of climate change and its regulation for any individual company, However, even in the face of these uncertainties, disclosure is increasingly the norm, rather than the exception. All public companies need to be analyzing the risks posed by climate change and, depending on the business, should be considering disclosure of those risks in their public filings.

To read the article in its entirety, please click here.

A FIRST GLIMPSE OF THE ENVIRONMENTAL AGENDA OF THE OBAMA PRESIDENCY

Posted on November 10, 2008 by Larry Ausherman

It has been a long time since an environmental issue attracted some serious attention in a presidential campaign. This is the year, and climate change is the issue. From his campaign to his election night reference to a "planet in peril", President-Elect Obama has focused on climate change. There are a few other environmental issues to watch as well.

 

Climate Change

            The issue of climate change overshadowed other environmental issues in this election, in part because it is directly linked to other high priorities of the new administration. Goals of creating 5 million green-collar jobs and a focus on renewable energy and energy conservation enlarge the profile of climate change initiatives. For example, on the Obama-Biden website, the topics of environment and energy are grouped together as one, and the initiatives of each are related. 

 

            Green house gases reduction is an important goal for President-Elect Obama. The goal to reduce greenhouse gases has many parts, but imposing an economy-wide cap and trade system is the centerpiece of the policy. The plan would require that all credits be purchased at auction by industry. Costs to purchase credits could be enormous.

 

            In addition to domestic commitments to climate change initiatives, Obama supports "re-engaging" with the United Nations and the creation of a Global Energy Forum that includes the G8+5 Nations . The initial steps of his international policy may come soon when Obama's representatives will likely visit the climate change talks in Poznan, Poland this December.

           

            The broadening Democratic majority in Congress favors Obama's climate change agenda. In addition to Democratic gains in the House and the Senate, the League of Conservation Voters reports that seven of its 2008 "dirty dozen" legislators were defeated in the 2008 election. Among environmental groups, hopes are high for the new presidency.

 

            But because Obama's objectives require heavy investment in renewable energy, regulatory compliance, and clean technology, they face difficult hurdles. High deficits and the global financial crisis challenge the ability of the federal government to spend, the capacity of private markets to invest, and the resilience of the U.S. economy and industry to weather increased costs of regulation. Great investment would be required for meeting goals for clean coal technology, biofuel development, renewable energy, and energy efficiency.

 

Other Environmental Issues

            Here are some of the other environmental issues to watch.

 

            CERCLA issues have not received great attention so far. However, Obama has suggested reinstitution of the tax on industry to pay for orphaned sites and has emphasized the concept of "polluter pays".

 

            For many years, changes to the General Mining Law of 1872 to impose royalty and/or additional regulation have been proposed and defeated. Although mining law reform has not been a significant part of the presidential campaign, the chances for its passage in the more Democratic congress has increased.

           

            Obama's past opposition to offshore drilling weakened a bit this year in the Senate as a result of a compromised effort. Obama would support offshore exploration in areas already set aside for it, but his opposition to ANWAR remains firm.

 

            It is unclear what priority the Obama administration will place on biodiversity and the Endangered Species Act. Biodiversity has received little attention in the campaign, but the campaign has opposed lessening of ESA consultation requirements.

Cut the Sprawl, Cut the Warming

Posted on October 7, 2008 by Jeff Thaler

For years, while Washington slept, most of the serious work on climate change has occurred in the states, and no state has worked harder than California. The latest example of California’s originality is a new law — the nation’s first — intended to reduce greenhouse gas emissions by curbing urban sprawl and cutting back the time people have to spend in their automobiles.

Passenger vehicles are the biggest single source of carbon dioxide in California, producing nearly one-third of the total. Meanwhile, the number of miles driven in California has increased 50 percent faster than the rate of population growth, largely because people have to drive greater distances in their daily lives.

The new law has many moving parts, but the basic sequence is straightforward. The state’s Air Resources Board will determine the level of emissions produced by cars and light trucks, including S.U.V.’s, in each of California’s 17 metropolitan planning areas. Emissions-reduction goals for 2020 and 2035 would be assigned to each area. Local governments would then devise strategies for housing development, road-building and other land uses to shorten travel distances, reduce driving and meet the new targets.

One obvious solution would be to change zoning laws so developers can build new housing closer to where people work. Another is to improve mass transit — in woefully short supply in California — so commuters don’t have to rely so much on cars.

The bill contains significant incentives, including the promise of substantial federal and state money to regions whose plans pass muster. In addition, and with the consent of the environmental community, the state will relax various environmental rules to allow “infill” — higher-density land use in or near cities and towns.

The bill’s architect, State Senator Darrell Steinberg, worked closely with developers and environmental groups like the Natural Resources Defense Council. The measure is the latest in a string of initiatives from the California Legislature, including a 2002 law that would greatly reduce carbon emissions from automobiles, and a 2006 law requiring that one-fifth of California’s energy come from wind and other renewable sources.

Given California’s size, these and other initiatives will help reduce global greenhouse gas emissions. Even more progress would be made if others follow. New York and 15 other states have already said they will adopt California’s automobile emissions standards when the federal government gives them the green light — which the Bush administration has stubbornly refused to do.

There is, of course, no substitute for federal action or for American global leadership on climate change, both of which the next president will have to deliver.

Cut the Sprawl, Cut the Warming

Posted on October 7, 2008 by Jeff Thaler

For years, while Washington slept, most of the serious work on climate change has occurred in the states, and no state has worked harder than California. The latest example of California’s originality is a new law — the nation’s first — intended to reduce greenhouse gas emissions by curbing urban sprawl and cutting back the time people have to spend in their automobiles.

Passenger vehicles are the biggest single source of carbon dioxide in California, producing nearly one-third of the total. Meanwhile, the number of miles driven in California has increased 50 percent faster than the rate of population growth, largely because people have to drive greater distances in their daily lives.

The new law has many moving parts, but the basic sequence is straightforward. The state’s Air Resources Board will determine the level of emissions produced by cars and light trucks, including S.U.V.’s, in each of California’s 17 metropolitan planning areas. Emissions-reduction goals for 2020 and 2035 would be assigned to each area. Local governments would then devise strategies for housing development, road-building and other land uses to shorten travel distances, reduce driving and meet the new targets.

One obvious solution would be to change zoning laws so developers can build new housing closer to where people work. Another is to improve mass transit — in woefully short supply in California — so commuters don’t have to rely so much on cars.

The bill contains significant incentives, including the promise of substantial federal and state money to regions whose plans pass muster. In addition, and with the consent of the environmental community, the state will relax various environmental rules to allow “infill” — higher-density land use in or near cities and towns.

The bill’s architect, State Senator Darrell Steinberg, worked closely with developers and environmental groups like the Natural Resources Defense Council. The measure is the latest in a string of initiatives from the California Legislature, including a 2002 law that would greatly reduce carbon emissions from automobiles, and a 2006 law requiring that one-fifth of California’s energy come from wind and other renewable sources.

Given California’s size, these and other initiatives will help reduce global greenhouse gas emissions. Even more progress would be made if others follow. New York and 15 other states have already said they will adopt California’s automobile emissions standards when the federal government gives them the green light — which the Bush administration has stubbornly refused to do.

There is, of course, no substitute for federal action or for American global leadership on climate change, both of which the next president will have to deliver.

Supreme Court to Open its 2009 Term

Posted on October 2, 2008 by Theodore Garrett

As is its custom, the Supreme Court will open its 2009 Term next Monday, the first Monday in October. In anticipation of that event, the Court held its first conference of the Term this Monday, and yesterday issued orders from that conference. The court granted two certs of note.

Nos. 07-1601, Burlington Northern & Santa Fe Railway Co. v. United States and 07-1607, Shell Oil Co. v. United States, present the question of whether owners of land subject to environmental cleanup may be held jointly and severally liable under CERCLA.

No. 07-1410, United States v. Navajo Nation, involves the government's fiduciary responsibility to Indian tribes relating to mining rights on tribal land. In 2003, the Court held that there were no enforceable fiduciary duties under federal statutes relating to mineral leasing. But on remand, the Federal Circuit held that the government breached duties under the common law of trust and the Indian Tucker Act. The Supreme Court will consider whether its prior ruling foreclosed the court of appeals' decision, and if not, whether the court was correct to hold the government liable as a matter of law for $600 million to the tribes under those sources of law.

First Regional Greenhouse Gas Initiative Auction Results: Massachusetts Gets $13.3 Million

Posted on September 30, 2008 by Seth Jaffe

The operators of the Regional Greenhouse Gas Initiative, or RGGI Inc., announced yesterday that all of the 12,565,387 CO2 allowances offered for sale in the first RGGI auction on September 25, 2008 were purchased at $3.07 per allowance. This is above the auction reserve price of $1.86 per allowance, and below recent prices on the Chicago Climate Futures Exchange. See RGGI Inc.'s press release here.

RGGI did not announce the names of the winning bidders, but noted that there were 59 participants in the auction, all from the "energy, financial and environmental sectors." In total, the bidders sought to purchase more than 51 million allowances, or approximately four times as many as were offered. The auction was administered by World Energy Solutions, Inc., and RGGI also retained an independent market monitor, Potomac Economics, to oversee the auction. Potomac Economics stated that most of the allowances were purchased by "compliance entities or their affiliates." See the Potomac Economics release here.

Massachusetts' share of the RGGI allowance proceeds came to approximately $13.3 million. In a press release issued yesterday, Governor Patrick confirmed the commitment in the Green Communities Act to use the RGGI funds for energy efficiency programs that will help individuals and municipalities address energy challenges.

Specifically, the $13.3 million in proceeds from the first auction will be allocated in the following ways:

  • $3.5 million for utility-administered energy efficiency programs, primarily funding the DPU's $7 million program to work with electric and natural gas utilities to expand their consumer energy efficiency programs
  • $5 million for start-up of the Green Communities Program, created by the Green Communities Act
  • $4.3 million for additional energy efficiency efforts this winter, subject to the report of the Winter Energy Costs Task Force which is due in early October
  • $500,000 for administrative and vendor costs associated with Massachusetts' participation in RGGI and the allowance auctions

The next auction is currently scheduled to be held on December 17, 2008.

Offshore Wind Farm in the Mid-Atlantic - Will Delaware Be the First State of Offshore Wind?

Posted on September 29, 2008 by Robert Whetzel

The nation’s first offshore wind farm may soon be built off the coast of Delaware. Although climate change and clean energy issues were part of the debate over this project, the Delaware wind farm project finds its origins in energy reliability and price stability legislation. 

In 2006, consumer energy prices in Delaware increased dramatically, following the State’s deregulation of electricity generation. As part of the deregulation process, a three year freeze had been placed on energy rate increases in Delaware. When the freeze expired, energy prices across the United States were spiraling upward and rates in Delaware were adjusted to market prices. The result was a significant increase in consumer electricity prices, with the attendant public outcry and legislative demand for reform.

 

 In an attempt to stabilize prices, the Delaware General Assembly enacted the Electric Utility Retail Customer Supply Act of 2006. The Act established a bidding process for long-term purchase power agreements, and directed Delmarva Power & Light Company (“Delmarva Power”), the State’s largest electricity service territory provider, to solicit bids for such an agreement. The legislation also mandated an integrated resource planning process in order to ensure the availability of sufficient and reliable resources over time to meet customers' needs at a minimal cost. 

 

The Delaware legislation required Delmarva Power to issue a request for proposals ("RFP") for the construction of new generation resources within Delaware along with a proposed output contract for a term of no less than 10 years and no more than 25 years. The Delaware Public Service Commission (the “PSC”) and the Delaware Energy Office were tasked with ensuring that the RFP elicited and recognized the value of proposals that: (a) utilized new or innovative baseload technologies; (b) provided long-term environmental benefits to the state; (c) had existing fuel and transmission infrastructure; (d) promoted fuel diversity; (e) supported or improved reliability; and (f) utilized existing brownfield or industrial sites. The PSC, the Director of the Office of Management and Budget, the Controller General, and the Energy Office (the "State Agencies") were tasked with evaluating the bids and determining whether to approve one or more of them. 

Three bids were submitted in response to the RFP: one for an offshore wind farm, one for a combined cycle gas turbine, and one for a coal-fired integrated gasification combined cycle ("IGCC") unit. After evaluation of the bids, both Delmarva Power and an independent consultant concluded that none of the bids met the evaluation criteria because, among other things, each of them proposed prices that were projected to be above market when the new generation facilities went on-line. The State Agencies, however, fashioned a hybrid energy supply approach, and directed Delmarva Power to negotiate for a long-term agreement for wind power with Bluewater Wind, LLC (“Bluewater”) and, concurrently, for an agreement with another generator to provide back-up power. These negotiations were to take place under the oversight of an independent third-party, who would be responsible for reporting to the State Agencies on the parties’ efforts to negotiate the agreements. 

Delmarva Power and the bidders were unable to negotiate concurrent agreements for the wind farm and the “backup” generation source. The State Agencies next directed Delmarva Power and Bluewater to negotiate a final agreement for the wind farm. When the deadline for a this agreement was reached in December 2007, the parties had not agreed upon many important terms, relating to the capacity, price, and risk for the project. After reviewing the status of negotiations, the PSC staff recommended approval of the proposed terms with the condition that the cost of the wind farm be spread over all of Delmarva Power’s customer base. The PSC staff also recommended that legislation be pursued that allocated the costs of the wind farm across all energy consumers in Delaware. At that point, the State Agencies tabled the matter because there was not a consensus to approve the agreement. 

The Delaware legislature then became involved in considering the wind farm power agreement, and conducted legislative hearings regarding the agreement and alternative energy technology and market trends. A legislative committee ultimately concluded that, while wind generation should be a significant component of the State’s electricity supply portfolio, Delaware citizens should not assume the large risk or pay the large premium contemplated in the (then) proposed wind farm agreement. This conclusion was not without opposition in the legislature.

During May and June, 2008, renewed negotiations took place between Delmarva Power and Bluewater, under the ever-present threat of further regulatory or legislative action. Ultimately an agreement was reached for the purchase of power and renewable energy credits (“RECs”) from the wind farm by Delmarva Power. This agreement coincided with legislation in the State that enabled the cost of the wind farm to be spread across all of Delmarva Power’s customer base, not just residential consumers and small businesses, and that substantially increased the value attached to the RECs for the wind farm. Under the agreement, Delmarva Power will purchase energy from the wind farm equal to the amount generated by a 200 MW nameplate facility (approximately 50 percent less than in the proposed December 2007 agreement.) The wind farm, however, may produce three times this capacity (i.e., up to 600 MW), and may secure additional customers for its power. The final agreement also provides termination rights to Bluewater, including termination based upon the content of final regulations to be promulgated by the Department of the Interior with respect to the permitting and siting of offshore wind farms. 

The Department of the Interior proposed regulations on July 9, 2008, and comments were due by September 8, 2008. The American Wind Energy Association, of which Bluewater is a member, submitted comments arguing against a provision that would require developers to pay 2 percent of their operating revenue to the government. Bluewater has stated that such a provision will not be a “deal killer” for the Delaware project, but has also recognized as problematic the impending expiration of federal renewable energy subsidies.

EPA IN THE DC CIRCUIT - WHERE HAS ALL THE DEFERENCE GONE?

Posted on September 23, 2008 by Linda Bochert
  • June 2007: DC Circuit Hands EPA and Industry Two Defeats:  Court Rejects EPA MACT Air Rules for Commercial and Industrial Boilers and Plywood and Composite Wood Products
  • February and July 2008: DC Circuit to EPA: Multi-Pollutant Strategy for Interstate Clean Air Fails to Meet Clean Air Act Requirements

Several recent cases have raised the following question in my mind: can EPA win an air case in the DC Circuit?

They teach us in law school that governmental agencies can expect a reasonable degree of deference from a reviewing court when exercising statutory authority to develop regulations to implement Congressional directives. States and entities subject to EPA’s regulations need something to rely on, and expect EPA and the Courts to provide some degree of predictability and certainty in the application of the regulations. Yet deference is nowhere to be found in the DC Circuit’s recent reviews of several EPA regulations implementing the Clean Air Act (CAA). And in each of the cases discussed below, the Court opted for the most dramatic remedy – vacatur of the offending rule.

These decisions can be sliced and diced from a variety of perspectives. At the least I think they raise vexing concerns about deference and choice of remedy. What do you think – are these the trend or the anomalies? Is this a real concern or much ado about nothing?

 

Here are my examples:

 1. June 2007: Commercial and Industrial Boiler MACT Rules

On June 8, 2007, in Natural Resources Defense Council v. EPA, No. 04-1385 (D.C. Cir. June 8, 2007) (NRDC I) the DC Circuit struck down two EPA rules setting air toxics limitations for commercial and industrial boilers and solid waste incinerators: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters (Boilers Rule) and Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Commercial and Industrial Solid Waste Incineration Units (CISWI Definitions Rule).

At issue were the emission standards for hazardous air pollutants (HAPs) emitted from commercial and industrial solid waste incinerators and industrial boilers and the appropriate setting of the Maximum Achievable Control Technology (MACT) standard.

The challenge was brought by environmental petitioners Natural Resources Defense Council, Sierra Club, and the Environmental Integrity Project. The Court agreed with them that EPA had impermissibly narrowed the definition of “commercial or industrial waste” in the CISWI Definitions Rule in violation of the plain language of section 129 of the Clean Air Act. Because the Boilers Rule was dependent on that same definition, both rules were rejected by the Court. EPA and industry representatives, including the Coalition for Responsible Waste Incineration, Utility Air Regulatory Group, and Utility Solid Waste Activities Group, contended that EPA’s definition was within the agency’s discretion, but the Court was not persuaded.

 

2. June 2007: Plywood and Composite Wood Products MACT Rules

On June 19, 2007, the DC Circuit dealt a second blow in a challenge to EPA’s rules to regulate HAPs from processing plywood and composite wood products (PCWP). Also named Natural Resources Defense Council v. EPA, No. 04-1323 (D.C. Cir. June 19, 2007) (NRDC II), this case was also brought by the Natural Resources Defense Council, Sierra Club and the Environmental Integrity Project against EPA. EPA was supported by industry groups, including the American Forest and Paper Association.

The two rules involved in this case were the National Emission Standards for Hazardous Air Pollutants: Plywood and Composite Wood Products (2004 Rule) and the National Emission Standards for Hazardous Air Pollutants: Plywood and Composite Wood Products; List of Hazardous Air Pollutants, Lesser Quantity Designations, Source Category List (2006 Rule), with the primary challenge to the 2006 Rule. Example of operations regulated by these rules include sawmills with lumber kilns, hardwood and softwood plywood and veneer plants, particleboard/fibreboard and other reconstituted wood product plants, and engineered wood product plants.

Once again, the issue was the appropriate MACT standard. In this case the pivotal elements were EPA’s decisions in the 2004 Rule to create a “low-risk subcategory” and in the 2006 Rule to extend the compliance deadline from October 2007 to October 2008.

 

3. February 2008: Clean Air Mercury Rule (CAMR)

On February 8, 2008, the DC Circuit struck down CAMR in New Jersey v. EPA, No. 05-1097 (D.C. Cir. Feb. 8, 2008). CAMR was the result of EPA’s decision to remove oil and coal-fired electric utility steam generating units (EGUs) from the list of sources of hazardous air pollutants (HAPs) and instead regulate mercury emissions from these EGUs through a cap-and-trade program similar to the Clean Air Interstate Rule (CAIR).

In response, New Jersey, and several other states, municipal governments and environmental groups, challenged CAMR claiming that EPA had no authority to delist the EGUs without providing a “specific finding” under section 112(c)(9) of the CAA. Because EPA did not make this specific finding, the Petitioners claimed that not only was the delisting invalid, but CAMR was also flawed because it was based upon this delisting decision. The DC Circuit agreed with the Petitioners, vacating both the delisting rule and CAMR.

 

4. July 2008: Clean Air Interstate Rule (CAIR)

On July 11, 2008, the D.C. Circuit vacated CAIR in North Carolina v. EPA, No. 05-1244 (D.C. Cir. July 11, 2008).

The multi-party challenge to CAIR was brought by the state of North Carolina, several electric utilities (SO2 Petitioners), specific electric utilities in Texas, Florida and Minnesota, one municipality, and the Florida Association of Electric Utilities (FAEU). The electric utilities in Texas, Florida and Minnesota challenged CAIR’s applicability to them because of their location and emissions amounts. North Carolina, the SO2 Petitioners, and FAEU brought substantive challenges to the regulation, claiming that EPA did not have the discretion to act as it did, or it did so unreasonably.

The Court agreed with North Carolina and the SO2 Petitioners, holding that CAIR failed to meet the requirements of the CAA and finding “EPA’s approach – regionwide caps with no state-specific quantitative contribution determinations or emissions requirements – is fundamentally flawed.”

 Is vacatur the best remedy?

 In all four of these cases, the Court chose to vacate rather than remand the rules. The dissent in the CISWI/Boilers Rules case unsuccessfully argued that remand without vacating the rules was preferable“[b]ecause the rules would ensure greater protection to public health and the environment during the time EPA will need to develop and promulgate new rules.” The majority was unpersuaded and preferred no rules at all. Is that really the best option for the environment?

And the language the Court uses implies more than a lack of deference. In vacating CAIR, a decision described as “unexpected” by both proponents and opponents, the Court described the rule as “fundamentally flawed” and directed EPA to “redo its analysis from the ground up.” In vacating CAMR, the Court characterized EPA as “deploy[ing] the logic of the Queen of Hearts.” What’s going on here?

EPA IN THE DC CIRCUIT - WHERE HAS ALL THE DEFERENCE GONE?

Posted on September 23, 2008 by Linda Bochert
  • June 2007: DC Circuit Hands EPA and Industry Two Defeats:  Court Rejects EPA MACT Air Rules for Commercial and Industrial Boilers and Plywood and Composite Wood Products
  • February and July 2008: DC Circuit to EPA: Multi-Pollutant Strategy for Interstate Clean Air Fails to Meet Clean Air Act Requirements

Several recent cases have raised the following question in my mind: can EPA win an air case in the DC Circuit?

They teach us in law school that governmental agencies can expect a reasonable degree of deference from a reviewing court when exercising statutory authority to develop regulations to implement Congressional directives. States and entities subject to EPA’s regulations need something to rely on, and expect EPA and the Courts to provide some degree of predictability and certainty in the application of the regulations. Yet deference is nowhere to be found in the DC Circuit’s recent reviews of several EPA regulations implementing the Clean Air Act (CAA). And in each of the cases discussed below, the Court opted for the most dramatic remedy – vacatur of the offending rule.

These decisions can be sliced and diced from a variety of perspectives. At the least I think they raise vexing concerns about deference and choice of remedy. What do you think – are these the trend or the anomalies? Is this a real concern or much ado about nothing?

 

Here are my examples:

 1. June 2007: Commercial and Industrial Boiler MACT Rules

On June 8, 2007, in Natural Resources Defense Council v. EPA, No. 04-1385 (D.C. Cir. June 8, 2007) (NRDC I) the DC Circuit struck down two EPA rules setting air toxics limitations for commercial and industrial boilers and solid waste incinerators: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters (Boilers Rule) and Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Commercial and Industrial Solid Waste Incineration Units (CISWI Definitions Rule).

At issue were the emission standards for hazardous air pollutants (HAPs) emitted from commercial and industrial solid waste incinerators and industrial boilers and the appropriate setting of the Maximum Achievable Control Technology (MACT) standard.

The challenge was brought by environmental petitioners Natural Resources Defense Council, Sierra Club, and the Environmental Integrity Project. The Court agreed with them that EPA had impermissibly narrowed the definition of “commercial or industrial waste” in the CISWI Definitions Rule in violation of the plain language of section 129 of the Clean Air Act. Because the Boilers Rule was dependent on that same definition, both rules were rejected by the Court. EPA and industry representatives, including the Coalition for Responsible Waste Incineration, Utility Air Regulatory Group, and Utility Solid Waste Activities Group, contended that EPA’s definition was within the agency’s discretion, but the Court was not persuaded.

 

2. June 2007: Plywood and Composite Wood Products MACT Rules

On June 19, 2007, the DC Circuit dealt a second blow in a challenge to EPA’s rules to regulate HAPs from processing plywood and composite wood products (PCWP). Also named Natural Resources Defense Council v. EPA, No. 04-1323 (D.C. Cir. June 19, 2007) (NRDC II), this case was also brought by the Natural Resources Defense Council, Sierra Club and the Environmental Integrity Project against EPA. EPA was supported by industry groups, including the American Forest and Paper Association.

The two rules involved in this case were the National Emission Standards for Hazardous Air Pollutants: Plywood and Composite Wood Products (2004 Rule) and the National Emission Standards for Hazardous Air Pollutants: Plywood and Composite Wood Products; List of Hazardous Air Pollutants, Lesser Quantity Designations, Source Category List (2006 Rule), with the primary challenge to the 2006 Rule. Example of operations regulated by these rules include sawmills with lumber kilns, hardwood and softwood plywood and veneer plants, particleboard/fibreboard and other reconstituted wood product plants, and engineered wood product plants.

Once again, the issue was the appropriate MACT standard. In this case the pivotal elements were EPA’s decisions in the 2004 Rule to create a “low-risk subcategory” and in the 2006 Rule to extend the compliance deadline from October 2007 to October 2008.

 

3. February 2008: Clean Air Mercury Rule (CAMR)

On February 8, 2008, the DC Circuit struck down CAMR in New Jersey v. EPA, No. 05-1097 (D.C. Cir. Feb. 8, 2008). CAMR was the result of EPA’s decision to remove oil and coal-fired electric utility steam generating units (EGUs) from the list of sources of hazardous air pollutants (HAPs) and instead regulate mercury emissions from these EGUs through a cap-and-trade program similar to the Clean Air Interstate Rule (CAIR).

In response, New Jersey, and several other states, municipal governments and environmental groups, challenged CAMR claiming that EPA had no authority to delist the EGUs without providing a “specific finding” under section 112(c)(9) of the CAA. Because EPA did not make this specific finding, the Petitioners claimed that not only was the delisting invalid, but CAMR was also flawed because it was based upon this delisting decision. The DC Circuit agreed with the Petitioners, vacating both the delisting rule and CAMR.

 

4. July 2008: Clean Air Interstate Rule (CAIR)

On July 11, 2008, the D.C. Circuit vacated CAIR in North Carolina v. EPA, No. 05-1244 (D.C. Cir. July 11, 2008).

The multi-party challenge to CAIR was brought by the state of North Carolina, several electric utilities (SO2 Petitioners), specific electric utilities in Texas, Florida and Minnesota, one municipality, and the Florida Association of Electric Utilities (FAEU). The electric utilities in Texas, Florida and Minnesota challenged CAIR’s applicability to them because of their location and emissions amounts. North Carolina, the SO2 Petitioners, and FAEU brought substantive challenges to the regulation, claiming that EPA did not have the discretion to act as it did, or it did so unreasonably.

The Court agreed with North Carolina and the SO2 Petitioners, holding that CAIR failed to meet the requirements of the CAA and finding “EPA’s approach – regionwide caps with no state-specific quantitative contribution determinations or emissions requirements – is fundamentally flawed.”

 Is vacatur the best remedy?

 In all four of these cases, the Court chose to vacate rather than remand the rules. The dissent in the CISWI/Boilers Rules case unsuccessfully argued that remand without vacating the rules was preferable“[b]ecause the rules would ensure greater protection to public health and the environment during the time EPA will need to develop and promulgate new rules.” The majority was unpersuaded and preferred no rules at all. Is that really the best option for the environment?

And the language the Court uses implies more than a lack of deference. In vacating CAIR, a decision described as “unexpected” by both proponents and opponents, the Court described the rule as “fundamentally flawed” and directed EPA to “redo its analysis from the ground up.” In vacating CAMR, the Court characterized EPA as “deploy[ing] the logic of the Queen of Hearts.” What’s going on here?

Global Warming Litigation Heating up - Village of Kivalina Lawsuit

Posted on August 21, 2008 by Mark Walker

As the debate regarding the contribution of anthropogenic greenhouse gases to global warming continues, some parties are taking their concerns directly to the courts. Perhaps the latest in the growing number of global warming lawsuits is the Native Village of Kivalina, Alaska v. ExxonMobil, et al., Case No. CV-08-1138, in the United States District Court for the Northern District of California, San Francisco Division.

THE VILLAGE OF KIVALINA

The Village of Kivalina is located in northwest Alaska about 120 miles from the Arctic circle. The Village is comprised of roughly 1.9 square miles of land which lies on the tip of a barrier island which separates the Chukchi Sea and a lagoon on the mainland side. There are 399 residents of Kivalina, 97% of whom are Native Alaskans referred to as "Inupiat" Eskimos, meaning "the people."

THE PROBLEM

With claims presaged by Al Gore's "An Inconvenient Truth", Kivalina claims that global warming has caused the melting of Arctic sea ice which formerly protected the Village from winter storms. Without the protective ice, the Village claims that storms have caused massive erosion, leaving "houses and buildings in imminent danger of falling into the sea." The Village contends that, "if the entire village is not relocated soon, the village will be destroyed." Governmental estimates of the cost to relocate run as high as $400 million –roughly $1 million per resident.

THE DEFENDANTS

The defendants are 9 oil and gas companies, 14 electric generation companies and 1 coal company. Kivalina contends that the defendants are among the largest emitters of greenhouse gases in the United States, and that the defendants "are responsible for a substantial portion of the greenhouse gases in the atmosphere that have caused global warming." The Village is pursuing a public nuisance theory.

CONSPIRACY CLAIMS

With allegations that are indeed carbon copied from the "Science Fraud" chapter in "An Inconvenient Truth", Kivalina claims that eight of the defendants have engaged in a civil conspiracy to generate misinformation and propaganda to create doubt as to whether global warming is occurring and, if so, whether man-made emissions are to blame. The Village claims that the alleged co-conspirators have used "front groups, fake citizens organizations, and bogus scientific bodies" to generate the alleged misinformation and doubt.

MOTIONS TO DISMISS

The Kivalina lawsuit is in its early stages, however, the defendants have filed motions to dismiss claiming, inter alia, that (1) the plaintiffs cannot pursue a federal common law nuisance claim because such claim is available only to States seeking injunctive relief and because the Clean Air Act displaces the authority of the courts to regulate nationwide greenhouse gas emissions and global warming; and (2) the plaintiffs' conspiracy claims are not independent torts, but are derivative of their underlying nuisance claims and should fail along with the nuisance claims. 

POLITICAL QUESTION DOCTRINE

Similar lawsuits have previously been dismissed on the grounds of lack of standing and non-justiciability under the political question doctrine. See Comer, et al. v. Murphy Oil, et al., Case No. 1:05-cv-00436-LTS-RHW, in the United States District Court for the Southern District of Mississippi, dismissal currently on appeal to the Fifth Circuit Court of Appeals (Appeal No. 07-60756); State of California v. General Motors, et al., Case No. C-06-05755-MJJ, in the United States District Court for the Northern District of California, dismissal currently on appeal to the Ninth Circuit Court of Appeals (Appeal No. 07-16908). In Comer the plaintiffs blamed Hurricane Katrina on global warming and on 8 oil companies, 31 coal companies and 4 chemical companies that allegedly contributed to global warming. 

So far, the courts appear to be of the view that the responsibility for developing a comprehensive global warming policy which balances the interests of reducing air pollution and its social costs with the corresponding harm to economic development and its attendant social costs is a political question which is reserved for the political branches of government, and that such policies should not be developed on an ad hoc basis by the courts. Kivalina is once again testing the resolve of the courts to stay out of the global warming debate until Congress and/or the EPA establish clear policies regarding man-made greenhouse gas emissions.

To view a copy of the Kivalina Complaint, click here.

For more information on the author, click here.

EPA PROPOSES CO2 STORAGE RULES

Posted on July 22, 2008 by Rick Glick

On July 15, EPA announced new rules for underground injection of carbon dioxide (CO2). The rules are intended to provide a measure of regulatory certainty for carbon capture and storage (CCS) implementation.  CO2  STORAGE RULES. CCS is the technology for capturing CO2 as it is released from coal-fired power plants, oil refineries or other large scale sources of CO2 emissions, and then transporting the gas for injection into a suitable underground geologic formation. EPA estimates that CCS could account for as much as 30% of CO2 emissions by 2050, which has obvious implications for climate change.

NEW CLASS OF UIC WELLS

Under the Safe Drinking Water Act, EPA administers the Underground Injection Control (UIC) program. The program is designed to protect drinking water aquifers from industrial injection of fluids into deep geologic formations for purposes such as enhanced oil or gas recovery. CO2  storage presents special challenges as it is buoyant, can be corrosive and would be spread over a large area and held indefinitely. Therefore, EPA proposes a new Class VI well specific to storage. 

NO PRESCRIPTIVE STANDARDS

EPA proposes performance-based standards, as opposed to prescriptive requirements. In general, an injection and operations plan must be included with the application that demonstrates drinking water would be protected. Permit holder would have to monitor and periodically report back to EPA to ensure that model predictions as to the size of the CO2  plume and injection pressures prove true. Permittees would be required to demonstrate financial responsibility for post-injection site care for 50 years; that time period could be shorter or longer, depending on the residual risk to drinking water aquifers based on monitoring data.

PLENTY OF ROOM FOR STATE REGULATION

Note that the rules do not address the capture and transportation of CO2. Further, the new rules do not address property rights, liability or other siting regulatory concerns, so we can expect the states to assert jurisdiction. 

For more information, see full article here.

ALABAMA JOINS OTHER STATES IN ENACTING UNIFORM ENVIRONMENTAL COVENANTS ACT

Posted on July 18, 2008 by Jarred O. Taylor, II

Alabama joined a number of other states dealing with environmental covenants when it enacted the Alabama Uniform Environmental Covenants Act, effective January 1, 2008. Ala. Code§35-19-1 et seq. (“Act”).The Alabama Department of Environmental Management (“ADEM”) has been working on implementing regulations, which are expected to mimic the Act and be released in the next few months. ADEM will also charge a fee for implementation and oversight of the program and covenants.

For those not familiar with the concept, in many situations environmental contamination cannot be completely addressed by total removal (clean closure) of the offending soil or remediation of the groundwater to a level allowed for unrestricted use.  Some amount or concentration of contamination must be left behind. In those situations, EPA and ADEM will require additional measures, such as land use controls or continuing monitoring and maintenance. The idea is that if property has contamination on it unsuitable for a residential housing development or the construction of a school, those interested in buying or developing the property are put on notice of the limit of the property to commercial or industrial use.  These controls and obligations are often embodied in deed restrictions or recorded declarations which could be terminated by various common law mechanisms; therefore, the Uniform Environmental Covenants Act was created to provide a mechanism by which environmental covenants and land use restrictions survive the potential fatal operations of the common law. States were encouraged to adopt the uniform act, and Alabama has now done so.

An “Environmental Covenant” is defined as “[a] servitude arising under an environmental response project that imposes activity and use limitations.” Ala. Code § 35-19-2(5). Such “environmental response projects” can arise under state or federal hazardous waste cleanup laws, such as CERCLA, RCRA, or Alabama’s version of brownfields.

Before the Act was passed, ADEM still required a restrictive covenant or deed of some kind when contaminants were being left behind, but it was never sure what might happen to the restriction upon a subsequent sale of the property because it had no enforcement authority. If the property changed hands several times, there was no manner by which ADEM could require the Seller and the Buyer to maintain that restriction as a part of the sale. With the Act, there is a “holder” of the covenant which can enforce the covenant, and ADEM has enforcement power even if it is not a holder. A holder can be any person, a governmental agency (such as ADEM), an environmental group, or a unit of local government. The interest of a holder is considered to be an interest in real property; however, the Department’s interest in a covenant, unless it becomes a holder, will not be considered to be an interest in real property. There are certain elements that each covenant must meet in order to be effective, and those are clearly set out in the Act. Importantly, each environmental covenant requires at least one holder, and a holder can be the fee simple owner and/or the grantor of the covenant.

If, at the time an environmental covenant is recorded or registered, the Act does not abrogate the common-law doctrine of “first in time, first in right” as it relates to prior and valid property interests. If there are other interests in the subject real property with priority over the covenant, unless the prior interest in the property is made subordinate to the covenant by the owner of such interest, then the prior interest is not affected.

The grantor of an environmental covenant has a statutory responsibility to notify certain persons or entities of the covenant. Specifically, the grantor must provide a copy of the covenant to (i) each person signing the covenant; (ii) each person with a “recorded interest” in the subject property; (iii) each tenant or person in possession of the subject property; and (iv) each county or municipality in which the real property is located (normally the county or municipal office where deeds are recorded, such as the probate office). You also have the option of filing the covenant with ADEM (it keeps a registry), and then filing a notice with the county probate office in lieu of the entire covenant.

Environmental covenants are perpetual although there are exceptions set out in the Act, such as if the covenant itself has a specified length of time, a condition allowing termination is satisfied, or a court is petitioned for its modification. Of course, one always has the option of conducting additional remediation of the property to reach unrestricted use standards, which would then allow for termination of the covenant.

The author wishes to acknowledge the contributions made to this article by Bryan Nichols of Maynard, Cooper & Gale, P.C.

Connecticut Department of Environmental Protection Submits RGGI Regulations for Legislative Approval

Posted on June 9, 2008 by Gregory Sharp

The Connecticut Department of Environmental Protection (“DEP”) has submitted for legislative approval regulations to control carbon dioxide (CO2) emissions and establish a CO2 emissions credit program.[i] The controversial regulations are designed to fulfill Connecticut’s commitment to the Regional Greenhouse Gas Initiative (“RGGI”), which establishes a CO2 emissions cap and trade program for power plants in nine Northeastern and Mid-Atlantic states.[ii] RGGI is designed to be a model for a broader, national market-driven program to establish a market value for greenhouse gas (“GHG”) emissions to provide incentives for reducing GHG emissions over the long term.

Carbon dioxide is the most significant GHG by volume. Unlike many other pollutants emitted by the combustion of fossil fuels, there are no commercially available control technologies to limit CO2 emissions. Therefore, programs to reduce GHG emissions focus on improving energy efficiency, reducing the use of fossil fuels through conservation efforts, and using renewable and alternative fuels.



[i]               Proposed Conn. Agencies Regs. § 22a-174-31 and 31a.

[ii]               Information about RGGI can be found at http://rggi.org.

The regulations impose a tonnage cap on CO2 emissions from large fossil fuel-fired electricity generating units in Connecticut. The initial tonnage cap is 10.7 million tons. The regulations seek to stabilize CO2 emissions from these units in 2009-2014, then reduce those emissions by 2.5% per year in 2015-2018 from the electric utility sector. The regulations allow allocation of emissions offsets to be used for compliance where real reduction of greenhouse gases are achieved outside the regulated utility sector. They require auctioning of CO2 allowances and the use of auction proceeds for consumer benefit or strategic energy purposes as required by Conn. Gen. Stat. § 22a-200c.Finally, the regulations require a demonstration of compliance every three years.

The regulations must be approved by the Legislative Regulations Review Committee of the General Assembly before they can become effective. Significant controversy surrounds several of the key provisions which have been opposed by companies with electric generating facilities in the state.

One concern is that the CO2 allowance costs will push the price of electricity up for consumers, despite industry investments in energy efficiency. Critics of the regulation advocate direct per kilowatt-hour rate relief, which is not provided in the proposed regulations.

A second problem for the electric generating companies is the Department’s refusal to limit auction participation to RGGI regulated sources – the owners and operators of fossil-fueled electric generating facilities. DEP fears that closed auctions might result in lower prices for carbon allowances, due to lessened competition. However, with no cap on auction allowance prices, the regulated entities fear that financial speculators may drive up the price of this new commodity. There is also a significant concern that environmental organizations could purchase these allowances and “retire” them by taking them off the market, driving up the price of the remaining carbon allowances and possibly creating a shortage. Historical data suggests that generators in Connecticut may need 94% of the available allowances in 2009 in order to operate at levels expected to meet demand.

Another significant issue is that the proposed Connecticut regulations provide no cap or ceiling on the auction price for the CO2 allowances. DEP estimates that the allowance price in 2009 will be approximately $2 per ton, increasing to $5 per ton in 2024. The allowance price will have a direct impact on electric rates.

The anticipated rate impact prompted Maine, New Hampshire, and New Jersey to establish cap mechanisms to protect consumers. Maine established a limit of $5 per ton, the highest price estimated by Connecticut DEP, beyond which auction proceeds would be applied to kilowatt-hour rebates to ratepayers. New Hampshire is establishing a $6 per ton rate cap, above which funds would be rebated to consumers, similar to the Maine auction provisions. New Jersey has mandated that if two consecutive regional auctions result in allowance prices above $7 per ton, an action plan must be developed for ratepayer relief.

Finally, the regulations provide that DEP will retain 7.5% of the funds realized from the auctions for administrative costs and programs to mitigate the impacts of climate change, despite the fact that the agency concedes that it only needs a quarter of this retainage to cover the administrative costs of the program.

The proposed regulations were submitted to the Regulations Review Committee on June 6, 2008. The Committee has 65 days to approve, recommend modifications, or reject the proposed regulations. Whether the regulations will be in place before the first RGGI auction scheduled in September remains to be seen. 

Gregory A. Sharp

Murtha Cullina LLP

Delaware Environmental Law Update

Posted on May 23, 2008 by Robert Whetzel

On May 15, 2008, Delaware enacted legislation that will affect the transfer or closing of facilities in Delaware where chemical or hazardous substances have been or are located. The legislation establishes three principal requirements for affected facilities. First, prior to the transfer of a facility, the parties to the transaction must conduct "All Appropriate Inquiry" as defined in Delaware's Hazardous Substances Cleanup Act, and all documents prepared or identified pursuant to such inquiry must be submitted to the Department of Natural Resources and Environmental Control (DNREC). Second, if an affected facility terminates its operations or files for bankruptcy, certain requirements must be completed no later than 90 days after termination of all business or activities at the facility, including certification of the removal of the chemicals or hazardous substances from the facility. Third, financial assurance will be required for transferred facilities or new facilities, in an amount to ensure that, upon termination, abandonment or liquidation of activities at the facility, all appropriate means will be taken to stabilize and secure the facility.

The legislation will become effective upon the promulgation by DNREC of facility transfer regulations. DNREC will begin the development of regulations to implement this legislation in late summer or early fall and is expected to promulgate regulations in early 2009.

 

If you have any questions about this Delaware Corporate Update , or other legal issues, please contact a Richards, Layton & Finger attorney.

WHOA THERE

Posted on May 8, 2008 by Brian Rosenthal

Broad statement of underlying support cannot sustain EPA regulatory definition of navigable waters [1]

 EPA’s broad regulatory reach on navigable waters is rejected by the United States District Court for the District of Columbia. 

Setting aside the EPA’s regulatory definition of navigable waters, the D.C. Circuit Court  found the EPA’s definition was inadequately explained in light of recent United States Supreme Court cases. Oil producing facilities that add pollutants to navigable waters were required to develop spill prevention, control and counter measure plans under a Clean Water Act regulation that broadly defined navigable waters. Affected industry participants and associations successfully challenged the regulation.  

The question became whether in promulgating a regulation in an area where there has been recent Supreme Court activity whether the EPA considered all the relevant factors. If it did not, plaintiffs argued the EPA’s decisions were arbitrary and capricious or a clear error of judgment. The EPA argued while concise, its explanation was adequate. Its explanation came in a response to a comment and provided in part: “The case law supports a broad definition of navigable waters, such as the one published today, and that definition does not necessarily depend on navigability in fact.”[2]

The court could not reconcile, however, recent cases, that do not define navigable waters as broadly as in the EPA’s expansive rule. Noting recent courts have reined in the reach of the definition of navigable waters to not reach the fullest extent of the commerce clause, the court found inadequate EPA’s brief comment statement. Thus, the court agreed the EPA rule was not the product of reasoned decision making and struck it.



[1] American Petroleum Ind. v. Johnson, No. 02-2247 (D.D.C. March 31, 2008) (LEXIS 24963). 

[2] 2002 SPCC Rule, 67 Fed. Reg. at 47,075.

Acknowledging under an EPA review, the agency’s explanation must only be concise and general, the court noted that an explanation still must be provided showing that the relevant factors are considered. The EPA’s broad statement regarding case law support offered few clues as to which cases were used for reliance; thus, while the EPA’s statement was concise and general it did not provide sufficient support for the regulation. 

While expert agencies deserve deference and a “law review article” basis is not required for support, the court found the particular issues in this case provided a “unique burden” based on the recent Supreme Court case law that addressed the very issue.[1] 

At the very least, the court found recent case law established the Clean Water Act jurisdiction is not as broad as the limits of the Commerce Clause. In essence, the court concluded while the EPA may have taken a look at the factors, it could not conclude the look was reasoned enough to sustain the regulation. 

Therefore, the regulatory definition of navigable waters was set aside and vacated as arbitrary and capricious. 

The case has a nice overview of organizational and individual standing and ripeness. It also contains an interesting analysis of available remedies, discusses the reopening doctrine and the administrative review standard for cases in the D.C. Circuit. 



[1] Rapanos v. United States, 547 U.S. 715, 126 S. Ct. 2208 (2006); Solid Waste Agency of N. Cook County v. U.S. Army Corp of Engr’s, 531 U.S. 159, 121 S. Ct. 675 (2001).

Is Massachusetts Showing the Way Towards a Comprehensive Environmental Law?

Posted on April 25, 2008 by Seth Jaffe

I.          Introduction

In Massachusetts, the Executive Office of Energy and Environmental Affairs (EEA) recently announced two significant new initiatives. In October 2007, Massachusetts became one of the first states in the nation to require assessment of greenhouse gas emissions as part of an environmental policy act review process, issuing its final MEPA Greenhouse Gas Emissions Policy and Protocol (“GHG Policy”). The policy requires proponents of projects subject to the Massachusetts Environmental Policy Act, or MEPA, M.G.L. ch. 30, §§ 61-62I, to assess the greenhouse gas impacts of such developments. The requirement applies not only to direct impacts, such as stack emissions, but also to indirect impacts, such as electricity demand and traffic generation.

Second, In January 2008, EEA issued a draft guidance for public comment on “Integrated MEPA/Permitting Review.”  The purpose of the Integrated Review Guidance is to make the MEPA process the true focus of a comprehensive review of project permitting, in order to avoid the more haphazard coordination between MEPA and permitting agencies that has been the rule in the past. 

Both of these developments are important in their own right for anyone practicing environmental law or doing development in Massachusetts. However, they are significant for another reason as well -- in both of these efforts, one can detect a glimmer of an effort by EEA to craft one comprehensive environmental protection statute for Massachusetts.

II.         Background; the Current Balkanized World of Environmental Protection

Any environmental attorney who practices across the full alphabet soup of environmental statutes -- RCRA, CWA, CAA, TSCA, CERCLA, FIFRA (not to mention their state counterparts) -- has experienced the frustration of finding that a cost-effective solution to an environmental problem is precluded by a provision of some other environmental statute. Clients, who don’t see the world as a random amalgamation of statutes, but through the prism of a specific facility or operating unit, experience this problem acutely. Unfortunately, that is not the way legislators see the world; legislators address one problem at a time, as such problems are brought to their attention by constituents or the news media. Love Canal leads to CERCLA. Acid rain leads to SO2 regulation under the Clean Air Act. PCB problems lead to TSCA. Now, concerns over global climate change may lead to regulation of greenhouse gases. Unfortunately, never the twain shall meet; or they meet, but not in a way that anyone could consider logical.

The closest that any statutes come to the promise of a comprehensive environmental statute is the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. §§ 4321-4370(f), and NEPA’s state analogues, such as MEPA. These statutes are intended to require examination of overall project impacts. However, NEPA has significant limitations as a comprehensive environmental statute. First, its jurisdiction is limited to ”major Federal actions significantly affecting the quality of the human environment…”. NEPA, § 102(2)(C), 42 U.S.C. § 4332(2)(c). Second, it applies only to proposed future projects; it cannot be used to assess the impacts of existing facilities. Finally, and most importantly, NEPA has very limited substantive teeth. It is a purely informational statute. While an Environmental Impact Statement (EIS) that reveals significant potential impacts with no attempt by the proponent to mitigate those impacts may lead a permitting agency to deny necessary approvals, the substantive authority over a project remains with the permitting agencies.

Under NEPA, the agency proposing the action subject to NEPA prepares the EIS and then moves forward with the project, based on the conclusions of the EIS. A project opponent dissatisfied with the adequacy of the EIR must go to court, hoping that a federal judge will find the EIS inadequate. However, in Massachusetts, the project proponent must submit the Environmental Impact Report (we have to be different in Massachusetts; we have EIRs, not EISs) to EEA. EEA, after public comment, makes a formal determination whether the EIR complies with MEPA. EEA’s role in assessing the adequacy of the EIR -- including the statements in the EIR concerning how any adverse environmental impacts will be mitigated -- gives it a hook to use in requiring truly comprehensive review of new projects. 

Ultimate permitting decisions in Massachusetts are still made by other agencies given such jurisdiction by the various substantive environmental laws. Historically, participation by permitting agencies in the MEPA process has sometimes been fitful at best. The question environmental practioners are now trying to answer is whether these policies are simply the first steps by EEA to position the MEPA process as the focus of comprehensive environmental protection review in Massachusetts.

III.        The Details of the New Policies

If a project is subject to the GHG Policy, the project’s proponent must quantify the potential annual GHG emissions from the project in the EIR. Specifically, project proponents must assess potential GHG emissions from three different sources:

·                     Direct Emissions from Stationary Sources. Stationary sources include boilers, heaters, ovens, or furnaces (including periodic sources, such as emergency generators). 

·                     Indirect Emissions from Energy Consumption. Indirect emissions result from heating, cooling, electricity, and/or steam used at a project site. 

·                     Indirect Emissions from Transportation. Transportation-related emissions include emissions from employees, vendors, and customers. 

In other words, this policy is not applicable only to power plants, and it does not require assessment only of the direct GHG impacts of a project. Instead, it requires a comprehensive assessment of indirect impacts as well, including GHG emissions from travel to and from the project and indirect energy use associated with the project.

What About Mitigation?

Although the cost to prepare the required analyses will not be trivial, EEA has worked hard with the real estate industry and other stakeholders to try to craft approaches to assessing GHG impacts that will be manageable for project proponents. EEA has also put one other significant carrot before project proponents. If a proponent offers to implement “exceptional measures” to limit GHG emissions, EEA may allow the proponent to opt out of the GHG quantification analysis. However, at this point, it is not clear what would constitute such “exceptional measures.” Would electricity from a renewable source qualify? How about agreeing to design a building to a certain level of LEED certification?

Given EEA’s apparently real flexibility regarding the assessment side of the equation, the rubber will really meet the road for the GHG Policy in how EEA approaches mitigation. The GHG Policy is clear that it is not intended merely as a data gathering device. EEA repeatedly emphasizes that proponents will have to assess potential mitigation measures and must “explain which alternatives were rejected, and the reasons for the rejection.”

The GHG Policy could be seen as merely a tweak -- if a significant one -- to MEPA in order to address the significant threat posed by global climate change. However, the comprehensive nature of the policy, and EEA’s separate statements regarding the links between energy and environment (note the new name of the agency) and the importance of embedding concerns about climate change into all of its decisions suggest that EEA has greater hopes for the GHG Policy than as a mere tweak to MEPA.

The view that EEA is seeking to make MEPA a comprehensive environmental statute was made more concrete by EEA’s issuance of the draft policy on “Integrated MEPA/Permitting Review.” The purpose of the Integrated Review Guidance is indeed to fulfill the promise of MEPA as a comprehensive environmental protection statute. Although the Integrated Review Guidance is only draft, and will be utilized solely as a pilot project initially, the intent is clearly to make the MEPA process the true focus of environmental review for new development in Massachusetts, rather than simply as a tool to be utilized by the various permitting agencies, each operating in their own silos. The policy itself states that its purpose is “to make MEPA an integral part of permitting, rather than a separate process that precedes permitting.” 

IV.        Conclusions

It is too soon to predict the outcome of EEA’s apparent efforts to make MEPA a comprehensive environmental protection statute. First, only time will tell how committed EEA is to the project. Second, EEA remains limited by the jurisdictional authority it has been granted under MEPA. Third, as with NEPA, ultimate permitting decisions are still made by each agency pursuant to the authority granted the agency by the substantive statute requiring a permit. EEA has to date resisted efforts to mandate that agencies under EEA authority issue permits within a certain time period following completion of the review under the Integrated Review Guidance. Those agencies must comply with each statute they implement and good intentions will not justify in court an agency decision to ignore the provisions of one environmental statute in order to achieve a broader environmental benefit.

The real test of EEA’s current efforts will be whether it can find a way to assess cross-media environmental impacts, make a decision regarding whether a project is a net environmental benefit, and have that decision override narrower environmental statutes that would otherwise preclude a win-win outcome. What happens, for example, when the state Clean Water Act appears to require some treatment technology to mitigate an apparently small harm to the environment resulting from a water discharge, at a substantial cost in air emissions or decreased energy efficiency? There are also practical concerns regarding how agency personnel operate. What happens if the state Clean Water Act gives the Department of Environmental Protection sufficient authority to waive the discharge requirement, but the individual DEP employee reviewing the permit, who has worked on NPDES permits for her entire career, sees only the trees and not the forest? Persuading agency employees to pull in the same direction could be as significant an obstacle as negotiating the formal legal hurdles.

Until EEA figures out a way to reach the right environmental result across all media, the promise of a comprehensive environmental protection law will remain illusory. Stay tuned.

_________________________________________

Seth Jaffe is recognized by Chambers USA, The Best Lawyers in America and Massachusetts SuperLawyers as a leading practitioner in environmental compliance and related litigation. He works on a wide range of environmental law issues, representing clients in the permitting/licensing of new facilities and offering ongoing guidance on permitting and enforcement related matters under federal and state Clean Air Acts, Clean Water Acts, RCRA, and TSCA. He also advises on wetlands and waterways regulation. Seth’s clients include electric and telecommunications utilities, companies in the printing and chemical industries, and education and health care institutions.

Foley Hoag provides comprehensive legal services to clients throughout the United States and around the world. We serve a wide range of industries, including biopharma, energy and utilities, financial services, manufacturing, and technology. With 250 lawyers located in Boston, Massachusetts, and Washington, D.C. and our Emerging Enterprise Center in Waltham, Massachusetts, we provide creative solutions and results-oriented advice in the areas of bankruptcy, restructuring and workouts; corporate finance, mergers and acquisitions, and IPOs; labor and employment; litigation; environmental issues and land use; government strategies; intellectual property; tax, trusts and estates; and white collar and business crimes. For more information, visit foleyhoag.com.

Evans v. Walter Industries, Inc. - The Heightened Pleading Standards Announced In Bell Atlantic v. Twombly Apply To Toxic Tort Cases

Posted on March 19, 2008 by Jack Shumate

I.          Introduction

On May 21, 2007, the U.S. Supreme Court, in Bell Atlantic Corporation v. Twombly, 127 S.Ct. 1955; 167 L.Ed. 2d 929, announced a new standard for testing the sufficiency of pleadings in the face of a motion to dismiss. The Court set aside the rule in Conley v. Gibson, 355 US 41; 78 S.Ct. 99; 2 L.Ed. 80 (1957), which held that a complaint should not be dismissed unless it could be shown that it was not possible, pursuant to the pleadings, to demonstrate any set of facts which would support recovery; instead, the Court said that the appropriate test was whether the allegations of the complaint, if taken as true, would support the conclusion that recovery was “plausible.” In overruling Conley, the Court said, of the “possible” standard, “*** after puzzling the profession for 50 years, this famous observation has earned its retirement. The phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard ****.” 

Bell Atlantic was an anti-trust case based on the Sherman Anti-Trust Act. Many commentators suggested that the Bell Atlantic standard would only apply to matters (such as anti-trust) where the requirements of a statute dictated specific pleading requirements, that the Court had not intended to completely change the standards for testing the sufficiency of complaints.

Shortly after the Bell Atlantic decision, the U.S. District Court for the Northern District of Alabama was faced with the question in Evans v. Walter Industries, case no. 1:05-CV-01017-KOB. The Alabama court held the “plausible” standard applicable to a putative class action toxic tort case and it dismissed the case, with prejudice, against one of the Defendants.

As noted below, this decision could have significant implications in other Superfund cases if the federal courts, generally, reach the same conclusion.

II          BACKGROUND FACTS

This case arises from the extensive environmental concerns in Anniston, Alabama, a city of approximately 27,000 in northeastern Alabama. Anniston was the site where PCBs were first produced in 1927, and continued to be manufactured until 1972. In addition, in the first half of the 20th century the city was home to numerous iron pipe foundries; indeed, it was once known as the “sewer pipe capitol” of the world. The foundries produced thousands of tons, per day, of waste foundry sand allegedly contaminated with lead and a variety of other heavy metals, solvents, and PCBs. 

Much of Anniston is low lying and swampy, traversed by numerous creeks and open drains, many of which have become contaminated with PCBs. Foundry sand has been extensively used as fill material and top soil in residential yards throughout the city and adjoining communities. This has all led to Anniston becoming the location of two Superfund sites, one for remediation of PCBs and the other a removal action to clean lead from residential yards, extensive contribution actions, and a series of class actions by local residents who claim a variety of injuries as a result of local contamination. 

The concern of the local residents has been exacerbated by the fact that Anniston is immediately adjacent to Fort McClellan, an Army post which was for many decades the headquarters of the Army’s Chemical, Biological, and Radiological Warfare Corps and the Army is now in the process of destroying various toxins stored at the post which have become unstable with the passage of time.

III.        PROCEDURAL HISTORY

Plaintiffs, reportedly representing a plaintiff class of 12,000 to 14,000 people, filed a complaint in state court in 2005 asserting very broad, vague claims of personal injury, trespass, nuisance, and diminution of property value against foundry operators and a number of other, non-foundry companies. The case was removed to federal court pursuant to the Class Action Fairness Act and remains there.

Considerable skirmishing, involving Defendants’ motions attacking what were styled as “shotgun” allegations, and subsequent dismissals without prejudice eventually resulted in the filing of a second amended revised complaint in 2007. Defendants again attacked the complaint as the type of “shotgun” pleading which had attracted much negative comment by the Eleventh Circuit. A few days before argument on those motions, the Supreme Court released the Bell Atlantic decision. Defendants cited that decision as supplemental authority, arguing that the Court now had authority to dismiss the “shotgun” pleading with prejudice.

The Plaintiffs had alleged, and argued, that the foundries had produced thousands of tons of contaminated sand which ended up in Plaintiffs’ yards; further, that all of the Defendants may have released sand, PCBs, and other contaminants in sand that was used to clean up spills, stormwater, and air emissions. The Court was critical of these allegations because they did not specify what each Defendant had allegedly done, but, rather, seemed to treat all releases as a group action. The Plaintiffs argued that they could not be required to specify what each Defendant had done until they were permitted to pursue discovery. They argued that the Conley standard should apply and that their allegations should be found to be sufficient because it was “possible” that, in discovery, they could find specific facts to support their allegations. The Plaintiffs also argued that Bell Atlantic did not apply because the allegations were not made pursuant to a statute which required the averment of specific facts.

The Court rejected the Plaintiffs’ arguments and applied the Bell Atlantic standards. Its decision was based on three considerations. First, it noted that Conley was not an anti-trust case; therefore, even though the Supreme Court struck down the Conley test in an anti-trust case, its ruling was not limited to specific statutory actions.

Next, the Court held that adequate pleadings were necessary to advise not only the Defendants, but also the courts, of the allegations of the case so that discovery could be administered and could proceed in an appropriate manner. The Court styled this as a requirement to advise Defendants and the court of “*** who, what, when, where ***” the actions resulting in the damage complained of occurred. 

Next, the Court focused on the Supreme Court’s discussion, in Bell Atlantic, of the high cost of discovery and the increasing practice of plaintiffs in putative class actions to file suit with vague allegations and then use the high cost of discovery to pressure defendants into settling. 

Based on all these considerations, the Court dismissed the complaints as to all parties, but agreed to give Plaintiffs “one last chance” to file an adequate complaint against the foundry defendants. With respect to the non-foundry defendants, the Court observed that the allegations that there “may” have been discharges of contaminants in sand used to clean up spills and in stormwater and air emissions were entirely too vague and that, if the Plaintiffs could not produce much more specific allegations, those claims would be dismissed with prejudice.

Subsequently, Huron Valley Steel Corporation, a Defendant which is a recycler of non-ferrous scrap metals, moved for dismissal with prejudice and for entry of an immediate final judgment. The Court agreed that, from the face of the complaint, it appeared that this was a foundry sand case, that Huron Valley Steel Corporation had never produced or disposed of foundry sand, and that there were no other allegations against it that were not impermissibly vague. Therefore, the court dismissed the matter with prejudice as to Huron Valley Steel Corporation and entered final judgment for that Defendant. 

The court has yet to rule on the motions to dismiss of the remaining Defendants.

IV.       POTENTIAL IMPLICATIONS OF THIS DECISION

If other federal courts follow the line of reasoning of the Alabama court it could remove a number of complications in the future in Superfund matters. Most important, it may do away with, or at least significantly reduce, the practice of filing vague, broadly worded complaints against PRPs by groups of residents who live in the vicinity of Superfund sites, then seeking to pressure defendants to quickly settle. It could also simplify the task of planning and sequencing remediation activities and documenting Administrative Records to protect against such lawsuits. This could provide an important cost saving for PRPs in many cases.

For further information, contact Jack D. Shumate at shumate@butzel.com or (248) 258-1405.

Jack Shumate is Senior Environmental Counsel in the law firm Butzel Long, Professional Corporation. Mr. Shumate holds a BS degree in Chemical Engineering from Rose-Hulman Institute of Technology and received his JD from the Salmon P. Chase College of Law of Northern Kentucky University in 1962. He is listed in the Best Lawyers in America and is a Founding Regent and Charter Fellow of the American College of Environmental Lawyers.

Butzel Long is a full-service law firm headquartered in Detroit, Michigan with offices throughout Michigan and in Florida, New York City, and Washington DC and alliance offices in China and Mexico.

Kansas Agency Denies Air Quality Construction Permit for Coal-Fired Generating Units Based Solely on Projected CO2 Emissions

Posted on February 19, 2008 by Charles Efflandt

On October 18, 2007, the head of the Kansas Department of Health and Environment (KDHE), Secretary Roderick Bremby, denied an air quality permit application for two proposed 700-megawatt coal-fired generating units to be constructed in Holcomb, Kansas. The application was submitted by Sunflower Electric Power Company as part of a planned $3.6 billion expansion of an existing facility. The Secretary’s decision to deny the permit was based solely on the projected carbon dioxide emissions from these units and the impact of such emissions on climate change. Carbon dioxide is not specifically regulated as an air pollutant in Kansas.

In announcing his decision, which rejected the recommendation of agency staff that the permit be granted, the Secretary stated “I believe it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing.” The expanded facility was projected to release an estimated 11 million tons of carbon dioxide annually. The Secretary did not indicate at what level projected carbon dioxide emissions would, in his opinion, threaten human health and the environment. Thus, the Secretary left open the question of how other CO2 emitting facilities would be regulated in Kansas in the future. Although a number of states have entered into regional initiatives or enacted legislation designed to reduce greenhouse gas emissions over time, it is believed that KDHE’s outright denial of an air quality permit based solely on perceived “excessive” emissions of an unregulated greenhouse gas is a first in the nation.

The cited legal support for the decision is an opinion of the Kansas Attorney General that, notwithstanding specific statutes or rules regulating air emissions, K.S.A. 65-3012 gives KDHE the broad authority to take any permitting or other action deemed necessary should the Secretary make a factual determination that a particular emission constitutes an air pollutant and that such emissions threaten health or the environment. The “factual determination” supporting the Secretary’s conclusion that carbon dioxide is an air pollutant and that this particular facility’s projected carbon dioxide emissions would constitute a threat to health and the environment is not apparent from the permit denial decision.

On November 16, 2007, Sunflower Electric Power Corporation filed two lawsuits seeking to overturn KDHE’s permit denial decision challenging the legal authority for the agency’s decision.

Not surprisingly, the KDHE’s permit denial decision has generated substantial controversy. A media campaign was immediately launched by those opposing the KDHE’s decision. The theme of that campaign is that the Secretary’s claimed authority could logically be extended to other facilities and potentially other unregulated emissions to the general detriment of the state and its ability to attract and retain business.

In a subsequent action perceived as an attempt to diffuse this criticism, the Secretary announced the decision to approve an air quality permit for an ethanol plant, notwithstanding the facility’s carbon dioxide emissions. Although the projected CO2 emissions from the ethanol facility are substantially less than those of the proposed coal-fired generating plant, the KDHE’s approval of the ethanol plant permit did not elaborate on the specific factual and scientific bases for distinguishing the facilities. Thus, it remains unclear in Kansas what quantity of projected carbon dioxide emissions may exceed the unspecified level deemed by KDHE to constitute an unacceptable global warming threat.

State law-makers in both chambers of the legislature are presently considering several bills directed at the Secretary’s permit denial decision. Provisions of the various bills include legislation specifically “over-turning” the Secretary’s decision, the enactment of phased-in limitations on CO2 emissions with a “carbon tax” penalty for violators, and a variety of alternative energy incentives and requirements. Most of the bills being considered are being opposed by the governor and environmental groups as being hastily conceived and inadequate to meet the future health and regulatory challenges of greenhouse gas emissions in the state.

For more information please contact Charles Efflandt, practice group leader of the Environmental and Natural Resources team, Foulston Siefkin L.L.P., Wichita, Kansas http://www.foulston.com.

California v. U.S. EPA--Fighting for the Last Word on Mobile Source Greenhouse Gas Emissions

Posted on February 19, 2008 by Lee A. DeHihns, III

Following the United States Supreme Court’s landmark decision in Massachusetts v. EPA, deciding that greenhouse gases are a pollutant under the Clean Air Act, a federal-state skirmish has emerged in the climate change arena over mobile source emissions. The United States Government estimates that the transportation sector accounts for approximately one-third of all greenhouse gas emissions in the U.S. Over the past months, the question of how to reduce those emissions has evolved into a dramatic political and legal battle, pitting California’s Governor Arnold Schwarzenegger against U.S. President George Bush. 

The stage for this tussle was set long ago when Congress adopted the federal Clean Air Act and included in the law a special provision for California. Specifically, Section 209(a) of the Clean Air Act prohibits individual states from adopting emission standards for new motor vehicles. However, in recognition of California’s unique smog problems, a subsection (b) was added to enable California to adopt standards more stringent than federal standards so long as it applies for and obtains a waiver from the U.S. EPA. As one court recently explained, under Section 209(b), “Congress has essentially designated California as a proving ground for innovation in emission control regulations.” Other states are then free to adopt California’s standards pursuant to Section 177 of the Clean Air Act, so long as the standards are adopted at least two years before the model year that they regulate. 

In 2002, California invoked its unique Clean Air Act authority to address greenhouse gas emissions from mobile sources. In particular, the State passed AB 1493 requiring the California Air Resources Board to develop and adopt regulations for the greenhouse gas emissions of passenger automobiles and light duty trucks. In September of 2004, the Air Resources Board adopted standards that apply to such vehicles beginning with model year 2009. As required by the Clean Air Act, California then requested a waiver from the U.S. EPA so that the standards could enter into force. While the waiver request was pending, no less than sixteen other states lined up to adopt California’s standards—for all practical purposes, the California standards were poised to become the de facto national standard.  

Automobile manufacturers challenged those regulations in federal courts in both Vermont and California, arguing that the state automobile emission standards for greenhouse gases constituted fuel efficiency standards, and that fuel efficiency standards are exclusively regulated by the federal government under the Environmental Policy and Conservation Act (“EPCA”).[1] Both courts rejected the manufacturers’ challenges, deciding that federal law did not preempt California’s ability to affect fuel economy through the regulation of greenhouse gas emissions from automobiles, so long as the U.S. EPA granted a waiver under the Clean Air Act—the stage was set for a showdown between California and the U.S. EPA.

The U.S. EPA played its hand slowly. During the summer of 2007, the U.S. EPA held hearings on California’s waiver request. Perhaps foreshadowing its upcoming decision on the request, the U.S. EPA then announced in the fall that it would begin its own “Rulemaking To Address Greenhouse Gas Emissions From Motor Vehicles,” planning for the adoption of federal regulations by October 2008. Finally, the shot was fired on December 19, 2007, when Stephen Johnson, the U.S. EPA Administrator, held a press conference announcing his agency would not grant a waiver to California’s regulation. At the same time, President Bush signed a new energy bill, the Energy Independence and Security Act of 2007, requiring a fleet average of thirty-five miles per gallon by 2020 and an annual production of thirty-six billion gallons of renewable fuels by 2022.[2] In making the announcement, Johnson specifically cited Bush’s recent signing of the bill and said, “The Bush administration is moving forward with a clear national solution, not a confusing patchwork of state rules. I believe this is a better approach than if individual states were to act alone.”

Retaliation came swiftly. Little more than two weeks after Johnson’s announcement, California, along with 15 other states and five environmental groups, petitioned the Ninth Circuit on January 2, 2008, for review of the waiver denial.  In the lawsuit, California will need to make the case that its regulation under Section 209 was necessary to “meet compelling and extraordinary conditions.”  As a coastal state with limited fresh water resources, the effect of climate change on California may indeed be severe, involving rising sea levels, a reduction in the Sierra snow pack, and higher temperatures that would exacerbate the state’s ozone nonattainment problem, which is already the worst in the nation. A recent Stanford University study added fodder to this argument when it found Californians’ health will be disproportionately affected by greenhouse gas emissions, because the state is home to six of the most polluted cities in the United States. California will also need to make the case under section 209, that its standards “will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards.” To that end, the California Air Resources Board released a January 2, 2008, assessment that concludes the federal law, even when fully implemented, will not be as effective as California’s standards at reducing greenhouse gas emissions from new vehicles. Even if California is successful, California’s regulation will have to be modified as it was to apply to 2009 model cars—models that will shortly be coming to market. 

The EPA’s first legal maneuver in response to California’s petition may be to request a transfer from the Ninth Circuit to the more agency-friendly D.C. Circuit. Most challenges of EPA regulations must be filed in the D.C. Circuit—the relevant jurisdictional trigger being whether the action has “nationwide scope or effect.”  While the issue of the waiver makes its way through the courts, the U.S. EPA’s rulemaking will also go forward. To meet its goal of final action by October 2008, the U.S. EPA will have to move quickly, with the public comment period coming by summer 2008 at the latest. 

As these battles are fought, looming on the horizon is a general election in November, and a new federal administration beginning in January of 2009. If the U.S. EPA adopts regulations in October 2008 that do not go as far as the California standards, yet another legal challenge seems almost inevitable, if for no other reason than to stall any final rule until the administration changeover. When the dust does settle, presumably in 2009, the road to mobile source emission reductions will finally be paved.

Michèle Corash is a partner in the international law firm of Morrison & Foerster LLP and a member of the firm’s environmental law practice group. She served as General Counsel of the United States Environmental Protection Agency (EPA) from 1979 to 1982 and previously as Deputy General Counsel for the U.S. Department of Energy and Special Assistant to the Chairman of the Federal Trade Commission. Ms. Corash has consistently been listed in American Lawyer’s Corporate Counsel among the “Best Lawyers in America for Environmental Law” and in numerous other publications as being at the top of her field. She represents companies on a broad range of state, national and international environmental issues and claims regarding exposure to toxic substances. With the experience of being a former General Counsel of the EPA, Ms. Corash is well versed, and has been for many years, in the evolving area of clean technology, renewable resources and climate change. She advises clients on the many issues now facing corporations as they face the challenges of new technologies, infrastructures, markets and regulatory regimes.

Contact information: mcorash@mofo.com or (415) 268-7124



[1] Adopted in 1975, EPCA provides for the establishment of national corporate average fuel economy (“CAFÉ”) standards that apply to all passenger automobiles and light duty trucks.

[2] Coincidentally, at the same time, the European Commission adopted a proposal for legislation to dramatically reduce the average carbon dioxide (“CO2”) emissions of new passenger cars by 2012. If adopted by the European Parliament, the proposal requires, by 2012, a fleet average of 130 grams of CO2 emissions per kilometer, with another 10 grams per kilometer reduction from alternative sources such as biofuels and more efficient air-conditioning. Considering Europe’s cars currently emit on average 160 grams of CO2 per kilometer, this represents an almost twenty percent reduction of CO2 emissions in four years. 

Climate and the Courts

Posted on February 4, 2008 by Lee A. DeHihns, III

The Supreme Court ruled last term that climate change can be regulated under federal law. But will the continuing lack of action by Congress, the En­vironmental Protection Agency, and most states be replaced by new litiga­tion by activist states and public inter­est organizations against government agencies and private parties? Is this an area where litigation will, or alternatively should, fill a void left by meaningful government activity? When EPA separately receives a record-breaking 100,000 comment letters on the request by California to waive the Clean Air Act’s barrier to state regulation of greenhouse gases from motor vehicles, one realizes that the public’s demand for concrete action is urgent. A legitimate fear, how­ever, is that these petitions and lawsuits could produce a patch­work response to global warm­ing where a comprehensive na­tional strategy is called for.

 

Without federal legislation setting out a clear and compre­hensive policy on GHGs, what is certain is that court cases to address alleged damages from global warming emissions will continue under authorities liti­gants claim are in the CAA or under public nuisance and oth­er common law torts. Whether seeking federal statutory pre­emption of state action or af­firmation that the claimants’ is­sues are non-justiciable political questions, cases that would bar some of those assertions are now squarely before two federal appeals courts. The stakes in those cases — which I expect will go to the Supreme Court — are high. At issue are the responsibilities and rights of both the federal government and the states in en­vironmental policymaking as well as the role that courts play in resolving the special issues, such as causation, injury, and standing, raised by global warming.

The Supreme Court’s holding in Massachusetts v. EPA, decided April 2, 2007, has already had a tre­mendous impact on climate change policy develop­ment and litigation in the United States. In Massa­chusetts, 13 states, 3 cities, 13 environmental orga­nizations, and American Samoa asked for review of EPA’s denial of a petition for rulemaking to regulate GHGs — in this case four specific gases, including carbon dioxide — from new motor vehicles under Section 202(a)(1) of the CAA. That section requires that EPA “shall by regulation prescribe . . . standards applicable to the emission of any air pollutant from any class . . . of new motor vehicles . . . which in [the administrator’s] judgment cause[s], or contribute[s] to, air pollution . . . reasonably . . . anticipated to endanger public health or welfare.” The act defines air pollutant to include any physical or chemical substance emitted into the ambient air.

EPA’s denial of the petition reasoned that the CAA does not authorize it to issue mandatory regu­lations to address GHGs, especially when, as argued by the federal government, there is no science firmly linking emissions with an increase in global surface air temperatures. From a political perspective, EPA also reasoned that regulating new motor vehicles would conflict with President Bush’s comprehensive, voluntary strategy and undermine his ability to conduct foreign policy with developing countries over their emissions. EPA’s denial was not without sup­port: 10 states and 6 trade associations filed briefs against the petition.

Although the agency claimed that Massachusetts had failed to demonstrate an injury that could be tied to GHG emissions, the Court found that the state had standing to pursue review of EPA’s denial of its petition. The Court held that carbon dioxide and other GHG emissions do meet the definition of air pollutant under the CAA. The Court next held that the CAA requires EPA to regulate GHGs from new motor vehicles if it forms a judgment that such emissions under Section 202(a) “may reasonably be anticipated to endanger public health or welfare.” Welfare under the CAA includes effects on climate. EPA can only avoid regulatory action if it is appar­ent that GHGs from new motor vehicles do not contribute to climate change. Because of the Court’s linking of GHGs with the definition of air pollutant under the CAA, future litigation and other actions to reduce emissions will be strengthened.

In reaction to Massachusetts, and the lack of any decisions on GHG regulation by the agency since the decision last April, there are a variety of efforts underway to force EPA or other federal agencies to formulate a national approach to GHG regulation. Unfortunately, such an approach has to be taken up piecemeal since there is no single authority in the Clean Air Act that is a logical target. As a result, U.S. climate policy could become a crazy-quilt of differing standards and regulations across the country.

More Unanswered Petitions

In a lawsuit pending while Massachusetts’s petition for a rulemaking was on its journey, on September 12, 2007, another New England state received a favorable response to its separate petition to regu­late GHGs from motor vehicles in a federal trial court — although the final result will depend on the outcome from yet another state petition. In Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, a case brought by a group of car dealers, manufacturers, and their associations, a U.S. district court found that the state of Vermont’s regulations adopting California’s GHG standards for new automobiles were not pre­empted by either the CAA or the Energy Policy and Conservation Act of 1975, as amended. EPCA autho­rizes the Department of Transportation to set mileage standards for new cars and light trucks.

Section 202 of the CAA, the object of Massachusetts, requires the agency to establish standards for air pol­lutants emitted by new motor vehicles. Section 209(a) preempts a state from adopting its own motor vehicle emission standards, while Section 209(b) requires EPA to waive the preemption barrier for standards that meet certain conditions. The most important condition, of course, is that the state adopt the same regulations as California, which because it suffers from the worst air pollution in the country and was already legislating emissions reductions before the national government can receive a waiver to adopt standards stricter than federal regulations. Other states may adopt California standards for which a waiver has been granted if they do so at least two years before commencement of a new automotive model year.

California adopted GHG standards for new vehi­cles to begin in model year 2009, and asked EPA for a waiver of federal preemption in 2005, the same year as Vermont enacted its standards. It is this request that en­gendered the 100,000 comment letters, the most ever received on any regulatory petition. The federal agency is expected to act on California’s waiver request after it reviews the letters. However, California has decided not to wait on EPA to act on its request. On November 5, 2007, the state sued the agency in federal court to compel it to act on the petition. California Attorney General Edmund G. Brown Jr. said, “We have waited two years and the Supreme Court has ruled in our fa­vor. What is the EPA waiting for?” California pointed particularly to the fact that 16 other states have adopt­ed California standards or will do so soon. The ruling in Green Mountain Chrysler Plymouth allows Vermont’s petition to go forward, where it will have to await EPA’s decision on the California petition.

The Green Mountain decision draws support from Massachusetts, because the Supreme Court commented that despite the overlap between EPCA and the CAA, EPA must act to carry out its obligations without re­gard to what DOT does under EPCA. The Supreme Court held that “EPA has been charged with protect­ing the public’s health and welfare . . . a statutory obli­gation wholly independent of DOT’s mandate to pro­mote energy efficiency.” While recognizing that those emissions contribute to global warming, the district court recognized that Vermont’s attempt to regulate GHGs from cars is part of its comprehensive strategy to reduce GHG emissions statewide. Vermont is un­dertaking its motor vehicle program and other actions through its participation in the Regional Greenhouse Gas Initiative, an agreement among nine northeastern and mid-Atlantic states to adopt a regional cap-and-trade program for GHGs associated with large station­ary sources such as power plants.

One other interesting issue raised in the Vermont case is the allegation that the state’s regulations intrude upon the foreign affairs prerogatives of the president and the Congress and that they interfere with U.S. pursuit of international agreements to reduce GHGs. Again relying on Massachusetts, the district court said that the Supreme Court had dismissed EPA’s similar contention that regulating GHGs under the CAA might impair the president’s ability to negotiate with developing nations to reduce greenhouse gas emis­sions. Based on the evidence before it, the district court concluded that there was no demonstration that Ver­mont’s regulations would have a recognizable intrusion in the field of foreign affairs. The district court weighed the burden that the automotive industry bears to show that the Vermont regulations are beyond its ability to meet, and concluded that “the court remains uncon­vinced automakers cannot meet the challenges of Ver­mont and California’s greenhouse gas regulations.”

Staying in the world of motor vehicle emissions, on November 15, 2007, the Ninth Circuit reversed and remanded NHTSA’s corporate average fuel economy standards for light trucks for model years 2008–2011 issued under EPCA in Center for Biological Diversity v. National Highway Traffic Safety Administration. The standards were challenged by 11 states, the District of Columbia, the city of New York, and four public inter­est organizations. Emissions from light trucks make up about 8 percent of annual U.S. greenhouse gas emis­sions. NHTSA claimed it weighed all of the benefits of improved fuel savings, concluding that “there is no compelling evidence that the unmonetized benefits would alter our assessment of the level of the standard for [model year] 2011.” The appeals court found that NHTSA “assigned no value to the most significant benefit of more stringent CAFE standards: reduction in carbon emissions” and thus will have to promulgate new CAFE standards that take GHGs into account.

In yet another petition to EPA, on October 2, 2007, California Attorney General Brown joined three national environmental organizations in asking the agency to adopt strict regulations for GHGs from ocean-going vessels under the CAA — “and to begin the process immediately.” Brown said that ocean-going vessels emit more CO2 emissions than any nation in the world except for the United States, Russia, China, Japan, India, and Germany. The petition asserts that ocean-going vessels over 100 tons are estimated to emit up to 3 percent of the total world inventory of GHGs, while by comparison in Massachusetts v. EPA the Court found that the contribution of the U.S. transportation sector to the worldwide GHG total is about 6 percent. California asserts that such a large sectoral contribution to global warming is “vital to regulate.”

California has also turned to litigation and legisla­tion. Its case against the automobile manufacturers un­der federal common law and state law was dismissed on September 18 when the district court refused to entertain the federal common law claim, ruling that it comprises a nonjusticiable political issue, and then re­fused to exercise supplemental jurisdiction under state law. But the state is moving on its own: On September 27, 2007, Governor Arnold Schwarzenegger signed a bill that establishes a comprehensive program of regu­latory and market mechanisms to achieve GHG re­ductions.

The Question of Political Questions

Another issue facing current and future liti­gants concerns a political question, as decid­ed by the Southern District of New York in Connecticut v. American Electric Power Com pany. In that case, Connecticut and seven other states, the city of New York, and environmen­tal groups sued a number of electric utilities, includ­ing American Electric Power Company, the Southern Company, TVA, Xcel Energy, and Cinergy Corpora­tion under federal common law to abate the public nuisance of global warming. The complaint alleged that the defendants were the five largest emitters of car­bon dioxide in the United States, constituting approxi­mately one fourth of the electric power sector’s carbon dioxide emissions, and that U.S. electric power plants are responsible for 10 percent of worldwide carbon di­oxide emissions from human activities.

As in the California suit against the automakers, the court held that filing nuisance suits against utilities to abate emissions that allegedly contribute to global warming raises non-justiciable political questions that are beyond the limits of a court’s jurisdiction. The court concluded that “the scope and magnitude of the relief plaintiff’s seek reveals a transcendentally legislative na­ture of this litigation. Plaintiff asks this court to cap carbon dioxide emissions and mandate annual reduc­tions of an as-yet-unspecified percentage.” The court found that a case is “justiciable in light of the separa­tion of powers ordained by the Constitution only if the duty asserted can be judicially identified and its breach judicially determined and protection for the right ju­dicially molded.” The district court then went through an analysis of the six situations recognized as indicating the existence of a non-justiciable political question, cit­ing two U.S. Supreme Court cases, Baker v. Carr, de­cided in 1962, and Vieth v. Jubelirer, decided in 2004.

Among the factors in the Vieth v. Jubelirer case, which concerned gerrymandering, is whether a court faces “the impossibility of deciding [the case] without an initial policy determination of a kind clearly for nonjudicial discretion.” In Connecticut, the district court was honestly puzzled. It struggled with a variety of policy determinations concerning whether the cost of GHGs would be borne just by the defendants, the entire electricity generating industry, or all industries. It also struggled with the economic implications of making these choices, not to mention the effect on the country’s energy policy. In the end, the court conclud­ed it is the judicial branch that decides when a political question is raised, but “looking at the past and current actions (and deliberate inactions) of Congress and the executive within the United States and globally in re­sponse to the issue of climate change merely reinforces my opinion that the questions raised by plaintiffs’ complaints are non-justiciable political questions.” The decision was appealed to the U.S. Court of Appeals for the Second Circuit. Oral argument on appeal was held before the Massachusetts decision and although the Sec­ond Circuit sought additional briefing in light of the decision, it has not yet ruled in the case.

Another court decision that addressed the non-jus­ticiable political question issue is Comer, et al. v. Mur­phy Oil USA Inc., et al., decided last August by the U.S. District Court for the Southern District of Mississippi. This case, brought in the aftermath of Hurricane Ka­trina, was a putative class action on behalf of Mississip­pi citizens against defendants which included named oil company defendants (plus an additional 100 oil companies licensed to do business in Mississippi), in­surance firms, utilities, and chemical companies. The allegation was that these businesses emit GHGs, which changed the environment so as to cause more frequent and intense hurricanes over the past 30 years, result­ing in, among other things, Hurricane Katrina and the damages suffered by the plaintiffs.

Interestingly the plaintiffs did not ask the court to regulate global warming or change national global warming policy, but instead they sought damages for direct action by the defendants in contributing to the cause of Hurricane Katrina. The plaintiffs, similarly to those in the Connecticut v. American Electric Power Company case, said in a class action complaint, “To the extent that this complaint raises political issues, those issues are subordinate to the plaintiffs’ physical and monetary damages. Furthermore, although global warming causes tremendous damage to the environ­ment, public health, and public and private property every year, there is a dearth of meaningful political ac­tion in the United States to address global warming problems. Thus, to the extent that the political process has failed to provide people harmed by global warm­ing with means to recover for their injuries, the courts must execute their constitutional mandate embodied in Article III of the U.S. Constitution.”

Motions to dismiss were filed in the case, following arguments, similar to those made in Connecticut, that the case presented a non-justiciable political question and must be dismissed. In an opinion that received little notice, the district court found that the plaintiffs did not have standing to assert claims against any of the defendants and that their claims were nonjudiciable pursuant to the political question doctrine. An appeal has been docketed with the U.S. Court of Appeals for the Fifth Circuit.

The Special Standing of States

Another issue that has not been developed further since Massachusetts v. EPA is stand­ing to challenge government GHG inaction. As a backdrop to its decision, the Supreme Court was careful to explain that it was de­ciding whether GHGs should be regulated based on the wording of the CAA. The justices explained that “Article III of the Constitution limits federal court ju­risdiction to cases and controversies.” In other words, federal courts address “questions presented in an adver­sary context . . . capable of resolution through the judi­cial process.” The justices were also clear that “no justi­ciable controversy exists when parties seek adjudication of a political question.” In the Court’s view, “While it does not matter how many persons have been injured by the challenged action, the party bringing suit must show that the action injures him in a concrete and per­sonal way. This requirement is not just an empty for­mality. It preserves the vitality of the adversarial process by assuring both that the parties before the court have an actual, as opposed to professed, stake in the out­come, and that the legal questions presented . . . will be resolved, not in the rarefied atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.”

The Supreme Court took an additional step in rec­ognizing that the state of Massachusetts had a special position in the case. The Court said that “when a state enters the union, it surrenders certain sovereign prerogatives. Massachusetts cannot invade Rhode Is­land to force reductions in greenhouse gas emissions, it cannot negotiate an emissions treaty with China or India, and in some circumstances the exercise of its police powers to reduce in-state motor-vehicle emis­sions might well be preempted.” The Court stated that EPA had an obligation to protect all U.S. citi­zens under the CAA and the agency’s refusal to act presented a risk that Massachusetts had to sue to protect. The Court found that “the rise in sea levels associated with global warming has already harmed and will continue to harm Massachusetts. The risk of catastrophic harm, though remote, is nevertheless real. That risk would be reduced to some extent if petitioners received the relief they seek.”

The standing conclusion in Massachusetts needs to be used carefully in future cases due to the strong dissent written by Chief Justice John Roberts, who argues that the granting of special standing to a state has no precedent. He worries that the Article III stand­ing threshold has been lowered for all future litigants: “The good news is that the Court’s ‘special solicitude’ for Massachusetts limits the future applicability of the diluted standing requirements applied in this case. The bad news is that the Court’s self-professed relax­ation of those Article III requirements has caused us to transgress ‘the proper-and-properly limited-role of the courts in a democratic society.’ ”

Is Climate Change Material?

A final outgrowth of Massachusetts takes a completely different tack in reducing GHGs. Buoyed by the removal of barriers to EPA regulation of climate change, on September 18, 2007, a coalition of share­holders, environmental groups, and state officials filed a petition with the Securities and Exchange Commis­sion requesting that it issue an interpretive release clari­fying that material climate-related information must be included in corporate disclosures under existing law. The petition is notable because it calls for disclosures beyond the types of generic climate impacts that have been the subject of disclosures in the past and it alleges that the voluntary disclosures to date are insufficient. The petition seeks evaluation of the risks in three cat­egories: physical risk, financial risk, and legal proceed­ings. In citing Massachusetts v. EPA and pending federal legislation, the petition makes as its central point that “the transition to a carbon-constrained economy is underway, and public access to material information concerning the risks and opportunities that companies face, and their means of addressing those risks and op­portunities, is vital to investors.”

All of the efforts described in this article, some in and some out of courts, tell us that a chaotic path lies ahead for those seeking satisfactory solutions to global climate change. •

 

Lee A. DeHihns III, is the Chair of the American Bar Association’s Section of Environment, Energy and Resources for the 2007–2008 term, is a Partner in the Environmental and Land Use Group at Alston+Bird LLP in Atlanta, Georgia.

*This article originally appeared in The Environmental Forum January/February 2008 issue. For information regarding the Environmental Law Institute please visit their website at www.eli.org.

NRDC v. Winter -- Green Trumps the Blue and Gold -- National Security Takes a Back Seat to Natural Resources

Posted on January 22, 2008 by ACOEL Admin
 
I. INTRO
On January 3, 2008, a federal judge for the U.S. District Court for the Central District of California imposed substantial restrictions on the U.S. Navy’s use of mid-frequency active (MFA) sonar in waters off the California coastline.  Although details of the restrictions and their immediate impact on the Navy can readily be discerned by reviewing the judge's order, the reverberations of this order may have a much broader impact that could further enhance the role of environmental lawyers.
Until recently, few might have predicted the success of an environmental challenge to military operations -- especially given our country's current military operations abroad.  The California court's much-anticipated order is the latest word in an ongoing debate over MFA sonar operations in potentially close proximity to marine mammals, an activity decried by environmental groups and vigorously defended by the Navy.  The U.S. military has generally been able to defend questionable practices by emphasizing the overall importance of those practices to national security.  As the Supreme Court noted twenty years ago, "unless Congress specifically has provided otherwise, courts traditionally have been reluctant to intrude upon the authority of the Executive in military and national security affairs."[1]


[1] Dep’t of Navy v. Egan, 484 U.S. 518, 529 (1988).
II. PROCEDURAL HISTORY
A. THE DISTRICT COURT'S FINDINGS
In March 2007, the National Resources Defense Council (NRDC) and several other environmental groups filed suit in the U.S. District Court for the Central District of California against both the U.S. Navy and the National Marine Fisheries Service (NMFS), seeking to enjoin sonar operations scheduled between February 2007 and January 2009 as part of fourteen training exercises in the Southern California Operating Area (SOCAL).  The Navy defended its operations by emphasizing their importance to national security, an argument it has made with considerable success in the past, but this time the court found the national security argument less compelling than the competing concern about MFA sonar's impact on the marine environment. The court based its decision on the following findings.
1. PLAINTIFFS' PROBABILITY OF SUCCESS ON THEIR CLAIMS
   
a. NEPA
Because the Plaintiffs presented evidence sufficient to raise substantial questions about whether the proposed activities would have a significant impact, they demonstrated a probability of success on their claims that the Navy had committed several NEPA violations.  First, although the Navy prepared an Environmental Assessment (EA) prior to commencing its naval exercises in the SOCAL, the court disagreed with the Navy's subsequent decision to issue a Finding of No Significant Impact (FONSI).  Based on the court's review of facts available to the Navy, the court agreed with Plaintiffs that the proposed sonar operations would likely have a significant impact, triggering NEPA's requirement that an Environmental Impact Statement (EIS) be prepared.  Alternatively, because the court considered the Navy's self-imposed mitigation measures to be inadequate and incapable of preventing the significant impact anticipated, the Navy had no basis for issuing the FONSI. Second, the court found that "[the Navy's] EA failed to consider reasonable alternatives or cumulative impacts."[1]  The court noted that the Navy disregarded mitigation measures recommended by the California Coastal Commission (CCC), the state agency that administers California's Coastal Management Plan (CCMP), and it also elected not to implement more restrictive mitigation measures previously used by the Navy and its allies in similar training exercises that employed MFA sonar.  Although the Navy's EA did conclude that the proposed activities "would not have any significant contribution to the cumulative effects on marine mammals,"[2] the court held that, absent detailed and quantifiable information supporting that conclusion, the statement was merely aspirational and lacked the substantive analysis traditionally required by the Ninth Circuit. 
b. CZMA
When a federal agency's proposed activity will "affect[] any coastal use or resource,"[3] the CZMA requires the federal agency to submit a Consistency Determination (CD) to the applicable state agency.  In its analysis of the Navy's alleged violations of the CZMA, the court identified two deficiencies in the CD that the Navy submitted to the CCC.  First, the Navy neglected to mention that it intended to conduct sonar operations.  The Navy defended the omission by arguing that the sonar operations would not have an effect on the coastal zone.  Just as the court disagreed with the Navy's determination that its sonar operations would not have a significant impact on the marine environment, so too did the court disagree with the Navy's similar conclusion that MFA sonar would not affect the coastal zone.  Second, the CD did not incorporate mitigation measures that the CCC required pursuant to the CCMP.  The CZMA required the Navy to ensure that its sonar operations were "consistent to the maximum extent practicable with the enforceable policies of [the CCMP],"[4] and the Navy failed to satisfy its burden of proving the inapplicability of the mitigation measures required by the CCC.
2. POSSIBILITY OF IRREPARABLE HARM TO THE ENVIRONMENT
In support of its finding that the proposed MFA sonar operations would create a possibility of irreparable harm to the environment, the court relied not only on evidence provided by Plaintiffs but also cited a Navy study that "conclude[d] that the SOCAL exercises . . . [would] cause widespread harm to nearly thirty species of marine mammals, including five species of endangered whales, and [might] cause permanent injury and death."[5]
Having identified the possibility of irreparable harm, the court then considered the appropriateness of an injunction to prevent that harm.  After weighing the competing concerns of national security and environmental protection, the court concluded 
that the balance of hardships tip[ped] in favor of granting an injunction, as the harm to the environment, Plaintiffs, and public interest outweigh[ed] the harm that Defendants would incur . . . if prevented from using MFA sonar, absent the use of effective mitigation measures, during a subset of their regular activities in one part of one state for a limited period.[6]
  
B. THE DISTRICT COURT'S INITIAL ORDER
Based on the findings above, the court issued a preliminary injunction of potentially indefinite duration on August 7, 2007, because it would have prohibited all MFA sonar use "until the Navy adopt[ed] mitigation measures that would substantially lessen the likelihood of serious injury and death to marine life."[7]  
C. APPEAL TO THE NINTH CIRCUIT
On August 31, 2007, the Ninth Circuit stayed the district court's sweeping injunction, pending an appeal by the Navy.[8] On November 13th, the Ninth Circuit adopted the district court’s findings and vacated the stay, but it remanded the matter, chastising the district court for having imposed such an overly broad preliminary injunction. The Ninth Circuit instructed the district court to narrow the scope of the injunction by using its findings to craft mitigation measures uniquely tailored to fit the Navy’s MFA sonar operations in the SOCAL.[9] 
III. MITIGATION MEASURES IMPOSED BY THE DISTRICT COURT
On January 3, 2008, the district court finally issued its much-anticipated order in which it laid out the following mitigation measures applicable to future MFA sonar operations in the SOCAL:
1. 12 Nautical Mile Coastal Exclusion Zone.  "The Navy shall maintain a 12 nautical mile exclusion zone from the California coastline at all times."[10]  Although Plaintiffs sought to enjoin MFA sonar operation within twenty-five miles of the California coastline, the court, though agreeing with Plaintiffs that a twenty-five mile exclusion zone would ensure maximum protection of marine habitat, deemed the zone unduly burdensome to the Navy.  The court noted that the Navy had previously operated under a twelve mile exclusion zone and that such a zone struck the best balance between protection of marine habitat and the Navy's need to train "to detect submarines in the very bathymetry in which submarines are likely to hide."
2. 2200 Yard MFA Sonar Shutdown.  "The Navy shall cease use of MFA sonar . . . when marine mammals are spotted within 2200 yards . . . ."[11]  Designed only to prevent the most damaging consequences of exposure to MFA sonar, the court concluded that a 2200 yard zone of protection for marine mammals imposed a minimal burden on the Navy.
3. Monitoring.  For sixty minutes prior to conducting MFA sonar operations, the Navy "shall monitor for the presence of marine mammals,"[12] using lookouts on vessels and one dedicated aircraft to monitor the entire operating area.  If a marine mammal is spotted, the Navy must suspend sonar operations until it establishes the requisite 2200 yard buffer.  Once sonar operations have begun, the Navy must continue visual monitoring efforts by posting two National Oceanic and Atmospheric Administration (NOAA)- and NMFS-trained lookouts in addition to using one dedicated aircraft, and Navy vessels must also listen for the presence of marine mammals using passive acoustic monitoring.
4. Helicopter Dipping Sonar.  Helicopters must monitor the area for ten minutes prior to employing active dipping sonar and, after spotting a marine mammal within 2200 yards of the helicopter, must cease active dipping sonar operations until reestablishing the 2200 yard safety zone.
5. Surface Ducting Conditions.  "[W]hen surface ducting conditions are detected . . . in which sound travels further than it otherwise would due to temperature differences in adjacent layers of water . . . the Navy shall power down sonar by 6dB"[13] to minimize the sonar's greater intensity and range.
6. Choke Points and the Catalina Basin.  "[T]he Navy [shall] refrain from employing MFA sonar in the Catalina Basin,"[14] an area located between the Santa Catalina and San Clemente islands that provides habitat to a large population of marine mammals.
7. Continue National Defense Exemption (NDE) II Mitigation Measures.  Since 2002, the Navy has worked with NOAA and NMFS to ensure the compliance of its operations with all federal laws, and it has adopted various mitigation measures to achieve that goal of compliance.   The district court explained that its mitigation measures were to be implemented in addition to those measures either already adopted or currently under review by the Navy pursuant to its ongoing collaboration with NOAA and NMFS.
IV. RECENT DEVELOPMENTS
On Tuesday, January 15, 2008, President Bush signed an exemption authorizing the Navy's continued use of MFA sonar in its SOCAL exercises.  In the exemption, the President stated that the sonar exercises "[we]re in the paramount interest of the United States" and that compliance with the mitigation measures would "undermine the Navy's ability to conduct realistic training exercises that [we]re necessary to ensure the combat effectiveness of carrier and expeditionary strike groups."[15] The exemption "claim[s] that the Navy [is] exempt from the [CZMA] and . . . [NEPA],"[16] and it formed the basis of the Navy’s appeal to the Ninth Circuit late on Tuesday night. The Ninth Circuit remanded the case to the district court on Wednesday, and on Thursday, January 17th, the district court responded by temporarily lifting the requirements that the Navy maintain a 2200 yard zone of protection for marine mammals and that it power down its sonar during surface ducting conditions.[17] More developments are expected within the next several days.  
V. THE SIGNIFICANCE OF NRDC V. WINTER  TO ENVIRONMENTAL LAWYERS
NRDC v. Winter is not likely to be an isolated event in the history of environmental law.  At a minimum, the California court's January 3rd order represents an historic victory for environmental groups and a staggering blow to the U.S. military; however, the broader implications of this order will be the ones worth watching. The White House’s recent involvement in the case has ignited the controversy and captured the media’s attention, setting the stage for a dramatic showdown between proponents of national security and advocates of environmental protection. 
Though merely conjectural at this point, it seems plausible that NRDC v. Winter might spawn an explosion of environmental litigation, giving rise to an even greater abundance of work for environmental lawyers.  The case may give environmentalists renewed confidence to challenge the environmental records of their most formidable adversaries.  At the same time, it may also make many regulated entities more conscious of their own environmental vulnerability and prompt them to begin seeking the best legal representation available.  By prevailing against the U.S. Navy, the NRDC and its fellow plaintiffs have not only inspired other environmental groups around the country, but they have also issued a stern warning to the entire regulated community that no organization is immune from liability in this new era of heightened environmental awareness. 
Contact information: jim.farrell@butlersnow.com or (228) 575-3048
Jim Farrell is an associate in the law firm of Butler, Snow, O’Mara, Stevens & Cannada, PLLC, and a member of the firm’s environmental law practice group. Mr. Farrell graduated from the U.S. Naval Academy in 1999 and served for five years as a naval officer prior to attending law school. He received his JD from the University of Mississippi School of Law in 2007. In the summer of 2006, Mr. Farrell served as a law clerk in the U.S. EPA’s Office of Enforcement and Compliance Assurance.
Butler, Snow, O'Mara, Stevens & Cannada, PLLC, is a full-service law firm with more than 150 attorneys representing regional and national clients from offices in Jackson, Miss., on the Mississippi Gulf Coast, Memphis, Tenn. and Bethlehem, Penn.  For more information, visit www.butlersnow.com.


[1] Natural Res. Def. Council v. Winter, No. 8:07-cv-00335-FMC-FMOx, slip op. at 8 (C.D. Cal. Jan. 3, 2008) (order issuing preliminary injunction).
[2] Id.at 10.
[3] Id.at 11 (quoting 15 C.F.R. § 930.32(a)(1)).
[4] Id.at 10-11 (quoting 16 U.S.C. § 1456(c)(1)).
[5] Id.at 12.
[6] Id.at 12-13.
[7] Id.at 3. 
[8] See Natural Res. Def. Council v. Winter, 502 F.3d 859 (9th Cir. 2008).
[9] See Natural Res. Def. Council v. Winter, 508 F.3d 885 (9th Cir. 2008).
[10] Natural Res. Def. Council v. Winter, No. 8:07-cv-00335-FMC-FMOx, slip op. at 14 (C.D. Cal. Jan. 3, 2008) (order issuing preliminary injunction).
[11] Id.at 15.
[12] Id.
[13] Id.at 17.
[14] Id.at 17-18.
[15] Activists Vow to Push Fight Against Navy Sonar, http://www.msnbc.com/id/22683062 (last visited Jan. 21, 2008). 
[16] Daniel Hinerfield & Hamlet Paoletti, Sonar Case Remanded to District Court, http://www.nrdc.org/media/2008/080116c.asp (last visited Jan. 21, 2008).
[17] See Natural Res. Def. Council v. Winter, No. 8:07-cv-00335-FMC-FMOx, slip op. at 2 (C.D. Cal. Jan. 17, 2008) (order for temporary partial stay and setting briefing schedule).