THE TIMES THEY ARE A CHANGING FOR CALIFORNIA’S PROPOSITION 65

Posted on September 9, 2015 by Robert Falk

California’s “Proposition 65” warning requirements have long been a major concern for businesses that want their products offered for sale in the State’s large marketplace.  Businesses whose products contain even a detectable amount of any one of more than 900 chemicals often face enforcement lawsuits brought by for-profit plaintiffs unless their products contain a “clear and reasonable” Proposition 65 warning.  Short of eliminating the chemical entirely, the only way for businesses to immunize themselves from such claims has been for companies to label or display their products with a generic warning based on language set forth in the original Proposition 65 regulations.  It usually states: “WARNING:  This product contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm.” 

Three new developments threaten to make Proposition 65 less predictable and more difficult. 

1)      New Proposition 65 Warning Regulations Proposed for Adoption:  Earlier this year, the California Office of Environmental Health Hazard Assessment (“OEHHA”) formally proposed an extensive set of new rules concerning the requirements for Proposition 65 warnings to be deemed “clear and reasonable.”  While Proposition 65’s current regulations allow for compliance with its warning requirements through the type of generic, one sentence statement appearing above, the proposed regulations will, among other things, require:

a.       use of a yellow triangle pictogram containing an exclamation point;

b.      a more unequivocal warning statement indicating that the product “can expose” a user to chemicals known to the State to cause cancer and birth defects or other reproductive harm;

c.       listing particular chemicals if they are among a group of twelve which are the most frequent targets of Proposition 65 litigation;

d.      adding a URL to all warnings linking a public website that OEHHA will operate to provide information supplementing the warning for those so interested (see below); and

e.       presentation of the warning in languages in addition to English if the product label otherwise uses languages other than English.

The proposed new Proposition 65 warning regulations specify alternative and additional requirements for certain types of products, including for food, restaurants, and several products or facilities that have previously been the subject of enforcement litigation.  They also adopt revised and more onerous requirements for warnings for “environmental exposures,” such as for air emissions that arise from the operation of facilities or equipment within the State.  As proposed, businesses will have two years from the adoption of a final rule to transition their warnings to meet the requirements of the new regulation, after which they can face enforcement actions and citizen’s suits for products in the California market that still bear the old (or no) warnings.

2)      New Proposition 65 Website-Related Requirements Proposed for Adoption:  Although not contemplated by the voters when they approved Proposition 65 over twenty-five years ago, OEHHA is also proposing that it operate a website to provide information to the public to supplement and explain the basis for the Proposition 65 warnings given by businesses.  Information to be provided on this website may include the routes or pathways by which exposure to a chemical from a product may occur, OEHHA’s quantification of the level of exposure to a chemical presented by a product, and other information that may be of interest to plaintiffs as well as to sensitive consumers and other members of the public. 

Significantly, in addition to its potential public education function, the proposed website regulations also empower OEHHA to require that manufacturers, importers, and distributors of products bearing a Proposition 65 warning provide the agency with information if so requested.  Such information may include the identities of the chemicals in the product for which a warning is being given, the location or components of a product in which such chemicals are present, the concentration of those chemicals, and “any other information the lead agency deems necessary.”  While trade secret protection may be asserted in some circumstances, the requirement to provide information to OEHHA will be enforceable by public prosecutors, including the California Attorney General and District Attorneys.  

3)      Potential Changes Relative to Proposition 65’s “Safe Harbor” Levels for Chemicals Listed for Reproductive Effects:   Lead has been the focus of the vast majority of all Proposition 65 enforcement actions to date and resulted in hundreds, if not thousands, of settlements with national and international implications over the past two decades.  Cases have included those concerning trace levels of lead in ceramic tableware, water faucets, candy, mini-blinds, toys, and a wide array of other consumer products and foods.  However, in 2013, a trial concerning lead in 100% fruit juices, packaged fruits, and baby foods resulted in a highly significant Proposition 65 defense verdict based on a judge’s finding that the trace levels of lead exposure presented by each of these products was less that the State’s published “safe harbor” warning threshold for lead of 0.5 “micrograms/day.”  A California Court of Appeal decision published earlier this year sustained, among other things, the trial court’s finding that it was permissible for defendants’ experts to construct a daily average level of exposure based on real world data concerning the frequency of the consumption of the products at issue over a fourteen day time period.   Environmental Law Foundation v. Beech-Nut Corporation, et al., 325 Cal.App.4th 307 (2015). 

In anticipation of this type of appellate decision, earlier this year, one of the most historically active Proposition 65 plaintiff’s groups, the Mateel Environmental Justice Foundation, filed a lawsuit seeking a writ of mandate and declaratory relief challenging the 0.5 microgram/day “safe harbor” for lead.  Mateel contends that California’s published threshold for lead was not set consistently with Proposition 65’s 1,000-fold safety factor requirement for reproductive toxicants.  It therefore argues that this longstanding Proposition 65 safe harbor threshold should be declared illegal and inoperative despite it having been published more than 25 years ago and relied on for thousands of settlements and warning decisions.  Mateel further argues in its case that OEHHA should be ordered to promptly establish a dramatically more stringent safe harbor level for lead based on updated science concerning trace level exposures to lead.  It also seeks to have OEHHA ordered to adopt a rule precluding the averaging of exposure across multiple days in relation to the lead safe harbor level.  A second prominent citizen’s group, the Center for Environmental Health, which also focuses on Proposition 65 enforcement, submitted an administrative petition to OEHHA in early July seeking relief parallel to that sought by Mateel, regardless of the outcome of the lawsuit. 

OEHHA has just announced that, in response to this petition, it will soon initiate a rulemaking to update the existing Proposition 65 safe harbor for lead and several related Proposition 65 regulations.  The proposals include several major changes in the way the extent of exposure is calculated and how Proposition 65’s regulatory exemption for “naturally occurring” exemption for foods is determined.  OEHHA’s new proposals essentially seek to nullify the important Beech-Nut precedents and will likely make it even more difficult for businesses to defend Proposition 65 claims about lead and the nearly 300 other chemicals listed for reproductive effects, especially those that may be present as trace contaminants in food products.  OEHHA’s proposals include the following four elements:

A.      Revised Safe Harbor for Lead and Other Chemicals.  OEHHA proposes to repeal the current safe harbor level for lead (the Maximum Allowable Dose Level or MADL).  In its place, OEHHA proposes multiple levels that depend on the frequency of exposure, from exposure once per day to once every 116 or more days.  OEHHA asserts that the once-per-day figure should be reduced from 0.5 to 0.2 micrograms/day and that the existing 0.5 microgram/day level should instead apply only to exposures that occur no more than once every third day.  For exposures that would occur only once every 6 to 9 days, the lead safe harbor figure would rise to 1.0 microgram/day and to higher amounts as exposure intervals become more infrequent.  Plaintiffs’ groups contend that the lead safe harbor should be an order of magnitude lower at 0.03 micrograms per single day and do not want any alternative levels based on frequency of exposure over time.  Despite its proposal for lead, as to all other chemicals listed for reproductive effects OEHHA proposes to eliminate any consideration of the frequency of exposure when safe harbor levels are applied. 

B.      Naturally Occurring Allowances for Lead and Arsenic in Some Foods.  OEHHA also proposes to adopt specific naturally occurring allowances for lead and arsenic (but not other chemicals such as cadmium) in some specific types of food ingredients/products.  The allowances for arsenic are 60 ppb and 130 ppb for white and brown rice respectively.  For lead, they are 8.8 ppb for raw leafy vegetables and 6.2 ppb for raw non-leafy vegetables, fruit, meat, seafood, eggs, and fresh milk.  The agency bases its proposal on data regarding background levels of lead in soil in California as well as rates of uptake by relevant plants. 

C.      Averaging of Product Samples.  OEHHA further proposes to expressly prohibit averaging lead or other contaminant levels across different lots of a food product in the final form it will be purchased by a consumer.  It would instead require that the level of a contaminant in a lot of food be determined by “representative sampling” from within a particular lot.  OEHHA also would define a “lot” on a production basis, apparently by reference to date or production codes, which could significantly increase the amount of testing required.  Testing on this scale may be infeasible for most businesses.

D.      Average Rate of Exposure.  Finally, OEHHA proposes to dictate that, as to any Proposition 65-listed chemical (lead or otherwise), the “average rate of exposure” must always be calculated based on the arithmetic mean and not a geometric mean or some other measure of the central tendency of a data set.  OEHHA’s proposal flies directly in the face of the scientific testimony that prevailed in Beech-Nut and the prior position of the California Attorney General’s office on this issue.

OEHHA has scheduled public hearings to further discuss its new proposals on October 14 and 19, 2015.  It is also inviting written public comment on the lead safe harbor issue until October 28, 2015, and on the averaging issues until November 2, 2015.

Castor and Pollux – the Strange Case of the Twin MOAs between EPA and California’s DOGGR

Posted on August 20, 2015 by Patrick Dennis

For those of you who, like me, are becoming more confident as the years go by that you have “seen it all” in the field of environmental law, this strange current event will change your mind.

California’s oil and gas production industry has been on a roll for the past decade.  Aided by the price of crude oil in the $100 per barrel range and new technologies, including hydraulic fracturing among others, industry has increased production from previously written-off reservoirs.  During this time, the California Division of Oil, Gas and Geothermal Resources (“DOGGR”) has been the lead agency for that industry, issuing the key environmental permits for its regular operations.  Those include the underground injection permits that allow the industry to take the wastewater typically produced along with crude oil from subsurface production zones and reinject it underground into other water bearing zones.  For nearly thirty years, the issuance of such permits proceeded without major interruption or controversy, but as of the start of this year all that changed.

The story begins in 1982 with California’s application for primacy to implement the Underground Injection Control (“UIC”) program of the federal Safe Drinking Water Act.  Historically, in California most crude oil producing formations are comprised of over 90% water.  Produced water, generally of poor quality, has been disposed as Class II wastes through underground injection wells often located near the production wells.  California’s application for UIC primacy identified those underground aquifers where injection of produced water from oil and gas production was already taking place.  These aquifers were exempt from the prohibition on underground injection of Class II wastes either because they contained greater than 3,000 mg/l of total dissolved solids (“TDS”) and as a result were considered to be unfit as drinking water, or they contained less than 3,000 TDS but met stringent standards of the UIC program.

In a memorandum of agreement (“MOA”) between US EPA and DOGGR executed in September 1982, the two agencies memorialized their agreement to allow DOGGR to implement the federal UIC program in California.  A list of both exempt and non-exempt aquifers is attached to the MOA.  Just a few months later, in December 1982 a second version of the MOA was circulated that transferred 11 of the aquifers from the non-exempt list to the exempt list.  Then, in one of the stranger administrative developments I’ve seen, the September 1982 signature page was affixed to the end of the changed MOA and attachment.  Thus, there were two MOAs – MOA1 drafted and executed in September 1982 and MOA2 apparently drafted and agreed upon in December 1982,  both using the same signature page from September.  The 11 aquifers that went from non-exempt aquifers into which there could be no Class II discharge to exempt aquifers allowed to receive Class II discharges included some of the more critical subsurface aquifers used by the oil and gas industry.                  

As a result of the 1982 MOAs and the transfer of the administration of the UIC program to DOGGR, California’s oil and gas industry was able to secure a much closer (geographically and philosophically) regulatory agency.  UIC permits have been routinely issued to oil and gas producers for injection into exempt aquifers – as recognized in MOA2.  Today there are approximately 50,000 produced water and enhanced recovery oil and gas injection wells in California.  The oil and gas industry has invested hundreds of millions, more likely billions, of dollars in infrastructure and hardware for these wells based in substantial part on the authorizations in their DOGGR permits.

Now we come to the punchline and the strange situation we find ourselves in today. 

Beginning in about 2012, US EPA took a hard look at DOGGR’s implementation of the UIC program and concluded that DOGGR may have issued UIC permits for injection into underground formations that either were not, or should not have been, exempt under the standards set forth in the UIC program. That audit culminated this year in a series of letters issued by both EPA and DOGGR setting forth an ad hoc program to re-evaluate many of the underground formations that had been treated as exempt by DOGGR for decades, including the 11 aquifers that had been “switched” from non-exempt to exempt status by MOA2.  EPA and DOGGR contend that industry must prove that some of these long-held exempt aquifers really qualify for their exemptions, even though industry received permits from DOGGR based upon the 1982 MOA.  This complete reversal of long-held assumptions has caused a substantial amount of angst and uncertainty in the industry.

But perhaps the most astonishing development is the publication of analyses of the validity of the two competing MOAs for the 11 aquifers that appeared on the California EPA website and the dissemination of the competing MOAs on the DOGGR website.  In a March 2, 2015 memorandum authored by Matthew Rodriguez, the Secretary of Cal EPA, the strange procedural history of the competing MOAs, with identical signature pages, is detailed and includes a relatively candid admission that “DOGGR and U.S. EPA agreed to exempt the 11 aquifers, but may not have followed regulatory procedures.” 

Cal EPA and DOGGR seem to agree that they assumed and treated the 11 aquifers as exempt for 30 years and that MOA2 appears to be the real, and final, MOA.  However, US EPA has not issued a final opinion on that issue and continues to leave open the prospect that the 11 aquifers, among others, were never somehow officially exempt under the UIC.  They have even adopted a moniker for the 11 and calling them the “11 historically-exempt aquifers.”  

The final conclusion to this story is yet to be written.  Assuming that re-consideration of the  status of the exempt aquifers does not result in the removal of their exemption, then it may not be necessary to determine what legal significance the competing MOAs enjoy, or which one is “right.”  But if EPA or DOGGR change the status of aquifers from exempt to non-exempt, their actions may shut down injection operations, thereby imperiling ongoing oil and gas operations.  In that event, one or more of the affected industry companies may challenge the validity of MOA1 and seek to compel validation of MOA2.

If that happens, then as an oil and gas industry lawyer, I’m hoping that as between the twin MOAs, MOA2 is Pollux[1] and MOA1 is Castor.                            

 


   [1]   For those unfamiliar with Greek mythology, Pollux and Castor were twins with ambiguous parentage, but only Pollux was immortal and Castor was not.