Should Environmental Agencies be able to Revoke Consent Orders Unilaterally?

Posted on March 17, 2016 by Mark R. Sussman

In a highly unusual case that has led to a near unanimous call for legislative change by environmental lawyers in Connecticut, a Superior Court judge ruled that the Connecticut Department of Energy & Environmental Protection (“DEEP”) can unilaterally revoke a consent order that it negotiated with a company requiring the investigation of a contaminated site.  The lawsuit was initially brought by DEEP, among other reasons, to enforce the consent order.  However, after the defendant filed a counterclaim against DEEP alleging that the department had not acted reasonably and breached the order, the department unilaterally revoked the order and moved to dismiss the counterclaim.  The court held that the state statute that authorizes the department to issue, modify, or revoke orders, allows the department to revoke consent orders.  

Although the state agency may have had good reason to revoke the consent order in this case to help it improve its position in the litigation, that decision undermines the public policy in favor of encouraging negotiated settlements in environmental matters.  Most environmental consent orders are carefully negotiated, with give and take on each side.  If a private party knows that the environmental agency can simply revoke a consent order at any time, why would that party make concessions to resolve a dispute through an administrative order on consent?  

The U.S. Supreme Court in United States v. ITT Continental Baking Company long ago recognized that administrative consent orders and judicial consent decrees are in the nature of contracts and should be construed basically as contracts.  Therefore, the federal courts typically place a heavy burden on a party seeking to modify a consent decree.  Even the Connecticut court which ruled that DEEP can unilaterally revoke consent orders questioned the wisdom of such authority.

It remains to be seen whether the Connecticut state legislature will clarify that the state environmental department lacks the authority to unilaterally withdraw from an agreement that it negotiated.   A bill, S.B. 431, was recently proposed by the Judiciary Committee of the State General Assembly to reverse the Superior Court decision. The general assembly has until May 4, 2016, when the session ends, to pass such legislation.   If the legislation does not pass, and DEEP retains such authority, it is likely to find it much more difficult to settle administrative orders on consent in Connecticut.

Winds of Change in China’s National People’s Congress

Posted on April 18, 2014 by Robert Percival

Appalling environmental conditions that have accompanied China’s rapid growth have been described on Chinese social media as “postapocalyptic,” “terrifying,” and “beyond belief.”  During the last year, air pollution in several Chinese cities became so horrendous at times that road travel, schools, construction projects, and airports temporarily were shut down. Epidemiologists estimate that 1.2 million Chinese die prematurely each year from exposure to air pollution.  Due to widespread water pollution, tap water is not safe to drink, even in luxury hotels.  Pollution is estimated to cost the Chinese economy more than 3.5% of gross domestic product annually. 

Rising public demand to clean up the environment has caught the attention of China’s Communist Party leadership.  In an address at the opening of the annual session of the National People’s Congress (NPC) last month, Chinese Premier Li Keqiang declared “war on pollution.” Chinese authorities agree that enforcement is the number one problem with their environmental laws. Bie Tao, Deputy Director General of Policies and Regulations of MEP, cited estimates that half of all regulated facilities in China violate the law and that pollution in China would be 70% less than it currently is if polluters were in full compliance with the law. 

Problems with enforcement of China’s environmental laws run deep.   China’s regulatory system is highly decentralized with the nation’s Ministry of Environmental Protection (MEP) less than a fiftieth the size of the U.S. EPA for a country with more than three times as many people than the U.S.   Enforcement problems are compounded by local corruption, small penalties for violations, the lack of an independent judiciary and the absence of a long tradition of respect for the rule of law.

As Chinese authorities struggle to increase the enforceability of their environmental laws, two ACOEL members were given an unusual opportunity last month to peak into a window on the NPC’s legislative processes.  On March 19, James A. Holtkamp and I were invited to appear before the Legislative Affairs Commission of the NPC’s Standing Committee in Beijing along with David Pettit, a senior attorney with the Los Angeles office of the Natural Resources Defense Council (NRDC).   Billed as a “Green Dialogue,” the event was an extraordinary effort to obtain U.S. expert input to help resolve disagreements within the NPC on proposed amendments to make China’s basic Environmental Protection Law more enforceable. 

Representatives of the NPC’s Standing Committee and MEP presented us with six sets of questions concerning U.S. enforcement procedures and policies.  Many were directed at understanding how penalties for environmental violations are determined in the U.S.  A proposal to provide that maximum fines for environmental violations in China be calculated in part based on the number of days the violation has occurred was one issue that had created disagreement within the NPC.  We noted that this has become a fundamental principle of U.S. pollution control law and that it provides a powerful incentive for violators promptly to stop and correct violations.  We emphasized the importance of monitoring and reporting requirements in environmental permits.  We also suggested that China should consider adopting a policy that enforcement actions should recoup at least the economic benefit of the violation to ensure that companies do not profit from their violations.  This has been EPA’s long-standing policy and there appears to be some interest in adopting such a policy in China.

Chinese authorities are moving toward requiring greater transparency from polluters.  Beginning on January 1, 2014, they mandated that China’s 15,000 largest companies provide the public with continuous data concerning their air and water emissions, something that would have been unthinkable just a few short years ago. By opening up a “Green Dialogue” on U.S. enforcement practices, China’s legislators are exhibiting a healthy appetite for entertaining new ideas to improve the effectiveness of their environmental laws.  Our U.S. expert panel consisting of an industry practitioner, a public interest lawyer, and an academic apparently proved to be a persuasive coalition for we have learned that many of our recommendations are being incorporated into the new draft of China’s basic Environmental Law.

Yes, Another Blow, but not a Knockout

Posted on August 28, 2013 by Ralph Child

A recent post from Mary Ellen Ternes characterized the August 23, 2013 decision in EME Homer City Generation as another blow to EPA’s ability to enforce against long ago violations of the requirement to obtain New Source Review.

The Third Circuit’s decision certainly is a blow to EPA’s NSR enforcement initiative, but not nearly a knock-out.

First, the decision depended on the fact that neither the Clean Air Act or Pennsylvania’s EPA-enforceable State Implementation Plan expressly requires a major source to operate in compliance with the results of a New Source Review.  But some states do have that requirement in their EPA-enforceable SIPs, as the Third Circuit recognized in distinguishing other cases.  In such states, major sources that did not go through NSR as allegedly required at the time of construction or modification should still anticipate potential EPA enforcement via the SIP. 

Second, even where it is not illegal to operate in compliance with NSR, the question is still open whether the government may obtain injunctive relief anyway.  In United States v. United States Steel Company (N.D. Indiana), the Court held on August 21, 2013 that no penalties could be imposed at law because there is no federally enforceable requirement in Indiana to operate in accordance with the results of an NSR.  Yet the Court went on to  hold that the United States still can seek injunctive relief against a plant that allegedly violated the NSR requirement.  The Court reasoned that because the sovereign is not subject to laches, the government remains able to invoke the Court’s equitable powers and to seek an injunction to correct the violation.

On to the Seventh Circuit?

Petroleum Refinery Enforcement Initiative 2.0

Posted on August 5, 2013 by Paul Seals

Enforcement with a Flair

EPA has seen the smoke.
This certainly is no joke.
Benzene is a neighborhood scare,
With upsets going to the flare.

On July 10, the Department of Justice and EPA announced the lodging of a consent decree with Shell Oil Company to resolve alleged Clean Air Act violations at Shell’s refinery and chemical plant in Deer Park Texas.  This agreement represents the fourth “refinery flare consent decree” in the past year.  More are expected.

Shell will spend $115 million to control emissions from flares and other processes, and will pay a $2.6 million civil penalty.  EPA alleged that Shell was improperly operating its flaring devices resulting in excessive emissions of benzene and other hazardous air pollutants.  Shell will spend $100 million to reduce flare emissions.

These flare consent decrees represent a new chapter in EPA’s national Petroleum Refinery Initiative (“PRI”), which, beginning in 2000, resulted in the entry of 31 settlements covering 107 refineries in 32 states, affecting 90% of the domestic refining capacity.  EPA did address refinery flares as one of the marquee issues in PRI consent decrees – compliance with the New Source Performance Standards (“NSPS”) for Petroleum Refineries.

EPA is now pushing the envelope to impose “regulatory requirements plus.”  Through an enforcement alert in August of last year, EPA warned industry that there were significant issues with flare efficiency and excessive emissions.  EPA Enforcement Alert:  EPA Enforcement Targets Flaring Efficiency Violations.

What is EPA doing?  What is the basis of this Petroleum Refinery Initiative 2.0 and the imposition of “regulatory requirements plus”?

EPA bases this new initiative on the “general duty” requirements.  NSPS requires that at all times owners and operators should operate and maintain a facility or source consistent with “good air pollution control practices.”  In addition, Section 112r of the CAA requires owners and operators to maintain a safe facility by taking such steps as are necessary to prevent releases of hazardous air pollutants (“HAP”), and to minimize the consequences of accidental releases which do occur.  Accordingly, with no threshold amount, any release of a listed HAP (e.g. benzene) that could have been prevented violates this general duty.  If a flare smokes, there must be a violation.

This general duty is used to require control measures that go beyond those specified in the regulations.  The consent decrees include conditions addressing flare combustion efficiency limits incorporating automated controls with complex and expensive monitoring systems, flaring caps for individual flares and the overall refinery, and flare gas recovery systems for individual flares.

The enforcement train has left the station.  Who will be next in line?  How much will the ticket cost?  Are there rulemaking or other actions that may be taken to slowdown or stop the train?  Flares are not unique to petroleum refineries and petrochemical plants (e.g. flaring in oil and gas production facilities).  Will EPA provide other industries the opportunity to go for a train ride?

Enough Is Enough!

Posted on July 3, 2013 by Michael McCauley

On June 13, 2013, U.S. EPA announced its enforcement priorities for the next three years. Among other things, the Agency decided to continue its ill-fated, 15-year old "New Source Review (NSR) Enforcement Initiative."  This effort has targeted coal-fired power plants and other large manufacturing facilities for alleged violations of the Clean Air Act.  The allegations often pertain to projects which were implemented over twenty and thirty years ago.

Not surprisingly, EPA has not fared very well in the courts with cases like this.  The Agency has run into problems, including:  1) statute of limitations concerning projects completed more than five years before legal action has been commenced; 2) successor liability issues when the current owner/operator of a facility did not own or operate the facility when a targeted project was undertaken; and 3) serious evidentiary questions as to whether a decades-old project caused the requisite actual air emissions increase which triggers the requirements for NSR review under the Clean Air Act.  See generally "EPA's Utility Enforcement Initiative: The MetED Decision May Pose Problems for Plaintiffs," BNA Daily Environment Report, June 13, 2013; U.S. v. Midwest Generation, LLC, 694 F. Supp. 2d 999 (N.D. Ill. 2010), appeal pending in 7th Circuit Court of Appeals.

A recent notice of violation illustrates some of the unfairness and waste of resources connected with EPA's NSR Enforcement Initiative.  EPA issued the notice in 2012.  It alleged a number of NSR violations against the owner/operator of a manufacturing facility (not a utility).  One of the allegations pertained to a change made at that facility in 1982.  Since 1982, the ownership of the facility has changed four times.  The current owner has been targeted in EPA's enforcement action.  Records regarding the 1982 project are scant, and the personnel involved in the work in 1982 are all either long-retired or deceased.

To make matters worse, EPA had received the available information about the 1982 project in 1999 from the party who owned the facility at that time.  This was done in response to a Section 114 Information Request issued by EPA.  That owner heard nothing further from EPA about any of the projects covered in the 1999 inquiry.

In 2011, EPA issued a new Section 114 Information Request to the current owner who had acquired the facility in 2006.  The request covered projects that occurred after 1999, but it also covered projects which were done prior to 1999, including the 1982 project discussed above.

A reasonable person could ask:  1) Why did EPA wait for 13 years to allege a NSR violation regarding the 1982 project when the Agency was given information about it in 1999?  2) Why is EPA taking action now on a change made at the facility over thirty years ago?  3)  Why is EPA targeting the owner who acquired the facility in 2006 -- some seven years after EPA was first given information about the 1982 project?  4)  Has EPA considered that the current owner/operator of the facility is four times removed from the owner/operator who implemented the change in 1982?

Substantial amounts of money and countless hours of valuable employee time have been expended by the current owner in dealing with EPA on this case.  Both the money and the time could have been better utilized in helping to keep the facility competitive in a very challenging global marketplace.

EPA should consider whether the continuation of the NSR Enforcement Initiative is justified with respect to projects that occurred decades ago.  With most of these cases, fair-minded decision-makers at EPA will find that "Enough is Enough!"

The Reach of Sackett v. EPA: Impacts Beyond Clean Water Act Compliance Orders

Posted on June 19, 2013 by Theodore Garrett

When Sackett was decided by the Supreme Court, an uncharted issue was the extent to which the decision would be extended to make pre-enforcement review available to EPA orders under  other statutes.  EPA has now acknowledged that Sackett has a long reach. 

As previously reported, the Supreme Court in March 2012 issued its long awaited decision in Sackett v. EPA. In a unanimous decision, the Court held that the Sacketts may bring a civil action under the Administrative Procedure Act to challenge EPA’s compliance order. The court rejected the government’s argument that EPA is less likely to use orders if they are subject to judicial review, saying that “[t]he APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all.”

When I reported on this decision earlier, I noted that it will be important to see how EPA responds and what if any changes are made to EPA’s practice and procedure for issuing orders under other statutes.

EPA has now formally acknowledged that the Sackett decision has implications for other statutes.  In a memorandum dated March 21, 2013, EPA’s Office of Enforcement and Compliance Assurance has concluded that it is important to advise recipients of EPA unilateral orders under other programs of their opportunity to seek pre-enforcement judicial review of such orders. 

In particular, EPA has directed enforcement staff to immediately begin adding the following language to typical unilateral orders under FIFRA, Clean Air Act, Safe Drinking Water Act and EPCRA: 

“Respondent may seek federal judicial review of the Order pursuant to [insert applicable statutory provision providing for judicial review of final agency action.]” 

The foregoing language applies, inter alia, to stop sale, use or removal orders under FIFRA §13, stop work or compliance orders under Clean Air Act §§113(a) and 167, and emergency and compliance orders under EPCRA §§ 325(a). 

With respect to compliance and corrective action orders under RCRA §§3008(a), 3008(h), 9003(h) and 9006(a), EPA’s Memorandum directs enforcement staff to include language advising respondents that they may seek administrative review in accordance with 40 CFR Part 22 or 24 as applicable. 

EPA’s March 21, 2013 Memorandum states that EPA believes that the reasoning in Sackett does not lead EPA to believe that similar language is appropriate for unilateral orders issued under statutory authorities other than those discussed in the Memorandum, and it is noteworthy that the EPA Memorandum makes no reference to unilateral orders under CERCLA. 

Justice Scalia’s opinion in Sackett had little difficulty in disposing of the government’s argument that the Clean Water Act should be read as precluding judicial review under the APA, 5 U. S. C. §701(a)(1). The APA creates a presumption favoring judicial review of administrative action, and the Court concluded that nothing in the Clean Water Act’s statutory scheme precludes APA review.  EPA undoubtedly believes the CERCLA is different because of the provisions in §§113(h) that deprived the courts of jurisdiction to review challenges to removal or remedial actions selected or orders issued under §106 unless one of five exceptions applies. 

In addition to their Administrative Procedure Act argument, Sacketts also maintained that EPA’s issuance of the compliance order deprived them of due process in violation of the Fifth Amendment.  Because the APA disposed of the matter, the Supreme Court did not reach the Fifth Amendment issue.  Interestingly, before it granted certiorari in Sackett, the Supreme Court denied certiorari to review a decision by the D.C. Circuit rejecting arguments made by General Electric that CERCLA §106 orders violate the due process clause.  Stay tuned.

BSSE Issues Final Safety Culture Policy Statement

Posted on May 24, 2013 by Ronald R. Janke

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

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

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

ALI To Consider Environmental Law Projects

Posted on October 11, 2012 by Ridgway Hall

For the first time in its long history, the American Law Institute will consider two projects involving environmental law: 1) the law regarding environmental impact assessments, and 2) principles of environmental enforcement and remedies.  In each case, if the proposal is approved, the relevant federal, state and local law would be reviewed exhaustively by a working group with environmental experience. Their product would then be reviewed by the full ALI membership, probably resulting in a report of some sort.

Most of us know ALI as the author of the Restatements of the Law in such fields as torts, contracts, property, trusts, etc. The Restatements typically report with great thoroughness on the relevant case law and statutes, with the goal of setting forth a highly accurate statement of the law, including variations among jurisdictions, and sometimes indicating where clarification would be helpful.  The result is a consensus-based formulation of the law of the land, widely relied on by practitioners, teachers, courts and others.  Harvard Law Professor Clark Byse has  referred to it as “The law of Restatemania.”

Because the field of environmental law is relatively new and largely dominated by federal statutes, it has been widely thought until now that there is little need for a “Restatement of Environmental Law” or even a significant part of it.  A few previous ALI projects have touched on environmental law issues.  For example, the Restatement of Torts addresses nuisance, negligence, trespass and strict liability for highly hazardous activities, all of which can arise in an environmental context.  ALI’s  1991 “Reporters’ Study on Enterprise Responsibility for Personal Injury” addressed some aspects of toxic tort liability, including joint and severable liability.

The current effort is the result of the deliberations of some 47 ALI members who practice or teach environmental law, who concluded that there are a number of areas in environmental law where there is substantial confusion which could benefit from the type of thoughtful analysis and reporting for which ALI is well known.  After screening over 30 possible projects, the group is recommending the two described at the outset.

The Enforcement Law project would survey both civil and criminal law.  It would discuss how environmental liability arises, who can be liable, who can seek enforcement, and what remedies are appropriate. It would discuss areas of overlapping federal and state jurisdiction, and consider both statutes and common law.

The Environmental Impact Assessment project would discuss the triggering and nature of an obligation to assess potential environmental impact (including federal, state and local NEPAs), the scope of the inquiry and the methods.

This effort is being led by a 5 person steering committee chaired by Professor Tracy Hester, Director of the Environment, Energy and Natural Resources Center of the University of Houston Law Center.  He can be reached at tdheste2@central.uh.edu for further information. The other committee members are Dean Irma Russell and Professors Robert Percival, Victor Flatt and Joel Mintz.  Given the ALI’s clout in the legal profession, this initiative should be of considerable interest to ACOEL members.

Dear EPA: please don’t abandon your Audit Policy!

Posted on June 22, 2012 by Linda Bochert

If you have ever helped a client gain the enforcement protections available under the EPA Audit Policy, be concerned: EPA is reducing its Audit Policy work effort to a “minimal national presence”. 

Why?  Resources, of course.  EPA has too much to do and too few people to do it.  As part of the FY 2013 Office of Environmental Compliance Assurance National Program Manager Guidance (OECA NPM), EPA evaluated what it does in light of tightening budgets and overall agency priorities.  The EPA Audit Policy came up short:  it has resulted in a significant number of annual disclosures, but they are not in the areas of highest priority, and the agency believes traditional enforcement yields greater benefits.

EPA adopted the Audit Policy in 1995 and updated it in 2000.  It incentivizes regulated entities to conduct audits, timely self-disclose violations, promptly correct, and put in place systems to avoid repeats.  If you do that, any penalty EPA might otherwise apply – for the “gravity” of the violation, or to recover any “economic benefit” gained from noncompliance – can be forgiven.  Everyone wins – EPA gets compliance and compliance evaluation systems that protect against future violations; the business gets the certainty and comfort of knowing that if it looks for and finds noncompliance, it won’t be harmed financially; and the public gets the benefit of the environmental improvements.

EPA solicited comments on draft OECA NPM Guidance through March 19, 2012.  On April 30, 2012 EPA adopted the final FY 2013 OECA NPM, which included the following at page 15:

Audit Policy/Self-Disclosures: Since implementation of the Audit Policy began in 1995, EPA‘s enforcement program has increased its understanding of environmental compliance auditing, and believes that internal reviews of compliance have become more widely adopted by the regulated community, as part of good management. In addition, EPA has found that most violations disclosed under the Policy are not in the highest priority enforcement areas for protecting human health and the environment. EPA believes it can reduce investment in the program to a limited national presence without undermining the incentives for regulated entities to do internal compliance reviews to find and correct violations. As we reduce investment in this program, EPA is considering several options, including a modified Audit Policy program that is self-implementing.4(emphasis added)

4 Note: To meet the agency wide schedule, the final OECA NPM Guidance is being issued now, although we have not completed discussions on the content and schedule for the budget adjustments portion of the Guidance. Some of the budget adjustments outlined in this final guidance may be revised as we continue work on implementation plans.

I choose to read this to mean it’s not too late to let EPA know what we think. If the planned cutbacks are enacted, they will go into effect for FY 2013, i.e., on October 1, 2012.  Creative ideas for ways EPA can address its resource issues and keep the Policy active and vibrant are needed now.

We all recognize the challenges of diminishing resources, changing priorities, and committed constituencies.  Regardless, if you agree with me that the Audit Policy has been and  should continue to be a valuable tool in the compliance toolbox – for industry, EPA and the public -- and want to let EPA know that, please contact me.  Let’s see how ACOEL members can constructively contribute to this discussion. 

Update On The World's Largest Environmental Judgment

Posted on June 14, 2012 by Mark Walker

A lot has happened over the year since I first reported on the world's largest environmental judgment (see my 4/15/11 post).  Back then, U.S. District Judge Lewis Kaplan (S.D.N.Y.) had just preliminarily enjoined the enforcement of the $18.2 billion judgment against Chevron (Aguinda v. Chevron) for alleged pollution to the Amazon rainforest.  Judge Kaplan had ruled that the judgment was likely procured by fraud and was the product of a corrupt Ecuadorian judicial system.

On September 19, 2011, the Second Circuit vacated the preliminary injunction, later explaining that Chevron did not have the right to bring a preemptive lawsuit in New York seeking to have the judgment declared unenforceable where the judgment creditors were not seeking to enforce the judgment in New York.  The Court also expressed concerns about international comity, questioning the right of a New York court to declare another country's judicial system corrupt and then prohibit enforcement of its judgments in every country throughout the world. Chevron has petitioned the U.S. Supreme Court to overturn the Second Circuit's ruling.

On January 3, 2012, the Aguinda judgment was affirmed by an Ecuadorian intermediate appellate court.  The case now heads for its last leg of appellate review - to Ecuador's highest court, which will only review for legal errors.  However, the judgment is now enforceable unless a stay is obtained.

In January and February of 2012 the Permanent Court of Arbitration at the Hague issued a series of rulings directing Ecuador to take all measures necessary to suspend the recognition and enforcement of the judgment, both within and without Ecuador.  Chevron initiated the arbitration asserting that the judgment violates the Bilateral Investment Treaty between the U.S. and Ecuador.  In particular, Chevron contends that the judgment violates a 1995 settlement agreement between Ecuador and Chevron's predecessor, Texaco Petroleum (TexPet), under which TexPet spent approximately $40 million remediating pollution and funding various community development projects, for which TexPet received a full release of claims from Ecuador in 1998.

In March of 2012 the Ecuadorian judge who rendered the judgment against Chevron was removed from the bench for alleged corruption, as was another judge who had previously presided over the Aguinda case. 

In May 2012, Judge Kaplan ruled that Chevron's racketeering (RICO) claims against the attorneys and experts for the Ecuadorian plaintiffs can proceed in New York federal court.

Last Wednesday the Aguinda plaintiffs initiated collection efforts on the judgment in Canada.

Wow!  The plot continues to thicken.  I will keep you posted.

Bird Brain Idea?

Posted on January 26, 2012 by Stephen Herrmann

Last summer, the U.S. Department of Justice, acting on allegations made by agents of the U.S. Fish and Wildlife Service, brought criminal indictments against three oil companies operating oil fields in North Dakota, charging them with violating the Migratory Bird Treaty Act for acts resulting in the killing in the aggregate four Mallards, one North Pintail, one Red-Neck Duck and a Say’s Phoebe.  The birds allegedly fell victim to the oil companies “reserve pits” -- basically big holes dug into the ground to collect waste water and mud from drilling operations.  When such pits are not properly netted, birds can get into these ponds, get covered in muck and die.

In dismissing the government’s case, the United States District Court for the District of North Dakota stated the Migratory Bird Treaty Act of 1918 is far too vague to justify such indictments.  If inadvertently killing birds and drilling operations ought to be criminalized,  Congress must state so explicitly.  If the Act’s concepts of “take” or “kill” were read to prohibit any activity that could accidentally result in a dead migratory bird many every day activities could be criminally prosecuted such as “cutting brush and trees, and planting and harvesting crops, driving a vehicle, owning a building with windows or owning a cat.”

According to the U.S. Fish and Wildlife Service, here are some estimates on how many birds die from crashes involving: 
                     Windows                                 100 million killed
                     Communication Towers        5-50 million killed
                     Power Lines                            10,000 to 174 million killed
                     Cars                                         60 million killed
                     Windmills                               39,000 killed

Even for those of us, bird lovers and hunter, who support efforts to save migratory birds, it is hard to disagree that if the court were to decide otherwise  “many every day activities become unlawful -- and subject to criminal sanctions -- when they cause the death of pigeons, starlings and other common birds.”  Such prosecutorial actions fuel resistance to proper enforcement of environmental laws.

Aguinda v. Chevron Corporation - Environmental Justice or Sham?

Posted on April 15, 2011 by Mark Walker

There is probably no reason for you to have heard about this case – except that its possibly the largest judgment in the history of mankind! On February 28, 2011, an Ecuadorian Court granted a judgment against Chevron for over $19 billion dollars for environmental damages to the Amazon rainforest in Ecuador allegedly caused by oil and gas operations of Texaco Petroleum Company (TexPet) between 1964 and 1992. Chevron merged with TexPet's parent, Texaco, Inc., in 2001.


One of the more fascinating aspects of the judgment is that one-half of it, approximately $8.5 billion, is a punitive damage award that the Court gave Chevron the option of completely avoiding by saying it is sorry, i.e. by issuing a public apology within 15 days – an apology that was not issued and is likely never forthcoming.


U.S. District Judge (S.D.N.Y) Lewis Kaplan called this "an extraordinary case." Judge Kaplan said this in a March 7, 2011, order preliminarily enjoining the Ecuadorian plaintiffs and their lawyers from enforcing the judgment. Chevron contends that the judgment was the product of fraud and a corrupt Ecuadorian judicial system. Chevron has video footage in which a U.S. lawyer for the Plaintiffs admits he is going to confront the judge to "scare" and "intimidate" him – stating that it's "dirty" and something you would never do in the U.S., but adding unfortunately this is how things are done in Ecuador. Incredibly, the Plaintiffs' lawyers participated in the shooting of a documentary, "Crude: The Real Price of Oil," in which numerous apparently incriminating statements were made. Chevron subpoenaed the film "outtakes" and obtained this footage.


Of course, the case has a long way to go, with appeals by both sides in Ecuador, and a Chevron RICO case against the Plaintiffs and their lawyers in the United States.  In the end, this judgment may yet set another record – the world's largest unenforceable judgment.

You Want to Preclude a Citizens' Suit? Pick Your Poison.

Posted on September 17, 2010 by Seth Jaffe

When clients are threatened with citizen suits – and particularly when the threatened litigation involves a matter where EPA or a state regulatory agency is heavily involved, the clients always want to know why they can’t somehow get rid of the citizen suit, given that EPA is on the case. The answer is that they can – but only in limited circumstances.

The recent decision in Little Hocking Water Association v. DuPont confirmed this answer in the context of RCRA. The Little Hocking Water Association provides public water to certain communities in Ohio, directly across the Ohio River from a DuPont plant which uses , also known as PFOA or C8 – also known as the contaminant du jour. According to the complaint, the Little Hocking wells have among the highest concentrations of C8 of water supply wells anywhere and its customers have among the highest C8 blood levels anywhere. Little Hocking Water Association thus sued DuPont under RCRA’s citizen suit provision, claiming that DuPont’s release of C8 had created an “imminent and substantial endangerment."

Section 7002 of RCRA contains provisions precluding such citizen suits if either EPA or a state “has commenced and is diligently prosecuting” an action under RCRA to abate the endangerment. In the DuPont case, releases of C8 from the DuPont facility had been the subject of at least two administrative orders on consent entered into by DuPont and EPA. However, consent orders aren’t the same as “an action” under § 7002 or § 7003 of RCRA – and they thus do not preclude a citizen suit.

DuPont tried the next best argument – that EPA had primary jurisdiction over the regulation of C8 – and that the existence of EPA’s regulatory authority and the issuance of the consent orders meant that the courts should defer to EPA. DuPont’s argument was that a court could not fashion a remedy in the case without essentially establishing a new cleanup standard for C8 and that doing so is the job of EPA, not the courts.

The Court gave the primary jurisdiction argument short shrift. As the Court noted, using the doctrine of primary jurisdiction in citizen suits would dramatically reduce the scope of such suits. Since Congress provided a citizen suit mechanism – and provided very specific, discrete, circumstances in which citizen suits are precluded – it doesn’t make sense to use primary jurisdiction to establish another defense, particularly where the defense would almost eliminate the remedy. 

The bottom line? If you don’t want to face a citizen suit (and you’re not in compliance), get yourself sued by EPA or your state regulatory agency. The mere existence of EPA or state regulation, even if requirements are embodied in a consent order, is not enough.

The Deck is Still Stacked in the Government's Favor -- Is This A Good Thing?

Posted on July 22, 2010 by Seth Jaffe

Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable.  Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court. 

For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.

What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.

Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong? 

Just askin’.

EPA Issues a New Policy on Superfund Negotiations: Time For Another Rant?

Posted on October 19, 2009 by Seth Jaffe

Late last week, Elliott Gilberg, Acting Director of EPA’s Office of Site Remediation Enforcement (OSRE) issued an Interim Policy on Managing the Duration of Remedial Design/Remedial Action Negotiations. Members of the regulated community may not be surprised by the contents of the memo, but they certainly will not be pleased. In brief, the memorandum fundamentally makes two points:

EPA wants to shorten the duration of RD/RA negotiation

EPA is going to use the heavy hammer of unilateral administrative orders, or UAOs, to keep PRPs’ feet to the fire and ensure that negotiations move quickly.

PRPs will likely agree that shortening the duration of negotiations would be a good outcome in the abstract – but achieving it by greater use of UAOs? I don’t think so.

I can only wonder if EPA has even considered the impact of the Burlington Northern decision here. Is this a perverse reaction from EPA? A metaphorical throwing down the gauntlet to PRPs? It certainly feels that way.

I have a different suggestion, if EPA truly wants to shorten negotiations. First, acknowledge Burlington Northern and compromise on the merits in those great majority of cases where there are legitimate divisibility arguments. Second, stop acting like the last bastion of command and control regulation. Set cleanup standards and then, to the maximum extent permitted by existing law, let PRPs clean up to those standards, without micromanaging every detail of the cleanup process.

A Rant Against Superfund

Posted on April 15, 2009 by Seth Jaffe

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

 

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.

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.