Beware the Specter of Debarment

Posted on May 8, 2014 by Tom Sansonetti

Debarment is the process whereby the federal government can permanently prevent a company from doing business with the federal government or suspend a company from doing business with the federal government for a period of years.  The debarment process has been available for decades to the United States to be used against companies or persons whom the government believes are untrustworthy. For instance, removal from EPA’s list of violating facilities requires agency evaluation of corporate attitude. But the Obama Administration has broadened the scope of the process to potentially ensnare many an unsuspecting entity.

The debarment process as it currently exists has resulted in the following scenarios:

A. An oil company in the Rocky Mountain region settled a regulatory violation with the Department of the Interior’s Bureau of Land Management and as part of the agreement paid a substantial seven figure fine and adopted new procedures designed to prevent a reoccurrence of the violation and a two-year period of probation.  Imagine the surprise of the company’s managers and in-house lawyers when eighteen months after the settlement was executed, they received a Notice of Debarment for a three-year period preventing the use of their federal leases requiring new permits.

B. A wind farm owner that was convicted for killing bald eagles discovered that the company could not sell future electricity production to a federal facility.

C. An oil and gas company that pleaded guilty to a Clean Water Act spill faced debarment from being able to bid on federal oil and gas leases for five years.

Companies or persons found to be in violation of civil or criminal statutes or departmental regulations are subject to debarment.  While in egregious cases debarments can be perpetual, most debarments are for a period of three to nine years.  Debarments do not affect a company’s current government contracts, but do affect renewals of those contracts or the need for new permits on federal lands.  The debarments are company-wide.  Consequently, the above-mentioned wind farm owner also could not sell its electricity produced from its coal fired power plants to federal facilities.

Debarment proceedings are administered by the various Offices of Debarment, located within each cabinet department, with the closest responsibility for enforcing the law that was violated.  Thus, the Department of the Interior’s Office of Debarment (staffed by the Inspector General’s personnel) handles violations of fish and wildlife, public lands and Indian law.  Environmental Protection Agency lawyers in the grants and debarment program handle debarment proceedings authorized by Section 508 of the Clean Water Act or Section 306 of the Clean Air Act.

Upon the entry of a federal court judgment or consent decree a representative of the Department of Justice, often an Assistant United States Attorney, forwards the document to the appropriate cabinet department’s Office of Debarment.  The government deems debarment proceedings to be separate from the underlying litigation.  Agreements to avoid debarment may not be a condition of any plea bargain or consent decree.  Adverse outcomes after executive branch debarment hearings may be appealed to a federal district court under deferential Administrative Procedures Act standards. 

Is the NSR Enforcement Initiative Dead Yet? Injunctive Relief Claims Dismissed Against U.S. Steel

Posted on April 29, 2014 by Seth Jaffe

On April 18, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.

Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:

"Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)"

Judge Simon seems to have felt more compelled than persuaded.

"Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.

So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here."

One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.

Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.

 

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.

More on Daubert: The 11th Circuit Allows EPA’s Experts to Testify on NSR Violations

Posted on September 27, 2013 by Seth Jaffe

Last spring, my colleague Robby Sanoff complained on our firm’s blog about the problem resulting from appellate courts’ refusal to give appropriate discretion to district judges in performing their gatekeeping function under Daubert.  As Robby put it:

"The difference between “shaky but admissible” and unreliable and inadmissible evidence would seem to be entirely in the eye of the beholder."

Robby will not be pleased by last’s week’s decision by the 11th Circuit Court of Appeals in United States v. Alabama Power, reversing a district court order excluding EPA’s expert testimony in support of its NSR enforcement action against Alabama Power.  The Court majority performed an extensive review of the testimony provided in the Daubert hearing below, and concluded that the district court’s decision was clearly erroneous.  (For those of you concerned with the merits of these cases, the question was whether EPA’s model, which clearly applied to determinations of emissions increases for baseload plants, could be applied as well to cycling plants generally and the plants at issue in the case in particular.)

The case is particularly interesting because Judge Hodges, taking Robby’s view, dissented.  As Judge Hodges noted, prior to the Supreme Court decision in General Electric v. Joiner, appellate courts did not grant significant discretion to district courts in exclusion rulings.  However, Joiner made clear that the abuse of discretion standard applies even in outcome-determinative exclusion rulings.

Next, Judge Hodges noted that, in Daubert rulings, there should be a “heavy thumb – really a thumb and a finger or two – that is put on the district court’s side of the scale.”  He then rehearsed the actual statistics on Daubert reversals in the 11th Circuit:  3 reversals out of 54 cases.

Finally, Judge Hodges conducted a brief review of evidence tending to support the district court’s conclusion and determined that its decision was not “a clear error in judgment.”  Concluding that a different result might be appropriate if review were de novo, Judge Hodges quoted Daubert itself:

"We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning of authentic insights and innovations. That, nevertheless, is the balance that is struck by Rules of Evidence designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes."

Decisions such as this have to be discouraging to district court judges, as Robby noted.  It’s worth pointing at that Judge Hodges is actually a district court judge, sitting on the court of appeals by designation.  It seems fitting that the district judge on the panel would be the judge vainly trying to protect the discretion of district judges in Daubert matters.

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?

Another Blow to EPA’s NSR/PSD Enforcement Initiative

Posted on August 27, 2013 by Mary Ellen Ternes

Followers of this Blog will not be at all surprised with the Third Circuit’s August 22, 2013 ruling denying EPA’s requested CAA New Source Review enforcement relief against former and current owners of the grandfathered and allegedly subsequently modified power plant that has been called “one of the largest air pollution sources in the nation.”   Former and current owners of such aging power plants caught in EPA’s NSR national enforcement initiative are reassured with the Third Circuit’s finding that text of the Clean Air Act does not authorize injunctive relief for wholly past PSD violations, even if that violation causes ongoing harm.

Having lost its battle for the Cross-State Air Pollution Rule (CSAPR, or the Transport Rule) in August 2012, EPA was dealt another blow with United States v. EME Homer City Generation, in which the Third Circuit upheld the District Court’s 2011 dismissal of the government’s claims.

In 2011, the District Court for the Western District of Pennsylvania agreed with the current and former owners of the power plant that EPA had no authority to hold either party liable for alleged PSD violations arising from purported modifications to their grandfathered power plant.  In reaching defendants’ bases for dismissal, the District Court reviewed the permit actions approved by air permitting authorities in 1991, 1994, 1995 and 1996, which EPA alleged with Notices of Violation in 2008 (against the current owner) and 2010  (against current and former owners), to have triggered PSD, and which caused the current Title V permit to be incomplete.   The Court’s holding that the PSD violations constituted singular, separate failures by the former owner rather than ongoing failures meant that EPA was outside the five year statute of limitations, allowing no civil penalties against the former and current owners.  Moreover, the District Court held EPA was left with no injunctive relief against the current owner because they were in no position to apply for a PSD permit prior to their acquisition of the plant in 1998, and thus could not have violated PSD.

The District Court separately addressed EPA’s claims of injunctive relief against the former owner, recognizing the ongoing higher SO2 emissions that occurred without the benefit of an historic PSD permit.  The District Court was unwilling to reach a broad conclusion regarding its authority to award injunctive relief under the PSD program, but given that the former owners no longer owned or operated the plant, and therefore no longer violate PSD, held that there was no plausible basis for granting the rare and extraordinary remedy of injunctive relief, despite the higher emissions occurring the absence of BACT, which the court characterized as a present consequence of a one-time violation.

Upon review, the Third Circuit rejected EPA’s arguments that the current owners violated PSD by operating the plant without BACT with a simple, “no,” pursuant to the plain text of 42 USC 7475(a) which references merely “construction” and “modification,” not “operation, ” relying on U.S. v. Midwest Generation and Sierra Club v. Otter Tail Power Co.,  adopting the positions of the Seventh and Eighth Circuits that “even though the preconstruction permitting process may establish obligations which continue to govern a facility’s operation after construction, that does not necessarily mean that such parameters are enforceable independent of the permitting process,” and thoroughly refuting EPA’s arguments that PSD could somehow result in ongoing operational requirements outside the PSD permitting process.  

Likewise, the Third Circuit rejected EPA’s proposed injunctive relief, which would have required the former owners to install BACT or purchase emission credits and retire them, affirming the District Court’s decision on narrower grounds.  Specifically, the Third Circuit held that the text of the Clean Air Act does not authorize an injunction against former owners and operators for a wholly past PSD violation, even if that violation causes ongoing harm. 

Hopefully, this Third Circuit decision, along with the Seventh and Eighth Circuit decisions relied upon therein, will signal a substantive end to EPA’s NSR/PSD Enforcement Initiative for similarly situated historic grandfathered power plants and their former and current owners.  But, we may have to wait out EPA’s hard headed circuit by circuit enforcement approach.  See e.g., EPA’s December 21, 2013 enforcement memorandum, “Applicability of the Summit Decision to EPA Title V and NSR Source Determinations,” following the Sixth Circuit’s Summit Petroleum Corp. v. EPA et al.

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.

Expanded Access to Environmental Information – The New Era of Transparency and Its Risks and Opportunities

Posted on March 11, 2013 by Dean Calland

Over the past several years, EPA has created or upgraded a number of new informational tools that enable the public to gain access to environmental data.  This is part of the agency’s efforts to increase “transparency” regarding private and public sector environmental compliance and enforcement efforts.  As expressed in a recent press release, EPA believes that “transparency and access to information at all levels help to drive improvements in environmental performance.” 

A couple of very recent examples are worth noting.  Earlier this year, EPA announced the creation of new interactive state dashboards and comparative maps.  These online tools are components of EPA’s Enforcement and Compliance History Online (ECHO) website, and contain air, water and hazardous waste data for the previous five years.  According to EPA, such information includes “the number of completed inspections, types of violations found, enforcement actions taken, and penalties assessed by state.”  Users of the site can customize their searches to view just state activity, EPA activity, or both.  

A second example is EPA’s program to increase the transparency of chemical information under the Toxic Substances Control Act (TSCA).  Just last month, EPA released the 2012 Chemical Data Reporting (CDR) information for more than 7,600 chemicals.  The data can be used to identify important trends and analyses, such as determining the number of workers exposed to a particular chemical, the top 20 chemicals used in children’s products, the top 20 chemicals used in consumer products and the top industrial sectors that processed and used reportable chemicals.  EPA modified the CDR rule (formerly known as the Inventory Update Reporting rule) in 2011 to require that manufacturers and importers submit CDR information electronically.  Accordingly, the CDR information is added to the agency database and made publicly available much faster than ever before.  Stakeholders such as the American Chemistry Council and the Environmental Defense Fund applauded the recent changes to the CDR rule to increase the amount of information available to the public and thereby improve public understanding and confidence.

With appropriate controls, greater transparency is laudable for a variety of readily apparent reasons, and there is little doubt that federal and state agencies will increase both the number of tools available to the public and the usability of these tools to interpret data in the coming years.  Environmental stakeholders should evaluate these new tools and determine the risks and opportunities presented by them. 

For example, industry practitioners are quite familiar with the increasing scrutiny that has been placed on corporate decision-making in recent years by major investors and shareholders regarding such matters as the impact of the corporation’s activities on issues like greenhouse gas emissions and sustainability.  Some of these entities are using the new information tools and others like them to identify trends and determine how the corporation “measures up” against industry norms and political or governmental expectations.  Similarly, corporations are finding that their outside financial auditors are reviewing environmental databases to “check on” the environmental and safety disclosures that the companies are putting forth during the audit period.  Indeed, company management and counsel have sometimes been surprised by their auditors’ independently-gathered information that one or more of the company’s plants are listed on EPA or state databases as “non-compliant” with environmental requirements. 

In the same way, increased access to environmental and safety information brings with it new opportunities to gather meaningful information that can be extremely useful in preparing business plans for future activities and for claims and litigation related to environmental exposures.  Manufacturers and suppliers of environmental products and services, plaintiffs’ counsel, expert witnesses, environmental groups, public and governmental relations firms and insurance companies are just a small subset of the universe of interested parties for whom easier access to environmental and safety information can be helpful.  And now such data can be gathered more quickly and at a fraction of the costs that would have been required in the past.  Environmental stakeholders would do well to monitor the development of these transparency tools and to assess the risks and opportunities that they present.

COOPERATIVE FEDERALISM AND THE CLEAN AIR ACT ENCOUNTER TURBULENCE

Posted on December 14, 2012 by William Session

All of us know that enforcement of the Clean Air Act’s (CAA) proscriptions against pollutant air emissions is premised on the concept of Acooperative federalism.  We know that the CAA’s policy development and enforcement regime is based upon a division of state and federal regulatory responsibility.  Stated simply, the concept is that the federal government, through the EPA, sets standards for permissible emissions of substances affecting ambient air quality while individual states retain responsibility for implementing programs to enforce these standards. 

The States’ implementation mechanisms are aptly titled State Implementation Plans or SIPs.  SIPs are employed to demonstrate that federal and state air pollution regulations will allow counties in a particular state to meet federally mandated ambient air quality standards (NAAQS).  The SIP process approval results in pollution control requirements which govern and often times unduly complicate compliance efforts of state regulators.  They can also increase compliance costs borne by the regulated community.  One aspect of that conundrum is the fact that when States fail to meet deadlines for attaining these standards, the regulators themselves can face sanctions from EPA and even suits by the public.  Litigation and its costs complicate matters further.

As some regulators in Pennsylvania recently observed . . . [T]he current aggressive schedules for NAAQS reviews, State Implementation Plan (SIP) development and promulgation of Maximum Achievable Control Technology (MACT) standards are significant problems. Taken together, these inefficiencies are a resource drain on EPA, the states, the regulated community and the economy as a whole.  The messy situation described in this quote is the subject of this blog.

The turbulence inherent in this divided relationship has escalated in recent times fraying the long-standing statutory regulatory compact between the federal government and the States.   

An instructive example of the conflict of enforcement concept and reality engendered by the CAA’s cooperative federalism scheme was clearly highlighted in the recent case WildEarth Guardians v. Jackson.  This case dealt with EPA’s delays in approving SIPs or pollution control plans affecting discharges of fine particulate matter or PM2.5.  The plaintiffs in Wild Earth alleged that EPA failed to take final action under section 110(k)(2) and (3) of the CAA to approve SIP submittals in twenty (20) states meeting applicable requirements respecting the 2006 PM2.5NAAQS. 

In 2006, the U.S. Court of Appeals for the District of Columbia had found that EPA’s PM2.5 NAAQS had to change because it failed to adequately protect human health.  A change in this NAAQS required a change in States SIPs.  SIPs were proposed but languished at EPA.  Five years later, the plaintiffs in Wild Earth alleged that . . . [W]ithout infrastructure plans, citizens are not afforded full protection against the harmful effects of PM2.5 while seeking declaratory and injunctive relief.
 
Shortly after the suit was filed the plaintiffs and the EPA entered into a settlement. A consent decree called for the EPA to approve or disapprove SIP submittals for the 2006 PM2.5 standard as early as September 12, 2012 for some of the states involved and as late as February 13, 2013 for others.  The Consent Decree was entered and the case dismissed in May of 2012.  Case closed and compliance efforts back on track? 

Unfortunately, many of the underlying issues raised in Wild Earth, specifically, the lack of cooperation between the States and the federal government on implementation of the PM2.5 NAAQS have raged on unabated.  For example, eleven (11) states sued the EPA over the agency’s alleged failure to promulgate final NAAQS for PM2.5.  In New York v. Jackson the plaintiffs are seeking a declaration that EPA is in violation of Section 109(d)(1) requesting that EPA review, propose and promulgate a new PM2.5 NAAQS.  On June 14, 2012, EPA announced a proposal to strengthen the NAAQS PM2.5.  Almost simultaneously, the D.C. Circuit issued an order refusing to set a schedule for EPA to issue a new PM2.5 NAAQS. Am.Farm Bureau v. EPA.

These developments will inevitably spawn additional delays in PM2.5 related SIP modifications and EPA approvals. That is the point of these comments on this small corner of CAA regulation and enforcement.  Is the cooperative federalism underpinning of the CAA still workable?  Can court’s recognize and respect the concept when regulatory policy, administrative lethargy and real human health concerns collide? These comments and observations have focused on the PM2.5 issue mainly because it has come up in some recent work in our office. 

Without doubt other and more far-reaching examples of regulatory and judicial “turbulence abound, i.e., the raging fight over the EPA’s Cross State Air Pollution Rule (CSAPR).  In a dissenting opinion on the CSAPR case, on the concept of cooperative federalism, Judge Rogers had this to say. . . [T] he result is an unsettling of the consistent precedent of this court strictly enforcing jurisdictional limits, a redesign of Congress’s vision of cooperative federalism between the states and the federal government in implementing the Clean Air Act based on the court’s own notions of absurdity and logic that are unsupported by a factual record, and a trampling on this court’s precedent on which the Environmental Protection Agency was entitled to rely . . . .  Whew! 

So what are CAA practitioners to make of the mess Judge Rogers eloquently describes?  This blog entry offers no practical guidance for those laboring for an aggrieved client nor laments a bad result impairing enforcement prerogatives of the regulators.  Instead, I only point out that it may be time for a concerted effort to step back and reconsider whether the CAA’s cooperative federalism’s bifurcation of rule promulgation and enforcement continues to make scientific, policy or common sense in today’s world.

EPA Notches Another NSR Settlement: Is This The Most Successful Program That Shouldn’t Exist?

Posted on November 30, 2012 by Seth Jaffe

The following post is essentially a sequel to this morning’s post, which was originally intended to be posted in September.

Last week, EPA announced that it had reached yet one more – its 24th – settlement under as a result of its NSR enforcement initiative.  This time, it was Louisiana Generating’s Big Cajun II plant, in New Roads, Louisiana.  By now, the contours are familiar, including a penalty of $14 million and injunctive relief estimated to cost approximately $250 million.  Changes will include:

    - Installation of SNCR (not SCR) on all units to control NOx.
    - Installation of dry sorbent injection as a short term SO2 reduction measure
    - Retirement, refueling, repowering, or retrofitting of Unit 1 in the long-term
    - Refueling of Unit 2 to natural gas
    - Limitations on sulfur content
    - Plant-wide limits on SO2 emissions
    - Installation of electrostatic precipitators to control PM on units 1 and 3

It sure sounds great.  EPA estimates reductions of 20,000 tpy in SO2 emissions and 3,000 tpy in NOx emissions.  Still, I question the value of this settlement in the big picture.  I sense some double-counting here.  EPA is predicting significant reductions in emissions as a result of its industry-wide rules, including the transport rule (last known as CSAPR, but presumably awaiting a new acronym for its replacement) and the air toxics rule.

Add to that the cost pressures on coal resulting from the lower natural gas prices caused by the fracking boom, and it is quite possible that Louisiana Generating would have ended up in the same place even absent a settlement.  Throw in concerns about whether individual units were in fact violating the rather ambiguous NSR provisions or were engaging in what they truly considered routine maintenance, and the obvious economic issues raised by trying to implement command and control regulations on a plant-by-plant basis pursuant to litigation, rather than through nationwide market-based caps, and I say again that, to me, the NSR program is still spinach, and I say, to heck with it.

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.

Themes in Recent Changes to Offshore Oil and Gas Regulations

Posted on September 18, 2012 by Pamela Giblin

By Pam Giblin and Amber MacIver, Baker Botts L.L.P.

The regulatory landscape for the offshore oil and gas industry has been subject to rapid change in the two years following the Macondo Incident in the Gulf of Mexico.1   Two primary themes have emerged in the new and revised regulations:  (1) increased agency oversight, and (2) requirements for third party certification.  The regulations are relatively recent, but operators can expect to feel the impacts over the next year.

Increase Agency Involvement
The Mineral Management Service (MMS) oversaw many of the revenue collection, leasing, permitting and enforcement functions for the offshore industry prior to the Macondo Incident.  Following that event, the MMS was restructured into separate agencies in part to enable increased agency involvement and oversight.2  The three new agencies are:

(i)    the Bureau of Ocean Energy Management (BOEM), which has the leasing functions;
(ii)    the Bureau of Safety and Environmental Enforcement (BSEE), which has responsibilities for permitting and enforcement; and
(iii)    the Office of Natural Resources Revenue (ONRR), which has revenue collection.

The new agencies, and in particular BSEE and ONRR, have demonstrated a trend of increased agency involvement.  With respect to the ONRR, in just the past year, it has issued penalties that represent an increase in excess of three times the previous yearly average under MMS.3   This increased enforcement is a trend we expect to continue.
 
BSEE’s increased oversight is seen in the numerous regulations it has issued in the past two years.  Many of those new rules require additional agency intervention in offshore oil and gas operations.  For example, Section 250.456(j) of the Drilling Safety Rule requires that before an operator may switch from heavy to light drilling fluid, the operator must receive approval from BSEE.  The Workplace Safety on Safety and Environmental Management Systems (SEMS) rule requires operators to submit their self-audit plans to BSEE for review, BSEE may make changes to the plan, and it has the option to participate in the audit.4   In addition to formal changes in the regulations, both the former director of BSEE and the current director have indicated a potential shift in enforcement policy that would add contractors to the scope of BSEE’s enforcement actions, contrary to former MMS policy, further expanding the agency’s oversight of the industry.  We have not seen an example of this yet, but would expect that contractors could see enforcement in the near future.

These changes, among others, illustrate a trend of increased agency oversight of the offshore oil and gas industry.  It is a trend we expect to see continue at least during the next year.

Third Party Certification
BSEE has issued new regulations and amended others, adding dozens of new rules and requirements for offshore oil and gas operations.  The trend that runs through many of these changes is a requirement for certification by a third party.  For example, the Drilling Safety Rule requires that operators have a professional engineer independently certify that the casing and cementing program is appropriate for the purpose for which it is intended under expected wellbore pressure.5    Although the current SEMS rule allows for self-audits to be conducted either by designated qualified personnel (DQP) or third party auditors, the proposed SEMS II rule would eliminate the option to use DQP, requiring all self-audits to be performed by independent third party auditors.6

The likely outcome of the changes that result from these two overarching themes, increased agency involvement and third party certification, is additional enforcement and red tape.  Operators may face difficulty in scheduling operations when they have to rely on outside parties to certify their work or agency approval to make changes.  Enforcement actions are likely to increase as agency oversight increases.  Operations that have not been subject to scrutiny in the past are likely to face additional hurdles and possibly enforcement under the new regulations.  Offshore oil and gas operators need to closely follow the evolving regulatory scheme to stay in compliance with the rules and avoid costly enforcement actions.

      1The “Macondo Incident” refers to the April 20, 2010 explosion from the Deepwater Horizon drilling rig, in the Macondo prospect, Mississippi Canyon Block 252. 
      2See DOI Secretarial Order No. 3299 (May 19, 2010) (issued in May 2010 and gave the Assistant Secretary- Land and Minerals Management and the Assistant Secretary -- Policy, Management and Budget 30 days to develop a schedule to implement the Order).
     3See, e.g. ONRR Press Release, April 30, 2012, http://www.onrr.gov/about/pdfdocs/20120430.pdf, last visited July 9, 2012 ($1.9 million civil penalty against Cabot alleging inaccurate records); ONRR Press Release, March 29, 2012, http://www.onrr.gov/about/pdfdocs/20120329.pdf, last visited July 9, 2012 ($1.7 million civil penalty against Merrion for late royalty payments); ONRR Press Release, July 11, 2012, http://www.onrr.gov/about/pdfdocs/20120711.pdf, last visited August 30, 2012 ($1.2 million civil penalty against QEP resources for  maintenance of inaccurate reports).
     430 C.F.R. § 250.1920(b).
     530 C.F.R. §§ 250.418(h), 250.420(a)(6).
     676 Fed. Reg. 56683 (Sept. 14, 2011).

Is Clarification of Superfund “Common Sense” Unnecessary? The EPA doth protest too much, me thinks…

Posted on August 10, 2012 by Charles Efflandt

“Let me be clear: EPA has never designated manure as a hazardous substance nor has the agency ever designated a farm a Superfund site and has no plans to do so.” So says Mathy Stanislaus, EPA Assistant Administrator, Office of Solid Waste and Emergency Response in testimony before the House Energy and Commerce Subcommittee on Environment and Economy on June 27, 2012. The subject of the hearing was a bill called the “Superfund Common Sense Act” (H.R. 2997), which seeks to clarify that livestock manure is not a hazardous substance, pollutant or contaminant for purposes of CERCLA response authority and EPCRA emergency reporting.

With such an unequivocal statement of agency intent, is this latest Congressional effort to ensure a “common sense” interpretation of CERCLA and EPCRA with respect to livestock waste simply an attempt by agricultural interests to create an unnecessary and unwarranted regulatory “free pass,” or a prudent effort to provide needed certainty to the regulated community?

EPA’s position appears to be that the proposed codification of Superfund “common sense” is an uncalled-for response to the concerns being voiced. Beyond his broad statement of agency interpretation and intent, Mr. Stanislaus argues that EPA’s 2008 final rule exempting animal waste at certain farms from air emissions reporting under CERCLA section 103 and EPCRA Section 304 further demonstrates that the agency is already exercising common sense in its regulation of livestock waste.

Notwithstanding these assurances, however, Mr. Stanislaus admits that this final rule is currently under EPA review to address various issues being raised by a range of stakeholders. He also references EPA’s ongoing efforts to develop emissions estimating methodologies to better quantify air releases at livestock operations, presumably for future regulatory purposes.

Needless to say, such statements offer little comfort to the bill’s sponsors and regulated community, which are similarly discomforted by other statements of Mr. Stanislaus.  For example, Mr. Stanislaus testified that the Act would prevent EPA from responding under its CERCLA authority to “damaging” releases of hazardous substances associated with manure. Also, Mr. Stanislaus voiced the agency’s concern that the bill’s “common sense” provisions would prevent EPA from using CERCLA to issue abatement orders in response to releases presenting a substantial danger to health or the environment.

Proponents of the bill state that the Act is not about whether manure should be regulated, as animal feeding and other farm operations are already adequately regulated under the Clean Water Act, Clean Air Act and state-specific authorities. Rather, the issue is whether CERCLA’s environmental response provisions and requirements were intended to or should apply to manure management. Although recognizing that CERCLA has specifically exempted only the “normal application of fertilizer” from its definition of “release,” proponents argue that such definitional language is not dispositive of congressional intent with respect to the general characterization of manure as a CERCLA hazardous substance. They also point out that EPA has never issued guidance on what constitutes “normal application of fertilizer,” leaving that exemption and broader CERCLA issues to be resolved by the courts and agency.

Opponents argue that because constituents of manure, such as ammonia and hydrogen sulfide, are hazardous substances, there is no legal or scientific basis to totally exempt manure from the regulatory scheme of CERCLA and EPCRA. They also challenge the notion that CERCLA authority is unnecessary or duplicative by identifying gaps in the reach of other federal environmental laws, including authority to deal with natural resource damages and the recovery of response costs.

Whatever side of the fence you may be on, it does seem inevitable that, if the legal and scientific issues being debated are not addressed by Congress, they will almost certainly be considered and resolved in some fashion by EPA, state agencies and the courts. In light of this -- and notwithstanding EPA’s protests that codification of Superfund “common sense” is unnecessary because agency common sense already prevails -- is a legislative approach to clarifying these important issues preferable to the uncertainties of future agency rule making and the inconsistencies inherent in judicial rulings?

What Ever Happened to Reasonable Further Progress?

Posted on August 8, 2012 by Robert Falk

Under the federal Clean Water Act (CWA), most municipalities in the United States are now required to have National Pollutant Discharge Elimination System (NPDES) permits for discharges of stormwater/urban runoff.  As intended by Congress, both the U.S. Environmental Protection Agency (EPA) and authorized state NPDES permit writers originally took a programmatic approach relative to the requirements they put into such Municipal Separate Storm Sewer Systems or “MS4” permits.  Over time, though, municipalities have, in various ways, been required to address water quality standards more directly, including where such standards are expressed quantitatively. 

In California, this has manifested itself in the issuance of MS4 permits containing provisions called “Receiving Waters Limitations,” which, among other things, preclude the permitted municipal stormwater discharges from “causing or contributing to a violation of an applicable water quality standard.”  Since this ambitious goal is a tall order that likely cannot be met without the construction of large, capital-intensive detention and treatment facilities for which no funding is available, other language contained in these MS4 permits has instructed the municipality that if “exceedances of water quality standards persist,” they must evaluate and submit plans to improve their stormwater management programs to address the situation and then implement such plans and improvements according to a schedule they propose – an “iterative process” that envisions reasonable further progress towards the achievement of water quality standards over time and which inherently recognizes that resource and feasibility constraints may inform the pace of that progress.

Last year, in NRDC v. County of Los Angeles, et al., 636 F. 3d 1235 (9th Cir. 2011), the U.S. Court of Appeals ruled that demonstrating compliance with the iterative process language in these MS4 permits did not create a safe harbor and shield a municipality from direct enforcement of the Receiving Water Limitations themselves, including by means of a citizens’ suits.  The U.S. Supreme Court recently granted cert. in this case, raising a glimmer of hope for municipalities that a reasonable further progress approach might somehow be restored.

Unfortunately, the High Court may well not speak directly to this issue notwithstanding its practical import for municipalities.  Its cert. grant instead requested briefing and argument on the more unusual and academic issue of whether water that flows from one portion of a river that is navigable water, through an MS4 or other engineered channel, and into a lower portion of the same river is “discharge” from an “outfall” requiring an NPDES permit.  As its cert. grant itself suggests, this is an issue the U.S. Supreme Court likely already addressed in South Florida Water Management District v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004).  Accordingly, if the Ninth Circuit’s decision is reversed on this basis and without a discussion of the broader issues that caused it to arise, it will be left to Congress, EPA, or state permit writers to decide if they are willing to restore a reasonable further progress approach to municipal stormwater permitting.

National Federation of Independent Business v. Sebelius: What’s In It for Environmental Law?

Posted on July 23, 2012 by Jonathan Z. Cannon

The Supreme Court’s recent decision on the Patient Protection and Affordable Care Act (Act) caused equal parts celebration and outrage by upholding the constitutionality of the individual mandate as a tax.  Environmental lawyers, however, are focusing on other, less prominent aspects of the decision, which could have implications for the constitutionality of environmental laws.  These aspects are: (1) the conclusion of a bare majority of the Court that the Act’s individual mandate was not within Congress’ Commerce Power; (2) the holding -- concurred in by seven justices -- that the withholding of all Medicaid funds from states refusing to expand their coverage as required by the Act exceeded Congress’ power under the Spending Clause and ran afoul of the anti-commandeering principle of the Tenth Amendment. 

The Court’s Commerce Clause ruling addressed the individual mandate’s requirement that those not participating in the health insurance market purchase health insurance unless covered by an exclusion.   In their opinions on this issue, Chief Justice Roberts and Justices Scalia, Kennedy, Thomas and Alito agreed that failure to participate in the health insurance market did not warrant regulation under the Commerce Clause simply because that inactivity had an effect on the premiums charged to others buying health insurance.  As Chief Justice Roberts put it: “The Framers gave Congress the power to regulate commerce, not to compel it.”  Slip op. at 24 (emphasis in original).  This feature of the Court’s ruling may have no precise analogue in environmental statutes: typically environmental statutes prohibit or restrict activity with an arguable relation to interstate commerce rather than compelling such activity.  But certainly environmental lawyers will be searching for one. 

More generally, the five justices in the majority on this issue made clear their resolve to extend the restrictive view of the Commerce Power announced in cases such as U.S. v. Lopez and U.S. v. Morrison and to cabin decisions suggesting a more generous view of that power, such as Wickard v. Filburn and Gonzales v. Raich.  This resolve could affect future Commerce Clause rulings on the permissible scope of the Endangered Species Act, the Clean Water Act, and other environmental statutes: interpretations of the Clean Water Act influenced by restrictive commerce clause decisions have already narrowed its scope. 

The Court’s holding on the Medicaid expansion provision could have more direct implications for environmental statutes, particularly for cooperative federalism arrangements under statutes such as the Clean Air Act that threaten to withhold federal funds if states do not agree to implement prescribed programs.  The expansion provision required states to expand coverage to low income individuals as well as make other changes; states that failed to undertake this expansion were threatened with loss of all federal Medicaid funds.  Seven justices agreed that the choice the Act offered to the states – expand or forfeit all Medicaid funds – was not a choice at all, but coercion and therefore impermissible.  Their views appear in two opinions, one by Chief Justice Roberts, joined by Justices Breyer and Kagan, and another by Justices Scalia, Kennedy, Thomas, and Alito. 

While coming to the same conclusion on this issue, the two opinions were not entirely aligned on the features of the case that justified this conclusion, and neither drew clear lines for application in future cases.  Both opinions stressed the relative size of the forfeiture – all of Medicaid funds, which equaled nearly 22% of all state expenditures.  Both noted that the penalty upheld in South Dakota v. Dole -- withholding of 5% of federal-aid highway funds from states that failed to raise their drinking age to 21 – amounted to less than half of one percent of South Dakota’s budget.  But neither offered to fix the outermost line: too much is somewhere between 0.5 and 22%.  In a theme not picked up by the others, Justice Roberts’ opinion also argued that the expansion represented a new program, which impermissibly used the funds provided through an existing program (pre-expansion Medicaid) to leverage its acceptance by the states.  How the courts develop these different strains of analysis in future cases and what lines of demarcation emerge will determine the significance of threats to existing or future environmental law provisions that rely on the Spending Power.

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.

STATUTORY LIMITATIONS ON OHIO EPA’S ABILITY TO RECOVER COSTS

Posted on February 28, 2012 by Ronald R. Janke

A recent enforcement decision concluded the defendants did not have to pay response costs covered by an administrative consent order because the Ohio EPA lacked statutory authority to recover such costs.  The opinion affirmed the trial court’s denial of a claim for response costs  the Ohio EPA had incurred with respect to property owned by Mass Realty, which had failed to comply with an Ohio EPA administrative consent order it had signed when it acquired the property.  The order required Mass Realty to operate and maintain an existing groundwater gradient control system and to pay the Ohio EPA’s past and future response costs.  Mass Realty eventually failed to operate the system, and the Ohio EPA brought on enforcement action to impose civil penalties and to recover its response costs that had risen to about $116,000.

The appellate court denied the claim for response costs, which included “payroll costs, travel costs and enforcement-related costs” despite the fact the administrative consent order Mass Realty signed expressly obligated the company to pay response costs.  The order broadly defined the covered costs as “all costs including, but not limited to, payroll costs, contractor costs, travel costs, direct costs, indirect costs, legal and enforcement-related costs, oversight costs, laboratory costs, the costs of reviewing or developing plans, reports, and other items pursuant to these Orders, verifying the Work, or otherwise implementing or enforcing these Orders.”

Agreeing with Mass Realty’s argument that the Ohio EPA lacked statutory authority to collect the claimed response costs, the court concluded such costs were well beyond the scope of the statutory cost recovery provisions, which authorizes recovery of “the cost of investigation and measures performed, including costs for labor, materials and any contract services.” 

The court also rejected the Ohio EPA’s second statutory basis for issuing the order and recovering the costs pursuant thereto.  The agency noted Ohio law authorizes the agency to “enter into contracts or agreements” in furtherance of Ohio’s environmental statutes.  The court rejected this argument because it found the document that Mass Realty had signed was an order and not a contract or agreement within the meaning of the statute.  The court similarly rejected the Ohio EPA’s further arguments it could collect response costs either due to implied powers under other statutory authority or simply as a valid contract between two entities.  Noting the Ohio EPA “cannot extend its powers beyond those authorized by statute” and finding no statutory provision expressly authorizing the collection of the response costs, the court affirmed the trial court’s judgment.

Is the Era of “Enforceable Guidance” Coming to an End?

Posted on February 24, 2012 by William Hyatt

Typically, EPA guidance contains a “disclaimer” that it does not impose legally binding requirements and that the agency retains the discretion, on a case-by-case basis, to adopt different approaches.  In practice, however, EPA tends to require strict adherence to its guidance as though the guidance had been adopted as a binding regulation.  State regulatory agencies have followed the same or similar patterns.  The practice avoids the notice and comment protections of the Administrative Procedure Act and its state counterparts, denies access to the courts to challenge unlawful guidance, and creates uncertainty in the regulated community. Recently, however, New Jersey has signaled what may be the beginnings of a departure from that approach. 

In January, 2012, after years of advocacy by the regulated community, the New Jersey Legislature adopted Assembly Bill No. 2464, which prohibits the use of guidance documents that have not been adopted as rules, unless the guidance is posted on the agency’s website.  On January 17, 2012, Governor Christie signed A. 2464 into law.  P.L.2011, c.215 (N.J.S.A. 52:14B-3a).  Under the bill, even published guidance cannot impose new or additional requirements not spelled out in state or federal law or rules that the guidance is intended to clarify.  Most importantly, guidance not promulgated as a rule cannot be used as a substitute for state or federal law or rules for enforcement purposes.

This issue came to a head when the N.J. Department of Environmental Protection adopted rules implementing the recently enacted Site Remediation Reform Act, N.J.S.A. 58:10C-1 et seq. (SRRA), best known for creating a licensed site remediation professional program. The rules explicitly made NJDEP guidance enforceable.  That guidance, which contained a number of provisions the regulated community thought were extreme, had not undergone the notice and comment process required by the state APA. 

Now, NJDEP finds itself in an awkward position, having adopted rules which run counter to the newly adopted statute and having relied on the enforceability of its guidance to implement the SRRA.  As of this writing, the agency has not publicly disclosed how it intends to cope with this awkwardness.  It will be interesting to see whether Congress and the legislatures in other states follow the lead of A. 2464.

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.

SIZING UP TRADITIONAL CULTURAL PROPERTY IN NEW MEXICO

Posted on November 28, 2011 by Larry Ausherman

New Mexico is a land of vast expanses, mountains, mesas, and rich cultural heritages.  Cultural and historic properties are protected by New Mexico law in a manner that can impose significant restrictions and additional permitting requirements.  But should that protection extend to properties that are as large as a prominent mountain and its mesas?  Mount Taylor and its associated mesas span over 700 square miles in several counties in western New Mexico, near the city of Grants.  The “Mount Taylor Traditional Cultural Property," as listed on the State Register of Cultural Properties in 2009, covered an area more than half the size of Rhode Island.  Earlier this year a State court decision invalidated the listing, holding as one of several grounds, that the area was too large to be listed under the New Cultural Properties Act.

Mount Taylor is important to different people for varying reasons.  Its federal, state, and private lands and resources have been used for mining, ranching, logging, and recreation.  Also, some Native Americans claim that Mount Taylor is a part of their cultural and religious beliefs.  In 2009, five Indian tribes and pueblos, concerned about potential renewed uranium exploration and development activity in the Mount Taylor area, used the New Mexico Cultural Properties Act to nominate the Mount Taylor Traditional Cultural Property to the New Mexico State Register of Cultural Properties.  A “traditional cultural property” has been defined as a property that is eligible for listing because of its association with certain cultural practices or beliefs of a community.  The tribes asserted that the nominated property had traditional religious and cultural importance to them.  Because a listing on the State Register may impose additional permitting requirements on any activity that requires a state permit and is within (and in some circumstances, merely near) the listed property, property owners and others in the Mount Taylor vicinity who could be affected by a listing expressed great concern about the nomination. 

Acting on the tribes’ nomination, the state Cultural Properties Review Committee listed the Property under the Act in 2009.  But earlier this year, a reviewing court overturned the listing and held that, under New Mexico law, the size of the listing, combined with the indefinite nature of the Mount Taylor Traditional Cultural Property boundaries, was overbroad, arbitrary and capricious.  It also held that the process the Committee used for the listing was an unconstitutional violation of due process because it did not provide notice of the proposed listing to the mineral interest owners.  The attempted Mount Taylor Traditional Cultural Property listing would have been by far the largest by the State of New Mexico and possibly the largest by any state in the United States.  The matter is currently on appeal to the New Mexico Court of Appeals, and briefing has recently been completed.  The appeal also includes issues besides the size of the traditional cultural property and whether due process was afforded in the listing.  A decision could be entered by the New Mexico Court of Appeals in 2012.

 

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.