CERCLA Financial Responsibility- The Continuing Efforts to Breathe Life into Section 108(b)

Posted on September 23, 2014 by Charles Efflandt

Financial responsibility is a familiar environmental law concept. Many of us have negotiated financial assurance provisions in site consent agreements. RCRA’s closure and post-closure financial responsibility requirements at treatment, storage and disposal (TSD) facilities are well-established. Financial responsibility obligations are also a component of many other federal and state environmental programs.

I suspect, however, that few practitioners are aware of a CERCLA financial responsibility provision that has been in existence since the Act’s inception. CERCLA Section 108(b) mandates that the President identify classes of facilities that will be required to demonstrate a financial ability to cleanup releases of hazardous substances.  These facilities will be obligated to provide evidence of financial responsibility that is consistent with the degree and duration of the risks associated with their production, handling, treatment, storage and disposal of hazardous substances. The requirements of Section 108(b) are intended to assure availability of funds should the businesses go bankrupt or otherwise become financially unable to conduct future environmental response actions.

Section 108(b) generally imposes two regulatory tasks on EPA: Identify the classes of facilities for which financial responsibility requirements will be developed and promulgate regulations establishing those requirements. For twenty-eight years, EPA deferred breathing regulatory life into Section 108(b). EPA’s inattention to Section 108(b) ceased to be an option in 2008. Litigation commenced by the Sierra Club and others resulted in a federal court order requiring EPA to identify industries that would be first in line for Section 108(b) rulemaking. EPA determined in 2009 that the hard rock mining industry would be its first priority. In early 2010, EPA published advance notice of its intent to regulate additional classes of Section 108(b) facilities: chemical manufacturing, petroleum and coal products manufacturing and the electric power generation, transmission and distribution industry.

Although deadlines have come and gone, to date no financial responsibility rules have been proposed. Nevertheless, the lifeless form of Section 108(b) has finally begun to stir. EPA advised Senate lawmakers in June of this year that financial responsibility requirements for the hard rock mining industry would be issued by 2016. In the meantime, the NGOs remain ever vigilant. Armed with data indicating that, particularly during the recent recession, taxpayers and disadvantaged communities suffered the adverse consequences of EPA’s inaction, environmental advocacy groups filed a Petition for Writ of Mandamus demanding that the agency promptly comply with Section 108(b)’s rulemaking requirements. In contrast, many industry groups contended that the Section 108(b) rulemaking being developed is based on a flawed analysis of potential risk and ignores the impact of existing state and federal financial responsibility laws and regulations that have achieved most of the objectives of Section 108(b). Legislation introduced in the House of Representatives in 2013, generally supported by the affected industries, included significant amendments to CERCLA Sections 108(b) and 114(d). 

Whether you believe that Section 108(b) is outdated and unnecessary, or that immediate and comprehensive implementation of its mandates is of paramount importance, I would submit that EPA’s seemingly cautious approach to Section 108(b) rulemaking is justifiable.  Considering the financial consequences, the identification of target industries must be based on a careful and comprehensive evaluation of the actual risks associated with a particular industry’s handling of hazardous substances and the historic “track-record” of that industry’s ability to financially respond to releases. The extent to which existing federal and state financial assurance programs address the identified risks must also be carefully scrutinized to avoid unnecessary cost and duplication. EPA’s selection of acceptable financial assurance mechanisms is also of critical importance. Elimination of the so-called “financial test” method, for example, may impact the capacity of financial and credit markets to provide the necessary financial assurance and adversely affect global competitiveness.

Future rulemaking that is based on a thorough and defensible analysis of actual risk and is limited to filling in any gaps in existing financial assurance programs will best serve the public, the environment and the regulated community.

WATERS OF THE U. S. PAPER RELEASED BY ECOS

Posted on September 17, 2014 by Blogmaster

On Monday, the Environmental Council of the States (ECOS)  publicly announced a memorandum prepared by ACOEL members concerning  a controversial rule proposed by EPA and the Army Corps of Engineers to clarify jurisdiction over “waters of the United States.” In May 2013, ACOEL entered into a Memorandum of Understanding with ECOS to facilitate a relationship pursuant to which members of ACOEL will provide assistance on issues of interest to ECOS. 

Since the Supreme Court decision in Rapanos v. United States, there has been significant discussion regarding the scope of Clean Water Act jurisdiction.  In order to facilitate its members’ ability to comment on the proposed rule, ECOS requested that ACOEL members provide an objective analysis of how Rapanos has been interpreted to date and how the proposed rule might modify existing understanding of the term, if at all.  A diverse group of ACOEL members from academia, private law firms, and public interest groups volunteered and produced the attached comprehensive memorandum, which was made publicly available today by ECOS. 

In announcing the memorandum, Dick Pedersen, the President of ECOS and Director of the Oregon Department of Environmental Quality, thanked the members of ACOEL for their significant time and effort in preparing the “very informative” memorandum, and added that ECOS looks forward to working with ACOEL in the future.  ACOEL hopes that this memorandum will serve as a valuable resource in connection with EPA’s anticipated rulemaking efforts in this area. 

This is the second white paper produced by ACOEL members to aid ECOS members in assessing important federal environmental policy initiatives.  The first concerned implementation of section 111(d) of the Clean Air Act.

Observations on China’s New Environmental Protection Law

Posted on September 12, 2014 by Robert Falk

On January 1, 2015, China will formally begin implementing an updated Environmental Protection Law. The updated Law imposes significantly stricter environmental controls and greater responsibilities on corporations and local government officials while also giving China’s environmental regulators, prosecutors, and non-governmental organizations (“NGOs”) more “teeth” to demand accountability and obtain compliance.  

Key Aspects of China’s New Law   

1. Increased accountability of polluters

Any violations may be made public and could damage a company’s reputation domestically and abroad.  Individuals who were directly in charge of a polluting activity and/or other personnel who failed to abide by the updated Law’s more stringent environmental requirements will not be able to hide behind corporate walls.  Fines will accrue on a daily basis and responsible officials will be subject to jail sentences.  Companies will be required to publicly disclose their environmental impact assessment (EIA) documents and solicit public opinion on new projects to a much greater extent than previously required.

2. Increased accountability of government bodies /officials

While enterprises that did not comply with environmental regulations were previously subject to penalties, these were often overlooked, reduced, or waived due to local corruption.  To deter lax enforcement, government officials will now be subject to more serious consequences (such as demotions, dismissals, and criminal prosecution) for committing unlawful acts, including improperly granting permits and approving EIA documents, covering up violations, and failing to issue orders to suspend operations for polluters.  (Whereas opportunities to advance in the governmental hierarchy used to depend on meeting economic targets, performance evaluations will soon also take achieving environmental protection targets into account.)

3. Increased public disclosure

The new Law requires public disclosure of information regarding environmental monitoring, environmental quality, and the collection and use of pollutant discharge fees.  Designated types of heavy polluters will also be required to disclose the names, concentrations, and quantity of emissions of the main pollutants discharged, and information on the construction and operation of their pollution prevention and control facilities.  

4. Public interest lawsuits

The new Law allows NGOs to file lawsuits against polluters as long as the NGO is: 1) registered with the civil affairs department at or above municipal level, and 2) focused on environment-related public interest activities for five consecutive years or more.  It has been estimated that there are currently 300 NGOs in China that could meet these requirements.  

5. Protection for whistleblowers

The updated Law will protect any citizen or organization that reports:  (1) environmental pollution or ecological damage caused by any company, or (2) any failure by an environmental regulatory body to perform its legal duties.  Any such report and the identity of the whistleblower must be kept confidential. 

Implications

The fundamental message the updated Law sends to corporations and regulatory bodies is clear – China is now serious about improving environmental quality and will measure its success in curtailing pollution in tandem with its success in fostering economic development.  Keeping companies in key industries accountable for meeting higher environmental standards is, in fact, no longer just official verbiage, but an important strategic component of China’s overall economic strategy. 

In addition to prioritizing compliance, local companies and multinationals can align themselves with the Chinese government’s message by investing in the growing environmental technology sector in China and by promoting corporate environmental awareness and accomplishments to the Chinese public and international audiences via websites and CSR reports.  (In fact, multinationals are expected to lead the way in establishing transparency as a norm in China given their know-how and experience when operating in stricter jurisdictions.)

The updated Law constitutes a meaningful and strategic step toward improving China’s environment. While we cannot be sure how successful any particular aspect of the new Law’s implementation will be, companies are advised not to just take a “wait and see” approach.  A passive strategy risks making the company the target of enforcement actions and potentially significant penalties, and, perhaps most significantly in the longer term, damaging the reputation of the company both in and outside of China.  Instead, the economically and socially sound decision is to adjust corporate strategy in the nearer term to match that of the national Chinese government, and, perhaps, to aim to not only meet, but exceed, the environmental standards and requirements being put into place.  If companies seize the window of opportunity to distinguish themselves from other firms in China in the near term, the potential positive payoffs are likely to be significant in the longer run.

 

*Jasmine Wee a law student at the University of Hong Kong assisted Mr. Falk with a longer article on China’s new Environmental Protection Law from which these observations were derived.

Task Force Recommends Stronger ABA Leadership on Sustainability

Posted on September 2, 2014 by John Dernbach

Will the ABA make leadership on issues of sustainability a permanent part of the organization's infrastructure and policy?  That is the key recommendation of the American Bar Association’s Task force on Sustainable Development.  The July 31, 2014 Task Force report recommends that the ABA strengthen its ability to provide leadership on sustainability by creating a sustainability entity within ABA that is directly responsible to the ABA president.  “First and foremost,” the report said, "[the ABA] should establish a permanent infrastructure for integrating sustainability within the ABA over the long term.” 

As recommended by the Task Force, the sustainability entity  would engage "the entire organization and membership, and convey the ABA’s ethic for economic, social and environmental responsibility" under a “leadership team that reports directly to the ABA President.” 

The sustainability leadership entity would be guided by a short “written statement of ABA’s vision and values on sustainability relevant to the legal profession.”   It would be responsible for issuing an “annual report on ABA’s progress toward achieving sustainability” and on “law-related developments” on sustainability.  In addition, it would run an “ABA-wide program of annual awards for exemplary sustainability efforts by lawyers, law organizations, and others.”   Finally, it would be responsible for “[m]aintaining and enhancing the Resource Center” by, among other things, “making it prominently accessible from the ABA homepage.” 

The Task Force recommendation follows from then-ABA President James R. Silkenat’s 2013 charge to the Task Force to “focus on ways that the ABA can provide leadership on a national and international basis on sustainable development issues.”  (See my earlier blog, “ABA Task Force to Help Mainstream Sustainability in Law Practice.”)

The report also described the Task Force’s achievements in its first year.  Chief among these is the creation of an online Resource Center "that is dedicated to provide, on an ongoing basis, sustainable development tools, links, and other information for lawyers and law organizations.” 

The Task Force, which has twenty members (including me) representing the private sector, government, nongovernmental and intergovernmental organizations, and academia, is chaired by Lee A. DeHihns, a member of the Environmental & Land Development Group at Alston & Bird in Atlanta, Georgia and a former chair of the ABA Section on Environment, Energy, and Resources.  Although the Task Force was originally established for one year, the ABA Board of Governors has approved the Task Force for a second year.  In its second year, the Task force plans to address three additional areas where greater effort is needed to foster sustainable development: legal education, the role of lawyers, and government. 

On legal education, the task force will consider, among others, a recommendation to “identify specific areas of knowledge and practice skills that current lawyers and law organizations should possess in order to assure the basic understanding of sustainability needed for the competent practice of law in the 21st century.”   It will also consider a recommendation for the development or endorsement of “sustainability education and certification programs (via law schools or [continuing legal education] providers) that would enable lawyers who have taken a specific number of hours of sustainability-related courses to obtain a certificate.” 

On law practice, the task force will consider, among others, a recommendation that the ABA encourage all lawyers to consider ways of incorporating sustainable development into their law practice.   On government, the Task Force will consider specific ways of supporting the U.S. Environmental Protection Agency in fostering sustainability, as provided by EPA’s new strategic plan. 

The report notes that lawyers tend to lag behind their clients: “Clients, including business and industry clients, as well as nongovernmental and governmental clients, have become increasingly engaged in sustainability, with growing sophistication and more intensive commitment….[Yet] the legal community has been noticeably absent from meaningful participation in many sustainability ‘communities of practice.’  The Task Force is working to change that dynamic.” 

Of course, the recommendations  in this report are just that: recommendations.  The ABA will decide how to respond to them by following its normal policymaking processes.  However, the establishment of the Resource Center makes it easier for lawyers to obtain relevant information about sustainability.  Keeping the Task Force active for a second year provides an opportunity for continued dialogue. 

Ere the Bat Hath Flown: FWS Ponders Listing the Northern Long-Eared Bat as Endangered

Posted on July 8, 2014 by Chester Babst

 

On October 2, 2013, the United States Fish and Wildlife Service (FWS) proposed to list the Northern Long-Eared (NLE) bat as endangered across its entire range under the Endangered Species Act of 1973 (ESA).   The NLE bat is native to a large geographic area and hibernates or often roosts in caves or mines with large openings.  Within its range, which encompasses some 39 states and much of Canada, NLE bat populations have declined.  While an insignificant portion of this decline has been attributed to human activities, the predominant threat to the NLE bat population is White-nose syndrome (WNS) – a fungal disease that is transmitted in cold temperatures and exhibits a particularly high mortality rate.


Under Section 4(a)(1) of the ESA, FWS must consider five factors in determining whether to list the species as endangered: (1) “the present or threatened destruction, modification, or curtailment of its habitat or range,” (2) “overutilization for commercial, recreational, scientific or educational purposes,” (3) “disease or predation,” (4) “inadequacy of existing regulatory mechanisms,” or (5) “other natural or manmade factors affecting its continued existence.” According to FWS, where “one or more of these factors imperils the survival of a species,” an endangered listing may be necessary.


The proposed listing of the NLE bat carries particularly significant implications for the natural gas and mining industries, whose activities will require permitting that may be more difficult to obtain should the NLE bat ultimately be listed as endangered or threatened, even though such operations are acknowledged to insignificantly impact the NLE bat population.  Several other industries are likely to be affected as well, such as construction and agriculture.

In Pennsylvania, the Game Commission and Department of Conservation and Natural Resources are in the process of preparing an application to FWS for an incidental take permit (ITP) and habitat conservation plan (HCP) covering foresting activities over 3.9 million acres of state land that may provide habitat for the NLE bat and the endangered Indiana bat.  As described in the early scoping document for the proposed application, the draft HCP includes setback distances from roost trees and protection of hibernacula as potential impact “minimization measures.”  Although the draft HCP, if approved as submitted, would not cover coal mining activities on such lands, it is possible that agencies may nonetheless consider such measures in coal mining permitting decisions.

 Recently, several US Representatives from the Pennsylvania delegation sent a letter to the FWS challenging the proposed listing of the NLE bat as endangered due to its potential impact to several industries.  Instead, the Representatives requested consideration of listing the species as threatened, which would allow for establishment of special ESA “4(d)” rules that exempt activities that minimally affect the species.

 The FWS responded on June 30, 2014 by extending the NLE bat final listing determination period by six months and reopening the public comment period for 60 days through August 29, 2014, based on “substantial disagreement regarding the sufficiency and accuracy of the available data,” including NLE bat population trends and the probability of transmission of WNS to unaffected areas.  FWS also pledged to minimize or avoid the economic impacts described above by exercising “regulatory flexibility available under the ESA.”  However, it remains to be seen whether FWS will take a cooperative approach towards industries that could be impacted by the listing decision.  A final determination by FWS is expected no later than April 2, 2015.