EPA Meets Regional Uniformity Requirement – the Hard Way

Posted on June 3, 2014 by Robert Wyman

On Friday, in a case argued by my colleague, Greg Garre and briefed by Leslie Ritts, the D.C. Circuit decided a closely watched case construing the EPA’s “regional uniformity” requirement under the Clean Air Act (CAA.)  The court declared the agency’s directive to regional offices outside the Sixth Circuit to ignore a 2012 Sixth Circuit decision interpreting the CAA’s “single source” requirements as inconsistent with EPA’s uniformity requirement. The decision brings to light an important component of the CAA’s nationwide scheme.

Under the CAA, any “major source” of pollution is subject to certain heightened requirements.  EPA regulations provide that multiple pollutant-emitting activities will be considered together for purposes of the “major source” analysis if they are—among other things—“adjacent.”  But EPA has, in recent years at least, given “adjacent” an expansive and atextual meaning, concluding that even facilities separated by considerable physical distance should be deemed “adjacent” as long as they are “functionally interrelated.” 

In 2012, the Sixth Circuit in Summit Petroleum Corp. v. EPA held that EPA’s interpretation was “unreasonable and contrary to the plain meaning of the term ‘adjacent.’”  The EPA opted not to seek Supreme Court review of the Sixth Circuit’s ruling.  A few months after the Summit decision, however, EPA circulated a directive to the Regional Air Directors informing them that the agency would abide by the Sixth Circuit’s decision within the Sixth Circuit, but that “[o]utside the [Sixth] Circuit, at this time, the EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions.”

The National Environmental Development Association’s Clean Air Project (NEDA/CAP), an industry group, filed a petition for review in the D.C. Circuit, challenging the EPA’s “Summit Directive” as contrary to the statute and EPA’s own regulations.  NEDA/CAP explained that EPA’s Directive would impermissibly place NEDA/CAP members operating outside of the Sixth Circuit at a competitive disadvantage, subject to a more onerous permitting regime than their peers operating within the Sixth Circuit’s jurisdiction.  That disparity between regions, NEDA/CAP explained, was inconsistent with the CAA’s requirement that EPA assure “uniformity in the criteria, procedures, and policies applied by the various regions,” 42 U. S. C. § 7601(a)(2), as well as EPA regulations that similarly require inter-regional uniformity.

On Friday, the D.C. Circuit issued a decision agreeing with NEDA/CAP in National Environmental Development Association’s Clean Air Project v. EPA. Rejecting EPA arguments that the policy could only be challenged in the context of a discrete stationary source permit application, the Court held that NEDA/CAP’s blanket challenge to the EPA’s creation of two different permitting regimes across the country could be challenged today because of the competitive disadvantages it created for companies operating in different parts of the country.  

On the merits, the Court concluded that maintaining a standard in the Sixth Circuit different from the one applied elsewhere in the country was inconsistent with the agency’s regulatory commitment to national uniformity.  The Court recognized that an agency is ordinarily free, under the doctrine of “intercircuit nonacquiescence,” to refuse to follow a circuit court’s holding outside that court’s jurisdiction.  Here, however, the Court held that EPA’s own regulations required it to “respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.”  Finding that the agency’s “current regulations preclude EPA’s inter-circuit nonacquiescence in this instance,” the Court vacated the directive.

The decision is noteworthy in a number of respects.  Not only does the decision roundly reject EPA’s threshold objections to NEDA/CAP’s petition (standing, finality, and ripeness), but it appears to represent the first time a court has applied EPA’s uniformity regulations to invalidate a rule.  The decision therefore puts a light on an important component of the CAA’s nationwide enforcement scheme—the “regional uniformity” requirement.    

Virgin Petroleum Product Quandary in Rhode Island

Posted on May 22, 2014 by Richard Sherman

A case working its way through the Rhode Island state court system, Power Test Realty Co. Ltd. Partnership v. Sullivan, No. PC 10-0404 (R.I. Super. Ct. Feb. 19, 2013), poses a dilemma regarding the obligation to remediate releases of virgin petroleum product.

Under the Rhode Island equivalent of CERCLA, virgin petroleum product is exempt from the definition of hazardous substances. R.I.G.L. 23-19.14-3(c), (i). Releases of virgin petroleum product are therefore not subject to the imposition of joint, several, strict and retroactive liability. One would accordingly expect that any obligation to remediate virgin petroleum product releases would be based on causation. Rhode Island oil pollution statutes and regulations appear to impose liability based on causation only.

Nevertheless, the Rhode Island Department of Environmental Management and the Rhode Island Superior Court have taken the position that (1) the obligation of a current landowner to remediate a release of virgin petroleum product that occurred before acquisition of title arises on the theory that the term “discharge” under the state oil pollution statute includes “leaching” and (2) leaching of pre-acquisition petroleum product into the groundwater constitutes a passive and continuing discharge for which the current landowner is liable to remediate.

The Superior Court held that causation is irrelevant under the state oil pollution control statute and regulations. This ruling clearly contradicts the intent of the legislature to carve out virgin petroleum product from a no-fault liability scheme.

This case of first impression is now before the Rhode Island Supreme Court on a writ of certiorari, Docket No. SU-13-0076. Practitioners await with interest how the Court will work its way through this issue. Stand by for some tortured reasoning if the Superior Court ruling is upheld.

Welcome to the Mad-Hatter’s Tea Party: Resource Economics and Ground Water Contamination

Posted on May 20, 2014 by Donald Stever

The old adage, jokingly told by my college Economics 101 prof, that “economics is not a science but rather a black art”, is amply borne out by disputes between warring factions of resource economists that are playing out in ground water contamination natural resource damages litigation in New Jersey, Puerto Rico, and elsewhere. The issue:  how to value contaminated ground water. So far, the few courts that have actually looked at this issue have been skeptical of the “creative” economics propounded largely by the plaintiff bar.

In one corner, we have the classical economists, usually retained by the defendants’ bar, who argue that ground water must be valued based on the impairment of an economic use, such as potable fresh water that could otherwise be consumed or ground water that could otherwise be used for crop irrigation or for industrial process uses. They call this “use value.” Let’s say that we have a facility that contaminates ground water that is naturally salty, does not meet the federal SDWA secondary drinking water standards, and is not migrating beneath anybody else’s property, or generally any ground water that is not impacting any offsite user. These economists argue that this water should not be valued for its loss as potential drinking water or other uses and thus the cost of replacing it should not be considered, leaving the monetary resource value of this water to be zero. 

In the other corner we have the “creative” guys, typically retained by plaintiffs. They advance several theories upon which to predicate large monetary values for contaminated, but unused and unusable, ground water. Here are three:

Benefits Transfer: Under this theory, clean ground water has an inherent “value” to people, called by its proponents “existence value” and thus whether it is used or not, or anybody suffers actual harm or not, is irrelevant. The proponents of this theory rely on several, mostly old, studies in which groups of people were asked what they would pay to have assurance that their own ground water supply would be free of contamination. For example, would they contribute to the cost to construct a treatment facility? These economists then use an algorithm to calculate a per-gallon “value” of the contaminated ground water using the monetary values derived from those studies. This approach ignores real-world concepts of economic value, substituting for it a sort of fictional “gestalt” value.

Resource Equivalency Analysis: This approach borrows from techniques appropriately used to value damaged wetlands or plant or animal habitat. Its proponents also assume that ground water has inherent economic (“existence”) value. They first calculate the volume of contaminated groundwater over time, and attempt to determine what it would cost to purchase an amount of land sufficient to “protect” an equivalent volume of ground water elsewhere in perpetuity. Although this approach works for habitats, it has all kinds of problems when applied to ground water. For example, in one recent case the economist’s “equivalent” resource was a fresh water aquifer, which he was projecting as equivalent to a saline portion of the same aquifer, ignoring the fundamental meaning of the word “equivalency.”  Additionally, protecting ground water resources by preserving land also provides extraneous environmental benefits — such as providing habitat — which the theory seems to ignore. Furthermore, it is very difficult to determine appropriate land values.

Wasteful Use:  This is my favorite. In a pending litigation, a plaintiff economist named Kevin Boyle asserted that extracting contaminated seaside ground water from beneath an industrial facility, treating it to remove contaminants pursuant to a RCRA corrective action permit, and discharging the treated water to the ocean, constitutes a “wasteful use” of the extracted ground water. His argument was premised on returning the treated water to the aquifer and thus making it available for use, instead of discharging the water to the ocean. But the aquifer in question was naturally salty, on the edge of the ocean, naturally flowed out under the ocean, and the recharge area would have been entirely within the property of the industrial defendant.  He calculated his “wasteful use” value as the per gallon rack price of an equivalent volume of desalinated water sold to the public by the local water utility.

Stay tuned, sports fans. Surely more to come.

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. 

Anadarko Petroleum Agrees to $5.15 Billion Settlement for Environmental Cleanup Claims

Posted on May 7, 2014 by Donald Shandy

Anadarko Petroleum Corporation (“Anadarko”) and its Kerr-McGee unit, which Anadarko purchased in 2006, has entered into a settlement agreement with the United States, whereby Anadarko/Kerr-McGee agreed to pay $5.15 billion for a vast array of environmental clean-ups around the country.  The settlement represents the largest environmental enforcement recovery on record by the Department of Justice.  

The settlement stems from the bankruptcy of Tronox, a spinoff company created by Kerr-McGee for its chemical operations in 2006.  When Tronox declared bankruptcy in 2009, the United States and co-plaintiff Anadarko Litigation Trust (a litigation trust created to pursue Tronox’s claims on behalf of its environmental and torts creditors) asserted fraudulent conveyance allegations against Anadarko and Kerr-McGee, along with certain of its affiliates.  In December 2013, the U.S. Bankruptcy Court for the Southern District of New York found that the historic Kerr-McGee fraudulently conveyed assets to the “new” Kerr-McGee (a new corporate entity with the same name), leaving its legacy environmental liabilities behind in the old company (renamed Tronox and spun off as a separate company), with the intent to evade its debts —including liabilities for environmental clean-up at numerous sites across the country.   The court stated that “there can be no dispute that Kerr–McGee acted to free substantially all its assets … from 85 years of environmental and tort liabilities.”  In re Tronox Inc., 503 B.R. 239, 280 (Bankr. S.D.N.Y. 2013).  

Under the terms of the settlement agreement, the litigation trust and Anadarko/Kerr-McGee mutually agree to release all claims against each other.  Additionally, the United States government and Anadarko/Kerr-McGee have provided mutual covenants not to sue. 

  As a result of the settlement agreement, it is anticipated that the funds will be allocated to a number of clean-ups, which will include:

$1.1 billion paid to a trust charged with cleaning up contaminated sites around the county, including the Kerr- McGee Superfund Site in Columbus, Mississippi

$1.1 billion paid to a trust responsible for cleaning up a former chemical manufacturing site in Nevada that contaminated Lake Mead

Approximately $985 million paid to the U.S. Environmental Protection Agency (EPA) to fund the clean-up of approximately 50 abandoned uranium mines on land of the Navajo Nation 

Around $224 million paid to the EPA for clean-up of thorium contamination at the Welsbach Superfund Site in Gloucester, New Jersey

Pioneering Environmental Law: Remembering David Sive (1922-2014)

Posted on May 2, 2014 by Nicholas Robinson

Before environmental law existed, David Sive knew that the law could protect forests and fields, abate pollution of air and water, and restore the quality that humans expected from their ambient environments.  He fashioned legal arguments and remedies where others saw none.  His commitment to building a field of environmental law is exemplary, not just historically, but because we shall all need to emulate his approach as we cope with the legal challenges accompanying the disruptions accompanying climate change.

David Sive learned to love nature by hiking and rambling from parks in New York City to the wilderness of the Catskill and Adirondack Mountains.  He carried Thoreau’s Walden into battle in World War II in Europe, and read William Wordsworth and the Lake poets while recuperating from wounds in hospitals in England.  He had a mature concept of the ethics of nature long before he began to practice environmental law.

His early cases were defensive.  He defended Central Park in Manhattan from the incursion of a restaurant. He rallied the Sierra Club to support a motley citizens’ movement that sought to protect Storm King Mountain from becoming a massive site for generating hydro-electricity on the Hudson River.  Scenic Hudson Preservation Conference v. Federal Power Commission [FPC] (2d Cir. 1965), would become the bell-weather decision that inaugurated contemporary environmental law.  The case was based on the multiple use concepts of the Progressive Era’s Federal Power Act.  The FPC (now FERC), had ignored all multiple uses but the one Con Edison advanced.  When the Court of Appeals for the Second Circuit held that citizens had the right to judicial review to require the FPC to study alternative ways to obtain electricity, as well as competing uses for the site, the court laid the basis for what would become Section 102(2)(c) of the National Environmental Policy Act (NEPA).

When Consolidated Edison Company decided to build a huge hydroelectric power plant on Storm King, the northern portal to the great fiord of the Hudson River Highlands, citizens and local governments were appalled.  This was no “NIMBY” response.  Con Ed had forgotten that these fabled Highlands inspired the Hudson River School of landscape painting.  This artistic rendering of nature in turn inspired the birth of America’s conservation movement of the late 19th century.  The Hudson also instrumental to the historic birth of this nation; here the patriots’ control of the Highlands had kept the British from uniting their forces, and here soldiers from across the colonies assembled above Storm King for their final encampment as George Washington demobilized his victorious Army.  The Army’s West Point Military Academy overlooks the River and Storm King.  

David Sive and Alfred Forsythe formed the Atlantic Chapter in the early 1960s, despite heated opposition from Californians who worried the Club would be stretched too thin by allowing a chapter on the eastern seaboard.  David Sive chaired the Chapter, whose Conservation Committee debated issues from Maine to Florida.  He represented the Sierra Club, pro bono, in its intervention in the Storm King case, and other citizens brought their worries about misguided government projects or decisions to him. 

David Sive represented similar grassroots community interests in Citizens Committee for the Hudson Valley v. Volpe (SDNY 1969), affirmed (2d Cir. 1970).  Transportation Secretary Volpe had approved siting a super-highway in the Hudson River adjacent to the shore in Tarrytown and Sleepy Hollow, to accommodate Governor Nelson Rockefeller’s proposal to connect his Hudson estate to the nearby Tappan Zee Bridge.  Without the benefit of NEPA or any other environmental statutes, which would be enacted beginning in the 1970s, and relying upon a slender but critical provision of a late 19th century navigation law, after a full trial in the US District Court for the Southern District of New York, David Sive prevailed against the State and federal defendants.  He won major victories on procedure, granting standing to sue, and on substance, a ruling that the government acted ultra vires.  David Sive saved the beaches, parks and marinas of the Hudson shore.

Public interest litigation to safeguard the environment was born in these cases.  Public outrage about pollution and degradation of nature was widespread.  In September 1969, the Conservation Foundation convened a conference on “Law and the Environment,” at Airlie House near Warrenton, Virginia.  David Sive was prominent among participants.  His essential argument was that “environmental law” needed to exist. 

On December 1, 1970, Congress enacted the NEPA, creating the world’s first Environmental Impact Assessment procedures and establishing the President’s Council on Environmental Quality (CEQ).  The CEQ named a Legal Advisory Committee to recommend how agencies should implement NEPA chaired by US Attorney Whitney North Seymour, Jr. (SDNY).  This Committee persuaded CEQ to issue its NEPA “guidelines” on the recommendation of this Committee.  That year launched the “golden age” of NEPA litigation.  Courts everywhere began to hear citizen suits to protect the environment.

David Sive went on to represent citizens in several NEPA cases, winning rulings of first impression.  In 1984, he reorganized his law firm, Sive Paget & Riesel, to specialize in the practice of environmental law.  From the 1970s forward, NEPA allowed proactive suits, no longer the primarily defensive ones of the 1960s. “Citizen suits” were authorized in the Clean Air Act, Clean Water Act and other statutes. 

David Sive knew that without widespread support among the bar and public, these pioneering legal measures might not suffice.  He became a founder of the Natural Resources Defense Council (NRDC), which became one of the nation’s pre-eminent champions of public environmental rights before the courts.  To continue the Airlie House conference precedent, he institutionalized the established professional study of environmental law, as a discipline, through creation of the Environmental Law Institute (ELI).  With ALI-ABA (now ALI-CLE) he launched nationwide continuing legal education courses to education thousands of lawyers in environmental law, a field that did not exist when they attended law school.  He devoted an active decade to teaching law students in environmental law, as a professor at Pace Law School in New York.

This month, the Intergovernmental Panel on Climate Change (IPCC) released the second part of its Fifth Assessment Report.  The IPCC summaries of peer-reviewed scientific investigation suggest that law will confront problems even more challenging than those that David Sive addressed.  New legal theories and remedial initiatives will be needed that do not exist today.  The wisdom of ecologist Aldo Leopold can inform the next generation.  Globally, others carry on David Sive’s role, such Attorney Tony Oposa in the Philippines or M. C. Mehta in India.  The law can cope with rising sea levels, adaptation to new rainfall patterns, and other indices of climate change, but it will take individual commitment to think deeply about environmental justice in order to muster the courage to think and act tomorrow as David Sive did yesterday.

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.

 

Climate Change Litigation – Will Property Insurers Take the Lead?

Posted on April 24, 2014 by Ralph Child

Common law litigation seeking relief from petrochemical companies for causing climate change has been much touted but little successful.

The insurance industry has been warning of huge coming losses due to climate change, but has not taken aggressive action to force change.

Until now? 

In a lawsuit filed in Illinois state court on April 16, 2014, some property insurers sued the City of Chicago and a host of regional and municipal water managers for failure to provide adequate stormwater storage.  The class action suit alleges that the plaintiffs’ insureds would not have suffered so much flood damage from a 2013 storm had the defendants exercised better planning and construction to deal with foreseeable storms. 

Notably, the plaintiff insurers rely heavily on the 2008 Chicago Climate Action Plan.  The plan recognized that climate change would cause increased amounts, durations and intensities of rainfall.  Plaintiffs allege that despite the foreseen problem and having had adequate time and opportunity, the defendants failed to make the recommended and necessary improvements, leading to the injuries to the insureds’ properties.

Certainly this suit faces many challenges.  Courts are slow to override state and local governments’ complicated budgeting choices.  Moreover, courts may be ill-equipped to oversee projects such as Chicago’s Deep Tunnel Project, which was commissioned in the 1970s to address metropolitan flooding, stormwater and sewage.  After more than $3 billion so far, itwill not be completed until at least 2029.

Also, query whether such litigation will help or hurt state and local efforts to adapt to climate change.  It could deter honest forecasting of what it will take.

Still, this lawsuit could augur a new wave of common law climate change litigation – a category involving well-funded plaintiffs with provable arguments for proximate cause of real damages.

Navigating “Navigable” Waters

Posted on April 21, 2014 by Earl Phillips

Whether a wetland or modest stream is subject to Clean Water Act regulation as a “navigable water” of the United States (navigable in law) remains a muddy question. In Rapanos v. United States, the Supreme Court established a two-part test for determining CWA jurisdiction: the body of water must be “relatively permanent” and it must be adjacent (have a continuous surface connection) to navigable waters. Justice Kennedy’s concurring opinion says waters or wetlands sharing a “significant nexus” with traditionally navigable waters are subject to CWA jurisdiction.

In 2011, the EPA and Army Corps of Engineers (ACOE) released draft guidance on “waters of the United States” which expanded the waters over which the agencies planned to assert CWA jurisdiction, compared to pre-Rapanos. Then, in September 2013, the EPA’s Science Advisory Board released a draft scientific report, “Connectivity of Streams and Wetlands to Downstream Waters,” for public comment, stating that the final version of the report would be the basis for a joint EPA and ACOE rule on CWA jurisdiction.  On March 25, 2014, the two agencies released a proposed rule stating that all tributaries of traditional navigable waters and interstate waters, and adjacent water bodies, are automatically jurisdictional because they share a “significant nexus” with navigable waters. The proposed rule appears to assert default jurisdiction over many seasonal and rain-dependent streams and wetlands near rivers and streams, provided they are “tributaries.” Beyond this, the proposed rule states that jurisdiction over other types of waters with more uncertain connections to downstream waters—such as unidirectional waters, non-adjacent wetlands, and other waters outside of flood zones and riparian areas—will be evaluated on a case-by-case basis. The official version of the proposed rule was published in the Federal Register yesterday with public comments due in ninety days.

Parties understandably confused can petition for case-specific jurisdictional determinations. While a decision on such a petition may be definitive, courts have refused to allow judicial review of such decisions because they are not “final decisions” under the Administrative Procedure Act. In Belle Co., LLC v. U.S. Army Corps of Engineers, a federal district court noted that jurisdictional determinations do not impose any new or additional legal rights or obligations, but merely remind the party of existing duties under the CWA. By contrast, the Supreme Court determined in Sackett v. EPA that compliance orders issued by the ACOE or EPA following or flowing from jurisdictional determinations are subject to judicial review. 

Adding to the challenge of navigating these uncertain legal waters, many states and municipalities have expanded their statutory definitions of “waters” (e.g. artificial features and groundwater) and “wetlands” (e.g. soil types and buffers) to increase the breadth and depth of state and local regulation. So, update your navigational charts and prepare for some challenging sailing! 

A Tenuous Truce In Oregon’s Water Wars

Posted on April 11, 2014 by Martha Pagel

A year ago, this blog contribution described the latest battle in a nearly 40-year old water war in Oregon’s Klamath Basin. Now, there is a tenuous peace agreement in place – but it may be short-lived.  With substantial leadership from Senator Ron Wyden and Governor John Kitzhaber, a “Proposed Upper Klamath Basin Comprehensive Agreement” was negotiated among the Klamath Tribes, State of Oregon, and a large group of independent farmers and ranchers who hold water rights to surface waters in the Klamath Basin, above Upper Klamath Lake.  The underlying war has to do with who gets how much water in an on-going “general stream adjudication” of water diversions that began in the late 1800s to early 1900s, along with quantification of federally reserved water rights. 

In March, 2013, the Oregon Water Resources Department (“OWRD”) issued its “Findings of Fact and Final Order of Determination” (“FFOD”), which approved the federally reserved claims of the Klamath Tribes for substantial instream flows in the Klamath River and tributaries above Upper Klamath Lake, and for specified lake levels.  The Tribal water rights were granted a priority date of “time immemorial.”  When the FFOD took effect last year, the Tribes were legally entitled to make a “call” for water – requiring the OWRD to take immediate action to curtail water use by junior appropriators until the Tribes’ instream flow allocations were satisfied.  As a result, thousands of acres of irrigated farm and pasture lands were dry.  

The impact of the call was economically, socially and politically devastating, leading Senator Wyden and Governor Kitzhaber to convene a fast-moving settlement process that began late last fall and resulted in conceptual agreement before the end of 2013.  Further work in early 2014 resulted in a comprehensive agreement for the Upper Basin -- but the deal is fragile.  Implementation of key settlement terms depends on securing substantial federal funding and state agency support, with no guarantees of either. 

The settlement includes two key components:  a Water Use Plan and a Riparian Program.  Under the Water Use Plan, irrigators will voluntarily retire or reduce historic diversions by up to 30,000 acre-feet.  Under the Riparian Program, landowners will commit to voluntary habitat restoration actions.  The two components are to be implemented over a five year period, subject to the availability of federal funding.  An additional $40 million of federal funding is to be provided for Tribal economic development. 

This settlement agreement complements another agreement, reached several years ago, among the Tribes, state and federal agencies, and lower basin irrigators who receive water from Upper Klamath Lake under contracts with the U. S. Bureau of Reclamation.  That agreement also requires substantial federal funding that has not yet been committed, due at least in part to political pressures stemming from the fact that it addressed only half of the basin – leaving upper basin irrigators to bear the brunt of a Tribal call.  With the upper basin interests now addressed through this second settlement agreement, the basin is now fully covered with strategies to help recover instream flows to meet Tribal water needs while maintaining a sustainable level of economic use for farmers and ranchers. 

Optimists are hopeful the region will now be able to move forward with a united front to seek needed support from Congress.  Pessimists say the deal will crumble beneath the political weight and budget pressures of Washington DC.  One thing is for sure – the Klamath Basin water wars will not be ended soon.  Stay tuned for next year’s update.

Causation and Tarballs: Two Things That Just Won't Go Away

Posted on April 10, 2014 by Steve McKinney

In the Spring of 2012, just before trial on the Deepwater Horizon oil spill, BP and the plaintiffs reached a class action settlement.  This settlement created a business claims process that required no direct causation beyond a showing that the business was located in a certain geographic area and had experienced a certain decline in revenue during the relevant period.  The settlement included claims from throughout Mississippi, Louisiana and Alabama, and certain coastal counties of Florida and Texas.  In November, 2012, the district court held a fairness hearing where BP argued for approval.  In December, 2012, with the support of BP, the court certified the class and approved the settlement. 

Over time, estimates of BP’s claims exposure under the settlement agreement grew.  Frustrated by attorney advertising that getting paid by BP did not require showing that your losses were caused by the oil spill, BP returned to the district court and objected to the claims administrator’s interpretation of the settlement agreement.  BP argued for the first time that claims should be evaluated on an accrual basis accounting method rather than a cash basis.  This could have reduced BP’s exposure, but most small businesses maintain their books on a cash basis and the district court upheld the claims administrator’s interpretation.  BP appealed to the Fifth Circuit.

In the Summer of 2013, a 3-judge panel of the Fifth Circuit heard this first appeal and remanded the case for further development of the record on the parties’ intent. (link to decision)  One judge questioned sua sponte whether a causation standard that did not require proof of a connection to the oil spill undermined the parties’ legal ability to enter into a class action settlement.  The panel also instructed the district court to stay the payment of claims pending resolution of these issues.

Meanwhile, parties who had objected at the fairness hearing took a second appeal to the Fifth Circuit that challenged class certification.  BP joined in this appeal, notwithstanding having argued for certification before the district court.  BP argued that because the settlement agreement was being interpreted to pay claims that were not connected to the oil spill, the class was not properly certified.  In January, 2014, a 3-judge panel hearing the second appeal affirmed class certification based on the panel’s understanding of the injury alleged on behalf of potential class members and the panel’s view of Article III standing requirements and Rule 23 class certification requirements applicable at the settlement stage of the case. (link to decision)

Back to the first appeal. On remand, the district court ruled in December, 2013 that the revenue-based causation standard agreed to by the parties was sufficient for class certification and met the requirements of Rule 23 and other federal laws regarding class actions.  Predictably, BP asked the first Fifth Circuit panel to review this ruling.  On March 3, 2014, that first panel affirmed the district court’s ruling and ordered that the stay on payments be lifted. (link to decision)  Focusing more on the Claims Administrator’s interpretations of the Settlement Agreement, this panel determined that the agreed-upon claims process included elements sufficient to establish traceability of the claimed damage to the spill.  In a sense, the earlier panel decision reviewed the Settlement Agreement as a matter of principle and the later decision reviewed it in application.  On March 17, 2014, BP sought rehearing en banc.  As a result, the panel’s mandate will not issue and the stay will remain in place pending resolution of BP’s request for rehearing.  Is the gravity-challenged opera person warming up? 

Ashes to Ashes; Waters to Waters – The Death of EPA’s Water Transfer Rule?

Posted on April 8, 2014 by Robert M Olian

On March 28, 2014, a federal district court vacated EPA’s “Water Transfer Rule,” which had sought to clarify EPA’s position that transfers of water between navigable bodies of water do not require NPDES permits. See Catskill Mountains Chapter of Trout Unlimited, Inc. v. United States Environmental Protection Agency (SDNY, 3/28/2014). The Water Transfer Rule, codified at 40 CFR  § 122.3(i), was the presumptive culmination of a long and meandering trail of EPA regulatory interpretation, guidance memoranda and judicial opinions, including a trip to the United States Supreme Court in the case of South Florida Water Management District v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004).

The Catskill ruling is notable in several respects. First, it came from a district court. After the Supreme Court ruled, in Decker v. Northwest Environmental Defense Center, that district courts, rather than appellate courts, have jurisdiction in certain situations to review such regulations -- even if the suits are brought years after the rules were promulgated, the Eleventh Circuit held in Friends of the Everglades v. EPA that it lacked original jurisdiction over a challenge to the water transfer rulemaking, a ruling that the Supreme Court declined to review.

Second, the district court did not stay its ruling pending appeal, though appeal is a virtual certainty. Thus, the permit status of various water transferors who relied on the rule (irrigation districts, dam operators, water utilities, etc.) is now in limbo until a higher court reviews the Catskill decision or EPA promulgates a temporary fix. Any such fix, by the way, may be hard to come by in light of the district court’s expressed views about EPA’s misinterpretation of Congressional intent.

Third, the opinion contains language about the definition of “navigable waters” that does not quite align with EPA’s and the Corps’ imminent release of a Notice of Proposed Rulemaking addressing that very definition.

At this time, then, the only certainty is that litigation over the Water Transfer Rule will continue to flow. 

Massachusetts High Court Upholds Environmental Agency’s “Improvement” Of Statute: Will The Us Supreme Court Follow Suit?

Posted on March 17, 2014 by Stephen Leonard

How far can an agency deviate from a statutory scheme in order to achieve what it sees as the goals of that scheme? Can the regulatory structure “improve on” the statute?  These issues are currently playing out in two closely watched cases.

Last year these pages described a then-undecided Massachusetts state court case that had attracted a surprising degree of national attention. Pepin v. Division of Fisheries and Wildlife began as a relatively straightforward challenge to an agency determination that the plaintiffs’ land provided habitat for the Eastern Box Turtle and that construction of their planned retirement home was therefore subject to regulation under the Massachusetts Endangered Species Act (MESA). In the course of judicial appeals of the agency decision, the plaintiffs, with new counsel, shifted the focus of their argument to a challenge to the regulations themselves. When the Massachusetts Supreme Judicial Court (Mass SJC), acting sua sponte, transferred the case to its own docket, interest in the case spiked dramatically. Amicus curiae briefs were filed not only by state-based groups, on both sides of the issue (Massachusetts Audubon Society, Development Council of Western Massachusetts, Home Builders Association of Massachusetts), but also by those from farther afield (Pacific Legal Foundation, Defenders of Wildlife, National Association of Homebuilders, The Nature Conservancy). Clearly, something was at stake. And now, just as the Mass SJC has reached a decision in Pepin, very similar arguments are being made, with even more at stake, in this year’s most closely watched environmental case, Utility Air Regulatory Group v. EPA, the United States Supreme Court’s review of the Obama Administration’s attempt to regulate greenhouse gas emissions from stationary sources. 

To understand these issues, some background on the Massachusetts endangered species regulatory scheme and the challenge to it is necessary. (These are described in more detail in the earlier posting.) The challenged regulations established a process for mapping “priority habitats,” areas that are important for species that fall into any of the three categories established under MESA – in descending order of the peril that they face, endangered species, threatened species, and species of special concern. These Priority Habitat regulations require that before a project is undertaken in such an area, it must be reviewed by the Division of Fisheries and Wildlife to determine whether it will result in a “take” of a species falling into any of the three categories.  (“Take” is very broadly defined in the statute and includes habitat alteration.) If a take will occur, the regulations provide, the project may nevertheless proceed if it can be conditioned in such a way as to avoid that result or, in more difficult cases, if the project proponent takes other steps that will result in “a long-term net benefit to the conservation of the impacted species.”   

In practice, the evidence showed, 75% of projects proposed in Priority Habitat have been approved without conditions, 22% have proceeded with conditions, and 3% have required that other measures, resulting in a “long-term net benefit,” be taken in order to permit the project to proceed. Because of this history, at least parts of the development community in Massachusetts had accepted the Priority Habitat regulations as a reasonable way of accommodating both developers’ interests and the purposes of MESA.  

This acceptance was likely based on something else as well: As a practical matter, the Priority Habitat regulations were promulgated in lieu of regulations under another scheme, specifically set out in the legislation but never put into effect by the Division of Fisheries and Wildlife. MESA authorizes the Division to designate as “Significant Habitat” areas that are important to the survival of endangered and threatened species (but not species of special concern). And MESA severely constrains development in areas that the Division has so designated. But, because of the severity of the constraint, the Act also establishes substantial procedural protections before a particular property can be designated as Significant Habitat.  

Rather than designating any Significant Habitat, the Division, relying on a general grant of authority to adopt regulations, created the Priority Habitat scheme, with its less severe restrictions on development and its less burdensome (for the agency) procedural requirements. In short, the Division chose not to adopt regulations specifically contemplated in the enabling legislation and  adopted instead regulations that were easier to administer, less intrusive for those in the regulated community who would have fallen under the legislatively-contemplated scheme and, as a consequence, arguably more effective at protecting at-risk species in Massachusetts. Doing that, though, made the Priority Habitat regulations subject to challenge by those who might prefer that there be no regulation of land use in the interest of protecting at-risk species at all.

The challenge in the Pepin case to the Massachusetts wildlife agency’s rulemaking power is very like the industry challenge to EPA’s rulemaking in Utility Air Regulatory Group. On February 18 of this year, the Mass SJC upheld the validity of the Priority Habitat regulations. On February 24, the United States Supreme Court heard argument on the challenge by industry and certain states to the Environmental Protection Agency greenhouse gas regulations. (Other states intervened in support of the regulations, and there was extensive amicus participation.) At the heart of the challenge in the Supreme Court is an attack on EPA’s determination that it would raise very substantially the threshold at which emitters of greenhouse gases would be regulated; the emission levels specified in the Clean Air Act are much lower, but they were intended for “conventional” pollutants, not greenhouse gases. Using the Congressionally-specified levels would have been an administrative nightmare for EPA. And it would have been enormously burdensome for businesses and even individuals.  EPA therefore determined to use higher thresholds.  This presumably benefits the industry petitioners and the states that support them. But that is not the point. EPA’s action leaves it subject to the accusation leveled at the Massachusetts Division of Fisheries and Wildlife: That it re-wrote a statute in order, in its view, to make it work better, and that an administrative agency may not do that.

The Mass SJC had little difficulty rejecting this claim. The unanimous opinion begins its discussion of the validity of the Priority Habitat regulations by noting that “[d]uly promulgated regulations . . . are presumptively valid and ‘must be accorded all the deference due to a statute.’” And in analyzing whether the plaintiffs had overcome that presumption, the court “look[ed] to the statute as a whole to determine the scope of the agency’s power.” In the recent United States Supreme Court argument, EPA sought to invoke these principles in defense of its greenhouse gas regulations.  And it received some support from the Court. Justice Elena Kagan, according to the New York Times, acknowledged that what the agency did “was true to the law’s larger purpose.” But other Justices were less comfortable: Justice Anthony Kennedy “couldn’t find a single precedent that strongly supports [EPA’s] position.” And Justice Samuel Alito insisted that the agency’s use of its own threshold numbers, rather than those in the Clean Air Act, was unprecedented “in the entire history of federal regulation.”

The two cases are not the same, of course: the statutes are different; the agencies’ actions and choices were different; and the governing administrative law principles may be different in some respects. But it seems likely that the outcomes in the cases turned and will turn less on any of those factors and more on the views of the judges deciding them about the appropriateness of administrative agencies  making their own judgments about how best to accomplish broadly-stated legislative objectives.

One could easily argue that the Massachusetts Division of Fisheries and Wildlife took a more dramatic step, in declining to promulgate regulations that the enabling legislation called for and instead promulgating regulations that were not specifically contemplated by that legislation, than EPA did in adopting the regulatory model that Congress had called for but limiting its reach when it was clear that not doing that would be havoc-making. Perhaps if the Massachusetts Supreme Judicial Court had reviewed EPA’s actions and the United States Supreme Court had reviewed the Priority Habitat regulations, the results would reflect that distinction. But they didn’t. And what we got, and likely will get, are decisions that reflect as much the views of the members of those courts as they do the substantive nuances of the cases themselves.

Getting the Lead Out?

Posted on February 21, 2014 by Craig Johnston

There is a very interesting case pending in the Ninth Circuit regarding lead ammunition and its impact on raptors and scavenger birds, including California condors, in and around the Kaibab National Forest in Arizona. In Center for Biological Diversity v. U.S. Forest Service, the Center is pursuing a citizen suit alleging that the Forest Service is contributing to an “imminent and substantial endangerment” to wildlife under the Resource Conservation and Recovery Act by allowing the continued use of lead by hunters in the National Forest.

Factually, the allegations in the case are straightforward. Despite the existence of a “voluntary” program designed to reduce the use of lead ammunition in the Kaibab, hunters are still using it and the wildlife are still suffering the consequences, including mortality. Condors and other wildlife species are exposed to spent lead ammunition when they consume animals that have been shot but not retrieved or when they feed on the remains of field-dressed animals (also known as “gut piles”) that have been killed with lead ammunition. When lead-core rifle bullets strike an animal, they often fragment into hundreds of small pieces of lead that can be found several inches from the site of the wound in large game animals. A very small lead fragment is enough to severely poison or kill a bird, even one as large as a California condor, North America’s largest flying bird. Wildlife that ingest spent lead ammunition, even in minute amounts, experience many adverse behavioral, physiological and biochemical health effects, including seizures, lethargy, progressive weakness, reluctance to fly or inability to sustain flight, weight loss leading to emaciation, and death. In turn, wildlife experiencing these effects are far more susceptible to other forms of mortality, such as predation.

Nowhere is the threat of spent lead ammunition more apparent than on the Kaibab National Forest, an approximately 1.6 million-acre parcel of federal property in northern Arizona, bordering both the north and south rims of the Grand Canyon. Lead ingestion and poisoning from ammunition has been documented in many avian predators and scavengers that inhabit the Kaibab, including bald and golden eagles, northern goshawks, and ferruginous hawks. The most acute threats in the Kaibab are those posed to the condors. There are currently only approximately 75 free-flying condors in northern Arizona and southern Utah. Lead poisoning from exposure to spent lead ammunition is the primary cause of mortality in this fragile population. Even the surviving condors frequently need to have their blood treated for lead contamination; one female condor recently received 16 life-saving treatments over a 16-year period, before she ultimately died of lead poisoning.

The legal issues currently pending before the Ninth Circuit involve standing. The district court found that the Center lacks standing, relying both on its view that the Government would need to undertake a rulemaking in order to ban the use of lead ammunition in the Kaibab and on the fact that the condors’ range extends beyond the Kaibab itself, and thus that they might ingest lead elsewhere even were the Center to prevail. On appeal, the United States relies primarily on the latter of these two theories, which is interesting given that the condors’ lead exposure levels correlate strongly with the deer-hunting season on the Kaibab. As Alan Zufelt of the Arizona Department of Game and Fish put it: “We can put it on the calendar that every year right after the deer hunt there’s going to be a huge spike in condor lead poisoning.”

If the Ninth Circuit holds that the Center has standing, which, in this author’s view, it should, the case will then proceed to the merits, where the key legal question will be whether a landowner that knowingly allows visitors to engage in activities that result in the spread of poisons on its property may be deemed to be “contributing” to any resulting endangerment to wildlife. This issue could have implications not only for condors and the other wildlife on the Kaibab, but ultimately in other land-management contexts as well.

The National Environmental Policy Act: What Constitutes Segmentation and a “Direct” Environmental Impact?

Posted on February 14, 2014 by Thomas Hnasko

On February 11, 2013, the United States District Court for the District of New Mexico denied a Motion for Preliminary Injunction filed by the Village of Logan, seeking to compel the Bureau of Reclamation (“BOR”) to perform an environmental impact statement (“EIS”) for the Ute Lake Diversion Project in eastern New Mexico. The BOR issued an environmental assessment (“EA”), which failed to analyze the foreseeable impacts to Ute Lake based on the design capacity of the intake structure to withdraw 24,000 acre-feet per year (“af/yr”). The BOR contended that, while contracts had been issued to deliver the full 24,000 af/yr of water, the project which it funded was limited to withdrawals from the lake of only 16,450 af/yr. Significantly, the environmental and socioeconomic impacts of 16,450 af/yr paled in comparison to the projected impacts resulting from withdrawals of 24,000 af/yr.

The briefs in the Tenth Circuit present an issue of first impression under NEPA. That is, can the BOR defer an analysis of certain impacts it knows will occur in the future, and summarily discuss those deleterious impacts under the rubric of “cumulative” rather than “direct” effects? According to the Department of Justice, Logan’s complaint about the matter is only one of “nomenclature,” and it should not matter whether the effects are deemed “direct” or “cumulative.” In response, Logan argues that the difference is one of substance, as an analysis of “cumulative” effects of a project does not require a comparison of the project to reasonably available alternatives, whereas an analysis of foreseeable “direct” effects, i.e., withdrawals up to the capacity of the intake structure, would require a vigorous comparison to available alternatives. These alternatives, which received only a one-half page discussion in the EA’s section on cumulative effects, include retirement of wasteful irrigation groundwater rights to augment municipal water supplies in eastern New Mexico. According to Logan, allowing the BOR to analyze a plainly foreseeable “direct” effect as merely “cumulative” would result in the illegal segmentation of the project. If such a result were sanctioned, there would be no NEPA analysis ever undertaken of the effects between 16,450 af/yr and 24,000 af/yr.

Oral argument is scheduled for March 17, 2014.

Fines for Environmental Violations may be an Ordinary Cost of Business-Tell that to the Budget Committee!

Posted on February 3, 2014 by Richard Horder

Courts have long wrestled both with the survival of environmental claims in bankruptcy and with the proper prioritization of environmental claims within bankruptcy.  In Munce’s Superior Petroleum Prods. v. N.H. Dep’t of Envtl. Servs., the First Circuit split with the Third Circuit over the prioritization of punitive fines for a company’s post-petition violation of environmental laws.  In Pa. Dep’t of Envtl. Res. v. Tri-State Clinical Labs., Inc., the Third Circuit determined these to be general unsecured claims, but the First Circuit disagreed and gave the fines administrative expense priority ahead of unsecured creditors.

Tri-State Clinical Labs. involved a company that violated solid waste disposal laws by disposing of biological materials into the general trash.  The company engaged in this conduct both before and after filing for bankruptcy, and the Pennsylvania Department of Environmental Resources (DER) assessed criminal fines for both the pre- and post-petition conduct.  The parties agreed that the fines for the pre-petition violations were general unsecured claims, but DER contended the fines for the post-petition violations should be given administrative priority pursuant to 11 USCS § 503(b)(1)(A) (i.e., as “the actual, necessary costs and expenses of preserving the estate”).  The court disagreed.  First, the court looked to the specifically-itemized administrative expenses set forth in the statute, and determined, with the exception of fines related to taxes, they were all “compensation for services that are necessarily incident to the operation of a business.”  The fines, being punitive in nature, were not compensation for services, and a company’s unlawful conduct is not a “necessary cost of doing business.”   In addition, the specific inclusion of tax fines suggested Congress’ intent not to include any other type of “non-compensatory” penalties.  Finally, the end result of granting a punitive fine administrative priority status would be the payment of that fine by innocent third parties (the unsecured creditors), not the debtor.  The court contrasted its decision with a situation involving compensatory payments to the state for its work in cleaning up a contaminated site, which would have received administrative priority. 

The court in Munce’s Superior Petroleum Prods. disagreed with this analysis.  Munce’s Superior Petroleum Prods (MSPP) violated state environmental laws requiring secondary containment around its aboveground storage tanks.  The New Hampshire Department of Environmental Services (DES) filed an action in court, seeking injunctive relief and civil penalties, and the court entered a consent preliminary injunction requiring MSPP to bring its tanks up to code or take them out of service.  MSPP did not comply with the injunction, and DES filed a motion for contempt.  MSPP then filed for bankruptcy.  The state court stayed the DES action, but then lifted the stay on a finding that DES was “protecting public health and safety and the environment.”   The state court then granted DES’ motion for contempt, ordered MSPP to take its tanks out of service and fined MSPP $1000 per day of noncompliance.  MSPP still did not comply, and the court ultimately granted DES’ motion for $192,000 in fines.

The bankruptcy court assigned the $192,000 in fines administrative expense priority, and the First Circuit affirmed.  The court first determined that the fines were for post-petition conduct (not complying with the contempt order), not for the pre-petition environmental violations that originally triggered DES’ lawsuit.  Next, the court decided that “in light of today’s extensive environmental regulations, the payment of a fine for failing to comply with those regulations is a cost ordinarily incident to operation of a business.”  Therefore, “fines for noncompliance post-petition with state environmental law” fall within 11 USCS § 503(b)(1)(A) and should be granted administrative expense priority. 

Is Standing a Fantasy, or not?

Posted on January 30, 2014 by Thomas Lavender

In a matter brought in the Original Jurisdiction of the South Carolina Supreme Court, the Court opined in its January 22, 2014 decision that the citizen group plaintiffs lacked standing.  The plaintiffs asserted public nuisance and zoning claims related to Carnival cruise ship Fantasy’s operations at the Union Pier Terminal near Charleston’s Old and Historic District.  The Court granted Carnival Cruise Lines’ motion to dismiss the lawsuit. 

The Court cited its previous decision in Sea Pines, a challenge by animal rights groups to the issuance of a depravation permit to reduce the deer population on Hilton Head Island, where many children’s vacation fantasies of seeing Bambi are often fulfilled.  The citizen groups attempted to emphasize their “particularized injury” caused by the Fantasy docking in Charleston Harbor.  Specifically, these groups asserted, among other things, the Fantasy “visually disrupts the historic skyline” and emits “noise pollution, including broadcast announcements and music” that have injured these groups and their members by “reducing their use and enjoyment of the local environmental and Charleston’s historic assets.”

Having pondered all of the alleged egregious conduct resulting from the presence of the Fantasy, the Court found “all members of the public suffer from and are inconvenienced by traffic congestion, pollution, noises and obstructed views.”  Thus, it concluded the citizen group plaintiffs lacked standing, a fundamental prerequisite for instituting a legal action.

Temporary contamination – Ain’t that a non-compensable shame?

Posted on December 12, 2013 by Jeff Civins

A “stigma” is a mark of shame.  When applied to real estate, stigma refers to an unfavorable quality in a property that makes it less attractive.  Whether a landowner may recover stigma damages for temporary contamination that has been remediated in accordance with state law is an issue the Texas Supreme Court will consider when it hears oral argument in early December in the case of Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch

In that case, the lower appellate court had affirmed the decision of the trial court, following a jury trial, awarding the plaintiff almost $400,000 in damages attributable to an alleged diminution in value resulting from temporary contamination.  In arguing for reversal, Houston Unlimited has asserted that this decision recognizes a new cause of action in Texas – for stigma damages absent permanent physical injury.  Because of the ramifications of this holding, a number of Texas trade associations have filed amicus briefs in support of Houston Unlimited.1 

Houston Unlimited operated a metal-processing facility that had failed to comply with various regulatory requirements relating to the management of solid waste and storm water.  Its operations also had resulted in leaks to the adjoining Mel Acres Ranch.  The Texas Commission on Environmental Quality (“TCEQ”) cited Houston Unlimited for these violations and required it to investigate the contamination on the ranch.  

Houston Unlimited stopped the leaks and instituted steps to prevent future leaks. Its investigation showed that there was no ongoing contamination and that only one sample result – for copper in one pond – showed an excess of a TCEQ action level, which a month later had fallen below the action level. The ranch nonetheless sued for trespass, nuisance, and negligence, alleging that it had suffered permanent damage, measured by a loss in market value of the property.

The jury found that there had been no permanent nuisance or trespass, but nonetheless awarded the ranch stigma damages.  Houston Unlimited asserts that a majority of jurisdictions reject this theory of recovery and that the decision of the lower court disregards the TCEQ’s regulatory determination as well as prior case law.  The Court’s determination – whether temporary contamination ain’t a non-compensable shame – will have significant ramifications for other pollution damage cases in Texas and possibly elsewhere.  

The blogger’s firm, Haynes and Boone, represents one of those associations – The Texas Oil & Gas Association – in this matter.

Listen Up Federal Court Litigators! Proposed Changes to the Federal Rules of Civil Procedure

Posted on October 17, 2013 by John Barkett

The Federal Rules of Civil Procedure are 75 years old—they went into effect on September 16, 1938.  The Advisory Committee on Civil Rules has just published for public comment very significant changes to the FRCP.  Every environmental litigator—indeed, every litigator—should read them.  The changes are too numerous to outline completely in this blog posting, but let me highlight the proposed changes to the discovery rules.

Rule 26(b)(1), which addresses the “scope” of discovery, would be changed in three important ways.  First, discovery would be limited solely to matters relevant to a party’s “claim or defense” and the former text also permitting for good cause discovery of matters “relevant to the subject matter involved in the action” will be deleted.  Second, the word “proportionality” will be included in the scope of discovery.  The proportionality factors that were in Rule 26(b)(2)(C) will be included specifically in the scope of discovery in Rule 26(b)(1).  With the proposed change, discovery must be “proportional to the needs of the case considering the amount in controversy, the importance of the issues at stake in the action, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”  Finally, the text “calculated to lead to the discovery of admissible evidence” has been deleted.  The goal of this text originally was to make it clear that information like hearsay could be discovered since it might lead to discoverable admissible evidence.  But this language has been used by many courts to expand the scope of discovery beyond its original purpose.  In its place, the proposed rule will read: “Information within this scope of discovery need not be admissible in evidence to be discoverable.”

Rules 30 and 31 will be amended so that the presumptive limit of 10 depositions per side or for third parties and a duration limit of 7 hours for each deposition are reduced to 5 depositions per side with a maximum duration of 6 hours.  Rules 30 and 31 still would require the district court to grant leave to take more depositions as long as that outcome is consistent with Rules 26(b)(1) and (2) (currently the reference is just to Rule 26(b)(2)).  Parties can stipulate to have more depositions; there is no change there.  And parties can still stipulate to longer depositions and the court “must” still allow additional time “consistent with Rules 26(b)(1) and (b)(2)” (again Rule 26(b)(1) has now been added to this phrase) if needed to fairly examine the deponent, or if the deponent, another person, or any other circumstance impedes or delays the examination.

Interrogatories would be limited to 15 instead of 25 under a change to Rule 33 and for the first time requests for admissions under Rule 36 would be limited to 25 requests except as to the genuineness of documents.

With respect to responses to Rule 34 requests for production, Rule 34(b)(2)(B) would require that the grounds for objecting to a request be stated with specificity.  Rule 34(b)(2)(C) would then require that an objection state whether any responsive materials are being withheld on the basis of that objection.  But an objection can state that documents are not being searched if that is the case (e.g., that a search was limited to documents created after a specific date).  Where a party states that it will produce documents or electronically stored information instead of permitting inspection, the production must be completed no later than the time for inspection in the request or a later reasonable time stated in the response.  A corresponding change will be made to Rule 37(a)(3)(B)(iv) to provide that a party seeking discovery may move for an order compelling production if a party “fails to produce documents.”
 
There are other changes to Rule 26 and 37 as well as proposed changes to Rules 1, 4, and 16.  You can read them all on the website of the Administrative Office of the U.S. Courts.

As a member of the Advisory Committee on Civil Rules, let me also encourage readers to submit comments on the proposed rules if you believe the proposals can be improved upon or should not be implemented.  Commenting is easy.  Go to the link above and follow the instructions to “Comment Now!”  The comment period ends February 15, 2014.

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.

Cooperative Federalism? We Don’t Need No Stinkin Cooperative Federalism

Posted on July 31, 2013 by Seth Jaffe

On Friday, July 19, the Court of Appeals for the 10th Circuit, in Oklahoma v. EPA, affirmed EPA’s rejection of Oklahoma’s state implementation plan setting forth its determination of the Best Available Retrofit Technology, or BART, to address regional haze.  The Court also affirmed EPA’s promulgation of a federal implementation plan in place of the Oklahoma SIP.  While rehearsing the Clean Air Act’s “cooperative federalism” approach, the Court seemed more focused on deference to EPA’s technical assessment of the SIP than on any obligation by EPA to cooperate with states.

"Given that the statute mandates that the EPA must ensure SIPs comply with the statute, we fail to see how the EPA would be without the authority to review BART determinations for compliance with the guidelines.
                                                            ***
While the legislative history may evidence an intent to prevent the EPA from directly making those BART decisions, it does not necessarily evidence an intent to deprive the EPA of any authority to ensure that these BART decisions comply with the statute."

Judge Kelly dissented.  As he noted, while the courts normally grant deference to EPA’s decisions, such deference is appropriately limited where “EPA rejected Oklahoma’s evidentiary support with no clear evidence of its own to support its contrary conclusion.”  Judge Kelly also noted that, even in a statute relying substantially on state implementation, the amount of power given to the states to implement the regional haze program is particularly evident.

I don’t know whether Oklahoma will seeking rehearing en banc.  (It’s difficult to imagine that the Supreme Court would be interested in hearing this case.)  I do know that cooperation is in the eye of the beholder.

Massachusetts Supreme Court Considers Agency’s Endangered Species Authority

Posted on July 29, 2013 by Stephen Leonard

Bill and Marlene Pepin own 36 acres of land in Hampden, Massachusetts on which they hope to build a retirement home.  Their plans have thus far been frustrated by the designation of their property as Priority Habitat for the Eastern Box Turtle, a Species of Special Concern under the Massachusetts Endangered Species Act, Mass. Gen. Laws C. 131A. The designation was made by the Massachusetts Division of Fisheries and Wildlife, pursuant to its Priority Habitat regulations, 321 Code Mass. Regs. 10.01 et seq., which were promulgated under to the “no take” provision of the Act.

Pursuant to the regulations, the Pepins’ plans must be reviewed by the Division and will be approved only on a showing that they will not result in the “take” of a Species of Special Concern, a showing that may require modifying the project or otherwise taking steps to protect the species.  This is a burden that, in the Division’s view, is not especially onerous and is one that has been met many times by many projects during the two decades that the regulations have been in effect.  This view appears to have the support of at least a portion of the development community in Massachusetts, support that is based on a concern about what the likely alternative would be to regulation under the Priority Habitat regulations.

The Pepins, though, have taken the view that their project in not subject to the Division’s authority.  They have challenged the designation of their property as Priority Habitat; and they have challenged the Division’s authority to adopt the Priority Habitat regulations in the first place.  They lost on both grounds in an administrative proceeding and appealed the result to the Superior Court, where they lost again.

The Pepins appealed the judgment to the Massachusetts Appeals Court, the Commonwealth’s intermediate level appellate court.  And then the case got considerably more interesting.  In the space of a few months, it was transformed from a relatively straightforward (if very important to the Pepins) challenge to an agency determination into one of the most important administrative law and environmental cases in Massachusetts in a number of years.

The case was docketed in the Appeals Court last year; the Pepins, and then the Division of Fisheries and Wildlife, filed their briefs.  Also filing, in support of the Division, were amici curiae Massachusetts Audubon Society, Massachusetts Association of Conservation Commissions and the Conservation Law Foundation.  Among the amici’s arguments in support the of the Division’s authority to promulgate the challenged Priority Habitat regulations was the assertion that it is better for the development community to be regulated under those regulations than pursuant to a different provision of the Act, one that the Pepins assert is the only provision available to the Division to regulate development on private property.  In support of the assertion, amici appended to their brief an October 2011 letter from NAIOP Commercial Real Estate Development Association Massachusetts, an extremely active participant in discussions and lobbying concerning environmental regulation in Massachusetts (NAIOP was formerly the National Association of Industrial and Office Parks.)  NAIOP’s letter opposed legislation that would have codified the position that the Pepins were taking in court (including in Superior Court, at the time the letter was written) – that the Division does not have authority to regulate private activities in lands designated Priority Habitat and can regulate development only pursuant to the much more restrictive Significant Habitat provisions of the Act, which sharply limit development but which require substantial procedural steps before they can be effective with respect to any particular parcel.  “NAIOP strongly believes that this bill would be bad for real estate development. . . .  [T]he Division has developed a more flexible regulatory mechanism through Priority Habitat. . . .  [T]he bill would result in more unpredictability and uncertainty for developers . . ..”  The bill did not pass.

Late last year, before the case could be argued in the Appeals Court, the Massachusetts Supreme Judicial Court (“SJC”), acting sua sponte, moved the case to its own docket.  In February of this year, the SJC announced that it was “soliciting amicus briefs.  This matter . . . raises the question of what procedural protections are required when the division [] designates ‘priority habitat.’”  The Pacific Legal Foundation, of Sacramento, California, then moved for leave to file an amicus brief in support of the Pepins.  (There is a New England Legal Foundation, based in Boston; it has not played a role in the case.)

The Pacific Legal Foundation brief does not address what had been the original issue between the Pepins and the Division – whether their property was correctly designated as Priority Habitat.  Its entire focus is instead on the asserted unlawfulness under Massachusetts law – statutory law, decisional law and constitutional law – of the Priority Habitat regulations. 

Section 4 of MESA creates three categories of protected species:  Endangered; Threatened (at risk of becoming Endangered); and Species of Special Concern (at risk of becoming Threatened).  The statute directs the Division to establish lists of these species and to designate Significant Habitats for Endangered and Threatened Species (but not for Species of Special Concern).  The designation of Significant Habitat involves substantial scientific and administrative work by the Division; and designation results in substantial limits on land use in the areas designated – but the statue also provides significant opportunities for affected landowners to challenge the designation or otherwise to seek to lessen or eliminate its impact on them – including by petitioning the Division Director to purchase their property.

Separately, Section 2 of MESA makes it unlawful to “take” any listed species (i.e., Endangered, Threatened or of Special Concern).  And in Section 4 the statue empowers the Division to “adopt any regulations necessary to implement [its] provisions [].”

The Division has established a “List of Endangered, Threatened and Special Concern Species;” 321 Code Mass. Regs. 10.90; but the Division has not designated any geographical areas as Significant Habitat. The Division has, however, established by regulation the category of Priority Habitat, to be “used for screening Projects and Activities that may result in the Take of State-listed Species [in all three categories] and to provide guidance to Record Owners regarding a Project or Activity . . ..”  321 Code Mass. Regs. 10.12(1).  The regulations permit an owner whose land is in delineated Priority Habitat to request reconsideration of the delineation; they place the burden on the owner to show that the delineation was improper.

Designation of the Pepins’ land as Priority Habitat for the Eastern Box Turtle was pursuant to these regulations.  Their administrative challenge was summarily dismissed because they produced no evidence that the designation was incorrect, and, as is noted above, the Superior Court upheld the dismissal.  The Pepins’ appellate brief addresses this issue, but its importance has diminished considerably.  The SJC took the case, and the Pacific Legal Foundation moved to become involved, because the case presents a vehicle for challenging the Division’s authority to create a species protection program that is not specifically created by the statute.

The Division’s defense on appeal is a familiar one in administrative law: The statute creates a comprehensive scheme to protect species in varying degrees of peril; it vests “all powers hereunder” in the Director of the Division; it prohibits the “take” of any protected species; and it empowers the Division to “adopt any regulations necessary to implement [its] provisions.”  Given the statutory structure and the deference that is accorded administrative determinations, the Division’s decision to adopt the Priority Habitat Regulations in order to administer the no take provision is reasonable and must be sustained.

There is an appealing counterargument:  The Legislature created a mechanism for regulating the use of private property in the interest of species protection.  That mechanism contains significant protections for landowners.  The Division’s creation of a different mechanism, not mentioned anywhere in the statute and having less robust landowner protections, undermines the balance the Legislature struck between protecting species and respecting property rights.

That argument is briefly made explicit in the Pacific Legal Foundation brief, but the bulk of the brief is a thoroughgoing attack on the authority of the Division – and of administrative agencies generally – to adopt regulations that are not expressly contemplated and specifically described in legislation.  To mount this attack, the brief must delve deeply into Massachusetts administrative and constitutional law.  And it does, advancing a narrow reading of what it means for a regulation to be “necessary” to effect the purposes of a statute; questioning the appropriateness of deferring to the Division’s interpretation of the statute in this case; and seeking to distinguish a line of Massachusetts cases that holds that statutory authority to act in a specific manner does not foreclose an agency’s pursuing parallel action under a general grant of authority.  Moreover, the brief argues, the SJC should decide the case in a way that avoids potential constitutional issues – the brief suggests that upholding the regulations could lead to regulatory takings and that the legislative delegation the Division relies on would constitute a violation of the Massachusetts Constitution’s separation of powers requirement – by striking down the regulations.

The Massachusetts Supreme Judicial Court has long been sensitive to environmental concerns, and it has upheld the broad authority of state and local administrative bodies to act to protect the environment.  The court has also been careful to ensure that the rights of Massachusetts citizens are protected, including by insisting on strict adherence to procedural requirements established by the Legislature.  Bill and Marlene Pepin’s case presents an important test of how those interests will be harmonized.  Argument is now set for October 2013 – stay tuned.

The Ghost of Offshore Boundaries Past

Posted on July 24, 2013 by James Palmer Jr.

At the 2013 Offshore Technology Conference in Houston, nobody was really surprised to hear Gulf Coast and Alaska Governors calling for an expansion of offshore drilling activity and streamlined permitting processes.  But, more than a few were probably surprised to hear the Governors of North Carolina, South Carolina, and Virginia echo the same sentiments, especially because drilling activity offshore these three states is currently banned by Presidential edict.
 
As the post-BP offshore drilling debate marches on, there just might be some interesting wrinkles down the way between and among the allied states that support a resurgence of seaward exploration and production operations.  One possibility deserves a passing note.
 
During its 2011 Regular Session, the Louisiana Legislature passed, and the Governor signed into law, Act No. 336, which extended the offshore boundary of the State from the current three geographical (nautical) miles to three marine leagues (nine geographical miles), as measured from the coastline.  At its June 2012 meeting, the Louisiana Wildlife and Fisheries Commission followed suit by formally adopting the legislative mandate and conforming its marine regulatory jurisdiction accordingly.  The new boundary created by Act No. 336 by its terms is subject to recognition by Congress or the courts.
 
While a Louisiana official was quoted in the media afterwards as saying that Mississippi and Alabama should join Louisiana and launch the same initiative against the federal government, the Mississippi Commission on Marine Resources, at its July 2012 meeting, adopted a Resolution opposing the action of its Louisiana counterpart.  Thus, the issue was joined at that point, at least at the state agency level.  But, not to be outdone in statutory law, the Mississippi Legislature, in its 2013 Regular Session, amended Section 3-3-1, Mississippi Code of 1972 Annotated, through the adoption of HB 1072, which mimics the 2011 Louisiana legislation by extending the boundary of Mississippi offshore territorial waters from three geographical miles to three marine leagues.  This legislation became effective on July 1, 2013.
 
For perspective, a history lesson is necessary.  In a stunning decision in 1947, followed by two more in 1950, the United States Supreme Court decreed that coastal states have no claim to any submerged lands offshore.  Because these decisions directly impacted not only the states along the Atlantic, Pacific, and Gulf Coasts, but those along the Great Lakes, as well, the adverse reaction to them was swift and strong.  After several years of wrangling, Congress passed the Submerged Lands Act (the Act) in 1953 to undo what the Supreme Court had done.
 
Of the three major components of the Act (i.e. lands under navigable inland waters; tidelands; and lands under the open sea), the centerpiece is a Congressional grant of state title to, and jurisdiction over, certain offshore areas.  Specifically, states along the Atlantic and Pacific Coasts were granted submerged lands extending three geographical miles seaward of their respective coastlines.  The Great Lakes States were granted submerged lands extending to the international boundary.  States along the Gulf of Mexico were granted submerged lands extending not less than three geographical miles nor more than three marine leagues seaward of their respective coastlines. 
 
But, there the Congress stopped.  Except to define the term "coastline" as "the line of ordinary low water along that portion of the coast which is in direct contact with the open sea and the line marking the seaward limit of inland waters," the law gives no specific geodetic references or methodologies for its delimitation.  And, the ultimate decision regarding the respective offshore domains of the five states bordering the Gulf of Mexico was left to be determined by the courts. Simply put, the Act thus set the stage for more court battles to follow.

In 1960, the Supreme Court determined that the Submerged Lands Act boundaries for Louisiana, Mississippi, and Alabama should extend three geographical miles seaward from their respective coastlines.  The Court further determined that the Submerged Lands Act boundaries for Texas and the Gulf Coast of Florida should extend three marine leagues seaward from their respective coastlines, because of the different histories of admission to the Union of these two states.   But, as with the Congress, the Supreme Court made no attempt to delimit the respective "coastlines" for any of the five Gulf Coast states, which inevitably led to even further protracted litigation.
 
Following the 1960 Supreme Court decision, several bills were introduced in the Congress to amend the Act to specifically grant to Alabama, Mississippi, and Louisiana submerged lands extending three marine leagues from their respective coastlines.  These efforts failed.

The next eruption of litigation targeted the Mississippi Sound.  In April 1971, the United States for the first time publicly disclaimed the inland-waters status of Mississippi Sound by publishing a set of maps depicting several irregularly shaped polygons between the mainland and the barrier islands that were denoted "enclaves of high seas," the submerged lands underlying them thus belonging to the federal government.  The States of Mississippi and Alabama were once again launched into litigation against the United States. 
 
In 1985, the Supreme Court trounced the federal government by adopting the Special Master's determination that Mississippi Sound constitutes a "historic bay" and thus is inland waters in its entirety.  Further, the Court also adopted the Special Master's determination that the "coastline" is the line of ordinary low water on the south shore of the barrier islands.  The Court then directed the parties to prepare a proposed final decree and submit it to the Special Master for consideration by the Court.  This process, which took another seven years, involved Supplemental Decrees in which the baselines for establishing the coastlines of both Alabama and Mississippi, described using point-to-point geodetic coordinates, were approved by the Court and set out in the decrees.
 
Thus, the three-geographical-mile offshore submerged lands boundary for these two states, granted under the Act and subsequently established by the Supreme Court in its 1960 decision, was then precisely determinable.  At last, in 1992, after over three decades of fighting over the federal-state submerged lands boundary for Alabama, Mississippi, and Louisiana, the Supreme Court put the matter to rest – until now.
 
Whether or not the 2011 Louisiana legislation and/or the 2013 Mississippi Legislation will actually lead to any changes in the current offshore submerged lands boundaries of these states remains to be seen.  As already noted, attempts over a half century ago to accomplish the same objective as that of Act No. 336 and HB 1072 failed.

Quite obviously, both Alabama and Texas have considerable vested interests in the actions now taken by their neighboring states.  Less obvious, though, is the prospect that, if Congressional action is mounted in furtherance of either Act No. 336 or HB 1072, nobody should be surprised if any of the East Coast or West Coast states (or Alabama), which were also granted three-geographical-mile offshore submerged lands boundaries under the Act, might be heard to say, "Me, too."

Fourth Circuit Rules CERCLA Preempts State Statute of Repose

Posted on July 22, 2013 by Daniel Riesel

On July 10, 2013, a divided Fourth Circuit Court of Appeals held the Comprehensive Environmental Response, Compensation and Liability Act’s (“CERCLA’s”) federally-mandated commencement date preempts not only state statutes of limitations but also statutes of repose, an issue that has split federal courts and left considerable uncertainty about the timeliness of claims arising under CERCLA and environmental common law.

One of the unique aspects of CERCLA is that it imposes a universal statute of limitations on toxic torts and other state law claims for damages “caused or contributed to by exposure to any hazardous substance or pollutant or contaminant.”  42 U.S.C. § 9658(b)(4).  This statute of limitations runs from the time the plaintiff discovers, or reasonably should have discovered, the cause of the injury or damages.  CERCLA expressly preempts state statutes of limitations that set an earlier commencement date, such as the date of the tortious conduct or the date of the injury.       

CERCLA’s “federally required commencement date” has generated considerable commentary and confusion, with federal courts split over the scope of CERCLA’s preemptive effect.  One particularly divisive issue involves whether CERCLA preempts state statutes of repose, which are separate from statutes of limitations.  Statutes of repose generally provide a longer period in which to file a claim, but they cannot be tolled and often begin to run earlier as well.  Noting that the federally required commencement date under CERCLA refers only to “statutes of limitations,” the Fifth Circuit has held “the plain language of [CERCLA] does not extend to statutes of repose.”  Burlington N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355, 362 (5th Cir. 2005).

In Waldburger v. CTS Corporation, 2013 WL 3455775 (4th Cir. July 10, 2013), the Fourth Circuit adopted the contrary position, finding the relevant text of CERCLA to be ambiguous and interpreting it to preempt a North Carolina statute of repose.  Reversing the United States District Court for the Western District of North Carolina, the Fourth Circuit held that courts and lawmakers have often used the terms “statute of repose” and “statute of limitations” interchangeably, and that the application of CERCLA’s federal discovery rule was more consistent with the statute’s remedial purpose.  It therefore held a state repose period that required real property claims to be filed within 10 years of the tortious action did not apply to a nuisance claim alleging the discovery of groundwater contamination several years after the final alleged discharge.  In dissent, Judge Stephanie Thacker argued that, “the plain and unambiguous language of § 9658 indicates only statutes of limitations were intended to be preempted.” 

The Waldburger ruling will benefit plaintiffs harmed by the latent effects of environmental contamination, who may not become aware of their injuries until after a state statute of repose has run.  Such plaintiffs must exercise reasonable diligence, however, to establish they did not have reason to know of the harm at an earlier date. 

New Water Wars in Oregon’s Klamath Basin

Posted on July 9, 2013 by Martha Pagel

These are sad times in Oregon’s Klamath Basin.  The state is making national headlines again over water wars pitting farmers and ranchers irrigating lands above Upper Klamath Lake against the Klamath Indian Tribes.

The Klamath area first made front page national news in 2001, when farmers and ranchers protested the removal of water from irrigation in order to protect threatened sucker fish under the federal Endangered Species Act (ESA).  This time, the headlines stem from an unprecedented “call” for water to serve a time immemorial water right granted to the Klamath Tribes.  Under principles of the prior appropriation doctrine in place in Oregon and most western states, seniority matters, and time immemorial is the ultimate priority date. 

The current problem was a long time in the making. After more than 38 years of administrative proceedings, the Klamath Basin General Stream Adjudication finally reached a critical legal juncture in March, 2013 that allowed historic water use claims to be enforced for the first time.  At that time, the Oregon Water Resources Department (OWRD) issued its long-awaited “Findings of Fact and Final Order of Determination” (FFOD) summarizing the state’s proposed disposition of more than 730 claims.

The FFOD included the state’s quantification of treaty-based reserved water rights for the Klamath Tribes to ‎support fishing and gathering activities in Upper Klamath Lake and its tributaries.  Although the instream flow and lake level amounts claimed by the ‎Tribes and approved by OWRD are still subject to further judicial review, the state is obligated ‎to respond to the Tribes’ call unless and until a court stays the action. ‎

As a result of the call, OWRD has already begun the process of shutting off water diversions for all other upper basin water right holders to the extent needed to fully satisfy the Tribes’ approved claims.  This means a loss of water for thousands of acres of irrigated farmland and other junior uses including domestic water for homes, stock water, and even the lodge at Crater Lake National Park.  The regulation system is based strictly on priority dates; however, OWRD has taken emergency action to allow continued water deliveries for human consumption and stock water.

At this point, a coalition of upper basin water users has petitioned for a judicial stay of the FFOD’s enforcement.  A hearing was held on July 3, and a decision is expected soon.  If the stay is not approved, the upper basin lands will remain dry and the economic losses will be substantial.  With nearly 40 years to prepare, it is sad that the affected interests were not able to reach some level of negotiated agreement before the battle lines were drawn.  Although both Tribal and non-Tribal water users have expressed interest in a negotiated solution, ‎there is no settlement process currently underway, and the war rages on.‎