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.‎

Enough Is Enough!

Posted on July 3, 2013 by Michael McCauley

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

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

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

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

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

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

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

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

Offers of Judgment Permitted in RCRA Citizen Suit Attorney Fees Disputes

Posted on June 28, 2013 by John A. McKinney Jr

A Third Circuit decision this month determined that offers of judgment pursuant to Fed.R.Civ.P. 68 may be made in attorney fee disputes in RCRA citizen suits (42 USC § 7002).  In Interfaith Community Organization v. Honeywell International, Inc., 2013 WL 2397338 (C.A.3 (N.J.)  Honeywell International (“Honeywell”) agreed to pay certain fees and costs in connection with Appellees Interfaith Community Organization and Hackensack River keeper’s monitoring costs in connection with Honeywell’s remediation of certain sites.  A dispute arose as to Appellees’ counsel’s fee filings, and Honeywell served offers of judgment as to the disputed fees.  Appellees contended that the offers were null and void in a RCRA citizen suit and prevailed on the issue below.  The Third Circuit overturned the decision below.

The Third Circuit first addressed the argument that Rule 68 is incompatible with Congressional intent allowing RCRA  citizen suits and is forbidden by the Rules Enabling Act, 28 US § 2072.  That act prohibits the Supreme Court from adopting general rules of practice and procedure for cases in the US courts that abridge, enlarge or modify a substantive right.  The Third Circuit found that Rule 68, in facilitating settlements, does not affect a litigant’s substantive rights even though a litigant may be faced with a hard choice.  Being forced to make that choice does not abridge, enlarge or modify its substantive rights.  The court found unpersuasive the appellees’ arguments attempting to distinguish a Supreme Court case that allowed Rule 68 in civil rights litigation involving fee shifting.

In the case below, the District Court had entered a judgment ordering Honeywell to remediate one area and Honeywell had entered into consent decrees agreeing to remediate additional areas.  Appellees contended that Rule 68 cannot apply after a judgment has been rendered on liability.  The Third Circuit disagreed and found that liability also included fees and costs, and they had not been determined in this case.

Given this decision (which also addresses issues other than Rule 68), it is likely RCRA citizen suit defense counsel will utilize the offer of judgment rule more often.  However, there are numerous cases and articles detailing the perils of using the rule in the wrong case or in the wrong way.  Counsel should pay close attention to those.

Taking the Fifth on the Fifth’s Taking Clause

Posted on June 26, 2013 by Robert M Olian

…nor shall private property be taken for public use, without just compensation.

Everyone understands the Fifth Amendment’s takings clause to mean, at a minimum, the government cannot force the transfer of private property to the government even for a manifestly governmental purpose (e.g. a highway right of way, or a new airport runway), without compensating the property owner.

Tuesday’s Supreme Court decision in Koontz v. St. John’s River Water Management District is the latest in a series of Supreme Court rulings to extend the protections of the Takings Clause beyond the obvious governmental requisitioning of private property. That’s “latest,” not “last”.

Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), combine to set forth the Court’s requirements for an “essential nexus” and “rough proportionality” between conditions on land use development and the government’s underlying objectives in the permit scheme to which the property owner is subjected. Absent either nexus or proportionality, a taking has occurred, and the Takings Clause requires that the property owner get “just compensation.” So far, so good.

The facts in Koontz are to some extent irrelevant; indeed the Court’s opinion expressly disowned any determination of the merits of his particular claim for compensation. Depending on whose brief you read, Koontz wanted to develop some wetlands property but the Water Management District refused to approve his project as proposed and put forth some mitigation options that were either “extortionate demands” or “helpful suggestions”, one of which consisted of Koontz spending money to improve public lands remote from his own property. Koontz took umbrage and sued under Florida state law.  The trial court found for Koontz on the basis of Nollan-Dolan, and the intermediate state appellate court affirmed.

The Florida Supreme Court reversed for two reasons: first, it held the Nollan-Dolan standard does not apply to denial of a permit; and second, it held the standard does not apply to a requirement for the payment of money, as opposed to the impairment of a specific piece of property.

Every Justice agreed that the Florida Supreme Court got the first part wrong; that is, they all agreed the Takings Clause applies to permit denials as well as permit approvals. The majority and dissent parted ways with respect to the second question, however, with the majority again holding that Florida got it wrong and that excluding monetary exactions would allow permitting agencies to improperly circumvent the Nollan-Dolan requirements.

Now, one can agree or disagree with the majority, but the decision hardly shocks the conscience. What the decision holds is far less important than what remains to be decided in future cases:

1.    How concrete and specific must a demanded concession be to give rise to liability under Nollan and Dolan?
2.    What happens if a permitting authority merely says, “Denied, come back with something better,” and makes no other demand?
3.    Where will the line be drawn to prevent countless local land use decisions from becoming federal cases?

On these points, the majority took the Fifth.

Surprise, Surprise, Surprise: An Agency Cannot Revise Regulations In a Consent Decree

Posted on May 22, 2013 by Seth Jaffe

In a decision that should not have come as a surprise to anyone, the 9th Circuit Court of Appeals ruled late last month, in Conservation Northwest v. Sherman, that the Bureau of Land Management and other agencies implementing the Northwest Forest Plan could not amend the NFP without complying with the procedural requirements of the Federal Land Policy Management Act.  The rationale of the decision should apply far more broadly than just the FLPMA, however.  It should apply to any action by any agency purporting to amend agency regulations that would otherwise be subject to procedural requirements, such as notice-and-comment rulemaking, without complying with those procedural protections.

The history of the case itself it tortuous and not really relevant here.  The short version is that the agency defendants sought to resolve citizen litigation regarding the “Survey and Manage” provisions of the NFP by entering into a consent decree that would amend certain elements of Survey and Manage.  It was uncontested that, if the agencies had sought to do so outside the context of litigation, they would have had to follow FLPMA requirements.  The agencies – and the District Court which upheld entry of the consent decree – argued that, because approval of a consent decree is a “judicial act”, it is not subject to the FLPMA procedures.

I’ve got to say, that argument just seems like a non sequitur to me.  In any case, the 9th Circuit rejected it, concluding that:

"a district court abuses its discretion when it enters a consent decree that permanently and substantially amends an agency rule that would have otherwise been subject to statutory rulemaking procedures."

Well, yeah.

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Still Unclear Whether Twiqbal is Game Changer for Pleading Environmental Claims

Posted on May 15, 2013 by Richard Horder

What lessons can environmental litigators take from the Supreme Court’s recent jurisprudence on pleadings?  As most of the legal community is aware, the Court retired the “no set of facts” standard for a motion to dismiss under Rule 12(b)(6) and installed a “new” plausibility pleading standard in its 2007 decision, Bell Atlantic Corp. v. Twombly and 2009 decision, Ashcroft v. Iqbal.  Together, these cases are often affectionately called “Twiqbal” and have caused both the courts and plaintiffs a great deal of angst over the years since their pronouncement.  Yet, in the midst of the confusion, the greater question remains whether these decisions, as a practical matter, actually represent a game changer for pleading.

According to the latest Report to the Judicial Conference Advisory Committee on Civil Rules, there has been no increase in the rate of courts granting motions to dismiss following Twiqbal.  However, a recent study from the University of California Hastings College of Law disputes this conclusion and finds that dismissal rates of all claims have, in fact, increased since Twiqbal.  More importantly, the Hastings study finds a greater likelihood that a claim will be dismissed for factual insufficiency following the Supreme Court’s decisions.

Such studies raise the question of what impact, if any, Twiqbal has today on pleading environmental claims.  Thus far, although several courts have addressed environmental claims under the Twiqbal plausibility standard, the results have not been consistent.  Like the antitrust and civil rights claims addressed in Twombly and Iqbal, courts have often elevated the pleading standard for environmental claims due to their complexity, which often requires expensive discovery to flesh out the facts after filing the complaint.  An early dismissal in such circumstances stands to avoid substantial litigation costs.  Thus, if a court believes Twiqbal indeed represents a heightened pleading requirement, it is likely to require more specific facts to support the relevant environmental claims.

Accordingly, the environmental plaintiff should hedge its bets and take care in crafting its complaint if it is filing in federal court.  Specifically, the plaintiff may want to take more time to investigate prior to filing to better describe the defendant, it’s link to the site, the types of hazardous substances released, and how specifically the defendant’s actions caused the release and the damages incurred.  Depending on the circumstances, the plaintiff may want to avoid federal court altogether and rely on state claims as most states have yet to adopt the Twiqbal plausibility pleading standard.  On the other side of the field, the environmental defendant should more carefully consider the value of filing a motion to dismiss for factual insufficiency and attack any gaps between the facts alleged and the formulaic recitations of the elements of the claim.

Logging Road Runoff Does Not Require an NPDES Permit: The Supreme Court (For Now) Defers to EPA’s Interpretation of Its Own Regulations

Posted on March 22, 2013 by Seth Jaffe

On Wednesday, in Decker v. Northwest Environmental Defense Center, the Supreme Court ruled that runoff from logging roads does not constitute a discharge from a point source that requires an NPDES permit.  The decision upholds EPA’s interpretation of its own regulations and overturns – what a surprise! – a 9th Circuit decision which had held that permits were necessary for logging runoff.

While EPA got the result that it wanted here, the decision may come back to haunt it in the long run.  The decision was largely based on what is commonly known as Auer deference, the rule that courts will defer to an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.” After a thorough review of the various relevant regulations and a dip or two into the Oxford American Dictionary, and after noting that the agency’s interpretation need not be “the best one”, the Court found EPA’s interpretation “permissible.”

So, why should EPA be concerned?  Justice Scalia, at his most curmudgeonly, dissented on the ground that Auer should be overturned because it grants too much authority to agencies.  Justice Scalia rejected out of hand what I would have thought would be the simplest and most obvious defense of Auer:  that if courts defer to agency interpretation of statutes under Chevron, shouldn’t they, a fortiori, defer to agency interpretation of the agency’s own rules?  Apparently not.  To Justice Scalia, Chevron deference merely allocates to agencies, rather than courts, the primary duty of interpreting statutes, but allowing agencies to interpret their own regulations has the dangerous result of concentrating both the writing and interpretation function in one branch of government.

I don’t buy it, but it’s important to note that, while Justice Scalia was the sole dissenter, Justice Roberts wrote a concurring opinion, joined by Justice Alito, stating that, while Decker was not the proper case to reassess Auer (a cynic might say that Justice Roberts reached that conclusion because EPA was aligned with industrial interests, rather than the environmental NGOs, in Decker), they were both open to reviewing Auer in the proper case.

Sounds like three votes to me.  Somewhat surprisingly, Justice Thomas joined neither the concurrence nor the dissent.  Justice Kennedy wrote the majority opinion, so he clearly still believes in Auer.  Without Kennedy and with Thomas a cypher at this point, the votes to revisit Auer may not be there.  In any case, it is worth noting that Justice Breyer, who is Justice Scalia’s frequent sparring partner on administrative law issues, took no part in the decision.  I look forward to his spirited defense of Auer when the time comes.

Hydraulic Fracturing Fluid Balancing Act: Disclosure Versus Protection of Trade Secrets

Posted on March 7, 2013 by Linda Bullen

One of the many controversies surrounding hydraulic fracturing involves the protection of trade secrets in an evolving regulatory environment hungry for more information about every aspect of operations.  Regulators, litigants and the public press for disclosure of the composition of hydraulic fracturing fluids while manufacturers and operators resist full disclosure to protect proprietary formulas believed to be valuable secrets.  
 
In a pre-rulemaking decision draft of hydraulic fracturing regulations released on December 18, 2012, California addressed the tension between protecting trade secrets and the public's right to obtain information under California's Public Records Act ("Act").   Under the draft regulations, operators are not required to disclose the chemical composition of hydraulic fracturing fluid prior to drilling.  After fracking, operators must disclose the chemicals in their fracturing fluid by chemical family and by percent of the fluid.  Disclosure of precise chemicals and formulas is not required.  Operators must also provide contact information for the person or entity that possesses the information withheld as a trade secret.
 
The California draft regulations reflect a national trend.  Alaska, however, bucks this trend with draft regulations released in December which require full disclosure of each fluid additive type by chemical name, CAS registry number and concentration.  The issue is far from resolved and we can certainly expect more regulation and litigation.

Seventh Circuit Allows Cost Recovery Action for AOC Response Costs

Posted on January 25, 2013 by John Barkett

In Bernstein v. Bankert, the Seventh Circuit follows the Second, Third, Eighth, and Eleventh Circuits in holding a CERCLA plaintiff with a contribution claim under Section 113(f) does not have a cost recovery claim under Section 107.  But when does a signatory to an administrative order on consent (AOC) have a contribution claim?

Plaintiffs incurred response costs arising out of two administrative orders on consent (AOC).  The first AOC resulted in an engineering evaluation and cost analysis of removal options.  The second AOC resulted in implementation of the selected removal action.

The first AOC was carried out to its completion.  Completion of the second AOC was conditioned, however, upon the “complete and satisfactory performance by Respondents of their obligations under this Order” and issuance of a Notice of Completion by EPA, and neither condition had occurred at the time of the summary judgment.

The district court held plaintiffs could only sue in contribution and the limitations period had run on claims under both AOCs.

The court of appeals agreed on the claim arising out of the first AOC since that AOC had been completed and too much time had passed before suit was filed.  It disagreed on the claim arising out of the costs incurred under the second AOC, however, because Section 113(f)(3)(B) of CERCLA gives a contribution action to a person “who has resolved its liability to the United States … in an administratively … approved settlement,” and the second AOC had not yet been completed.  Thus, plaintiffs had not “resolved their liability” to the United States and could only bring a claim under Section 107 for which the limitations period had not yet run.  The court of appeals also held that whether costs are incurred voluntarily or involuntarily is irrelevant since 113(f)(3)(B) focuses only on whether liability had been “resolved.” 

There was no discussion of what might happen if the second AOC was completed during the course of the litigation so all CERCLA lawyers should stay tuned.

States Investigate EPA's "Sue-and-Settle" Practice

Posted on January 15, 2013 by Mark Walker

The Attorney Generals of thirteen states (Alabama, Arizona, Georgia, Kansas, Michigan, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah and Wyoming) are investigating EPA's sue-and-settle practice.  At issue is the EPA's practice of entering into voluntary settlements of lawsuits brought by environmental groups, through consent decrees, in which the EPA commits itself to promulgate environmental rules and regulations, often under strict time schedules, without input from other stakeholders and impacted parties, including the states.  Often-times the EPA also reimburses the environmental group for its attorney fees.  Although the stakeholders may have input in the subsequent rulemaking process, the concern is that the effectiveness of such input may be limited because certain results are prescribed by the voluntary settlement or because the agreed schedule effectively limits meaningful input and consideration.

These same concerns were also recently discussed in the June 28, 2012, hearing before the Oversight and Government Reform Committee of the U.S. House of Representatives.  Hearing statements and testimony provided good descriptions of (i) how sue-and-settle settlements are a form of "off ramp" rulemaking bypassing the traditional rulemaking concepts of transparency, public participation and judicial review; (ii) how billions of dollars in added costs and millions of lost jobs have resulted from these off ramp settlements and why these added regulatory burdens may not have resulted had the traditional rulemaking process been followed; and (iii) the specific impact of EPA's sue-and-settle settlement upon the Regional Haze rules.

On August 10, 2012, the thirteen Attorney Generals submitted a Freedom of Information Act (FOIA) request to EPA.  Among other things, the request seeks communications between EPA and 80 identified "interested organizations", and specifically identifies 33 sue-and-settle settlements entered into by EPA in the last three years.  After noting in a press release that EPA entered into one consent decree on the same day the lawsuit was filed, the states seek to determine whether there was collusion to advance a common agenda between the environmental groups and EPA.  The FOIA request’s stated purpose is to provide a report to be furnished to the states and Congress outlining EPA's practice.  So far, the EPA has done little but object to producing documents, seeking to impose fees upon the states even though the request should be exempt from fees.  No meaningful production of documents has occurred.

Certainly there are some good arguments to be made regarding the benefits of allowing citizen groups to file lawsuits to hold EPA accountable. Similarly, there are articles refuting the suggestion of collusion concerning certain prior EPA settlements.  Nevertheless, where important environmental policy issues are at stake with far reaching economic consequences, there should never be any question about collusion or secrecy.  Transparency should always be the watchword.  EPA’s production of the requested documents would do much to advance the goal of transparency.  If the settlements were in the best interest of the public, they should be able to withstand the glare of public scrutiny.

Reflections on 35 Years as an "Air-Head"

Posted on November 29, 2012 by Michael McCauley

Author's Note: I wrote this piece at the request of my firm earlier this year.  It appeared in the "Diversity Blog" on our firm's website around "earth Day" in April, 2012.  After attending the ACOEL Annual Meeting in Washington, D.C. this past week, I know that many other College Fellows share my sentiments about the field we have been fortunate enough to practice law in during our careers.

I have been practicing environmental law at Quarles & Brady (in Milwaukee WI), in one form or another, since I joined the firm as a brand new attorney in 1977. Charlie Kamps was kind enough to be my mentor in the early days, and he gave me many opportunities to work with him on Clean Air Act issues. Over the years, I have been heavily involved in virtually all aspects of environmental law, but my work under the federal Clean Air Act became a real specialty. Among colleagues around the country who specialize in this area of the law, we often (somewhat sarcastically) refer to ourselves as "Air-Heads."

Working in environmental law has been very exciting. When I started out, Charlie and I were really the only two attorneys in the firm who devoted most of our practice time to environmental law. [There were many others in the firm who handled environmental litigation cases, such as the important Illinois v. Milwaukee Clean Water Act case which Quarles & Brady won in the U.S. Supreme Court in 1981. But those lawyers did not normally do environmental work on a day-to-day basis for a large number of firm clients.] In the early 1980's, the environmental practice area exploded with the passage of the federal Superfund Law and its eventual impact on virtually all corporate transactions, lending work and real estate ventures. Quarles & Brady's Environmental Practice Group grew to nearly thirty lawyers (in seven offices and four states) by the late 1990's.

For most of those years (from 1986 to 2007), I rode the wild, environmental-law-growth "roller coaster" as Chair of the firm's Environmental Law Group. At the same time, I was involved in many high stakes cases and transactions. Most of my work centered on air permitting and in defending Clean Air Act enforcement cases. I grew accustomed to living my professional life going at 100 mph on a regular basis. The issues were complex and novel, and I derived immense satisfaction from helping to steer difficult matters to a successful resolution.

The real stakes in environmental law could not be more important -- the protection of human health and welfare and the safeguarding of our natural resources for future generations. Many people think that it should be relatively easy to do all that -- just "follow the law." However, our environmental laws do not give precise directions on how this is to be accomplished. The laws set overall goals and prescribe processes by which those goals are to be achieved. But most often, the real requirements of our environmental statutes must be worked out on a case-by-case basis. This requires a complicated balancing of scientific, economic, engineering, legal and political factors. It is this balancing process which I have found exhilarating to be involved in throughout my career.

I am grateful for the opportunity to be involved in this important work. It has given meaning and a sense of real accomplishment to my professional life.

Should the U.S.Have Specialized Environmental Courts?

Posted on November 26, 2012 by Catherine R. McCabe

The creation of specialized environmental courts and tribunals around the world has exploded in recent years as countries grapple with the increasingly complex challenges of environmental problems and laws.  There are now over 360 environmental courts or tribunals in 42 countries (see George and Catherine Pring, “Greening Justice: Creating and Improving Environmental Courts and Tribunals”), and the Journal of Court Innovation, vol. 3, Winter 2010.  Is it time for us to consider this option in the U.S.?

The U.S. Judicial Conference noted in its 1990 Report that specialized courts are considered “exotic in the American legal culture” and that “most American lawyers find the idea of specialized courts repugnant.”  However, the U.S. uses specialized courts to deal with other complex and specialized fields of law (e.g., U.S. Tax Court, Bankruptcy Courts, U.S. Court of Federal Claims).  A few specialized environmental courts and tribunals have operated successfully in the U.S. since the early 1990’s, including the Vermont Superior Court Environmental Division (1990), local courts such as the Shelby County, Tennessee Environmental Court (1991), and administrative tribunals such as the U.S. EPA’s Environmental Appeals Board (1992).

Specialized courts arguably offer several advantages for judges, parties and practitioners, including greater judicial expertise in complex legal, scientific and technical areas, more efficient adjudication, reduced litigation costs, and more predictable decision-making.  Potential disadvantages and challenges include the costs to set up and maintain a separate system, organize and locate the court(s) to assure convenient access for parties, potentially inefficient caseloads due to inadequate or unevenly distributed cases, and the risk of court “capture” by either environmental activists or industry.  See U.S. Judicial Conference 1990 Report at 18-20.

ACOEL members are uniquely qualified and situated to offer valuable insight into this important question for the future of environmental law and litigation in the U.S.  Should we consider creating more specialized environmental courts or tribunals in the U.S.? 

What do you think?