Posted on May 15, 2013
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.
Posted on March 27, 2013
At a local government meeting on a land use plan, officials hear opposition based on the claim that it is tainted by Agenda 21. A state public utility commission considering smart meters hears similar claims. They are confused: what is Agenda 21 and why does it matter?
A well organized campaign against Agenda 21, spread by the Tea Party, Glenn Beck, and the John Birch Society, exists well outside the realm of ordinary environmental law work. But it is beginning to affect that work. The real target of this campaign, moreover, is not Agenda 21 but sustainable development—a common sense approach to reconciling environment and development that provides the basis for our environmental and land use laws. Environmental lawyers thus need a basic understanding of what Agenda 21 is and what it is not.
Agenda 21 is a comprehensive public strategy for achieving sustainable development. It was endorsed by the U.S. (under the presidency of George H.W. Bush) and other countries at the U.N. Conference on Environment and Development in 1992. Agenda 21 stands for two broad propositions: 1) environmental goals and considerations need to be integrated into all development decisions, and 2) governments and their many stakeholders should work out the best way to integrate environment and development decisions in an open and democratic way.
Agenda 21 contains an almost encyclopedic description of the best ideas for achieving sustainable development that existed in 1992. On land use, it specifically counsels respect for private property. It contains a detailed description of the role that many nongovernmental entities, including business and industry, farmers, unions, and others, should play in achieving sustainability.
Agenda 21 endorses, and to a great degree is based upon, ideas that were already expressed in U.S. environmental and natural resources laws. Its core premise is espoused in the National Environmental Policy Act of 1969. Long before Agenda 21, NEPA set out “the continuing policy of the Federal government” to “create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans” (42 U.S.C. § 4331).
Ironically, Agenda 21 was never taken seriously as such in the United States; there has never been much enthusiasm here for following international agreements. It is not a legally binding treaty; it contains no provisions for ratification, for example. Agenda 21 also says nothing about new ideas like green building, smart growth, and smart meters. But sustainable development as an idea—achieving economic development, job creation, human wellbeing, and environmental protection and restoration at the same time—is gaining traction.
In response, opponents are attacking sustainability by making false statements about Agenda 21. They say that Agenda 21 is opposed to democracy, freedom, private property, and development, and would foster environmental extremism. For many opponents, the absence of a textual basis in Agenda 21 for such claims (in fact, the text explicitly contradicts all of these claims) is not a problem. First, they are attacking a document that is not well known, and so they count on not being contradicted. Second, the false version of Agenda 21 fits a well known narrative that is based on fear of global governance and a perceived threat of totalitarianism, and on distrust of the United Nations. Indeed, the absence of information to support such fears only deepens their perception of a conspiracy. According to this view, moreover, people who talk about sustainable development without mentioning Agenda 21 are simply masking their true intentions.
Far-fetched, you say? Well, consider this: in 2012, Alabama adopted legislation that prohibits the state or political subdivisions from adopting or implementing policies “that infringe or restrict private property rights without due process, as may be required by policy recommendations originating in, or traceable to ‘Agenda 21’” (Ala. Code § 35-1-6). This, of course, could chill a variety of otherwise ordinary state and local decisions. Similar bills are pending in state legislatures across the country.
In a variety of other places, elected officials and professional staff who have worked with stakeholders for years to produce specific land use and energy proposals find their work mischaracterized as the product of Agenda 21, even though they have never heard of it. Agenda 21’s lack of direct relevance to the specific proposals should, but does not always, provide an answer to such claims.
The campaign against Agenda 21 has no serious empirical or textual foundation. But it can work against sustainability and good decisions—and cost time and money—when clients and their lawyers don’t recognize it for what it is.
Posted on March 20, 2013
Investors, including public, labor and religious pension funds and socially responsible investment (SRI) funds, are filing increasing numbers of shareholder resolutions on environmental, social and governance (ESG) issues. Each spring, investors vote their proxies on these shareholder proposals, including many focused on environmental matters. The average number of votes on environmental proposals are increasing as well. In addition, a growing number of such resolutions are “withdrawn”, based on an agreement that the company will take specified actions consistent with the proposal. Ceres tracks ESG resolutions filed by members of its investor network, and nearly 40% have been withdrawn by agreement in recent years.
ESG proposals generally call for reports, policy changes or actions by companies to address ESG-related business risks and opportunities, such as filing a sustainability report, setting a greenhouse gas emission reduction target, improving energy efficiency or linking executive compensation to ESG metrics. As outlined in a recent Bloomberg BNA article, emerging topics featured in 2013 resolutions include physical risks from climate change, risks from hydraulic fracturing including methane emissions, “stranded asset” risks associated with energy companies’ fossil fuel reserves and sourcing sustainable palm oil to reduce deforestation. According to a recent analysis, investors now file about 50% more shareholder proposals on environmental and social issues than they did a decade ago, with nearly 400 filed each year.
But there has not been as dramatic an increase in the number of proposals voted on because proponents have withdrawn an increasing number of their proposals, generally after reaching agreements with the company. Such negotiated “withdrawals” are a sign that corporate America is increasingly willing to adopt new practices to address social and environmental concerns. Although votes on shareholder proposals are legally nonbinding, companies now appear to pay more attention to them.
One likely reason for greater corporate responsiveness is that the shareholder resolutions are garnering higher votes – the average vote on such proposals has grown from 11.9% in 2003 to 18.5% in 2012, according to As You Sow. In addition, according to a recent study by the IRRC Institute entitled “Growing Traction for Environmental and Social Proposals at U.S. Companies”, the number E&S resolutions grew by one-third between 2005 and 2011 to about 40 percent of all shareholder proposals going to a vote, and the number of votes above 30% on such proposals grew from 3% in 2005 to 31% in 2011.
Investors who have filed the most ESG resolutions during the 2013 proxy season to date are: socially responsible investment firms (29%), pension funds (26%), and faith-based institutional investors (18%). Surprisingly, philanthropic foundations have filed only 7%, while unions have filed 8%, and individual investors 6%. Special interest groups such as animal rights organizations accounted for the remaining 6%.
The fastest growing type of resolution filed over the last several years has related to political spending disclosure, representing 33% of 2013 resolutions so far, with ‘sustainable governance’ resolutions representing another 14% of this year’s resolutions. Sustainable governance resolutions include those asking for annual sustainability reports, as well as requests linking executive compensation to ESG metrics, such as reduced pollution or improved worker safety. Climate change and other environmental issues are the focus of 26% of the 2013 resolutions.
As ESG filings and average votes continue to grow, companies are increasingly faced with the question of how best to respond to a shareholder resolution. Corporate managers nearly always oppose these resolutions, and frequently ask for the SEC’s approval to exclude them from their proxy statement, although the resolutions often serve as early warnings for emerging financial risks such as climate change. The Society of Corporate Secretaries of Governance Professionals recommends that companies: 1) meet with the filer to discuss the request; and 2) consider whether and to what extent the company can implement the proposal or take other actions that will satisfy the filer.
Companies receiving resolutions should keep in the mind that the shareholder filer’s ultimate goal is not to get a high vote, but rather for the company to address the issue raised in the resolution, which the shareholder believes presents an important risk or otherwise affects the value of their investment. And filers are generally willing to negotiate in good faith and build a productive working relationship with the company. Some banks that received resolutions about predatory lending practices prior to the financial crisis probably wish they had paid more attention to the risks raised in the resolutions. Nearly all companies and investors would have been better off if they had done so, and the same lesson may very well apply to resolutions on environmental issues.
Posted on January 2, 2013
An earlier post noted that adaptation to climate change is inevitable and is finally emerging as a priority for public policy. Long overshadowed by campaigns to prevent or slow global warming, federal and state initiatives and efforts by many professionals have resulted in efforts to start to collect data and promote serious planning for ocean rise and other effects of climate change.
Storm Sandy has more than reinforced that trend: it has established a much wider recognition that planning, design, engineering and regulatory decisions must incorporate the expected impacts of climate change and can no longer rely on historic weather and temperature conditions. That shift will have broad implications throughout the legal system, amounting to an emerging law of adaptation to climate change that is distinguishable from the emerging law of greenhouse gas controls.
As often is true, the legal academy is in the vanguard – there is a surge of law review articles and also a recent compilation published by the ABA.
For example, utility regulators have broad authority to require public service companies to prudently operate and maintain their systems. It is common for regulators to require emergency response plans, and, in some states, to impose significant penalties for overly delayed restoration of service after storm events.
Now, regulators are likely to require utilities also take account of changes because of global warming effects, not just based on historic conditions. Environmental groups recently petitioned NY regulators to so require.
But how exactly can this step be done? Modeling of the timing and extent of climate change effects can only produce broad ranges and generalities and are indefinite about effects at particular locations. What retrofitting is needed to assure reliable service to far future ratepayers and at what expense to current ratepayers? Ratepayers, regulators and utility stockholders will not reach agreement without significant dispute.
Existing zoning for flood plains should be modified to account for climate change. Making those changes will trigger large disputes as previously settled expectations are overturned. Until the rules are changed, are zoning bodies tied to outdated flood control maps incorporated into their regulations, or can they consider supplemental, updated information?
Environmental impact reviews for proposed projects typically address the effects of a project on the environment. Now must they consider the effects of the environment on the project? How? It will be litigated.
Also, as noted in an earlier post, the public trust doctrine might not serve to require regulatory agencies to regulate greenhouse gas emissions. But will it successfully undergird a state’s assertion of authority to regulate activities on or affecting lands subject to the public trust in order to account for changes and threats to shorelines? As beaches recede, will public trust lands start to incorporate currently private property?
The common law of property, too, will be affected. A landowner can lose title to land if it slowly disappears by reliction due to changes in a water body’s natural behavior, whereas a sudden loss by avulsion allows the landowner to keep title and restore the land. But what if the sudden loss is due to a storm event that is part of a slow rise in ocean levels?
Finally, at what point will it become clear that professionals must take account of global warming in designing structures or else experience risk of liability for unanticipated effects?
Posted on October 11, 2012
For the first time in its long history, the American Law Institute will consider two projects involving environmental law: 1) the law regarding environmental impact assessments, and 2) principles of environmental enforcement and remedies. In each case, if the proposal is approved, the relevant federal, state and local law would be reviewed exhaustively by a working group with environmental experience. Their product would then be reviewed by the full ALI membership, probably resulting in a report of some sort.
Most of us know ALI as the author of the Restatements of the Law in such fields as torts, contracts, property, trusts, etc. The Restatements typically report with great thoroughness on the relevant case law and statutes, with the goal of setting forth a highly accurate statement of the law, including variations among jurisdictions, and sometimes indicating where clarification would be helpful. The result is a consensus-based formulation of the law of the land, widely relied on by practitioners, teachers, courts and others. Harvard Law Professor Clark Byse has referred to it as “The law of Restatemania.”
Because the field of environmental law is relatively new and largely dominated by federal statutes, it has been widely thought until now that there is little need for a “Restatement of Environmental Law” or even a significant part of it. A few previous ALI projects have touched on environmental law issues. For example, the Restatement of Torts addresses nuisance, negligence, trespass and strict liability for highly hazardous activities, all of which can arise in an environmental context. ALI’s 1991 “Reporters’ Study on Enterprise Responsibility for Personal Injury” addressed some aspects of toxic tort liability, including joint and severable liability.
The current effort is the result of the deliberations of some 47 ALI members who practice or teach environmental law, who concluded that there are a number of areas in environmental law where there is substantial confusion which could benefit from the type of thoughtful analysis and reporting for which ALI is well known. After screening over 30 possible projects, the group is recommending the two described at the outset.
The Enforcement Law project would survey both civil and criminal law. It would discuss how environmental liability arises, who can be liable, who can seek enforcement, and what remedies are appropriate. It would discuss areas of overlapping federal and state jurisdiction, and consider both statutes and common law.
The Environmental Impact Assessment project would discuss the triggering and nature of an obligation to assess potential environmental impact (including federal, state and local NEPAs), the scope of the inquiry and the methods.
This effort is being led by a 5 person steering committee chaired by Professor Tracy Hester, Director of the Environment, Energy and Natural Resources Center of the University of Houston Law Center. He can be reached at email@example.com for further information. The other committee members are Dean Irma Russell and Professors Robert Percival, Victor Flatt and Joel Mintz. Given the ALI’s clout in the legal profession, this initiative should be of considerable interest to ACOEL members.
Posted on October 3, 2012
2012 marks the 50th anniversary of Silent Spring, one of the first books to point out the environmental dangers associated with pursuing technological and scientific advances without fully understanding their possible negative side effects. Silent Spring was a revolutionary environmental exposé published in 1962 by an unassuming author, Rachel Carson. Her book inspired a powerful social movement that continues to impact environmental law and American society today.
A scientist and ecologist, Carson was a former editor of U.S. Fish and Wildlife Service publications and a feature writer for the Baltimore Sun who eventually dedicated herself to writing books that taught people about the fragile beauty of Earth’s ecosystem. Silent Spring was written in the wake of post-war lethargy, new affluence and during a time when Americans were confident science had all the answers. Disturbed by the proliferate use of synthetic chemical pesticides after WWII, Carson challenged this practice and sounded a loud warning about the use of chemical pesticides, a reminder of the responsibility of science and the limits of technological progress.
Critics called Carson an alarmist, and Silent Spring was met with intense rebuttals from the scientific establishment and some major industries. Regardless, Carson was steadfast in her resolve to show the need for new environmental policies and regulations necessary to protect human health and the environment.
Silent Spring is proof of the power of public opinion, and despite scientific skeptics, the book sparked a major environmental revolution. Carson’s exhaustive environmental calculations in Silent Spring brought to light the fact that people were subjecting themselves to slow poisoning by the misuse of chemical pesticides and toxic pollutants that take more than 15 years to break down. In addition, she exposed the fact that these chemicals could cause irreparable liver and nervous system damage, cancer and reproductive issues.
Carson’s testimony before Congress in 1963 later served as the catalyst for the ban on the domestic production of DDT and sparked a grassroots movement demanding better environmental protection and increased regulation, resulting in the formation of the U.S. Environmental Protection Agency (EPA).
Sadly Carson was not able to enjoy the fruits of her labor. She died after a long battle with breast cancer in 1964, just 18 months after her testimony before Congress. However, many celebrate the impact of her work on April 22 each year on Earth Day.
So after 50 years, how much has changed? Today, there is federal regulation of everything from coastal development to farming practices. Environmental protection includes policies concerning natural resources, human health, economic growth, energy, transportation, agriculture, industry and international trade and all parts of society. Many would say there is over regulation today. In many cases, I agree. However as Rachel Carson showed us, there is a need for some regulation, if just to protect us from ourselves.
Posted on July 25, 2012
If the Rio Summit concluded last month met expectations, it’s because they were so low. The 49 page document summarizing the agreement by the government representatives, The Future We Want, was largely stripped of strong language and substantive commitments. From my perspective, two failures and one success in the agreement stand out. First, the diplomats could not muster a firm commitment to the UN Secretary General’s goal of ensuring universal access to energy services and doubling the rate of improvement in energy efficiency and use of renewable energy sources by 2030. Paragraph 127 on energy sources seems to give equal status to high and low carbon fuels, and earlier language endorsing reduction of environmentally and economically harmful subsidies was dropped. This was not an encouraging result for a summit focused on advancing a “green economy.”
Second, the final document also watered down statements of support for the rights of women to family planning services as well as ownership of various forms of property. Although 105 national science organizations joined many women’s groups in urging a strong stance on moderating population growth by providing reproductive health services wanted by women, objections by the Holy See (aka the Vatican) and backward members of the G-77 developing countries’ coalition caused numerous small changes in wording (e.g. promote vs. ensure) that ended up barely preserving existing UN commitments to rights to reproductive health services. (See the analysis by Rebecca Lifton at the Center for American Progress) The brightest spot in the final agreement is a comparatively aggressive set of commitments to protect and restore oceans and marine resources. Professor Ann Powers, oceans expert at Pace Law School, attended the summit and notes that 20 of the 238 paragraphs of the agreement dealt with oceans issues like plastic debris and fisheries management and included most of what ocean advocates sought.
The non-governmental attendees were far more successful in making commitments and connections. Many members of the business community, for example, continued the tradition, begun in 1992, of active participation in the Rio meeting as an environmental trade fair in ideas, products, and contacts. In one notable project, a consortium of 24 companies, collaborating with the Corporate EcoForum and the Nature Conservancy, has been working toward the goal of valuing natural resources used and saved by companies. According to Neil Hawkins, Vice President for Environment, Health, and Sustainability at Dow Chemical, the goal of pricing ecosystem services to mobilize markets in advancing sustainable development was a major focus of events at the Rio summit. The meeting was a catalyst for making specific company commitments to develop and test valuation methodologies as well as an opportunity to educate a broader audience on progress being made.
Finally, the legal profession sponsored a varied menu of law and governance programs. The World Congress on Justice, Governance and Law for Environmental Sustainability convened judges, prosecutors, practitioners, and auditors to debate how to make environmental law more effective and how to increase public access to legal remedies. (See the Rio + 20 Declaration of the Congress). At a time when multilateral diplomacy cannot produce a binding agenda, lawyers are challenged to find new ways to secure commitments from parties willing to act to advance environmental progress.
Posted on April 26, 2012
April 22, 2012 was the 42nd Earth Day, an event that passed with limited notice by most Americans and the news media. For all but a few of us who work in the field, the environment is no longer a “top 10” issue. Yet objectively, the planet is in materially worse shape than it was on the first Earth Day in 1970. As a species, we are collectively destroying the earth’s natural systems, plundering its resources and squandering its natural capital at an accelerating and unsustainable rate. The “Tragedy of the Commons” that Garrett Hardin wrote so eloquently about in advance of the first Earth Day is rapidly unfolding just as he predicted.
On a global scale, the earth’s ecosystems are under siege. With a human population of 7 billion, and headed for at least 10 billion fairly soon, growing greenhouse gas emissions and resultant climate change, increasing regional water scarcity, and growing global competition for dwindling resources, the trends are to put it mildly, not looking good. It has been estimated that we are now consuming the planet’s resources, emitting pollutants and generating waste at about 1.5 times the earth’s carrying capacity. The “externalities” of our ever growing global economy are overwhelming the earth’s ability to assimilate them.
[For a fairly comprehensive and sobering account of the causes, effects and trends of global environmental degradation, I recommend Paul Gilding’s recent book, The Great Disruption.]
If we continue on our present course, our environmental, social and economic systems appear to be headed for collapse, or at least some very rough sledding with unacceptably high (and of course, inequitably distributed) human and ecological casualties. Catastrophic and irreversible climate change is a growing possibility, if not a probability, without fundamental changes in how we use energy. After more than 40 years of effort, and a proliferation of “green” policies and initiatives, we are clearly losing the war of environmental protection and conservation. This is particularly disquieting for those of us who work in the environmental profession, supposedly understand these issues, and presumably care about the real world outcomes.
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Posted on May 12, 2011
Although even casual observers will have noted the fanfare surrounding the U. S. Securities Exchange Commission (SEC)'s release last year of guidance to public companies on disclosures regarding climate change and its consequences under federal securities laws and regulations, far less attention has been given to other developments in the carbon disclosure milieu that should inform corporate strategy. While the debate over regulation of greenhouse gas (GHG) emissions remains a hot topic in the courts, stakeholder pressure for greater transparency regarding GHG emissions management continues unabated, as illustrated by the evolving agendas of key stakeholders in the U.S. and abroad, two of which are highlighted briefly below.
Carbon Disclosure Project
The Carbon Disclosure Project (“CDP”) is a non-profit initiative launched in London in 2000 “to collect and distribute high quality information that motivates investors, corporations and governments to take action to prevent dangerous climate change.” Approximately 2,500 organizations in over 60 countries now measure and disclose GHG emissions and climate change strategies through CDP. Data is made available for use by institutional investors, corporations, policymakers and their advisors, public sector organizations, government bodies, academics and the public, including via channels on both Bloomberg and Google Finance. Investor CDP requests information on GHG emissions and climate change strategies on behalf of 534 institutional investors with a combined $64 trillion in assets under management and provides climate change data from thousands of the world’s largest corporations. Other notable initiatives include CDP Supply Chain, through which 60 corporate members encourage suppliers to measure and disclose climate change information. CDP's Public Procurement initiative, through which national and local governments can question suppliers about energy use, GHG emissions and related risks, is a beginning to have an impact, including at the US General Services Administration, where work is underway on a project analyzing the costs and benefits of disclosing through CDP. CDP has launched a new product for investors with FTSE and ENDS Carbon called the FTSE CDP Carbon Strategy Index. It has launched initially with two UK indices; the FTSE CDP Carbon Strategy All-Share Index and the FTSE CDP Carbon Strategy 350 Index. Both indices have been designed in response to growing awareness of the significant potential impact of climate change on investment returns. Post Copenhagen, governments across the globe have been working towards holding emissions below levels that would increase global temperatures by 2ºC. Achieving these levels will require increased costs for carbon emissions. The FTSE CDP Carbon Strategy Index Series reflects this carbon risk in its initial offering of ‘carbon-tilted’ versions of the UK’s FTSE All-Share and FTSE 350 indices. The indices feature the same constituents with a variation of weightings based on their exposure to carbon risk, relative to their sector peers. The index series is based on future-oriented criteria rather than past emissions data. It is the first index series to offer a long term forward-looking investment tool that closely tracks established UK benchmarks while supporting the reduction of climate change risks across investment portfolios. This means retail and institutional investors, such as pension funds, can achieve broad and diversified market exposure as well as manage the impact of climate change on their investment. One can gain considerable insight into the state of the art of carbon disclosure from a review of responses to CDP, as well as the cross-cutting analyses compiled by the organization and its partners. To access the most current and archived reports, click here.
Climate Disclosure Standards Board
The Climate Disclosure Standards Board ("CDSB") is an initiative convened by the World Economic Forum at its annual meeting in 2007 and hosted by the CDP as Secretariat in response to increasing demands for standardized reporting of climate change information in “mainstream” reports. The term "mainstream reports“ is used to describe annual reports in which corporations are required to deliver audited financial results under the corporate, compliance or securities laws. CDSB released a Reporting Framework in September of 2010. In connection with its work, CDSB has also compiled a database of global developments on legislation that directly or indirectly affects the way in which GHG emissions are calculated and/or the way in which risks are disclosed in corporate and securities filings. CDSB is in the process of upgrading the format to a new platform called “Interactive Standards” where the public and others will be able to see and contribute to the database. Other plans for 2011 center around engagement with corporations, investors and regulators through structured programs designed to align further the needs of preparers and users of climate change-related information.
Posted on May 4, 2011
In his July 8, 2010 ACOEL blog entry, Fournier “Boots” Gale of this firm reported on the then-most recent court decision dealing with whether and how a plaintiff could recover, under CERCLA, costs it incurred for a cleanup performed under a consent decree or administrative settlement. One of the more intriguing developments for CERCLA practitioners has been the tension between and radical changes to cost recovery or contribution claims under 107 and 113 of CERCLA. Boots reported on the July 2, 2010 decision by a federal judge here in Alabama to grant complete summary judgment to defendants, finding that a party compelled to incur such costs can only proceed under Section 113, and not 107. Because the defendants in that case had also entered into an administrative settlement with EPA for the same site, thus obtaining Section 113 contribution protection, all of plaintiffs’ claims were dismissed. That case is still on appeal to the 11th Circuit. The issue decided by the Alabama federal court--whether compelled costs were recoverable under Section 107, 113, or both—had been left unanswered by the United States Supreme Court in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). Courts have been struggling with this issue ever since.
The latest opinion on this issue is from the 8th Circuit, in Morrison Enterprises, LLC v. Dravo Corp., 2011 WL 1237526 (8th Circuit, April 5, 2011). The 8th Circuit was the federal circuit court whose decision was affirmed in the Atlantic Research case, so the result in this case is not surprising. Noting the question unanswered by the United States Supreme Court in Atlantic Research, the Morrison Court, as did the federal court in Alabama, concluded that Section 113 was the appellants’ exclusive remedy, confirming the summary judgment granted by the district court below on the Section 107 claim. One of the Morrison appellants argued to the district court that one of the contaminants it cleaned up was totally unrelated to its operations and, thus, the costs it incurred related to that contaminant were “voluntary” and thus recoverable under Section 107. Interestingly, the plaintiffs in the Alabama case made the same argument. Both the Alabama and 8th Circuit Courts rejected the argument because all of the work was performed under and pursuant to a consent decree, which was broad enough to encompass the costs for cleaning up the contaminant sought to be carved out as voluntary. In effect, even if one wishes to argue later that some costs incurred were for a contaminant for which one had no responsibility, if the costs incurred are pursuant to that consent decree, or administrative settlement, then the costs are not incurred voluntarily and a Section 107 claim is still barred. In a final blow to the cost recovery efforts in this case, the appellant attempted to amend its complaint to assert a Section 113 claim after summary judgment had been entered on its 107 claim, but the district court denied it as untimely (and the Morrison court affirmed on this issue, too).
Posted on April 22, 2011
In 2009, the United States District Court for the Eastern District of Wisconsin rendered a widely reported and discussed decision in Appleton Papers Inc. v. George A. Whiting Paper Co., No. 2:08-cv-16-WCG (E.D. Wis. Dec. 16, 2009) (Appleton I) that many remember as being unique. This is because rather than considering the usual so-called “equitable factors” to determine proportionate financial responsibility in a CERCLA contribution action such as waste-in volume or relative contaminant toxicity, the District Court focused entirely on a single marker of relative culpability i.e., Appleton Paper’s knowledge that their actions would cause environmental harm.
In February of 2011, the District Court issued an equally intriguing opinion in Appleton Papers Inc., v. Whiting Paper Co., No. 08-C-16, 41 ELR 2011 (E.D. Wis. Feb. 28, 2011) (Appleton II). Relying in large measure on the District Court’s 2009 decision, multiple defendants argued that the response costs already contributed to cleanup effort should be borne by NCR Corp. and Appleton Papers Inc. (collectively “the Appleton Plaintiffs”). All of the Defendant’s arguments highlighted the same equitable factor that barred the Appleton Plaintiffs from obtaining contribution it, e.g, knowledge that a generated waste might cause environmental harm. The District Court agreed, and determined that the Appleton Plaintiffs were liable to the Defendants for response cost of remediating four of the five operable units along the Lower Fox River. However, the Appleton Plaintiffs were determined not to liable for costs associated with Operable Unit No. One (“OU1”) because the OU1 defendants were unable to prove that the Appleton Plaintiffs contributed to the contamination of OU1 (OU1 is located upstream of the Appleton Plaintiffs’ facility) or that the Appleton Plaintiffs were arranges under CERCLA §107).
These cases warrant practitioners’ review as they clearly express the notion that contribution liability should rest upon satisfaction of the ultimate objective of the CERCLA liability scheme i.e., that the polluter pays the costs of resolving the pollution it causes. This objective should never be far from mind, as the fact based focus of inquiry utilized by the District Court in these cases may well be the undoing of practitioner’s efforts to rely upon supposed technical and legal attributes of relative responsibility. Instead, the focus should be directed to the essential inquiry at the root of the CERCLA legislative cost recovery scheme e.g., the polluter who causes pollution to occur should pay for its cleanup.
Posted on April 5, 2011
CERCLA liability under section 107 is often characterized as strict, joint and several unmitigated by considerations of causation, fault or fairness. Contribution is different, however. Congress, in section 113(f)(1), specifically authorized the courts to allocate costs “using such equitable factors as the court determines are appropriate.” Illustrative of this fundamental difference is the fight over who shall pay what for the massive PCB cleanup of the Lower Fox River.
NCR is incurring the bulk of the costs based on discharges of PCBs incident to the manufacture of carbonless paper at a facility on the River. It sued numerous paper mills along the River based on their discharges of PCB containing wastewater incident to the recycling of trim and waste carbonless paper. In late December 2009, Judge Griesbach of the Eastern District of Wisconsin dismissed NCR’s suit for contribution against the paper mills based on NCR's knowledge of the content and risks associated with PCB-containing carbonless paper as manufacturer/developer of the product compared to the recycling paper mills.
Framed thus — in old fashioned terms about knowledge of dangers and avoidance of risk—it was no contest. NCR was denied contribution because of its knowledge, learned gradually over time, about the toxic nature of PCBs as against those who merely, and without access to NCR’s superior knowledge of the product, processed it for recycling. The Court’s analysis, it said, “is governed by traditional principles of equity, such as the relative fault of the parties, any contracts between the parties bearing on the allocation of cleanup costs, and the so called ‘Gore factors.’” The lengthy recitation of the largely undisputed facts was nothing less than a moral indictment of NCR’s actions and reactions as the knowledge about PCB toxicity and its threat to the environment came to be documented and disseminated; in short, nothing less than a fault-based conclusion.
The flip side of this case came down in February 2011. Judge Griesbach decided that the paper mills, which had incurred expenses related to various EPA and Wisconsin DNR orders and settlements, monitoring and investigation, were entitled to contribution from NCR for those portions of the River where both recycling and manufacturing PCB contamination occurred. This time around the Court was satisfied that its singular use of NCR’s “fault” as the sole determinant to deny NCR contribution in 2009 was likewise sufficient to grant the paper mills a right of contribution against NCR. In other words, fault or culpability can become the overriding factor and permit the court to eschew consideration of any other equitable factors, including Gore factors. One sees in the Court’s emphasis on charging the financial cost on those “responsible” for creating the hazardous conditions a tone and direction quite at variance with the rather automatic analysis of liability under section 107. Hence, although approximately half of the PCBs originated with the paper mills and not NCR’s manufacturing, the Court, on culpability grounds, was prepared to impose the entire cost on NCR exclusive only of amounts reimbursed to the defendants by insurance.
Posted on April 4, 2011
A few months ago, a significant anniversary passed without much fanfare: the 30th anniversary of the passage of CERCLA. Interestingly, 30 years has another meaning today in the Superfund world as many of the CERCLA sites have passed through the active cleanup phase and into the long-term operation and maintenance phase. When practitioners began working with the Superfund statute in the early days, the question of when would a Superfund cleanup “end” was considered. Many of us thought that 30 years of monitoring at a site after completion of the active remediation stage was a reasonable expectation. This expectation, while not expressly stated in CERCLA or the National Contingency Plan, was based on the approach used in RCRA closures which generally require 30 years of post-closure monitoring.
But 30 years of working with the Superfund statute has made it clear that 30 years is not a meaningful benchmark for long-term O&M, at least not to EPA. The critical documents in the Superfund process, the Records of Decision, the Consent Decrees and the EPA Guidance documents usually do not specify when long-term operation and maintenance may cease. As a result, because groundwater contamination at many Superfund sites has proven to be so difficult to remediate to drinking water or some other agreed upon standards, many PRP Groups are faced with the possibility that their Superfund site may require perpetual monitoring. In addition, since the Consent Decrees require a five year review process by EPA for all active sites, the possibility of enhanced monitoring or additional remediation always looms on the horizon.
The uncertainties in knowing when a Superfund site will “end” creates many challenges for performing parties and their counsel. Among those difficulties:
- Continual disclosure on company financials and SEC filings;
- Time and expense of keeping PRP Groups functioning over many years and paying for government internal and contracted oversight costs;
- Lack of certainty or predictability in budgeting long-term costs for Superfund liabilities; and
- Loss of institutional memory and familiarity at sites where, over time, companies and their divisions are sold and counsel, consultants and EPA personnel move on and/or retire.
These risks and costs, of course, are spared for de minimis parties and other PRPs who structure their settlements as cash-outs either to EPA or to other PRPs. For those performing parties left behind, however, the ability to determine a reasonable end point to the commitment they entered into years, if not decades earlier, often remains a largely unresolved and perhaps undeterminable question under present regulation and practice.
Many of us are working in PRP Groups where active remediation has been completed yet the groundwater remains substantially above the Performance Standards. In many of these sites, the groundwater plume is controlled and presents no risk to human and other environmental receptors yet reasonable predictions about when the monitoring program and the Superfund “machine” can be turned off remains a mystery. With the 30th anniversary of Superfund now passed, it is time for more discussion and coordination between EPA and the PRP community about how and when Superfund sites, especially those with long-term groundwater monitoring requirements, may “end.”
Posted on March 28, 2011
Despite a House Republican agenda to eviscerate EPA’s GHG authority, EPA is pushing forward with workable greenhouse gas reduction solutions. EPA’s gradual phasing in of GHG permitting requirements for new facilities has provoked a vicious response from both heavy industry and political partisans, despite the requirements’ limited scope on only the largest pollution sources in the country – those that emit the equivalent of a burning railroad car of coal a day – and the common-sense requirements that these new facilities install the most efficient cost-effective technology available.
EPA has moved cautiously in deployingpotentially more important regulatory tool: New Source Performance Standards (NSPS). Starting with the two largest sectors of emitters in the U.S., electricity generators and refineries, NSPS can create a “floor” of minimum standards for new and modified facilities, as well as create a flexible, state-based system to drive steady reductions from existing sources. Importantly, reinvented NSPSstandards can capture the benefits of and build upon existing state GHG reduction programs, encourage other states to pursue or join in broader clean energy solutions, and produce greater environmental benefits (GHG reductions) than traditional NSPS.
In part to exploreand flesh out its new approach to NSPS, EPA held several “listening sessions” to hear from industry, air pollution control agencies, NGOs, and others in February and March of this year. A recurring theme throughout these sessions was flexibility. The most common stakeholder response has been thatEPA should set reasonably stringent 111(b) standards for new and modified sources. At the same time, EPA should build upon its experience in allowing state emissions averaging and trading to propose guidelines for states to regulate existing sources. These guidelines should include astraightforward method for states to show that alternative existing or proposed programs – whether or not they include individual numeric standards for individual NSPS sources– would achieve equivalent or greater emission reductions to traditional NSPS, individually applied.
Several states, including California, were quite vocal in these listening sessions, and for good reason. As Seth Jaffe pointed out in his blog, emissions trading programs such as California’s cap-and-trade program under Assembly Bill 32 clearly provide the most cost-effective emission reductions. Other states could propose clean energy programs, that achieve local economic development and energy security objectives, as well as emissions reductions, or they could be attracted to join existing regional initiatives. Rather than adopt a one-size fits all NSPS, EPA can establish a stringent NSPS that allows states, their industries, and other stakeholders to work together to innovate and create unique solutions that serve multiple goals.
Posted on March 22, 2011
We all know that the bona fide prospective purchaser (BFPP) provision provides a defense to CERCLA liability for contaminated sites and allows a knowing purchase of contaminated property. It encourages brownfields and voluntary cleanup programs across the country.
Judicial interpretations of the BFPP defense are scarce. In October 2010, a federal district court in South Carolina issued its opinion which was a nasty turn of events for BFPP’s. (Ashley II of Charleston, LLC v. PCS Nitrogen, Inc. (“Ashley II”), Case No. 2:05-cv-02782-MBS). The case was for recovery of cleanup costs associated with a former fertilizer manufacturing plant in Charleston, South Carolina.
The court decided that Ashley was not a BFPP, as it claimed, and was responsible for five percent of the clean-up costs based on the following facts: (1) Ashley had torn down some structures in 2008, which allowed rainwater to contact cracked sumps containing hazardous substances. As a result, disposal of hazardous substances had occurred after Ashley took possession of the property; (2) Ashley was “affiliated” with other PRPs because Ashley had indemnified them and, more significantly, attempted “to discourage EPA from recovering response costs covered by the indemnification”; and (3) Ashley had not exercised appropriate care because it failed to address recognized environmental conditions (RECs) that were identified in the environmental site assessment as well as other potential site hazards.
The lesson here is that Purchasers should consider the effect of indemnity provisions and any interactions they may have with government agencies regarding other PRPs. In addition, because “disposal” may be defined very broadly, purchasers should thoroughly evaluate construction, demolition, and other site activities to determine if such activities could cause a release of hazardous substances. Finally, it is critical that all RECs be addressed, beginning no later than the time the purchaser acquires the property and continuing for the duration of its ownership.
Posted on March 11, 2011
In cases of first and second impression, federal district courts in South Carolina and California have now ruled on the bona fide prospective purchase (“BFPP”) defense following its enactment in 2002 and EPA’s subsequent “all appropriate inquiries” (“AAI”) implementing regulations in 2006. In Ashley II of Charleston, L.L.C. v. PCS Nitrogen, Inc., Judge Seymour of the District of South Carolina undertook an exhaustive 55-page examination of the facts surrounding the purchase by Ashley II of several parcels from various owners. In the more succinct decision of 3000 E. Imperial, LLC, v. Robertshaw Controls Co., et al., Judge Anderson of the Central District of California addressed the divisibility of harm in connection with a purchaser’s cost recovery action against the seller under CERCLA §107(a) and also addressed the plaintiff’s BFPP status.
In a lengthy discussion of the history of the site, the Court examined the involvement of each of the prior owners as well as the actions of Ashley II in determining whether the harm was divisible. Ultimately, the Court determined that the harm was not divisible; however, the Court did construct a basis for allocating liability. Of particular note was the Court’s extensive analysis of the bona fide prospective purchaser status of Ashley II; but also of interest were the Court’s holdings on the issue of contractual indemnifications and release agreements.
One thing that the Court failed to give any attention to was the Consent Agreement entered into between the State of South Carolina and Ashley II. This document bears some resemblance to the State’s Brownfield non-responsible party contracts. This document attempted to establish Ashley II as a non-responsible party and afforded it contribution protection.
Ultimately, the Court set forth an allocation of the response costs by percentage attributable to each party, with Ashley II bearing its allocation along with those for which it had indemnified.
3000 E. Imperial
The California District Court’s decision came on the heels of the Ashley II decision. Obviously, the history of the 3000 E. Imperial site was less complex. There, the Court discussed at some length the testimony of two competing experts on when the USTs in questions were likely to have resulted in a release. The Court then examined divisibility of harm in conjunction with the Burlington decision and considering the elements of § 433A of the Restatement (Second) of Torts. Ultimately, the Court concluded that the defendant’s claim for divisibility was insufficient. The Court then turned to the defendant’s counterclaim for § 107 cost recovery as a PRP. Obviously, the plaintiff had claimed that it was not a PRP by virtue of its status as a BFPP. Following a brief examination of the plaintiff’s actions following closing and a fleeting reference to “appropriate care,” the Court concluded that the plaintiff did take “reasonable steps” to prevent further releases and was entitled to BFPP status.
Posted on February 25, 2011
The Los Alamos Study Group (the “Study Group”) is presently challenging the United States Department of Energy (“DOE”) and the National Nuclear Security Administration’s (“NNSA”) efforts to construct the new Chemistry and Metallurgy Research Replacement Nuclear Facility (“CMRR-NF”) at Los Alamos, New Mexico.
The Study Group’s complaint, in federal district court in Albuquerque, asserts that the project has changed so dramatically that an eight-year old environmental impact statement (“EIS”) does not begin to adequately analyze the environmental impacts of the present iteration of the CMRR-NF, and that defendants’ offer to conduct a supplemental environmental impact statement (“SEIS”) is merely a fait accompli to continue with the detailed planning and initial construction of the massive venture.
In considering the original Nuclear Facility, the federal defendants issued an EIS in 2003, and followed it with a Record of Decision (“ROD”) in 2004. The 2003 EIS addressed a Nuclear Facility to be built no deeper than 50-75 feet below grade. In the years that followed, however, seismic conditions underlying Los Alamos became better understood, and the federal defendants were faced with a project that arguably did not take into account those conditions. There was no discussion in the 2003 EIS of deeper excavation and no reference to a layer of volcanic ash known to underlie the site that would greatly complicate plans to construct at a greater depth, or meet then-known seismic safety criteria. The ROD stated that: “[B]ased on the CMRR EIS, the environmental impacts of the preferred alternative” (built 50 feet or less deep) would be “minimal” and “small.”
Moreover, since 2004, the project has seen further fundamental changes. The original budget for the Nuclear Facility was estimated at $350-$500 million. In 2003, the estimate, as reported to Congress, was $600 million. The EIS stated that construction would be completed in 2009; now, it is estimated to conclude in 2022, at a cost approaching $6 billion.
In 2003, NNSA reported that the Nuclear Facility would have 60,000 square feet of Hazard Category 2 space within 200,000 square feet of gross area. The CMRR-NF has now changed from a structure to be built to a depth of 50 feet, to a structure requiring an excavation to 125 feet, with the bottom 50-60 feet of the hole filled with concrete. As a result, the total volume of excavation for the CMRR-NF has increased from about 167,000 cubic yards in 2003, to 579,000-704,000 cubic yards in 2010, a three-to-four fold increase in construction equipment, spoilage, and disposal needs. The volume of soil now remaining to be excavated has increased six-fold.
Additionally, changes in the basic concept of the Nuclear Facility have expanded to include the introduction of the so-called “hotel concept” that would accommodate various unknown future missions, but would require large open floor areas and significant increases in concrete and steel. The concrete now needed is 371,000 cubic yards, up from 3,194 cubic yards. This is more concrete than was used for the Big-I Interchange in Albuquerque, or for the Elephant Butte Dam in southern New Mexico. The steel needed is now 18,539 tons, up from 242 tons. That is roughly the equivalent of the Eifel Tower. In short, the Nuclear Facility dwarfs the Manhattan Project and would be the largest construction project in the history of the State of New Mexico.
The Los Alamos Study Group case is one of first impression, as it is the first to contest the federal defendants’ decision to perform a SEIS as opposed to a new EIS altogether. Unlike a SEIS, an EIS must consider all available alternatives, including refurbishment of existing, under-utilized buildings at Los Alamos, and any other alternative besides the construction of the present iteration of the $6 billion CMRR-NF. Many of those alternatives, rejected in the original 2004 Record of Decision, may now be viable given the significant cost increases in the present version of the Nuclear Facility.
The federal defendants have filed a motion to dismiss based on prudential mootness and other grounds. All pleadings and other filings in the case may be obtained on the Study Group’s website.
Posted on February 23, 2011
As we all know by now, in Burlington Northern and Sante Fe Railway Co. v. United States, decided in May, 2009 (BNSF I), the Supreme Court surprised us yet again by interpreting CERCLA differently than the lower courts and Superfund practitioners had come to understand the statute to mean. The Court held (a) that “arranger” liability under Section 107(a)(3) of CERCLA is triggered only if there is an intent to dispose of hazardous substances, and (b) that joint and several liability under CERCLA may be avoided if there is a reasonable basis for apportioning harm among the “covered persons,” affirming divisibility on facts that most practitioners would not have expected to prevent joint and several liability. Since then, the lower courts have been wrestling with the application of these rulings under CERCLA. Meanwhile, however, the state courts have begun to address these issues under state law counterparts to CERCLA. Recently, the Supreme Court of Montana did just that. State of Montana v. BNSF Railway Co. (BNSF II)
Montana, like many other states, has its own version of CERCLA, called the Comprehensive Environmental Cleanup and Responsibility Act (“CECRA”). CECRA has its own categories of liable parties, including a broad class of “arrangers,” but unlike CERCLA, explicitly provides for joint and several liability. These differences result in greater potential exposure for defendants in hazardous waste cases.
BNSF II involved three adjoining properties north of Kalispell, MT, all of which had been listed as state Superfund sites. One of the sites, called the Reliance site, was a former crude oil refinery. BNSF transported petroleum products into and out of the Reliance site, using railroad cars that sometimes leaked badly. The trial court found that “[r]efinery workers occasionally ‘got a soaking’ when unloading crude oil” from BNSF railcars and that “when shipments of crude oil arrived and the holding tanks were full, the crude oil was dumped onto the ground in pools on BNSF property in the area.” The trial court found that BNSF “had been involved in dumping petroleum products onto the surface of the earth.”
The Montana Department of Environmental Quality (DEQ) sued seven parties, six of whom settled, with the result that a Final Unified Abatement Order was entered, holding BNSF jointly and severally liable for the Reliance site, as an “arranger” under CECRA, even though the trial court made no finding that BNSF intended to release a hazardous substance at the site.
Like CERCLA, CECRA contains no definition of an “arranger.” Instead, Section 75-10-715(1)(c) of CECRA includes among the list of liable parties “a person who generated, possessed, or was otherwise responsible for a hazardous or deleterious substance and who, by contract, agreement, or otherwise, arranged for disposal or treatment of the substance or arranged with a transporter for transport of the substance for disposal or treatment,” language that differs somewhat from Section 107(a)(3) of CERCLA.
The trial court held BNSF liable as an “arranger” under CECRA because of its “involvement” with Reliance in the dumping of petroleum on the Reliance site. The trial court relied on the Ninth Circuit decision in BNSF I, adopting a broad form of “arranger” liability, and refused to reconsider its ruling when the Ninth Circuit was reversed by the Supreme Court.
The Montana Supreme Court began its review of the trial court decision by noting that Section 114(a) of CERCLA provides that nothing prevents a State from imposing additional liability beyond those imposed by CERCLA. The Court then held that “an entity need not specifically ‘intend’ to dispose of a hazardous substance for imposition of ‘arranger’ liability ” It was enough that BNSF “possessed or was otherwise responsible for the materials it shipped” and that “[a] necessary and foreseeable consequence of shipping the material was unloading the material.” Since BNSF employees moved full tank cars of crude oil to the Reliance site so Reliance employees could dump the crude oil on the ground, “BNSF participated in the unloading process which resulted in the release of the materials it possessed.” In holding that the trial court did not err in holding BNSF liable as an “arranger,” the Court set a low bar for “arranger” liability under CECRA.
Unlike CERCLA, which is silent as to whether or not “covered persons” are jointly and severally liable under the statute, CECRA provides, in relevant part, that “notwithstanding any other provision of law,*** the following persons are jointly and severally liable for a release or threatened release of a hazardous or deleterious substance***” .
Notwithstanding this statutory language, the trial court entered a pretrial order that once the state proved that BNSF is a liable party, “BNSF must come forward with evidence to show it was only responsible for a portion of the contamination at the site to avoid the possibility of joint and several liability for all the surface contamination.” When BNSF failed to make such a showing, the trial court held BNSF jointly and severally liable. Because BNSF had failed to prove the factual basis for apportionment, the Supreme Court declined to rule on whether apportionment would ever be possible under the statutory language. Thus, BNSF II leaves unanswered the question of whether liability can ever be apportioned under a statute that explicitly provides for joint and several liability, no matter how distinct the harms may have been.
As the United States Supreme Court continues to read CERCLA narrowly, state statutes, like CECRA, may become more important in the development of hazardous waste law. BNSF II may very well represent the beginning of a trend.
Posted on February 11, 2011
There is nothing new about transboundary water quality disputes under the Clean Water Act. Introductory classes on environmental law commonly trace the history of Supreme Court decisions arising from Milwaukee’s battles with Illinois over sewer discharges into Lake Michigan, the challenge Vermonters’ raised against New York paper mill discharges into Lake Champlain, and Oklahoma’s objections to a permit EPA issued to a sewage treatment plant in Arkansas. Given the length of time that the Clean Water Act program has been in place and the large number of instances in which upstream discharges drain into and therefore arguably affect water quality in downstream states, one would expect that most of the relevant legal questions would be well-settled. Recently, however, transboundary water quality disputes have arisen with increasing frequency.
Coal bed methane development in Wyoming has given rise to disputes with Montana over salinity impacts in the Powder and Tongue Rivers. Efforts by the state of Washington to protect dissolved oxygen levels in Spokane Lake have prompted a dispute over Washington’s attempt to impose wasteload allocations that would limit nutrient discharges by upstream sources in Idaho. Oklahoma’s efforts to restore the Illinois River to pristine scenic river conditions have resulted in recurrent and steadily intensifying disputes with agricultural interests on both sides of the border and point sources located predominantly in the headwaters on the Arkansas side. EPA’s imposition of nutrient water quality standards in Florida could have direct effects on discharges originating in Georgia; and the agency’s showcase multi-state TMDL for the Chesapeake Bay has recently precipitated challenges by state and national agricultural interests. In what undoubtedly is the most dramatic transboundary claim under the Clean Water Act, environmental groups have filed a petition with EPA asking the Agency to impose nutrient water quality standards and adopt TMDLs for the main stem of the Mississippi River, all of its tributaries, and certain related coastal waters in the Gulf of Mexico.
These recent disputes have recurring themes that arise out of weaknesses or unresolved questions regarding the Clean Water Act program. The statute empowers each state to exercise sovereign independence in adopting water quality standards that apply within the state’s own borders (so long as minimum federal standards are met), but the statute does little to address or even give consideration to the interests of other states that may be directly affected by those standards. Transboundary disputes frequently involve situations in which the regulatory burdens fall disproportionately on interests in one state while the resulting environmental benefits are realized largely or entirely in another state, but the Clean Water Act does nothing to address questions of transboundary fairness. Transboundary disputes frequently involve regulatory decisions that have enormous financial and long term planning consequences, but the decisions are often based upon limited factual data, imperfect scientific analysis, and less than comprehensive computer modeling. The Clean Water Act offers no process for seeking to assure that the quality of the decision making will be commensurate with the gravity of the consequences at stake. Indeed, the program largely makes the magnitude of financial consequences simply irrelevant. Disparities between the magnitude of the consequences and the limited quality of analysis and data supporting the regulatory decision are particularly problematic when the regulatory decision is being made by one jurisdiction that has no political accountability to the other.
It is perhaps no surprise that most of the recent transboundary water quality disputes are arising out of efforts to regulate the discharge of nutrients. Nutrient pollution is the largest unresolved water quality issue nationally; and the adverse effects of excess nutrients frequently occur at locations far downstream from the original source. The fact that most of the current transboundary water quality disputes involve nutrient pollution probably makes the disputes even more difficult than normal to resolve. Nutrient pollution has no simple, universally accepted means of measurement. It is costly and time consuming to establish a clear causal link between a given discharge of nutrients and an observed adverse effect; and many of the most important sources of nutrient pollution are non-point sources which are beyond direct control under the Clean Water Act. Unfortunately, this appears to be a recipe for increased frustration and controversy.
Transboundary water quality disputes may not be a new phenomenon, but it does not appear that we are any closer to finding a good way to resolve them.
Posted on February 1, 2011
Over the past three decades, EPA has issued more than 1,700 CERCLA UAOs to roughly 5,400 PRPs ordering the performance of response actions at CERCLA sites costing in aggregate in excess of $5 billion. Only a small handful of those orders, however, have ever been challenged in court, and vanishingly few have been subject to any independent third party review whatsoever.
Why is that? Well, as even EPA might agree, it is not because the Agency is infallible. No, the reason for EPA’s essentially unreviewed exercise of its UAO authority is the CERCLA statute itself, which (a) by operation of Section 113(h), precludes any challenge to a UAO order until the ordered response action has been completed (typically many years later at an average cost of $4 million dollars) and (b) by operation of Sections 106 and 107, subjects any PRP who elects to defy a UAO to treble punitive damages and additional penalties of $37,500 per day, which accumulate until EPA, at its sole discretion, brings an enforcement action.
In this regard, CERCLA is an outlier in administrative law. Though instances are common where federal statutes give agencies the power to issue administrative orders, virtually every other comparable scheme affords recipients of such orders either a prior hearing or the prompt opportunity for independent review after the order is issued. CERCLA, of course, provides neither.
So what justifies this unusual approach? It has been suggested on occasion that due process must be dispensed with because UAOs are needed to address emergency conditions. They can only be issued, after all, where an imminent and substantial endangerment to public health or the environment is shown. There are two problems with that rationale, however. First, the courts have largely upheld EPA’s position that “imminent and substantial endangerment” doesn’t really mean “imminent” or “substantial” – there really is no site involving a hazardous substance and a release (actual or threatened) that doesn’t meet the statutory criteria for UAO issuance. Second, as EPA has conceded in litigation, the fact is that EPA doesn’t issue UAOs in true emergencies; in those circumstances, it does the work itself and seeks to recover its costs later.
Okay, so even if true emergencies are not implicated, it’s still the case that EPA has a need to act quickly and that allowing pre- (or prompt post-) issuance review would unduly impede cleanup of hazardous sites, right? Well, as it turns out, that’s not true, either. Analysis of EPA’s CERCLIS database reveals an average 8-year lag-time between identification of a site and issuance of a UAO and a 4-year lag between remedy selection and UAO issuance. Obviously, there’s plenty of time in the system for a little due process.
So why haven’t past procedural due process challenges to this UAO scheme (and there have been a number of them) succeeded? The courts that have rejected those challenges have commonly concluded that the challenging PRPs couldn’t show a pre-hearing deprivation of property, as is required to trigger Fifth Amendment protections. Those courts reasoned that a PRP could simply refuse to comply with and wait for EPA to sue to enforce the UAO, and in that event would suffer no pre-hearing deprivation of property since penalties and damages could only be awarded following a court hearing.
Though the conclusion is facially appealing, its fallacy is demonstrated by the record of the most recent constitutional challenge brought by GE. There, following extensive discovery from EPA and expert testimony on both sides, GE was able to demonstrate empirically that a PRP that elected to defy a UAO would be immediately punished by the equity and capital markets, which would recognize the massive contingent liability such defiance would create and account for it by lowering the PRP’s stock value and increasing its cost of financing, with consequent impacts on its ability to bid for new projects or to hire additional employees, among other things. Indeed, although he took issue with GE’s assessment of the magnitude of the impact, even EPA’s economic expert agreed that defiance would occasion such harmful effects and that they would be significant. And the District Court agreed, as well, that defiance would not avoid a deprivation of property, though it ultimately ruled against GE on the basis that the burden to EPA of providing hearings outweighed the private party interests favoring such hearings.
On appeal the D.C. Circuit rejected the district court’s finding of a pre-hearing property deprivation, however, and ruled instead that such harmful impacts did not involve constitutionally protected property rights and so dismissed GE’s constitutional challenge on that predicate ground without reaching the District Court’s balancing analysis. The potential implications of that holding – which GE believes is inconsistent with Supreme Court precedent – extend well beyond CERCLA confines, and so GE has sought certiorari review. The government’s response to GE’s petition is due February 4.
Posted on December 28, 2010
Since passage of the Federal Insecticide, Fungicide, and Rodenticide Act in 1972, environmental statutes and regulations have sought to balance legislative mandates seeking disclosure of chemical identities and properties against trade secret protection concerns. This tension can be seen in the labeling of cosmetics, the submittal of test data under the Toxic Substances Control Act (“TSCA”), and the disclosure of chemical additives to fluids used for hydraulic fracturing. In all three situations, efforts to increase access to chemical identity information are likely to create further challenges to trade secret protection.
On the cosmetics labeling and TSCA front, a bill introduced in the House of Representatives this past July, entitled the Safe Cosmetics Act of 2010, would have required cosmetics labels to identify the name of each ingredient in descending order of its “predominance”, with the same information provided for internet sales. Regardless of the type of sale, the ingredients would not be afforded trade secret protection. While the bill was not enacted, the concerns that kept it alive even in the waning days of the Congressional session may be a harbinger of a new version in the upcoming session.
A bill to amend TSCA also filed in the House last July would have required a manufacturer to provide an upfront justification for any trade secret claim made in an information submittal under TSCA, with EPA required to evaluate the submittal within 60 days thereafter. While this bill did not pass either, EPA had previously announced its intention toreview chemical identity CBI claims in health and safety studies submitted under TSCA, and it subsequently proposed amendments to its TSCA regulations that would require upfront justification of a chemical identity claim. In addition, EPA has substantially increased the chemical information available on its Envirofacts database, and is now providing free access to its TSCA inventory of chemicals.
Additives to hydraulic fracturing fluids have likewise been the subject of much attention, and have sparked initiatives in a number of states to require their disclosure. Beginning next year, Arkansas will require disclosure hydraulic fracturing fluids on a well by well basis, although allowing more generic disclosure of proprietary chemicals. The information will be publicly available for review on the website of the Arkansas Oil and Gas Commission. In Wyoming, the additives are reported to the staff of the state’s Oil and Gas Conservation Commission, rather than to the public, and the Commission has granted a number of requests for trade secret protection, although the requests themselves are matters of public record.
Colorado requires oil and gas drillers to keep an inventory of the chemical additives at the site of each well, with state regulators getting a copy of the inventory upon request. Pennsylvania requires material safety data sheets covering the fracing fluid materials to be included with each drilling plan submitted for approval, with the MSDS sheets made available to the landowner and to local government and emergency responders. Both Colorado and Pennsylvania are considering expansion of those requirements.
In September EPA issued letters to nine companies engaged in hydraulic fracturing related activities seeking the identity of the fracing fluid additives and copies of studies about their health and environmental effects. All of the companies have now responded to the EPA request, with Halliburton establishing a public website to disclose information about those additives. In addition, a number of trade associations, including the American Petroleum Institute, have lent their support to a voluntary disclosure registry under development by the Groundwater Protection Council, which includes a number of state officials responsible for groundwater protection, and the Interstate Oil and Gas Compact Commission, with data to be disclosed on a well-by-well basis.
How efforts such as those just described will address trade secret issues remains to be seen, particularly given the concerns raised about potential contamination of drinking water supplies by fracing fluids. However, it appears that the day has passed when one could claim trade secret protection and provide support for that claim only when the information was actually requested. And the new riff on that old refrain sung by Johnny Mathis and Doris Day appears more likely to be that “my secret name’s no secret any more”.
Posted on October 12, 2010
On October 6, 2010, and at the direction of Governor Joe Manchin (D-WV), the West Virginia Department of Environmental Protection (WVDEP) filed a complaint against EPA and the Army Corps of Engineers in U.S. District Court for the Southern District of West Virginia. The complaint alleges that two actions by EPA, requiring surface mine permit applications to undergo enhanced scrutiny and setting a new water quality standard based on conductivity, are unlawful and have brought the permitting process to a standstill. WVDEP is seeking a court order declaring EPA’s actions to be unlawful and enjoining their implementation.
WVDEP argues that EPA’s actions 1) are substantive rule changes that did not go through formal rulemaking required by the APA; 2) require the Corps to apply illegal presumptions during environmental assessments of new surface mine permits; 3) usurp West Virginia’s authority to implement its own water quality standards and effectively issue NPDES and SMCRA permits; 4) impose new water quality standards that are not based on sound science; and 5) have caused undue delays in the issuance of surface mining permits and threaten the supply of coal available for the nation’s energy needs.
Governor Manchin is in a hotly contested race for the US Senate in which his opponent is accusing him of being a "rubber stamp" for President Obama. Undoubtedly this action will be offered as a response to that criticism.
Posted on September 22, 2010
EPA has issued an Advanced Notice of Proposed Rulemaking that broadly re-opens the question whether to authorize PCBs in caulk and under what conditions. EPA did not propose any new rules on the issue, but sought comments on what to do. This balance of this post reviews EPA’s regulatory efforts on this issue and the comments on the ANPRM, and then summarizes some options for building owners while the agency ponders.
Last year EPA announced that in “recent years” it had learned that many 1950 to 1978 buildings may contain caulking with PCB concentrations higher than 50 ppm, indeed often quite a bit higher. Linda Bochert’s post of November 3, 2009 linked to the EPA’s PCBs-in-caulk website, which the agency established to provide guidance for preventing exposures and conducting safe building renovations.
Last year’s guidance conspicuously avoided a central issue: EPA’s position on the legal status of PCB-containing caulk. EPA’s position actually is clear: PCBs at levels above 50 ppm in caulking are not authorized, hence are illegal to maintain. Yet EPA has never mounted a program to identify and remedy PCB-containing caulk, and last year’s guidance tacitly condones leaving PCBs in place indefinitely. So EPA de-emphasizes its legal interpretation. Quite possibly that is because EPA managers have not viewed PCB-containing caulking as causing actual health impacts whereas remediation certainly poses high costs and raises its own health risks.
The bottom line? Clear-cut and sensible regulatory answers remain far in the future. Meanwhile EPA is sending mixed messages – PCBs in caulk are unauthorized but don’t overreact while we ponder. Building owners, prospective purchasers and contractors must sort out their own answers about what to do or not do.
In truth, EPA long has had general awareness of PCBs in old caulk. If the concentrations are below 50 ppm, the caulk qualifies as an excluded PCB product and is not regulated by EPA. If the concentrations are higher, EPA considers the use to be illegal to maintain because EPA has never issued a use authorization for PCBs in building materials.
When over-50 ppm PCBs in caulk are reported to EPA, generally EPA has required remediation under TSCA’s rules. EPA New England (Region 1) has had a number of such matters. The Region also insists that cleanups must meet the requirements of the PCB spill regulations, which generally require cleanup in occupied buildings to levels well below 50 ppm.
Yet there is no obligation under TSCA for building owners to test for PCBs in caulk or to report exceedances to EPA. Many building owners ignore the issue, even if they are aware of the general possibility. So unauthorized caulk persists in many buildings, or goes away during renovations or demolition, awaiting potential discovery in unplanned circumstances.
That has led to a number of mini-crises, particularly for public school systems facing growing parental and school staff awareness. PCBs in schools have been much discussed in New York and elsewhere. In January 2010 the New York City schools and EPA entered into an extensive consent order to evaluate school buildings and study ways to encapsulate or treat PCBs over a period of several years.
In practice then, EPA has sent mixed messages. It has commendably - albeit tacitly -recognized that immediate and costly removal of unauthorized PCBs in caulk usually is not warranted. Yet the use remains unauthorized. Given the strictures of TSCA and the ill repute of PCBs, that remains unsettling for many building owners and prospective purchasers.
Efforts to authorize PCBs in caulk: the 1994 NOPR
The mixed messages from EPA and the issues of cost and health risks call out for clear cut regulatory answers, but also hamper EPA from issuing definitive regulations. It has already tried and retreated before.
Specifically, in 1994 as part of unrelated PCB rule changes, EPA proposed to authorize PCBs in pre-TSCA building materials, with conditions, similarly to intact asbestos containing materials. The NOPR included EPA’s conclusion that continued use at concentrations above 50 ppm did not pose a significant risk as long as the materials were in good condition. 59 Fed. Reg. 62788, 62810 (12/6/94).
The proposed conditions had many downsides from a building owner’s perspective, because leaving the materials in place, once discovered, would have then required:
· Notice within 30 days to EPA and potentially exposed individuals;
· Marking in a prominent location;
· Quarterly air monitoring and wipe sampling for one year and annually thereafter until removal of the material;
· Removal or containment (by encapsulation with a sealant) if wipe sampling or air monitoring showed exceedances of workplace standards;
· 24-hour notice to EPA of such exceedances;
EPA’s final rule issued deferred the issue while indicating EPA intended to issue a supplemental notice of proposed rulemaking and asking for further information on how much of a problem this is or not. 63 Fed. Reg. 35383, 35386 (6/29/98)
The 2010 ANPRM and Comments
Over a decade later, EPA has issued an ANRPM on unrelated PCB rule changes, and used it to request comments on whether EPA should reconsider the 50 ppm level for excluded PCB products. That request also specifically called for comment on whether EPA should issue a use authorization for PCBs in caulk. ANRPM, 75 Fed. Reg. 17645, 17664 (April 7, 2010). The ANPRM did not, however, describe any revised levels or conditions that EPA might propose for PCBs in caulk.
Many of the comments on the APNRM on this issue call for more study, but otherwise reflect an unsurprising range of recommendations. Comments from the Children’s Environmental Health Network urged EPA to cease any thought of authorizing an increase in the 50 ppm level. Comments from the American Federation of Teachers recommended a “suspension” of the allowance of PCB-containing caulk below 50 ppm while research is done. Massachusetts DPH comments tracked EPA’s position of 1994 by recommending leaving intact caulk alone, and included its own recent guidance to that effect. MIT’s comments proposed a facility-specific and detailed risk management approach. Comments from the National Association of College and University Business Officials recommended issuance of a use authorization for intact materials, perhaps conditioned on an I&M program.
Overall, the ANPRM attracted relatively few comments on this issue, by contrast with voluminous comments from the utility sector on other issues. The paucity of attention may mean that PCBs in caulk still have not reached a widespread awareness in the commercial real estate community, which provided exactly no comments. Or building owners just may prefer the status quo.
Continued Regulatory Uncertainty: Working Out Own Answers
It seems likely that EPA will not be providing any new rules on this issue in the foreseeable future. That leaves the regulated community to work out its own answers as best it can.
It appears that many building owners have determined not to look for PCBs in caulk, even in buildings where they might be expected. There is no requirement to do so and there have been no reports of actual health impacts due to PCBs in caulk.
Other building owners have chosen to test for PCBs in caulk in order to reduce regulatory risk, but only when renovations or demolition are undertaken for other reasons. Only if unauthorized PCBs are found then do they conduct remediation under the health and safety and disposal restrictions under the PCB rules.
Some prospective purchasers are including this issue in their due diligence, particularly if renovations are planned, and building attendant costs into the pricing. But some do not, relying on the absence to date of regulatory requirements, regulatory pressure or health impacts.
Some owners are writing requirements into construction contracts to make sure that contractors identify and handle any such caulking appropriately, similarly to contractual provisions for asbestos-containing materials.
Given EPA’s mixed message – PCBs in caulk are unauthorized but don’t overreact – each of those practices may be sensible. Building owners and prospective purchasers must choose their own paths based on their own policies and risk tolerance.
Posted on August 17, 2010
The most recent Supreme Court examination of the validity of solid waste flow control ordinances under the dormant Commerce Clause occurred in United Haulers Ass’n v. Oneida-Herkimer Solid Waste Management Authority, 550 U.S. 330 (2007). In United Haulers, the Court held that flow control ordinances which favor a state-created solid waste authority, but treat in-state and out-of-state private entities the same, ‘do not “discriminate against interstate commerce” for purposes of the dormant Commerce Clause.’ Id. at 345. In such case, the validity of a nondiscriminatory ordinance with an incidental effect on interstate commerce is analyzed under balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). Id. at 346. However, if the flow control ordinance favors a single private entity over other private entities, the holding in C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383 (1994), controls. Id. at 341.
United Haulers has been the linchpin for local governments to launch flow control ordinances. However, although the United Haulers decision upheld the validity of a flow control ordinance against a commerce clause challenge, the decision was based on an ordinance that was expressly authorized by the New York legislature and which required the disposal of solid waste at a landfill operated by a solid waste authority created by the New York legislature. In United Haulers, the New York legislature enacted specific legislation which allowed Oneida and Herkimer Counties to “impose ‘appropriate and reasonable limitations on competition’ by, for instance, adopting ‘local laws requiring that all solid waste . . . be delivered to a specified solid waste management-resource recovery facility.’” Id. at 335. Additionally, the flow control ordinance in United Haulers directed that all waste in Oneida and Herkimer Counties be disposed of at the Oneida-Herkimer Solid Waste Management Authority (“Oneida-Herkimer Authority”), which was created by the New York legislature and was therefore a political subdivision of the state. Id. at 335. As such, under United Haulers, it is clear that a local flow control ordinance authorized by state legislation and directing solid waste to a public waste authority created by state legislation does not violate the commerce clause if it satisfies the Pike balancing test. It is likewise clear that a flow control ordinance which directs all solid waste generated within the boundaries of a local government to be directed to a privately-owned facility is still controlled by the holding in C & A Carbone, Inc. v. Clarkstown and invalid. 511 U.S. at 391. However, the United Haulers decision does not specifically address the significance of the authorization for the flow control ordinance by the New York legislature.
According to a 1995 EPA report to Congress, state legislatures in 35 states have expressly authorized the enactment of flow control ordinances by local governments. For those states in which flow control is not expressly authorized by the state legislature, it is unclear whether a flow control ordinance enacted by a subdivision of the state would withstand a commerce clause challenge. At the very least, the absence of state authorization for flow control measures may affect the analysis of certain elements under the Pike balancing test. Additionally, in states in which the state legislature has not expressly authorized the enactment of flow control ordinances by local governments, a local flow control ordinance could be preempted by state solid waste laws and therefore invalid even if it does not violate the commerce clause; thus, leaving open the question of whether or not United Haulers has opened the door forever on local flow control.
At least one frontal challenge to local flow control is pending in S.C. In Sandlands, LLC, et al. vs. Horry County, et al., Case No. 4:09-cv-01363-TLW-TER (currently pending in United States District Court in the District of South Carolina), a landfill and affiliated hauling company are challenging a county’s ability to restrict the exportation of waste to out-of-county landfills on commerce clause and preemption claims. The plaintiffs are attempting to distinguish United Haulers as well as arguing that the ordinance is preempted by State law. The impacts of the ordinance are being felt on disposal facilities in the region as the State has implemented a regional planning approach for siting disposal facilities. While the defendants removed the commerce clause question to federal court, the federal court has certified and the State Supreme Court has accepted the preemption question.
Posted on July 22, 2010
Last week, in City of Pittsfield v. EPA, the First Circuit Court of Appeals affirmed denial of a petition by the City of Pittsfield seeking review of an NPDES permit issued by EPA. The case makes no new law and, by itself, is not particularly remarkable. Cases on NPDES permit appeals have held for some time that a permittee appealing an NPDES permit must set forth in detail in its petition basically every conceivable claim or argument that they might want to assert. Pretty much no detail is too small. The City of Pittsfield failed to do this, instead relying on their prior comments on the draft permit. Not good enough, said the Court.
For some reason, reading the decision brought to mind another recent appellate decision, General Electric v. Jackson, in which the D.C. Circuit laid to rest arguments that EPA’s unilateral order authority under § 106 of CERCLA is unconstitutional. As I noted in commenting on that decision, it too was unremarkable by itself and fully consistent with prior case law on the subject.
What do these two cases have in common? To me, they are evidence that, while the government can over-reach and does lose some cases, the deck remains stacked overwhelmingly in the government’s favor. The power of the government as regulator is awesome to behold. Looking at the GE case first, does anyone really deny that EPA’s § 106 order authority is extremely coercive? Looking at the Pittsfield case, doesn’t it seem odd that a party appealing a permit has to identify with particularity every single nit that they might want to pick with the permit? Even after the Supreme Court’s recent decisions tightening pleading standards, the pleading burden on a permit appellant remains much more substantial than on any other type of litigant.
Why should this be so? Why is it that the government doesn’t lose when it’s wrong, but only when it’s crazy wrong?