Posted on March 2, 2015
In Paradise Lost, John Milton wrote that “easy is the descent into Hell, for it is paved with good intentions.”
A modern environmental lawyer might say that the road to waste, inefficiency, and obstruction is paved with good intentions. Nowhere is that more apparent than with citizen suit provisions, as was demonstrated in the decision earlier this week in Nucor Steel-Arkansas v. Big River Steel.
Big River Steel obtained a permit from the Arkansas Department of Environmental Quality to construct a steel mill in Mississippi County, Arkansas. Nucor owns an existing steel mill in – you guessed it – Mississippi County, Arkansas. Nucor brought a host of claims in various forums (Sorry; I’m not a Latin scholar and cannot bring myself to say “fora”) in an effort to derail the Big River Steel project. It appealed the permit in Arkansas courts. It also petitioned EPA to object to the permit.
Finally – the subject of this case – it brought a citizens’ suit under the Clean Air Act alleging that the permit did not comport with various CAA provisions addressing permitting. The Court rightly dismissed the complaint, basically on the ground that the suit was simply an improper collateral attack on the air permit. The 5th and 9th Circuits have reached similar conclusions in similar circumstances.
The point here, however, is that clients don’t want to win law suits; they want to build projects. Even unsuccessful litigation can tie projects up in knots, jeopardizing project financing or causing a project to miss a development window.
The road to hell is paved with the pleadings of bogus citizen suits.
Posted on December 30, 2014
You’ll have to turn to more traditional holiday reading because EPA’s methane reduction strategy for the oil and gas industry won’t be available until next year. On March 28, 2014, the White House released its Strategy to Reduce Methane Emissions and instructed EPA to develop a comprehensive plan to reduce methane emissions from landfills, coal mines, agricultural operations, and the oil and gas industry. The White House further directed EPA to address oil and gas sector methane emissions by building on the emission reduction successes of existing regulations and voluntary programs.
EPA responded to this directive by publishing five white papers on methane emission sources in the oil and gas sector in April 2014, and requesting peer review and comment on each. The white papers address methane and volatile organic compound (VOC) emission mitigation techniques for: compressors, hydraulically fractured oil well completions and associated gas from ongoing production, equipment fugitive leaks, liquids unloading, and pneumatic devices.
Contemporaneously, EPA proposed enhancements to its long-standing and successful voluntary program for methane emission reductions—the Natural Gas STAR Program. EPA initiated the Natural Gas STAR program in 1993 to encourage voluntary methane emission reductions in the oil and gas sector through the application of cost-effective technologies and improved work practices.
EPA seeks to enhance the existing voluntary program with 17 “Gas STAR Gold” methane reduction protocols and a heightened recognition incentive for participating companies. There is a proposed Gas STAR Gold protocol for each of the source activities addressed by a technical white paper, with the exception of methane emissions from well completions following hydraulic fracturing. Other proposed Gold STAR protocols address methane emissions associated with casinghead gas, flares, glycol dehydrators, hydrocarbon storage tanks, and pipelines.
To achieve Gas STAR Gold status, a participating company must certify that at least one of its facilities has implemented all applicable Gold STAR protocols. Companies with at least 90% of their facilities implementing all applicable Gold STAR protocols achieve “Gas STAR Platinum” status.
While few doubt that EPA will pursue methane emission reductions via a regulatory framework, it is speculation only whether EPA’s approach will consist of methane reductions as: (1) a co-benefit of regulations aimed at VOC emissions; (2) direct regulation of methane emissions; or (3) a combination of these approaches. Regardless of the regulatory direction EPA takes, expanded and enhanced voluntary measures will certainly be part of its comprehensive strategy for reduced methane emissions.
EPA’s next step will be to announce the type of regulatory framework necessary to achieve White House goals, and explain how voluntary efforts fit into that framework. Although EPA aimed to announce that planned strategy by the end of the year, recent reports indicate that a January 2015 announcement is more realistic. It looks like we will have to look elsewhere for our leisure holiday reading. (Thanks are due to Karen Blakemore in our Baton Rouge office for all that is good and useful in this post.)
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on September 23, 2014
Financial responsibility is a familiar environmental law concept. Many of us have negotiated financial assurance provisions in site consent agreements. RCRA’s closure and post-closure financial responsibility requirements at treatment, storage and disposal (TSD) facilities are well-established. Financial responsibility obligations are also a component of many other federal and state environmental programs.
I suspect, however, that few practitioners are aware of a CERCLA financial responsibility provision that has been in existence since the Act’s inception. CERCLA Section 108(b) mandates that the President identify classes of facilities that will be required to demonstrate a financial ability to cleanup releases of hazardous substances. These facilities will be obligated to provide evidence of financial responsibility that is consistent with the degree and duration of the risks associated with their production, handling, treatment, storage and disposal of hazardous substances. The requirements of Section 108(b) are intended to assure availability of funds should the businesses go bankrupt or otherwise become financially unable to conduct future environmental response actions.
Section 108(b) generally imposes two regulatory tasks on EPA: Identify the classes of facilities for which financial responsibility requirements will be developed and promulgate regulations establishing those requirements. For twenty-eight years, EPA deferred breathing regulatory life into Section 108(b). EPA’s inattention to Section 108(b) ceased to be an option in 2008. Litigation commenced by the Sierra Club and others resulted in a federal court order requiring EPA to identify industries that would be first in line for Section 108(b) rulemaking. EPA determined in 2009 that the hard rock mining industry would be its first priority. In early 2010, EPA published advance notice of its intent to regulate additional classes of Section 108(b) facilities: chemical manufacturing, petroleum and coal products manufacturing and the electric power generation, transmission and distribution industry.
Although deadlines have come and gone, to date no financial responsibility rules have been proposed. Nevertheless, the lifeless form of Section 108(b) has finally begun to stir. EPA advised Senate lawmakers in June of this year that financial responsibility requirements for the hard rock mining industry would be issued by 2016. In the meantime, the NGOs remain ever vigilant. Armed with data indicating that, particularly during the recent recession, taxpayers and disadvantaged communities suffered the adverse consequences of EPA’s inaction, environmental advocacy groups filed a Petition for Writ of Mandamus demanding that the agency promptly comply with Section 108(b)’s rulemaking requirements. In contrast, many industry groups contended that the Section 108(b) rulemaking being developed is based on a flawed analysis of potential risk and ignores the impact of existing state and federal financial responsibility laws and regulations that have achieved most of the objectives of Section 108(b). Legislation introduced in the House of Representatives in 2013, generally supported by the affected industries, included significant amendments to CERCLA Sections 108(b) and 114(d).
Whether you believe that Section 108(b) is outdated and unnecessary, or that immediate and comprehensive implementation of its mandates is of paramount importance, I would submit that EPA’s seemingly cautious approach to Section 108(b) rulemaking is justifiable. Considering the financial consequences, the identification of target industries must be based on a careful and comprehensive evaluation of the actual risks associated with a particular industry’s handling of hazardous substances and the historic “track-record” of that industry’s ability to financially respond to releases. The extent to which existing federal and state financial assurance programs address the identified risks must also be carefully scrutinized to avoid unnecessary cost and duplication. EPA’s selection of acceptable financial assurance mechanisms is also of critical importance. Elimination of the so-called “financial test” method, for example, may impact the capacity of financial and credit markets to provide the necessary financial assurance and adversely affect global competitiveness.
Future rulemaking that is based on a thorough and defensible analysis of actual risk and is limited to filling in any gaps in existing financial assurance programs will best serve the public, the environment and the regulated community.
Posted on August 25, 2014
On August 12th, the 9th Circuit Court of Appeals issued a decision that arguably explains everything from why the Tea Party exists to why otherwise calm and sane executives suddenly lose all their hair. Perhaps most astounding, the decision is clearly correct. Perhaps the law is an ass.
In 2008, Avenal Power submitted an application to EPA for a PSD permit to construct a new 600 MW natural gas-fired power plant in Avenal, California. Although section 165(c) of the Clean Air Act requires EPA to act on such applications within one year, EPA failed to do so.
Subsequently, and before EPA ever did issue a permit, EPA revised the National Ambient Air Quality Standard for NOx. Avenal Power apparently could demonstrate that emissions from the new plant would comply with the old NAAQS, but could not demonstrate that it would not cause an exceedance of the new NAAQS. After some waffling, EPA took the position that it could grandfather the permit application and review it under the prior NAAQS. Citizen groups appealed and the Court of Appeals held that EPA had no authority to grandfather the application.
To the Court, this was a simple application of Step 1 of Chevron. The Court concluded that sections 165(a)(3) and (4) and 110(j) of the CAA unambiguously require EPA to apply the NAAQS in effect at the time a permit is issued. Thus, EPA has no discretion to grandfather permit applications, even though EPA was required by law to issue a permit decision at a time when more lenient requirements were in effect.
I think that the Court’s decision is clearly right on the law. The statutory language seems unambiguous. But what did the Court have to say to those who feel that the result is inequitable, because Avenal was legally entitled to a decision in one year, and would have obtained its permit if EPA had acted timely? Pretty much, tough luck:
Finally, EPA relies heavily on the argument that the equities weigh in favor of Avenal Power. In short, we agree. Avenal Power filed its application over six years ago, and endeavored to work with EPA for years, even after filing suit, to obtain a final decision. But however regrettable EPA’s treatment of Avenal Power has been, we simply cannot disregard the plain language of the Clean Air Act, or overlook the reason why an applicant must comply with revised and newly stringent standards —that is, “to protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare and the productive capacity of its population.” Honoring the statute’s plain language and overriding purpose, we must send EPA and Avenal Power back to the drawing board. (Emphasis added.)
In other words, EPA screwed up, and Avenal Power got screwed. Imagine having to explain that to your client.
Posted on June 18, 2014
It has been more than 30 years since EPA hired its first criminal investigators, but questions remain about when environmental violations will result in criminal charges. Critics frequently portray environmental crime as a poster child of “over-criminalization” with a recent example Senator Rand Paul in his book Government Bullies: How Everyday Americans Are Being Harassed, Abused, and Imprisoned by the Feds.
To address these concerns, I have suggested that prosecutors should limit criminal charges to violations that involve one or more of the following aggravating factors: (1) significant environmental harm or public health effects; (2) deceptive or misleading conduct; (3) operating outside the regulatory system; or (4) repetitive violations. By doing so, prosecutors would focus on violations that undermine pollution prevention efforts and avoid targeting defendants who committed technical violations or were acting in good faith.
I subsequently developed the Environmental Crimes Project to determine how often the aggravating factors I identified were present in criminal prosecutions. With the assistance of 120 students at the University of Michigan Law School, I analyzed all defendants charged in federal court with pollution crime or related Title 18 offenses from 2005-2010. We examined court documents for over 600 cases involving nearly 900 defendants to create a comprehensive database of environmental prosecutions.
Our research revealed that prosecutors charged violations involving aggravating factors in 96% of environmental criminal prosecutions from 2005-2010. More than three-quarters of the violations involved repetitive conduct, and nearly two-thirds involved deceptive or misleading conduct. Moreover, we found that 74% of the defendants engaged in conduct that involved multiple aggravating factors. And, for 96% of the defendants with multiple aggravating factors, one of the first three factors (harm, deceptive conduct, or operating outside the regulatory system) was present along with repetitiveness.
These findings support at least three significant conclusions. First, in exercising their charging discretion, prosecutors almost always focus on violations that include one or more of the aggravating factors. Second, violations that do not include one of those aggravating factors are not likely to be prosecuted criminally. Third, prosecutors are most likely to bring criminal charges for violations that involve both one of the first three factors and repetitiveness—and are less likely to bring criminal charges if that relationship is absent.
I plan to update my research with data from 2011-2012 and to examine a representative sample of civil cases using the same criteria. But my research already should provide greater clarity about the role of environmental criminal enforcement and reduce uncertainty in the regulated community about which environmental violations might lead to criminal charges. My research also suggests that prosecutors are exercising their discretion reasonably under the environmental laws and should lessen concerns about over-criminalization of environmental violations.
For more, please see David M. Uhlmann, Prosecutorial Discretion and Environmental Crime, 38 HARV. ENVTL. L. REV. 159 (2014).
Posted on June 13, 2014
If it’s wastewater from a treatment plant pumped into injection wells and it ends up in the ocean, you need an NPDES permit under the Clean Water Act. At least that’s the conclusion from the U.S. District Court for the District of Hawaii in Hawai’i Wildlife Fund v. County of Maui, decided May 30, 2014.
In Hawai’i Wildlife Fund, a case in which my colleague David Henkin in our Honolulu office represented the plaintiffs, the Court considered the following facts: The County of Maui operates a wastewater treatment plant located about a half mile from the ocean that pumps millions of gallons of treated wastewater into several injection wells each day. Within the last few years, EPA and others performed a tracer dye study because of concern that much of this wastewater was migrating through a groundwater aquifer and emerging in the ocean off the coast of Maui through seeps and springs. The results of this study confirmed that, for a number of the injection wells, this was the case, even though it took several weeks for the dye to move from the wells into the ocean through the groundwater aquifer. Based on other information, the County apparently had been aware since 1991 that its wastewater discharges were reaching the ocean. Plaintiffs, Hawai’i Wildlife Fund and others, brought a citizens suit under the Clean Water Act asserting that because the County wastewater treatment facility had no NPDES permit, the discharge of wastewater into the ocean via the injection wells and groundwater was an illegal, unpermitted discharge.
U.S. District Court Judge Susan Mollway agreed and granted the plaintiffs summary judgment. The Court was not deterred by the County’s argument that it had an application for an NPDES permit pending with the State or other preliminary matters. Instead the Court observed that “the only area of dispute between the parties is whether the discharges into the aquifer beneath the facility constitute a discharge into ‘navigable waters[,]’” the operative language of the Clean Water Act in this case.
On this point, the Court turned to the Supreme Court’s Rapanos decision and concluded that waters regulated by the CWA are broader than waters that are “navigable-in-fact,” hardly a controversial conclusion. The Court then went on to conclude that “liability [for an unpermitted discharge] arises [under the CWA] even if the groundwater . . . is not itself protected by the [Act] as long as the groundwater is a conduit through which the pollutants are reaching [the ocean].” As the Court observed, “[t]here is nothing inherent about groundwater conveyances and surface water conveyances that requires distinguishing between these conduits under the [CWA].” In the Court’s view, as long as the groundwater served as a conveyance for pollutants that reached navigable waters, liability for an unpermitted discharge would attach.
The Court also concluded that liability for an unpermitted discharge arose under an alternative test which the parties drew from the Ninth Circuit’s post-Rapanos decision in Northern Cal. River Watch v. City of Healdsburg, even though the Court expressed skepticism about the applicability of this test where groundwater is involved. Under this alternative test, because there was a clearly discernible nexus, i.e., the groundwater aquifer, between the County’s discharge of pollutants into injection wells and its subsequent emergence in the ocean, and because the discharge of pollutants to the ocean significantly affected the “physical, biological, and chemical integrity” of the ocean in the area of the seeps and springs through which the discharge emerged, liability for an unpermitted discharge also would attach.
Next up: civil penalties and remedy.
Posted on May 16, 2014
In 2012 and 2013, the Supreme Court issued several decisions recognizing claims for regulatory takings that observers believed might indicate a shift toward greater protection of private property rights. In Arkansas Game and Fish Comm’n v. United States, 568 U.S. ___ (No. 11-597, Dec. 4, 2012), the Supreme Court upheld a claim for a temporary taking based on flooding associated with a Corps of Engineers project, discussed here. And in Horne v. Department of Agriculture, 569 U.S. ___ (No. 12-123, June 10, 2013), under very unusual circumstances, the Supreme Court allowed the takings claim to be presented as a defense to government regulatory action. The 2013 decision in Koontz v. St. Johns River Water Management District, 570 U.S. ___ (No. 11-1447, June 25, 2013), concerned mitigation requirements associated with land development in Florida, discussed here and here. Shift in judicial approach to greater protection of property rights? Maybe not.
During the same time period, the Court of Appeals for the Federal Circuit held that a landowner could not claim a taking arising out of denial by the Corps of an application for approval of a wetland mitigation bank. Hearts Bluff Game Ranch, Inc. v. United States, 669 F.3d 1326 (Fed. Cir. 2012). This lesser-known decision addresses a fundamental aspect of takings law — what is the property interest that is protected by the takings clause? Apparently it matters whether you have a permit denial (and can seek compensation) or a denial of a government approval of a benefit (which confers no compensable property right).
A wetlands mitigation bank is a property where wetlands have been enhanced or restored or otherwise improved. The mitigation bank credits generated by those efforts are available as compensatory mitigation for impacts authorized under Corps permits issued under Section 404 of the Clean Water Act. Unlike dredge or fill of wetlands or streams that require a Section 404 permit, the mitigation bank is not approved by permit. Rather, under regulations, the mitigation bank is reviewed by the Corps, EPA and other federal and state agencies, known as the Interagency Review Team (IRT). Subject to IRT review, the Corps and the mitigation banker sign a Mitigation Banking Instrument (MBI) that approves the mitigation bank. The MBI contains terms such as the size and nature of the wetland enhancement or restoration that will occur on the bank property. The MBI also establishes the credits for the bank, i.e., the marketable element that can be sold to a wetland permit applicant who needs to provide compensatory mitigation.
Despite this seemingly complicated process, the situation can be simplified in this way: Mr. Black, owner of Blackacre, wants to fill wetlands on his property to build homes. Mr. Black must obtain a Section 404 permit from the Corps and likely will need mitigation to offset what he fills. Ms. White, owner of Whiteacre, wants to restore and enhance wetlands on her property, and use that enhancement as a basis to offer credits for wetland compensation to those who need to mitigate their impacts to wetlands, like Mr. Black. Ms. White needs to go through the mitigation banking regulatory process for her approvals. Her MBI will authorize the planned “ecological development” of her property.
Comparing the Hearts Bluff decision to more standard regulatory takings law, if Mr. Black’s application for a permit is denied, he may be able to sue the United States for compensation for the taking of his property. If Ms. White’s application for approval of the mitigation bank is denied, the Federal Circuit says she has no compensable property interest.
Hearts Bluff sought approval for a 4000 acre mitigation bank in Texas. The land was located where the planned Marvin Nichols Reservoir might be sited, a proposed reservoir that has a long history in Texas. Hearts Bluff also sued in state court. After consulting with the state and evaluating the potential site, the Corps denied the application for mitigation bank approval, citing reasons that do not appear in the takings decisions.
Any regulatory takings claim faces a number of hurdles. What is unusual about Hearts Bluff is that the court held that the company had no “cognizable property interest.”
The Federal Circuit focused on its two-part test for evaluating takings claims. “First, as a threshold matter, the court determines whether the claimant has identified a cognizable Fifth Amendment property interest that is asserted to be the subject of the taking. . . .Second, if the court concludes that a cognizable property interest exists, it determines whether that property interest was ‘taken.’” Id. at 1329. The court stopped at step one, finding that there was no property interest.
The court adopted the government’s position that Hearts Bluff “was never entitled to operate a mitigation bank solely by virtue of its ownership of the land and that it did not have a property right in access to the mitigation banking program because the program is entirely a creature of the government and subject to pervasive and discretionary government control.” Id. at 1330. The mitigation banking program, said the court, “is run exclusively by the Corps, subject to its pervasive control, and no landowner can develop a mitigation bank absent Corps approval. Mitigation banking in its entirety would not exist without the enabling government regulations. Under our precedent, therefore, the Corps’ discretionary denial of access into the Corps program cannot be a cognizable property interest.” Id. at 1331.
The court relied on precedent where the claimant owned property but not the particular right to use the property as it asserted. For example, in Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206 (Fed. Cir. 2005), the court had held that a helicopter operator had no takings claim when a federal “flight restriction” essentially destroyed its business. There are not many cases in this area, and many of them deal with personal property, rather than real property. These decisions do not turn on the distinction between a government permit and a government benefit, but rather delve into whether the claimant’s property carried with it the right to pursue the particular “end goal.”
In short, while Hearts Bluff certainly owned the real property, its ability to “develop” it as a mitigation bank was not a “right” that could be taken by the Corps’ denial of its application. It was not such a right because the government essentially created the end use (mitigation banking).
It’s been a long time since my law school days, but the “bundle of sticks” that I was taught constitute real property rights should include the right to seek governmental approval for the owner’s preferred uses, regardless of whether the government program is new, old, established by regulations, or described in a statute. The government does not always commit a taking by denying such uses, but it is troubling that property rights should depend on which government program is involved.
Posted on April 18, 2014
Appalling environmental conditions that have accompanied China’s rapid growth have been described on Chinese social media as “postapocalyptic,” “terrifying,” and “beyond belief.” During the last year, air pollution in several Chinese cities became so horrendous at times that road travel, schools, construction projects, and airports temporarily were shut down. Epidemiologists estimate that 1.2 million Chinese die prematurely each year from exposure to air pollution. Due to widespread water pollution, tap water is not safe to drink, even in luxury hotels. Pollution is estimated to cost the Chinese economy more than 3.5% of gross domestic product annually.
Rising public demand to clean up the environment has caught the attention of China’s Communist Party leadership. In an address at the opening of the annual session of the National People’s Congress (NPC) last month, Chinese Premier Li Keqiang declared “war on pollution.” Chinese authorities agree that enforcement is the number one problem with their environmental laws. Bie Tao, Deputy Director General of Policies and Regulations of MEP, cited estimates that half of all regulated facilities in China violate the law and that pollution in China would be 70% less than it currently is if polluters were in full compliance with the law.
Problems with enforcement of China’s environmental laws run deep. China’s regulatory system is highly decentralized with the nation’s Ministry of Environmental Protection (MEP) less than a fiftieth the size of the U.S. EPA for a country with more than three times as many people than the U.S. Enforcement problems are compounded by local corruption, small penalties for violations, the lack of an independent judiciary and the absence of a long tradition of respect for the rule of law.
As Chinese authorities struggle to increase the enforceability of their environmental laws, two ACOEL members were given an unusual opportunity last month to peak into a window on the NPC’s legislative processes. On March 19, James A. Holtkamp and I were invited to appear before the Legislative Affairs Commission of the NPC’s Standing Committee in Beijing along with David Pettit, a senior attorney with the Los Angeles office of the Natural Resources Defense Council (NRDC). Billed as a “Green Dialogue,” the event was an extraordinary effort to obtain U.S. expert input to help resolve disagreements within the NPC on proposed amendments to make China’s basic Environmental Protection Law more enforceable.
Representatives of the NPC’s Standing Committee and MEP presented us with six sets of questions concerning U.S. enforcement procedures and policies. Many were directed at understanding how penalties for environmental violations are determined in the U.S. A proposal to provide that maximum fines for environmental violations in China be calculated in part based on the number of days the violation has occurred was one issue that had created disagreement within the NPC. We noted that this has become a fundamental principle of U.S. pollution control law and that it provides a powerful incentive for violators promptly to stop and correct violations. We emphasized the importance of monitoring and reporting requirements in environmental permits. We also suggested that China should consider adopting a policy that enforcement actions should recoup at least the economic benefit of the violation to ensure that companies do not profit from their violations. This has been EPA’s long-standing policy and there appears to be some interest in adopting such a policy in China.
Chinese authorities are moving toward requiring greater transparency from polluters. Beginning on January 1, 2014, they mandated that China’s 15,000 largest companies provide the public with continuous data concerning their air and water emissions, something that would have been unthinkable just a few short years ago. By opening up a “Green Dialogue” on U.S. enforcement practices, China’s legislators are exhibiting a healthy appetite for entertaining new ideas to improve the effectiveness of their environmental laws. Our U.S. expert panel consisting of an industry practitioner, a public interest lawyer, and an academic apparently proved to be a persuasive coalition for we have learned that many of our recommendations are being incorporated into the new draft of China’s basic Environmental Law.
Posted on April 16, 2014
Transportation of crude oil via rail has increased from 9,500 carloads in 2008 to more than 400,000 carloads in 2013, and an increase in incidents associated with these shipments has occurred as well. On February 25, 2014, the U.S. Department of Transportation (DOT) issued an Emergency Restriction-Prohibition Order (amended on March 6, 2014) to address safety issues of transporting crude oil by rail.
The DOT Emergency Order focuses on the imminent safety hazard posed by misclassification of crude oil, which can lead to the use of containers that lack the safety enhancements necessary to safely transport oil properly classified as Packing Group (PG) I and II materials. The Emergency Order required testing and classification of crude oil prior to transportation rather than reliance on generic information. The amended Emergency Order stepped back somewhat because it “does not specify how often testing should or must be performed, nor does it require testing to be performed for each and every shipment.” The amended order allows the operator to determine whether it has sufficient data available to reliably classify the crude oil it intends to ship. It still requires operators to treat Class 3 petroleum crude oil as a PG I (highest danger classification) or PG II (medium danger classification) material rather than the less demanding PG III classification. A presumptive PG I or PG II classification removes from use several models of tank cars that have fewer safety measures. Recent accident investigations indicate that presumptive classifications become dangerous where some sources of crude (like the Bakken Formation) exhibit comparatively higher volatility.
This Emergency Order followed a DOT safety initiative (agreed to by the Association of American Railroads (“AAR”)) that establishes new, voluntary safety standards for the transportation of crude oil by rail, including speed restrictions, increased rail and mechanical inspections, and improved braking systems. But are these measures enough?
Overall, yes. Improved safety requires actions of different types: (1) operational changes; (2) additional steps to prevent derailments; and (3) tank car design changes. The Emergency Order and DOT/AAR safety initiative address the first two pathways. What about tank car design? The Emergency Order leaves that issue for another day. Although the Emergency Order will affect the ability to use certain tank cars with fewer safety measures, it has been estimated that the tougher classification standards for crude oil will affect less than three percent of tank cars now used in the United States. In 2011, AAR adopted higher standards for new tank cars transporting crude oil and ethanol, although there were no retrofit specifications adopted. According to the AAR, roughly 92,000 tank cars are moving flammable liquids and approximately 78,000 of them do not meet the new 2011 tank car standards.
Regulators have also acknowledged the need for improvements for tank cars. The Pipelines and Hazardous Materials Safety Administration (PHMSA) is considering recommendations by the AAR to upgrade new tank car standards and require existing tank car retrofits. The AAR recommended to PHMSA several improvements for tank cars transporting flammable liquids, including an outer steel jacket around the tank car, thermal protection, improved pressure relief valves, and other measures to prevent puncture in the case of an accident.
None of these measures are the final solution, but the Emergency Order, the DOT safety initiative and upgrades to tank car safety standards are crucial steps toward safer transportation of crude oil.
Posted on April 14, 2014
Last week, in response to shareholder requests that it disclose information regarding how climate change might affect it in the future, ExxonMobil released two reports, one titled Energy and Climate, and one titled Energy and Carbon – Managing the Risks. They actually make fascinating reading and seem to represent a new tack by ExxonMobil in its battle with those seeking aggressive action on climate change.
The reports do not deny the reality of climate change. Indeed, the reports acknowledge climate change, acknowledge the need for both mitigation and adaptation, acknowledge a need to reduce fossil fuel use (at some point), acknowledge the need to set a price on carbon, and acknowledge that ExxonMobil in fact already is making future planning decisions utilizing an internal “proxy” price on carbon that is as high as $80/ton of CO2 in the future.
The reaction of the shareholder activists who pushed for the disclosures? They are not happy. Why not?
Because ExxonMobil has said explicitly that it doesn’t believe that there will be sufficient worldwide pressure – meaning government regulations imposing very high carbon prices – to reduce fossil fuel use sufficiently quickly enough to limit global temperature rise to 2 degrees Celsius. It also does not believe that worldwide carbon regulation will leave it with any “stranded assets.”
I understand the moral case against fossil fuel use. Personally, however, I’d rather rely on a carbon price that provides the appropriate incentives to get the reductions in CO2 emissions that we need to mitigate climate change. On that score, sadly, it’s not obvious to me at this point that ExxonMobil’s analysis of likely outcomes is actually wrong.
My biggest complaint with the reports is the refusal to recognize that markets react dynamically to new regulatory requirements. The history of big regulatory programs is that they pretty much always cost less than the predictions made before the regulations are implemented. The lesson then is that the current projections of energy cost increases resulting from a high cost of carbon are likely to be overestimated.
Time will tell. At least I hope so.
Posted on April 2, 2014
What happens when an administrative agency actually fails to comply with a court order mandating the adoption of regulations? New Jersey administrative agencies and bodies have an idea despite the state’s Supreme Court modification of a lower court’s order. As state environmental agencies and boards often face court orders mandating new or modified regulations, they should know what almost happened in New Jersey.
In New Jersey, the nation’s most densely populated state, there is a constant tug between development and preservation. Two New Jersey Supreme Court decisions and the state’s Fair Housing Act address housing. In effect, they require all 566 municipalities to provide for the development and existence of low and moderate-income housing so that each municipality meets its fair share of the region’s housing needs. The Act created the Council on Affordable Housing (COAH) to establish housing fair share numbers for the municipalities and the regulatory means to meet them. COAH has been criticized routinely and has been the subject of several major decisions since its creation. The last such decision, In re Adoption of N.J.A.C. 5:96 & 5:97 by N.J. Council on Affordable Housing, was in September of 2013 when the Supreme Court ordered COAH to enact new rules within five months. With COAH under attack from the current administration and with several seats on its board empty, meeting the deadline seemed unlikely. COAH held no meetings within the five months and the deadline was not met.
As a result of missing the deadline, the Superior Court-Appellate Division, our intermediate court, issued a decision and order of March 7, 2014, that should be a lesson to all regulatory bodies. The Appellate Division took the extraordinary measure of requiring a COAH meeting five days after issuing the order to be attended by sufficient board members to constitute a quorum, at which meeting the board was to instruct its executive director to prepare compliant rules. The Appellate Division required that the new rules be presented to COAH two weeks later. On that date, COAH was to meet again with a quorum, conduct an official meeting and adopt the rules consistent with the state’s Administrative Procedures Act. Six weeks later, again with a quorum required, COAH was to meet to review all public comments, consider them and any amendments proposed by the executive director and adopt the rules.
As if the level of detail in directing COAH was not enough, here’s the part of the decision and order that caused a stir. If this aggressive schedule was not met in any way, the Appellate Division ordered that “each member of the COAH Board will be ordered to personally appear before this court … to show cause why he or she shall not be declared in contempt of this court’s authority subject to monetary sanctions, civil detention, and such other sanctions the court may deep suitable to induce compliance with this order.” If this order does not send a chill into the hearts of tardy regulators, nothing will.
Perhaps the chill was ameliorated by the subsequent order of the New Jersey Supreme Court of March 14, 2014, setting more lenient time frames for compliance. The Supreme Court’s order also dropped the language about appearing personally at a contempt hearing but another court might not if its order to issue regulations is not met. For state regulators in such a situation, their court of highest jurisdiction may not back away from the approach taken by the New Jersey Appellate Division, establishing a specific agency schedule and threatening severe personal consequences in the face of non-compliance with a court order.
There may be nothing particularly new about the judicial power to enforce its orders, including use of citation for contempt. In the context of reviewing administrative regulations and dealing with appointed or elected boards or agencies, exercise of this judicial power generally includes recognition of and sensitivity to the separation of powers and the “real world” circumstances in which agencies act. However, these recent New Jersey orders should put regulators on notice that reviewing courts will be less tolerant of failures to implement their decisions.
Posted on March 10, 2014
Environmentalists and utility companies don’t always see eye to eye. But when we do find common ground, big changes can happen. Earlier this month, NRDC and the Edison Electric Institute, which represents all the nation’s investor-owned utility companies, serving 220 million Americans, announced an agreement to work together to bring more clean energy and efficiency into the electric grid.
Moving toward a cleaner, more efficient electric grid is less a question of technology than of policy. Outdated utility regulations can pit utility companies and clean energy against each other. Under the traditional regulatory scheme, utilities have to sell increasing amounts of electricity in order to recover their costs. So when customers start putting up solar panels on their roofs, the utility “loses.” Or when customers weatherize their homes and don’t need as much heat to stay warm, the utility “loses.”
This outdated regulatory model is slowing the growth of clean energy and efficiency, and jeopardizing the development of the grid that utilities and customers would all like to have: an enhanced grid that provides clean, reliable, affordable electricity with less carbon and toxic air pollution. In order to speed up the deployment of clean energy and efficiency across the country, and bring our grid into the modern era, utility companies and customers need to be rewarded for doing the right thing.
NRDC and the EEI have come to a path-breaking agreement on key policy changes that will make our electric grid cleaner and more robust. The most significant change is a shift in thinking. Instead of being in the business of selling electricity, a commodity, utilities should be in the business of providing better quality electricity services. This means more efficient electricity, from diverse clean sources like wind and sun, supplied by a robust, modern grid that can take advantage of clean energy, whether it’s generated from someone’s roof or from a power plant. Both utilities and clean energy providers will be winners if this is done right.
Having the support of utilities is a major step forward in pushing for reform. When utilities are rewarded for making our grid better--cleaner and more efficient--instead of merely for selling more electricity, we’ll see improvements much faster. More clean energy, more efficiency, more reliability, more options for consumers. Working together, with a host of diverse partners, NRDC and EEI can help convince state utility commissions to update their regulatory policies and help usher in a new era of clean, reliable, affordable electricity.
Posted on March 5, 2014
Environmental response trusts created as a result of corporate bankruptcies demonstrate that workable mechanisms exist to protect against future environmental liability. This prompts the question: Can this concept be expanded and become an official amendment to CERCLA, or a separate Brownfields law?
The Revitalizing Auto Communities Environmental Response Trust (“RACER Trust”), the largest response trust every created, owns, manages and remediates the former holdings of General Motors. It includes 89 properties, 60 of which needed environmental remediation, with over $640 million provided to RACER Trust, nearly $500 million of that designated to address environmental liability. The RACER Trust holds the liability for onsite contamination when it sells a property as long as the new owner allows the remediation work to continue. This liability shield also travels with the land, providing security to future purchasers with regard to unexpected contamination that could otherwise cost thousands or millions of dollars. What is unique about this and other trusts, is the cooperative nature which the Trustees and the regulatory agencies have displayed in addressing contamination and remedial activities, very different than the standard contentious approach which routinely exist at sites today.
There have been several legislative proposals in the 113th Congress to provide fixes to CERCLA, the cornerstone law of environmental remediation. The proposed legislation, however, is more focused on transferring authority over clean-up of sites to the states and implementing credit for state contributions to the remediation. In its testimony to the House Energy and Commerce Committee last May, EPA’s Office of Solid Waste and Emergency Response laid out the reasons for its opposition to many of the legislative proposals. The main points of concern are over the potential delays, increased administrative and litigation costs, and conflicting clean-up authority at sites.
But instead of legislation that could result in further slowing down an already protracted process, what about creating opportunities and enticements for development of contaminated properties? Whether under the CERCLA regime, or through the Brownfields program, there are ways to create environmental liability shields that would restore these properties to useful status, providing industry and jobs for the surrounding communities. In 2007, a nascent proposal to address this issue was developed. The draft legislation called for the creation of the Recovered Property Protection and Assurance Trust or R-PAT for transfer of contaminated properties and their associated environmental liabilities to a quasi-governmental trust. The R-PAT concept would have required a current property owner to pay a significant fee in order to place the land in the trust, and then cleaned up and conveyed, liability-free, to a purchaser. For various reasons, including the quasi-governmental nature of the trust and the floundering economy, the proposal was a non-starter.
However, given the dearth of other viable proposals, perhaps it is time to re-examine the trust concept and how contaminated properties can be best put back to profitable use. If we really want to streamline CERCLA or improve the Brownfields program, then let’s talk about how to get the land back into use, how to remove the time consuming and wasteful antagonism surrounding remediation and how to provide bullet-proof shields for bona fide purchasers now and in the future.
Posted on February 26, 2014
A working group of federal agencies has issued a preliminary list of options for improving chemical facility safety and security for public comment by March 31, 2014. This document implements Section 6(a) of Executive Order 13650, which was issued on August 1, 2013, in response to the explosions at a fertilizer plant in West, Texas. These options for changes in policies, regulations, and standards for chemical facility safety and security are potentially the most far-reaching actions triggered by this Executive Order, which has received renewed attention due to the recent drinking water contamination in West Virginia that was caused by a leak from a chemical storage facility.
The working group lists 49 distinct options, which are each presented as questions, for public input. A number of the options are applicable to specific chemicals, namely ammonium nitrate and other explosives. A few options specifically apply to oil and gas facilities. Most options, however, broadly deal with chemical safety and security within industry in general. This last category of options addresses issues relating to process safety, regulatory coverage of additional hazardous chemicals, chemical reactivity standards, security at chemical facilities and identifying regulated facilities.
These options raise many important and thought-provoking issues. Here are a few examples. Can overlapping chemical safety and security programs of two or more agencies be harmonized? Should being subject to one regulatory program, such as the OSHA process safety management, automatically mandate coverage under another program, such as EPA’s risk management program? Should agencies use rulemaking, policies or guidance to effectuate chemical facility safety and security improvements? How can agencies work with private consensus standard organizations in this area? Can strategies, such as greater worker involvement, root-cause analysis or the use of leading indicators, improve safety and security at chemical facilities? While focusing on the front-page accidents can help answer these issues, attention to successful models of chemical facility safety and security is a more reliable guide to identifying useful improvements.
Posted on February 25, 2014
In an article earlier this week, the Boston Globe reported on concerns that the Massachusetts Department of Environmental Protection is planning to weaken cleanup standards for hazardous waste sites in Massachusetts, seemingly in response to pressure from developers. The article is so wrong and the concerns are so misplaced that some response is necessary.
First, we expect MassDEP to regulate in the face of uncertainty. That means that MassDEP must set cleanup standards without perfect knowledge. As a result, most people – and certainly the environmentalists complaining about the regulatory changes – would expect MassDEP to err on the side of conservatism, making the cleanup standards more stringent than may be necessary.
At the same time, science evolves and we’d expect MassDEP to alter cleanup standards periodically in response to changed science. Moreover, if MassDEP originally erred on the side of being overly conservative, one would expect that, as science improves, many standards could be relaxed – and that that would be a good thing.
What’s most troubling about the article and the NGO position here is the idea that environmental protection is still a black hat / white hat arena and that if something is good for economic development, then it must be bad for the environment. I thought we’d gotten past that in Massachusetts. Indeed, brownfields redevelopment is the prototypical example given of environmental protection being used to advance economic goals. That’s why it’s both stunning and deeply depressing to see lines such as this in the article:
"Critics worry the rules will spur developers to build on contaminated land, known as brownfields."
Better instead that we should plow under the greenfields and leave the brownfields vacant and without any cleanup, I suppose. I thought we already tried that strategy and concluded it didn’t work.
Posted on February 20, 2014
As I sit in my thankfully warm office on a frigidly cold winter day, I ponder the difficulty of regulating the environmental consequences of climate change. Whether a true believer or a science skeptic, it is hard not to wonder what happens if global warming believers are right. Isn’t it a good idea to work to improve air quality regardless and be ahead of the curve if systematic warming proves a fact?
Even that fairly cautious, deliberative body, the United State Supreme Court, in its 5-4 decision in Massachusetts v. EPA, made quick work of EPA’s reasons for inaction in deciding that EPA could regulate greenhouse gases under the Clean Air Act. The reader may recall that the State of Massachusetts, along with other entities, challenged EPA’s decision that the agency had no authority to regulate carbon dioxide and greenhouse gases. EPA had argued that even if the agency had authority, it could not practically regulate greenhouse gas emissions in a meaningful way to address global climate change. Thus EPA had decided to exercise discretion by not regulating—based on foreign policy considerations such as not putting the U.S. at a competitive disadvantage.
The majority of the U.S. Supreme Court, in rejecting this rationale, was favorably disposed toward taking incremental steps on climate change. The Court said: “Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop (citation omitted). They instead whittle away at them over time, refining their preferred approach as circumstances change and as they develop a more-nuanced understanding of how best to proceed.” Perhaps, in other words, one has to start somewhere. To its credit, EPA then initiated regulatory steps to do just that but has largely been hindered at every step by further legal challenges.
The old adage “Think globally, but act locally,” long touted in land use politics and grassroots environmental movements, might also test the global climate change debate about how best to address this collective problem. It should not come as any great surprise that efforts to address climate change globally have met with limited success. Why should one nation-state undertake costly reform while others continue as usual? One only has to look at how difficult it has been to get “started” regulating greenhouse gas emissions in the U.S. with the push-back from some states, regulated utilities, and global warming skeptics in general.
The New York Times recently reported about a new study on China’s “export” of pollution that focuses on the economics and trade implications on a global scale. That was followed by the recent announcement by the European Union, with an activist record on climate change, that it intends to scale back some of its climate change goals and regulations—citing economic problems like high energy costs and declining industrial competitiveness as reasons. The U.S. continues to raise climate change issues in its diplomatic dialogues and trade discussions with other countries, but it is hard to gain much leverage when the U.S. is unwilling to make commitments to the global community in the same way other industrialized countries have.
If the global problem seems so insurmountable, how can we get much traction taking those incremental steps on a national, state and local level? I am an advocate for addressing climate change—I just don’t know how to persuade the skeptics, if the current science doesn’t convince them. Perhaps taking a second look at economic incentives would help us draft better, fairer regulations that create greater motivation for regional and local initiatives—like carbon trading and the Regional Greenhouse Gas Initiative in the northeastern U.S. It is usually better to frame things via positive incentives. Use carrots rather than sticks.
Two other Times stories also caught my eye. One story was about corporations like Coca-Cola and Nike awakening to the threat of climate change because of a growing realization that weather conditions causing drought and crop failures will ultimately affect their bottom lines. They needed to plan for water scarcity. That reminded me of how the clothing corporations, a while back, were scrutinized for their overseas labor practices and started expressing interest in human rights—arguably with a view to their future bottom line profits. While the impact of the current stories is debatable, public attention may bring consumers and stakeholders into the debate. Some companies are worried about consumer boycotts after bad publicity; better to be ahead of the curve, improve labor rights or use of natural resources, avoid consumer wrath, and protect profits via change now. So both the soft drink industry and particularly clothiers were looking to the future, trying to anticipate negatives.
The other story was about the political debate over flood insurance and who should bear the risk of building in flood zones, another perceived cost of climate change. Broadening public attention to these climate change issues and the probable dire consequences of no action should help improve the political and regulatory debate. The Obama administration's announced creation of seven regional “climate hubs” to help farmers and rural communities understand the potential consequences of climate change may be just such a new strategy.
So where does this leave me? Still stymied, but hopeful that by broadening my perspective I might yet see allies and alternatives on how regulating climate change might move forward, even incrementally. Two rules of thumb: 1) anticipate probable future negatives and head them off now, and 2) find more carrots and rely less on sticks. By the way, did I mention that I am a state regulator but my remarks are my own?
Posted on February 11, 2014
Last week, EPA released its second external review draft of an updated Policy Assessment on the national ambient air quality standard for ozone. It also released updated draft risk and exposure assessments. To no one’s surprise, the new drafts confirm support for lowering the ozone NAAQS from 75 ppb to a range of 60 ppb to 70 ppb.
Why is this not a surprise? Because, as I noted some time ago, the prior draft policy assessment also supported a NAAQS in the range of 60 ppb to 70 ppb. Moreover, the Clean Air Science Advisory Committee weighed in on the prior draft, supporting a standard in the 60 ppb to 70 ppb range. In fact, before getting cold feet, CASAC had indicated that the data would support a standard below 60 ppb.
Courts’ deference to CASAC determinations on these issues is pretty well established. It seems clear that EPA has to lower the NAAQS to at most 70 ppb in order to survive judicial review. It’s not even obvious that 70 ppb would stick, though that will be clearer after CASAC has reviewed this most recent draft Policy Assessment.
The other significant question is when EPA will actually issue the new standard. After all, EPA was prepared to issue a new standard in 2011 or early 2012, when the White House put the proverbial kibosh on EPA’s plans. Will EPA somehow manage to delay issuance of the new standard until after the November elections? Now that the Super Bowl is over, I think that the Vegas bookies are putting their money on after.
Posted on January 29, 2014
The Food and Drug Administration recently recommitted itself to its feeble policy of addressing the profligate use of antibiotics in livestock by enlisting the voluntary participation of the drug companies that make the antibiotics. Peter Lehner discussed previous iterations of this policy in his ACOEL blog post of November 2012. Two documents issued in December 2013 reveal the details of the agency’s current plans. The first is a final guidance document describing the FDA’s process for handling drug sponsors’ voluntary efforts to phase out certain uses of antibiotics in animal feed and water and to bring the remaining uses under the oversight of a veterinarian. The second is a draft rule relaxing the requirements for veterinarians in exercising this oversight. (In a new article, I provide an in-depth analysis of the several different strands of the FDA’s plan.)
Together, the documents recently issued by the FDA promise little more than continued delay in tackling a public health risk that has bedeviled the Agency for decades. The FDA’s decision to rely on voluntary action by drug companies and to continue to allow routine uses of antibiotics in whole herds and flocks of animals in order to prevent infections brought on by stressful conditions leaves gaping holes in the protection the Agency purports to provide. The Agency’s meager backup plans in case this endeavor does not work out as it hopes do little to comfort the skeptical. Moreover, the FDA’s proposal to weaken rules for veterinary oversight undermines the Agency’s plan to place veterinarians at the front line of preventing agricultural overuse of antibiotics. In addition, after a small outburst of transparency at the start of the process, this whole undertaking will move underground for three years while the FDA works things out privately with participating drug companies.
Rather than pursuing this doomed course, the FDA should do what a federal district court has already ordered it to do: complete regulatory proceedings to withdraw approvals for the mass administration of medically important antibiotics to food-producing animals. As I have explained in a recent article, the FDA’s refusal to do so rests on the mistaken legal premise that such withdrawals must be preceded by formal, trial-type hearings; this premise ignores decades of developments in administrative law and misreads the Agency’s own enabling statute.
Posted on January 21, 2014
The EPA Audit Policy, “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” adopted in 1995, 60 Fed. Reg. 66,706 (Dec. 22, 1995), amended at 65 Fed. Reg. 19,618 (Apr. 11, 2000), was targeted by EPA for abandonment in 2012. Perhaps in response to resounding objections by industry and outside counsel, EPA has not yet dismantled this cherished avenue toward forgiveness.
For counsel productively utilizing the EPA’s Audit Policy, EPA’s announcement that it intended to abandon the Audit Policy, particularly in the context of Next Generation Enforcement and budgetary cutbacks in “boots on the ground” inspections, created significant concern that industry would be caught in a communication and policy void that would lead to more punitive yet unnecessary enforcement proceedings. While EPA has removed the possibility of e-reporting per its Audit policy electronic disclosure website, EPA has maintained regulated entities’ ability to utilize the Audit Policy by directly reporting to regional Audit Policy staff. See EPA’s Audit Policy website here. Hopefully, EPA will continue to recognize the many benefits resulting from continued support of the Audit Policy, particularly in the context of more remote enforcement strategies, fewer “boots on the ground” and heavier reliance on state enforcement resources.
Audit policy – History
In response to developing state audit privilege legislation, EPA developed an interim policy addressing the scope of “privilege” allowed for voluntary environmental audits and their findings. 60 Fed. Reg. 66,709 (March 31, 1995). Seeking to avoid litigation regarding the scope of privileged environmental audit findings, EPA’s interim policy offered incentives to conduct voluntary audits where the findings were disclosed and promptly corrected. EPA issued its final Audit Policy in 1995, with the specific purpose of enhancing protection of public health and the environment by encouraging regulated entities to voluntarily discover, disclose, correct and prevent violations of Federal enforcement law. The benefits offered by EPA’s 1995 final Audit Policy included reductions in the amount of civil penalties, possible elimination of gravity-based penalties, and a determination not to recommend criminal prosecution of disclosing entities. EPA’s adoption of the 1995 Audit Policy followed five days of dialogue, hosted by ABA’s SEER (then SONREEL) with representatives from regulated industry, states and public interest organizations which identified options for strengthening the former interim policy and included changes reflecting insight gained through this ABA dialogue, over 300 comments received and EPA’s practical experience in implementing the interim policy. Since its adoption, EPA has issued several guidance documents, including EPA’s Audit Policy Interpretive Guidance (January 1997), Audit Policy; Frequently Asked Questions (2007); and EPA’s Audit Policy: Tailored Incentives for New Owners, 73 Fed. Reg. 44, 991 (Aug. 1, 2008), all available here.
Enforcement budgetary constraints
In the face of fierce political opposition and severe budgetary cutbacks, EPA issued public statements regarding areas where resources would be cut back or eliminated. Specifically, on April 30, 2012, EPA’s OECA issued its “National Program Manager (NPM) Guidance” to EPA’s regional offices proposing to spend no resources processing self-disclosures under the Audit Policy beginning with EPA’s 2013 Fiscal Year. In the NPM Guidance, EPA stated its position that internal compliance reviews had become more widely adopted by the regulated community as part of good management, that most violations disclosed under the Policy were not in the highest priority enforcement areas for protecting human health and the environment, and that EPA could reduce its investment in the program to a limited national presence without undermining the incentives for regulated entities to do internal compliance reviews to find and correct violations with potentially a modified Audit Policy that is self-implementing. See the FY2013 OECA NPM Guidance (Publication Number – Final: 305R12001) available here.
With the issuance of the April 2012 NPM Guidance came a strong response by regulated entities. Members of the national environmental bar, including individual practitioners, the American College of Environmental Lawyers and the Corporate Environmental Enforcement Council, reached out to the EPA and requested discussion, urging EPA to retain the Audit Policy. See e.g., related ACOEL blog postings available here, and CEEC letter to Cynthia Giles, Assistant Administrative, EPA OECA (Feb. 8, 2013), available here.
Common arguments defending the continued implementation of the Audit Policy include the fact that the Audit Policy serves as the basis for a continued culture of compliance even in landscape of dynamic changes to industry and regulation, quantifiable benefits in achieving compliance, as well as serving as a consistent baseline for states adopting their own audit policies.
EPA’s Promotion of Next Generation Enforcement
In 2012, EPA began promoting its Next Generation Compliance initiative. See Next Generation Compliance article from Environmental Forum, republished here. With EPA’s NGC, EPA is seeking to streamline federal enforcement oversight with regulations adopting “built-in” compliance, advanced pollution monitoring, electronic reporting, increased transparency and innovative enforcement strategies. EPA’s examples of “built-in” compliance include standards for manufacturers of mobile sources and air pollution control equipment, where compliance with standards are certified initially by the manufacturer, rather than relying initially on post-installation field testing. Following installation of air pollution control equipment, EPA’s approach would utilize advanced pollution monitoring to evaluate compliance of operating air pollution control equipment. Advanced pollution monitoring would also include fence-line monitoring and remote sensing techniques including infrared cameras. Examples of electronic reporting include NPDES Electronic Reporting, see 78 Fed. Reg. 46006 (July 30, 2013) (proposed rule), and EPA’s Toxic Release Inventory electronic reporting data based, TRI-MEweb, available here. With electronic reporting, greater electronic availability of data allows greater transparency of reported data. Finally, innovative enforcement strategies build on advanced monitoring, electronic reporting and third-party verification, coupled with industry sector approaches, including industry wide recognition and notification of noncompliance, followed by set compliance deadlines and, if necessary, enforcement.
EPA’s Reduced Enforcement Goals for 2014-2018
On November 19, 2013, EPA published its Draft 2014-2018 Strategic Plan, with public comment ending on January 3, 2014. 78 Fed. Reg. 69412 (Nov. 19, 2013). Comparing EPA’s proposed 2014-2018 enforcement goals to its 2011-2015 enforcement goals shows that EPA intends to significantly cut back on the number of inspections as well as many other enforcement goals. Specifically, EPA is reducing its 5-year cumulative inspection and evaluation goal from 105,000 inspections to 70,000 inspections. EPA expects to initiate fewer civil judicial and administrative enforcement cases, setting its initiation goal at 11,600 compared to an earlier 19,500, and conclude fewer cases, 10,000 compared to an earlier 19,000. Compare Draft FY 2014-2018 EPA Strategic Plan, available here, to FY 2011-2015 EPA Strategic Plan, available here.
Implications of NGC and Reduction in Inspections
EPA’s Next Generation Compliance approaches, coupled with significantly reduced inspections, may seem like a relief to some. However, EPA’s NGC emphasizes remote monitoring methods and automatic electronic reporting. In other words, data will be reported electronically, potentially without the necessary context required for a full compliance evaluation. However, numbers alone do not allow a conclusive compliance determination. Reliance on mere data without the context achieved with an in-person inspection raises risks that enforcement actions, albeit reduced in number, may be allowed to proceed despite facts that mitigate against taking such action. Of course, this risk varies depending upon the regulatory program and may be less significant where delegated states maintain sufficient budgets for inspections. However, this concern remains magnified where qualitative data, such as, for example, fence-line monitoring and use of remote infrared cameras, may be relied upon in the Clean Air Act enforcement context to create a presumption of noncompliance, potentially collected in a manner that is divorced from actual quantitative point-source emission data and permitted parametric operating conditions which facilities rely on to demonstrate ongoing compliance. While regulated entities maintain documentation demonstrating ongoing compliance, the threat remains that such NGC techniques could mire entities in unnecessary enforcement actions where an in-person inspection could preempt such proceedings.
In this uncertain enforcement environment, regulated entities will likely want to continue to directly rely on the assurance provided by EPA’s Audit Policy, as well as state audit policies adopted pursuant to, and maintained consistent with, EPA’s Audit Policy and the policies and principles therein.
As of January 2014, EPA continues to allow regulated entities to avail themselves of EPA’s Audit Policy by reporting to named regional EPA Audit Policy staff. Hopefully, EPA’s dismantling of its electronic Audit Policy reporting program constitutes sufficient savings to allow EPA’s regional offices to continue accepting Audit Policy disclosures.
Posted on November 22, 2013
Commentary on the Supreme Court’s grant of certiorari in the greenhouse gas case has addressed the question taken for review: whether EPA permissibly decided that regulating motor vehicle greenhouse gas emissions triggered permitting regulations for stationary sources like power plants. (See Garrett and Buente blogs). This is an interesting question of statutory interpretation, but it may be more important that the Court declined to review EPA’s fundamental finding that greenhouse gases “may reasonably be anticipated to endanger public health or welfare.” The D.C. Circuit panel in the case agreed with EPA that the scientific evidence amply supported action under the precautionary standard of endangerment which allowed the agency to act in the face of scientific uncertainty and without a complete quantification of risks, costs, and benefits of regulation. Relying on its 1976 decision upholding EPA’s regulation of lead additives in gasoline under the same part of the Clean Air Act, the D.C. Circuit panel had no difficulty concluding that EPA had made the case for control of greenhouse gases from motor vehicles as a precautionary rule. This holding and its reasoning will be important support to EPA as the agency moves forward with the more complex and costly initiative to set emission standards for power plants. Electric generating plants contributed over 38% of U.S. CO2 emissions in 2012, with coal-fired plants accounting for nearly three quarters of those emissions.
Some observers may have dismissed the possibility of Supreme Court review of the endangerment finding considering the strength and complexity of the scientific evidence. However, a Court that has eviscerated federal campaign finance and voting rights law, disregarding congressional intent and its own precedents, can’t be counted on to defer to a science-based EPA decision just because the overwhelming majority of scientists endorses the agency’s conclusions. Some of the justices may well agree with Judge Janice Rogers Brown’s vigorous dissent from the D.C. Circuit’s vote to deny rehearing en banc of the panel decision. Invoking memories of living near Los Angeles in the seventies when smog hid the mountain views, Judge Brown argued that the Clean Air Act is aimed at “inhaled” pollution of the type that kills people and not pollution that harms public health or welfare less directly through impairment of natural resources like water resources or crops by climate change—harm, as she put it, coming “at the end of a long speculative chain.” Though mistaken in her interpretation of the Clean Air Act, Judge Brown’s opinion illustrates the challenge of educating both the courts and the public on the more complex chains of causation involved in defining harm from ecological damage and less traditional pollutants. Her opinion is a good reminder that advocates of regulation to safeguard ecological resources, including our climate, have work to do to build greater understanding of profoundly serious risks.
Posted on November 11, 2013
On November 6, 2013, the American Society for Testing and Materials (ASTM) issued the revised version of the ASTM E1527 Standard for Phase I Environmental Site Assessments. The new standard supersedes the prior 2005 standard, which had been deemed to satisfy EPA’s “all appropriate inquiry” rules. EPA has expects to confirm whether the new standard is compliant by the end of 2013.
The 2013 amendment to ASTM E1527 provides clarification on the definitions of Recognized Environmental Condition and Historical Recognized Environmental Condition. The amendment also includes a new term, Controlled Recognized Environmental Condition, and addresses the potential assessment for Vapor Migration Risk. The amendment further clarifies requirements for the requisite regulatory file review and includes updates to User responsibilities under the standard. The EPA has summarized the updates and changes from the E1527-05 standard in a document in the EPA docket. (See Amendment to Standards and Practices for All Appropriate inquiry.)
Posted on November 7, 2013
Quoting our colleague Philip Ahrens, “We shall see” indeed.
Invoking force majeure due to the 16-day government shutdown, EPA has again (for the third time) delayed the issuance of the Clean Water Act 316(b) rules past the November 4, 2013 deadline most recently agreed to in its settlement with Riverkeeper. It remains to be seen if EPA will deliver the 316(b) rules on November 20, 2013 – just in time for a little light reading over your turkey dinner – or seek a further extension with Riverkeeper. EPA and environmentalists are now in talks for a new deadline, so you can probably head home to enjoy your turkey and sides at Thanksgiving without toting home a Federal Register package to disrupt your holiday.
Advocates for a more stringent set of rules appear to have used the latest delay to secure political support from a group of House Democrats that recently encouraged EPA Administrator Gina McCarthy to require power plants and other industrial facilities to install closed-cycle cooling water technologies not just to save local ecosystems, but also to respond to climate change. According to the elected officials, “Closed-cycle cooling structures would ensure greater energy grid security and reduce ecological harm in a warming world.” That’s a pretty incredible statement all around given that, although the cooling water intake rules have been embroiled in a multi-decade-long saga of regulations and litigation about entrainment and impingement of fish, they have never been about a meaningful assessment of the ecological impact of various entrainment and impingement rates in various types of water bodies. In fact, the proposed rule completely failed to take into account significant variations in different types of waterbodies.
Given the proposed 316(b) rules, EPA is unlikely to jump on the closed-cycle cooling bandwagon and abandon a more flexible approach. The Democratic Congressmen say in their letter that flexibility unfairly burdens state environmental protection agencies. Environmentalist say that the flexible approach will bring more litigation because the proposed approach is not lawful. Industry groups continue to prefer flexibility as it allows them options such as upgraded screens, barrier nets, reduced intake velocity, fish return systems – technologies that would lead to reduced impingement and entrainment but cost far less than retrofitting plants with cooling towers and other high-energy technologies. So industry too remains primed for challenge. At stake is the potential for hundreds of millions of dollars of upgrades for an ill-defined environmental benefit.
While it’s anyone’s guess when the rules will come out, it does seem reasonable to predict that whenever they emerge, the lawsuits will follow.
Posted on October 30, 2013
Of the 21 separate questions presented in the 9 petitions for writ of certiorari filed in the U.S. Supreme Court in Utility Air Regulatory Group et al. v. Environmental Protection Agency et al., challenging nearly every aspect of the Environmental Protection Agency’s recent greenhouse gas regulations—from the initial “endangerment” finding to the restriction on motor vehicle emissions to the stationary-source permitting requirements—the Court granted review of only a single issue: “[w]hether [EPA’s] regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” Several commentators have interpreted this decision (reported in a prior post by Theodore Garrett) as an implicit affirmation of EPA’s regulatory regime, insofar as the Court chose not to address some of the broader challenges to the agency’s basic authority to regulate greenhouse gas emissions under the Clean Air Act. But, whatever implications might be drawn from the Court’s decision not to grant review of certain issues, far more telling is the Court’s deliberate rewriting of the question presented, narrowly tailored to address the validity of the stationary-source permitting regulations.
Those regulations rest on an exceedingly questionable interpretation of the Clean Air Act. The stationary-source provisions of the Act require any industrial facility that emits an “air pollutant” in “major” amounts—defined by the statute as 250 or more tons of the pollutant per year—to obtain pre-construction and operating permits from the local permitting authority. 42 U.S.C. § 7475. EPA acknowledges that it would be “absurd” to apply these provisions by their terms to sources of greenhouse gas emissions, since nearly every business in the country (including even small commercial enterprises and residential facilities) emit greenhouse gases at more than 250 tons per year, and the agency can offer no reason why the statute should not be interpreted instead to apply only to the large industrial facilities that emit “major” amounts of a pollutant otherwise subject to regulation under the permitting provisions—i.e., one of the so-called “criteria pollutants” for which a national ambient air quality standard has been issued. Nevertheless, EPA has interpreted the statute to apply to sources of greenhouse gas emissions and, to address the acknowledged “absurd results” created thereby, has decided that for these purposes the threshold for a “major” emissions source should be increased from 250 tons per year—as stated in the statute—by 400-fold, to 100,000 tons per year. The agency has, in other words, literally rewritten the express terms of the statute in order to justify its preferred interpretation.
The dissenting judges in the D.C. Circuit severely criticized the result. That is most likely the reason the Supreme Court granted review of the case, to correct the agency’s interpretation of the Act and ensure that neither EPA nor other agencies attempt to redo legislative power in this way in the future. Whether or not the limited nature of the certiorari grant can be viewed as an approval of EPA’s authority to regulate greenhouse gases from mobile sources, it almost certainly reflects suspicion—if not disapproval—of the agency’s stationary-source regulations. The definitive answer should come by June 2014, when the Court is expected to rule.
Posted on September 23, 2013
The legal profession lost a giant earlier this month when Ronald H. Coase passed away Sept. 2nd. You may know Coase as the economist who framed the Coase Theorem and won the 1991 Nobel Prize in Economic Science. But you may not know that Coase spent his career at a law school, not in an economics department. Or that several of his key economic insights have as much relevance for the law as they do for economics.
Coase wrote his first influential paper, The Nature of the Firm, in 1937. In it, he announced the concept of transaction costs, the notion that people must incur costs simply to participate in supposedly free market. After he recognized that it takes time and resources for someone to gather information to make a deal in the marketplace, and even more to bargain for the deal and to police and enforce it, Coase hit on the then-radical idea that people will organize themselves into firms or corporations only if it will reduce their individual transaction costs. The firm, in other words, exists because it incurs lower transaction costs to handle certain kinds of dealings. This explains why companies grow into large, complicated behemoths, and also why they outsource functions when the external market begins to do the same job with lower transaction costs.
Transaction costs are important for all lawyers to consider, but Coase’s next big work is particularly significant to environmental lawyers. His 1960 The Problem of Social Costs introduced the idea that relatively free markets could allocate resources more efficiently than any regulatory system. Even more boldly, Coase showed that, if you assume no transaction costs, a free market reaches the most efficient result no matter how society’s property rights may be distributed initially. A polluter given the complete right to do so will pollute only as much as is socially useful, because otherwise his neighbors will pool their money to buy him out.
Interestingly, Coase never liked his idea as applied to the real world. He knew that assuming no transaction costs was big and unrealistic. In real life, there are transaction costs everywhere, as his 1960 paper noted:
This would seem particularly likely when, as is normally the case with the smoke nuisance, a large number of people are involved and in which therefore the costs of handling the problem through the market or the firm may be high.
When there are transaction costs, the market will not find the most efficient result, and it will end up imposing externalities on others. Coase felt that government regulation or taxation would often be needed to fix this problem.
So in the end, Coase was an empiricist: look carefully at each situation and decide based on the facts, not ideology, whether market forces or government action will work better. We should all raise a toast in his memory.
NB: To see more of Coase’s delightful way of thinking about the world, read this 1997 interview of him at The Ronald Coase Institute’s website.