Crude Beginnings to Regulating the Rail Transportation of Oil?

Posted on April 16, 2014 by Eva O'Brien

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.

ExxonMobil Admits Climate Change Is Real. It also Imposes an Internal Cost on Carbon. Still Not Enough to Get Any Love From the Greens (Interesting Reading, Though)

Posted on April 14, 2014 by Seth Jaffe

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.

Haven’t Complied with a Court Order Requiring the Adoption of a Rule? Watch Out.

Posted on April 2, 2014 by John A. McKinney Jr

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.

Working with Utilities to Bring More Clean Energy into the Grid

Posted on March 10, 2014 by Peter Lehner

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.

Brownfields Redevelopment – a New Trust Mechanism to the Rescue?

Posted on March 5, 2014 by Elliott Laws

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.

Options For Improving Chemical Facility Safety And Security

Posted on February 26, 2014 by Ronald R. Janke

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.

I Thought Redeveloping Brownfields Was a Good Idea: Apparently the Boston Globe Hasn’t Gotten the Message

Posted on February 25, 2014 by Seth Jaffe

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.

Silly me.

Regulating Climate Change

Posted on February 20, 2014 by Annette Kovar

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?

EPA Inches Closer to a More Stringent Ozone Standard: When Will It Actually See the Light of Day?

Posted on February 11, 2014 by Seth Jaffe

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.

The FDA Punts Again on Livestock Antibiotics

Posted on January 29, 2014 by Lisa Heinzerling

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.

Where are we now? EPA's Audit Policy, Next Generation Compliance and Budgetary Implications

Posted on January 21, 2014 by Mary Ellen Ternes

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.

Conclusion

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. 

EPA’s Greenhouse Gas Regulation Dodges a Bullet

Posted on November 22, 2013 by Leslie Carothers

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.

New ASTM E1527-13 Standard for Phase I ESA

Posted on November 11, 2013 by Thomas Lavender

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.)

Cooling Water Intake Rules – Will This Turkey Arrive for the Holidays?

Posted on November 7, 2013 by Molly Cagle

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.

Grant of Certiorari in Greenhouse Gas Regulation Litigation: Limited But Important

Posted on October 30, 2013 by David Buente

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. 

Coase: the passing of a legend in law and economics

Posted on September 23, 2013 by Rodney Brown

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.

Environmental Regulation and the Rhode Island Business Climate: Governor Chaffee Tries To Fix It

Posted on August 15, 2013 by Richard Sherman

The business climate in Rhode Island is viewed by many observers as unpromising at best and dismal at worst. The reasons are too numerous to articulate here, but at least there is an effort now being made that may contribute to an improvement in such climate.

The administration of Governor Chafee is undertaking a significant effort not only to review and revise the myriad of environmental regulations that burden the regulated business community, but also to make efforts to revise the state environmental regulatory scheme to pre-empt conflicting local regulations and ordinances that inhibit the permitting and licensing process and otherwise discourage the growth of businesses of varying sizes.  The initial report includes findings and recommendations across the bureaucracy, but specifically addresses the Department of Environmental Management.  

While budgetary constraints may impact the speed with which such reform is undertaken and implemented, desperate times call for desperate measures. Hopefully, we will see some improvement in the relatively near future.

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

Posted on July 31, 2013 by Seth Jaffe

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

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

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

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

Taking the Fifth on the Fifth’s Taking Clause

Posted on June 26, 2013 by Robert M Olian

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

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

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

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

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

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

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

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

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

On these points, the majority took the Fifth.

Partners?

Posted on June 25, 2013 by Steve McKinney

Congress said EPA and the States are partners in implementing the Clean Air Act.  It’s simple: EPA sets pollutant-by-pollutant standards for clean air (NAAQS) and each State develops and implements a state-specific plan to meet and maintain those NAAQS.  Each partner is well-positioned and equipped to perform its assignment and Congress included appropriate “carrots and sticks” in the Act to ensure that both do their job.  The Supreme Court has extolled Congress’s partnership approach and EPA routinely professes its deep appreciation of its State partners and their important role.  So wassup with EPA suddenly demanding that thirty-six States delete rules about excess emissions during startup, shutdown and malfunction (SSM) that have been EPA-approved for 30 to 40 years?

On February 22, in response to a 2011 petition by Sierra Club, EPA proposed to “call” thirty-six state implementation plans (SIPs) because they contain affirmative defense, exemption, or director’s  discretion rules for excess emissions during periods of SSM. EPA’s previous approval of the offending rules wasn’t even a speedbump.  EPA also rejected any obligation to connect the offending rules with air pollution problems in the affected States.  EPA’s legal position on how the States should enforce their CAA permits was enough to shuck the partnership and impose the federal will.  And EPA didn’t even ask nicely.  State requests for information about EPA’s consideration of their SIPs were ignored and States were given 30 days to comment on a proposal EPA took more than a year to develop.  EPA gave its State partners another 45 days only after more than a dozen State Attorneys General jointly asked for more time and the Senate Committee considering the new Administrator’s confirmation made the same request.

When comments were filed on May 13, thirty affected States filed comments; none of them supported EPA’s proposed call of their SIP.  Not even EPA’s regular supporters on issues like tougher NAAQS thought EPA’s dictation was a good idea.  Complaints from EPA’s partners ranged from being wrongfully excluded from EPA’s evaluation of their SIP to EPA trampling on the States’ planning and implementation responsibilities to EPA creating a lot of work that could have been avoided if EPA had just talked to them.  No amount of spin can make this look good for state–federal relationships.

So why?  Well, Sierra Club did ask for it.  Maybe because an obvious compliance impact is on emission limits with continuous monitoring and short averaging times like opacity.  And maybe because coal-fired power plants always have opacity limits and deleting common excess emission rules will set those sources up for widespread enforcement litigation.  Or, maybe the States and the previous EPAs had it wrong for all these years and someone finally straightened everyone else out.  Like so many conundrums of this type, it might take some judges to give us the answer.

Pursuant to a settlement agreement with Sierra Club, EPA must finalize the SSM SIP Call by August 27, 2013.

A Case of the Vapors – Does New Jersey’s Newest Vapor Intrusion Technical Guidance Foreshadow a Return to the “Old Days” of Environmental Regulation in New Jersey?

Posted on June 20, 2013 by Kenneth Mack

Enacted in May 2009, New Jersey’s “Site Remediation Reform Act”, N.J.S.A. 58:10C-1, et seq. (“SRRA” or “Act”) was heralded by the State’s Department of Environmental Protection (“NJDEP”) as a “new world order” for the State’s site remediation regulation.  Four years later, its imposition remains a “work in progress”.

Belatedly following Massachusetts’ lead, the Act largely privatized site remediation by placing most decisions, including the ultimate provision of final remediation approval, in the hands of state-licensed professionals, called “Licensed Site Remediation Professionals” (“LSRPs”).  It replaced NJDEP’s former “command and control” approval process, which tended toward extreme micro-management of each case.  Instead, LSRPs are supposed to use their professional judgment in effecting remediation.

Interestingly, much of the impetus for the SRRA came chiefly from the Government, compelled by its enormous backlog of unresolved cases: it was not unusual for remedial reports to languish on NJDEP desks, awaiting action, for years.  Moreover, NJDEP had little or no knowledge of many sites on its “known contaminated site list” which numbered anywhere from 10,000 to 15,000 (the fact that that number was unclear was itself troublesome).  Indeed, one of the precipitating causes of the Act was a vapor intrusion case in which it was belatedly discovered, in 2006, that a child day care center had been built, and was operating, on a site which formerly housed a thermometer factory.  This site should have been (but was not) cleaned up under the State’s ISRA law when the factory closed in 1994.  The site had been classified as one of “low” concern, so it was not inspected by NJDEP until twelve years after such closure.  The discovery of these circumstances caused public consternation, followed by litigation and, ultimately, legislation. 

Although the environmental consultant community enthusiastically welcomed the new law (almost immediately dubbed the “environmental consultant right to work act”), individual LSRPs continue to have difficulty weaning themselves away from the “security blanket” of prior department approval of their actions.  These fears are understandably heightened by the statutorily enjoined random audit of at least ten percent of LSRPs annually by the LSRP Licensing Board and the Department’s separate ability to audit final remediation approvals, (called “Response Action Outcomes”, or “RAOs”), for up to three years after issuance. 

Partly in response to the LSRPs’ expressed need for some certainty, NJDEP has been steadily adding to the scope and detail of various technical guidance documents, the most recent one of which is its “Vapor Intrusion Technical Guidance (Version 3.1)" issued in March of this year. At 184 pages, with appendices, this guidance (“VI Guidance”) is nearly twice as long as the next-largest NJDEP “guidance document” and far longer than similar VI guidance issued by authorities in neighboring states.  Indeed, its length is nearly that of OSWER’s External “Review Draft” “Final Guidance for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Sources to Indoor Air”, whose issuance it preceded by about a month.  Predictably,  the two documents do not exactly mesh seamlessly. 

The prescriptive nature of the VI Guidance is equal to its heft and seemingly contrary to the Act’s proclaimed conferring of discretionary judgment upon LSRPs.  More troublesome is the fact that the various detailed dictates to LSRPs in the VI Guidance have been translated into a welter of forms that must be filed by the LSRP at various points in the VI remedial process.  These new forms –which are apt to change with some frequency – are all “machine readable” and, in light of the draw-down of experienced NJDEP personnel caused by government cutbacks and natural attrition, are increasingly reviewed by machines, rather than experienced personnel, at least in the first instance.  This seems likely to produce an exaltation of form over substance that does little to foster actual remediation.  Moreover, departures from the VI Guidance must be supported by the LSRP’s explanation of rationale under a pre-SRRA regulation entitled “Variance from Technical Requirements”.  Few such “variances” were ever permitted under this regulation in the past.  The fact that such “departures” may be substantively reviewed by NJDEP only after the final RAO is issued and, if denied, would result in the RAO’s invalidation, creates an added “chilling effect” on an LSRP’s consideration of any such deviation, however warranted.  And, while NJDEP personnel continue to be available to LSRPs for consultation and advice, it is unclear what effect, if any, reliance on such advice would have in any subsequent audit of an RAO. 

It may be that the VI Guidance is sui generis and that its overly doctrinaire approach will not be followed by NJDEP in other areas of remediation.  If not, the “new world order” of the SRRA may morph into something that looks very much like NJDEP’s  “ancien regime”.  Or maybe I just have a case of the vapors.

I Believe in Environmental Regulation, But….

Posted on June 10, 2013 by Seth Jaffe

I believe in governmental environmental regulation.  We have a complicated world and it is not surprising that many activities, including those generating greenhouse gases, cause negative externalities.  At the same time, however, I have spent more than 25 years representing regulated entities in negotiations with government regulators and it is impossible to do such work without obtaining an appreciation for the very significant costs that bureaucracies impose.

With all due respect – cue the upcoming diss – to my many friends in government, the absence of market discipline or the ability to fire nonpolitical bureaucrats often leads to street level bureaucrats operating under a law of their own devising.  Moreover, if a complex economy causes externalities requiring regulation, that same complexity should cause regulators to pause before imposing or revising complicated regulatory regimes.  Unintended consequences abound.

The genesis of these musings was the confluence of a number of otherwise unrelated recent regulatory developments.  The most significant was headline in the Daily Environment Report earlier this week noting that “EPA [is] Still Unable to Provide Time Frame For Revising Definition of Solid Waste Rule.”  RCRA is the perfect example. No one can really quarrel with the need for hazardous waste regulation, in order to prevent the creation of more Superfund sites.  However, if we’re still fighting over the definition of something as basic as solid waste more than 30 years after the inception of the program and EPA’s most recent efforts to update the definition remain fruitless after about five years of effort, then we have to acknowledge some serious implementation problems where the rubber is trying to hit the road.

I’ll also provide two recent examples from my home state of Massachusetts.  MassDEP has been engaged in a serious regulatory reform effort, which has earned deserved praise.  However, as NAIOP has recently noted in comments on the draft proposal to revise the Massachusetts Contingency Plan, MassDEP’s proposed Active Existing Pathway Elimination Measure Permit is “so cumbersome that it is not clear that a PRP or redeveloper would want to seek such a permit.”  This calls to mind MassDEP’s reclaimed water regulations, which were intended to encourage water reuse, but are so cumbersome that no one is applying for the permits.

Thus, the final caution.  The MassDEP example is extremely common – and extremely troubling.  Regulator gets great idea for innovative program. Prior to implementation, concerns are raised about what happens if….  More effort is put into avoiding the perceived downsides than in actually making the program work.  Program ends up being worse than nothing.

I believe in environmental regulation, but…

Will Supreme Court Accept Challenges to Obama Climate Change Authority?

Posted on June 3, 2013 by Richard Lazarus

Four votes.  That is the number of votes required to grant a Supreme Court petition for a writ of certiorari.  And because that is the same number of Justices who dissented from the Court’s landmark 2007 ruling in Massachusetts v. EPA, EPA has reason to worry over the summer.

Pending before the Court are nine petitions seeking review of a wide ranging set of challenges to EPA’s regulation of greenhouse gas emissions from new motor vehicles and new stationary sources.  Petitioners include most every significant part of American industry, 14 States, and numerous political leaders.  Some petitions, consistent with Judge Brett Kavanaugh’s dissent from the D.C. Circuit’s denial of rehearing en banc in Coalition for Responsible Regulation v. U.S. EPA, are strategically narrow; they ask the Court to review only a relatively narrow issue regarding the applicability of the Clean Air Act’s Prevention of Significant Deterioration Program to greenhouse gas emissions. Others, by asking the Court to overturn EPA’s determination that greenhouse gas emissions from new motor vehicles endanger public health and welfare seek, as a practical matter, to topple   the Obama Administration’s effort to address global climate change in the absence of new federal legislation.  But a few of the petitions jettison even any pretense of modesty by directly asking, consistent with D.C. Circuit Judge Janice Rogers Brown’s blistering dissent from en banc denial, the Court to do no less than overrule Massachusetts v. EPA.

The Solicitor General and other respondents (including 18 States) will no doubt oppose cert on all issues in their responsive filings this summer.  They have nontrivial arguments, especially given the serious questions they can raise concerning the Article III standing of petitioners to raise the particular legal claims that would likely otherwise have the most force on the merits.  But EPA is likely to be less concerned with whether review is granted than, if granted, on what issues.  The legal stakes for some issues raised are far less consequential than they are for others, which are quite enormous.

Any cert grants will likely be announced in late September, shortly before October’s “First Monday” to allow for expedited briefing and argument as early as January 2014 and more likely in February. Otherwise, all petitions will be denied on that First Monday.  It will be a long summer’s wait for all parties.

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

Posted on May 22, 2013 by Seth Jaffe

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

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

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

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

Well, yeah.

.

Decommissioning Power Plants: A Process Without a Standard Regulatory Framework

Posted on May 7, 2013 by Pamela Giblin

The confluence of aggressive new EPA regulations targeted at coal-fired power plants and low natural gas prices has made the decommissioning of older coal-fired plants substantially more likely in the coming years. Decommissioning a plant does not occur within a specific regulatory framework. In many cases, unless there is a suspected public health threat, potential environmental conditions at the plant do not have to be reported to government agencies. For that reason environmental remediation of a plant site is often addressed in the property sale and redevelopment process.

But the shut down and decommissioning of power plants nonetheless has significant regulatory implications, and the reality is that analysis of regulatory obligations and advance planning, including a proactive strategy for interacting with agencies and other stakeholders, is essential. Understanding obligations requires review of existing permits and the underlying regulatory landscape. And that landscape may shift under your feet – for example, new regulations for coal combustion residuals on the horizon may implicate the closure of certain waste management units.

The regulatory landscape may also provide opportunities to maximize value. There are a wide variety of emission credit programs that vary by jurisdiction. Identifying and capturing emission credits brings value to the table. Similarly, water rights, to the extent they are marketable in a particular jurisdiction, could be a source of revenue.

On the practical front, laying out a smooth decommissioning path through careful planning may help avoid stoking the fire of agency, local or public ire. The agency may have a formal role to play depending on the permit conditions or applicable regulations, but there may also be extensive agency oversight exercised through pursuit of enforcement actions. Particularly where community interest is high, local, state or federal agencies may have a heightened interest and enforcement provides them an avenue for involvement in the site that might not otherwise exist. So it is important to recognize the key stakeholders early and to understand how their interest may translate to pressure on an agency to leverage any violations.

If the site is one with good redevelopment potential, finding and working with a credible and savvy purchaser may keep the focus on the end game and allow for appropriate risk-based standards to be deployed against a more concrete vision for the future of the site. Once there is a well-developed understanding of the regulatory obligations associated with the particular plant and the overall objective for the site after decommissioning, it may be the moment to reach out to the state and federal agencies, and perhaps key stakeholders, with early, accurate and contextualized information.

Because there is not a standard regulatory framework to apply, experience over the coming years as plants come offline will be telling – it is that experience that will provide useful frameworks for up front, comprehensive analysis and strategic outreach for a smooth path through decommissioning.