Posted on June 30, 2015
In Jonathan Cannon’s excellent post on Monday’s Supreme Court decision in Michigan v. EPA, he noted that the majority and the minority aren’t actually that far apart in their views on whether EPA must consider costs in this rulemaking. I have a slightly different take: They may not be that far apart, but they’re both wrong.
In fact, the issue in Michigan v. EPA seems so simple that the MATS rule could have been affirmed in a two-page opinion. Judge Scalia notes that the word “appropriate” – on which the entire 44 pages of the majority, concurring, and dissenting opinions focus – is “capacious”. I agree. If so, and if Chevron means anything, “appropriate” is surely capacious enough to allow for an interpretation that does not include cost considerations. That should have been the end of the case.
I do feel compelled to note, however, that Justice Kagan’s dissent also got it wrong, in at least three ways:
- I think she’s flat wrong to suggest that, because the MATS “floor” is based on the top 12% of facilities already in operation, that means that establishment of the floor already takes cost into account. As Justice Scalia cogently notes, those existing facilities may well have been under their own regulatory duress – a duress that may not have considered cost.
- Justice Kagan confuses cost-benefit analysis and cost-effectiveness analysis. For any given goal sought by EPA, the various options provided by the MATS rule may allow power generators to attain the goal in the most cost-effective means possible, but if even the most cost-effective approach were to yield $10B in costs and $10M in benefits, that would fail the cost-benefit test for most people.
- Finally, and most importantly, Justice Kagan got the consequences wrong. Instead of suggesting, as she did, that the majority decision,
"deprives the American public of the pollution control measures that the responsible Agency, acting well within its delegated authority, found would save many, many lives,"
she should have made the point that the majority decision will have no impact on EPA or the MATS rule. The Supreme Court did not vacate the rule; it merely remanded the rule to the Court of Appeals. Justice Kagan’s position should have been that EPA still has sufficient discretion, even on the existing record, to defend the MATS rule within the confines of the majority opinion. Instead, Justice Kagan gave ammunition to those who oppose the rule, by suggesting that it cannot be saved.
A pox on both their houses.
Posted on June 29, 2015
Recent events have me pondering this question.
Most notably, in two court decisions last week, courts ordered the State of Washington and the government of the Netherlands to take more aggressive action against climate change. In the Washington case, in response to a complaint from eight teenagers, a trial court judge has ordered the Washington Department of Ecology to reconsider a petition filed by the teenagers requesting reductions in GHG emissions. Similarly, in the Netherlands, a court ordered the government to reduce GHG emissions by 25% within five years. The Dutch case was brought under human rights and tort law, not under existing Dutch environmental laws.
I have been very skeptical of the use of nuisance-type litigation to require more aggressive government regulatory efforts. I still think comprehensive market-based regulation is the best approach. However, in the absence of aggressive action in the United States and world-wide, these suits are going to increase in number.
So, how are they similar to the same-sex marriage issue? First, as noted in Obergefell, courts were initially – and for some time – not just unfriendly to litigation efforts in support of same-sex marriage, they were positively dismissive. Second, there is the gradual increase over time in the litigation.
Next, there is also the change over time in the scientific understanding of the issues. While same-sex marriage has always been, on both sides, primarily a moral issue, it would be wrong to ignore the role that an increasing understanding of the genetics of sexual preference has played in the debate. Similarly, the move towards an overwhelming weight of evidence, not just that climate change is occurring, but that it is anthropogenic, has obviously been important to the climate change debate.
Finally, while the moral issues in same sex marriage may seem to distinguish it from the climate issue, the recent papal encyclical makes clear that there are moral aspects to the climate change debate as well.
I have no crystal ball. I do not know whether we are going to see a groundswell, and then, perhaps, a tidal wave that will somehow overcome the gridlock in United States and world politics on climate change. There are differences in the two issues, most obviously in the short-run economic costs of addressing climate change. Nonetheless, I do know that it wouldn’t surprise me if the tidal wave comes, and relatively soon.
Posted on June 5, 2015
Earlier this week, the D.C. Circuit Court of Appeals rejected both industry and environmental group petitions challenging EPA’s determination of what is a solid waste in the context of Clean Air Act standards for incinerators and other combustion units. It wasn’t actually a difficult case, but it does provide a lesson for Congress. When the technical nature of EPA’s decisions was layered on top of the fundamental deference given EPA’s interpretation of the statute under Chevron, the petitioners were never going to prevail:
We afford great deference to EPA’s determinations based on technical matters within its area of expertise.
The crux of the environmental petitioners’ case was that certain of the materials, such as scrap tires, exempted by EPA from the definition of solid waste, are unambiguously “discarded” within the meaning of RCRA, so that EPA did not have discretion to exempt them. Unfortunately, as the Court noted:
the term “discarded” is “marked by the kind of ambiguity demanding resolution by the agency’s delegated lawmaking powers.”
In other words, given the current state of decrepitude of the non-delegation doctrine, when Congress enacts legislation using words as vague as “discarded”, it is essentially telling EPA to figure out what Congress meant to say. And when EPA does figure out what Congress meant to say, the Courts are not going to disturb EPA’s interpretation.
For those in Congress who don’t like the way EPA implements statutes for which it is responsible, they might learn a lesson from Pogo.
Posted on May 7, 2015
The D.C. Circuit Court of Appeals just reversed and remanded EPA’s rule allowing backup generators to operate for up to 100 hours per year as necessary for demand response. It’s an important decision that could have lessons for EPA and the regulated community across a wide range of circumstances, including eventual challenges to EPA’s proposed GHG rule.
EPA said that the rule was necessary to allow demand response programs to succeed while maintaining grid reliability. Commenters had argued that, by encouraging greater use of uncontrolled backup generators, EPA’s rule makes other generators less economic, thus creating a negative feedback loop, with less and less power generated by controlled units, resulting in greater and greater need for uncontrolled backup generators. Here’s what the Court concluded:
- EPA failed adequately to respond to the commenters’ arguments. Noting that “an agency must respond sufficiently to “enable [the court] to see what major issues of policy were ventilated,” the Court instead found that EPA “refused to engage with the commenters’ dynamic markets argument."
- To the extent EPA did respond, it was “self-contradictory”, arguing that it was not justifying the regulation on reliability grounds, even though the final rule said that it was based on reliability concerns.
- The 100-hour rule was based on faulty evidence. EPA relied on evidence that backup sources had to be available at least 60 hours to participate in a PJM “Emergency Load Response Program.” However, PJM itself noted that this minimum does not apply to individual engines.
- Finally, and perhaps most importantly, while EPA justified the rule on reliability grounds, the Court stated that:
grid reliability is not a subject of the Clean Air Act and is not the province of EPA.
This last issue is the part of the opinion that could have some bearing on judicial review of EPA’s GHG rule. The Court noted that there was no evidence that FERC or NERC had participated in the backup generator rule or provided comments to EPA. When, during the course of the rulemaking, a commenter suggested that EPA work with FERC, this was EPA’s response:
the rulemaking’s purpose was to address emissions from the emergency engines “and to minimize such pollutants within the Agency’s authority under the CAA. It is not within the scope of this rulemaking to determine which resources are used for grid reliability, nor is it the responsibility of the EPA to decide which type of power is used to address emergency situations.”
This statement did not make the Court happy:
EPA cannot have it both ways it [sic] cannot simultaneously rely on reliability concerns and then brush off comments about those concerns as beyond its purview. EPA’s response to comments suggests that its 100-hour rule, to the extent that it impacts system reliability, is not “the product of agency expertise.”
And why is this relevant for the GHG rule?
First, because EPA had better consult with FERC and NERC, so that it can defend any statements it makes in the GHG rule about its impact, if any, on reliability. Second, it’s clear that the court will not show deference to EPA’s conclusions about reliability, since that is not within the scope of EPA’s expertise.
Posted on May 6, 2015
When selecting best management practices (BMPs) to protect streams during and following construction, riparian buffers are often considered the most effective option. These permanently vegetated areas alongside waterbodies can capture, infiltrate and control stormwater flow, filter contaminants, stabilize stream banks and otherwise help protect and restore waterbodies and the ecological functions they support. Recognizing the particular importance of riparian buffers located adjacent to exceptional value and high quality waters designated for special protection, the Pennsylvania Department of Environmental Protection (PADEP), like many other state environmental regulatory agencies, adopted regulations prohibiting earth disturbance activity within 150 feet of a special protection waterbody. The regulations further required a property developer to protect or establish a riparian forest buffer under certain circumstances where waters in the project’s watershed fail to attain their designated uses.
And then along came the Pennsylvania legislature. Faced with objections from homebuilders and other developers to restrictions on use of their properties, the legislature enacted Act 162 of 2014 to provide developers with additional options. Under Act 162, a developer who requires an NPDES stormwater construction permit may disturb land within 150 feet of a special protection waterbody if it implements BMPs “substantially equivalent” to a riparian buffer or a riparian forest buffer. If the earth disturbance would occur in a special protection watershed within 100 feet of a surface water, the developer must also offset any reduction of the total square footage of the buffer zone that would have been utilized as a BMP with a replacement buffer. The replacement buffer must be created in the same drainage area as the disturbed buffer and be as close as feasible to the area of disturbance at a ratio of one-to-one.
In response to the passage of Act 162, PADEP recently published interim final guidances on equivalency demonstration and offsetting. The equivalency demonstration guidance requires each developer disturbing earth within 150 feet of a special protection water to implement BMPs that reduce loadings of pollutants including total suspended solids, total phosphorous and nitrate. In addition, the developer must show that its BMPs are functionally equivalent to a riparian buffer or forested buffer by providing, among others, habit for wildlife and vegetation, flood attenuation, channel stability and support of aquatic food webs. Under the buffer offsetting guidance, a replacement buffer should be composed of native, diverse tree and shrub vegetation and preferably be installed at a location that receives runoff with characteristics similar to or more degraded than the runoff that the replaced buffer would have encountered.
While many regulatory regimes afford environmental agencies discretion to grant waivers and exceptions to buffer protection requirements, Pennsylvania has by statute granted developers the option of using substantially equivalent BMPs, supplemented where necessary by offsetting. PADEP has drafted guidances with stringent criteria for demonstrating equivalency and offsetting, but the guidances have yet to be finalized let alone judicially reviewed. Experience in administering Act 162 will reveal whether, under PADEP’s watchful eye, equivalency and offsetting can uniformly serve as effective substitutes for a prohibition on development near special protection waters. In the meanwhile, some healthy skepticism is in order.
Posted on April 16, 2015
After Sackett, the question on everyone’s mind was “How far does it go?” The first test of that question was the decision by the 5th Circuit Court of Appeals – not known as a bastion of liberalism – in Belle Company v. Corps of Engineers, holding that a Corps jurisdictional determination is not final agency action subject to judicial review. Late last week, however, in Hawkes Co. v. Corps of Engineers, the 8th Circuit disagreed, creating a circuit split.
As we noted at the time, the 5th Circuit decision in Belle focused on the differences between the Sacketts’ position facing an enforcement order and that of Belle Company facing a Corps JD. As the 5th Circuit emphasized, the JD did not require Belle Company to do anything. Nor did the JD expose Belle Company to penalties. Nor did it prejudice Belle Company’s ability to obtain a permit. Nor did it include a finding of a CWA violation.
The 8th Circuit took a different tack, focusing instead on the one great, glaring similarity between the enforcement order in Sackett and the JD in Hawkes Co. – in both cases, the Corps’ decision, as a practical matter, defined the property owner’s rights and ended the proceeding.
It’s not obvious to me that the Supreme Court will take the case, even with the circuit split. I don’t think that the Court likes these cases. On the other hand, it is obvious that the conservative wing of the court sees Sackett as a very important decision and there could well be four votes to decide the issue at this point.
If the Court does take the case, all bets are off. I think that the 5th Circuit still has the better of the legal argument, and I expect that will be sufficient for all but the most ardent property rights advocates on the Court. Whether there are five ardent property rights advocates on the Court is what remains to be seen.
Posted on March 31, 2015
Way back around the turn of the decade from the ‘70s to the ‘80s I was invited by the International Joint Commission to attend a conference in Montreal to discuss whether the Canadians should adopt a statute similar to the Toxics Substances Control Act of 1976 (“TSCA”). The IJC is a largely advisory US-Canadian body whose primary area of interest is the Great Lakes. Also on that delegation was the principal author of the text of TSCA, Clarence (“Terry”) Davies. I did not win many friends on that trip when I argued that TSCA took the wrong approach to regulating chemicals in the stream of commerce and in the environment primarily because it used an inappropriate cost-benefit premised standard of review. I also argued that TSCA’s standards were simultaneously too vague and too complex. I suggested that the Canadians start afresh.
In the years following, Congress ignored repeated calls for significant amendment or replacement of TSCA, including a chorus of suggestions that it be replaced by a statute resembling the European Community’s chemical regulatory regime, REACH. In the meantime, EPA soldiered along, trying to make the best of enforcing an antiquated and fundamentally flawed regulatory statute.
Now after all these years we have two competing bills in the Senate, each of which purports to “reform” TSCA. On the one hand we have S.697, the “Frank R. Lautenberg Chemical Safety for the 21st Century Act”, an allegedly “bipartisan” effort co-sponsored by Senators Mark Udall (D-N.M.) and David Vitter (R-La.), the first hearing on which was held on March 18th. And from another corner, we have S.725, the “Alan Reinstein and Trevor Schaefer Toxic Chemical Protection Act”, co-sponsored by Senators Barbara Boxer (D-Calif.) and Ed Markey (D.Mass.). At about 175 legislative pages, these bills aren’t capable of being thoroughly analyzed in a blog.
The Udall bill is tepidly supported by the chemical industry and by at least one environmental group, the Environmental Defense Fund. It is opposed by some other environmental and public safety advocacy groups. It would pre-empt state chemical regulatory programs like California’s Proposition 65 and other state-run chemical regulatory programs in California and Washington. The Boxer bill, predictably, because its principal sponsor is from California, preserves state programs. Both bills in one degree or another attempt to address the core problems with TSCA by changing the standard of review to a risk-based standard, overhauling and strengthening EPA’s information gathering authority on hazard, exposure and use data, and prioritizing chemicals for review. The Udall bill throws a bone to the chemical industry by exempting a wide variety of chemicals considered to be of low exposure potential or low risk.
I confess that, although I am not a policy wonk, I have an interest in these bills partly because if either — or a significant element of either — is enacted into law I will have to re-write an entire chapter of The Law of Chemical Regulation and Hazardous Waste. My guess is that, given Congress’s track record of doing little or nothing over the last few years, I won’t have to worry about getting writer’s cramp any time soon.
Posted on March 25, 2015
Those who have tried to keep up with the development of environmental law into the second decade of the 21st century will not be surprised, as others may be, by the attention now focused on reuse of soil. Uncounted millions of cubic yards of soil are moved each year in the New England region alone. Until very recently, in the absence of contamination above regulatory remediation standards, the excavation and reuse of soils was not subject to any environmental regulation at all.
Now with the pace of national economic activity rising, soil reuse is drawing the focused attention of State regulators in the northeast region and across the nation. EBC Nov 6, 2014 program. In particular, New Hampshire, Massachusetts, Connecticut and Vermont are all currently considering how to regulate soil reuse. In 2014, Massachusetts adopted a requirement for the development of a soil reuse policy by June 2015 and that effort is well underway.
While New Hampshire relies on a broad definition of “contamination,” it recognizes it lacks explicit legal authority to develop a full blown regulatory program for reuse of “mildly contaminated” soil. The current definition of contamination reaches, by its terms, any non-naturally occurring, regulated contaminant “that has the potential to adversely affect human health or the environment.” N.H. Env-Or 602.07.
In these circumstances, New Hampshire is currently regulating on a case by case basis, limiting receiving sites to soils that do not exceed natural background levels. Solid waste regulation can be avoided by an agency waiver, or reuse can be approved with an acceptable soil management plan and soil testing protocol. The New Hampshire agency is making efforts to respond to approval requests rapidly enough to avoid frustrating market driven transactions. It recognizes, as other regulators do, that construction projects may otherwise be forced to send lightly contaminated soil to landfills, depriving the region of essential landfill capacity, while increasing construction costs for little, if any, environmental benefit. For example, both New Hampshire and Massachusetts have recognized that unreclaimed gravel pits and quarries present potential hazards and risks of their own. They can be attractive nuisances that claim the lives of those who try to use them unwisely for recreation year after year and they can become repositories for discarded materials including stolen or abandoned vehicles. In short, they can be a locus of a range of community problems, if unattended. Rather than pay to send lightly contaminated soils to landfills, a better and more beneficial use could be found.
The States considering such new programs recognize that their efforts to impose environmental regulation on such a substantial volume of previously unregulated activity could well have unintended and unnecessary adverse consequences for both small and large scale redevelopment projects just as the economy is gaining strength. It must be undertaken in a manner that will not exacerbate other very significant potential problems. They are coordinating among themselves the planning and development of such regulation and giving serious consideration to designing methods that will likely bear the simplicity and efficiency of general permits. Legislative action will no doubt be necessary to authorize these new programs.
There is little question that as economic activity continues to increase, the States must establish consistent criteria setting forth the standards to be used in determining where mildly contaminated soils generated at construction projects and other developments can be disposed of at subsurface locations. Municipalities and the regulated community need to be educated about this process and engage with the regulators to ensure that the final standards are well-understood, easily implementable, and adequately ensure the environment is protected.
Posted on March 10, 2015
In a December 2012 blog post, I discussed the tensions raised by “Water for Texas 2012 State Water Plan” between the expected population growth and available water resources in Texas. As water demand is expected to rise, existing water supplies are diminishing.
These critical water supply constraints are again brought into sharp focus by the population projections contained in a March 5, 2015 report released by the Office of State Demographer. The 40-year projections (2010 to 2050) indicate that if the migration patterns observed in Texas between 2000 and 2010 continue at the same rate, the population of Texas will double, representing a significant increase in projections contained in the 2012 State Water Plan. The projected water resource shortages will be exacerbated.
The 2012 State Water Plan, based on a 50-year horizon, projected a 2060 population of 46.3 million. New population numbers, based on the recent migration patterns, project an increase from the 2010 Census population of 25.1 million to a 2050 population of 54.4 million.
For the past 10 years, Texas experienced the largest annual population growth of any state. Will the Texas economy maintain its strength to support job growth that will attract young workers from around the country and the world? Can the associated high net migration be sustained? What will be the impact of this growth? How will the environmental impacts be anticipated and managed?
The areas of fastest growth include the areas in and around Dallas/Ft. Worth, Austin/San Antonio, and Houston. Cities in those areas are making plans to secure long-term water supplies. Will they be successful? Will regulatory changes have to be made to surface and groundwater water rights to effectively and efficiently acquire, manage, and conserve these limited water resources? Will the infrastructure be there? How will it be financed?
Will Texas have “cool, clear water”?
Posted on March 9, 2015
It is popular to grouse about how long it takes EPA to issue a rule these days. When I was at EPA in its formative years, we often went from proposal to final in just a few months. There are many reasons why the trek to final rule signing has now become so time-consuming. To name just one, advocates on all sides increasingly file lengthy comments covering technical, economic, and legal issues. And reviewing courts increasingly require EPA to fully explain its basis and purpose in response to all those comments.
While these types of delays are understandable, another type of delay is not. I am speaking of the lag between the rule’s signing by the Administrator and its publication in the Federal Register. You would think this ministerial act (the Federal Register Director isn’t authorized to re-write EPA’s rules) should be accomplished in four or five days. It almost always was when I was at EPA, and today it often is for other agencies. And sometimes these days, EPA’s signed rules get published in a few days.
But there are many exceptions, and a great example is now before us. Administrator McCarthy signed the RCRA “coal combustion residue” (CCR) final rule on December 19, 2014. It has yet to hit the Federal Register, and EPA staff announced on a recent webconference that they “hoped” it would by late March or early April. Other recent examples come to mind. The signed-to-published lag time for EPA’s 2012 CAA Oil & Gas NSPS/NESHAP rule was 121 days. The lag time for EPA’s 2014 CAA NSPS greenhouse gas (GHG) proposed rule was 110 days. It now looks like the RCRA CCR Rule will break 100.
What in the world is going on during these lengthy lag times? EPA staff will tell you that a document with numerous charts, tables, and graphs bamboozles the Federal Register people – even though the CFR has been replete with charts, tables and graphs for decades. EPA staff will also tell you (as they have for the CCR Rule) that they are fixing “typos.” But with 21st century software, can catching and correcting typos possibly take 100 days or more?
So why grouse about this? I am not suggesting that EPA staff might be making substantive, consequential changes to a final rule after the Administrator signs it. EPA does place the final rule on its Website immediately after the document is signed, so any “corrections” in the Federal Register version can be detected by a careful review. (It would be nice – for transparency’s sake – if EPA would make a practice of releasing a red-line showing exactly which “corrections” were made to the signed version during the 100+ days.)
And I am not grousing about the Federal Register publication delays per se. What bothers me is EPA’s frequent practice of refusing to release critical documents supporting the final rule – for instance, the Response to Comment (RTC) document – until the day the rule hits the Federal Register. It is this embargo – coupled with a long signed-to-published lag time – that hurts. During the recent webconference for the RCRA CCR Rule, for instance, EPA staffers made clear that the RTC and other support documents would not be released until the “hoped for” publication in late March or April.
For an agency (and Administration) that touts “transparency” at every turn, I cannot understand why EPA engages in this embargo practice. And sometimes (but not often enough), EPA does release these support documents before the rule is published in the Federal Register – so there is obviously no legal barrier to such a release.
Why should anyone care about such an embargo? As soon as a final rule is released, regulated entities often need to go into high gear to prepare for compliance. In these preparations, they need to be able to understand and interpret the rule’s provisions, many of which are often unclear or ambiguous. EPA’s RTC often provides interpretations and guidance far more lucidly than the rule’s preamble. One good example: in the RTC to EPA’s 2013 CAA “CISWI” rule, EPA provided a key interpretation of what types of activities would be deemed a “modification” triggering new source status. This interpretation appeared nowhere in the rule’s preamble and could hardly have been divined from the regulatory language. It is plainly unfair and contrary to principles of good government to hide this kind of interpretation from regulated parties for 100+ days when they are preparing for compliance.
Moreover, parties on all sides of a rulemaking (industry and public interest groups) need to begin evaluating judicial review options and theories as soon as they can after a final rule is signed. Why should they have to wait 100+ days for critical documents that are essential to their evaluation?
So dear EPA: PLEASE start releasing your RTC and other supporting documents at the same time you release your signed rule!
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.