Posted on December 2, 2014
Back in September 2008, TransCanada Keystone Pipeline LP (TransCanada) filed what it probably thought at the time was a straightforward, routine application for a Presidential permit to build its Keystone XL pipeline. As almost everyone knows now, that pipeline would deliver thousands of barrels of Canadian crude oil to refineries on the U.S. gulf coast. The project appeared to be straightforward because the environmental review process required by the National Environmental Policy Act (NEPA) has been honed over many years. If not exactly expeditious, the NEPA process is well known and often used. And the project appeared to be routine because there are many pipelines that already cross U.S. territory.
Yet, six years later, there still is no final decision on a permit. The review process has ballooned into an intricate one, attracting legislative and judicial attention and intervention at both the state and federal levels, not to mention increased public awareness. Normally, one would expect increased public attention and awareness to lead to better decision-making and hopefully that will be the case here. My question, though, is whether this public participation could have been integrated into the NEPA process earlier. A follow-up question might be whether it would have mattered once politics took over.
The delay in completing this project review is undoubtedly frustrating for many and has created a “moving target” conundrum with many other decision-makers now involved. Even with a decision by the Nebraska Supreme Court and a final Presidential decision on the permit, the congressional and federal legal challenges are unlikely to end. Has this project become so politicized that there can be no public confidence in the eventual outcome? Would there have been a better way to encourage public participation earlier?
Nebraska could have gotten involved sooner. The federal NEPA regulations allow a State or local agency “which has jurisdiction by law or special expertise with respect to any environmental impact involved in a [proposed project]” to become a cooperating agency, with the federal lead agency conducting the federal NEPA review. In 2009, the Department of State invited local governments to weigh in on the permitting process for the Keystone XL pipeline under NEPA by becoming a cooperating agency.
At that time, the pipeline route debate had not yet arisen and Nebraska could still participate in the NEPA process by providing comments. In addition, the federal NEPA regulations normally require a cooperating agency to use its own funds. Nebraska’s ability to fund its own NEPA-like review of the project was severely limited since the state had no similar NEPA-like requirement or source of funding at that time. Given the lack of controversy early on, the extra expense of becoming a cooperating agency seemed unnecessary when the opportunity to offer comment was an option.
Would Nebraska involvement at that earlier time have made a difference? It’s hard to say. Opposition to the pipeline route in Nebraska only started to come together when the Final Environmental Impact Statement (EIS) came out in August of 2011 and TransCanada began contacting local landowners to obtain easements. The growing opposition led to Nebraska legislation essentially creating a cooperating role for Nebraska by providing adequate funding for preparation of a report to supplement the federal EIS. That report was published in January 2013.
In addition to Nebraska’s actions, the U.S. Department of State determined that more information was needed about alternative routes to avoid the environmentally sensitive Sand Hills region of Nebraska. This prompted Congress to adopt a provision forcing Presidential action on the 2011 EIS within 60 days.
The President then denied the permit for the reason that it didn’t allow sufficient time to review the proposed alternative route through Nebraska. TransCanada re-applied in May 2012 with a proposed new route through Nebraska. This led to more state legislation, state legal challenges, a supplemental report issued by Nebraska in 2013, and a Final Supplemental EIS issued by the U.S. Department of State. But, there’s still no permit decision, as most parties are awaiting a final decision by the Nebraska Supreme Court on the constitutionality of the state legislation.
This looks more like a schizophrenic chess match than responsible government. Is it just government avoiding a difficult and controversial decision? But, with so many wrenches thrown into this particular NEPA review, how could we expect the process to reach a final resolution in a timely manner? It is rare these days to find any public policy being made in a forthright and timely manner without competing vested interests impeding the administrative process in any number of “legitimate” ways. Unfortunately, environmental issues are no different in this respect than immigration or health care. The Keystone XL pipeline is only one example where our Constitutional construct has given us lots of “checks” without much balance.
Posted on October 29, 2014
The unfortunate fact about copper mining is that it just cannot be done without impacting groundwater. This inevitable result occurs because of the massive excavations extending below groundwater elevations and the leaching of contaminants through the process of capturing copper. Most western mining states, including Arizona, have recognized this inevitable consequence and have crafted a “point of compliance” system where groundwater quality standards must be achieved at some designated point beyond the active mining site. Previously, the New Mexico Environment Department dealt with quality exceedances at active mining sites either by issuing variances from compliance requirements under the New Mexico Water Quality Act, or by simply ignoring the problem altogether. The Copper Mine Rule has been promoted as a pragmatic response to the cumbersome administrative variance procedure.
Under the New Mexico Water Quality Act, groundwater compliance must be achieved at any “place of withdrawal for present or reasonably foreseeable future use.” This jurisdictional threshold is markedly different than the jurisdictional standard for surface water discharges, which requires compliance precisely at the point of discharge into a body of surface water. The Copper Mine Rule recognizes that groundwater directly beneath an active mine site would not be available for use during the period of active mining operations and thus would not qualify as a “place of withdrawal” where groundwater standards must be met. Similar to the “point of compliance” approach taken by other states, the New Mexico Copper Mine Rule requires that groundwater standards must be achieved at monitoring well locations placed as close as practicable around the perimeter of the active mine site.
The Copper Mine Rule has been appealed by various NGOs and by the New Mexico Attorney General. The Attorney General contends on appeal that any determination of a “place of withdrawal” must be made on a case-by-case basis, rather than through a rule-making procedure. Interestingly, the Attorney General originally represented the New Mexico Water Quality Control Commission (“WQCC”) when it adopted the Copper Mine Rule, but abruptly reversed course and has lodged an appeal against the Rule for which it provided representation to the WQCC. As part of the response to the Attorney General’s appeal, the WQCC has filed a motion seeking to disqualify the Attorney General, based on a conflict of interest, from taking positions adverse to its former client. The matter is presently pending before the New Mexico Court of Appeals.
Posted on August 28, 2014
Over 30 earthquakes jolted the area in and around the City of Azle, Texas —20 miles north of Fort Worth—last November through January. In response to citizen concerns, the Texas House Committee on Energy Resources created a Subcommittee on Seismic Activity, to investigate whether there was a link between earthquakes and increased oil and gas production and disposal wells. In addition, the Railroad Commission of Texas—the agency with jurisdiction over oil and gas activities in Texas--hired a state seismologist and, on August 12, approved a draft of proposed rules that would require companies to do a seismic survey before obtaining permits for new oil and gas disposal wells—so-called Class II injection wells. Representatives of both the Texas oil and gas industry and environmental groups are supportive of this proposal.
Texas, in particular, has been part of the tremendous increase in oil and gas exploration and production activity nationwide through hydraulic fracturing and horizontal drilling. Although “fracking” per se does not appear to result in quakes, there is a concern that related disposal well injection might. The Railroad Commission proposal is intended to address this concern. Some have suggested the Texas proposal could be a model for other states.
The proposal would require applicants for oil and gas injection wells used for disposal to provide additional information, including logs, geologic cross-sections, and structure maps for injection well in an area where conditions exist that may increase the risk that fluids will not be confined to the injection interval. Those conditions include, among other things, complex geology, proximity of the base rock to the injection interval, transmissive faults, and a history of seismic events in the area as demonstrated by information available from the USGS. The proposal also would clarify that the Commission may modify, suspend, or terminate a permit if fluids are not confined to the injection interval, that is, if it poses a risk of seismic activity. Presumably, the effect of the proposal, if promulgated, will be not only to regulate oil and gas disposal activities to address potential seismic effects, but also to generate data that may be useful in determining whether and to what extent further regulation is needed.
Posted on July 21, 2014
In Wisconsin, the desire to develop prime Milwaukee lakefront property is running head on into the Public Trust Doctrine and fueling interest in the state’s earliest history. The lands that are now Wisconsin, Ohio, Indiana, Michigan and Illinois were initially included in the Northwest Ordinance of 1787 which established that navigable waters are “common highways” and are “forever free” to all citizens of the United States. This language was incorporated into the state Constitution in 1848, and the Public Trust Doctrine is an integral part of Wisconsin’s environmental identity. The doctrine has been interpreted over the years to ensure that beaches have public access, that the public can swim, boat or walk in any water body as long as they “keep their feet wet,” and that restaurants located along Lake Michigan offer at least one cheap meal.
Now a developer wants to replace an ill-suited County bus garage along the lake front with a high rise development that would include a hotel and high end apartments with lovely lake views. The problem: under the Public Trust Doctrine, title to the Lake Michigan lake bed (as it existed in 1848) off the shores of Milwaukee rests with the state, which is required to “preserve” and “promote” the public trust. A scramble to the history books and maps ensued, and an initial memorandum from the Wisconsin Department of Natural Resources “determining” that the land in question was not part of the lake bed in 1848 was rescinded when historical maps were found showing that approximately 2/3 of the property was in the lake bed at that time. Proponents next argued that the property in question had accreted naturally, thus exempting it under a narrow exception to the Public Trust doctrine. When historical documents showed that any structures that would have led to accretion were placed after the property was filled (and soil borings identified fill material), these parties turned to a 1913 deal with the Chicago Northwestern Railway. The arguments that the city conveyed this property to the railroad, and that it would have become upland by the process of accretion, and in any event was for a public purpose and did not materially affect the rights of the public, did not gain independent traction, over similar public trust concerns.
Enter the legislature. A budget bill was initially passed, whereby the legislature, as “Trustee,” approved the 1913 transaction. However, because Wisconsin law does not allow the legislature to include private bills in budget bills, a second bill was introduced and Act 140 was signed into law on March 17, 2014. Act 140 sets the boundary of the lake bed at the line of the 1913 transaction, bars the Wisconsin Department of Natural Resources from taking a position on the determination, and declares that the legislature’s findings are “in lieu of, and have the same effect as,” a quiet title action entered by a court.
The new law could have a profound impact on Milwaukee’s lake front. This month, another company offered to purchase the county parking garage in the same area; this land was also part of the lake bed in 1848 and was included in the 1913 transaction. The private company will pay off existing debt and commit to immediate, much-needed repairs to the parking garage. It remains to be seen whether Act 140 will survive a judicial challenge, and whether judicial confirmation of the statute will be necessary to entice any necessary funding and title insurance for the developments.
Posted on May 22, 2014
A case working its way through the Rhode Island state court system, Power Test Realty Co. Ltd. Partnership v. Sullivan, No. PC 10-0404 (R.I. Super. Ct. Feb. 19, 2013), poses a dilemma regarding the obligation to remediate releases of virgin petroleum product.
Under the Rhode Island equivalent of CERCLA, virgin petroleum product is exempt from the definition of hazardous substances. R.I.G.L. 23-19.14-3(c), (i). Releases of virgin petroleum product are therefore not subject to the imposition of joint, several, strict and retroactive liability. One would accordingly expect that any obligation to remediate virgin petroleum product releases would be based on causation. Rhode Island oil pollution statutes and regulations appear to impose liability based on causation only.
Nevertheless, the Rhode Island Department of Environmental Management and the Rhode Island Superior Court have taken the position that (1) the obligation of a current landowner to remediate a release of virgin petroleum product that occurred before acquisition of title arises on the theory that the term “discharge” under the state oil pollution statute includes “leaching” and (2) leaching of pre-acquisition petroleum product into the groundwater constitutes a passive and continuing discharge for which the current landowner is liable to remediate.
The Superior Court held that causation is irrelevant under the state oil pollution control statute and regulations. This ruling clearly contradicts the intent of the legislature to carve out virgin petroleum product from a no-fault liability scheme.
This case of first impression is now before the Rhode Island Supreme Court on a writ of certiorari, Docket No. SU-13-0076. Practitioners await with interest how the Court will work its way through this issue. Stand by for some tortured reasoning if the Superior Court ruling is upheld.
Posted on May 21, 2014
With a heap of fanfare, in mid-February, New York’s Governor Cuomo announced that the NY Green Bank is open for business. Cuomo began ramping up his clean energy policy last summer, with the appointment of Richard Kauffman, as New York’s chairman of energy and finance, and Chair of the New York State Energy Research and Development Authority (NYSERDA). Kauffman was the former U.S. Energy Secretary Steven Chu’s senior advisor on clean energy finance. NY’s energy and finance chair is making it clear that government subsidies alone have not been successful in creating a robust clean energy marketplace. Kauffman believes that government could encourage the development of private sector capital markets by helping to foster a demand for a low carbon economy. The creation of new Green Banks could lead to permanent, steady and reliable financing for clean energy efficiency projects, and create clean-energy jobs along the way. It’s a win- win for everyone, ensuring a low carbon future and building long-term economic prosperity. New York is not alone, the United Kingdom has a national Green Investment Bank, and in the U.S., Connecticut, Vermont and Hawaii, have Green banks. New York expects that NY Green Bank will advance the state’s clean energy objectives.
Established in June 2011, Connecticut’s Clean Energy Investment Authority was the first state green bank, the first of its kind in the country. On the federal level, the Green Bank Act of 2014 was first introduced in April, in the U.S. House of Representatives by Congressman Chris Van Hollen of Maryland, and Senator Chris Murphy of Connecticut introduced a companion bill in the Senate, as well. In 2009 a bill passed the House, but not the Senate. The Green Bank Act of 2014 would establish a Federal Green Bank with a maximum capitalization of $50 billion from Green Bonds and the authority to co-fund the creation of state-level Green Banks with a low-interest loan of up to $500 million. The legislation provides for the Green Bank to be supported with $10 billion in “Green Bonds” issued by the Treasury; it will have a 20 year charter and will be able to acquire another $40 billion from Green Bonds. Passing the Green Bank Act of 2014 would give all states the option to receive funds from the federal government to assist with financing on a local level and to encourage the movement to a clean energy future. This appears to be yet another arena where the states will take the lead and eventually the federal government will follow.
NY Green Bank is a state sponsored investment funding institution created to attract private funds for the financing of clean energy projects. Mainly, it is a public-private financing institution having the authority to raise capital through various means ― including issuing bonds, selling equity, legislative appropriations, and dedicating utility regulatory funds ― for the purpose of supporting clean energy and energy efficiency projects. NY Green Bank got started with an initial capitalization of $218.5 million, financed with $165.6 million of uncommitted funds raised through clean energy surcharges on the State’s investor owned utility customers, or idle clean energy ratepayer funds, combined with $52.9 million in auction proceeds from emission allowances sales from the Regional Greenhouse Gas Initiative (RGGI). The $218. 5 is meant to be a first step in capitalizing the $1 billion NY Green Bank initiative announced by the governor in his 2013 State of the State address.
NY Green Bank is a division of the NYSERDA, a public benefit corporation aimed at helping New York State meet its energy goals: reducing energy consumption, promoting the use of renewable energy sources, and protecting the environment. Globally, we have seen natural gas and renewables gaining ground at the expense of crude oil and coal.
On April 10, I had the pleasure of hearing Alfred Griffin, the President of the Green Bank, and Greg Hale, Senior Advisor to the Chairman of Energy and Finance Office of the Governor of NY, speak at a roundtable sponsored by Environmental Entrepreneurs (E2). They explained that NY Green Bank was created in December 2013, when a Public Service Commission (PSC) order, provided for its initial capitalization. The order was issued in response to a petition filed by NYSERDA seeking clean energy funds. Griffin and Hale see the $1 billion dollar investment fund as breaking down barriers for projects that are currently neglected. NY Green Bank, however, is not there to provide operating capital, it is there for project capital. They are seeking credit worthy projects and looking to promote standardization. These types of clean energy projects will be a bridge to private markets, eventually not requiring any public subsidy, and ultimately becoming sustainable. NY Green Bank will need impactful deals to demonstrate market success. In the clean tech space, investors are setting investment targets for private equity activity. Residential rooftops are among the type of projects being considered. The bank, for example, would work with a private partner to seed investment in a solar power company for solar panel construction at a specific site. The money would be directed for the panels not salaries or operating expenses. Given the global makeup of energy consumption, energy investors here and abroad are looking to leverage growth opportunities to decide where to invest growing dollars to take advantage of shifts in the energy market. New York state, although, not first, is situated right where it should be.
Posted on April 11, 2014
A year ago, this blog contribution described the latest battle in a nearly 40-year old water war in Oregon’s Klamath Basin. Now, there is a tenuous peace agreement in place – but it may be short-lived. With substantial leadership from Senator Ron Wyden and Governor John Kitzhaber, a “Proposed Upper Klamath Basin Comprehensive Agreement” was negotiated among the Klamath Tribes, State of Oregon, and a large group of independent farmers and ranchers who hold water rights to surface waters in the Klamath Basin, above Upper Klamath Lake. The underlying war has to do with who gets how much water in an on-going “general stream adjudication” of water diversions that began in the late 1800s to early 1900s, along with quantification of federally reserved water rights.
In March, 2013, the Oregon Water Resources Department (“OWRD”) issued its “Findings of Fact and Final Order of Determination” (“FFOD”), which approved the federally reserved claims of the Klamath Tribes for substantial instream flows in the Klamath River and tributaries above Upper Klamath Lake, and for specified lake levels. The Tribal water rights were granted a priority date of “time immemorial.” When the FFOD took effect last year, the Tribes were legally entitled to make a “call” for water – requiring the OWRD to take immediate action to curtail water use by junior appropriators until the Tribes’ instream flow allocations were satisfied. As a result, thousands of acres of irrigated farm and pasture lands were dry.
The impact of the call was economically, socially and politically devastating, leading Senator Wyden and Governor Kitzhaber to convene a fast-moving settlement process that began late last fall and resulted in conceptual agreement before the end of 2013. Further work in early 2014 resulted in a comprehensive agreement for the Upper Basin -- but the deal is fragile. Implementation of key settlement terms depends on securing substantial federal funding and state agency support, with no guarantees of either.
The settlement includes two key components: a Water Use Plan and a Riparian Program. Under the Water Use Plan, irrigators will voluntarily retire or reduce historic diversions by up to 30,000 acre-feet. Under the Riparian Program, landowners will commit to voluntary habitat restoration actions. The two components are to be implemented over a five year period, subject to the availability of federal funding. An additional $40 million of federal funding is to be provided for Tribal economic development.
This settlement agreement complements another agreement, reached several years ago, among the Tribes, state and federal agencies, and lower basin irrigators who receive water from Upper Klamath Lake under contracts with the U. S. Bureau of Reclamation. That agreement also requires substantial federal funding that has not yet been committed, due at least in part to political pressures stemming from the fact that it addressed only half of the basin – leaving upper basin irrigators to bear the brunt of a Tribal call. With the upper basin interests now addressed through this second settlement agreement, the basin is now fully covered with strategies to help recover instream flows to meet Tribal water needs while maintaining a sustainable level of economic use for farmers and ranchers.
Optimists are hopeful the region will now be able to move forward with a united front to seek needed support from Congress. Pessimists say the deal will crumble beneath the political weight and budget pressures of Washington DC. One thing is for sure – the Klamath Basin water wars will not be ended soon. Stay tuned for next year’s update.
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 February 5, 2014
In the mid 1970’s, the City of Cleveland and some fifty plus surrounding communities created a sewer district now known as the Northeast Ohio Regional Sewer District (“NEORSD”) to handle sanitary and industrial discharges into Lake Erie, and several rivers, including the Cuyahoga. Over time, however, the Cleveland area experienced considerable urban sprawl, creating vast expanses of impervious surfaces in the form of parking lots and large clusters of office, shopping, Big Box, commercial and industrial facilities. With the conversion of green space to impervious roofs and parking facilities, some of the communities began to experience more flooding and erosion problems. Indeed, the Cleveland Metroparks, known as the “Emerald Necklace” because of the park lands situated in the flood plains of the Cuyahoga, Chagrin, and Rocky Rivers, was particularly hard hit from the storm water runoff originating in the nearby suburbs.
To address storm water and erosion problems that were “regional” in scale, the NEORSD developed a program in 2010 that included the payment of fees by all property owners based on the amount of impervious surface areas, like driveways, parking areas, and roof tops. The NEORSD expected to use these funds on projects that would alleviate flooding and stream erosion. But there was no unanimity among the member communities of the NEORSD about the need for, or the type of program that the district wished to implement. Approximately ten of those communities objected, in large part because their geographical elevations were such that they likely would never benefit from the preventive measures. Moreover, many of those communities already had their own expensive, capital intensive storm water systems. Furthermore, a significant number of commercial property owners objected because of the hefty fees that they would pay based on the parking lots and roof structures they maintained.
To validate the regional program, the NEORSD filed a declaratory judgment action in the Court of Common Pleas in Cuyahoga County, where it prevailed. But the dissenting communities and commercial property owners appealed, and secured a two to one appellate reversal in 2013. The appeals court concluded that the sewer district did not have the authority to address storm water unless it was also contaminated with sewage. The court of appeals did not reach the merits of the claim that the storm water fees were illegal taxes. (The NEORSD had billed approximately $35,000,000 in fees by the time of the appeals court decision.)
The NEORSD has appealed the decision to the Ohio Supreme Court, with significant amicus support. The dissenting communities and the commercial property owners have urged the Ohio Supreme Court to decline to hear the case, and claim that the legislative process in the General Assembly is the proper place to balance the political considerations that might be involved in a fee supported regional storm water management plan. They claim that the current plan is nothing more than power grab and illegal tax by an unelected and unaccountable body. The NEORSD, on the other hand, argues that the storm water problems know no political boundaries, and thus its regional, holistic approach is far superior to the piecemeal, community by community approach that previously existed.
As of this note, the Ohio Supreme Court has not decided whether it will take the case. The underlying court of appeals decision can be accessed here.
Posted on February 3, 2014
Courts have long wrestled both with the survival of environmental claims in bankruptcy and with the proper prioritization of environmental claims within bankruptcy. In Munce’s Superior Petroleum Prods. v. N.H. Dep’t of Envtl. Servs., the First Circuit split with the Third Circuit over the prioritization of punitive fines for a company’s post-petition violation of environmental laws. In Pa. Dep’t of Envtl. Res. v. Tri-State Clinical Labs., Inc., the Third Circuit determined these to be general unsecured claims, but the First Circuit disagreed and gave the fines administrative expense priority ahead of unsecured creditors.
Tri-State Clinical Labs. involved a company that violated solid waste disposal laws by disposing of biological materials into the general trash. The company engaged in this conduct both before and after filing for bankruptcy, and the Pennsylvania Department of Environmental Resources (DER) assessed criminal fines for both the pre- and post-petition conduct. The parties agreed that the fines for the pre-petition violations were general unsecured claims, but DER contended the fines for the post-petition violations should be given administrative priority pursuant to 11 USCS § 503(b)(1)(A) (i.e., as “the actual, necessary costs and expenses of preserving the estate”). The court disagreed. First, the court looked to the specifically-itemized administrative expenses set forth in the statute, and determined, with the exception of fines related to taxes, they were all “compensation for services that are necessarily incident to the operation of a business.” The fines, being punitive in nature, were not compensation for services, and a company’s unlawful conduct is not a “necessary cost of doing business.” In addition, the specific inclusion of tax fines suggested Congress’ intent not to include any other type of “non-compensatory” penalties. Finally, the end result of granting a punitive fine administrative priority status would be the payment of that fine by innocent third parties (the unsecured creditors), not the debtor. The court contrasted its decision with a situation involving compensatory payments to the state for its work in cleaning up a contaminated site, which would have received administrative priority.
The court in Munce’s Superior Petroleum Prods. disagreed with this analysis. Munce’s Superior Petroleum Prods (MSPP) violated state environmental laws requiring secondary containment around its aboveground storage tanks. The New Hampshire Department of Environmental Services (DES) filed an action in court, seeking injunctive relief and civil penalties, and the court entered a consent preliminary injunction requiring MSPP to bring its tanks up to code or take them out of service. MSPP did not comply with the injunction, and DES filed a motion for contempt. MSPP then filed for bankruptcy. The state court stayed the DES action, but then lifted the stay on a finding that DES was “protecting public health and safety and the environment.” The state court then granted DES’ motion for contempt, ordered MSPP to take its tanks out of service and fined MSPP $1000 per day of noncompliance. MSPP still did not comply, and the court ultimately granted DES’ motion for $192,000 in fines.
The bankruptcy court assigned the $192,000 in fines administrative expense priority, and the First Circuit affirmed. The court first determined that the fines were for post-petition conduct (not complying with the contempt order), not for the pre-petition environmental violations that originally triggered DES’ lawsuit. Next, the court decided that “in light of today’s extensive environmental regulations, the payment of a fine for failing to comply with those regulations is a cost ordinarily incident to operation of a business.” Therefore, “fines for noncompliance post-petition with state environmental law” fall within 11 USCS § 503(b)(1)(A) and should be granted administrative expense priority.
Posted on November 13, 2013
Water management issues have become much more serious in recent years. Even Minnesota – the Land of 10,000 Lakes – is coping with limited water resources. Recent state reports have warned a growing number of parts of Minnesota will soon face groundwater shortages, especially during drought periods due to increasing water use and the potential effects of climate change.
In Minnesota, the responsibility to ensure the State maintains an adequate supply of water resources falls primarily upon the Department of Natural Resources (“DNR”). Since 1937, the DNR Commissioner has regulated water use through a water appropriations permit program. In implementing the appropriations program, the DNR Commissioner is granted broad authority to assess cumulative impacts and sustainability. Although there is no specific definition in state law, the DNR has defined “sustainable water use” as “the use of water to provide for the needs of society, now and in the future, without unacceptable social, economic, or environmental consequences.”
To manage groundwater conflicts, the Minnesota Legislature in 2010 authorized the DNR to designate “groundwater management areas” and develop water use plans for these designated areas. The DNR is now in the process of implementing this new law. Last year, the DNR undertook a process to develop a groundwater strategic plan to designate and implement groundwater management areas. In kicking off the planning process, the DNR acknowledged that both the Department and water users have traditionally operated under the assumption that water was plentiful and limits were seldom necessary. The DNR now recognizes, however, that it has the authority to change the permitting system to shift away from such generous assumptions and to make determinations intended to promote sustainability even if those determinations result in the denial of some allocation requests.
The DNR is now seeking input from stakeholders in the development of the state-wide strategic plan. The DNR has also identified three potential groundwater management areas but the specific boundaries have not been delineated. In fact, defining the groundwater management boundaries will be one of the toughest issues in implementing the new law, as DNR is weighing whether boundaries should be based on underlying aquifers, distribution of current and future use, watershed boundaries, or even community boundaries.
As water management issues become more serious, Minnesota’s groundwater management area program presents one potential model for other policymakers and regulators who must tackle these tough issues.
Posted on October 23, 2013
On September 4, 2013 EPA published proposed changes to its Water Quality Standards Rule at 40 CFR Part 131 (WQS Rule). The proposal is styled “regulatory clarifications” but the proposal represents the most significant changes made to the WQS Rule in some thirty years. The WQS Rule currently sets forth the minimum conditions that must be met in each State’s or Tribe’s water quality standards before EPA can approve them under the Clean Water Act (CWA). Increasingly over the years, state water quality standard decisions have been the driver behind required stringent permit limits in NPDES Permits, TMDLs for impaired waters and lawsuits against EPA. The proposed rule is mostly an attempt to codify exciting EPA guidance and practices to ensure national consistency and “transparency.” Many of the proposed changes were generally discussed in EPA’s Advance Notice of Proposed Rule Making (ANPRM) on water quality standards published in 1998 and many come from the Great Lakes Water Quality Guidance at 40 CFR Part 132.
First EPA is proposing to amend the use attainability analysis (UAA) requirements found in the current rule to now require a state or Tribe to identify the highest attainable use (HAU) and the water quality criteria to protect the HAU in any UAA. A UAA is a structured analysis a State or Tribe can undertake to attempt to demonstrate to EPA that the so called “fishable and swimmable” uses required under the CWA are not attainable based on a number of factors. These factors include low flows, natural or physical conditions, human caused conditions which cannot be remedied, dams, or because controls to achieve attainment would be too expensive. At least in the Northwest, EPA have been very reluctant to approve UAAs because the agency has a “rebuttable presumption” that fishable uses and swimmable uses are attainable (some might call it an irrebuttable presumption) and implicitly that it is never too expensive to remedy water quality problems. Requiring states and Tribes to also adopt a new HAU in connection with a UAA along with associated criteria may make the UAA an even less viable CWA off-ramp.
Speaking of off-ramps, the proposed rule also sets forth the conditions under which a state or Tribe can adopt “variances” to water quality standards for individual or groups of NPDES permittees. Variances are merely referenced in the current WQS Rule and have been viewed as a “UAA lite.” Variances are codified in water quality standards (subject to approval by EPA) and allow individual dischargers or groups of NPDES Permits to temporarily exceed water quality based effluent limits based on the same factors which justify a UAA. EPA articulates in the proposal that it believes variances have been underutilized and therefore sets forth the conditions which the Agency will grant variances for an individual or groups of NPDES permittees. (e.g. Demonstrate temporary unattainability, maximum timeline of 10 years and protect the HAU during the variance.) Whether the proposal will lead to more variances may be doubtful. EPA has typically been unwilling to approve variances for industrial or commercial dischargers (although they are more flexible with municipalities) because pollution controls to meet WQS are seemingly never too expensive.
As my colleague Patricia Barmeyer notes in her recent post, the proposed rule also proposes changes to antidegradation implementation procedures that are somewhat consistent with current practices and guidance by providing some flexibility in how states protect high quality waters and a specific requirement that states must first require dischargers to implement “practicable” pollution controls that minimize or eliminate any degradation to high quality before allowing the discharge. “Practicable” is not defined but if this term is implemented in the same way as proving economic hardship in a UAA or variance then new and increased discharges could be subject to additional (and expensive) hurdles in going through antidegradation reviews. Finally, the proposed rule addresses compliance schedules in NPDES permits consistent with current practice and specifies the conditions under which the EPA Administrator will make determinations that a water quality standard does not meet the requirements of the CWA. Comments on the proposed rule are due on December 3, 2013 (unless an extension is granted).
Posted on September 9, 2013
For those of you who interact now with, or may in the future interact with, the Alabama Department of Environmental Management (ADEM), whether its staff or the lawyers who make up ADEM’s Office of General Counsel (OGC), meet ADEM’s General Counsel, Tom Johnston:
Q: Tell me a little bit about your background, how long you've been at ADEM, how long as General Counsel, and the make-up of the OGC.
A: I attended the University of California, Berkeley, earning a B.S. in Resource Economics, and came back home to Alabama to get my law degree from the University of Alabama School of Law, receiving my J.D. in 1983. I have been with the OGC for 25 years, representing ADEM in civil enforcement actions, in defensive litigation before the Alabama Environmental Management Commission (AEMC), and in state and federal courts, both at the trial and the appellate levels. I was appointed as the agency’s General Counsel in 2010, following the retirement of long-time General Counsel Olivia Rowell. Currently, there are nine attorneys on staff with the OGC, including myself. While an effort is made to allow staff attorneys to develop expertise by working closely with an assigned ADEM program, our attorneys are also encouraged to provide assistance outside their assigned area, which allows them to expand their individual experiences and remain current in the broad array of environmental law.
Q: What has been one of the more interesting or challenging legal issues you or the OGC has handled, and how did it turn out?
A: The case that comes to my mind is one that presented significant issues of public health and safety, combined with the complexity of the underlying subject matter and the science and technology involved. I refer to the permit appeal and legal challenges lodged against the Chemical Weapons Incinerator built at the Anniston Army Depot in Calhoun County, Alabama to destroy the stockpile of chemical agent and munitions that had been stored at the depot since World War II. The potential impact on the surrounding communities from an accidental release of aging chemical agent was down-right frightening, regardless of whether the release was the result of continued storage, an operational accident, sabotage, or terrorism. From beginning to end, the permits issued by ADEM for the incinerator underwent the most detailed processing and review in the Department’s history, a process that extended beyond ten years. As the attorney in the Office of General Counsel assigned to the case, I provided assistance along the way, from the public hearings during the notice and comment permitting, to the administrative permit appeals initiated before the AEMC, to collateral challenges lodged in trial court and pursued through appellate review. The administrative hearing in the permit appeal was the longest in ADEM history and, at over 700 pages, generated the most extensive recommendation to date from an AEMC hearing officer.
In the end, 12 years after the Army’s initial application to ADEM, the Supreme Court of Alabama upheld all permits issued by ADEM, without modification. For myself (and the Army, DOD, and private attorneys also involved), the joy and professional satisfaction of obtaining that legal victory will be long remembered. Even so, that joy was surpassed in December, 2011, with the announcement that the incinerator had destroyed the last remaining munition, and had forever removed from the consciousness of that community the specter of an agent-related accident. Over the life of the incinerator project, more than 4.5 million pounds of chemical agent – including over 600,000 rockets, projectiles, mines and mortars – were successfully and safely destroyed without major incident.
Q: ADEM has changed over the years, and I know the OGC has changed, too. What are some of the more significant changes you’ve seen in your time at ADEM?
A: The more significant changes I have witnessed during my twenty-five years with ADEM result from advancements in information technology. From advances in word-processing and database management to electronic filings and use of the internet, these developments have fundamentally changed not only how we handle the Department’s business, but also the public’s ability to interact with ADEM. Utilizing the tools now available through advancements in information technology and the internet, ADEM is now one of the most transparent agencies in Alabama state government, and a leader in transparency among the state environmental agencies in EPA Region IV. With the development of the ADEM website, citizens now have access to a wide range of electronic data and may tailor search queries by facility name, permit number, or location and community. Through our website, citizens may now file complaints and research information. The Department has engaged in a concerted effort through workshops and community outreach to provide “how-to” instructions on using the ADEM website. Regulated entities also have benefited through the ability to file reports electronically, such as discharge monitoring reports, thereby avoiding potential mistakes and errors from manual entry of data.
Q: Is funding still a big problem for ADEM and the OGC? What are some other significant issues?
A: Funding and budgetary constraints at the state and federal level continue to present some of the most significant challenges to ADEM I have observed since joining the staff in 1988. As a result, ADEM has had to take steps to cut back and streamline. Last summer our director announced the sale of the Department’s surveillance airplane. A hiring freeze was implemented and staffing levels have decreased through attrition. In the Office of General Counsel, we have not filled two attorney slots and one of our support positions. Employees have not received merit raises in five years, cost of living adjustments have been stayed, and promotional opportunities are limited. Yet, even with these constraints, environmental management by ADEM has performed in the upper percentile in national rankings. I give credit for these rankings to the dedicated men and women who staff ADEM, and the guidance and leadership from the front office.
Q: Are there particular legal or substantive issues the OGC or ADEM is working on that you can share; or perhaps issues you see coming down the road with which ADEM or the OGC will have to deal?
A: One issue we are seeing on a recurring basis arises from activities conducted by business organizations that enjoy limited liability under state law, i.e. limited liability companies or “LLCs.” What was once a form of business organization little noticed by ADEM, the use of LLCs appears to have skyrocketed in areas of activity subject to ADEM regulation. Whether the activity involves development of a residential subdivision, or the operation of a private wastewater treatment facility, when a LLC engages in activities that result in significant environmental impact and damages, the assertion of limited liability by those responsible stymies enforcement efforts and limits the ability of courts to grant relief. When construction activities undertaken by a LLC result in impacts to streams and tributaries, or damages the property of adjoining land-owners, courts are looking at ADEM and private plaintiffs and asking: “What can I do if there are no assets in the company?” We are aware of cases now where the limited liability form of organization has resulted in either no remediation of impacted property, or emergency response remediation conducted on the public dime. In this respect, the LLC business organization has allowed the de facto shifting of financial responsibility from the LLC investors to others.
Posted on August 26, 2013
On August 20, 2013, the U.S. Court of Appeals for the 3rd Circuit in Bell et al. v. Cheswick Generating Station, GenOn Power Midwest, L.P. answered a question of first impression: “whether the Clean Air Act preempts state law tort claims brought by private property owners against a source of pollution located within the state?” In this case, Plaintiffs filed claims under state tort law against the GenOn’s Cheswick Generating Station, a 570-megawatt coal-fired electrical generation facility in Springdale, Pennsylvania for allegations of ash and contaminants settling on their residential property (located within a mile of the plant). The Appeals Court held that “(b)ased on the plain language of the Clean Air Act and controlling Supreme Court precedent, we conclude that such source state common law actions are not preempted.”
This decision was based upon the U.S. Supreme Court precedent found in Intl. Paper Co. v. Ouellette. The question presented by Intl. Paper Co. v. Ouellette was “whether the [Clean Water] Act pre-empts a common-law nuisance suit filed in a Vermont court under Vermont law, when the source of the alleged injury is located in New York.” The U.S. Supreme Court held that: (1) Clean Water Act preempted Vermont nuisance law to extent that that law sought to impose liability on New York point source, but (2) Act did not bar aggrieved individuals from bringing nuisance claim pursuant to law of source state.
The Supreme Court of Appeals of West Virginia has previously applied the Intl. Paper Co. v. Ouellette decision to the Clean Air Act in Ashland Oil, Inc. v. Kaufman. In the Ashland Oil case The Supreme Court of Appeals of West Virginia held that Intl. Paper Co. v. Ouellette “requires the application of the statutory or common law of the source state to an interstate pollution dispute when the pollutants in question are regulated by the Clean Air Act. However, the procedural law of West Virginia shall be followed when the issues are being litigated in this State's courts.”
Thus, it appears, at least in the 3rd Circuit, that while interstate common law disputes are preempted by the Clean Air Act, intrastate disputes are not.
Posted on August 15, 2013
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.
Posted on July 29, 2013
Bill and Marlene Pepin own 36 acres of land in Hampden, Massachusetts on which they hope to build a retirement home. Their plans have thus far been frustrated by the designation of their property as Priority Habitat for the Eastern Box Turtle, a Species of Special Concern under the Massachusetts Endangered Species Act, Mass. Gen. Laws C. 131A. The designation was made by the Massachusetts Division of Fisheries and Wildlife, pursuant to its Priority Habitat regulations, 321 Code Mass. Regs. 10.01 et seq., which were promulgated under to the “no take” provision of the Act.
Pursuant to the regulations, the Pepins’ plans must be reviewed by the Division and will be approved only on a showing that they will not result in the “take” of a Species of Special Concern, a showing that may require modifying the project or otherwise taking steps to protect the species. This is a burden that, in the Division’s view, is not especially onerous and is one that has been met many times by many projects during the two decades that the regulations have been in effect. This view appears to have the support of at least a portion of the development community in Massachusetts, support that is based on a concern about what the likely alternative would be to regulation under the Priority Habitat regulations.
The Pepins, though, have taken the view that their project in not subject to the Division’s authority. They have challenged the designation of their property as Priority Habitat; and they have challenged the Division’s authority to adopt the Priority Habitat regulations in the first place. They lost on both grounds in an administrative proceeding and appealed the result to the Superior Court, where they lost again.
The Pepins appealed the judgment to the Massachusetts Appeals Court, the Commonwealth’s intermediate level appellate court. And then the case got considerably more interesting. In the space of a few months, it was transformed from a relatively straightforward (if very important to the Pepins) challenge to an agency determination into one of the most important administrative law and environmental cases in Massachusetts in a number of years.
The case was docketed in the Appeals Court last year; the Pepins, and then the Division of Fisheries and Wildlife, filed their briefs. Also filing, in support of the Division, were amici curiae Massachusetts Audubon Society, Massachusetts Association of Conservation Commissions and the Conservation Law Foundation. Among the amici’s arguments in support the of the Division’s authority to promulgate the challenged Priority Habitat regulations was the assertion that it is better for the development community to be regulated under those regulations than pursuant to a different provision of the Act, one that the Pepins assert is the only provision available to the Division to regulate development on private property. In support of the assertion, amici appended to their brief an October 2011 letter from NAIOP Commercial Real Estate Development Association Massachusetts, an extremely active participant in discussions and lobbying concerning environmental regulation in Massachusetts (NAIOP was formerly the National Association of Industrial and Office Parks.) NAIOP’s letter opposed legislation that would have codified the position that the Pepins were taking in court (including in Superior Court, at the time the letter was written) – that the Division does not have authority to regulate private activities in lands designated Priority Habitat and can regulate development only pursuant to the much more restrictive Significant Habitat provisions of the Act, which sharply limit development but which require substantial procedural steps before they can be effective with respect to any particular parcel. “NAIOP strongly believes that this bill would be bad for real estate development. . . . [T]he Division has developed a more flexible regulatory mechanism through Priority Habitat. . . . [T]he bill would result in more unpredictability and uncertainty for developers . . ..” The bill did not pass.
Late last year, before the case could be argued in the Appeals Court, the Massachusetts Supreme Judicial Court (“SJC”), acting sua sponte, moved the case to its own docket. In February of this year, the SJC announced that it was “soliciting amicus briefs. This matter . . . raises the question of what procedural protections are required when the division  designates ‘priority habitat.’” The Pacific Legal Foundation, of Sacramento, California, then moved for leave to file an amicus brief in support of the Pepins. (There is a New England Legal Foundation, based in Boston; it has not played a role in the case.)
The Pacific Legal Foundation brief does not address what had been the original issue between the Pepins and the Division – whether their property was correctly designated as Priority Habitat. Its entire focus is instead on the asserted unlawfulness under Massachusetts law – statutory law, decisional law and constitutional law – of the Priority Habitat regulations.
Section 4 of MESA creates three categories of protected species: Endangered; Threatened (at risk of becoming Endangered); and Species of Special Concern (at risk of becoming Threatened). The statute directs the Division to establish lists of these species and to designate Significant Habitats for Endangered and Threatened Species (but not for Species of Special Concern). The designation of Significant Habitat involves substantial scientific and administrative work by the Division; and designation results in substantial limits on land use in the areas designated – but the statue also provides significant opportunities for affected landowners to challenge the designation or otherwise to seek to lessen or eliminate its impact on them – including by petitioning the Division Director to purchase their property.
Separately, Section 2 of MESA makes it unlawful to “take” any listed species (i.e., Endangered, Threatened or of Special Concern). And in Section 4 the statue empowers the Division to “adopt any regulations necessary to implement [its] provisions .”
The Division has established a “List of Endangered, Threatened and Special Concern Species;” 321 Code Mass. Regs. 10.90; but the Division has not designated any geographical areas as Significant Habitat. The Division has, however, established by regulation the category of Priority Habitat, to be “used for screening Projects and Activities that may result in the Take of State-listed Species [in all three categories] and to provide guidance to Record Owners regarding a Project or Activity . . ..” 321 Code Mass. Regs. 10.12(1). The regulations permit an owner whose land is in delineated Priority Habitat to request reconsideration of the delineation; they place the burden on the owner to show that the delineation was improper.
Designation of the Pepins’ land as Priority Habitat for the Eastern Box Turtle was pursuant to these regulations. Their administrative challenge was summarily dismissed because they produced no evidence that the designation was incorrect, and, as is noted above, the Superior Court upheld the dismissal. The Pepins’ appellate brief addresses this issue, but its importance has diminished considerably. The SJC took the case, and the Pacific Legal Foundation moved to become involved, because the case presents a vehicle for challenging the Division’s authority to create a species protection program that is not specifically created by the statute.
The Division’s defense on appeal is a familiar one in administrative law: The statute creates a comprehensive scheme to protect species in varying degrees of peril; it vests “all powers hereunder” in the Director of the Division; it prohibits the “take” of any protected species; and it empowers the Division to “adopt any regulations necessary to implement [its] provisions.” Given the statutory structure and the deference that is accorded administrative determinations, the Division’s decision to adopt the Priority Habitat Regulations in order to administer the no take provision is reasonable and must be sustained.
There is an appealing counterargument: The Legislature created a mechanism for regulating the use of private property in the interest of species protection. That mechanism contains significant protections for landowners. The Division’s creation of a different mechanism, not mentioned anywhere in the statute and having less robust landowner protections, undermines the balance the Legislature struck between protecting species and respecting property rights.
That argument is briefly made explicit in the Pacific Legal Foundation brief, but the bulk of the brief is a thoroughgoing attack on the authority of the Division – and of administrative agencies generally – to adopt regulations that are not expressly contemplated and specifically described in legislation. To mount this attack, the brief must delve deeply into Massachusetts administrative and constitutional law. And it does, advancing a narrow reading of what it means for a regulation to be “necessary” to effect the purposes of a statute; questioning the appropriateness of deferring to the Division’s interpretation of the statute in this case; and seeking to distinguish a line of Massachusetts cases that holds that statutory authority to act in a specific manner does not foreclose an agency’s pursuing parallel action under a general grant of authority. Moreover, the brief argues, the SJC should decide the case in a way that avoids potential constitutional issues – the brief suggests that upholding the regulations could lead to regulatory takings and that the legislative delegation the Division relies on would constitute a violation of the Massachusetts Constitution’s separation of powers requirement – by striking down the regulations.
The Massachusetts Supreme Judicial Court has long been sensitive to environmental concerns, and it has upheld the broad authority of state and local administrative bodies to act to protect the environment. The court has also been careful to ensure that the rights of Massachusetts citizens are protected, including by insisting on strict adherence to procedural requirements established by the Legislature. Bill and Marlene Pepin’s case presents an important test of how those interests will be harmonized. Argument is now set for October 2013 – stay tuned.
Posted on July 24, 2013
At the 2013 Offshore Technology Conference in Houston, nobody was really surprised to hear Gulf Coast and Alaska Governors calling for an expansion of offshore drilling activity and streamlined permitting processes. But, more than a few were probably surprised to hear the Governors of North Carolina, South Carolina, and Virginia echo the same sentiments, especially because drilling activity offshore these three states is currently banned by Presidential edict.
As the post-BP offshore drilling debate marches on, there just might be some interesting wrinkles down the way between and among the allied states that support a resurgence of seaward exploration and production operations. One possibility deserves a passing note.
During its 2011 Regular Session, the Louisiana Legislature passed, and the Governor signed into law, Act No. 336, which extended the offshore boundary of the State from the current three geographical (nautical) miles to three marine leagues (nine geographical miles), as measured from the coastline. At its June 2012 meeting, the Louisiana Wildlife and Fisheries Commission followed suit by formally adopting the legislative mandate and conforming its marine regulatory jurisdiction accordingly. The new boundary created by Act No. 336 by its terms is subject to recognition by Congress or the courts.
While a Louisiana official was quoted in the media afterwards as saying that Mississippi and Alabama should join Louisiana and launch the same initiative against the federal government, the Mississippi Commission on Marine Resources, at its July 2012 meeting, adopted a Resolution opposing the action of its Louisiana counterpart. Thus, the issue was joined at that point, at least at the state agency level. But, not to be outdone in statutory law, the Mississippi Legislature, in its 2013 Regular Session, amended Section 3-3-1, Mississippi Code of 1972 Annotated, through the adoption of HB 1072, which mimics the 2011 Louisiana legislation by extending the boundary of Mississippi offshore territorial waters from three geographical miles to three marine leagues. This legislation became effective on July 1, 2013.
For perspective, a history lesson is necessary. In a stunning decision in 1947, followed by two more in 1950, the United States Supreme Court decreed that coastal states have no claim to any submerged lands offshore. Because these decisions directly impacted not only the states along the Atlantic, Pacific, and Gulf Coasts, but those along the Great Lakes, as well, the adverse reaction to them was swift and strong. After several years of wrangling, Congress passed the Submerged Lands Act (the Act) in 1953 to undo what the Supreme Court had done.
Of the three major components of the Act (i.e. lands under navigable inland waters; tidelands; and lands under the open sea), the centerpiece is a Congressional grant of state title to, and jurisdiction over, certain offshore areas. Specifically, states along the Atlantic and Pacific Coasts were granted submerged lands extending three geographical miles seaward of their respective coastlines. The Great Lakes States were granted submerged lands extending to the international boundary. States along the Gulf of Mexico were granted submerged lands extending not less than three geographical miles nor more than three marine leagues seaward of their respective coastlines.
But, there the Congress stopped. Except to define the term "coastline" as "the line of ordinary low water along that portion of the coast which is in direct contact with the open sea and the line marking the seaward limit of inland waters," the law gives no specific geodetic references or methodologies for its delimitation. And, the ultimate decision regarding the respective offshore domains of the five states bordering the Gulf of Mexico was left to be determined by the courts. Simply put, the Act thus set the stage for more court battles to follow.
In 1960, the Supreme Court determined that the Submerged Lands Act boundaries for Louisiana, Mississippi, and Alabama should extend three geographical miles seaward from their respective coastlines. The Court further determined that the Submerged Lands Act boundaries for Texas and the Gulf Coast of Florida should extend three marine leagues seaward from their respective coastlines, because of the different histories of admission to the Union of these two states. But, as with the Congress, the Supreme Court made no attempt to delimit the respective "coastlines" for any of the five Gulf Coast states, which inevitably led to even further protracted litigation.
Following the 1960 Supreme Court decision, several bills were introduced in the Congress to amend the Act to specifically grant to Alabama, Mississippi, and Louisiana submerged lands extending three marine leagues from their respective coastlines. These efforts failed.
The next eruption of litigation targeted the Mississippi Sound. In April 1971, the United States for the first time publicly disclaimed the inland-waters status of Mississippi Sound by publishing a set of maps depicting several irregularly shaped polygons between the mainland and the barrier islands that were denoted "enclaves of high seas," the submerged lands underlying them thus belonging to the federal government. The States of Mississippi and Alabama were once again launched into litigation against the United States.
In 1985, the Supreme Court trounced the federal government by adopting the Special Master's determination that Mississippi Sound constitutes a "historic bay" and thus is inland waters in its entirety. Further, the Court also adopted the Special Master's determination that the "coastline" is the line of ordinary low water on the south shore of the barrier islands. The Court then directed the parties to prepare a proposed final decree and submit it to the Special Master for consideration by the Court. This process, which took another seven years, involved Supplemental Decrees in which the baselines for establishing the coastlines of both Alabama and Mississippi, described using point-to-point geodetic coordinates, were approved by the Court and set out in the decrees.
Thus, the three-geographical-mile offshore submerged lands boundary for these two states, granted under the Act and subsequently established by the Supreme Court in its 1960 decision, was then precisely determinable. At last, in 1992, after over three decades of fighting over the federal-state submerged lands boundary for Alabama, Mississippi, and Louisiana, the Supreme Court put the matter to rest – until now.
Whether or not the 2011 Louisiana legislation and/or the 2013 Mississippi Legislation will actually lead to any changes in the current offshore submerged lands boundaries of these states remains to be seen. As already noted, attempts over a half century ago to accomplish the same objective as that of Act No. 336 and HB 1072 failed.
Quite obviously, both Alabama and Texas have considerable vested interests in the actions now taken by their neighboring states. Less obvious, though, is the prospect that, if Congressional action is mounted in furtherance of either Act No. 336 or HB 1072, nobody should be surprised if any of the East Coast or West Coast states (or Alabama), which were also granted three-geographical-mile offshore submerged lands boundaries under the Act, might be heard to say, "Me, too."
Posted on July 10, 2013
In April of 2013 the Arkansas legislature put an end to the ad hoc policy of implementing the NAAQS through stationary source permitting based upon source specific NAAQS modeling. The Arkansas legislature did not need a crystal ball to predict the chaos that was about to occur when the new NAAQS (PM2.5, one hour SO2 and one hour NO2) were swept into the existing Arkansas regulatory program. Arkansas’ environmental agency, the Arkansas Department of Environmental Quality (ADEQ) has relied upon its stationary source permitting program to implement the NAAQS for years, as opposed to relying upon state implementation plan (SIP) development. ADEQ has required every permit applicant to submit air dispersion modeling, and thereby demonstrate that the source will not cause a NAAQS violation. By comparison, EPA generally requires only PSD permit applicants to submit NAAQS dispersion modeling, and requires the states to otherwise address NAAQS compliance through their SIPs.
When Arkansas’ SIP permit procedures were last updated in 2000, minor (non-Title V) sources, and “minor modifications” at major sources were not required to undertake NAAQS modeling. Arkansas’ policies regarding NAAQS modeling were generally in sync with the Clean Air Act and most other states. Over the ensuing years regulatory creep expanded Arkansas’ NAAQS modeling program to the point that nearly every stationary source permit application was involved. ADEQ permit engineers required NAAQS dispersion modeling for minor sources, for minor mods at major sources, and then for any permit renewal—even no change renewals, “just to make sure that the source is still OK.” For example, a facility that had operated in full permit compliance for decades, without any modifications, could face permit renewal problems for no reason other than background conditions or recent meteorological data changed the NAAQS modeling results. Suffice to say this development was unpopular, making permitting expensive, time consuming, and uncertain.
The uncertainty was predicted to become chaos in September of 2012 when ADEQ proposed to drop the new NAAQS into its existing SIP. ADEQ’s “plan” was that the new NAAQS would also be implemented through stationary source permitting, including ADEQ’s expansive NAAQS modeling policies. Of particular concern is the PM2.5 standard, which, at 12 ug/cm3, is already near or exceeded by the background levels measured at the majority of the ambient monitoring stations throughout the state—background that is rarely, if ever, the result of any stationary source activity, but more likely the result of rural road dust and other non-stationary sources.
It became apparent to the regulated community that each permit review following adoption of the new NAAQS would generate ad hoc findings of modeled exceedances of the new NAAQS. By implementing the NAAQS through stationary source permitting rather than SIP planning, ADEQ eliminated any evaluation of regional cause and effect, and precluded any consideration of comprehensive solutions that involve all contributing sources. Under ADEQ’s “plan,” the unwitting permit applicant is forced to stand alone and face the consequences of a failed NAAQS modeling exercise. Concerns raised by the regulated community fell on deaf ears.
The Arkansas legislature stepped in, and in April of 2013 it enacted Act 1302, which required ADEQ to stop “protecting the NAAQS” by requiring stationary source permit applicants to undertake dispersion modeling, except in enumerated circumstances. Act 1302 prohibits ADEQ from using modeling for stationary source permit decisions or requiring retrofit pollution control technology. With the exception of PSD and other limited situations, dispersion modeling can only be used when there is a source or pollutant-specific SIP requirement. The Clean Air Act requires states to develop a SIP “for maintenance and protection of the NAAQS,” and Act 1302 requires ADEQ to implement the NAAQS as required by the Clean Air Act. The legislature did not neuter the agency’s efforts to protect clean air (which was the agency’s unsuccessful lobbying position). The legislature just said quit implementing the NAAQS through ad hoc permit decisions based on source specific air dispersion modeling. The legislature told ADEQ to use its ambient monitoring network, area modeling, and other tools to evaluate NAAQS compliance, and where non-attainment occurs, do the comprehensive planning that is required by the Clean Air Act to address it. Act 1302 was carefully drafted to compliment the Clean Air Act, and serves as a good model for any state facing similar NAAQS implementation issues.
During the two months since Act 1302 has been the law in Arkansas the agency has gone through some needed growing pains. The proposed rulemaking to enact the new NAAQS in Arkansas is being re-evaluated in light of the requirements of Act 1302. Much of the regulatory creep that occurred over the past decade has been curtailed, such that minor sources, minor modifications and no change permit renewals are no longer being required to submit dispersion modeling or demonstrate NAAQS compliance.
There is nothing like the heavy hand of the legislature to bring reason back into agency decision making. It appears that ADEQ now recognizes (much like most other states) that modeling has its limitations, and these minor stationary source projects are not causing, nor are they likely to cause any NAAQS problems. There is still a lot of work to be done as the new NAAQS are adopted, and real SIP planning commences. But sometimes it takes a pre-emptive strike to get the process started on the right track.
Posted on July 9, 2013
These are sad times in Oregon’s Klamath Basin. The state is making national headlines again over water wars pitting farmers and ranchers irrigating lands above Upper Klamath Lake against the Klamath Indian Tribes.
The Klamath area first made front page national news in 2001, when farmers and ranchers protested the removal of water from irrigation in order to protect threatened sucker fish under the federal Endangered Species Act (ESA). This time, the headlines stem from an unprecedented “call” for water to serve a time immemorial water right granted to the Klamath Tribes. Under principles of the prior appropriation doctrine in place in Oregon and most western states, seniority matters, and time immemorial is the ultimate priority date.
The current problem was a long time in the making. After more than 38 years of administrative proceedings, the Klamath Basin General Stream Adjudication finally reached a critical legal juncture in March, 2013 that allowed historic water use claims to be enforced for the first time. At that time, the Oregon Water Resources Department (OWRD) issued its long-awaited “Findings of Fact and Final Order of Determination” (FFOD) summarizing the state’s proposed disposition of more than 730 claims.
The FFOD included the state’s quantification of treaty-based reserved water rights for the Klamath Tribes to support fishing and gathering activities in Upper Klamath Lake and its tributaries. Although the instream flow and lake level amounts claimed by the Tribes and approved by OWRD are still subject to further judicial review, the state is obligated to respond to the Tribes’ call unless and until a court stays the action.
As a result of the call, OWRD has already begun the process of shutting off water diversions for all other upper basin water right holders to the extent needed to fully satisfy the Tribes’ approved claims. This means a loss of water for thousands of acres of irrigated farmland and other junior uses including domestic water for homes, stock water, and even the lodge at Crater Lake National Park. The regulation system is based strictly on priority dates; however, OWRD has taken emergency action to allow continued water deliveries for human consumption and stock water.
At this point, a coalition of upper basin water users has petitioned for a judicial stay of the FFOD’s enforcement. A hearing was held on July 3, and a decision is expected soon. If the stay is not approved, the upper basin lands will remain dry and the economic losses will be substantial. With nearly 40 years to prepare, it is sad that the affected interests were not able to reach some level of negotiated agreement before the battle lines were drawn. Although both Tribal and non-Tribal water users have expressed interest in a negotiated solution, there is no settlement process currently underway, and the war rages on.
Posted on June 20, 2013
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.
Posted on April 29, 2013
On September 14, 2011, I posted a blog piece that was entitled “A Tug of War: How Can the State Satisfy Its Burden of Proof?” This posting discussed the diametrically opposed decisions of an Ohio trial court and an appeals court on the important issue of the kind of evidence necessary to prove a violation of an air emission limitation in an operating permit. This closely watched case in Ohio eventually reached the Ohio Supreme Court, which finally announced its decision on December 6, 2012.
In State ex rel. Ohio Attorney General v. Shelly Holding Co. the Ohio Supreme Court sided with the appellate court and ruled that the civil penalty calculation started on the date of the violation, as demonstrated by the failure of a stack test, and continued until the permitted source demonstrated compliance with the emission limitations. Over the objections of Shelly and several industry amicus filings, the Ohio Supreme Court concluded that the state enforcement agency need not prove that the facility was operating out of compliance for each intervening day; such noncompliance can be presumed.
The issue arose, in part, because Shelly failed stack tests that were conducted under unrealistic, maximum-possible conditions when in fact day-to-day operations were likely to generate lower emissions. The state argued that Shelly should have discontinued operations until a subsequent stack test successfully demonstrated adherence to the permit’s emission limitations. Alternatively, the air pollution source could apply for and receive a new permit with different limits, or it could make intervening facility modifications that would enable it to pass the stack test. Shelly felt that it was improper to presume that the facility would exceed its emission limits unless the state makes a prima facie showing that the violation is likely to be ongoing or continuing.
After concluding that the burden is on the violator to prove by a preponderance of the evidence that there were intervening days on which no violation occurred or that the violation was not continuing in nature, the Ohio Supreme Court found no constitutional problem with extending the penalty to those subsequent days after the failed stack test. Thus, in Ohio, the beginning date for calculating a civil penalty for an air pollution control violation is the first date of demonstrated non-compliance (the failed stack test) and continues, even at lower operating rates, until the facility demonstrates a return to compliance.
While this decision arose in the context of an air permit, the State of Ohio is likely to cite it in other programs, such as NPDES permits.
Posted on April 25, 2013
After decades of sparring over nutrient loading in the Illinois River, and following several short term extensions of a previous truce, Arkansas and Oklahoma recently executed an agreement, the “Second Statement of Joint Principles and Actions”, that establishes a procedural framework for attempting to resolve their long running trans-boundary water quality dispute.
The Illinois River heads up in a rapidly developing section of Northwest Arkansas and flows west into a comparatively undeveloped portion of Northeast Oklahoma, where the river is designated by state statute as a scenic river. For more than two decades Oklahoma has worked to reduce the amount of nutrients, and particularly phosphorus, discharged into the Illinois River watershed. In 2002 Oklahoma adopted a numeric water quality criterion for Total Phosphorus that many considered impossible to attain in a developed watershed. In an effort to avoid litigation over the validity of the numeric criterion, Arkansas and Oklahoma entered into an agreement in 2003 known as the Statement of Joint Principles and Actions. This agreement provided, among other things, that: (i) Oklahoma would postpone for 10 years the date on which the numeric criterion would be fully effective; (ii) Arkansas sources would take a number of steps to reduce phosphorus discharges; and (iii) Oklahoma would review the existing numeric criterion, with an opportunity for Arkansas representatives to participate, before the end of the ten year period to determine whether the numeric criterion should be changed.
The ten year truce created by the Statement of Joint Principles and Actions was originally scheduled to expire in July 2012. During the ten year period Arkansas sources made significant progress in reducing the amount of phosphorus they discharged in the watershed. As a result, phosphorus levels in the Illinois River began to decline and most observers agreed that conditions in the river were significantly improved. Towards the end of the ten year period Oklahoma undertook a review, with full participation by representatives of Arkansas, EPA, and the Cherokee Nation. The review ended in a sharply divided report, with Oklahoma representatives stating that no change in the numeric phosphorus criterion was warranted and Arkansas representative stating that significant change was necessary.
As the end of the ten year truce approached, officials from Arkansas and Oklahoma began negotiations once again on how to avoid litigation. Focus on the potential for costly litigation was sharpened by the fact that EPA had publicly commenced work on a Phosphorus TMDL for the entire Illinois River watershed. After several agreements on short term extensions of the July 2012 deadline, Arkansas and Oklahoma reached agreement in February 2013 on a Second Statement of Joint Principles and Actions. This new agreement provides, among other things, that Arkansas and Oklahoma will fund a joint three year water quality study using EPA protocols to determine the threshold Total Phosphorus levels at which shifts in algal species or biomass production occur that result in undesirable aesthetic or water quality conditions. Oklahoma and Arkansas agree in the Second Statement to be bound by the findings of the joint study, and Oklahoma agrees to adopt a new numeric criterion for Total Phosphorus in the Illinois River if the results of the joint study are significantly different from the existing criterion (i.e., more than -0.010 mg/l or +0.010 mg/l than the existing .037 mg/l criterion). During the term of the Second Statement of Joint Principles and Actions, both states agree not to initiate or maintain litigation contrary to the terms of the agreement, and the statute of limitations on all claims is extended. Oklahoma agrees that it will postpone for the duration of the new agreement the date on which its existing, hotly disputed numeric criterion is to be fully effective.
EPA was not a party to the negotiation of the new agreement and it has not announced any formal position on its effect. It is not clear what impact the new agreement will have on EPA’s work to develop a TMDL for Phosphorus in the Illinois River watershed or on the various NPDES permits for POTWs on the Illinois River that are currently pending review in EPA Region 6.
Posted on March 29, 2013
At the time when Superfund was flexing its muscle and impacting the ability of successful completion of property transfers, most states developed some form of voluntary cleanup program or “VCP”. Those programs were supposed to allow for rapid and effective assessment and remediation, and furnish liability releases or covenants with liability protection. Sounded good huh?
And how many of our clients have a small collection of such sites that they volunteered to assess and address with the sweet promise of walking away, and quickly? Some used the voluntary cleanup program as a risk allocation tool in property transfers. Others wanted the promised release or covenant in order to obtain an environmentally worry-free, and thus more valuable, property that was theirs to sell.
Some states have had the fortitude to reform their voluntary cleanup programs by privatizing the process. In those states licensed professionals determine whether property investigations and remediation are necessary and when they are complete. They then issue some form of certification that leads to a covenant not to sue or a release. [See "New Jersey Follows Massachusetts into the World of Licensed Environmental Consultants and Privatized Cleanup Oversight", David Farer ,July 9, 2009].
In other states the agencies have not overcome their dependence on the fees generated by voluntary cleanup programs, utilizing those fees to pay the salaries of agency personnel engaged in the oversight of voluntary cleanup activities. In these states "voluntary" really means "hooked and can't get out." Let's look at a familiar ballad - best read while listening to Eric Clapton's Voodoo Chile (Live from Madison Square Garden):
Well on the day I signed up
For the Voluntary Cleanup Plan
Well I was promised fast and efficient
Get you out of a jam
It gives you certainty and freedom
And you'll be able to transfer worry free
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
Well I had a grain elevator
With a little dab of carbon tet
Oh Yeah, just a little dab
In the shallow soil
VCP had me test it
Oh, just a little dab at low levels
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
And I said I am finished
But VCP said not so fast
So I started on the groundwater
Even though it was 200 feet down
Yeah I started drilling
And haven't hit bottom yet
Now it's 10 years later
From the time I began
Yeah, it's 10 years later
And I haven't found that carbon tet yet
But I 'm gonna keep goin
Cause I'm in the money so deep
My heirs and assigns ask me
Say – what's goin on?
I have to tell them
My sad, sad song
Lord I'm a VCP chump
Oh Lord, I'm a VCP chump
So, most ballads eventually come to an end. How can we continue VCP reform in states where the VCP Bluesy Ballad still is being sung?
Posted on February 19, 2013
Oil and gas development has traditionally been regulated by the states, and the majority of the states with viable shale reserves have adopted laws or regulations that directly address hydraulic fracturing. However, several local governments have responded to concerns over potential health and environmental impacts by banning hydraulic fracturing within their jurisdictions. To date, local bans have been enacted in Colorado, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, and West Virginia. In several cases these local bans have been challenged as being preempted by comprehensive state regulation of oil and gas development. While there is very little appellate case law addressing the legality of local bans, two preemption cases are currently on appeal in New York. Norse Energy Corp. USA v. Town of Dryden, No. 2012-1015 (N.Y. App. Div.); Cooperstown Holstein Corp. v. Town of Middlefield, No. 2012-1010 (N.Y. App. Div.). In each case, the local trial court upheld a local ban on hydraulic fracturing, finding that preemption language in the state’s Oil, Gas, and Solution Mining Law (“OGSML”) did not apply to local land use regulations.
Appellant natural gas developers rely primarily on the OGSML’s preemption provision, arguing that its broad language was intended to preempt all local ordinances and regulations related to oil and gas development unless they are directed toward local roads or real property taxes. They also emphasize the broad scope of DEC’s oil and gas regulations which go beyond regulating how oil and gas development is conducted and also address spacing requirements and other limitations on where oil and gas development can occur. Thus, they assert that any local ordinance that limits where hydraulic fracturing can occur is superseded by the OGSML. The natural gas developers also argue that under implied preemption principles and New York’s constitutional limits on home rule authority, local governments cannot prohibit hydraulic fracturing because such regulations are in direct conflict with the OGSML’s provisions that dictate where oil and gas development can occur. Finally, the natural gas developers argue that the trial court’s reliance on supersedure provisions from other statutes was misplaced due to key differences in the language of the supersedure provisions as well as the relatively broader scope of DEC’s regulatory authority under the OGSML.
In contrast, the towns of Dryden and Middlefield assert that local prohibitions on hydraulic fracturing can be harmonized with the OGSML and its preemption provision. They argue that the local bans on hydraulic fracturing were not enacted for the purpose of regulating natural gas development, but instead are part of comprehensive land use plans designed to protect the public health, safety, and general welfare of the local community. Because the purpose of the prohibitions are not to “regulate” natural gas development, the towns contend that the prohibitions are not subject to the OGSML’s preemption provision. Instead, they argue that such local bans can be harmonized with the OGSML by limiting the OGSML’s well spacing and setback provisions to those areas where oil and gas development is otherwise permitted. Further, the towns argue that the trial court properly relied on earlier cases interpreting the supersedure provisions of the Mined Lands Reclamation Law (“MLRL”). The towns assert that the supersedure provisions in the MLRL and OGSML are substantially similar and, therefore, should be given similar effect. Thus, the towns assert that the prior cases that upheld local ordinances banning mining practices that were subject to regulation under the MLRL are binding precedent here.
Oral argument has been scheduled for March 21, 2013 and a final decision is not expected for several months, at the earliest. However, these cases will be closely watched in other jurisdictions where local bans on hydraulic fracturing have been enacted and where additional litigation is expected. Given the diversity among state laws addressing both home rule authority and oil and gas development, the legality of local bans on hydraulic fracturing is likely to remain a hotly debated issue for several years to come, particularly as oil and gas development using hydraulic fracturing continues to expand to new shale reserves around the country.
Posted on January 16, 2013
The concept of a “Waiver Rule” to be promulgated by the New Jersey Department of Environmental Protection (“NJDEP” or “Department”) created both excitement within the New Jersey regulated community and consternation among environmental groups. Business and development interests saw a Waiver Rule as a long overdue attempt by NJDEP to bring some flexibility into the State’s environmental regulatory experience. Environmentalists were convinced the Waiver Rule concept would open the door for polluters and greedy developers to complete an end run around New Jersey’s complex environmental statutory and regulatory scheme. A coalition of environmental and conservation groups initiated litigation challenging the adoption of the Waiver Rule. The environmentalists argued their case against the validity of the Waiver Rule before a three-judge appellate panel on January 14. In response to this argument, representatives of the business community told the court that a common sense approach to environmental regulation in New Jersey, as embodied in the Waiver Rule, is needed to spur economic development. It is likely this issue will end up before the New Jersey Supreme Court.
The Waiver Rule, N.J.A.C. 7:1B, became reality in response to Governor Chris Christie’s Executive Order No. 2, which attempted to instill “common sense principles” into the governing of New Jersey. Executive Order No. 2 and the Waiver Rule promised a better environmental regulatory climate to improve the State’s economy.
Will the Waiver Rule, effective as of August 1, 2012, actually make a difference? In its first five months, the Waiver Rule does not yet seem worthy of the regulated community’s early enthusiasm or the trepidation of the environmental groups. To date, NJDEP has still not approved a waiver under the Waiver Rule and, according to NJDEP’s Office of Permit Coordination & Environmental Review, only fourteen waiver applications have been accepted for review by NJDEP since August 1st.
NJDEP’s philosophy on the implementation of the Waiver Rule may well be embodied in N.J.A.C. 7:1B-1.1(b) which states: “[i]t is not the purpose of this chapter to allow for the routine circumvention of any Department rule.” The NJDEP guidance makes clear that application of the Waiver Rule will be limited. Only NJDEP (and not any Licensed Site Remediation Professional) is allowed to grant a waiver under the Waiver Rule. Will NJDEP ever get to “yes” on a waiver application? Time will tell.
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