EPA Is Not an Expert in Determining Electric System Reliability

Posted on May 7, 2015 by Seth Jaffe

The D.C. Circuit Court of Appeals just reversed and remanded EPA’s rule allowing backup generators to operate for up to 100 hours per year as necessary for demand response. It’s an important decision that could have lessons for EPA and the regulated community across a wide range of circumstances, including eventual challenges to EPA’s proposed GHG rule.

demand response

EPA said that the rule was necessary to allow demand response programs to succeed while maintaining grid reliability.  Commenters had argued that, by encouraging greater use of uncontrolled backup generators, EPA’s rule makes other generators less economic, thus creating a negative feedback loop, with less and less power generated by controlled units, resulting in greater and greater need for uncontrolled backup generators. Here’s what the Court concluded:

  1. EPA failed adequately to respond to the commenters’ arguments. Noting that “an agency must respond sufficiently to “enable [the court] to see what major issues of policy were ventilated,” the Court instead found that EPA “refused to engage with the commenters’ dynamic markets argument."
  2. To the extent EPA did respond, it was “self-contradictory”, arguing that it was not justifying the regulation on reliability grounds, even though the final rule said that it was based on reliability concerns.
  3. The 100-hour rule was based on faulty evidence. EPA relied on evidence that backup sources had to be available at least 60 hours to participate in a PJM “Emergency Load Response Program.”  However, PJM itself noted that this minimum does not apply to individual engines.
  4. Finally, and perhaps most importantly, while EPA justified the rule on reliability grounds, the Court stated that:

grid reliability is not a subject of the Clean Air Act and is not the province of EPA.

This last issue is the part of the opinion that could have some bearing on judicial review of EPA’s GHG rule.  The Court noted that there was no evidence that FERC or NERC had participated in the backup generator rule or provided comments to EPA.  When, during the course of the rulemaking, a commenter suggested that EPA work with FERC, this was EPA’s response:

the rulemaking’s purpose was to address emissions from the emergency engines “and to minimize such pollutants within the Agency’s authority under the CAA. It is not within the scope of this rulemaking to determine which resources are used for grid reliability, nor is it the responsibility of the EPA to decide which type of power is used to address emergency situations.”

This statement did not make the Court happy:

EPA cannot have it both ways it [sic] cannot simultaneously rely on reliability concerns and then brush off comments about those concerns as beyond its purview. EPA’s response to comments suggests that its 100-hour rule, to the extent that it impacts system reliability, is not “the product of agency expertise.”

And why is this relevant for the GHG rule?

First, because EPA had better consult with FERC and NERC, so that it can defend any statements it makes in the GHG rule about its impact, if any, on reliability.  Second, it’s clear that the court will not show deference to EPA’s conclusions about reliability, since that is not within the scope of EPA’s expertise.

Where Have all the Buffers Gone?

Posted on May 6, 2015 by Kenneth Warren

When selecting best management practices (BMPs) to protect streams during and following construction, riparian buffers are often considered the most effective option.  These permanently vegetated areas alongside waterbodies can capture, infiltrate and control stormwater flow, filter contaminants, stabilize stream banks and otherwise help protect and restore waterbodies and the ecological functions they support.  Recognizing the particular importance of riparian buffers located adjacent to exceptional value and high quality waters designated for special protection, the Pennsylvania Department of Environmental Protection (PADEP), like many other state environmental regulatory agencies, adopted regulations prohibiting earth disturbance activity within 150 feet of a special protection waterbody.  The regulations further required a property developer to protect or establish a riparian forest buffer under certain circumstances where waters in the project’s watershed fail to attain their designated uses.  

And then along came the Pennsylvania legislature.  Faced with objections from homebuilders and other developers to restrictions on use of their properties, the legislature enacted Act 162 of 2014 to provide developers with additional options.  Under Act 162, a developer who requires an NPDES stormwater construction permit may disturb land within 150 feet of a special protection waterbody if it implements BMPs “substantially equivalent” to a riparian buffer or a riparian forest buffer.  If the earth disturbance would occur in a special protection watershed within 100 feet of a surface water, the developer must also offset any reduction of the total square footage of the buffer zone that would have been utilized as a BMP with a replacement buffer.  The replacement buffer must be created in the same drainage area as the disturbed buffer and be as close as feasible to the area of disturbance at a ratio of one-to-one.  

In response to the passage of Act 162, PADEP recently published interim final guidances on equivalency demonstration and offsetting.  The equivalency demonstration guidance requires each developer disturbing earth within 150 feet of a special protection water to implement BMPs that reduce loadings of pollutants including total suspended solids, total phosphorous and nitrate.  In addition, the developer must show that its BMPs are functionally equivalent to a riparian buffer or forested buffer by providing, among others, habit for wildlife and vegetation, flood attenuation, channel stability and support of aquatic food webs.  Under the buffer offsetting guidance, a replacement buffer should be composed of native, diverse tree and shrub vegetation and preferably be installed at a location that receives runoff with characteristics similar to or more degraded than the runoff that the replaced buffer would have encountered.  

While many regulatory regimes afford environmental agencies discretion to grant waivers and exceptions to buffer protection requirements, Pennsylvania has by statute granted developers the option of using substantially equivalent BMPs, supplemented where necessary by offsetting.  PADEP has drafted guidances with stringent criteria for demonstrating equivalency and offsetting, but the guidances have yet to be finalized let alone judicially reviewed.  Experience in administering Act 162 will reveal whether, under PADEP’s watchful eye, equivalency and offsetting can uniformly serve as effective substitutes for a prohibition on development near special protection waters.  In the meanwhile, some healthy skepticism is in order.  

OKLAHOMA SURPASSES CALIFORNIA IN EARTHQUAKES

Posted on May 1, 2015 by Mark Walker

Oklahoma has quietly earned the dubious distinction of earthquake capital of the Lower 48, having surpassed California last year.  In 2014, Oklahoma had 585 earthquakes of magnitude 3.0 or higher compared to California’s 180.  The cause of this dramatic rise in seismic activity, and whether it is induced by human activity, particularly by oil and gas operations, has been the subject of much discussion and scientific study.

When I last blogged about this subject (June 2014) the U.S. Geological Survey (USGS) and the Oklahoma Geological Survey (OGS) had just issued a joint warning of the increased risk of a M5.5 or greater earthquake in central Oklahoma, stating that the science suggests that a “likely contributing factor” to the increase in earthquakes is injection of oilfield wastewater into deep geologic formations.  Despite several sensational articles implying that industry has exercised undue influence over the OGS and its scientific conclusions, on April 21, 2015, the OGS issued a statement in which it reiterated the view that “the primary suspected source of triggered seismicity is…from the injection/disposal of water associated with oil and gas production…the OGS considers it very likely that the majority of recent earthquakes…are triggered by the injection of produced water in disposal wells . . . .”

On April 23, 2015, the USGS released a new report which again noted the connection between earthquakes and certain deep disposal wells, but concluded that, “induced seismicity does not occur near every disposal well, so it is important that we continue to study and learn more about how these earthquakes are generated…These changes may be related to oil and gas exploration activity but they also may depend on physical processes, which are poorly understood…many questions remain”.

As the science develops, the Oklahoma Corporation Commission (OCC), which regulates oil and gas wastewater disposal wells in Oklahoma under the SDWA Underground Injection Control program, has taken an aggressive approach.  The OCC has identified “areas of interest”, which are areas within 10 kilometers of any earthquake swarm.  Eight areas of interest encompassing approximately 112 square miles have been identified.  On March 12, 2015, the OCC sent letters to operators who dispose of oilfield wastewater into the deep Arbuckle formation within these areas of interest directing that they provide information from which it can be determined whether such disposal is in communication with the underlying crystalline basement rock.  If it is, the OCC is requiring that disposal into the Arbuckle be discontinued.  Failure to produce the information results in immediate curtailment of disposal by 50%.

With the downturn in crude oil prices, most companies have dramatically cut back on drilling and completing new wells.  This downturn itself may provide a scientific opportunity to see if reduced oilfield activity produces fewer earthquakes in Oklahoma.

Eroding Ice: Fourth Circuit’s recent decision limiting “Arranger Liability”

Posted on April 29, 2015 by George von Stamwitz

A plaintiff seeking to characterize a business transaction as “disposal” under CERCLA may now feel like a polar bear looking for a patch of thick ice. 

On March 20, 2015, a divided panel on the Fourth Circuit Court of Appeals, in Consolidation Coal Co. v. Ga. Power Co., affirmed a District Court's ruling holding that transformer sales did not evidence an intent on to dispose of hazardous materials, and therefore did not support a finding of “arranger liability” under “CERCLA” even when words like “scrapping” and “disposal” were used. Looking to the framework of the Supreme Court’s 2009 ruling in Burlington Northern Burlington Northern and Santa Fe Railway Co. v. United States and the Fourth Circuit’s 1998 ruling in Pneumo Abex Corp. v. High Point, Thomasville & Denton Railroad Co., the 2-1 majority held that while a party who sells a product that contains hazardous substances also “‘intends’ to rid itself of that hazardous substance in some metaphysical sense… [an] intent to sell a product that happens to contain a hazardous substance is not equivalent to intent to dispose of a hazardous substance under CERCLA.” Rather, in the court’s words, “there must be something more.” 

Georgia Power, a major Georgia electrical utility that supplies power to most of Georgia, sold used electrical transformers containing PCBs to Ward Transformer Company. Ward repaired and rebuilt used transformers for resale. In the process, Ward’s Raleigh, North Carolina, facility became contaminated with PCBs. After the Ward site was added to the National Priorities list, Consolidated Coal Company and another company bore most of the cleanup costs as PRPs under CERCLA, spending approximately $17 million each in cleanup costs. 

Any attorney who has ever tried or been involved with a CERCLA case knows that Georgia Power, given these facts, looks like a prime target to sue for contribution.

In their appeal to the Fourth Circuit Court of Appeals, Consolidated Coal argued the District Court improperly considered the low value of the used transformers and Ward’s ability to profit from their resale. This, Consolidated Coal contended, overlooks the possibility that Georgia Power had a “dual intent” to make money from the sales of transformers and thus had an intent to dispose of the hazardous materials as an arranger. Thus, according to Consolidated Coal, Georgia Power’s “secondary motive” for the transformer sales -- to dispose of PCBs –- was sufficient to create arranger liability under CERCLA. 

The Court concluded that there was no direct or substantial evidence that Georgia Power intended, “even in part,” to arrange for disposal. Furthermore, the use of the words “scrapping” or “disposal” in Georgia Power’s documents had “limited bearing” on their intent to “dispose” of transformers as the word is construed in CERCLA, let alone the PCBs within those transformers. The Court was also not swayed by the fact that the transformers were sold in lots and that some of the transformers were partially disassembled, or that old oil was required to be removed from the transformer as part of the reconditioning process. According to the Court, all Georgia Power did was to sell its transformers to the highest bidder.

While these cases remain fact sensitive, the trend lines suggest CERCLA plaintiffs alleging “disposal” may be on thin ice.

My Brief Career as an Environmental Tax Lawyer

Posted on April 28, 2015 by Michael McCauley

On April 15 of this year, I thought about the following quote:

 

"Taxes are what we pay for civilized society."

--Oliver Wendell Holmes Jr.

U.S. Supreme Court Justice

 

And then I reminisced a bit.

My career as a federal tax lawyer was very brief. About 25-30 years ago, I represented a client which thought it was paying too much in "Superfund" taxes.  These taxes are levied on companies which manufacture and produce chemicals. The money is then used by U.S. EPA and others to fund hazardous waste disposal site clean-ups.

I certainly was not a tax lawyer. But one of our senior partners who was in charge of managing work for a chemical company client needed help. He was an excellent tax lawyer, but he said he knew nothing about Superfund taxation. Since I was doing a lot of Superfund clean-up work at the time, I drew the short straw for arguing the merits of this matter before the IRS.

I can't remember now whether the company had a good legal basis for contesting the tax. It might have had something to do with the fact that the client company recycled some amount of used chemicals into making new product. Thus, the Company believed, some of the same chemicals were taxed twice -- once when they were originally manufactured and then again when they were recycled into new product. I do remember that the client's top management thought that the Superfund tax on chemical production in general was very "unfair." [The client never got to the point of considering the "fairness" of the strict, retroactive, joint and several liability regime for generators under the Superfund Law.]

The Company President and I went out to Washington to discuss the merits of our case with officials of the IRS and the Treasury Department. We got out of our cab in front of the Internal Revenue Service Building on Constitution Avenue one bright sunny morning in April. I looked up at the imposing building. Emblazoned in granite across the top of the building was the above quote from Justice Holmes.

I turned to my client and asked him to look up and read the quote. Then I said, "Jon, this is why we are not probably going to win our case here today." And we didn't.

The Company was not interested in pursuing a judicial appeal. So ended my career as a tax lawyer.

Perhaps a Corps Jurisdictional Interpretation is Final Agency Action After All

Posted on April 16, 2015 by Seth Jaffe

After Sackett, the question on everyone’s mind was “How far does it go?”  The first test of that question was the decision by the 5th Circuit Court of Appeals – not known as a bastion of liberalism – in Belle Company v. Corps of Engineers, holding that a Corps jurisdictional determination is not final agency action subject to judicial review.  Late last week, however, in Hawkes Co. v. Corps of Engineers, the 8th Circuit disagreed, creating a circuit split.

As we noted at the time, the 5th Circuit decision in Belle focused on the differences between the Sacketts’ position facing an enforcement order and that of Belle Company facing a Corps JD.  As the 5th Circuit emphasized, the JD did not require Belle Company to do anything.  Nor did the JD expose Belle Company to penalties.  Nor did it prejudice Belle Company’s ability to obtain a permit.  Nor did it include a finding of a CWA violation.

The 8th Circuit took a different tack, focusing instead on the one great, glaring similarity between the enforcement order in Sackett and the JD in Hawkes Co. – in both cases, the Corps’ decision, as a practical matter, defined the property owner’s rights and ended the proceeding.

It’s not obvious to me that the Supreme Court will take the case, even with the circuit split.  I don’t think that the Court likes these cases.  On the other hand, it is obvious that the conservative wing of the court sees Sackett as a very important decision and there could well be four votes to decide the issue at this point.

If the Court does take the case, all bets are off.  I think that the 5th Circuit still has the better of the legal argument, and I expect that will be sufficient for all but the most ardent property rights advocates on the Court.  Whether there are five ardent property rights advocates on the Court is what remains to be seen.

Can Environmental Lawyers Save The Earth

Posted on April 8, 2015 by Charles Tisdale

What is your favorite place on Earth.  The beach.  The mountains.  A hiking trail to a waterfall.  A river or lake.  People are drawn to water, mountains, and forests.  Being in nature switches off the analytic left brain, turns on the creative right brain, and activates the heart and body.  Experiencing the environment is like mindful meditation. 

What is the biggest challenge the world faces?  Controlling technology.  Curing diseases.  Making the world safer.  Preventing a nuclear disaster.  Overcoming poverty.  Preventing another economic depression.  Reducing illiteracy.  We can address many of these social problems.  However. we cannot control nature.  We have to learn to live with nature.  If we cannot learn to live with nature. we will destroy the earth and ourselves.

Sea levels are rising faster and glaciers are melting more rapidly now than in 1950.  Hurricane Katrina and Super Storm Sandy are powerful reminders that man cannot control nature.  Record snowfalls in the northeast shut down many activities in 2014 and 2015.  California is in a prolonged drought.   

In the 1970’s, America’s concern for the earth led Republicans and Democrats to create the laws and regulations which are universally recognized as the most successful environmental laws in the United States.  Other countries used these laws as models.  These laws include the 1970 Clean Air Act, the 1972 Clean Water Act and the 1976 hazardous waste law.  Richard Nixon created EPA in 1970.  April 22, 1970 was the first Earth Day.

The Clean Air, Clean Water and hazardous waste laws are still used to limit the discharge of pollution into the environment.  However, science has discovered new environmental problems and sources of pollution which require amendments to the 1970’s laws or new regulations.

Congress will not amend the 1970’s laws to give EPA the authority to control new sources of pollution.  Congress opposes new regulations proposed by EPA.  Many legislators contend that additional pollution controls will bankrupt American industry because other countries can make cheaper products since their industries do not have to pay for pollution controls.

What motivated Congress to create the Clean Air, Clean Water and hazardous waste laws in the 1970s?  I believe that powerful images of environmental crises  captured in photographs touched everyone, regardless of their political party.  (1) The Cuyahoga River catching fire near Cleveland in 1969.  (2) Chattanooga air pollution so dark that headlights were necessary to see at noon on a sunny day.  (3)  Containers leaking hazardous waste into the Valley of the Drums in Kentucky.

Has our concern for the earth disappeared?  No.  Businesses and citizens are finding sustainable solutions to environmental problems.  Recycling saves money.  Businesses and citizens will not buy unhealthy products.  Consumers want utilities to use nature’s energy: sun, wind and water.  Local farms and gardens provide more of our food.

Americans are still concerned about the earth.  Scientists tell us that emissions from cars cause air pollution which prevents children from playing outside on hot sunny days in Atlanta, Houston and Los Angeles.  Runoff from cities and farms causes pollution which makes some rivers unsafe for swimming.  Why have our concerns and new scientific discoveries not led Congress to take actions to address today’s most serious environmental issues?  How can we educate our leaders and generate the consensus that leads to support of new pollution controls.  What are the actions, the events and the pictures that will motivate Americans to find the common understanding needed to agree on new laws and regulations.

Environmental lawyers can save the earth.  Why and How?

Why?

Environmental lawyers care about the environment.  We may fight about how clean is clean.  We may disagree on how stringent an air or water discharge standard must be.  But we all want to reduce pollution to levels that protect human health and the environment and are cost effective.

How?

(1)        Education – Environmental lawyers representing industry, EPA, states and environmental non-profits learn the relevant scientific facts and applicable laws.  Environmental lawyers can teach clients, legislators, agency officials, judges and the public.

Education is critical to reaching agreement on action to protect the environment.

(2)        Advocacy – Environmental lawyers are trained to marshal the facts and law and advocate for change in legislatures and courts.  Environmental lawyers are experts in relevancy and advocacy.

(3)        Facilitated Agreements – Environmental lawyers representing industry, government and environmental advocacy groups regularly resolve environmental disputes without litigation or soon after litigation is commenced.

Environmental lawyers know that litigation is a last resort.  Environmental lawyers can teach their clients that a mediated settlement is superior to giving up control of the outcome to a judge. 

(4)        Alternative Dispute Resolution – When the operator of a hazardous waste site cannot clean up the site, the parties who sent waste to the site must clean it up.  Environmental lawyers created a mediation process which enables each company to agree on a percentage of the cleanup cost without lengthy litigation.  The mediation process enables the companies to clean up hazardous waste sites faster and cheaper than EPA. 

(5)        Cleanup of Contaminated Property - In the 1980’s, environmental lawyers created the “Brownfield” process in which a natural biological solution is used to clean up contaminated property so that it can be used again.  The private sector taught EPA that waste sites could be reused rather than abandoned.

(6)        Private Sector Cleanup – Legislators and EPA set the pollution standards.  However, environmental lawyers and the private sector can clean up pollution faster and cheaper that any governmental agency.

(7)        Aid To Other Countries – Congress is concerned that new environmental regulations will be so expensive that U.S. businesses will not be able to compete with other countries who continue to pollute.  China is often used as an example.  Lawyers from the American College of Environmental Lawyers (ACOEL) have given free legal advice to the Chinese government on how to eliminate pollution through use of daily fines, a concept that was fundamental to enforcement of the 1970’s Clean Air and Clean Water laws.  Chinese companies are spending money on pollution control.  American industry will not be at a competitive disadvantage in pricing its products.

(8)        White Papers – In 2014, ACOEL lawyers prepared “White Papers” explaining the facts and law on proposed EPA water and air regulations.  Lawyers representing all views worked together on the White Papers.  The White Papers educate.  They do not advocate.  State environmental agencies have praised these White Papers.

Can Environmental Lawyers Save the Earth?  Yes we can.  We need to continue educating our children, our citizens, and our leaders in business, government, and nonprofits.  The 1970s environmental laws and regulations can be amended to save the earth.  

Further Advice from Air Act Andy: What A Difference A Year – And a Broken Foot – Make

Posted on April 6, 2015 by Andrea Field

On March 25, 2015, the Supreme Court heard 90 minutes of argument in Michigan v. EPA, No. 14-46. Briefing and argument focused on one aspect of EPA’s Mercury and Air Toxic Standards (MATS) Rule: whether EPA unreasonably refused to consider costs in determining if it is appropriate to regulate hazardous pollutants emitted by electric utilities. If you were unable to attend the argument but want to know more about it than you can learn from the press reports, then this “Advice from Air Act Andy” column is for you.

Question: Based on questions asked by the Justices during argument, many predict this will be a 5-4 decision, with Justice Kennedy possibly casting the deciding vote. What do you think?

Air Act Andy: I will preface my answer with the disclosure that a year ago I told my client there was virtually no chance the Court would choose to hear the MATS case. With my prognostication credentials thus firmly established — and keeping in mind that it is unwise (and usually embarrassing) to predict what the Court will do based on the questions asked at oral argument — let me say only that I came away from the argument sensing a 4-3-2 split in the Court.  I leave it to you, gentle reader, to infer more.

Question: Did Justice Breyer and his clerks spend endless hours hypothesizing scenarios for how EPA might have taken costs into account in developing the MATS Rule?

Air Act Andy: Without speculating on how many hours Justice Breyer and his clerks spent thinking about this, I note that he arrived at argument armed with a long list of questions suggesting he was troubled by the idea that EPA might regulate hazardous air pollutant emissions from electric utilities without any consideration of costs. In particular, he asked whether costs had been, or could be, considered in the subcategorization of electric generating units, even if costs were not considered in EPA’s initial listing of those sources.

Question: What did the parties make of Justice Breyer’s focus on subcategorization?

Air Act Andy: I don’t have to speculate here. The government made enough of Justice Breyer’s questions that, one day after argument, the Solicitor General filed a letter with the Court to provide information relevant to “questions pertaining to how EPA assesses whether to establish subcategories of sources” under the pertinent provisions of the Clean Air Act.

Question: Isn’t it unusual to submit a post-argument letter to the Court?

Air Act Andy: The rules of the Court do not specifically cover this sort of filing, and only time will tell how helpful the filing was for the government. It is worth noting, though, that once General Verrilli filed his letter, other parties followed suit. In particular, petitioners’ counsel pointed the Court to specific language in the preamble to the final MATS Rule, 77 Fed. Reg. 9304, 9395 (Feb. 16, 2012), where EPA said it could not, and did not, consider costs during the subcategorization process:

Failing to demonstrate that coal-fired [electric generating units] are different based on emissions, the commenters turn to economic arguments, asserting that failing to subcategorize will impose an economic hardship on certain sources. Congress precluded consideration of costs in setting [technology standard] floors, and it is not appropriate to premise subcategorization on costs either.

Question: On a more personal note, was your trip to the Court less eventful than the last time you were there?

Air Act Andy: Ah, you are referring to my December 11, 2013 visit to the Court. On that snowy day, I arrived at the Court wearing a long, stylish gray cardigan sweater instead of a suit jacket. I was stopped by guards and politely told I would not be allowed to sit in the section reserved for members of the Supreme Court Bar unless I replaced my fashionable sweater with a suit jacket. Someone from the clerk’s office, acting like a fine restaurant’s maitre d’, swiftly provided me with a ladies suit jacket and allowed me into the courtroom. But when I returned to the Court last month to hear argument in Michigan v. EPA, I was not treated like a fashion felon. Instead, Court staff personally escorted me into the courtroom a half hour before anyone else from the public was allowed in the room, gave me a prime seat, and allowed me to sit quietly and take in the majesty of the room. 

Question: What is the reason for the different treatment?

Air Act Andy: Last month, I arrived wearing a foot cast instead of a gray cardigan. I had broken my foot the week before, and the Court’s wonderful staff gave me permission to arrive and get seated early.

Question: So, was it worth it to have a broken foot?

Air Act Andy: I wouldn’t recommend that you drop granite on your foot a week in advance of a trip to the Supreme Court, but being able to sit by myself in the courtroom for a half hour before others were admitted was pretty special.

The Clean Power Plan: NOT Exactly What the Statute Tells EPA To Do

Posted on April 3, 2015 by Richard G. Stoll

As most followers of this blog know, EPA proposed its “Clean Power Plan” for existing electric power plants under the Clean Air Act (CAA) in June 2014. And just this week (March 31), the Obama Administration with great fanfare submitted its 2025 greenhouse gas (GHG) emissions target to the United Nations for the international climate change convention.

The Administration pledged to reduce U.S. GHG emissions by 26-28% (below 2005 levels) by 2025, and the bulk of these reductions are supposed to come from the Plan.  But will the massive reductions EPA claims will result from the Plan ever occur?

Defending the legality of the Plan in an interview published in the March 31 Wall Street Journal, EPA Administrator Gina McCarthy claims she is “following the direction of the Supreme Court” and doing “exactly what the statute [CAA] tells us we’re supposed to do.”

Huh? While the Supreme Court has recognized EPA’s authority to regulate GHGs under the CAA, it most certainly has not given EPA the “direction” EPA is taking in its pending proposal. And neither has Congress.

EPA’s Plan would mandate a panoply of groundbreaking controls on energy supply and demand. It would force utilities to use natural gas rather than coal, ramp up renewable energy use (wind, solar), and impose mandates for reducing energy consumption. Yet the CAA provision for which EPA claims authority for all this (§111(d)) only authorizes EPA to impose “standards for emissions” upon “existing sources” of air pollution — such as power plants. The controls must also be “adequately demonstrated.” In the past EPA applied this authority faithfully to the statutory terms, so “sources” that emit pollution are limited to prescribed amounts of emissions.

While EPA’s proposal includes some real emission standards for air pollution sources (power plants), the vast majority of GHG reductions are to come from the energy supply/demand measures that have no basis in the text of the CAA. If you are compelled through these mandates to limit your dishwasher use to specified hours or pay higher rates, is your dishwasher an “existing source” of “air pollution” and are the hourly restrictions “emission standards”? And how can such novel approaches be “adequately demonstrated”?

The Administration tried but failed to obtain amendments to the CAA from Congress to address climate change. EPA’s Plan might have been authorized by that failed effort, and it might be authorized by future legislation. The Plan’s pioneering provisions might arguably reflect good public policy. But under the CAA as it now stands, EPA is not authorized to impose them.

As for “direction” from the Supreme Court? In its recent Utility Air Regulatory Group v. EPA opinion (June 23, 2014), the Court rejected EPA’s attempt to regulate GHGs by “tailoring” the unambiguous text of the statute. The Clean Power Plan doesn’t just “tailor” the terms of the statute — it attempts to weave new authority out of whole cloth.

Can States Procure Clean Energy through an RFP Process?

Posted on April 1, 2015 by Mark R. Sussman

In February 2015, the states of Connecticut, Massachusetts and Rhode Island announced their intent to seek new large-scale clean-energy projects through a multi-state procurement process.  According to the draft Request for Proposal (RFP) the “essential purpose” of this procurement is to “identify any projects that offer the potential for the Procuring States to meet their clean energy goals in a cost-effective manner that brings additional regional benefits.”  The draft RFP seeks bids for the delivery of Class I renewable energy projects (i.e. solar, wind, biomass, fuel cells in Connecticut, and some hydroelectric) through power purchase agreements, combined power purchase agreements and transmission upgrades, or transmission projects with clean energy delivery commitments.  Because each state has different procurement laws and different definitions of “renewable energy”, the draft RFP notes that contracts for any selected projects must be negotiated with the relevant electric distribution companies (EDC) and approved in accordance with applicable state and federal laws.

To encourage the generation of renewable energy, many states have adopted Renewable Portfolio Standards (RPS) to require electric distribution companies and retail electric suppliers to include an increasing percentage of renewable energy in their mix of generation resources.  Unfortunately, the RPS alone seems insufficient to encourage the development of enough renewable energy resources to address the renewable energy and climate change policies of the states.  Therefore, the three New England states, as well as others, are experimenting with different methods to incentivize renewable energy generation.  Given the substantial capital requirements for constructing new electric generating facilities and the need for an assured revenue stream, long-term power purchase agreements are increasingly being used to encourage the construction of new energy resources.  The RFP to be issued by the three New England states seeks to attract new large scale renewable energy projects by offering successful bidders long-term energy contracts.

One question raised by this new approach to encourage the construction of reasonably-priced renewable energy resources is whether federal law preempts the states from contracting for large wholesale electric generation, despite independent state policies designed to encourage the development of more renewable energy resources.  This issue has been raised in several recent federal lawsuits.  

Last year, both the Fourth and Third Circuit Courts of Appeals concluded that state programs awarding long term contracts to new electric generating facilities were preempted by the Federal Power Act.  In PPL EnergyPlus, LLC v. Nazarian, 753 F.3d 467 (4th Cir. 2014), the Fourth Circuit held that a fixed, twenty-year energy contract for a new Maryland generating facility was preempted by federal law. Using an RFP process, Maryland selected a company to build a power plant and sell its energy and capacity on the federal interstate wholesale market.  Under the approved contract, the winning project was eligible for payments from the local EDC that amounted to the difference between the price paid in the interstate market and the amount approved in its EDC contract.  The Fourth Circuit concluded that the Maryland law was field preempted because it functionally sets the rate that the generator receives for sales in the interstate energy market, an area within the exclusive jurisdiction of FERC. 

Similarly, the Third Circuit, in PPL EnergyPlus, LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014), held that federal law preempted a New Jersey statute under which the state solicited and awarded bids for new electric generating capacity using long-term energy capacity agreements.  The Third Circuit, however, acknowledged that states have a role to play in energy markets, and stated that not every state program that has an effect on interstate electric rates will be preempted.  The court explained that states may utilize measures that subsidize generators without being preempted, as long as such subsidies do not essentially set wholesale prices.   

In 2013, Connecticut solicited proposals for large scale renewable energy through an RFP process.  That solicitation resulted in the selection of a 250 MW wind project in Maine and a 20 MW solar project in Connecticut.  Both projects were awarded long term power purchase agreements for the energy produced by these projects.  A disappointed bidder, Allco Finance Limited, filed suit alleging preemption, following Nazarian and Solomon.  On December 10, 2014, the district court dismissed the case, finding that a disappointed bidder lacks standing. Allco Finance, Ltd. v. Klee. Nevertheless, the court ruled on the merits.  The district court concluded that the state RFP process was not preempted, rejecting Allco’s argument that the state-approved contracts set the wholesale price for energy produced by the successful bidders.  The court ruled that the effect of the Connecticut program on the interstate market was at most indirect and would cause no market distortion.  Allco has appealed the district court’s decision to the Second Circuit.

The use of an RFP process to encourage the development of renewable energy projects through the award of long term energy contracts is an effective way to procure lower cost renewable generation.  The Connecticut Z-REC program, which awards long term Renewable Energy Credit (“REC”) contracts, has proven to be successful in driving down the cost of solar renewable energy credits from small (less than 1 MW) solar projects.  In light of the federal preemption obstacles in awarding long-term wholesale electricity contracts, another approach may be to support large scale renewables by procuring long term contracts for RECs and allowing the energy price to be set by the interstate markets.  Since a REC represents the renewable attribute of electricity, and not the energy itself, such procurement should avoid the preemption issues identified by the Third and Fourth Circuits.  This may provide a path forward for states to pursue their clean energy goals by incentivizing larger scale renewable resources. 

Whither TSCA: To Reform or Not to Reform (and if so How) — That is the Question

Posted on March 31, 2015 by Donald Stever

Way back around the turn of the decade from the ‘70s to the ‘80s I was invited by the International Joint Commission to attend a conference in Montreal to discuss whether the Canadians should adopt a statute similar to the Toxics Substances Control Act of 1976 (“TSCA”). The IJC is a largely advisory US-Canadian body whose primary area of interest is the Great Lakes. Also on that delegation was the principal author of the text of TSCA, Clarence (“Terry”) Davies. I did not win many friends on that trip when I argued that TSCA took the wrong approach to regulating chemicals in the stream of commerce and in the environment primarily because it used an inappropriate cost-benefit premised standard of review. I also argued that TSCA’s standards were simultaneously too vague and too complex. I suggested that the Canadians start afresh.

In the years following, Congress ignored repeated calls for significant amendment or replacement of TSCA, including a chorus of suggestions that it be replaced by a statute resembling the European Community’s chemical regulatory regime, REACH. In the meantime, EPA soldiered along, trying to make the best of enforcing an antiquated and fundamentally flawed regulatory statute. 

Now after all these years we have two competing bills in the Senate, each of which purports to “reform” TSCA. On the one hand we have S.697, the “Frank R. Lautenberg Chemical Safety for the 21st Century Act”, an allegedly “bipartisan” effort co-sponsored by Senators Mark Udall (D-N.M.) and David Vitter (R-La.), the first hearing on which was held on March 18th. And from another corner, we have S.725, the “Alan Reinstein and Trevor Schaefer Toxic Chemical Protection Act”, co-sponsored by Senators Barbara Boxer (D-Calif.) and Ed Markey (D.Mass.). At about 175 legislative pages, these bills aren’t capable of being thoroughly analyzed in a blog.

The Udall bill is tepidly supported by the chemical industry and by at least one environmental group, the Environmental Defense Fund. It is opposed by some other environmental and public safety advocacy groups. It would pre-empt state chemical regulatory programs like California’s Proposition 65 and other state-run chemical regulatory programs in California and Washington. The Boxer bill, predictably, because its principal sponsor is from California, preserves state programs. Both bills in one degree or another attempt to address the core problems with TSCA by changing the standard of review to a risk-based standard, overhauling and strengthening EPA’s information gathering authority on hazard, exposure and use data, and prioritizing chemicals for review. The Udall bill throws a bone to the chemical industry by exempting a wide variety of chemicals considered to be of low exposure potential or low risk. 

I confess that, although I am not a policy wonk, I have an interest in these bills partly because if either — or a significant element of either — is enacted into law I will have to re-write an entire chapter of The Law of Chemical Regulation and Hazardous Waste. My guess is that, given Congress’s track record of doing little or nothing over the last few years, I won’t have to worry about getting writer’s cramp any time soon.

Pacific Northwest Water Wars

Posted on March 30, 2015 by Rick Glick

It may come as a surprise that people fight over water in soggy Oregon and Washington. To be sure, we have not experienced the same level of conflict over competing water needs as our neighbors in the southwest, but in fact the conflicts are there and the stakes are high.

Most senior water rights in the Pacific Northwest are held by agriculture, whereas the growth in demand for water is occurring in the municipal and industrial sectors . . . and at last check, fish still need flowing streams. Add to that dynamic a declining hydrograph due to climate change, and the table is set for confrontation.

Two recent cases in the Oregon Court of Appeals and a case in the Washington Supreme Court that address municipal water rights illustrate the point. A more complete discussion of these cases is in the current issue of The Water Report.

The Oregon cases arise from a 2005 statute providing special rules for extensions of time to complete development of municipal water supplies. The caption for both cases is WaterWatch of Oregon v. Water Resources Department, but one involves the City of Cottage Grove and the other a group of Clackamas River water providers. The 2005 statute provides that for the first municipal extension granted after enactment of the statute, “fish persistence” conditions must be applied to the “undeveloped portion” of the city’s water system.

By the time Cottage Grove’s extension application was considered, the city had completed work on its water system. The Oregon Water Resources Department found no “undeveloped portion” and therefore imposed no fish persistence requirements. The court overturned the extension, finding that the fish conditions must relate back to the previous extension in 1999.

The Oregon Supreme Court initially accepted review of the case, but then without explanation declared that review was “improvidently” granted and dismissed it. Thus, the case stands; legislative corrections may be forthcoming. For the moment, Cottage Grove and other similarly situated public water providers may have less water than they previously thought due to fish flow curtailments and may incur unbudgeted additional public expense.

In the Clackamas case, the court found the “fish persistence” conditions were inadequate because OWRD failed to articulate how the conditions actually protected fish. The case is now back before OWRD for further proceedings.

In Cornelius v. Washington State University, the Supreme Court came to a happier conclusion for public water providers. The issue was whether university groundwater rights identified as for “domestic” purposes were entitled to special protections afforded only to municipal purposes. The Court unequivocally held they are.

The economies of our region depend on the courts getting it right with respect to municipal water supplies. Washington public water providers can rest easier than their counterparts in Oregon after their state courts’ recent pronouncements.

Dirty Dirt, Developing State Soil Reuse Regulation

Posted on March 25, 2015 by Gregory H. Smith

            Those who have tried to keep up with the development of environmental law into the second decade of the 21st century will not be surprised, as others may be, by the attention now focused on reuse of soil. Uncounted millions of cubic yards of soil are moved each year in the New England region alone. Until very recently, in the absence of contamination above regulatory remediation standards, the excavation and reuse of soils was not subject to any environmental regulation at all.

            Now with the pace of national economic activity rising, soil reuse is drawing the focused attention of State regulators in the northeast region and across the nation. EBC Nov 6, 2014 program. In particular, New Hampshire, Massachusetts, Connecticut and Vermont are all currently considering how to regulate soil reuse. In 2014, Massachusetts adopted a requirement for the development of a soil reuse policy by June 2015 and that effort is well underway.

            While New Hampshire relies on a broad definition of “contamination,” it recognizes it lacks explicit legal authority to develop a full blown regulatory program for reuse of “mildly contaminated” soil. The current definition of contamination reaches, by its terms, any non-naturally occurring, regulated contaminant “that has the potential to adversely affect human health or the environment.” N.H. Env-Or 602.07.  

            In these circumstances, New Hampshire is currently regulating on a case by case basis, limiting receiving sites to soils that do not exceed natural background levels. Solid waste regulation can be avoided by an agency waiver, or reuse can be approved with an acceptable soil management plan and soil testing protocol. The New Hampshire agency is making efforts to respond to approval requests rapidly enough to avoid frustrating market driven transactions. It  recognizes, as other regulators do, that construction projects may otherwise be forced to send lightly contaminated soil to landfills, depriving the region of essential landfill capacity, while increasing construction costs for little, if any, environmental benefit. For example, both New Hampshire and Massachusetts have recognized that unreclaimed gravel pits and quarries present potential hazards and risks of their own. They can be attractive nuisances that claim the lives of those who try to use them unwisely for recreation year after year and they can become repositories for discarded materials including stolen or abandoned vehicles. In short, they can be a locus of a range of community problems, if unattended. Rather than pay to send lightly contaminated soils to landfills, a better and more beneficial use could be found.

            The States considering such new programs recognize that their efforts to impose environmental regulation on such a substantial volume of previously unregulated activity could well have unintended and unnecessary adverse consequences for both small and large scale redevelopment projects just as the economy is gaining strength. It must be undertaken in a manner that will not exacerbate other very significant potential problems. They are coordinating among themselves the planning and development of such regulation and giving serious consideration to designing methods that will likely bear the simplicity and efficiency of general permits. Legislative action will no doubt be necessary to authorize these new programs.

            There is little question that as economic activity continues to increase, the States must establish consistent criteria setting forth the standards to be used in determining where mildly contaminated soils generated at construction projects and other developments can be disposed of at subsurface locations. Municipalities and the regulated community need to be educated about this process and engage with the regulators to ensure that the final standards are well-understood, easily implementable, and adequately ensure the environment is protected.

Oklahoma Federal Court Says It Lacks Jurisdiction to Award Declaratory Relief to EPA in Clean Air Act Case

Posted on March 23, 2015 by Donald Shandy

On January 15, 2015, Oklahoma Western District Judge Timothy DeGiusti dismissed a declaratory judgment action brought by the United States Environmental Protection Agency (EPA) against Oklahoma Gas and Electric Company (OG&E) under the Clean Air Act.  In United States v. Okla. Gas & Elec. Co. , the Court found that it lacked subject matter jurisdiction over EPA’s claims.

The litigation involved certain modifications made by OG&E at its Muskogee and Sooner plants.  These modifications occurred more than five (5) years prior to EPA’s suit.  Before commencing each of the projects, OG&E submitted “Project Notifications” to the Oklahoma Department of Environmental Quality (DEQ) that: (1) stated that each of the modifications would not result in a significant emissions increase; and (2) committed to submitting annual reports supporting this conclusion.  OG&E did not submit detailed emissions calculations.  However, five years of data subsequent to the modifications confirmed that significant emissions increases did not occur. 

Although the underlying dispute revolves around whether OG&E was required to obtain a Prevention of Significant Deterioration (PSD) permit before commencing each of the modifications, EPA did not allege that the projects were “major modifications” or that the projects resulted in “significant emissions increases” from the Sooner or Muskogee plants.  Nor did the government seek penalties for violations of the PSD permit requirements or injunctive relief requiring OG&E to obtain permits, likely seeking to avoid the application of the five year general statute of limitations applicable to government claims for fines, 28 U.S.C. § 2462. Instead, the government only sought a declaration that OG&E did not properly project whether the modifications to the Sooner and Muskogee plants would result in a significant increase in emissions.

Given that the government did not allege a “major modification” or a “significant emissions increase” for any of the projects, the Court found that the government had not presented an actual case or controversy sufficient for the Court's exercise of jurisdiction. 

Even if OG & E failed as a matter of law to evaluate whether the modifications would result in a significant increase in post-modification emissions of regulated pollutants at each facility, that failure to project is not, without more, determinative of whether a PSD permit is required. Unmoored from a claim that the modifications at issue are major modifications, Plaintiffs ask this Court to make a declaration as to a collateral legal issue governing aspects of a future potential suit. EPA's attempt at piecemeal litigation, therefore, cannot withstand the Court's jurisdictional limitations.

The Court also rejected EPA’s novel claim for injunctive relief seeking to require OG&E to properly calculate whether the projects were likely to result in a significant emissions increase prior to construction.

The Court is not aware of any decision in which the injunctive relief requested by EPA has been granted, or for that matter, ever requested. As the parties concede, there is no statutory or regulatory requirement that projections be submitted to EPA or any other regulatory authority in the first instance. And, as the Sixth Circuit addressed in DTE Energy, there is no prior approval required by the agency. Thus, if the Court were to grant the injunctive relief requested by EPA it would be directing OG & E to submit projections where no statutory or regulatory authority for such action exists. The availability of relief of the nature requested by EPA is a matter to be addressed by Congress, not this Court.

This is an important decision limiting EPA’s ability to “second-guess” a facility’s pre-construction permitting calculations in the absence of data demonstrating a significant emissions increase.  

Never Mind the Road to the Final Four. How About the Road to the Right Case for Revisiting Auer Deference?

Posted on March 17, 2015 by Andrea Field

In its March 9, 2015 decision in Perez v. Mortgage Bankers Association, the Supreme Court held that the Administrative Procedure Act’s notice-and-comment requirement “does not apply . . . to interpretative rules.”  The decision was unanimous, but the concurring opinions of Justices Alito, Scalia, and Thomas express concern with the consequences of the Court’s opinion.   As set out well in the temperate concurrence of Justice Scalia (yes, it really is temperate), in giving the category of interpretive rules Auer deference: 

we do more than allow the agency to make binding regulations without notice and comment.  Because the agency (not Congress) drafts the substantive rules that are the object of those interpretations, giving them deference allows the agency to control the extent of its notice-and-comment-free domain.  To expand this domain, the agency need only write substantive rules more broadly and vaguely, leaving plenty of gaps to be filled in later, using interpretive rules unchecked by notice and comment.

While the three concurring justices are looking down the road for the right case for revisiting what is generally known as Auer deference (i.e., judicial deference to an agency’s interpretation of its own regulations), Seth Jaffe’s next-day blog posting suggests that the road to the right case might be a long one.           

I agree that the Court is unlikely to revisit Auer during the current Administration.  But what happens if those in the next Administration disagree with choices made by the current Administration?  What if they choose to address those disagreements by issuing a tsunami of interpretative rules that reverse both longstanding interpretive rules on which people have relied and/or the newer interpretive rules of the current Administration?  What happens, for example, if the next Secretary of the Department of Labor reverses the interpretive rule upheld by Perez?  Will those adversely affected by such a new interpretive rule stand by without protest?  Will they be satisfied with Justice Sotomayor’s suggestions for recourse (e.g., by trying to persuade courts that the reinterpretations are arbitrary and capricious)? 

I think not.  I think that just a short jog down the road, we will see some particularly bold (or outrageous) re-interpretative rules flowing from agencies unimpeded by fears of the judicial review process.  That will prompt challenges from those supportive of the previous interpretive rules.  And that might well prompt the Chief Justice and one or more other justices to join Justices Alito, Scalia, and Thomas in revisiting Auer deference.  I, for one, would welcome that revisit.    

The “Significance” of the “Nexus”: Latest (Last?) Precon Decision on Wetlands Jurisdiction

Posted on March 17, 2015 by Margaret (Peggy) N. Strand

In a decision that may end a 13-year battle over wetlands jurisdiction, the Fourth Circuit on March 10 upheld the U.S. Army Corps of Engineers findings that a 4.8 acre wetland had a “significant nexus” to navigable waters under the Clean Water Act. Of importance to future challenges, the court deferred to the Corps’ rather ordinary wetlands evidence, despite contrary evidence from a developer of a proposed planned unit development in Chesapeake, Virginia. 

The Precon case spanned the 2006 Supreme Court decision in Rapanos v. United States, when Justice Kennedy introduced the jurisdictional standard of “significant nexus.”  For a refresher, a “significant nexus” between wetlands and navigable waters exists “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’”. For previous posts concerning CWA jurisdiction, see here and here. The Fourth Circuit previously had found a “nexus” between Precon’s 4.8 acre wetland and navigable waters seven miles away and allowed aggregation of the Precon’s 4.8 wetland acres with a region of 448 “similarly situated” wetlands, but remanded for application of the “significant” aspect of Justice Kennedy’s test.

CWA jurisdictional groupies watched the Precon case as among the first to involve evidence demonstrating jurisdiction under the “significant nexus” test and the only decision to be remanded for a showing of “significance.”  Evidence was presented, experts disagreed, and the court deferred to the Corps.  On the key point of “significance,” the decision found neither arbitrary nor capricious the Corps’ findings of water flow. In addition, the court deferred to the Corps’ showing of wetland functions in relation to the navigable water, particularly water quality (dissolved oxygen) impairments to the Northwest River, which are reduced by the carbon sequestration of retained organic matter by the aggregated wetlands. The court also found credible the Corps’ qualitative evidence of habitat use by common species (deer, squirrels, amphibians).

The take-away:  If a “nexus” is “significant” based on a showing of general relationship of wetland functions to downstream receiving water impairments and common wildlife (wetland and non-wetland) usage, it is hard to imagine a wetland failing to be held jurisdictional when aggregation is allowed.  Counsel for Precon indicates it will seek en banc rehearing and may seek certiorari, so there may be yet another chapter to this saga.  

EPA’s New Coal Combustion Residuals Rule: A 745-Page Deferral With a 12,400-Ton Surprise

Posted on March 16, 2015 by Richard G. Stoll

(Reproduced with permission from Daily Environment Report, den, 03/12/2015. Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com)

Another Environmental Protection Agency battle focusing on coal has recently ended—for now at least. While most recent coal warfare has been fought on Clean Air Act fronts, this battle was fought on the fields of the Resource Conservation and Recovery Act. The target is coal combustion residuals (CCR) generated by electric utilities.

The EPA’s CCR rule will soon be published in the Federal Register. It has been a long time coming. The flash point for the rulemaking—the Archduke Ferdinand moment—was the December, 2008 Tennessee Valley Authority (TVA) Kingston, Tennessee incident. TVA’s ash pond dike ruptured and millions of gallons of coal ash and water spilled into the surrounding waters and land.

The Kingston spill received extensive press coverage, and it occurred just a few weeks after President Barack Obama was elected. Obama had nominated Lisa Jackson to be his EPA Administrator, and at her Senate confirmation hearing in January 2009, Jackson committed to take aggressive regulatory action to minimize the chances of similar occurrences in the future.

The EPA first proposed the rule in 2010, and issued three supplemental notices along the way. In 2013, because it was starting to look as though the EPA would take forever to issue a final rule, both industry and public interest groups secured a ‘‘citizens suit’’ federal court order forcing a deadline.

Now that the rule is out, more battles are coming. In light of the intense and polarized advocacy during the rule’s development, both judicial review and attempts to amend RCRA are a virtual certainty. And remarkably, for the most pivotal issue of the battle, the EPA’s new rule simply kicks the can down the road—thus setting up a completely new round of rulemaking unless Congress intervenes...

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Connecticut Adopts Municipal Brownfield Liability Relief Program

Posted on March 13, 2015 by Gregory Sharp

Many states and the federal government have struggled with the challenge of how to adapt statutory strict liability schemes imposing clean up obligations on property owners in such a way that will enable new investors to redevelop brownfields sites without fear of litigation over previous releases.

The Connecticut General Assembly has recently provided liability relief to municipal entities to encourage them to redevelop brownfield sites by removing potential liability concerns which might otherwise arise from acquiring title to previously contaminated property.

The Connecticut legislation defines brownfields as “any abandoned or underutilized site where redevelopment, reuse or expansion has not occurred due to the presence or potential presence of pollution in the buildings, soil or groundwater that requires investigation or remediation before or in conjunction with the redevelopment, reuse or expansion of the property.”

Historically, municipalities and their affiliates, such as redevelopment agencies, were reluctant to acquire brownfields properties by foreclosing tax liens, or through arms- length transactions, because the State’s Clean Water Act imposes joint and several liability on owners of contaminated property, even if they did not own the property at the time of the releases.  As such, if a municipal entity took title to contaminated property, it would run the risk of receiving an abatement order from the Department of Energy and Environmental Protection (“DEEP”) or being sued by third parties.

Under the new Municipal Brownfield Liability Relief Program, a municipality, or a qualified municipal affiliate, which qualifies for the program may take title to a brownfield property free of claims by the State or third parties for contamination existing on the property prior to the acquisition.

Assuming the property meets the definition of a brownfield under the statute, the municipality must meet four conditions to enter the program: a) that it intends to redevelop or facilitate redevelopment of the property, b) that it did not contribute to the contamination at the site, c) that it has no legal affiliation with a party responsible for the contamination, and d) that it is not under a previous obligation to remediate the property.

Another significant benefit of the new program is that it exempts a participating municipal entity from having to comply with the Connecticut Transfer Act.  That Act requires a seller of certain classes of property defined as an “establishment” under the Act to make a filing with the Department of Energy and Environmental Protection.  The filing requires that if there has been a release of hazardous waste at the property which has not been remediated, a party to the transaction must provide a certification that it will accept responsibility to conduct a full investigation and remediation under prevailing standards and guidelines.

Another benefit of the program is that a municipal entity is not required to fully investigate and remediate the property under the State’s Remediation Standard Regulations.  However, it must make good-faith efforts to minimize the risk to public health and the environment.  It also must submit a plan and schedule to facilitate both redevelopment and remediation, and it must also notify DEEP of any exceedances of Significant Environmental Hazard thresholds.

The legislature authorized the program in 2013, and DEEP provided application forms for the program in September of 2013.  So far the response has been discouraging, with only two municipalities entering a total of three sites in the program to date.  The lack of a robust response is likely attributed to the difficulty an underfunded DEEP faces in reaching out to the state’s 169 towns.

Whether the new liability relief program will eventually encourage more municipalities to participate in redeveloping and remediating brownfield properties remains to be seen.  However, along with a recently announced round of grants from the Department of Economic and Community Development of up to $7.5 million, it should at least open the door for  municipalities to take a second look at unproductive properties.

News Flash: Courts Still Defer to an Agency’s Interpretation of Its Own Rules

Posted on March 10, 2015 by Seth Jaffe

The Supreme Court on Tuesday ruled that, when an agency revises its interpretive rules, it need not go through notice-and-comment rulemaking.  Although the decision, in Perez v. Mortgage Bankers Association, required the court to reverse a long-held line of D.C. Circuit cases, the decision was not difficult; it was, in fact, unanimous.  In short, the Administrative Procedures Act:

states that unless “notice or hearing is required by statute,” the Act’s notice-and-comment requirement “does not apply … to interpretative rules.”

It carves out no exception for revisions to interpretive rules.  Game over.

The truly interesting part of the case was in the concurring opinions.  Both Justices Scalia and Thomas, effectively joined by Justice Alito, argued that Supreme Court decisions giving deference to agencies’ interpretation of their own rules have no constitutional foundation and should be overruled.

This is not the first time that they have made these arguments.  As I noted previously, in Decker v. Northwest Environmental Defense Center, Chief Justice Roberts also suggested that it might be time to revisit what is generally known as Auer deference.  It is notable in Perez that the Chief Justice joined the Court’s opinion.  Absent a change in the make-up of the Court, I don’t see it revisiting Auer any time soon.

Otherwise, the most notable part of the case is a statement from Justice Thomas that, to me, already wins the metaphor of the year prize.  Justice Thomas’s argument against Auer deference, while couched in constitutional terms, is really a screed (parts of which I sympathize with) against the growth of rulemaking and the modern administrative state.  He laments the use of interpretive rules and the decline of formal notice-and-comment rulemaking, and the protections that are required:

Yeti-590x330

Today, however, formal rulemaking is the Yeti of administrative law. There are isolated sightings of it in the ratemaking context, but elsewhere it proves elusive.

True dat. It just doesn't justify abandoning Auer deference in my book.

 


Cool Water, Part 2

Posted on March 10, 2015 by Paul Seals

In a December 2012 blog post, I discussed the tensions raised by “Water for Texas 2012 State Water Plan” between the expected population growth and available water resources in Texas.   As water demand is expected to rise, existing water supplies are diminishing.   

These critical water supply constraints are again brought into sharp focus by the population projections contained in a March 5, 2015 report released by the Office of State Demographer.   The 40-year projections (2010 to 2050) indicate that if the migration patterns observed in Texas between 2000 and 2010 continue at the same rate, the population of Texas will double, representing a significant increase in projections contained in the 2012 State Water Plan.  The projected water resource shortages will be exacerbated.   

The 2012 State Water Plan, based on a 50-year horizon, projected a 2060 population of 46.3 million.  New population numbers, based on the recent migration patterns, project an increase from the 2010 Census population of 25.1 million to a 2050 population of 54.4 million.   

For the past 10 years, Texas experienced the largest annual population growth of any state.  Will the Texas economy maintain its strength to support job growth that will attract young workers from around the country and the world?   Can the associated high net migration be sustained?  What will be the impact of this growth?  How will the environmental impacts be anticipated and managed?   

The areas of fastest growth include the areas in and around Dallas/Ft. Worth, Austin/San Antonio, and Houston.   Cities in those areas are making plans to secure long-term water supplies.   Will they be successful?  Will regulatory changes have to be made to surface and groundwater water rights to effectively and efficiently acquire, manage, and conserve these limited water resources?  Will the infrastructure be there?   How will it be financed?  

Will Texas have “cool, clear water”? 

EPA Should End Its Embargo Practice

Posted on March 9, 2015 by Richard G. Stoll

It is popular to grouse about how long it takes EPA to issue a rule these days. When I was at EPA in its formative years, we often went from proposal to final in just a few months. There are many reasons why the trek to final rule signing has now become so time-consuming. To name just one, advocates on all sides increasingly file lengthy comments covering technical, economic, and legal issues. And reviewing courts increasingly require EPA to fully explain its basis and purpose in response to all those comments.

While these types of delays are understandable, another type of delay is not. I am speaking of the lag between the rule’s signing by the Administrator and its publication in the Federal Register. You would think this ministerial act (the Federal Register Director isn’t authorized to re-write EPA’s rules) should be accomplished in four or five days. It almost always was when I was at EPA, and today it often is for other agencies. And sometimes these days, EPA’s signed rules get published in a few days.

But there are many exceptions, and a great example is now before us. Administrator McCarthy signed the RCRA “coal combustion residue” (CCR) final rule on December 19, 2014. It has yet to hit the Federal Register, and EPA staff announced on a recent webconference that they “hoped” it would by late March or early April. Other recent examples come to mind. The signed-to-published lag time for EPA’s 2012 CAA Oil & Gas NSPS/NESHAP rule was 121 days. The lag time for EPA’s 2014 CAA NSPS greenhouse gas (GHG) proposed rule was 110 days. It now looks like the RCRA CCR Rule will break 100.

What in the world is going on during these lengthy lag times? EPA staff will tell you that a document with numerous charts, tables, and graphs bamboozles the Federal Register people – even though the CFR has been replete with charts, tables and graphs for decades. EPA staff will also tell you (as they have for the CCR Rule) that they are fixing “typos.” But with 21st century software, can catching and correcting typos possibly take 100 days or more?

So why grouse about this? I am not suggesting that EPA staff might be making substantive, consequential changes to a final rule after the Administrator signs it. EPA does place the final rule on its Website immediately after the document is signed, so any “corrections” in the Federal Register version can be detected by a careful review. (It would be nice – for transparency’s sake – if EPA would make a practice of releasing a red-line showing exactly which “corrections” were made to the signed version during the 100+ days.)

And I am not grousing about the Federal Register publication delays per se. What bothers me is EPA’s frequent practice of refusing to release critical documents supporting the final rule – for instance, the Response to Comment (RTC) document – until the day the rule hits the Federal Register. It is this embargo – coupled with a long signed-to-published lag time – that hurts. During the recent webconference for the RCRA CCR Rule, for instance, EPA staffers made clear that the RTC and other support documents would not be released until the “hoped for” publication in late March or April.

For an agency (and Administration) that touts “transparency” at every turn, I cannot understand why EPA engages in this embargo practice. And sometimes (but not often enough), EPA does release these support documents before the rule is published in the Federal Register – so there is obviously no legal barrier to such a release.

Why should anyone care about such an embargo? As soon as a final rule is released, regulated entities often need to go into high gear to prepare for compliance. In these preparations, they need to be able to understand and interpret the rule’s provisions, many of which are often unclear or ambiguous. EPA’s RTC often provides interpretations and guidance far more lucidly than the rule’s preamble. One good example: in the RTC to EPA’s 2013 CAA “CISWI” rule, EPA provided a key interpretation of what types of activities would be deemed a “modification” triggering new source status. This interpretation appeared nowhere in the rule’s preamble and could hardly have been divined from the regulatory language. It is plainly unfair and contrary to principles of good government to hide this kind of interpretation from regulated parties for 100+ days when they are preparing for compliance.

Moreover, parties on all sides of a rulemaking (industry and public interest groups) need to begin evaluating judicial review options and theories as soon as they can after a final rule is signed. Why should they have to wait 100+ days for critical documents that are essential to their evaluation?

So dear EPA: PLEASE start releasing your RTC and other supporting documents at the same time you release your signed rule!

California Appellate Decision Could Impact Railroad–Underground Pipeline Relationships Nationwide

Posted on March 3, 2015 by Tom Sansonetti

On January 21, 2015 the California Supreme Court declined to hear an appeal from a lower appellate court, thus leaving in place a decision with the potential to impact the longstanding relationship between the nation’s railroads and pipeline companies concerning payment for use of congressionally granted right-of-ways that date from the 19th Century.

The momentous decision in Union Pacific Railroad vs. Santa Fe Pacific Pipeline, Inc. was announced by a unanimous three judge panel from the Court of Appeal of the State of California’s Second Appellate District on November 5, 2014.  The ruling overturned a Los Angeles County trial court judge’s award of $10 million for back rent, plus interest due to the Union Pacific Railroad from the Santa Fe Pacific Pipeline Company.

The pipeline company’s successful appeal centered on narrowing the scope of what pre-1871 grants from Congress to railroad companies included.  The appellate court agreed with the pipeline company that the proverbial “bundle of sticks” of property rights granted by Congress only included uses related to “railroad purposes.”  Oil and gas pipelines buried alongside the tracks were deemed not to be a railroad purpose, as petroleum pipelines were not even conceived of at the time the grants were issued, and had no link or relationship with the daily running of a railroad.

As a result of the appellate court’s holding, the true recipient of the pipeline rental payments was declared to be the United States government as represented by the Department of the Interior’s Bureau of Land Management.  The right-of-way at issue was 2014 miles in length, touched five states and was being renewed for a period of ten years.  Since the pipeline company had been making its rental payments to the railroad for several decades, the possibility looms of the United States, who was not a party to the lawsuit, seeking retroactive application of the ruling to the millions of dollars previously paid to the United Pacific Railroad.

It is anticipated that the railroad will file a petition to grant certiorari with the United States Supreme Court by its April 21, 2015 deadline.  If the Union Pacific Railroad is unsuccessful in either getting certiorari granted or in the subsequent appeal itself, then one could envision other pipeline companies, fiber optic companies and other non-railroad oriented users of the many railroad right-of-ways across the entire country seeking to suspend and not renew rent payments to railroads with pre-1871 grants.  Consequently, the United States government could end up with an unanticipated sizeable new income stream to help fill the nation’s coffers.

No Competitors In My Backyard?

Posted on March 2, 2015 by Seth Jaffe

In Paradise Lost, John Milton wrote that “easy is the descent into Hell, for it is paved with good intentions.”  

road to hell

A modern environmental lawyer might say that the road to waste, inefficiency, and obstruction is paved with good intentions.  Nowhere is that more apparent than with citizen suit provisions, as was demonstrated in the decision earlier this week in Nucor Steel-Arkansas v. Big River Steel.

Big River Steel obtained a permit from the Arkansas Department of Environmental Quality to construct a steel mill in Mississippi County, Arkansas.  Nucor owns an existing steel mill in – you guessed it – Mississippi County, Arkansas.  Nucor brought a host of claims in various forums (Sorry; I’m not a Latin scholar and cannot bring myself to say “fora”) in an effort to derail the Big River Steel project.  It appealed the permit in Arkansas courts.  It also petitioned EPA to object to the permit.

Finally – the subject of this case – it brought a citizens’ suit under the Clean Air Act alleging that the permit did not comport with various CAA provisions addressing permitting.  The Court rightly dismissed the complaint, basically on the ground that the suit was simply an improper collateral attack on the air permit.  The 5th and 9th Circuits have reached similar conclusions in similar circumstances.

The point here, however, is that clients don’t want to win law suits; they want to build projects.  Even unsuccessful litigation can tie projects up in knots, jeopardizing project financing or causing a project to miss a development window.

The road to hell is paved with the pleadings of bogus citizen suits.

Managing “Online” Info Impacts Agency Resources

Posted on February 26, 2015 by Irma S. Russell

The internet and social media have changed our lives in subtle and not-so-subtle ways.  Many of these changes are good.  Agencies offer an amazing array of information about their work and achievements on environmental issues.  Environmental NGOs and law firms provide websites and electronic newsletters with breaking news and hot topics in the environmental arena, catching our attention and educating us on important developments.  So today, everything seems to be just a click away.  (When was Ginger Rogers born anyway? And when did she and Fred star in Top Hat?  When will the EPA and the Corps finalize the “waters of the U.S. rule”?)  At any rate, information on environmental law and environmental issues is available faster than most of us would have dreamed when we began practice, and this on-demand on-line information is helpful.

Nevertheless, generally there are costs associated with benefits, and downsides as well as upsides to developments.  The sheer volume of information available online can be overwhelming.  Online research often leads to more questions and more research, creating confusion similar to a discovery response providing too many boxes of documents.  Managing and using voluminous and rapid-fire information can be difficult.  Moreover, the online and always “on” orientation can create heightened expectations – both by the public and clients.  The general sense has become that anything can be found online in an instant. (How many movies did Fred and Ginger make together anyway?) 

The goal of transparent government means agencies (including federal, state, and local agencies) make substantial information available on the internet.  The Freedom of Information Act of 1966 (FOIA) is by no means the only -- or even the primary -- tool for gaining information about the government.  The Federal Register provides a wealth of information.  Created in 1935, 44 U.S.C. § 1501, et seq. (2012), the Register now provides online access to virtually all agency decisions.  Additionally, numerous websites offer information on agency programs, processes, and enforcement actions, all without the need of filing a FOIA request.  For example, the U.S. Environmental Protection Agency (EPA) website provides scientific information relevant to environmental statutes, and extensive information on regulatory initiatives.  See, e.g., Environmental Protection Agency, Climate Change Science.  The EPA also gives specific guidance on how to submit a FOIA request.  See Environmental Protection Agency, Freedom of Information Act (FOIA).

Agencies invest substantial resources in the internet generally and social media in particular.  Necessarily the commitment to online access involves a cost, both in terms of expenditures and agency resources.  Recently EPA began using blast emails to get its message to the public on particular initiatives and to poll the public about environmental protection measures.  See, e.g., Thunderclap; Thunderclap, I Choose Clean Water, (Sept. 29, 2014) (showing EPA as organizer of the Thunderclap poll).

A dramatic recent example of the use of social media is found in the proposed rule on the “waters of the United States” (often referred to as “WOTUS”).  In April 2014, the EPA and the U.S. Army Corps of Engineers (Corps) published a proposed jurisdictional rule on waters of the United States for notice and comment.  The rationale of the proposed rule rests in significant part on the principles articulated by Justice Kennedy in his concurring opinion in SWANCC and asserts jurisdiction (by category under the rule) based on a determination that the nexus, alone or in combination with similarly situated waters in the region, is significant based on data, science, the CWA, and case law.  ACOEL and many other organizations and individuals commented on this important rule.  For a full exploration of the commenting process on the proposed WOTUS rule, see the article Social Media: Changing the Landscape of Rulemaking, by Nina Hart, Elisabeth Ulmer, and Lynn White, which will appear in the summer edition of Natural Resources & EnvironmentThe article reports on the increased use of social media in the rule making process, the dramatic number of comments submitted on the high-profile and contentious issue of classifying waters of the U.S., and the difficulties for the agencies in trying to respond to so many comments.  

While the difficulty of limited agency resources is nothing new, recent news coverage highlights the issue in the modern context of tight budgets. An example is found in the disappointing pace of EPA delay on the important work of listing toxic substances (showing EPA’s work of assessment of toxic chemicals has fallen below the pace set by the Bush administration). 

This is not to say that the burden of evaluating comments in one office of EPA is the cause of the shortfall on toxic chemical assessment in another.  Moreover, the difficulties of setting agency priorities and allocating scarce enforcement resources are new to no one.  Nevertheless, he challenges for EPA and other agencies in using the tools of the online age, including social media, are real.  As a practical matter, agencies need to give serious thought to reinventing government in the sense of using the technological tools to manage the growing flood of information.  Significant study will be required for agencies to fulfill the mission of educating and informing the public, managing data, and taking input seriously, all while meeting their statutory missions.  

FAIR OR FOUL? THE BALL IS IN THE WATER

Posted on February 25, 2015 by Richard Sherman

As a result of a change in ownership of the Pawtucket, Rhode Island Red Sox, the AAA farm team for the Boston Red Sox, there are plans to move the team to Providence to a proposed new stadium hard by the Providence River. Apparently, the proposed stadium will be designed so that home runs hit over the right field wall will land in the River - comparable to home runs hit over the right field wall at the San Francisco Giants’ ball park into McCovey Cove in San Francisco Bay.

However, there is growing opposition to the proposed stadium location, among other things.  It is not inconceivable that opponents will take whatever steps they deem necessary to stop the use of this valuable urban redevelopment land for the stadium.  And the discharge of “discarded equipment” or “solid waste” – i.e, a baseball hit over the right field wall – into the River without a permit from the Rhode Island Department of Environmental Management (RIDEM) could lead to an enforcement action against the team that no one would anticipate or want.

Such a notion is not as far-fetched as one might surmise.  I was involved in a matter a few years ago concerning skeet shooting activities where the “clay” targets were sent out over the water to be shot.  RIDEM took the position that such activities – even with non-toxic shot and biodegradable targets – required a permit under the Rhode Island Pollutant Discharge Elimination System regulations. And such permit was ultimately denied for various reasons.

So the team owners might want to talk to RIDEM about a permit for home run baseballs landing in the River. Given the proposed design of the stadium, this would not be a random occurrence but could occur on a regular basis due to the stadium design. Would the stadium be viewed as a point source? Otherwise, the team (or its fans) may have to patrol the River in a boat before and during each game to retrieve the home run baseballs or even put up a net on top of the wall.