Posted on January 7, 2015
Much of my legal work deals with hazardous material remediations driven by CERCLA or state equivalents. The allocation of these costs among liable parties, in court or out, is generally conceded to be expensive and ultimately unsatisfying to most of them. I never thought I would see it in another area of environmental law but now I have.
Dams are regulated in my state by the New Jersey Department of Environmental Protection. It is a big job. Most of our lakes and ponds are dammed streams or rivers. At one point New Jersey had 196 dams where a failure might result in probable loss of life and/or extensive property damage. 50 of these need repairs at an estimated cost in excess of $33 million. There were also another 396 dams where failure might result in significant property damage. 317 are in need of repair to bring them up to state standards at a cost in excess of $126 million. Who pays for the necessary repairs to these dams and how?
A case decided by our intermediate appellate court on January 2nd of this year answers this question in a most CERCLA-like way. In New Jersey Department of Environmental Protection v. Alloway Township the Appellate Division interpreted provisions of the Safe Dam Act (N.J.S.A. 58:4-1 to 4-14). This Act “casts a ‘broad net’ of liability … so that its remedial purpose … is served” by imposing “significant obligations” on the owner or person having control of a reservoir or dam. At issue in this case was a privately owned lake created by an earthen dam that now has township road on top which is supported by a county bridge and culverts that are part of the dam.
The New Jersey Department of Environmental Protection (“NJDEP”) brought an action against the person owning the property below the lake and the dam, the township that maintained the road on the dam and the county that maintained portions of the dam. The court held “there are four classes of people who are subject to the statute: (1) dam owners; (2) reservoir owners; (3) those who control the dam; and (4) those who control the reservoir. It follows that if a party fits into any one of those categories, the [NJDEP] may seek enforcement of the SDA against that person.” All the parties fell into at least one of those classes.
The Appellate Division also blessed the allocation of liability made below. There, the judge, sitting in the Chancery Division - General Equity Part, made an equitable allocation of the costs of compliance: sixty-five percent to the County, twenty-five percent to the property owner, and ten percent to the Township.
What – equitable allocation in another environmental program? Cheer up CERCLA lawyers. Our skills may be useful in dam regulatory litigation.
Posted on January 5, 2015
If you want a sense of emerging developments likely to impact the business community it is important to keep an eye on pronouncements from EPA’s Office of Enforcement and Compliance (OECA). OECA is the “lead” for EPA’s Next Gen compliance initiative, which will continue to set enforcement priorities as it rolls out through 2015. Next Gen is far from perfect and severely underfunded, but since its principles provide the guideposts for compliance policy, being well informed provides an important edge in compliance situations.
For years EPA has been calling on federal and state enforcement managers to develop approaches that go beyond traditional single facility inspections and enforcement. EPA took the lead in its FY 2014 National Program Manager’s Guidance OECA by announcing the Next Generation Compliance Initiative.
Next Gen focuses on five areas:
1. Designing and drafting regulations and permits that are simpler and easier to implement.
2. Using advanced emissions/pollutant detection technology so that regulated entities, government, and the public have prompt access to monitoring data concerning environmental conditions (as well as potential violations).
3. Electronic submission of permit applications and monitoring data.
4. Prompt web-posting of traditional compliance data, and presenting information obtained from advanced emission monitoring and electronic reporting (so-called big data sets) to the public.
5. Developing data analytics to guide enforcement activities.
EPA kicked off Next Gen in style. A major policy statement appeared in the September-October 2013 issue of ELI’s Environmental Forum. The Next Gen strategy was reaffirmed in OECA’s FY 2015 national program manager’s guidance; in numerous interviews and public statements by senior EPA officials and in a compliance plan announced in October 2014. These efforts are continuing. Indeed, George Washington Law School will convene the latest in a series of events focusing on Next Gen compliance on March 26 and 27, 2015. The symposium will address the role of advanced monitoring in environmental compliance and enforcement. In addition, OECA staff have presented a number of Next Gen workshops to state officials.
Despite EPA’s roll-out efforts, Next Gen has had critics who find the initiative too vague to be helpful. The Government Accountability Office found that OECA lacks a strategic plan to implement the initiative. In addition, Next Gen does little to reward good behavior. In fact, Next Gen ignores positive feed-back as a driver of improved compliance.
While increased use of technology and public disclosure sound great, it remains to be seen how OECA will implement Next Gen in practice. Nevertheless, whether Next Gen has staying power or not, there are several themes that need to be considered:
1. OECA’s focus on improved transparency and community participation is here to stay and enhanced community outreach will increasingly find its way into EPA (and state) regulations. To keep pace, the regulated community needs to continuously rethink how to use media (new and old) to inform and engage stakeholders, especially members of vulnerable communities.
2. EPA and delegated states will continue to experiment with ‘innovative enforcement strategies’ using advanced monitoring and data analytics and that rely less upon traditional inspections; self-reporting and tips. Industry should look for opportunities to provide input to these efforts.
3. Monitoring data is now a public resource, easily shared and routinely subjected to new uses. Therefore, rigorous quality assurance and quality control is essential at every step of the data collection and reporting cycle. Use of software that flags inconsistent results or mathematically impossible outcomes (like EPA’s Greenhouse Gas Reporting Tool) should be dramatically expanded.
4. E-reporting cannot be a one-way street based simply on replacing paper reports with electronic submissions. OECA needs to provide guidance and support so that regulators can invest resources and develop policies that ensure that they can use e-reporting to provide relevant compliance assistance in real time.
We’ll need to wait and see whether OECA’s Next Gen Initiative will play a major role in shaping future environmental enforcement. In the meantime, OECA’s framework for achieving more effective compliance can serve as a guide for advanced companies to refine their environmental management systems while helping to focus enforcement efforts on the worst performers.
Posted on December 30, 2014
You’ll have to turn to more traditional holiday reading because EPA’s methane reduction strategy for the oil and gas industry won’t be available until next year. On March 28, 2014, the White House released its Strategy to Reduce Methane Emissions and instructed EPA to develop a comprehensive plan to reduce methane emissions from landfills, coal mines, agricultural operations, and the oil and gas industry. The White House further directed EPA to address oil and gas sector methane emissions by building on the emission reduction successes of existing regulations and voluntary programs.
EPA responded to this directive by publishing five white papers on methane emission sources in the oil and gas sector in April 2014, and requesting peer review and comment on each. The white papers address methane and volatile organic compound (VOC) emission mitigation techniques for: compressors, hydraulically fractured oil well completions and associated gas from ongoing production, equipment fugitive leaks, liquids unloading, and pneumatic devices.
Contemporaneously, EPA proposed enhancements to its long-standing and successful voluntary program for methane emission reductions—the Natural Gas STAR Program. EPA initiated the Natural Gas STAR program in 1993 to encourage voluntary methane emission reductions in the oil and gas sector through the application of cost-effective technologies and improved work practices.
EPA seeks to enhance the existing voluntary program with 17 “Gas STAR Gold” methane reduction protocols and a heightened recognition incentive for participating companies. There is a proposed Gas STAR Gold protocol for each of the source activities addressed by a technical white paper, with the exception of methane emissions from well completions following hydraulic fracturing. Other proposed Gold STAR protocols address methane emissions associated with casinghead gas, flares, glycol dehydrators, hydrocarbon storage tanks, and pipelines.
To achieve Gas STAR Gold status, a participating company must certify that at least one of its facilities has implemented all applicable Gold STAR protocols. Companies with at least 90% of their facilities implementing all applicable Gold STAR protocols achieve “Gas STAR Platinum” status.
While few doubt that EPA will pursue methane emission reductions via a regulatory framework, it is speculation only whether EPA’s approach will consist of methane reductions as: (1) a co-benefit of regulations aimed at VOC emissions; (2) direct regulation of methane emissions; or (3) a combination of these approaches. Regardless of the regulatory direction EPA takes, expanded and enhanced voluntary measures will certainly be part of its comprehensive strategy for reduced methane emissions.
EPA’s next step will be to announce the type of regulatory framework necessary to achieve White House goals, and explain how voluntary efforts fit into that framework. Although EPA aimed to announce that planned strategy by the end of the year, recent reports indicate that a January 2015 announcement is more realistic. It looks like we will have to look elsewhere for our leisure holiday reading. (Thanks are due to Karen Blakemore in our Baton Rouge office for all that is good and useful in this post.)
Posted on December 19, 2014
For decades, environmental lawyers focused on cleaning up the air and water. We made tremendous progress. Today, in most of the country, our air is safer to breathe and our waters more fit for drinking and recreation than at the dawn of the environmental movement.
But while our air and water got cleaner, our food system got dirtier during that same time period. Vast numbers of chemicals started to be used in the production and processing of food, with little thought given to the long-term impacts on human health and the environment.
Safeguards have failed to keep pace with the introduction of new chemicals, and the powerful industries behind these products put tremendous pressure on federal agencies to limit health protections, putting our health and our environment at risk.
Here are three ways to start cleaning up our dirty food system:
1. Close the Giant Food Additive Loophole
Hundreds, if not a thousand or more, chemical food additives used in processed and packaged foods that make up the majority of the American diet are never publicly revealed, much less reviewed for safety by the FDA. A recent report from NRDC explored this loophole in food safety law, known as GRAS, or “generally recognized as safe,” which allows chemical manufacturers to decide for themselves if their product is safe. In many cases, the FDA isn’t even notified when chemical additives enter our food supply.
Some additives which manufacturers claimed to be “generally recognized as safe” have been linked to fetal leukemia, testicular degeneration, and other adverse effects in human cell or animal tests. NRDC found these additives listed as ingredients in at least 20 food products.
The FDA can and should move now to end the conflict of interest in this system; and when the agency does review a manufacturer’s safety claims, their concerns should be made available to the public. Ultimately, Congress needs to close the GRAS loophole and reform outdated food safety law.
2. Stop Risky Herbicide Used on Corn and Soy
The EPA recently approved the herbicide Enlist Duo, which is toxic to many plants, but not to a new strain of genetically modified corn and soy. Enlist Duo is likely to become the replacement for the weed-killer popularly known as Roundup, which became one of the most widely used herbicides in the nation after Monsanto developed genetically modified corn engineered to resist it. According to Monsanto, Roundup and its family of glyphosate-based herbicides are registered for use in more than 130 countries.
But after 20 years of heavy use, Roundup is no longer effective against certain weeds, which have evolved a resistance to it. The industry’s solution is to escalate: develop a new strain of GMO crops that can withstand a new, more potent herbicide.
Enlist Duo is a combination of glyphosate, the active ingredient in Roundup, and another herbicide, 2,4-D. The EPA signed off on Enlist Duo despite ample evidence of the harm caused by 2,4-D, and without taking into account the last two decades of research on glyphosate.
In recent years, glyphosate has emerged as a major contributor to the alarming decline of monarch butterflies, as it has decimated milkweeds across the Midwest, the only plant on which a monarch will lay its eggs. (Milkweeds have not evolved any resistance to glyphosate.) Emerging evidence suggests glyphosate may pose a threat to human health, with possible links to kidney disease, pre-term deliveries, attention deficit hyperactivity disorder, birth defects, and miscarriages.
2,4-D has been associated with decreased fertility, higher rates of birth defects, and other signs of endocrine disruption. It’s been found in drinking water and can drift in the air over great distances, increasing the likelihood of human exposure far from the fields where it’s sprayed.
The approval of Enlist Duo will expand both the geographic area and the length of the season during which 2,4-D would be used, potentially increasing the risk of exposure to 20 million children and women of childbearing age here in the U. S.
NRDC is suing the EPA for its approval of Enlist Duo.
3. Stop Antibiotic Abuse in Livestock Industry
Eighty percent of the antibiotics sold in this country are for use in livestock and poultry, not for humans. And these antibiotics are largely used on animals that aren’t sick.
To keep antibiotics effective, we need to change the way we raise animals for their meat. NRDC has been spearheading a campaign to raise awareness of antibiotic abuse in the livestock industry and pressing the FDA to take action. Recently, a number of major food companies have announced that they have or will transition away from antibiotics, including Perdue Farms, Chik-Fil-A, Panera Bread, Chipotle and others.
These moves are encouraging and welcome but still voluntary, and not yet backed up by any increased transparency into antibiotic practices. And Foster Farms, the biggest chicken producer in the West, whose product was linked to a widespread Salmonella outbreak in 2013 and 2014, has yet to announce any changes in its antibiotics practices.
Meanwhile, the latest FDA statistics show that antibiotic sales to the livestock industry continue to rise. Real change will come when we have truly effective safeguards—not the voluntary measures offered by the FDA, and not the similarly weak proposal recently (and commendably) vetoed by Governor Jerry Brown of California.
Governor Brown has called stakeholders back to the table to find a more effective way for the industry to change its risky practices. It’s possible that California could lead the way forward on antibiotic stewardship.
Posted on December 18, 2014
There has already been significant discussion of the economic impacts of climate change. Damage from catastrophic events, the cost to build adaptation measures such as sea walls; these have all been examined. Now, a National Bureau of Economic Research Working Paper suggests a much more direct measure. Apparently, we’re just not as productive as the planet warms.
Cole Porter knew what he was talking about.
Posted on December 17, 2014
Last spring, as the Washington Post reported, I caught Justice Scalia in an embarrassing blunder that prompted the Justice to revise overnight the version of his dissenting opinion in EPA v. EME Homer City Generation, L.P. posted on the Supreme Court’s website. Scalia’s stumble? In his zeal to condemn EPA for what the Justice plainly considered to be an outrageous construction of Clean Air Act language in EME Homer, he somehow managed to get completely backwards what EPA had argued in Whitman v. American Trucking Ass’n. And as the environmental law blogosphere cheerily trumpeted, what made the mistake especially “cringeworthy” was that Scalia himself had written the Court’s opinion in Whitman, so one was hard-pressed to blame just his law clerk. (On the other hand, here at Harvard Law School, I was very much hoping it was not a Harvard clerk.)
However, what most fascinated me about the entire episode was not Scalia’s initial mistake, but the Court’s procedures for correction. The only reason the public knew about this particular correction was because Justice Scalia’s initial error had been so widely publicized, which was what in turn led me and others to spot the correction and publicize that as well. Otherwise, the correction was made entirely without the Court itself providing any notice. The slip opinion that appeared on the Court’s website was simply different from the one appearing the very next morning.
I was likely more focused on the Court’s process for correction because at that very moment, I had just completed a law review article on the Court’s longstanding, but wholly unappreciated, practice of revising slip opinions in just this kind of clandestine manner. And, not just dissenting opinions as in EME Homer, but also majority opinions of the Court. The Court has literally always done this sort of thing, although no one had ever called them out on it.
I first became aware of the practice as a lawyer for the U.S. Department of Justice in 1987 when, at EPA’s prompting, we urged the Court to correct a “mistake” in its original slip opinion in International Paper Co. v. Ouellette, a significant Clean Water Act case, because of EPA’s concern that certain language in that opinion mischaracterized the role of citizen suits. At our client’s urging, my then-boss, the Solicitor General, formally notified the Court of this “formal error” and the Court changed the language, precisely as we recommended, to eliminate the issue. As a result, the language appearing several years later in the bound volume of the U.S. Reports differed substantively from the original slip opinion language. No notice of this change was given, including to any of the parties in the case. The U.S. had participated as an amicus.
When this happened in 1987, I vowed someday to write on the topic. It took me only about 27 years to do so, and the upshot appeared a few days ago in a lengthy article published in the December 2014 issue of the Harvard Law Review. The article undertakes a full look at the Court’s practice, extending back to its earliest days until the present. (For example, Chief Justice Roger Taney added 18 pages to his opinion for the Court in Dred Scott v. Sandford in 1857, after the original opinion announcement.)
In my partial defense, not only did the necessary archival research require significant work over an extended time period, but the topic invariably took a backseat to other, seemingly more pressing, topics on which I was engaged. In all events, the final article is now available here, and includes discussion of EME Homer, International Paper Company, and other environmental cases.
Posted on December 15, 2014
"A long time ago in a [May 19, 1980 Federal Register] far, far away [or so it seems]", EPA declared its authority to regulate all hazardous secondary material, whether discarded or reused, under the Resource Conservation and Recovery Act (RCRA), and that it would exercise its authority to promote properly conducted waste reclamation. Ever since then, a kind of Empire/Rebellion struggle has played out over the scope and extent of broad based recycling exclusions to the RCRA solid waste definition.
Over the years, recycling exclusions generally focused on particular industries. However, EPA’s last final rule, issued in the October 30, 2008 Federal Register during the Bush administration, contained several much broader exclusions. Those exclusions covered a waste generator’s onsite recycling, offsite recycling in the U.S., and transfers of hazardous secondary materials for recycling conducted outside the U.S.
The 2008 rule prompted litigation from both industry and the Sierra Club. The Sierra Club also filed an administrative petition seeking EPA repeal of the final rule. On September 7, 2010, EPA reached a settlement agreement with the Sierra Club under which EPA agreed to issue a notice of proposed rulemaking and a final rule that addressed the Sierra Club’s concerns. EPA’s final rule announced on December 10 is the latest chapter in the ongoing saga.
The new final rule rolls back many of the Bush era provisions that minimized agency filings and involvement. It contains revisions to the onsite generator recycling exclusion, replaces the exclusion for offsite recycling in the U.S., eliminates the exclusion covering recycling outside the U.S., and introduces a new exclusion for recycling of certain solvents. It also contains some new requirements applicable to all recycling activities, and to new variances and non-waste determinations for recycled materials.
EPA’s new final rule is intended to provide greater safeguards against sloppy and sham recycling. These provisions address accumulation of hazardous secondary materials when there is no near term prospect for recycling, and require an up-front demonstration that the recycling process will generate a valuable product suitable for reuse. They also require offsite recycling by a facility with a Part B permit or interim status under the RCRA regulations, or by facility that has obtained a variance after meeting the same types of requirements imposed upon permitted and interim status facilities.
Offsite recyclers and waste generators engaged in onsite recycling must adopt new procedures that include notification and periodic updates of recycling activity, demonstration that the recycling is legitimate, documentation of when accumulation has commenced for the material being recycled, and compliance with recordkeeping requirements and with emergency response and preparedness procedures like those imposed on hazardous waste generators. In addition, the new rule provides a definition of “contained" that is intended to ensure proper storage of hazardous secondary materials.
Beside adding safeguards to two of the three exclusions instituted in 2008 and eliminating the third one, the new rule introduces an exclusion to cover the recycling of 18 commercial grade solvents. Under that exclusion, such solvents must be used in one of four industrial sectors that do not include waste management, and the remanufactured solvents must be employed for specified uses that do not include cleaning or degreasing.
The solvent exclusion is subject to notification and recordkeeping requirements similar to those contained in the previously described recycling exclusions. In addition, there must be compliance with the tank and container standards covering Part B permitted facilities and with air emission control requirements imposed under the federal Clean Air Act or, where not applicable, to the air emission standards covering Part B permitted facilities.
In its 2011 proposal, EPA sought to impose the new notification and containment requirements on facilities covered by a pre-2008 exclusion or exemption. In the preamble to its new rule, EPA has deferred adoption of those requirements have been deferred in order to more fully consider the comments and concerns that were raised. One pre-2008 exclusion that received particular attention is scrap metal recycling, since scrap metal being recycled may be left on the ground rather than in a receptacle.
This link summarizes the new provisions and identifies a few other items of interest.
Posted on December 12, 2014
Even before the Republican sweep of the mid-term elections in November 2014, working for the Federal Government in general and EPA in particular has not been – shall we say – always “fun” for the typical federal employee. Regardless of the party in power, federal employees always play the whipping boy (or girl) for any politician trying to make a point. When your agency is in the lead on making headline-grabbing news that enflame the core on the right and the left, such as with EPA, the invective target is placed squarely on that Agency, and by extension, its employees.
For many of the last dozen years, EPA has been accused of being a job-killer on one hand and indifferent to the health impacts of pollution on the other. More recently it has become the poster child for supposed incompetence when it comes to the basic tenets of good management by keeping porn-watchers, phony spies, and “healthy-but-still-on-medical leave” personnel on the payroll. It has seen its staffing cut by almost 15%.
Of EPA’s 14 Senate-confirmed positions, six are held by career employees in an “acting” capacity; and two are simply vacant. Senior agency officials point to employee morale as their primary management concern. With expectations of an increase in Washington gridlock and an accompanying increase in oversight hearings likely on the full panoply of Agency programs, the next two years will be particularly hard on EPA.
While some might simply say “oh pity the poor EPA employee”, I believe there will be a practical impact on companies because of this gridlock and “fed-bashing”. In addition to personnel reductions already in place, over 30% of the approximately two million civilian Federal workers are eligible for retirement.
This could result in a severe “brain drain” as employee morale continues to plummet in the face of constant Congressional investigations, criticism and budget cuts. This also will result in seasoned and experienced personnel being replaced by younger and significantly less experienced employees.
Highly regulated companies usually have anywhere from dozens to thousands of weekly contacts with their Federal regulators, usually for routine operating, permitting and approval questions and approvals. As experienced personnel are replaced by those who are less experienced, or in many instances not replaced at all, these routine business activities will increasingly be subject to delays which may ultimately have serious impacts on the company.
Company estimates for a major capital improvement could be off by months and millions of dollars if an experienced Agency permit writer retires and is either not replaced or is replaced by someone totally unfamiliar with either the program under which the permit is written or the company’s operations. In this respect the gridlock between Congress and the President has a more granular and underappreciated impact on such a company than merely being the grist for the Sunday news shows’ debates on Washington DC’s dysfunctional approach to government.
Posted on December 11, 2014
A thought occurred to me recently, and not for the first time, about the decisions of the New Jersey state judiciary, including our Supreme Court, in the area of environmental law generally and site remediation particularly. My realization was that those decisions are driven as much by a desire to facilitate the remediation of contaminated sites as they are by principled interpretation of statutes, regulations, canons of construction and the like.
Such an approach, of course, is understandable on one level, as New Jersey environmental statutes are ameliorative in nature, a cleaner environment is in the interest of everyone, and our fair state has suffered environmentally from its industrial legacy more than most jurisdictions. But on a deeper level, courts are supposed to decide cases in accordance with law, and deciding cases with a particular goal in mind may result in an injustice to the litigants. Moreover, fuzzy reasoning could provide inaccurate guidance to the bar and public.
In one recent case, for example, the Supreme Court of New Jersey was called upon to determine the degree of causation that the New Jersey Department of Environmental Protection (“NJDEP”) needed to establish in order to impose liability on a discharger of hazardous materials. Rather than simply requiring proximate cause, the court hemmed and hawed its way along, formulating the appropriate standard at various points as a “real, not hypothetical” connection, and as a “reasonable nexus or connection” between the alleged discharger and the discharge.
The Court ultimately held that the standard of causation needed to establish liability varies with the form of relief requested. Unfortunately, the Court provided no support for this approach, which conflates the proof needed to establish liability with what is necessary to impose damages. This leads to the conclusion that the Court was reluctant to impose a difficult burden of proof on the state and, presumably, private litigants which could result in judgments for defendants and hence, in the Court’s view, deter remediation of contaminated sites.
In another recent case, the Supreme Court had to determine the interplay between the jurisdiction of a state agency and state trial courts in adjudicating liability for site remediation. The Court reversed the trial and appellate courts and held that a litigant could seek relief in court before the contours of the remediation had been firmly established.
Undergirding the Court’s reasoning was pragmatism – the earlier we allow a contribution plaintiff to pursue other responsible parties, the more the defendants will be encouraged to participate in the remediation process, thereby facilitating more and faster cleanups. While the result was correct as a matter of existing law, the reasoning was weighted far too heavily with an eye towards the result.
Finally, in a case that recently was argued and awaits adjudication, the Supreme Court was asked to determine whether a statute of limitations exists under the New Jersey Spill Compensation and Control Act, our state’s CERCLA analog, and, if so, how long it is and when it begins to run. Implicit in many of the questions the Court asked the advocates was which resolution would facilitate the faster remediation of more sites – no statute of limitations at all, which would allow remedial claims to be brought at any time and not foreclose an action, or a limitations period which would incentivize the plaintiff and defendants to move forward more quickly to clean up sites.
Remediating the environment, and making sure responsible parties are held to their obligations, are plainly laudable goals. But a little less focus on the ultimate environmental outcome and greater adherence to the principles of adjudication, statutory interpretation and the like would improve the quality of justice without sacrificing environmental protection.
Posted on December 10, 2014
On December 2, 2014 the United States District Court for the Eastern District of Arkansas enjoined the Small Business Administration (SBA) and the Farm Service Agency (FSA) (together the “Agencies”) from making any payments on their loan guaranties to Farm Credit Services of Western Arkansas (Bank), pending the Agencies’ compliance with the National Environmental Policy Act (NEPA) and the Endangered Species Act (ESA). The Bank had loaned nearly $5 million to C&H Hog Farms, Inc. (C&H) in 2012 for the construction of a confined animal feeding operation (CAFO), collateralized by a guaranty from the United States.
The court’s decision paves the way for potential alteration of the collateral agreement terms, over two years after the non-party Bank had closed and funded the loan. Such court action could jeopardize the farm loan guaranty program.
In its decision the court found that the SBA failed to conduct any environmental review of its loan guaranty or to consider the impact of that loan on the endangered Gray Bat that resides in an area near the CAFO, and that the FSA’s environmental impact and endangered species reviews were inadequate; the Agencies’ actions thereby violated both NEPA and ESA. The court’s injunction precludes the Agencies from making any payment on their loan guaranties to the Bank until they have complied with their obligations under NEPA and ESA, giving them a year to do so.
In August of 2012, and as provided under state regulation, C&H received a General No Discharge Permit (Permit) from the Arkansas Department of Environmental Quality (ADEQ) that addresses the management of manure, litter, and process wastewater generated from the CAFO. The Permit authorizes up to 6503 swine, at a location along a creek that discharges to the Buffalo National River, the nation’s first national river.
Upon completion of FSA’s review process and issuance of a Finding of No Significant Impact in August 2012, C&H obtained an initial construction loan of $3.6 million, 75% of which was guaranteed by SBA. C&H later received a $1.3 million loan, with 90% of that loan guaranteed by FSA. Both loan guaranties were required by the Bank. The loans were funded, construction was completed, CAFO operations commenced, and C&H has been making timely loan payments.
In August of 2013 the Buffalo River Watershed Alliance and several other organizations sued the Agencies, alleging that the CAFO permit contemplated at least occasional discharges of waste into surface waters that could pollute the Buffalo National River, and that the Agencies had violated NEPA, ESA, and certain other federal requirements. The plaintiffs requested that the loan guaranties be enjoined, pending a further environmental review. On December 2, 2014 an injunction was issued. C&H and the Bank were not parties to the litigation.
The significance of this decision is not the finding of a NEPA or ESA violation. What is surprising, and noteworthy, is the Court’s conclusion that such agency action was sufficiently related to a loan arrangement between two entities that were not party to the suit, leading to possible rewriting of that loan two or more years after it was negotiated and closed, and the funds dispersed.
The court concluded there was a sufficient causation nexus because “[w]ithout the guaranties, there would’ve been no loans. Without the loans, no farm.” In addition, the Court concluded that requiring further NEPA and ESA review would in fact redress the plaintiffs’ injuries for the loans already made since the Agencies have an “ongoing role in monitoring any conditions placed on their guaranties,” thereby suggesting that further restrictions could well be placed on C&H’s operation of the CAFO.
The Agencies have now agreed to undertake the additional review within the mandated 12 month time period. That review may result in no additional restrictions, or in restrictions that C&H can carry out without difficulty. With C&H being current on its loan payments, this decision may ultimately have no practical impact on C&H or its Bank. However, the “oh my” scenario is equally possible, because the court’s decision has no limits on the scope of additional restrictions that may be imposed.
As noted by the court, “[t]he federal agencies, through guaranty conditions, have control over C&H’s case-relevant behavior” and “it’s likely that more environmental review will change how C&H operates its farm.” If C&H is unable to meet those restrictions, resulting in a loan default, the Bank will lack the guaranty it required to fund the loan in the first place. Thus, the court has authorized the guarantor to re-write the terms if its guaranty, post hoc, to the severe detriment of the non-party Bank.
With a six year statute of limitations on filing a NEPA claim, what farm loan guaranty is safe from being altered or eliminated as a result of judicial action? Will Old MacDonald be prohibited from obtaining next year’s crop loan until the Agencies complete an EIS, a process that will take a year to complete and likely cause him to miss the planting season?
And what about other endangered species that could implicate the validity of other farm loan guaranties? EPA’s proposed habitat designation for two newly listed endangered mussels will encompass over 40% of the area of the state of Arkansas, impacting one third of all property owners in the state, most of which are farmers.
In addition, the broader implications of this decision on security interests cannot be overlooked. There were no parties in the litigation to argue that relieving the United States from its debt/collateral obligation would unfairly reward the Agencies for their failure to comply with NEPA and ESA. The Agencies certainly did not advance that argument. In fact, the injunction is what the Agencies requested, the court noting that its “Order will follow generally the terms [of the injunction] suggested by [the Agencies].” The Court even ordered the Agencies to “modify or void the loan guaranties as they deem appropriate in light of their revised and supplemented NEPA and ESA analysis.” The impact upon the agricultural loan program is clear, since these loans are routinely traded as federally insured securities.
The Arkansas Farm Bureau has succinctly identified the potential implications of this decision: “[The opinion] probably just made it a whole lot harder for the next guy who’s trying to get a farm loan, regardless of where they are.” You can take that to the bank—or not!
Posted on December 5, 2014
The 468 megawatt Cape Wind project, slated for construction in federal waters off the coast of Massachusetts in Nantucket Sound, is the first offshore wind project to be proposed and approved in the United States. The project has strong support from the Commonwealth of Massachusetts, many national, state and local environmental groups, organized labor and many others.
But being the first in an innovative venture is always difficult, and unsuccessful litigation by project opponents – some funded in large part by billionaire Bill Koch – has slowed the pace of the project. By Cape Wind’s count, thirty-two cases have been filed by project opponents. Cape Wind has ultimately prevailed in all of these actions.
A recently issued but unheralded district court decision now signals yet another legal victory for Cape Wind.
In April 2010, after a lengthy and comprehensive environmental review and permitting process which included preparation of two environmental impact statements, the U.S. Department of Interior approved the Cape Wind project. Project opponents then filed three complaints in the United States District Court for the District of Columbia.
The complaints, which were ultimately consolidated, challenged approval of the project by various federal agencies and alleged violations of the National Environmental Policy Act (NEPA), the Endangered Species Act, the Migratory Birds Treaty Act, the National Historic Preservation Act, the Outer Continental Shelf Lands Act, and the Coast Guard and Maritime Transportation Act of 2006.
Cape Wind intervened in the actions as a defendant-intervenor. Because of the project’s clean energy significance, NRDC attorneys (including me), joined by the New England-based Conservation Law Foundation and Mass Audubon, the state’s leading wildlife protection organization, filed two “friend of the court” briefs in support of the project.
In March 2014, U.S. District Court Judge Reggie Walton issued an 88-page decision granting summary judgment to the defendants, rejecting the bulk of opponents’ challenges to the federal government’s 2010 approval of the project. The court dismissed outright a host of claims that related to the government’s environmental review of the project under the National Environmental Policy Act and to the Coast Guard’s review of navigation issues under the Outer Continental Shelf Lands Act.
The court remanded two limited issues back to the federal agencies. First, it directed the U.S. Fish & Wildlife Service (FWS) to make an independent determination about whether a potential operational adjustment for the project was a “reasonable and prudent measure”. The court explained that it was unable to tell, based on the record, whether the Fish & Wildlife Service had made an independent determination or had adopted a position taken by a sister agency.
Second, the court directed the National Marine Fisheries Service (NMFS) to issue an incidental take permit covering right whales. While the NMFS biological opinion stated that the project “was not likely to adversely affect right whales” and that “incidental take was not likely to occur,” the court found that the opinion did not state that an incidental take would not occur or determine the volume of any potential take.
After the court’s decision, the two federal agencies complied with the district court’s instructions. FWS issued its independent determination with respect to the potential operational adjustment. NMFS amended the incidental take opinion to state that no take of right whales was anticipated, and thus the incidental take amount for this species could be set at zero.
However, that did not end the matter. As the district court noted in its September 12, 2014 order, “history should have forewarned that any attempt to bring this [protracted] litigation to an expeditious conclusion would prove difficult.” And as expected, the plaintiffs filed a supplemental complaint challenging the two agencies’ actions on remand.
On November 18, 2014, the district court dismissed the plaintiffs’ supplemental complaint. The court made short work of the claims, finding them all to be barred – some because they had been previously waived or abandoned and some because the Court had previously considered and rejected them. Indeed, the court noted that some of the claims were “difficult to understand.” With that decision, this chapter in the long string of legal challenges was concluded, at the district court level at least. The plaintiffs filed a notice of appeal yesterday.
Meanwhile, the Cape Wind project continues to move forward. In July, the U.S. Department of Energy issued a conditional loan guarantee commitment for the project, the first step toward securing a $150 million loan guarantee. In August, the project selected its lead construction contractors. Construction is expected to proceed in 2015.
And Cape Wind’s example has spurred forward movement in the U.S. offshore wind industry. Currently, there are some fourteen offshore wind projects in an advanced stage of development along the East Coast and elsewhere, representing 4.9 gigawatts of potential renewable electricity capacity. Despite the protracted litigation, it’s my hope that Cape Wind, buoyed by its legal victories, will herald the start of a new renewable energy industry that will fully and sustainably tap into the United States’ huge offshore wind resource.
Posted on December 4, 2014
In December 1952, John W. Davis, the senior name partner in one of the nation’s most prominent law firms and the Democratic candidate for President in 1924, appeared before the Supreme Court. He was defending the long-established Constitutional doctrine of “separate but equal” in public education and urged “judicial restraint” in any effort to overturn the Court’s 1896 decision in Plessy v. Ferguson which had blessed that practice as a socially and legally acceptable way of reconciling the competing claims of human equality and social stability in the United States.
In May 1954, in Brown v. Board of Education, the Supreme Court unanimously reversed Plessy, finding that segregated schools were ‘inherently unequal”. The decision made possible a new America that, while still staggeringly unequal, is no longer premised on officially-sanctioned segregation of people by race.
Suppose John W. Davis had won his argument? What if the legions of respected and highly competent lawyers who represented southern states, towns and school districts had succeeded in their efforts to undermine the Brown decision by dragging out the Court’s injunction to dismantle segregation “with all deliberate speed” not simply for 20 years but for 50?
What kind of society would we be living in today if those efforts, supported by many years of precedent, deeply-held social beliefs and substantial economic interests, had succeeded? What role could the United States play in today’s world if we still sanctioned “separate but equal” treatment of our own citizens? How proud would those lawyers now be of their efforts to preserve a status quo that, as many of them must have known, had to fall for our nation to free itself of the legacy of slavery?
Climate change is not slavery or de jure racial segregation, though in truth it will affect the lives of hundreds of millions, perhaps billions, of people throughout the world for decades and quite likely centuries. But the failure of the United States to address its GHG emissions since the 1992 U.N. Framework Convention on Climate Change and the prospects for continuing litigation over even the modest EPA efforts now under way to restrict coal plant emissions can be viewed as a similar refusal to recognize the need for fundamental changes.
I believe that lawyers must at least consider whether they wish to be part of a scorched-earth litigation strategy to defer, for as long as possible, our nation’s efforts (and the efforts of other nations) to break free of reliance on coal, which has represented the single greatest source of the Earth’s increased GHG emissions since 2000.
John W. Davis surely believed he was behaving as lawyers should in defending his clients’ actions under then-prevailing law. However, I wonder whether, in retrospect, he would have preferred to be part of the solution instead of the continuing problem that still challenges our society.
If our nation today fails to confront climate change and the other nations of the world follow our dubious lead, how will future generations look at our profession’s role in that tragedy? How will we look at ourselves?
Posted on December 3, 2014
As my three prior blogs have discussed (see parts I, II, and III), the State of New Jersey has responded to Hurricane Sandy’s devastation in 2012 by escalating its efforts to construct sand dunes on its beaches to protect the shore communities beach front properties from repetitive coastal flooding. These cases have attacked the failure of the ensuing takings awards as not giving adequate compensation for the resulting partial loss of ocean view by the impacted homeowners or, by failing to reduce such awards to reflect the benefit the dunes would provide against future flooding in the future.
Now comes along a shore community, the City of Margate (in which this author owns a 10th floor vacation condominium), which filed a 16 page complaint (with 149 pages of exhibits) and asked the U.S. District Court of New Jersey to enjoin the NJ Department of Environmental Protection (NJDEP) and the U.S. Army Corps of Engineers (Corps) from trespassing on its residents properties by constructing dunes on Margate’s beaches. Despite the proposed takings being grounded in the Government’s power to protect the public health, safety and welfare, the Court issued a temporary restraining order (TRO) on November 24 in response to Margate’s Complaint alleging an “unlawful taking of Margate’s beachfront property”, required a bond of [only] $10,000.00 and scheduled a December 4, 2014 hearing to determine whether a preliminary injunction should be issued.
Stay tuned for further updates on this litigation which constitutes a challenge to the propriety of using sand dunes as an appropriate storm protection strategy for Margate, acknowledging that some preventive measures are necessary to deal with what will probably be recurring coastal flooding.
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 December 1, 2014
Food is a big part of why Thanksgiving is my family’s favorite holiday. Over the years, we have tried to eat sensibly and sustainably, and to waste less food. But on the Monday after Thanksgiving, I suspect we are not alone as we contemplate the wilted salad, the wan sweet potatoes, and the last of the now not-so-attractive leftover turkey. Indeed, one recent study by NRDC estimated that Americans throw away 40% of their food.
In the last few years, declining capacities at conventional solid waste disposal facilities, combined with the realization that there are more beneficial things to do with food waste and other organics than to throw them in a landfill or burn them have led to partial food or organic waste bans in California, Connecticut, Massachusetts, Vermont, as well as in cities such as Seattle, San Francisco, and New York.
Of course, these ambitious waste segregation programs require that there be an alternative location to reuse or process these materials. Historically, organics have been transformed into compost or animal feed. Unfortunately, the volume of the waste stream is far in excess of what existing, generally small composting facilities can handle. Larger facilities that might be able to increase capacity are generally located far from urban and suburban centers that generate the waste. Many regulators have recognized the need to create an infrastructure to handle this material but a more comprehensive national program is needed if we are really going to stop throwing our food into landfills.
One of the most promising technologies to manage the large amount of organic waste generated near city centers is anaerobic digestion (“AD”). AD systems use anaerobic bacteria to break down organic matter into methane and carbon dioxide. The resulting methane can generate energy in place of traditional fossil fuels. A large-scale system might generate as much as 8-10 MW of electricity (enough to power 8-10,000 homes), while diverting thousands of tons of organics from landfills. And as a bonus, the residual materials can be used as compost or soil amendments. AD systems are well established at wastewater treatment plants and are emerging at certain large agricultural operations.
But there have not been many large scale AD systems designed to handle the anticipated flood of organics that will soon be separated from the general waste stream. Part of the problem may be one of raw material supply – a single large AD system may need hundreds of thousands of tons of segregated organic materials annually. The waste bans may help develop a reliable supply. Siting of these facilities presents other challenges. Some states, most notably Massachusetts have amended regulations to make it easier (though certainly not “easy”) to permit these facilities, at least on a state level. Hopefully other regulators will follow suit, allowing market forces to coalesce and expand what is now a nascent industry. Otherwise the organic material diverted from the solid waste stream by well-intentioned laws and rules will pile up in unpleasant ways.
Posted on November 24, 2014
Last September, EPA proposed to supplement a proposed SIP Call to effect the wholesale elimination of “malfunction” affirmative defense provisions in numerous states’ SIPs under the Clean Air Act (CAA). This supplemental proposed rulemaking was a direct response to a decision of the D.C. Circuit in NRDC. v. EPA. EPA’s alarming reaction to the decision in that case is unwarranted, reverses long-standing policy with regard to startup, shutdown and malfunction (SSM) events that has been affirmed by multiple reviewing courts as rational, and would effectively require facility operators to predict future malfunctions and permit for them or prevent them if they are to avoid civil penalties for malfunction-derived excess emissions. If unable to do so, operators would incur penalties intended to deter their noncompliance, arising from their failure to predict and account for future malfunctions.
The portion of the NRDC v. EPA decision that addressed affirmative defenses only considered EPA’s authority to create them in private suits under Section 304(a) of the CAA. The D.C. Circuit found that federal courts, not EPA, have authority under Section 304(a) to apply affirmative defenses in such private suits, on important separation of powers principles. The court specifically limited its holding to affirmative defenses in the context of citizen suits, noting that “[w]e do not here confront the question whether an affirmative defense may be appropriate in a State Implementation Plan.” Of course, the vast majority of enforcement actions alleging violations of emissions limits and seeking penalties for such excess emissions are brought by state permitting authorities with delegated programs established in their SIPs. Most SIPs contain some SSM affirmative defenses, including in cases of a qualifying “malfunction,” which will insulate the operator from civil penalties (though not injunctive relief) if the affirmative defense is properly invoked. See prior ACOEL blogs on this important topic for more background (“Partners?,” by Steve McKinney, and “5th Circuit Upholds…” by Karen Crawford).
EPA has long interpreted the CAA to allow states to include at least a limited affirmative defense for malfunctions in their SIPs, and Circuit Courts reviewing challenges to such affirmative defenses have agreed that this is a permissible interpretation of the statute. More recent cases have narrowed SSM affirmative defenses in response to environmental group petitions, by (1) requiring continuous compliance with permit limits for scheduled, i.e., foreseeable, startup and shutdown emissions, so as not to result in or contribute to a violation of the NAAQS, and (2) clarifying that the protections of the affirmative defense from the imposition of civil penalties for excess emissions do not preclude regulators from seeking injunctive relief in response to a malfunction. This balance was struck by EPA in the 2013 proposed SIP Call, although many industry stakeholders and states have opposed the elimination of affirmative defenses for excess emissions during startup and shutdown.
EPA’s sole justification for now completely abandoning SSM accommodations is the conclusion that an affirmative defense for malfunctions renders any and all of the seventeen SIPs containing such provisions “substantially inadequate” in the wake of NRDC v. EPA. Yet that decision does not extend to affirmative defense provisions in SIPs, as noted above, and is therefore not a good reason for disregarding longstanding agency SSM policy. Indeed, EPA’s wholesale reversal of its SSM Policy is directly contrary to numerous other federal appellate courts that have squarely addressed the issue and held that SIP and Federal Implementation Plan (“FIP”) affirmative defense provisions for malfunction events are consistent with the CAA. See Luminant Generation Co. v. EPA; Mont. Sulphur & Chemical v. EPA; Ariz. Public Service Co. v. EPA.
Many facilities requiring air permits to operate have complex mechanical and electronic equipment with countless components that, by their nature, may inevitably fail or malfunction at some point, despite an operator’s best efforts and regular maintenance. Most remaining affirmative defense provisions, based on EPA’s historical direction (and the efforts of Sierra Club and other environmental groups to eliminate all SSM provisions as somehow being illegal), would now be sufficiently tailored (following the 2013 SIP Call) to balance the practical realities of unforeseen component failure and the responsibility of facility operators to minimize excess emissions through adherence to good air pollution control practices. Indeed, a malfunction affirmative defense may only be invoked in most states when the excess emissions were caused by a sudden, unavoidable breakdown of equipment, or a sudden, unavoidable failure of a process to operate in the normal or usual manner, beyond the reasonable control of the operator. See, e.g., Colorado Air Quality Control Commission Common Provisions Regulation Sect. II.E.1. SSM affirmative defenses also typically require that operators make repairs as expeditiously as practicable, minimize the amount and duration of excess emissions, and take all reasonably possible steps to minimize the impact of the excess emissions on ambient air quality. These important and material qualifying pre-conditions to availing oneself of a malfunction affirmative defense ensure that air quality is being protected to the maximum extent practicable, even during malfunctions, consistent with good air pollution control practice.
Expecting operators to predict the future and imposing stiff penalties when they can’t defies common sense, and ignores centuries of jurisprudence that recognize the need for exceptions due to circumstances beyond one’s reasonable control, such as the universally understood concept of force majeure. It is perhaps ironic that an agency that has focused upon the use of improved emerging and available technologies to create Next Generation or “NextGen” Compliance requirements simply doesn’t “get it” when a technology or device fails to operate as designed and intended, and then gets a hammer out to whack the operator, as if that will “deter” future malfunctions…bad machine!
Posted on November 24, 2014
In his seminal essay in 1972, Christopher Stone famously asked “Should Trees Have Standing?” Apart from Justice Douglas’s dissent in Sierra Club v. Morton, the idea has never gained much traction, at least in United States courts. Now, due to the passage of a “Community Bill of Rights” ordinance by the Grant Township (Pennsylvania) Supervisors, the concept is about to get a legal test.
It appears that the ordinance was drafted by the Community Environmental Legal Defense Fund, and the Supervisors have retained CELDF to defend the ordinance against a challenge by the Pennsylvania General Energy Company, which apparently wants to dispose of fracking wastewater in Grant Township.
According to the complaint challenging the ordinance, the ordinance does not just enshrine nature with rights; it would deprive them to corporations. Allegedly, the ordinance states that corporations challenging the ordinance are:
not deemed to be ‘persons,’ nor possess any other legal rights, privileges, powers, or protections which would interfere with the rights or prohibitions enumerated by [the] Ordinance.
Good luck defending that one in court. Call me an old-fashioned anthropocentric, but I prefer defending protections for natural systems and the environment on the ground that such protections are good for people.
Posted on November 19, 2014
DEFENSE TO JOINT AND SEVERAL LIABILITY
On September 25, 2014, the Seventh Circuit added two more opinions to the long list of decisions arising out of the Lower Fox River and Green Bay Superfund Site (Fox River Site) in northeastern Wisconsin.
In NCR Corp. v. George A. Whiting Paper Co., a contribution suit, the court reversed and remanded a decision by the Eastern District of Wisconsin, which had held that NCR was not entitled to any contribution from the other defendants.
In U.S. v. P.H. Glatfelter Co. (Glatfelter), an enforcement action, the court ruled on a number of important CERCLA issues, such as whether a permanent injunction can be issued to enforce a Section 106 unilateral administrative order. In affirming in part and reversing in part the same District Court decision, the Seventh Circuit provided the latest appellate guidance on the divisibility of harm defense to joint and several liability.
The District Court had rejected divisibility of harm defenses raised by defendants NCR and Glatfelter, ruling, as a matter of law, that the “harm” in one of the operable units of the Fox River Site (OU-4) was not “theoretically” capable of being divided. The District Court ruling thereby avoided the second step of the divisibility of harm analysis, the factual question of how a divisible harm might be apportioned. That was the question resolved by the Supreme Court in Burlington N. & Santa Fe R.R. Co. v. United States (Burlington Northern), a decision which gave Superfund practitioners great hope because the apportionment approved by the Court was so imprecise. Litigation in the lower courts following Burlington Northern quickly turned to the question of what makes a harm “theoretically” capable of being divided. The question is whether it is possible to approximate the contamination caused by each party.
In the District Court, defendants NCR and Glatfelter argued for divisibility of harm on different theories. NCR admitted that it had contributed to the contamination in OU-4, but argued that the harm was capable of apportionment and that it should be liable only for its apportioned share of the costs. Glatfelter argued that it did not cause any of the contamination in OU-4 and therefore was not liable for the costs of cleaning up OU-4.
As to NCR, the Seventh Circuit first addressed the question of what the appropriate metric should be for measuring the contamination caused by each party. The District Court, after a lengthy trial, had viewed the harm as “binary,” in the sense that contamination in concentrations above EPA’s maximum safety threshold of 1.0 ppm of PCBs was harmful; whereas, concentrations below that level were not. The Seventh Circuit rejected that “on-off switch” approach on the ground that the evidence at trial had shown that the dividing line between “harmfulness and geniality” was much more subtle. The Seventh Circuit reviewed the various metrics used by EPA to measure harm and settled on “surface weighted average concentrations” (SWAC) of 0.25 ppm throughout OU-4 as the appropriate value. Even that value, however, could not be viewed as “binary,” according to the Seventh Circuit , because lesser concentrations still could pose risks of harm.
This analysis led the Seventh Circuit to reconsider whether remediation costs can be a useful approximation of the contamination caused by each party. The District Court had concluded that, like contamination levels, remediation costs were “binary” in the sense that “sediment with PCB concentrations below 1.0 ppm would impose no remediation costs, while sediment with PCB concentrations above 1.0 ppm would always impose about the same remediation costs.” The Seventh Circuit said “[w]e think the district court got this wrong as well.” Instead, “remediation costs increase with the degree of contamination above 1.0 ppm. As a result, remediation costs are still a useful approximation of the degree of contamination caused by each party.” As the Seventh Circuit explained, that is so because “the cost of the remedial approach in a particular area is positively correlated with the level of contamination near the surface of that area, which contributes to the operable unit’s SWAC, and consequently, the harm.”
The Seventh Circuit concluded:
As a result, we think the harm would be theoretically capable of apportionment if NCR could show the extent to which it contributed to PCB concentrations in OU4. And if NCR cleared that hurdle, we think a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
The Seventh Circuit then went on to agree with the District Court’s critique of expert opinion offered by NCR to estimate the percentage of mass it contributed to OU-4, but faulted the District Court for failing to explain why it rejected an alternative approach to estimating mass-percentages. The Seventh Circuit did not say whether the estimated mass-percentages, if properly done, would have proven that the harm in OU-4 was “theoretically” capable of apportionment. Instead, the Seventh Circuit reversed the District Court’s rejection of the divisibility defense and remanded for further fact finding.
As to Glatfelter, the Seventh Circuit characterized its divisibility argument as an “all-or-nothing game,” in the sense that Glatfelter argued that none of its PCBs made their way into OU-4, obviating the need, in Glatfelter’s view, to approximate its share of the PCB contamination in OU-4. The Seventh Circuit thoroughly analyzed the testimony of Glatfelter’s expert (to the point of proposing complex algebraic formulas to demonstrate his testimony was unsound), concluding “Glatfelter failed to prove that the PCB discharges for which it is responsible were not a sufficient, or at least a necessary cause of at least some of the contamination in OU-4. Therefore, the district court correctly ruled against Glatfelter on its all-or-nothing divisibility defense.”
So what do Superfund practitioners learn from Glatfelter? Some things we already understood are confirmed. Divisibility analysis is a two step process; the initial and far more challenging step is to prove that the harm is “theoretically” capable of apportionment. The burden of proof on that issue rests with a defendant advancing a divisibility of harm defense. Glatfelter now instructs that the test to determine whether a harm is theoretically capable of apportionment depends upon the extent to which the defendant contributed to concentrations of contaminants at the site, an obvious subject for expert testimony. The battle on that issue can be expected to resume in the District Court. To the extent the first step is cleared, a reasonable basis for apportionment could be found in the remediation costs necessitated by each party.
More than theoretical is the fact the Fox River Site will produce more opinions for guidance to Superfund practitioners in this confusing and difficult area of the law.
Posted on November 17, 2014
November 1967: The Moody Blues release their second album, Days of Future Passed, said to be an influential work of the countercultural, psychedelic era. May 2014: Wolverine goes back in time to rally the X-Men against the Sentinels in Days of Future Past. In between: Ed Muskie and Leon Billings roamed the Earth, particularly the U.S. Senate, and modern-day environmental law was born and thrives.
2014 also is the centennial of the birth of Muskie in the old mill town of Rumford, Maine. On November 15, almost exactly 47 years after release of Future Passed, Harvard Law Professor Richard Lazarus and Leon Billings, Senator Muskie’s former chief of staff, spoke on a panel looking back and to the future of laws like the Clean Air and Water Acts that were unanimously passed by the Senate through the guidance of Muskie and Billings.
Billings spoke of how what Muskie was able to shepherd through Congress and into law involved concepts still pervasive and taken for granted today—such as private attorneys general, nondegradation, open decision-making, the public’s right to breathe healthy air and removal of the right to pollute. He described Muskie’s insistence of and ability to achieve bipartisanship, with allies for the CAA and CWA efforts including such Senators as Baker, Eagleton, Cooper, Bayh, Boggs and Dole, as well as the exhaustive efforts to fully vet and document the need for legislation. For example, for the CWA the Senate Committee held 33 days of hearings with 1721 witnesses, 470 statements and 6,400 pages of testimony, followed by 45 sub-or-full-Committee markup sessions and 39 Conference meetings.
Billings then focused on two concepts that he said demonstrate Muskie’s ability over 40 years ago to look to the future. The first, “waters of the Unites States” grew out of the Senator’s knowledge of the 1899 Refuse Act; he successfully convinced his colleagues that the Act supported a broad view of “waters of the US” to include, for example, wetlands. Since then, the Supreme Court has gone “at least as far as we had expected, and more broadly than we could have hoped”, said Billings.
The second concept is that of climate change and the Clean Air Act. Billings was very clear: Section 111(d) was no accident, is not being misinterpreted, and Muskie intended there to be a legislative basis for then-unknown or undefined pollution problems like CO2, what Billings now calls the “epitome of the precautionary principle”. The phrase “selected air pollution agents” almost never made it out of the House-Senate Conference in December 1970, but a compromise was struck so late at night it never made it into the Conference reports. And while no one then envisioned CO2 and climate change, Billings said that if Muskie were alive when the Supreme Court ruled in Massachusetts v EPA that CO2 is a pollutant, he would have said, “Why do you think I put that provision in there in the first place?”
Richard Lazarus then spoke of Senator Muskie’s enduring legacy in the courts as the font of legislative intent underlying many environmental laws, including frequent references to Muskie in court opinions and during oral arguments at the Supreme Court. He also demonstrated that while President Nixon did sign the bills authored by Muskie and had the label of being an environmental President, in fact he was largely using the issue for a short time as a defensive measure to cut off Muskie’s prospects as a potential 1972 Presidential candidate. Richard then showed slides of handwritten notes made by Nixon’s Chief of Staff, H.R. Haldeman of three discussions with the President: in February 1971, even when they thought environmental protection “has to be done”, at the same time they thought it “is not worth a damn”; in June “should take on environment—it’s not a sacred cow”; and by July 1971 they wanted to put the “brakes on pollution bills…when we can without getting caught”, and to “reexamine all pollution bills in terms of current economic impact”.
Richard also discussed the current EPA rulemaking under 111, especially referencing the term “best system of emission reduction”; EPA’s June 2014 legal memorandum in support of its rulemaking proposal used Senator Muskie’s own words concerning “system” as encompassing the potential for emission reductions to occur outside the fence, and to include more than just controls. He said that for EPA, Muskie is its “Mr. Clean”.
During Q&A, both panelists discussed the partisanship of the past 10-20 years contrasted with during Muskie’s era. Billings mentioned how during Muskie’s opening presentation of the Clean Air Act on the Senate floor, the presiding officer was Senator Barry Goldwater, who sent down a note (now lost to history) saying, “Ed, that is the finest speech I think I have ever heard on the floor of the U.S. Senate.” Turning to NEPA, the concept of an” environmental impact statement” developed through a personal compromise Muskie struck with Senator Jackson.
Afterwards I asked Billings, “If Ed Muskie and you were in the Senate now, what would you be doing?” He said, “If we were the majority party, holding a lot of oversight hearings to bring in all the scientists and evidence; if the minority party, writing speeches.”
And that is how the Past (or Days Passed) in Environmental Law still have major force in today’s many controversies. Oh, by the way: The Moody Blues recently released a new box set, “Timeless Flight”, and are still touring. Long live rock and environmental laws!
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on November 11, 2014
Bucking the trend of five Circuit Courts of Appeal, the U.S. District Court for Utah decided the Endangered Species Act (ESA) cannot be applied on private property for a wholly intrastate species. The threatened Utah prairie dog, found exclusively in Southwestern Utah, apparently has insufficient connection to interstate commerce to support federal protection when found on privately owned land.
In the aptly named People for the Ethical Treatment of Property Owners (PETPO) v. US Fish and Wildlife Service, PETPO sued the government when it modified its regulations establishing limitations on “take” (death, injury) of the Utah prairie dog, a species found only within Utah. Because the species was not found interstate and finding no other relationship between the species and interstate commerce, the court looked at and rejected all of the government’s arguments that the ESA take limitations on the Utah prairie dog were authorized by the Congressional power to regulate activities having a substantial relation to interstate commerce.
The government’s arguments were the same as have been made in multiple court decisions, each of which finding regulation of wholly intrastate species under the ESA supported by the Commerce Clause, including in the 9th, 11th, 5th, 4th and DC Circuits (respectively, see San Luis & Delta-Mendota Water Authority v. Salazar; Alabama-Tombigbee Rivers Coalition v. Kempthorne; GDF Realty Investments, LTD. v. Norton; Gibbs v. Babbitt; Nat’l Ass’n of Home Builders v. Babbitt.) The PETPO decision is contrary to this precedent, which, if upheld by the Tenth Circuit, may lead to a split in the Circuits and a shot at Supreme Court review.
Constitutional law groupies will recall the Supreme Court seemed to establish more strict limitations on the federal Commerce Clause power when it struck down the “Gun-Free School Zones” law in United States v. Lopez and overturned parts of the Violence Against Women Act in United States v. Morrison. At that time, folks questioned whether the ESA would survive a constitutional challenge involving a wholly intrastate species. For a number of years in a number of courts, the government has prevailed. Now there is a decision to the contrary to be watched as it makes its way through appeals.
The court soundly rejected all of the government’s arguments supporting the regulation. The government argued the “activities” prohibited by the rule are commercial or economic in nature; for example, limitations on farming and construction. This position was rejected because the regulation applied whether or not linked to an economic activity. More significantly, the court said the government was looking at the wrong thing for a nexus to commerce: the proper focus of the “substantial effect” test is the “regulated activity.” “In other words, the question in the present case is whether take of the Utah prairie dog has a substantial effect on interstate commerce, not whether the regulation preventing the take has such an effect.” The fact that property owners would have to stop farming or otherwise engage in some commercial activities did not, on its own, provide sufficient nexus to interstate commerce to support species protection.
The government also argued the Utah prairie dog has biological and commercial value, so that any takes of the animal have a substantial effect on interstate commerce. The Utah prairie dog is not a commercial species, and the court concluded, “any takes of Utah prairie dogs on non-federal land–even to the point of extinction–would not substantially affect the national market for any commodity regulated by the ESA.”
As far as biological value, Defendants argue prairie dogs perform many functions contributing to the ecosystem. This point was also rejected in strong language:
If Congress could use the Commerce Clause to regulate anything that might affect the ecosystem (to say nothing about its effect on commerce), there would be no logical stopping point to congressional power under the Commerce Clause. Accordingly, the asserted biological value of the Utah prairie dog is inconsequential in this case.
Finally, intervenor Friends of the Earth argued an interstate commerce connection based on the fact the prairie dog has been the subject of scientific studies and commercially published books. The court said lots of books had been published about both guns and women, but that was not sufficient under Lopez or Morrison.
Although no Clean Water Act decisions are cited, the PETPO opinion may be of interest to those following the constitutionality of federal regulation over wetlands. Pending proposed regulations defining waters of the United States for Clean Water Act jurisdiction rely in part on the connectivity of ecosystems dependent on clean water. (See here, here and here.) Rejecting the argument that the Utah prairie dog warranted federal protection as part of an integrated ecosystem, the Utah decision quotes Chief Judge Sentelle, in dissent in National Ass’n of Home Builders v. Babbitt, “The Commerce Clause empowers Congress ‘to regulate commerce’ not ‘ecosystems.’”
Posted on November 6, 2014
Ozone is the quintessential ambient pollutant. It is the result of complicated chemical reactions involving NOx and VOCs, sunlight, humidity and temperature. It is primarily an urban pollutant, because that is where most of the NOx and VOCs are emitted, but it is also a regional challenge particularly in the eastern U.S.
The Uintah Basin of eastern Utah is the quintessential Western U.S. Empty Quarter. It is sparsely populated and windswept, and is a high-altitude desert. It is home to the Ute Indian Tribe, and the greater part of the Basin is Indian Country for purposes of environmental regulation, meaning EPA – not the State of Utah – has regulatory authority. The Basin is home to extensive reserves of oil, gas, oil shale and oil sands.
If the Basin is a dry, windy environment, then why have ambient ozone levels spiked dramatically in the Basin the last few years, during the winter, no less? It turns out that ozone is not only created during hot muggy summer days, but when VOCs build up during winter inversions with a lot of sun and snow. Periodic winter high pressure systems trap the VOCs and the ozone appears. EPA has classified the Basin as “unclassifiable” for ozone and has denied an administrative petition to classify the area as nonattainment. That denial is currently under review at the D.C. Circuit.
So where is this aberrant ozone coming from? Although oil and gas has been produced in the Basin for decades, the fracking boom has swept into Eastern Utah with a vengeance, and the number of wells and associated facilities has mushroomed. Utah DEQ, EPA Region 8, the counties, the Tribe, NGOs and the operators are jointly working on strategies to mitigate the problem, including newly promulgated state rules requiring retrofit of existing wells with equipment to reduce VOCs. These efforts are complicated, however, by the jurisdictional differences over air issues as between Utah DEQ and EPA and the results are sometimes a bit clumsy. But all of the stakeholders see the need to address the ozone issue proactively, and the end result will hopefully be a model for addressing similar issues in North Dakota, western Wyoming and Western Colorado.
Posted on November 4, 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. On August 12, the Railroad Commission of Texas, with support from both the Texas oil and gas industry and environmental groups, 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. On October 28, 2014, the Railroad Commission unanimously voted to finalize that proposal.
Presently, the state has more than 3600 active commercial injection wells used for the disposal of oil and gas wastes. The rules require applicants for new oil and gas disposal wells 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 rules also clarify that the Railroad 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. The effect of these rules 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 to further regulate those activities. The rules also may serve as a model for other states concerned about the seismic effects of oil and gas waste disposal.
Posted on November 3, 2014
The Science Advisory Board has at last released its peer review of EPA’s draft report on Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis, the technical support for the proposed rule on definition of “waters of the United States” under the Clean Water Act. The SAB paper is generally supportive of EPA’s analysis.
The proposed rule has generated a great deal of controversy, causing EPA and the Corps to extend the comment period twice (November 14 is the current deadline). Part of the controversy relates to EPA’s analysis of the technical literature supporting the proposed rule, particularly the effect of tributaries, intermittent and ephemeral streams on navigable waters. A detailed explanation of the proposed rule, case law leading up to it, and prior agency guidance can be found here.
The SAB paper confirms EPA’s science, but recommends more nuance in some instances. For example, the paper agrees that tributaries, intermittent and ephemeral streams can have a significant effect on the physical, biological and chemical integrity of receiving waters, but notes that the question is not simply whether there is a connection between upstream sources and navigable waters. The SAB chides EPA for taking a “binary” view of connectivity—either a water body is connected to a navigable water or it is not. Rather, the paper urges EPA to acknowledge there is a “gradient of connectivity.”
That there is a gradient of connectivity seems obvious, even from a lay standpoint; everything is connected at some level. But that observation by itself is not terribly helpful, as EPA and the Corps have a regulatory function that is binary in nature—either there is Clean Water Act jurisdiction or there is not. What would be helpful is guidance on where on the gradient government intervention matters; that is, how the agencies can recognize a truly “significant nexus” as prescribed by Justice Kennedy in Rapanos.
The SAB also makes recommendations to improve the clarity of the EPA report and make more definitive statements. For example, the SAB states that the literature supports a firmer statement on downstream functions of “unidirectional,” non-floodplain wetlands. The SAB also recommended that EPA expand the discussion of approaches to quantifying connectivity, which would increase the utility of the document for regulators.
The SAB paper certainly is a necessary element of the scientific support for EPA’s and the Corps’ proposed rule for determining jurisdiction. But it is unfortunate that the agencies reached their policy choices in the proposed rule without first having the benefit of the SAB’s input. That opens the door to criticism that the SAB paper is just window dressing.
Whether that reversed sequence matters in the long term remains to be seen. Even if EPA and the Corps had waited until the SAB completed its peer review, the rule would probably have come out roughly the same and attracted as much comment.
Posted on October 31, 2014
“Elmer Gantry,” a noir classic novel by Sinclair Lewis and a 1960 film, features a tortured central character with the word “love” tattooed on the knuckles of one hand and “hate” on the knuckles of the other hand. The vision of the hands together intertwined as symbols of the dilemma of the conflicted protagonist’s internal battles is evocative of the disconnect between our deep and undeniable thirst for energy and our disdain for the manner by which it is produced and delivered to us.
A History of Options:
Coal fired power plants are coming under heavy fire as the U.S. seeks to significantly reduce air emissions. Global climate change, health impacts and a series of other negative effects on the ecosystem are cited as bases for accelerated retirements of these generation stations. No doubt coal mining is a tough and dirty business; yet for two centuries it has provided the backbone of the development of electric power plants and the extraordinary benefits of electric energy. How to reconcile this history with the current political climate? How do we transition from coal as a major US fuel source, one that provides domestic supply and multiple benefits in employment, tax base, and economic activity?
Likewise, hydroelectric generation is enshrined in the transformation of much of the West in the songs of Woody Guthrie, as a magnificent contribution to our development as a nation. And, the desirability of hydroelectric generation is magnified when the only “issue on the table” is the greenhouse gas impacts of generation. Yet, the impacts of hydroelectric development have had deleterious effects on fish, landscapes, and water supply. And, as drought strangles much of the West, there is a struggle over whether to tear down the much admired, in fact almost “loved,” green dams of the New Deal Era. The question at issue here is which side is good and which is evil, and the answer is “it all depends.”
Another love-hate relationship lies with the nuclear generation fleet. From the standpoint of greenhouse gas emissions, the nuclear generation fleet is a winner. Yet to some anti-nuclear interests, the nuclear stations (for the most part, forty years or older) are the devil incarnate, and subject to exorcism. Yet, these facilities provide nearly 20 per cent of the electric power of the country. So again, the desire for a clean electric supply and antipathy to the technology clash. In this case, dealing with the aftermath of closing a nuclear generation station includes the significant and seemingly intractable problem of nuclear waste storage and disposal, leading to more profoundly difficult questions and concerns.
Another emotional “generation war” is centered on the role of natural gas fired generation. Once again, there are epic clashes over gas. Gas is ever more obviously abundant and relatively desirable from an environmental standpoint. However, extreme passions have been aroused by gas production-related issues like hydraulic fracturing, new pipeline capacity and fears about safety, and harmful environmental effects from natural gas drilling, production, transportation and distribution. Despite the fact that natural gas fueled generation has filled approximately a quarter of the nation’s electric generation demand for many years, and is likely to be a major solution to the shift from coal, nuclear and some hydroelectric plants, the heated anti-fracking debate continues. Thus, the struggle continues between “good,” (by those who see gas as a solution to the need for reliable generation) and “evil” (by those who oppose the drilling, development and delivery impacts of any form of hydrocarbon-related fuel). Indeed, the politics, sophistication and interest of high profile opponents has elevated the bitter war of words and politics to a new level.
Finally, the role of renewables as a source of generation to replace nuclear, coal and other forms of generation would, superficially, seem to be uncontroversial. Yet once the specifics of a project become known, opposition to the project grows. Like politics, all projects are local. Wind power towers, with associated land use, avian impacts, noise, reliability and transmission-related needs become the object of ire for interests that may not benefit from the projects. Likewise, solar projects with land use, impact on wildlife water use and other hot-button issues may precipitate other battles. The beauty of the project is in the eye of the beholder and beneficiary.
The Paradox Ahead
Overarching all these projects are difficult issues associated with transmission capacity and cost, reliability, taxation, employment and overall local economic dependency. And uncertainty about the need for new generation makes things worse: why tolerate potentially disruptive technologies if efficiency increases and other factors means that new generation isn’t needed? In light of the volatile, complicated, politically charged environment, the struggle for answers and stability will continue. As long as our society remains conflicted, these issues will continue unabated to be “front page,” and lawyer and politician intensive. The search for rational solutions to meet the needs of the country for reliable, safe, environmentally acceptable electric generation must continue for the nation to survive and thrive, despite the pain, cost and compromise necessary. And like the soul of “Elmer Gantry,” we must ultimately cease to be at war with ourselves to survive.