New Jersey Follows Massachusetts into the World of Licensed Environmental Consultants and Privatized Cleanup Oversight

Posted on July 9, 2009 by David Farer

On May 7, 2009, New Jersey enacted the Site Remediation Reform Act (S.1897/A.2962). SRRA, with its new Licensed Site Remediation Professional (“LSRP”) Program, is having a far-reaching impact on the way transactions and redevelopment projects are being planned and handled in New Jersey.

 

Following the Massachusetts Licensed Site Professional program, SRRA establishes a licensing procedure for consultants and contractors to be certified as LSRPs and overseen by a licensing board. 

 

In most cases New Jersey DEP will no longer be required or authorized to review and approve investigation and cleanup plans in advance, or to issue No Further Action letters and Covenants Not To Sue when cleanups have been wrapped up. Instead, LSRPs will determine the propriety and conclusion of investigations and cleanups, and will issue the final sign-off document, which is now to be known as a "Response Action Outcome" ("RAO"). LSRPs – rather than DEP – will determine the required amount of any financial assurance, and will determine when and to what extent the financial assurance can be reduced as a cleanup progresses. 

 

Once the LSRP issues the RAO, the party conducting the cleanup will be deemed to have received a Covenant Not to Sue by operation of law. Following an LSRP’s issuance of an RAO, DEP will have three years to audit the LSRP’s work, though the bases for DEP to invalidate an RAO are limited.

 

By August 7, 2009, a temporary licensing program must be operational, and by November 7, DEP must issue interim rules for implementing the new law. Once the interim rules and temporary licensing program are in place, all new projects subject to the state's cleanup laws – including transaction-triggered investigations and cleanups under the state's Industrial Site Recovery Act – will be overseen by LSRPs rather than DEP, unless they fall into specific exceptions such as sites ranked most highly on a new ranking system to be established by DEP under the reform law.

Parties currently under DEP oversight for existing cases will have up to three years to switch over to the LSRP program.

 

Pursuant to the reform law, DEP is directed to establish a permitting program for institutional and engineering controls, with specific financial assurance requirements. (New Jersey has not adopted the Uniform Environmental Covenants Act.)

 

The state's innocent purchaser protections are modified so that LSRP-certified work is deemed equivalent to that overseen and approved by DEP.

 

DEP is directed to establish, within a year, "presumptive remedies" for cleanups of residential properties, schools and day care facilities. Such projects are to be cleaned up to unrestricted use standards, or pursuant to a presumptive remedy, with certain exceptions available on a case-by-case basis.

 

The reform law also alters reporting obligations in situations where spills and discharges are discovered. Until now, it has been the responsibility of a property owner or operator – not a third party such as a consultant or potential purchaser – to report discovery of contamination to DEP, except as to spills or discharges from regulated underground storage tank systems. Under SRRA, however, LSRPs will now have specific affirmative obligations to report knowledge of contamination directly to DEP in a variety of settings. 

DEP has been gearing up for the new program. Aside from its current efforts in development of the interim rules and temporary licensing procedures, DEP is also in the process of developing standard operating procedures, applications, fees and forms, and guidance documents covering subjects such as mandatory timeframes and presumptive remedies.

KANSAS RENEWABLE ENERGY ACT: UNUSUAL COMPROMISE RESURRECTS COAL PLANT CONSTRUCTION; LIMITS AUTHORITY OF STATE ENVIRONMENTAL AGENCY

Posted on July 9, 2009 by Charles Efflandt

With the May 2009 enactment of comprehensive energy legislation, Kansas joined a majority of states establishing renewable and clean energy requirements. Although a significant step in the development of renewable energy, the story receiving the most attention was that the new law, ironically, resurrected a presumed-dead coal-fired power plant project. That project, which involved two proposed 700 megawatt coal-fired generating units, had previously been denied a construction permit solely due to concerns over the climate change impact of perceived excessive emissions of carbon dioxide. The legislature further enacted limitations on the broad regulatory authority relied on by the state environmental agency to deny the coal plant project a permit. The question now being asked is whether the complex political compromise that enabled the passage of the legislation was a “win-win” or a “no-win” result.

KANSAS RENEWABLE ENERGY ACT: UNUSUAL COMPROMISE RESURRECTS COAL PLANT CONSTRUCTION; LIMITS AUTHORITY OF STATE ENVIRONMENTAL AGENCY

Posted on July 9, 2009 by Charles Efflandt

With the May 2009 enactment of comprehensive energy legislation, Kansas joined a majority of states establishing renewable and clean energy requirements. Although a significant step in the development of renewable energy, the story receiving the most attention was that the new law, ironically, resurrected a presumed-dead coal-fired power plant project. That project, which involved two proposed 700 megawatt coal-fired generating units, had previously been denied a construction permit solely due to concerns over the climate change impact of perceived excessive emissions of carbon dioxide. The legislature further enacted limitations on the broad regulatory authority relied on by the state environmental agency to deny the coal plant project a permit. The question now being asked is whether the complex political compromise that enabled the passage of the legislation was a “win-win” or a “no-win” result.

Tenth Circuit Holds Collateral Source Rule Inapplicable to CERCLA 113 Actions

Posted on July 8, 2009 by Delmar Ehrich

Friedland v. Indus. Co, No. 08-1042, 2009 U.S. App. LEXIS 11660 (10th Cir. May 29, 2009). 

 

The United States Court of Appeals for the Tenth Circuit has held that the collateral source rule is inapplicable in CERCLA actions, affirming the district court’s grant of summary judgment to defendants on the ground that Mr. Friedland already recouped all of his recoverable costs from other persons and therefore had no damages to recover. 

 

The plaintiff, Mr. Friedland, is the former director and president of the Summitville Consolidated Mining Company, Inc. (“SCMCI”). SCMCI operated a gold mine from 1984 to 1992. Defendants-appellees helped construct the mine and provided quality assurance regarding the heap leaching system – where cyanide solution was sprayed on gold-bearing ore to remove the gold. 

 

SCMCI declared bankruptcy and abandoned the mine in 1992. EPA thereafter undertook actions to address acid mine drainage and other conditions at the facility. In 1996, the United States and the State of Colorado sued Mr. Friedland under CERCLA § 107 to recover the costs of these measures. Mr. Friedland settled the governments’ claims against him for approximately $20 million, after incurring legal fees in excess of $28 million. 

 

Mr. Friedland brought several actions against contractors that had built the mining facility. He entered into a series of settlement agreements with these parties or their insurance companies pursuant to which he recovered in excess of the $20 million he agreed to pay to settle the cost-recovery claims by the State of Colorado and the United States. In the latest action, Friedland sued The Industrial Company and another defendant. The defendants moved for summary judgment on the ground that Mr. Friedland had no damages or right to contribution under CERCLA § 113(f) because he had recovered in an amount exceeding the payment made to the United States and State of Colorado. The district court granted summary judgment and Mr. Friedland appealed, arguing that: (1) the collateral source rule prohibits crediting the defendants in the amount of the settlement money he received from the insurance companies; and (2) the settlement money should be credited toward the $28 million in legal fees as opposed to the $20 million settlement amount. 

 

The Tenth Circuit upheld the district court’s ruling, holding that the collateral source rule does not apply to CERCLA contribution actions. The Tenth Circuit differentiated CERCLA contribution action which involves “two or more culpable tortfeasors” from personal injury actions where innocent plaintiffs seek to be made whole. The Tenth Circuit held that allowing a CERCLA contribution plaintiff to recover more than the response costs he paid out of pocket “flies in the face of CERCLA’s mandate to apportion those costs equitably among the parties” and would create a windfall for those responsible for the pollution. CERCLA § 9613(f)(1).

 

The Tenth Circuit also held that under Hess Oil Virgin Islands Corp. v. UOP, Inc., 861 F.2d 1197 (10th Cir. 1988) and Burlington Northern Railroad, 200 F.3d 679 (10th Cir. 1999), the defendant-appellees were entitled to a full credit in the amount of the settlements Mr. Friedland received if the damages he alleged against defendant-appellees were the same as those addressed the settlements. The settlements did not expressly allocate the settlement money between settling the underlying litigation or to legal defense. The Tenth Circuit held that Mr. Friedland’s failure to allocate the settlement monies between legal fees and response costs was fatal to his contention that the defendants-appellees were not entitled to a credit in the settlement amount. Therefore, the Tenth Circuit upheld the district court’s finding that there was no basis to allocate the settlement money between the clean-up costs and legal fees, and defendants-appellees were entitled to a full credit in the amount of the settlements.

Coeur Alaska, Inc. v. Southeast Alaska Conservation Council et al

Posted on June 24, 2009 by Theodore garrett

On June 22, 2009, the Supreme Court held 6-3 that the Corps, rather than EPA, has authority to permit the discharge of a rock and water mixture called “slurry” from a mine froth flotation process to a nearby lake, reversing the Ninth Circuit’s decision that the proposed discharge would violate the EPA’s performance standard and §306(e) of the Clean Water Act.  Coeur Alaska, Inc. v.. Southeast Alaska Conservation Council et al., __U.S.__ (No.  No. 07–984, June 22, 2009).  Section §402(a) of the Clean Water Act forbids the EPA to issue permits for fill materials falling under the Corps’ §404 authority. Because §404(a) empowers the Corps to “issue permits . . . for the discharge of . . . fill material,” and the agencies’ joint regulation defines “fill material” to include “slurry . . . or similar mining-related materials” having the “effect of . . . [c]hanging the bottom elevation” of water, 40 C.F.R. §232.2, Justice Kennedy's opinion for Court states, the slurry Coeur Alaska wishes to discharge into the lake falls within the Corps’ §404 permitting authority.  The Clean Water Act is ambiguous on the question whether §306 applies to discharges of fill material regulated under §404, however EPA’s internal “Regas Memorandum” states that the performance standard applies only to the discharge of water from the lake into the downstream creek, and not to the initial discharge of slurry into the lake.  The dissent , written by Justice Ginsburg, takes the view that a discharge covered by a performance standard must be authorized, if at all, by EPA.

BIOFUELS AND CLIMATE CHANGE

Posted on June 23, 2009 by Christopher Davis

Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.  

 Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
 

 

While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels. 

Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.

Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy.   Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.

Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny. 

Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown.    In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.

It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.

Posted by Christopher P. Davis, Goodwin Procter LLP

BIOFUELS AND CLIMATE CHANGE

Posted on June 23, 2009 by Christopher Davis

Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.  

 Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
 

 

While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels. 

Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.

Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy.   Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.

Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny. 

Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown.    In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.

It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.

Posted by Christopher P. Davis, Goodwin Procter LLP

Interior Secretary Salazar Demonstrates True Commitment to Renewable Energy

Posted on June 15, 2009 by Linda Bullen

On May 2, 2009, Secretary of the Department of the Interior, Ken Salazar held a public meeting just outside Las Vegas, in the Red Rock Canyon National Recreation Area, to announce the opening of four new BLM offices to handle renewable energy permitting. The offices will be located in Nevada, Arizona, California and Wyoming, and have been designed to address the backlog of pending renewable energy project applications. The DOI estimates that 200 solar applications and over 25 wind projects are pending with the BLM in the western states.

 

            I was one of the 25 or so attendees lucky enough to have the honor and privilege to be invited to a meeting with Secretary Salazar prior to the public meeting where this announcement was made. This earlier meeting was attended by developers of solar, wind and geothermal projects and others in the renewable energy industry. I was impressed by Secretary Salazar’s level of knowledge about both renewable projects and the BLM permitting process, as demonstrated by his comments and questions. Secretary Salazar also announced that $305 million in American Recovery and Reinvestment Act(ARRA) monies will be used for BLM projects to restore landscapes, spur renewable energy development on public lands, and create jobs. I left the meeting with confidence in the Secretary’s commitment to renewable energy and to the implementation of changes, policies and programs that will convert renewable energy from a noble goal to a reality.

 

Linda M. Bullen

Interior Secretary Salazar Demonstrates True Commitment to Renewable Energy

Posted on June 15, 2009 by Linda Bullen

On May 2, 2009, Secretary of the Department of the Interior, Ken Salazar held a public meeting just outside Las Vegas, in the Red Rock Canyon National Recreation Area, to announce the opening of four new BLM offices to handle renewable energy permitting. The offices will be located in Nevada, Arizona, California and Wyoming, and have been designed to address the backlog of pending renewable energy project applications. The DOI estimates that 200 solar applications and over 25 wind projects are pending with the BLM in the western states.

 

            I was one of the 25 or so attendees lucky enough to have the honor and privilege to be invited to a meeting with Secretary Salazar prior to the public meeting where this announcement was made. This earlier meeting was attended by developers of solar, wind and geothermal projects and others in the renewable energy industry. I was impressed by Secretary Salazar’s level of knowledge about both renewable projects and the BLM permitting process, as demonstrated by his comments and questions. Secretary Salazar also announced that $305 million in American Recovery and Reinvestment Act(ARRA) monies will be used for BLM projects to restore landscapes, spur renewable energy development on public lands, and create jobs. I left the meeting with confidence in the Secretary’s commitment to renewable energy and to the implementation of changes, policies and programs that will convert renewable energy from a noble goal to a reality.

 

Linda M. Bullen

National Advanced Conference on Natural Resource Damages Litigation

Posted on June 11, 2009 by Rachael Bunday

Dear Friends:


On behalf of Richard Curley (Golden, CO) and myself, I am writing to extend a personal invitation to attend the July 9 & 10 Santa Fe, New Mexico “National Advanced Conference on Natural Resource Damages Litigation.”  The course will be held at the La Fonda Hotel in Santa Fe.

The course features national leaders in environmental litigation including:

  •  

      ·       Deputy Assistant Attorney General John Cruden (Washington, DC)
      ·       US Department of Interior attorney John Carlucci (Washington, DC)
      ·       Colorado Senior Assistant Attorney General Vicky Peters (Denver, CO)
      ·       Massachusetts NRD Director Dale Young (Boston, MA)
      ·       Exxon Mobil Chief Attorney Robert Johnson (Houston, TX)
      ·       BP Senior Attorney Jean Martin (Houston, TX)
      ·       Nationally renowned plaintiffs’ environmental attorneys Allan Kanner
      (New Orleans, LA) and John Dema (St. Croix, VI)
      ·       Environmental toxicologist Ken Jenkins (Petaluma, CA)
      ·       Environmental economists William Desvousges (Raleigh, NC) and
      Robert Unsworth (Cambridge, MA)

As well as widely respected environmental attorneys:

  •  

      ·       Brian Cleary (Hayden, ID)
      ·       Donald Fowler (Washington, DC)
      ·       Ira Gottlieb (Newark, NJ)
      ·       Brian Israel (Washington, DC)
      ·       Angus Macbeth (Washington, DC)
      ·       Bradley Marten (Seattle, WA)
      ·       Deborah Tellier (San Francisco, CA)
      ·       Michael Thorp (Seattle, WA)

The course agenda is packed with vital information of high value to any attorney who is, or may someday be, involved in the expanding world of NRD litigation.  Attendees will also get a chance to meet and interact with this extraordinary faculty in a selective and intimate environment, including a catered, cost-free reception on the evening of July 9.

Please take a moment to review the brochure from program sponsor Law Seminars International (see http://www.lawseminars.com/detail.php?SeminarCode=09NRDNM).  If, as I hope, you are able to join us, please take advantage of the $150 discount offered to friends and clients of Farella Braun + Martel LLP.  To do so, please mention the “FBM Discount” in the comments box of the registration page or when registering by phone at (800) 854-8009.

This is an exciting opportunity to see this august assemblage of environmental experts at one national program.  The atmosphere of Santa Fe is an added bonus.  We hope to see you there.

With best regards,
James A. Bruen

Derivatives Trading in Climate Change Legislation

Posted on June 2, 2009 by Stephen M. Bruckner

ACES & Eights? Swaps and Other Derivatives in Climate Change Legislation

 

By

 

Stephen M. Bruckner

 

            On May 21, 2009, the House Energy and Commerce Committee approved H.R. 2454, the American Clean Energy & Security Act (ACES), by a 33-25 vote. As the Committee touts its efforts on the much-examined markup of H.R. 2454 (aka, “Waxman-Markey discussion draft”), coalitions from each side of the ideological spectrum assail the legislation as toothless and watered-down, or a disaster for the American economy.  The bill has a long way to go, including review by other House committees and, of course, the Senate, so it may be premature for Committee Chairman Henry Waxman to bestow the mantle of “decisive and historic action.

Buried within ACES’ cap-and-trade emissions plan are a series of provisions that detail how big banks, hedge funds, and traders can use complex securities and derivatives to profit from the new carbon allowance market.  We all watched aghast as “credit default swaps” and similar financial alchemy led to the melt down of Wall Street and the credit markets. Do these types of investments have a proper role in climate change and energy legislation?  In a bill that already has plenty of political and policy hurdles, why add financial regulation?

Title III, Subtitle D of ACES, entitled “Carbon Market Assurance”, amends the Federal Power Act to create a financial instrument known as a “regulated allowance derivative”, which can include a “swap agreement”, and directs the Federal Energy Regulatory Commission to establish regulations for these financial vehicles.  Title III, Subtitle E of ACES, entitled "Additional Market Assurance", addresses transactions in derivatives involving energy commodities such as coal, gasoline, and natural gas. These provisions open the door for financial institutions to partake in the new market created by ACES’ emission allowances.  It allows companies, funds, and traders to purchase and trade emission allowances, and to devise complex derivative instruments to sell and trade, picking up commissions and charging fees along the way.  As a result, the theoretical value of the allowances and their derivatives will be determined, in large part, by the manipulation and speculation of financial parties with little or no concern for carbon emission standards or federal climate policy beyond immediate monetary gain. 

Simply put, the emerging market for new carbon allowances created by the bill could be (at best) undermined or (at worst) commandeered by financial contrivances that are already partially responsible for the nation’s current financial instability.  The fundamental value of the new cap-and-trade 'products' will necessarily fluctuate as the emissions market adjusts and stabilizes.  If big banks and hedge funds can use puts, swaps, options and other speculative instruments, which the federal government has yet to capably regulate, the stability of emissions allowances and carbon trading could be placed at risk.  The chaos visited upon the economy at large by these and other financial instruments should cause hesitation and serious consideration as to whether they belong in Congress' first attempt at comprehensive climate change legislation. 

Derivatives Trading in Climate Change Legislation

Posted on June 2, 2009 by Stephen M. Bruckner

ACES & Eights? Swaps and Other Derivatives in Climate Change Legislation

 

By

 

Stephen M. Bruckner

 

            On May 21, 2009, the House Energy and Commerce Committee approved H.R. 2454, the American Clean Energy & Security Act (ACES), by a 33-25 vote. As the Committee touts its efforts on the much-examined markup of H.R. 2454 (aka, “Waxman-Markey discussion draft”), coalitions from each side of the ideological spectrum assail the legislation as toothless and watered-down, or a disaster for the American economy.  The bill has a long way to go, including review by other House committees and, of course, the Senate, so it may be premature for Committee Chairman Henry Waxman to bestow the mantle of “decisive and historic action.

Buried within ACES’ cap-and-trade emissions plan are a series of provisions that detail how big banks, hedge funds, and traders can use complex securities and derivatives to profit from the new carbon allowance market.  We all watched aghast as “credit default swaps” and similar financial alchemy led to the melt down of Wall Street and the credit markets. Do these types of investments have a proper role in climate change and energy legislation?  In a bill that already has plenty of political and policy hurdles, why add financial regulation?

Title III, Subtitle D of ACES, entitled “Carbon Market Assurance”, amends the Federal Power Act to create a financial instrument known as a “regulated allowance derivative”, which can include a “swap agreement”, and directs the Federal Energy Regulatory Commission to establish regulations for these financial vehicles.  Title III, Subtitle E of ACES, entitled "Additional Market Assurance", addresses transactions in derivatives involving energy commodities such as coal, gasoline, and natural gas. These provisions open the door for financial institutions to partake in the new market created by ACES’ emission allowances.  It allows companies, funds, and traders to purchase and trade emission allowances, and to devise complex derivative instruments to sell and trade, picking up commissions and charging fees along the way.  As a result, the theoretical value of the allowances and their derivatives will be determined, in large part, by the manipulation and speculation of financial parties with little or no concern for carbon emission standards or federal climate policy beyond immediate monetary gain. 

Simply put, the emerging market for new carbon allowances created by the bill could be (at best) undermined or (at worst) commandeered by financial contrivances that are already partially responsible for the nation’s current financial instability.  The fundamental value of the new cap-and-trade 'products' will necessarily fluctuate as the emissions market adjusts and stabilizes.  If big banks and hedge funds can use puts, swaps, options and other speculative instruments, which the federal government has yet to capably regulate, the stability of emissions allowances and carbon trading could be placed at risk.  The chaos visited upon the economy at large by these and other financial instruments should cause hesitation and serious consideration as to whether they belong in Congress' first attempt at comprehensive climate change legislation. 

Eleventh Circuit Wades into the Everglades on ESA Issues, Miccosukee Tribe v. United States, No. 08-10799

Posted on May 21, 2009 by Patricia Barmeyer

The Eleventh Circuit has waded, again, into the ongoing debates over restoration of the Everglades. In addressing yet another lawsuit filed by the Miccosukee Tribe, the Court largely upheld the Fish & Wildlife Service’s delicate balance between the competing and inconsistent habitat needs of the Cape Sable seaside sparrow and the Everglade Snail kite, both endangered species. The seaside sparrow needs stable low water levels below a certain water control structure; the kite’s habitat is destroyed by the resulting rising water levels in the impoundment. The FWS issued a biological opinion allowing the Corps of Engineers to operate the structure to avoid extinction of the sparrow and to conduct an incidental take of the kite. While largely affirming the agency, the Eleventh Circuit reversed on the issue of the trigger that would require initiation of consultation under Section 7 and, along the way, made new law in this circuit on several important issues.

First, the court rejected the tribe’s argument, often advanced by conservation groups in ESA litigation, that the ESA requires that FWS “give the benefit of the doubt to the species.” The court held that this language, taken from a conference committee report, does not mean that the FWS is required to issue a jeopardy opinion if the evidence is evenly balanced between likely jeopardy and likely no jeopardy. Rather, the Eleventh Circuit explained, the language was intended to prevent FWS from shirking its consultation duties by relying on scientific uncertainty, but did not require any substantive result. The court held that “the need to give a species the benefit of the doubt cannot stand alone as a challenge to a biological opinion.”

 

Second, the court held that the FWS Consultation Handbook, which is not a formal rule, is nevertheless entitled to Chevron deference because it was adopted after notice and comment, citing Nw. Ecosystem Alliance v. United States Fish & Wildlife Service, 475 F.3d 1136, 1142-43 (9th Cir. 2007).

Third, the court rejected the argument that negative impacts on a species’ critical habitat must be permanent to amount to “adverse modification” under the ESA. Writing for the court, Judge Carnes noted: “It is not enough that the habitat will recover in the future if there is a serious risk that when that future arrives the species will be history.”

Finally, the Eleventh Circuit invalidated the incidental take statement because it used a habitat indicator -- specific water levels-- as a proxy to establish the trigger that would require the agency to reinitiate the Section 7 consultation process. The court held that the FWS’ use of a habitat indicator as a proxy, as provided for in the Consultation Handbook, fails Chevron step one, based on its conclusion that the legislative history of the ESA clearly indicates Congressional intent that actual population data must be used as the trigger for re-consultation, unless the agency demonstrates that it is impracticable to do so. Further, even if the agency can demonstrate the need to use a habitat proxy, the habitat proxy trigger must be addressed to the specific habitat needs of the species.

This decision, reviewing the FWS’ attempt to manage challenging species protection problems and breaking new ground on ESA legal issues, is sure to be much-cited and widely debated.

CLEAN WATER ACT PERMITTING REQUIRED FOR PESTICIDE APPLICATIONS

Posted on May 19, 2009 by Kevin Beaton

It is well known that EPA rules developed under the Bush Administration have not fared well in the federal courts. Earlier this year, a 2006 EPA rule that exempted the application of pesticides to surface waters from Clean Water Act NPDES permitting requirements suffered a similar fate in Nat’l Cotton Council v. EPA, 553 F.3d 927 (6th Cir. 2009). The effect of this ruling will likely require any person or governmental entity throughout the United States that applies pesticides and insecticides near or onto waters to first obtain an NPDES permit.           

            A.        The History of Pesticide Regulation under the Clean Water Act.

            In Nat’l Cotton Council of America v. EPA, the court evaluated the legality of a 2006 EPA rule which provided that the application of pesticides and herbicides to and over surface water to control pests, weeds and insects consistent with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) does not require an NPDES Permit. 

 

How EPA came to promulgate the 2006 rule is a familiar scenario to environmental lawyers. The operative provisions in the Clean Water Act relied on by the court in Nat’l Cotton Council to vacate EPA’s rule have been in place since 1972. For some thirty years, farmers, irrigation districts, foresters, local health agencies, fishery agencies and others have applied pesticides and herbicides to and above waters to control pests, weeds, insects and other undesireable species believing that all that was required under federal law was to follow the FIFRA labeling requirements. During this time EPA never definitively took a position whether NPDES Permits were or were not required for such applications. 

The assumption that compliance with FIFRA exempted pesticide applicators from the Clean Water Act permitting was dashed in 2001 in the case of Headwaters, Inc. v. Talent Irrigation Dist., 243 F.3d 526 (9th Cir. 2001). In Headwaters,the court found that the application of an herbicide to a canal to control weeds required an NPDES Permit. Critical to the Court’s decision in Headwaters was the fact that a chemical residue which was toxic to fish remained in the water days after application. Therefore the Court found that the residue was a “chemical waste” and therefore a “pollutant” under the Clean Water Act. The Court rejected the idea that compliance with FIFRA labeling requirements obviated the need for an NPDES Permit finding that the two federal statutes served different purposes. The court’s finding on this point was based, in part, on an amicus brief filed by EPA in the case which took the position at that time that compliance with FIFRA did not exempt an applicator of pesticides from obtaining an NPDES Permit. Shortly after Headwaters, the Ninth Circuit issued another decision on whether the application of pesticides from an airplane above surface waters required an NPDES Permit in League of Wilderness Defenders v. Forsgren, 309 F.3d 1181 (9th Cir. 2002). Forsgren was another citizen suit, this time brought against the United States Forest Service (USFS) for unlawfully discharging insecticides from airplanes to control moths which infect and kill trees on national forest lands without an NPDES Permit. In Forsgren, the Court found that the aerial application of insecticides over national forest lands (including surface waters) required an NPDES Permit. The USFS argued such spraying was covered by an EPA rule exempting certain “silvicultural activities” from NPDES Permit requirements. The Court found that the USFS’ application of pesticides clearly involved the discharge of a pollutant (insecticide) from a point source (airplane) to jurisdictional waters. The Court also found that EPA’s silvicultural rules did not (and could not) exempt activities Congress clearly required to be subject to NPDES Permit requirements under the Clean Water Act.

            The Headwaters and Forsgren cases created a major stir not only in the West but around the United States. Now activities that nobody ever believed required an NPDES Permit were subject to Clean Water Act permitting. For example, during this time the spread of West Nile Virus associated with water borne vectors were causing illness and deaths around the United States. Local agencies around the United States were facing citizen suit liability for unlawfully spraying insecticides on waters without an NPDES Permit or were potentially forced to go through a lengthy permit process (if a permit was even available) to undertake an activity that required immediate action. Some states with NPDES Permit programs such as Washington and California acted quickly and issued general NPDES Permits to authorize application of pesticides and herbicides into waters to address this untenable situation. EPA chose not to issue any type of general permits, but rather adopted an “interim guidance document” in 2003. See 65 Fed. Reg. 48385. EPA opined in the Guidance Document application of pesticides and herbicides to surface waters consistent with FIFRA requirements were not “pollutants” under the Clean Water Act since such application did not involve the discharge of a chemical “waste” but rather a chemical “product” and therefore no NPDES Permit was required. EPA then went forward with a proposed rule which resulted in publication of a final rule at 40 CFR § 122.3(h) in 2006 that closely followed their interim guidance document.

            B.        The Cotton Council Decision.

After the EPA published the final rule in late 2006, a host of environmental advocacy groups, groups opposed to the use of pesticides, and industries filed challenges to the rule in numerous federal courts throughout the United States. Each group sought to have their challenge heard in a favorable forum. All of the challenges were consolidated before the Sixth Circuit Court for decision. The court in Cotton Council rejected much of the rationale offered by EPA in support of the rule. EPA’s principal position in supporting the exemption was that the application of pesticides to and above waters in accordance with FIFRA is the application of a product and not a “chemical waste” or a “biological material” and therefore not a “pollutant” under the NPDES Permit program. The court in Cotton Council focused on the definition of “pollutant” in the Clean Water Act which included the terms “chemical waste” and “biological materials.”

            The court accepted EPA’s position that some chemical pesticides that are intentionally applied to waters for a beneficial purpose are chemical products and not a “chemical waste” as long as there does not remain any chemical residue after application. This finding was consistent with an earlier Ninth Circuit case that found the discharge of a pesticide to waters with the intent of eradicating a certain species of fish and which did not leave any remaining chemical residue in the water was not a discharge of a pollutant requiring an NPDES Permit. See Fairhurst v. Hagener, 422 F.3d 1146 (9th Cir. 2005). The court in Cotton Council, however, disagreed with EPA as it relates to pesticides that leave a “residue” in the water. The court in Cotton Council agreed with the Ninth Circuit’s analysis in Headwaters that such residues were clearly a “chemical waste” and therefore a pollutant.

            The court rejected EPA’s attempt to subtly overturn Headwaters by suggesting that even if chemical residues (toxic or otherwise) remained in the water after application of chemical pesticides an NPDES Permit was still not required because at the time of discharge the pesticide was still a “product” and only turned into a waste after it was in the water. According to EPA this meant that the chemical waste was not discharged from a point source but rather was now a “nonpoint” pollution source and not subject to NPDES Permit requirement. The court rejected EPA’s logic and found the Clean Water Act did not support EPA’s “temporal” interpretation that material could be lawfully discharged without a permit but later turn into a pollutant.

            The court also found that a variety of other pesticides which utilize “biological materials” such as viruses, bacteria, fungi, and plant material were pollutants and therefore could not be exempted from NPDES Permit requirements if they were discharged to or above surface waters. The court found that the plain meaning of the term “biological materials” in the definition of “pollutant” did not require such material to be a “waste.” Therefore the court concluded that the application of any biological pesticide to jurisdictional waters from a point source whether it left a residue or not required an NPDES Permit.

            C.        Aftermath of Nat’l Cotton Council.

            EPA has requested a two-year stay of the ruling to allow the agency sufficient time to develop a general NPDES Permit authorizing pesticide application on, near or above surface waters. Industry parties may seek rehearing or request review of the ruling before the United States Supreme Court. A change in the Clean Water Act is also possible but seems unlikely in the current political environment. At this point it is clear that any chemical pesticide that is applied to or above waters from a point source that leaves any type of chemical residue in the water requires an NPDES Permit. Also the application of any biological pesticide to or above waters from a point source also requires an NPDES Permit. 

For those who are not familiar with actually obtaining an NPDES Permit from EPA, it is no simple task. For example, it is not unusual for EPA to take years to issue an NDPES Permit for a new facility or years to reissue an NPDES Permit for an existing facility whose permit has expired. Most states (approximately forty-six states) issue NPDES Permits in lieu of EPA. Often state permitting decisions are faster than EPA, but not always. General permits are authorized for certain categories of discharges. See 40 CFR § 122.28. Typical general permits issued by EPA include stormwater discharges from construction sites, stormwater discharges from industrial facilities, and discharges from confined animal feeding operations. States often mirror EPA general permits in administering state programs. 

Because of the varied water applications of various pesticides, insecticides, and fungicides to and near waters throughout the United States, it is likely that issuance of a general permit covering all of these activities will be a challenge, which explains EPA’s request to stay the decision for two years. Likely permit conditions will include instream monitoring and a variety of pesticide application management practices. No matter what happens to EPA’s stay request or any further appeals by industry, one thing is certain: the regulatory uncertainty under the Clean Water Act associated with pesticide applications to or near waters over the past seven years will continue.

The Burlington Northern Decision

Posted on May 19, 2009 by John Barkett

The Supreme Court’s decision in Burlington Northern was not unexpected from my vantage point especially given the literal interpretation of CERCLA by the Court in Aviall and Atlantic Research and the flow of the oral argument. 

I was a little surprised that Justice Stevens was assigned the task of writing the opinion since Justice Thomas wrote Aviall and Atlantic Research.  But with 7-2 (Justices Ginsburg and Stevens dissented in Aviall because the Court would not decide the issue of entitlement to sue under Section 107), 9-0 (Atlantic Research decided the Section 107 private of action question left unresolved in Aviall), and 8-1 (Justice Ginsburg was the lone dissenter in Burlington Northern) votes in these three opinions, the Court is not going out of its way to fix CERCLA’s language. Section 113(f)(1) means what it says. Section 107 means what it says. An arranger must have an intent to dispose. And joint and several…

 

Wait a second. The statute says nothing about “joint and several liability.” It does not set a liability standard at all. In fact in 2007, in note 7 of Atlantic Research, the Court wrote, “We assume without deciding that §107(a) provides for joint and several liability.”

Two years later, the Court appears to have deftly answered this question, albeit indirectly. It called the holding in Chem-Dyne the “seminal opinion on the subject of apportionment in CERCLA actions …written in 1983 by Chief Judge Carl Rubin of the United States District Court for the Southern District of Ohio.” Quoting Judge Rubin, the Court said that joint and several liability is not mandated in every CERCLA cost recovery action and that Congress intended the scope of liability to “’be determined from traditional and evolving principles of common law[.]’”

As the entire environmental world now knows, the Court held that the district court’s findings should not be disturbed: “The District Court’s detailed findings make it abundantly clear that the primary pollution at the Arvin facility was contained in an unlined sump and an unlined pond in the southeastern portion of the facility most distant from the Railroads’ parcel and that the spills of hazardous chemicals that occurred on the Railroad parcel contributed to no more than 10% of the total site contamination, some of which did not require remediation.”

Going forward, the facts will dictate the outcome. The Court blessed the use of basic allocation or apportionment principles that have been applied in numerous CERCLA cases and numerous consent decree approval orders over the past 25 years. Indeed, it was mildly critical of the Ninth Circuit for talking out of both sides of its mouth: “Although the Court of Appeals faulted the District Court for relying on the ‘simplest of considerations: percentages of land area, time of ownership, and types of hazardous products,’ 520 F. 3d, at 943, these were the same factors the court had earlier acknowledged were relevant to the apportionment analysis. See id., at 936, n.18 (‘We of course agree with our sister circuits that, if adequate information is available, divisibility may be established by ‘volumetric, chronological, or other types of evidence,’ including appropriate geographic considerations’ (citations omitted)).”

In cases where there is no orphan share and multiple parties, it will behoove EPA and the parties to work on apportionment issues up front to save litigation costs. Yes, I relate “apportionment” to “allocation” in saying this, but after Burlington Northern, it will be the rare case that will lack the facts to make a reasonable basis for apportionment. Volumetric waste-in information may be controlling. Or varying toxicities of released hazardous substances may be. Or geography or time of ownership or operation. There may be equitable factors as between or among jointly and severally liable parties, e.g., cooperation, that may not relate to apportionment, but not that many cases have utilized this allocation factor, and most judges engage in an allocation exercise that is indistinguishable from an apportionment exercise, as was the case in Burlington Northern. Cf. Restatement of the Law (Third) Torts, §1, cmt. a., §26 cmt. a. (focusing on the role that comparative responsibility now plays in tort law).

Where there is an orphan share, the stakes are much higher after Burlington NorthernCf. United States v. Newmont USA Limited, 2008 WL 4612566 (E.D. Wash. Oct. 17, 2008) (after a six day trial, submission of dozen depositions or deposition excerpts and 1,600 exhibits, finding the two defendants—one of which was alleged to be an orphan--jointly and severally liable but then finding for the defendants on their counterclaim in contribution against the United States, and then equitably allocating response costs 1/3 to the United States and 1/3 each to the two defendants).

It will still behoove the regulator and the regulated to work things out. If EPA becomes the “bank” (funds the work) at a site, post Burlington Northern, it may find itself absorbing the orphan share or at least not knowing whether it will until after a trial on the merits. (Time will tell but presumably summary judgments will become rare on apportionment issues given the fact-intensive nature of the exercise.) A PRP may be reluctant to become the bank where there is a large orphan share if it does not receive assurance that the orphan share will be addressed fairly, and that may mean more than what EPA is currently offering in its orphan share policy. See, generally, Barkett, Orphan Shares, 23 N.R.E. 46  (2008). Consent order and decree negotiations should become less one-sided in the future. But budget constraints may result in more contention (trials), especially in cases where the orphan share potentially is quite large.

Arrangers of used but useful products can take comfort in Burlington Northern. The entity that recycles solvents or used oil, for example, will embrace the decision especially if reclamation wastes are disposed of at a location other than the recycler’s facility. Sellers of used but useful products will as well. Again, the facts will dictate the outcome.

EPA REQUESTS VOLUNTARY REMAND OF ITS DESERT ROCK ENERGY PROJECT PSD PERMIT DECISION

Posted on May 7, 2009 by Jarry Ausherman

In the desert of New Mexico, the effect of another of the new Administration's shifts in previous federal environmental policy is being felt. As difficulties in permitting and building new coal-fired power plants have become more substantial, many power plant projects across the United States that were on the drawing board several years ago have fallen off of it. A notable exception is the Desert Rock Energy Plant, a joint project of the Navajo Nation's Diné Power Authority and Houston-based Sithe Global LLC that would be built on lands of the Navajo Nation. A significant step forward for that project had been EPA's issuance of the PSD permit in July of 2008. But recently, that step forward in air permitting has been followed by an administrative step back.

 

The Desert Rock Energy Project would involve construction of a 1500 megawatt coal-fired power plant on the Navajo Reservation. EPA's Region 9 had issued a final PSD permit for the project on July 31, 2008. The plant incorporates sophisticated, state of the art air pollution control technology, but it does not employ the coal gasification process known as "integrated gasification combined cycle" technology. Opponents to the project filed petitions with EPA's Environmental Appeals Board for review of the decision issuing the final PSD permit. The opponents raised greenhouse gas issues as well as other air quality and endangered species issues. Project opponents included the State of New Mexico.


In January, Region 9 filed its brief responding to the issues raised by the petitioners except the issue of whether the permit must contain an emissions limit for carbon dioxide. It withdrew the permit's response to comments explaining the basis for not evaluating carbon dioxide emissions in the BACT analysis. Region 9 requested the opportunity to file a Surreply Brief by April 27, 2009 to give EPA officials under the Obama Administration opportunity to consider more fully the positions previously advocated by EPA under the Bush Administration.

 

The EPA Administrator's office requested that Region 9 reconsider its permitting decision with respect to use of PM10 as a surrogate for PM2.5 to satisfy PSD requirements; consideration of IGCC in the BACT analysis; ESA consultation issues; MACT analysis for hazardous air pollutants; and the sufficiency of additional impact analysis. In response, on April 27, 2009, Region 9 asked the Environmental Appeals Board to remand the PSD permit for reconsideration and development of additional information by EPA. If the motion to remand is granted, the PSD permit will be sent back to EPA for further analysis, which could take many months and trigger another round of public comment.


The request for voluntary remand of this key permit for the high profile Desert Rock Energy Project is evidence of the degree to which the EPA under the current administration is reevaluating previous policy. In the case of Desert Rock, the EPA seeks to reevaluate a permit that it had already issued and defended in an appeal by opponents to permit issuance. If EPA's request for remand is granted, the extent to which EPA changes its permit decision remains to be seen. But the process itself presents the prospect for significant delays and additional public comment at a minimum.

Superfund Liability

Posted on May 4, 2009 by Theodore Garrett

In a stunning 8-1 decision, the Supreme Court changed the landscape of Superfund liability, holding that a company’s mere knowledge of spills in the course of delivery of a product is not a sufficient basis for liability as an arranger, and that defendant may avoid joint and several liability based on reasonable evidence supporting apportionment. Burlington Northern & Santa Fe Railway co. et al. v. United states et al. (No. 07–1601, May 4, 2009.)

In 1960, Brown & Bryant, Inc.(B&B), a now defunct agricultural chemical distributor, began operating on a parcel of land in California and expanded on to an adjacent parcel owned by two railroads. As part of its business, B&B purchased and stored various hazardous chemicals, including a pesticide supplied by Shell Oil Company. Many of these chemicals spilled during transfers and deliveries and equipment failures, resulting in soil and ground water contamination. In 1989, the EPA and the state cleaned up the site and then brought suit to recover their costs against Shell and the Railroads.

 

The District Court ruled in favor of the Governments, finding that both the Railroads and Shell were potentially responsible parties under CERCLA—the Railroads because they owned part of the facility and Shell because it had “arranged for disposal . . . of hazardous substances,” 42 U. S. C. §9607(a)(3). The District Court apportioned liability, holding the Railroads liable for 9% of the Governments’ total response costs, and Shell liable for 6%. On appeal, the Ninth Circuit agreed that Shell could be held liable as an arranger under §9607(a)(3). Although the Court of Appeals agreed that the harm in this case was theoretically capable of apportionment, it found the facts present in the record insufficient to support apportionment, and therefore held Shell and the Railroads jointly and severally liable for the Governments’ response costs.

 

 

Arranger Liability. The Supreme court, in an opinion by Justice Stevens, held that Shell is not liable as an arranger for the contamination at the Arvin facility. Because CERCLA does not specifically define what it means to “arrang[e] for” disposal of a hazardous substance, the phrase should be given its ordinary meaning. In common parlance, “arrange” implies action directed to a specific purpose, thus under §9607(a)(3)’s plain language, an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance. The facts found by the District Court do not support the conclusion that Shell entered into sales with the intent that at least a portion of the product be disposed of during the transfer process. The evidence shows that Shell was aware that minor, accidental spills occurred during transfer from the common carrier to B&B’s storage tanks; however, it also reveals that Shell took numerous steps to encourage its distributors to reduce the likelihood of spills. Thus, Shell’s mere knowledge of continuing spills and leaks is insufficient grounds for concluding that it “arranged for” disposal.

 

Apportionment. The Supreme Court also found that the District Court reasonably apportioned the Railroads’ share of the site remediation costs at 9%. Calculating liability based on three figures—the percentage of the total area of the facility that was owned by the Railroads, the duration of B&B’s business divided by the term of the Railroads’ lease, and the court’s determination that only two polluting chemicals spilled on the leased parcel required remediation and that those chemicals were responsible for roughly two-thirds of the remediable site contamination—the District Court ultimately determined that the Railroads were responsible for 9% of the remediation costs. The District Court’s detailed findings show that the primary pollution at the site was on a portion of the facility most distant from the Railroad parcel and that the hazardous chemical spills on the Railroad parcel contributed to no more than 10% of the total site contamination, some of which did not require remediation. Moreover, although the evidence adduced by the parties did not allow the District Court to calculate precisely the amount of hazardous chemicals contributed by the Railroad parcel to the total site contamination or the exact percentage of harm caused by each chemical, the evidence showed that fewer spills occurred on the Railroad parcel and that not all of them crossed to the B&B site, where most of the contamination originated, thus supporting the conclusion that the parcel contributed only two chemicals in quantities requiring remediation.

 

STEVENS, J., delivered the opinion of the Court, in which ROBERTS,

C. J., and SCALIA, KENNEDY, SOUTER, THOMAS, BREYER, and ALITO, JJ., joined. GINSBURG, J., filed a dissenting opinion. The following is a link to the opinion: http://supremecourtus.gov/opinions/08pdf/07-1601.pdf.

 

The Emerging National Climate Program

Posted on April 30, 2009 by Robert Wyman

As Congress debates comprehensive climate legislation, the EPA considers its options and responsibilities under the Clean Air Act, and states and regions continue to develop their own programs, it is important to consider the potential risks of dual or overlapping federal and state programs. A federal climate program will be vastly superior to a patchwork of state and regional programs. Congressional action is preferred, but even a federal EPA program would likely be superior to a state or regional approach.

 

There are several obvious reasons why a federal climate program would be superior to a patchwork of state programs.  Successfully stabilizing the climate will require nothing less than the transformation of our energy and transportation systems. As some detractors of climate proposals have noted, near-term cap and trade programs will reduce emissions, but will not do nearly enough to make the progress needed to stabilize the climate. That will require long-term and broad scale changes to the way all nations generate and use energy. While states are valuable laboratories, there is little question that only the federal government can support the required scale of research and development, invest in the necessary infrastructure (including an adequate national transmission system and transportation fuel supply system) and otherwise establish and support markets of sufficient scale to stimulate needed change. Likewise, federal action is necessary to ensure that our climate policy is integrated with other high priority national goals, such as energy and transportation security, reliability and affordability. There is an emerging consensus as to the appropriateness of near-term comprehensive federal action, tempered by concerns about its economic impact during a severe recession and by debate regarding program design.

 

If there is a federal program and, if, as expected, it includes a cap and trade program, there should not be overlapping state cap and trade programs. The reasons for this conclusion were nicely illustrated yesterday by the highly-regarded economics consulting firm, National Economic Research Associates (NERA), in the second of its Climate Policy Economic Insights newsletters. As noted in the NERA document, if a state program is more stringent than the federal program, then the allowance price in that state will be higher than the federal allowance price because sources regulated in that state will face a higher cost abatement curve than sources subject only to the federal program. A good illustration of this problem is the emerging California climate program. Early estimates of the marginal cost of a carbon allowance in California at the compliance year 2020 are in excess of $100 per annual ton of carbon dioxide equivalent (CO2e) emissions (see “Analysis of Measures to Meet the Requirements of California’s Assembly Bill 32,” Precourt Institute for Energy Efficiency, Stanford University, Discussion Draft September 27, 2008, at 14-16). By contrast, EPA’s initial estimate of the marginal cost at 2020 of the Waxman-Markey Discussion Draft is expected to be in the range of  $17-22/ton CO2e (see EPA Preliminary Analysis of the Waxman-Markey Discussion Draft, April 20, 2009, at 3, 15). This cost differential is not in the least surprising, as California GHG sources have been subject for many years to ambitious renewable portfolio standards (requiring up to 20% of electricity to be supplied to investor-owned utility customers by 2010) and aggressive energy-efficiency standards, among other strategies. Requiring California sources to reduce their emissions further will simply cost more because the lower-cost options along their cost abatement curve are no longer available. Note that this is very different from requiring all sources to meet a common performance standard, in which case state-by-state costs per ton would be much closer. Indeed a national trading program based on a performance standard (e.g., carbon intensity) would likely reward California sources for their early actions.

 

The bottom line is that sources in states with more stringent carbon reduction programs will pay more for their next ton of carbon than their competitors elsewhere, potentially more than five times more. This might be warranted if GHG emissions had a local health impact, but it is not warranted given that GHG emissions impacts are global in nature and the location of the reduction generally is not of concern (except for the unusual, and easily segregated, situations in which there are co-benefits of reducing criteria pollutants). Notably, at a recent visit to Washington, DC, by Southern California elected officials and business leaders, one visitor urged Senate EPW Chair Barbara Boxer to consider preempting state programs to avoid disadvantaging California businesses. Senator Boxer answered that no California source would pay more for a ton of carbon than anyone else in the country. This is a reassuring statement, but one that can only be true if federal legislation preempts state climate programs. Fortunately, the Waxman-Markey draft appears to recognize the potential problems of overlapping federal and state programs, as it contains a partial preemption (through 2017) of state cap and trade programs.

 

Even if federal legislation preempts state cap and trade programs, there is a strong likelihood that so-called “complementary” measures may still be implemented at the state level. Such measures include several programs of strategic importance, such as renewable power and transmission investments, low carbon transportation fuel standards, and, in California’s case, comprehensive motor vehicle regulations. The Waxman-Markey Discussion Draft appears to recognize the value of undertaking these strategic programs instead at a federal level. While state leadership in each of these areas is to be recognized and lauded, once robust federal programs are in place state programs in these critical areas should be transitioned to the federal programs in a manner that minimizes, and even eliminates, the economic inefficiency associated with compliance with multiple programs.

 

Some states (again, California is a prime example) will develop complementary command and control measures to reduce GHG emissions in other sectors or for other categories for which the state regulation is not strategic. That is to say that the measures’ value will be primarily in reducing emissions, not in advancing a technology or fuel of critical national or regional importance. It may be that some of these measures are warranted at the state level. A good example would be energy efficiency programs to retrofit buildings or local or state initiatives to reduce energy consumption or vehicle miles traveled through smart land use and transportation planning. Except in such situations where states and localities offer unique advantages in structuring such programs, once Congress enacts (or EPA implements) a robust GHG cap and trade program, states should avoid the adoption of additional GHG regulations where the carbon cap already provides an adequate incentive for reducing emissions on a national basis.

 

Seasoned Congressional observers will recognize that, despite best efforts, Congress may not be able to enact a federal cap and trade program in the near term. If the Senate’s recent budget amendment is any indication of the prospects of legislation this year, 89 Senators voted to oppose climate legislation if it would have the effect of increasing electricity or fuel prices. Of course, raising the price of energy to reflect the environmental impact of carbon emissions is one central purpose of a cap and trade program. So the Senate vote is a danger sign to the prospects for passage. Senator Boxer’s subsequent amendment, which sought support for returning allowance auction revenues to consumers to neutralize the program’s overall price impact, garnered 54 votes, but still 6 shy of what would be required to prevent a filibuster.

 

Recognizing that Congress may not succeed in passing a federal cap and trade program this year, EPA should develop an appropriate federal framework backstop program. This course would be a natural progression from EPA’s recent proposal to find that GHG emissions endanger public health and welfare. When considering agency regulation of GHGs, EPA’s 2008 Advanced Notice of Proposed Rulemaking (ANPR) showed a deep understanding of the potential risks of regulating GHG emissions under the Clean Air Act on the one hand, and of the possible path forward that could avoid significant economic injury on the other. Following this path, EPA should be prepared to develop a national GHG program under section 111(d) of the Act. As suggested by the Waxman-Markey Discussion Draft, to ensure ultimate consistency with emerging federal legislation and to minimize economic risk, the EPA should not treat GHGs as criteria or hazardous air pollutants, nor should the agency apply the Act’s new source review program to GHG sources. Likewise, using the full scope of administrative discretion likely to be recognized by the courts as appropriate in this extraordinary context, EPA should focus on the largest GHG sources (above 25,000 annual tons) and apply Title V only to those sources already subject to the Title V program for other pollutants. If Congressional action is delayed, then, applying section 111 of the Act, EPA should develop appropriate performance standards or benchmarks for existing and new GHG sources that would form the basis of a national averaging and trading program similar to the program that was used to remove lead from gasoline. This program would initiate investment in carbon reductions and provide a basis for the creation and use of GHG emission reduction credits. It also could easily transition either to a Congressional cap and trade program or, if Congress cannot act promptly, to an EPA-administered national cap and trade program, with full recognition and value to any credits generated under the initial phase of the program. While Congressional action is clearly preferable, an EPA national trading program would be better than a patchwork of state programs for the reasons noted above.

WAXMAN/MARKEY GREENHOUSE GAS REDUCTION BILL

Posted on April 24, 2009 by Mark Walker

On March 31, 2009, U.S. House Representatives Henry Waxman and Edward Markey released a discussion draft of the "American Clean Energy and Security Act of 2009". The bill is intended as an all-in-one clean energy, energy efficiency and greenhouse gas reduction law. The draft bill weighs in at a svelte 648 pages, anorexic in comparison to the recent 1073 page "Stimulus" bill, increasing the likelihood that it will actually be read. Bolstered by the EPA's 4/17/09 proposed findings that greenhouse gases threaten public health and contribute to the threat of climate change, this bill will now start winding its way through legislative review, possibly eliminating the need for independent EPA action on greenhouse gases. The House Subcommittee on Energy and Environment began hearings on the discussion draft on April 21, 2009. The  draft bill and administrative summaries can be reviewed here

The Waxman/Markey bill calls for U.S. reductions of greenhouse gas emissions to 97% of 2005 levels by 2012, 80% by 2020, 58% by 2030 and 17% by 2050. The bill utilizes the Clean Air Act as the authority to establish the declining limits, but otherwise exempts greenhouse gases from CAA regulation as criteria and hazardous air pollutants, from new source review, and from consideration in determining whether a stationary source requires a Title V permit.

Let the criticism (and bloggers) begin. Concerns have already been voiced about costs of compliance and raising the cost of conventional energy to the middle class. Some groups are critical of the bill because it allows carbon offsets, a perceived area of potential abuse. Some groups believe that the bill is not strict enough, making too many concessions at the outset, increasing the likelihood that it will be diluted through further legislative compromise. And then there is that pesky question of what to do with the revenues (taxes) generated from the anticipated cap and trade program (consumer rebates, deficit reductions, investment in sustainable energy programs, etc.). This is a greenhouse gas reduction bill to watch.

Is the Midwest Climate Initiative D.O.A.?

Posted on April 21, 2009 by George von Stamwitz

A report discussed at the March 31st meeting of the Midwestern Governors Association that highlights significant "leakage" if a regional GHG cap-and-trade program were adopted in the Midwest may be the beginning of the end for the Midwest GHG cap-and-trade program.  Essentially, the report notes the likelihood of significant increases in GHG emissions ("leakage") in other parts of the country that would result from a proposed regional cap-and-trade program.  According to a report cited in Carbon News, a companion publication of Inside EPA, the issue of leakage undermines the Midwest effort and attenuates the level of enthusiasm among state officials for a regional program. 

The report, “Cap-and-Trade Modeling: Initial Policy Run Results,” presented by the Pew Center on Global Climate Change, projects that more than half of the planned GHG emissions cuts would be offset by GHG emissions increases in other states.  Since only six states signed the Midwest Accord, the model assumes that the Midwest program would apply only to power generators within these six states, leading to an increase in electricity imported from non-participating border states.  The governors of Illinois, Iowa, Minnesota, Wisconsin, Kansas and Michigan (along with the Canadian province of Manitoba) signed onto the Midwest Accord in November 2007.  Ohio, Indiana, South Dakota and Ontario are observers to the process. The final meeting of the accord’s advisory group is May 11-12.  

Another factor that strongly contributes to a stalled Midwest GHG effort is the increasing likelihood that Congress will pass a national GHG cap-and-trade program.  On April 2, the House Energy and Environment Committee released a discussion draft of “The American Clean Energy and Security Act of 2009” (the Waxman-Markey bill).  While many important details have been left for future discussion, this comprehensive legislation promotes renewable sources of energy, carbon capture and sequestration technologies, energy efficiency, and would establish a national GHG cap-and-trade program.   The draft bill would apply to all sources greater than 25,000 tons per year and set aggressive reduction targets of 3% below 2005 level by 2012, 20% below by 2020, 42% below by 2030 and 85% below by 2050.  It has been projected that such reductions would virtually eliminate the use of carbon base fuels in the United States.  According to Rep. Waxman, D-California, a final draft of the bill will be sent to the floor for debate by Memorial Day.   

While some semblance of a Midwest GHG model rule may continue, it appears that any such effort under the Accord would serve simply as a prototype for a federal GHG cap-and-trade program (as would the Western Climate Initiative program).  Others argue that if the federal government fails to enact climate policy reasonably soon, the Midwestern Accord could serve as a “backstop,” but the more likely scenario would be the on-going effort at the EPA to regulate GHGs under the Clean Air Act.


Roger Walker
George von Stamwitz
Armstrong Teasdale LLP
 

U.S. EPA Issues Precedent-Setting Stormwater Decision

Posted on April 20, 2009 by David Van Slyke

On December 5, 2008, the U.S. EPA Region 1 announced that it would use its “residual designation authority” under Clean Water Act Section 402(p)(2)(3) to regulate owners of properties that discharge storm water into a three square mile urban watershed located within a major commercial center near downtown Portland, Maine. Landowners with one acre or more of existing “impervious surface” in the Long Creek watershed, such as parking lots, roads, and rooftops, will be required to obtain storm water permits under the National Pollutant Discharge Elimination System (NPDES).  The EPA decision was prompted by a March 6, 2008 petition from Conservation Law Foundation (CLF) asserting that certain storm water dischargers be required to obtain NPDES permits.  

 

The Long Creek Decision Reflects a Major Shift in EPA policy

The Long Creek decision, which closely follows a related decision announced by EPA Region 1 regarding the Charles River watershed in Massachusetts , represents a major shift in EPA policy.  For the first time, EPA is regulating runoff from parking lots and other impervious cover at existing commercial development (such as big box stores). EPA agreed with CLF that the percentage of impervious cover relates directly to storm water watershed degradation and that land development and associated impervious surfaces are a major source of water quality issues in impaired waterbodies such as the Long Creek and Charles River watersheds.

How will this change affect watershed landowners?

Under the program delegated to the Maine, DEP will now be regulating and issuing stormwater permits to all Long Creek watershed landowners meeting the one acre impervious cover threshold.  While storm water from new construction has been regulated by DEP under its existing stormwater rules, EPA’s Long Creek decision means that for the first time, Maine will impose stormwater permitting requirements for impervious cover on previously unregulated existing development.  

What are the requirements for watershed permittees?

EPA solicited public comment on its Long Creek RDA decision via a December 31, 2008 Federal Register Notice. The public comment period closed February 17, 2009; two public comments were recorded. Finalization of the decision is not expected until at least July 2009.

The precise scope of the requirements for prospective permittees will not be known until Maine DEP finishes its rulemaking; a draft rule regarding the new program will not be released until EPA issues its final decision.  However, it can be anticipated that landowners will have to control and treat storm water runoff from their parking lots, roads and roofs, develop and maintain various structural improvements and retrofits, monitor watershed conditions, and use best management practices at their properties.

EPA Clears the Way for Regulation of GHG

Posted on April 17, 2009 by Theodore Garrett

The Environmental Protection Agency has formally declared carbon dioxide and five other heat-trapping gases to be pollutants that threaten public health and welfare, setting in motion a process to regulate carbon dioxide and other gases associated with global warming. This announcement comes two years after the Supreme Court's decision in Massachusetts v. EPA. The Agency said the science supporting its so-called endangerment finding was "compelling and overwhelming." The ruling triggers a 60-day comment period before any proposed regulations governing emissions of greenhouse gases are published. Lisa P. Jackson, EPA's Administrator, said: "This finding confirms that greenhouse gas pollution is a serious problem now and for future generations.

Fortunately, it follows President Obama's call for a low-carbon economy and strong leadership in Congress on clean energy and climate legislation." EPA's announcement does not include specific targets for reducing greenhouse gases or new requirements for energy efficiency in vehicles, power plants or industry sources. Such new restrictions would be developed in subsequent rule-making or in legislation enacted by Congress. EPA's announcement stated that "[n]otwithstanding this required regulatory process, both President Obama and Administrator Jackson have repeatedly indicated their preference for comprehensive legislation to address this issue and create the framework for a clean energy economy."

A Rant Against Superfund

Posted on April 15, 2009 by Seth Jaffe

As some of my clients know all too well, I’ve been spending a lot of time on some Superfund matters recently. Although I can’t remember a period when I didn’t have at least one moderately active Superfund case, significant immersion in complex remedial decision-making and negotiations provides an unwelcome reminder just how flawed CERCLA is. Almost 20 years after the acid rain provisions of the Clean Air Act ushered in wide-spread acceptance of the use of market mechanisms to achieve environmental protection goals and the state of Massachusetts successfully privatized its state Superfund program, the federal Superfund program, like some obscure former Russian republic which remains devoted to Stalinism, is one of the last bastions of pure command and control regulation.

 

Can anyone tell me why the remedy selection process takes years and costs millions of dollars – before any cleanup has occurred or risk reduction been achieved? Can anyone tell me why, after the remedy has been selected, EPA has to spend millions of dollars – charged back to the PRPs, of course – to oversee the cleanup? Oversight costs can easily exceed 10% of cleanup costs, while oversight during the remedial design and feasibility study process sometimes seem to be barely less than the cost of actually performing the RI/FS.

While there are certainly a multiplicity of causes, there are two factors which greatly contribute to the problem. One was, coincidentally, highlighted in a post today by my friend Rob Stavins. As Rob noted, unlike the acid rain program, which was new at the time, the Superfund bureaucracy is well entrenched and there are a number of actors with a vested interest in maintaining the status quo

The second issue relates to the genesis of the Superfund program, as well as its continuing raison d’être. Whenever EPA has ranked relative risks from different environmental hazards, Superfund sites come in at the bottom. However, if you think back to Superfund’s origins, what comes to mind? Love Canal and the Valley of the Drums – and some concerned near-by residents who rallied around a cause to ensure that the problem would be addressed. As renowned risk communications expert Dr. Peter Sandman has noted, there is not necessarily a significant correlation between actual risk levels and public outrage, and it’s not possible to decrease outrage simply by providing accurate information about risks.

In short, the public is outraged by hazardous waste sites and does not trust PRPs to clean them properly. All of those EPA oversight costs are, in large part, intended not to decrease risk, but to lower outrage.  Outrage is understandable in some circumstances, and efforts to reduce it are laudable, but is it really an appropriate use of scarce environmental protection resources to spend the money that gets poured into Superfund sites?

There has to be a better way. Indeed, there is a better way. It’s called a privatized system in which PRPs have to meet well-defined cleanup standards, but are allowed to do so on their own, in whatever manner is most cost-effective, subject to audits by regulators. Privatized programs such as the one in Massachusetts are not perfect. However, their flaws – which largely stem from a failure to fully support privatization -- pale in comparison to the waste that is the federal program under CERCLA.

In other contexts, I’ve called on the Obama administration to embrace regulatory reform. Why not start with Superfund? Notwithstanding Rob Stavins’ point about the difficulty of overturning an entrenched status quo, if the states could do it, why not the federal government?

Besides, I have an entrenched personal reason for seeking Superfund reform. This stuff drives me nuts.

Cap and Trade, CO2, and the Economy

Posted on April 14, 2009 by David Tripp

Cap and Trade for air pollution emissions reductions has a proven track record as an effective tool in reducing pollution – but can it work on CO2? Sulfur dioxide (SO2), perceived in the 1980s as the major air pollution threat, was reduced by 10 million tons over a 10-year period starting in 1990, according to EPA, without extensive delays and litigation associated with other environmental campaigns. How did it work so well? The marketplace, backed by the Clean Air Act, was used to create incentives for companies to reduce their SO2 emissions and earn “credits” for each ton of SO2 eliminated. Those credits could then be sold to other companies which needed more time to meet SO2 Clean Air standards.

 

How did the overall reductions occur? Using the implementing authority of Title IV of the Clean Air Act, 42 U.S.C. § 7651, successive “Phase-down” reductions of SO2 emissions were required. Under Phase I, (1995) certain large emitters of SO2 were to reduce the concentration of SO2 in their emissions to 2.5 lbs/mm Btu, or less. Later, in Phase II, (2000), all emitters above 75MW capacity were to reduce SO2 emissions to 1.2 lbs/mmBtu, or less. To help incentivize early compliance, and reduce the economic impact on individual companies, the companies making reductions were issued a credit for each ton of emissions reduction, and could apply the credit to use at another unit owned by the company, keep the credit for future use, or sell the credit through a market established by the Chicago Board of Trade. EPA reports that with these incentives, the national total of SO2 air emissions has been reduced by 50% since 1990.

            Does President Obama want to reduce CO2? You betcha! In August, 2002, then-Senator Obama proposed a reduction of CO2 from 1990 levels by eighty percent, to occur by 2050. The same goals appeared during the Presidential campaign. This is a very ambitious and potentially costly goal. The Congressional Budget Office has estimated a cost of $15 billion to the national economy over 10 years to meet this ambitious goal, but if certain economic safeguards are used, a deficit reduction savings of $80 billion could occur.

            A big change has occurred since then – Obama, as President, has stated Goal Number 1 is to restart the economy. This is a goal shared by nearly all. Congress and the President have begun implementing a stimulus package which would put nearly a trillion dollars into the economy, facing criticism that the debt burden this will place on future investors and generations will frustrate economic recovery. At the same time, Congress and EPA are intent on legislative or administrative action to reduce CO2.

            Can Cap and Trade work to reduce CO2 in a money-constrained economy? Political leaders appear to have concluded that CO2 reductions must be implemented quickly, and Cap and Trade may be the most efficient vehicle, and has been shown to work under the Clean Air Act model for SO2 . A more pointed question is whether Cap and Trade for CO2 should be utilized to generate a tax revenue stream to reduce the national deficit. During his March 24, 2009 news conference, Obama made reference to a budget outline he had sent to Congress earlier, which included hundreds of billions of dollars in revenue to the government through implementation of Cap and Trade. This plan was dubbed a “Cap and Tax” approach to CO2 reduction. In the latest development, in a Senate vote on April 2, 2009, 67 members of the Senate voted to require at least 60 votes to adopt any new cap and tax on carbon energy. These political maneuverings appear to emphasize the momentum by Congress, with public support, to adopt some form of Cap and Trade for CO2 that does not become a hidden tax or result in economic dislocations or hardships on a national or wide-scale regional basis.

            What are the safeguards needed to implement Cap and Trade, but not damage the economy? Most of these have been identified already:

·                    Safety valve provisions. National and regional economic disruptions caused by CO2 reduction requirements should be eligible for relief through any new legislation. Loss of jobs, disruption of the potential for job creation or job preservation and similar hardships should be grounds for flexibility on deadlines and enforcement actions.

·                    Realistic goals should be adopted. President Obama’s earlier proposed eighty percent reduction now may seem more than the country can afford. Congress should adopt more realistic goals, and be prepared in the future to make adjustments if needed.

·                    Research and development for carbon capture and storage must be accelerated. The stalemate over finding and proving technologies to capture CO2, and to safely sequester CO2 should be addressed in setting national priorities, something akin to the World War II stimulus for factories to supply war material.

·                    A “Price-Anderson”-style act for risks associated with carbon storage or sequestration should be adopted. Only when developers, investors and financiers learn they can avoid major, long term liability or loss of equity in the event of an unplanned release of CO2, will the markets be encouraged to get behind carbon capture and sequestration.

            These are not insolvable problems. Realistic goals, flexibility in the design and implementation of a national Cap and Trade system for CO2, and allowing the market to work as it did for SO2 reductions should reduce CO2 significantly without impeding economic recovery.

Clock Ticking on Comments In Response to EPA's Proposed Mandatory GHG Reporting Rule

Posted on April 14, 2009 by Mary Ellen Ternes

 

While we wait for EPA’s GHG Endangerment Assessment and new GHG legislation, the EPA’s proposed mandatory greenhouse gas (GHG) reporting rule was published in the Federal Register, at Mandatory Reporting of Greenhouse Gases, proposed rule, 68 Fed. Reg. 16448 (April 10, 2008)

This proposed rule would require calculation and reporting of carbon dioxide (CO2), methane (CH3), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) in carbon dioxide equivalents by most major industrial and commercial sources of these gases with CO2 equivalent (CO2e) emissions over 25,000 tons per year. 

 

 

The sources covered by the proposed rule range from cement production to food processing, landfills to pulp and paper manufacturing. The rule also specifically requires separate reporting by suppliers of coal and coal-based liquid fuels, petroleum products, natural gas, natural gas liquids and industrial GHGs and manufacturers of vehicles and engines. Compliance with the proposed rule would appear to be challenging for those sources which emit hard to quantify, or never before quantified, fugitive emissions of GHGs. The proposed rule contemplates reporting by approximately 13,000 facilities, with the first annual report due in 2011 for the calendar year 2010.  EPA states that the reporting methods were built upon preexisting voluntary programs such as the U.S. Greenhouse Gas Inventory and The Climate Registry. 

 

There is a second public hearing on the proposed rule on April 16, 2009, at the Sacramento Convention Center, Sacramento, CA. More information is provided here.