Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on October 3, 2014
The Blog Calendar Gods directed me to post something on September 16, 2014, which just happens to be the 40th anniversary of the date that I first started to practice law. Not wanting that coincidence to go to waste, I decided to look back 40 years, to a time when the practice of environmental law was far less complex – or, at least, the things that EPA then published in the Federal Register were a lot shorter.
On September 16, 1974, EPA’s rules and notices took up less than four pages in the Federal Register and consisted of a notice of receipt of applications for pesticide registration under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA); a correction to one line of a previously-published notice of proposed rulemaking under the Clean Water Act; and the approval of a compliance schedule under the State of Kansas’ state implementation plan. The entire Federal Register on that date was only 104 pages long.
Fast forward 40 years. EPA’s fairly typical Federal Register postings on September 16, 2014, include – as was the case 40 years ago – rulemaking proposals and notices under the Clean Air Act, Clean Water Act, and FIFRA; however, the September 16, 2014 proposals and notices from EPA take up more than 125 pages of the Federal Register, and a typical edition of the Federal Register these days is well over 300 pages long. I could complain that EPA did not celebrate my anniversary with the publication of a splashy huge new rule in the Federal Register – but I think many of my clients would consider that to be a good thing.
Perhaps the most significant change over the past 40 years, though, is to the overall length and complexity of the rules that are now appear in volume 40 of the Code of Federal Regulations. (There is that number “40” again.) In 1974, 40 C.F.R. – the volume of the code containing most of EPA’s regulations – was about 2000 pages long. In the decades following that time, 40 C.F.R. has steadily increased in size (and complexity). In 1984, it was approximately 5,800 pages long; by 1993, it topped 11,000 pages; and in 2012, there were over 25,000 pages of regulations in 40 C.F.R.
For those of you wondering what else was going on 40 years ago (outside of the practice of environmental law), let me share the following tidbits from September 16, 1974. The big news that day was President Ford’s announcement of his “Program for the Return of Vietnam Era Draft Evaders and Military Deserters.” In addition, on that day, BART began operations in the Bay area, Bob Dylan recorded Blood on the Tracks, the Royal Canadian Mounted Police swore-in their first female recruits, and Joe Namath was on the cover of Sports Illustrated (he was shown rehabbing his battered knees, hoping to play one more season in his $250,000-per-year contract with the New York Jets). Also, if I had stopped cutting my hair 40 years ago today, my golden locks would be more than six yards longer than they are today.
I will be thinking about all of this as I lift my glass this evening and toast all of you and begin year 41.
Posted on September 23, 2014
Financial responsibility is a familiar environmental law concept. Many of us have negotiated financial assurance provisions in site consent agreements. RCRA’s closure and post-closure financial responsibility requirements at treatment, storage and disposal (TSD) facilities are well-established. Financial responsibility obligations are also a component of many other federal and state environmental programs.
I suspect, however, that few practitioners are aware of a CERCLA financial responsibility provision that has been in existence since the Act’s inception. CERCLA Section 108(b) mandates that the President identify classes of facilities that will be required to demonstrate a financial ability to cleanup releases of hazardous substances. These facilities will be obligated to provide evidence of financial responsibility that is consistent with the degree and duration of the risks associated with their production, handling, treatment, storage and disposal of hazardous substances. The requirements of Section 108(b) are intended to assure availability of funds should the businesses go bankrupt or otherwise become financially unable to conduct future environmental response actions.
Section 108(b) generally imposes two regulatory tasks on EPA: Identify the classes of facilities for which financial responsibility requirements will be developed and promulgate regulations establishing those requirements. For twenty-eight years, EPA deferred breathing regulatory life into Section 108(b). EPA’s inattention to Section 108(b) ceased to be an option in 2008. Litigation commenced by the Sierra Club and others resulted in a federal court order requiring EPA to identify industries that would be first in line for Section 108(b) rulemaking. EPA determined in 2009 that the hard rock mining industry would be its first priority. In early 2010, EPA published advance notice of its intent to regulate additional classes of Section 108(b) facilities: chemical manufacturing, petroleum and coal products manufacturing and the electric power generation, transmission and distribution industry.
Although deadlines have come and gone, to date no financial responsibility rules have been proposed. Nevertheless, the lifeless form of Section 108(b) has finally begun to stir. EPA advised Senate lawmakers in June of this year that financial responsibility requirements for the hard rock mining industry would be issued by 2016. In the meantime, the NGOs remain ever vigilant. Armed with data indicating that, particularly during the recent recession, taxpayers and disadvantaged communities suffered the adverse consequences of EPA’s inaction, environmental advocacy groups filed a Petition for Writ of Mandamus demanding that the agency promptly comply with Section 108(b)’s rulemaking requirements. In contrast, many industry groups contended that the Section 108(b) rulemaking being developed is based on a flawed analysis of potential risk and ignores the impact of existing state and federal financial responsibility laws and regulations that have achieved most of the objectives of Section 108(b). Legislation introduced in the House of Representatives in 2013, generally supported by the affected industries, included significant amendments to CERCLA Sections 108(b) and 114(d).
Whether you believe that Section 108(b) is outdated and unnecessary, or that immediate and comprehensive implementation of its mandates is of paramount importance, I would submit that EPA’s seemingly cautious approach to Section 108(b) rulemaking is justifiable. Considering the financial consequences, the identification of target industries must be based on a careful and comprehensive evaluation of the actual risks associated with a particular industry’s handling of hazardous substances and the historic “track-record” of that industry’s ability to financially respond to releases. The extent to which existing federal and state financial assurance programs address the identified risks must also be carefully scrutinized to avoid unnecessary cost and duplication. EPA’s selection of acceptable financial assurance mechanisms is also of critical importance. Elimination of the so-called “financial test” method, for example, may impact the capacity of financial and credit markets to provide the necessary financial assurance and adversely affect global competitiveness.
Future rulemaking that is based on a thorough and defensible analysis of actual risk and is limited to filling in any gaps in existing financial assurance programs will best serve the public, the environment and the regulated community.
Posted on August 25, 2014
On August 12th, the 9th Circuit Court of Appeals issued a decision that arguably explains everything from why the Tea Party exists to why otherwise calm and sane executives suddenly lose all their hair. Perhaps most astounding, the decision is clearly correct. Perhaps the law is an ass.
In 2008, Avenal Power submitted an application to EPA for a PSD permit to construct a new 600 MW natural gas-fired power plant in Avenal, California. Although section 165(c) of the Clean Air Act requires EPA to act on such applications within one year, EPA failed to do so.
Subsequently, and before EPA ever did issue a permit, EPA revised the National Ambient Air Quality Standard for NOx. Avenal Power apparently could demonstrate that emissions from the new plant would comply with the old NAAQS, but could not demonstrate that it would not cause an exceedance of the new NAAQS. After some waffling, EPA took the position that it could grandfather the permit application and review it under the prior NAAQS. Citizen groups appealed and the Court of Appeals held that EPA had no authority to grandfather the application.
To the Court, this was a simple application of Step 1 of Chevron. The Court concluded that sections 165(a)(3) and (4) and 110(j) of the CAA unambiguously require EPA to apply the NAAQS in effect at the time a permit is issued. Thus, EPA has no discretion to grandfather permit applications, even though EPA was required by law to issue a permit decision at a time when more lenient requirements were in effect.
I think that the Court’s decision is clearly right on the law. The statutory language seems unambiguous. But what did the Court have to say to those who feel that the result is inequitable, because Avenal was legally entitled to a decision in one year, and would have obtained its permit if EPA had acted timely? Pretty much, tough luck:
Finally, EPA relies heavily on the argument that the equities weigh in favor of Avenal Power. In short, we agree. Avenal Power filed its application over six years ago, and endeavored to work with EPA for years, even after filing suit, to obtain a final decision. But however regrettable EPA’s treatment of Avenal Power has been, we simply cannot disregard the plain language of the Clean Air Act, or overlook the reason why an applicant must comply with revised and newly stringent standards —that is, “to protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare and the productive capacity of its population.” Honoring the statute’s plain language and overriding purpose, we must send EPA and Avenal Power back to the drawing board. (Emphasis added.)
In other words, EPA screwed up, and Avenal Power got screwed. Imagine having to explain that to your client.
Posted on July 10, 2014
Last Monday June 23, it was the Supreme Court’s turn in the UARG case to decide whether EPA could “tailor” its climate policy to fit the PSD and operating permit programs in the current Clean Air Act. Both the Court and EPA faced the issue without any precise guidance from the missing branch: Congress.
As a result, yet another court – the DC Circuit – must next consider the proper remedy in the UARG case and, if past DC Circuit decisions are a sound guide, remand the matter back to EPA to take action consistent with the courts’ decisions. The DC Circuit will almost certainly not tell EPA what it can do, nor should it tell EPA how to exercise its remaining substantial discretion. The courts are only telling EPA what it cannot do in certain respects. Thus, the courts’ guidance to EPA is limited.
EPA will retain considerable discretion when it tries again to regulate GHG emissions from major stationary sources and major stationary source modifications under titles 1 and 5 of the Clean Air Act. EPA has loads of options, as many commenters pointed out during the prior EPA rulemaking. The options may fit the current Clean Air Act to varying degrees. In the words of the Supreme Court in the June 23 UARG decision, though, “Even under Chevron’s deferential framework, agencies must operate ‘within the bounds of reasonable interpretation.’” (J. Scalia for the Court, slip opinion at p. 16)
EPA may try to avoid options that would be most vulnerable to challenge under the principles expressed by the Court in the UARG opinion. One Court majority held that EPA lacked authority to “tailor” the Act’s numerical thresholds governing the PSD and operating permit programs. A different Court majority upheld EPA’s BACT rules for GHGs. Some commenters will undoubtedly urge EPA to continue its drive towards regulating GHGs under titles 1 and 5 of the current Clean Air Act. But, EPA should re-solicit the broadest public comment and carefully consider all options, as the Supreme Court requires under the Chevron standard of judicial review. After all, there will be a national election in 2016 and there will be a new Administration with its own views on the options. If the current Administration wishes to leave a lasting legacy in this area, it would be well advised to act on the basis of the most solid record and adopt moderate, fully vetted polices that can survive. As retiring Congressman John Dingell recently said in a farewell speech held by the National Press Club in Washington, D.C., “Compromise is an honorable word."
Congress is very unlikely to provide any additional guidance in this area any time soon, though. The nation will miss some basic policy decisions and compromises, such as:
• Should the PSD and operating permit programs apply to GHGs? How?
• Which sources should be covered? When? With a phase-in? Tied to what?
• In the PSD program, can and should BACT work the same way for GHGs as for criteria pollutants?
• In the operating permit program, when should sources have to add GHG provisions (since there aren’t yet any substantive requirements for the operating permits to pick up)?
• What substantive requirement should EPA develop and for which sources? When? E.g., should EPA set GHG emissions standards or other requirements for power plants and other source categories under section 111(d) of the Act, as EPA recently proposed?
• What role(s) should state and local agencies and programs play?
In the 1990 Clean Air Act amendments, Congress resolved issues like these in the Act itself. The leading precedent is title 4 – acid rain – where Congress even allocated emissions of SO2 by individual numbered electric power generators in named powerplants in named states. Both houses and both parties held hands and made this deal under the Capitol dome – a deal which has resulted in a stunning and stable policy success. The acid rain deal largely avoided the dilemmas that EPA and the courts now face in dealing with stationary source permitting under titles 1 and 5 of the Clean Air Act. It seems most likely that whatever EPA does next under the current Clean Air Act will be challenged vigorously in court – again and again – until Congress can once again come together under the dome.
Posted on June 27, 2014
Having unleashed EPA rulemaking of unprecedented scale in Massachusetts v. EPA (holding GHGs are “air pollutants” under the Clean Air Act (CAA) that EPA must regulate upon finding “endangerment”) and having further acknowledged EPA’s GHG authority in AEP v. Connecticut (holding CAA displaces federal nuisance common law), early this week in Utility Air Regulatory Group v. Environmental Protection Agency et al., the Supreme Court started the inevitable process of reining in the Agency’s exercise of its potentially boundless GHG authority under a statute designed for regulation of conventional air pollutants. Although interpretive gymnastics would be required whatever direction it took, the Court decided in a fractured decision that the CAA’s preconstruction Prevention of Significant Deterioration (PSD) and Title V operating permit programs allow EPA to impose Best Available Control Technology (BACT) for GHGs only when a source has triggered these programs “anyway” due to its conventional criteria pollutant emissions.
The consolidated cases below challenged a full basket of major EPA GHG rulemakings, including EPA’s endangerment finding, motor vehicle regulations (the Tailpipe Rule) and stationary source permitting rules. But the Court granted certiorari on only one question - whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles under one part of the Act triggered permitting requirements under the Act for stationary sources that emit greenhouse gases under another part of the Act. The Court rejected EPA’s PSD and Title V Triggering and Tailoring Rules, leaving intact only the ancillary BACT review of a source’s non-de minimis GHG emissions when a source otherwise undergoes PSD review for conventional pollutants.
The PSD program requires a permit to construct or modify a “major emitting facility”—defined as any stationary source with the potential to emit 250 tons per year of “any air pollutant” or 100 tons per year for certain types of sources—in areas where the PSD program applies. To qualify for a permit, the facility must, among other things, comply with emissions limitations that reflect BACT for “each pollutant subject to regulation under” the CAA. Title V requires a comprehensive operating permit to operate any “major source”—defined as any stationary source with the potential to emit 100 tons per year of “any air pollutant”—wherever located.
Recognizing that applying these thresholds to GHGs would result in permitting for numerous small sources, such as schools, hospitals and even large homes, EPA promulgated the so-called Tailoring Rule with special thresholds for GHGs that would apply in addition to the statutory thresholds and said that it would revisit whether to continue applying these special thresholds after five years, during which time it would study the feasibility of extending permitting to the small sources per the statutory thresholds. Under Step 1 of the Tailoring Rule, commencing January 2, 2011 (the effective date for its Tailpipe Rule), it obligated sources already required to obtain permits under the PSD program or Title V (so-called “anyway” sources) to comply with BACT for GHGs if they emitted at least 75,000 tons per year (tpy) of carbon dioxide equivalent (CO2e) units. Then, under Step 2, commencing July 1, 2011, it obligated sources with the potential to emit at least 100,000 tpy of CO2e to obtain permits under the PSD program and Title V for construction and operation, and sources with the potential to emit at least 75,000 tpy of CO2e to obtain permits under the PSD program for modifications. These higher thresholds were needed on a temporary basis, according to the EPA, because the number of permit applications would otherwise grow by several orders of magnitude, exceeding the agency’s administrative resources and subjecting to the major permit programs sources that Congress clearly did not intend to cover. EPA’s Tailoring Rule also contemplated a Step 3 where GHG permitting would apply to additional sources as well as a five year study on how to extend the program to remaining sources per the statutory thresholds.
Writing for the Court, Justice Scalia, joined by Justices Roberts, Kennedy, Thomas, and Alito, concluded that EPA’s legal interpretation that the PSD and Title V programs were triggered once EPA regulated GHGs under the mobile source program not only is not compelled, but moreover, simply is not reasonable. He reasoned that the “air pollutants encompassed by the Act-wide definition as interpreted in Massachusetts” are not the same “air pollutants referred to in the permit-requiring provisions” at issue. This is so because EPA has routinely given “air pollutant” in the permit-requiring provisions a narrower, context-driven meaning. The same five justices also concluded that EPA is not permitted to augment with additional thresholds – even temporarily, as EPA claimed – the 100 tpy and 250 tpy statutorily-defined thresholds for triggering the PSD program and Title V permitting requirements. He writes that the need for such an adjustment simply demonstrates that the PSD program and Title V were never intended to be expanded in this way, and adds that the EPA does not have the power to “rewrit[e] unambiguous statutory terms” such as the statutorily-defined numerical thresholds for applying the PSD program and Title V.
Justice Scalia, joined in this part by Justices Roberts, Kennedy, Ginsberg, Breyer, Sotomayor, and Kagan, then determined that the EPA reasonably interpreted the CAA to require that those new and modified sources already subject to PSD permitting due to their potential to emit conventional criteria pollutants also must comply with BACT for GHGs. In this context, he emphasizes that the statutory language – once permitting already has been triggered – requiring BACT “for each pollutant subject to regulation under this chapter” contextually leaves less room for interpretations that could limit BACT to a smaller set of pollutants, in contrast to the triggering “any air pollutant” language, which must be read contextually in a more limited manner. Additionally, he argues that applying BACT to greenhouse gases “is not so disastrously unworkable, and need not result in such a dramatic expansion of agency authority, as to convince us that EPA’s interpretation is unreasonable.”
Justice Breyer concurred in part and dissented in part, joined by Justices Ginsburg, Sotomayor, and Kagan. He joins the Court’s opinion as to the application of BACT to greenhouse gases, but asserts that the EPA is also permitted to interpret the CAA so as to trigger permitting requirements for stationary sources that emit an adjusted threshold level of greenhouse gases. Justice Alito concurred in part and dissented in part, joined by Justice Thomas. He argues that neither the EPA’s interpretation of provisions triggering permitting requirements nor its interpretation regarding BACT is permissible.
The Court’s decision to require independent PSD and BACT applicability before subjecting sources to BACT for GHG emissions squares fully with significant industry input to EPA early in its discussion of stationary source permitting. Our National Climate Coalition, for example, urged EPA to embrace such an interpretation in our 2009 Tailoring Rule comments and 2010 PSD White Paper.
Although this decision does not directly affect EPA’s authority to regulate stationary source GHG emissions by establishing New (or Existing) Source Performance Standards under section 111 of the Act, it portends significant challenges for the agency’s recent §111(d) proposal. Most notable are the several statements in the 5-4 portion of Justice Scalia’s opinion in which he cautions the agency not to “rewrite clear statutory terms to suit its own sense of how the statute should operate.” In articulating the Court’s test for whether an agency interpretation of ambiguous terms is reasonable, he stresses that an interpretation is less likely be viewed as reasonable to the extent it:
brings about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization. When an agency claims to discover in a long-extant statute an unheralded power to regulate a ‘significant portion of the American economy,’ [cite omitted], we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’
This portion of the Court’s ruling will likely figure prominently in the Court’s inevitable review of the agency’s §111(d) proposal. It thus may behoove EPA to consider in its final rulemaking approaches that bring the existing source program somewhat closer to its traditional rulemakings under that section.
Posted on June 18, 2014
It has been more than 30 years since EPA hired its first criminal investigators, but questions remain about when environmental violations will result in criminal charges. Critics frequently portray environmental crime as a poster child of “over-criminalization” with a recent example Senator Rand Paul in his book Government Bullies: How Everyday Americans Are Being Harassed, Abused, and Imprisoned by the Feds.
To address these concerns, I have suggested that prosecutors should limit criminal charges to violations that involve one or more of the following aggravating factors: (1) significant environmental harm or public health effects; (2) deceptive or misleading conduct; (3) operating outside the regulatory system; or (4) repetitive violations. By doing so, prosecutors would focus on violations that undermine pollution prevention efforts and avoid targeting defendants who committed technical violations or were acting in good faith.
I subsequently developed the Environmental Crimes Project to determine how often the aggravating factors I identified were present in criminal prosecutions. With the assistance of 120 students at the University of Michigan Law School, I analyzed all defendants charged in federal court with pollution crime or related Title 18 offenses from 2005-2010. We examined court documents for over 600 cases involving nearly 900 defendants to create a comprehensive database of environmental prosecutions.
Our research revealed that prosecutors charged violations involving aggravating factors in 96% of environmental criminal prosecutions from 2005-2010. More than three-quarters of the violations involved repetitive conduct, and nearly two-thirds involved deceptive or misleading conduct. Moreover, we found that 74% of the defendants engaged in conduct that involved multiple aggravating factors. And, for 96% of the defendants with multiple aggravating factors, one of the first three factors (harm, deceptive conduct, or operating outside the regulatory system) was present along with repetitiveness.
These findings support at least three significant conclusions. First, in exercising their charging discretion, prosecutors almost always focus on violations that include one or more of the aggravating factors. Second, violations that do not include one of those aggravating factors are not likely to be prosecuted criminally. Third, prosecutors are most likely to bring criminal charges for violations that involve both one of the first three factors and repetitiveness—and are less likely to bring criminal charges if that relationship is absent.
I plan to update my research with data from 2011-2012 and to examine a representative sample of civil cases using the same criteria. But my research already should provide greater clarity about the role of environmental criminal enforcement and reduce uncertainty in the regulated community about which environmental violations might lead to criminal charges. My research also suggests that prosecutors are exercising their discretion reasonably under the environmental laws and should lessen concerns about over-criminalization of environmental violations.
For more, please see David M. Uhlmann, Prosecutorial Discretion and Environmental Crime, 38 HARV. ENVTL. L. REV. 159 (2014).
Posted on June 13, 2014
If it’s wastewater from a treatment plant pumped into injection wells and it ends up in the ocean, you need an NPDES permit under the Clean Water Act. At least that’s the conclusion from the U.S. District Court for the District of Hawaii in Hawai’i Wildlife Fund v. County of Maui, decided May 30, 2014.
In Hawai’i Wildlife Fund, a case in which my colleague David Henkin in our Honolulu office represented the plaintiffs, the Court considered the following facts: The County of Maui operates a wastewater treatment plant located about a half mile from the ocean that pumps millions of gallons of treated wastewater into several injection wells each day. Within the last few years, EPA and others performed a tracer dye study because of concern that much of this wastewater was migrating through a groundwater aquifer and emerging in the ocean off the coast of Maui through seeps and springs. The results of this study confirmed that, for a number of the injection wells, this was the case, even though it took several weeks for the dye to move from the wells into the ocean through the groundwater aquifer. Based on other information, the County apparently had been aware since 1991 that its wastewater discharges were reaching the ocean. Plaintiffs, Hawai’i Wildlife Fund and others, brought a citizens suit under the Clean Water Act asserting that because the County wastewater treatment facility had no NPDES permit, the discharge of wastewater into the ocean via the injection wells and groundwater was an illegal, unpermitted discharge.
U.S. District Court Judge Susan Mollway agreed and granted the plaintiffs summary judgment. The Court was not deterred by the County’s argument that it had an application for an NPDES permit pending with the State or other preliminary matters. Instead the Court observed that “the only area of dispute between the parties is whether the discharges into the aquifer beneath the facility constitute a discharge into ‘navigable waters[,]’” the operative language of the Clean Water Act in this case.
On this point, the Court turned to the Supreme Court’s Rapanos decision and concluded that waters regulated by the CWA are broader than waters that are “navigable-in-fact,” hardly a controversial conclusion. The Court then went on to conclude that “liability [for an unpermitted discharge] arises [under the CWA] even if the groundwater . . . is not itself protected by the [Act] as long as the groundwater is a conduit through which the pollutants are reaching [the ocean].” As the Court observed, “[t]here is nothing inherent about groundwater conveyances and surface water conveyances that requires distinguishing between these conduits under the [CWA].” In the Court’s view, as long as the groundwater served as a conveyance for pollutants that reached navigable waters, liability for an unpermitted discharge would attach.
The Court also concluded that liability for an unpermitted discharge arose under an alternative test which the parties drew from the Ninth Circuit’s post-Rapanos decision in Northern Cal. River Watch v. City of Healdsburg, even though the Court expressed skepticism about the applicability of this test where groundwater is involved. Under this alternative test, because there was a clearly discernible nexus, i.e., the groundwater aquifer, between the County’s discharge of pollutants into injection wells and its subsequent emergence in the ocean, and because the discharge of pollutants to the ocean significantly affected the “physical, biological, and chemical integrity” of the ocean in the area of the seeps and springs through which the discharge emerged, liability for an unpermitted discharge also would attach.
Next up: civil penalties and remedy.
Posted on June 12, 2014
Buoyed by favorable recent Supreme Court and DC Circuit decisions recognizing EPA’s broad discretion under the Clean Air Act, on Monday, June 2, EPA scaled new heights of legal adventurism by proposing the Clean Power Plan, a greenhouse gas reduction program for the power sector that would compel states to implement supply- and demand-side energy strategies. EPA projects that its proposal would achieve approximately a 30% reduction from 2005 levels by 2030.
EPA’s action is under section 111(d) of the Clean Air Act, a little-utilized section that authorizes EPA to set emission guidelines for states to regulate listed source categories whose emissions are not regulated under either the Act’s criteria pollutant program under section 108 or the hazardous air pollutant program of section 112. The College recently prepared an excellent overview of section 111 authority for the Environmental Council of the States (ECOS).
Certain aspects of EPA’s proposal are worth noting. First, in stark contrast to prior stationary source rules, EPA seeks to harness the entire energy system, not just efforts at individual sources. The bulk of the proposed emission reductions will come not from the minor expected heat rate improvements at individual electric generating units (EGUs)(EPA’s first “building block”), but from directing states to increase generation at natural gas plants and renewables while reducing electricity demand. Three of EPA’s four “building blocks” thus address emission reductions that are outside the control of EGUs, the listed source category. Consistent with this approach, EPA proposes a portfolio enforcement approach by which states would be authorized to oblige entities other than the affected source for the reductions in building blocks two through four. The proposal calls for an overall state energy plan, not just for implementing emission reduction opportunities available to individual sources.
Second, the proposal does not establish common performance standards, but sets highly-variable standards for each state based on EPA’s assessment of the state’s individual capacity to reduce emissions under each of the four building blocks. EPA clearly listened to state pre-proposal input regarding material differences in each state’s EGU portfolio, its capacity to harness wind and solar generating technologies and other state differences.
Although the proposal’s projected benefits reflect an estimated 30% emission reduction from 2005 levels, EPA actually uses 2012 as the baseline for measuring a state’s starting carbon intensity. Because EPA sets each state’s interim and future carbon intensity targets based on the state’s capacity for reducing, shifting or avoiding EGU emissions, it is not surprising that the proposal does not provide any state with early action credit in the traditional sense. Some states are further along on their individual progress lines, but as currently designed the proposal does not allow any state to monetize its early reductions nor to avoid future progress based on its prior actions. This means that some states will be expected to do more than others for the foreseeable future. And, unless a true early action mechanism is included in EPA’s final rule, some states, such as California, may continue to incur net energy costs higher than their neighbors.
Several commenters have noted the material legal risk that EPA takes with this proposal. Among the many expected challenges will be that EPA cannot regulate EGUs under section 111(d) because the House version of that section precludes such regulation if the source category already has been listed under section 112. The proposal also could be challenged for including in the “best system of emission reduction” (BSER) emission reductions outside the control of the source and for obliging the state and entities other than EGUs to achieve such reductions. EPA argues in its proposal that it can require states to consider any measure that has the effect of reducing EGU emissions (i.e., an “effects” or “ends” test), but some will argue that section 111 only allows EPA to require those emission reduction options (i.e., “means”) available to the EGU itself.
Should EPA fail to finalize one or both of its section 111(b) new and modified/reconstructed unit proposals, then it may be challenged for a failure to finalize the prerequisite 111(b) rule. Other challenges could relate to an alleged failure properly to subcategorize facilities and for stepping beyond its emission reduction role to, in essence, regulate a state’s energy policy.
EPA has left some important design issues unresolved. EPA strongly encourages interstate cooperation, including the use of emissions trading, but it leaves the actual shape of such linkages undefined. Similarly unresolved is the question of how states can interact if they act alone. Given the regional nature of power markets and the fact that emission reductions occurring in one state often result from investment (on either the supply or demand side) in another, states and companies will need to know the ground rules for adjudicating potentially-conflicting claims for state plan credit and company compliance credit. EPA seeks comment on these and other critical issues.
For those interested, a more substantive analysis of the proposal can be found here.
Posted on June 3, 2014
On Friday, in a case argued by my colleague, Greg Garre and briefed by Leslie Ritts, the D.C. Circuit decided a closely watched case construing the EPA’s “regional uniformity” requirement under the Clean Air Act (CAA.) The court declared the agency’s directive to regional offices outside the Sixth Circuit to ignore a 2012 Sixth Circuit decision interpreting the CAA’s “single source” requirements as inconsistent with EPA’s uniformity requirement. The decision brings to light an important component of the CAA’s nationwide scheme.
Under the CAA, any “major source” of pollution is subject to certain heightened requirements. EPA regulations provide that multiple pollutant-emitting activities will be considered together for purposes of the “major source” analysis if they are—among other things—“adjacent.” But EPA has, in recent years at least, given “adjacent” an expansive and atextual meaning, concluding that even facilities separated by considerable physical distance should be deemed “adjacent” as long as they are “functionally interrelated.”
In 2012, the Sixth Circuit in Summit Petroleum Corp. v. EPA held that EPA’s interpretation was “unreasonable and contrary to the plain meaning of the term ‘adjacent.’” The EPA opted not to seek Supreme Court review of the Sixth Circuit’s ruling. A few months after the Summit decision, however, EPA circulated a directive to the Regional Air Directors informing them that the agency would abide by the Sixth Circuit’s decision within the Sixth Circuit, but that “[o]utside the [Sixth] Circuit, at this time, the EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions.”
The National Environmental Development Association’s Clean Air Project (NEDA/CAP), an industry group, filed a petition for review in the D.C. Circuit, challenging the EPA’s “Summit Directive” as contrary to the statute and EPA’s own regulations. NEDA/CAP explained that EPA’s Directive would impermissibly place NEDA/CAP members operating outside of the Sixth Circuit at a competitive disadvantage, subject to a more onerous permitting regime than their peers operating within the Sixth Circuit’s jurisdiction. That disparity between regions, NEDA/CAP explained, was inconsistent with the CAA’s requirement that EPA assure “uniformity in the criteria, procedures, and policies applied by the various regions,” 42 U. S. C. § 7601(a)(2), as well as EPA regulations that similarly require inter-regional uniformity.
On Friday, the D.C. Circuit issued a decision agreeing with NEDA/CAP in National Environmental Development Association’s Clean Air Project v. EPA. Rejecting EPA arguments that the policy could only be challenged in the context of a discrete stationary source permit application, the Court held that NEDA/CAP’s blanket challenge to the EPA’s creation of two different permitting regimes across the country could be challenged today because of the competitive disadvantages it created for companies operating in different parts of the country.
On the merits, the Court concluded that maintaining a standard in the Sixth Circuit different from the one applied elsewhere in the country was inconsistent with the agency’s regulatory commitment to national uniformity. The Court recognized that an agency is ordinarily free, under the doctrine of “intercircuit nonacquiescence,” to refuse to follow a circuit court’s holding outside that court’s jurisdiction. Here, however, the Court held that EPA’s own regulations required it to “respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.” Finding that the agency’s “current regulations preclude EPA’s inter-circuit nonacquiescence in this instance,” the Court vacated the directive.
The decision is noteworthy in a number of respects. Not only does the decision roundly reject EPA’s threshold objections to NEDA/CAP’s petition (standing, finality, and ripeness), but it appears to represent the first time a court has applied EPA’s uniformity regulations to invalidate a rule. The decision therefore puts a light on an important component of the CAA’s nationwide enforcement scheme—the “regional uniformity” requirement.
Posted on May 8, 2014
Debarment is the process whereby the federal government can permanently prevent a company from doing business with the federal government or suspend a company from doing business with the federal government for a period of years. The debarment process has been available for decades to the United States to be used against companies or persons whom the government believes are untrustworthy. For instance, removal from EPA’s list of violating facilities requires agency evaluation of corporate attitude. But the Obama Administration has broadened the scope of the process to potentially ensnare many an unsuspecting entity.
The debarment process as it currently exists has resulted in the following scenarios:
A. An oil company in the Rocky Mountain region settled a regulatory violation with the Department of the Interior’s Bureau of Land Management and as part of the agreement paid a substantial seven figure fine and adopted new procedures designed to prevent a reoccurrence of the violation and a two-year period of probation. Imagine the surprise of the company’s managers and in-house lawyers when eighteen months after the settlement was executed, they received a Notice of Debarment for a three-year period preventing the use of their federal leases requiring new permits.
B. A wind farm owner that was convicted for killing bald eagles discovered that the company could not sell future electricity production to a federal facility.
C. An oil and gas company that pleaded guilty to a Clean Water Act spill faced debarment from being able to bid on federal oil and gas leases for five years.
Companies or persons found to be in violation of civil or criminal statutes or departmental regulations are subject to debarment. While in egregious cases debarments can be perpetual, most debarments are for a period of three to nine years. Debarments do not affect a company’s current government contracts, but do affect renewals of those contracts or the need for new permits on federal lands. The debarments are company-wide. Consequently, the above-mentioned wind farm owner also could not sell its electricity produced from its coal fired power plants to federal facilities.
Debarment proceedings are administered by the various Offices of Debarment, located within each cabinet department, with the closest responsibility for enforcing the law that was violated. Thus, the Department of the Interior’s Office of Debarment (staffed by the Inspector General’s personnel) handles violations of fish and wildlife, public lands and Indian law. Environmental Protection Agency lawyers in the grants and debarment program handle debarment proceedings authorized by Section 508 of the Clean Water Act or Section 306 of the Clean Air Act.
Upon the entry of a federal court judgment or consent decree a representative of the Department of Justice, often an Assistant United States Attorney, forwards the document to the appropriate cabinet department’s Office of Debarment. The government deems debarment proceedings to be separate from the underlying litigation. Agreements to avoid debarment may not be a condition of any plea bargain or consent decree. Adverse outcomes after executive branch debarment hearings may be appealed to a federal district court under deferential Administrative Procedures Act standards.
Posted on April 30, 2014
Ethanol prices appear to be on the rise. Weather and an increase in exports appear to be responsible for the uptick. The reason for the reported jump in ethanol prices has to do with turbulent winter weather and increasing United States (U.S.) exports, largely to Brazil. Ethanol has wide usage in both countries. The Renewable Fuels Association reported that for 2011, the U.S. and Brazil accounted for 87% of the world’s ethanol fuel production. Some U.S. ethanol plants have stopped production in part because of droughts that have ravaged much of the nation’s crops and pushed commodity prices so high that ethanol has become too expensive to produce.
Bioethanol produced from fermentation of carbohydrates in sweet and starchy crops like sugar cane and corn, has gained in popularity as concerns about energy security and rising oil prices have become more acute. Ethanol fuel, an alcohol derivative, is a renewable motor fuel that is used as a biofuel additive for gasoline. Most cars in the U.S. today run on blends of up to 10% ethanol. Today’s typical fuel pump blend, E10, is 10% ethanol and 90% gasoline. Backed by government subsidies and mandates, ethanol plants rose in the Corn Belt, generating a new market for crops and billions of dollars in revenue for producers of this corn based fuel blend. Generally, oil companies have opposed using higher concentrations of ethanol, and have tried to get Congress to change federal rules so that we use less ethanol.
The U.S. EPA (EPA) has not been immune to the ethanol crunch crisis. Last November, EPA proposed slashing the corn ethanol mandate to 13.01 billion gallons this year, down from 14.4 billion gallon requirement outlined by federal statute. After already proposing to reduce the corn ethanol mandate, this year, on March 27, in a congressional hearing, U.S. EPA Administrator, Gina McCarthy defended the proposal, citing “infrastructure challenges and the inability at this point to achieve the levels of ethanol that are in the law.” The U.S. EPA is the agency charged with the responsibility for developing and implementing regulations to ensure that fuel contains a minimum amount of renewable fuel. Together with many stakeholders, EPA developed the Renewable Fuel Standard (RFS) program, and in 2005, the Energy Policy Act (EPAct) created the first RFS program. The program established the first renewable fuel volume mandate in the United States.
The RFS program sets forth a phase-in for renewable fuel volumes beginning with 9 billion gallons in 2008 and ending at 36 billion gallons in 2022. As required under EPAct, the original RFS program (RFS1) required 7.5 billion gallons of renewable- fuel to be blended into gasoline by 2012. The EPA proposed reduction in the mandate would have significantly affected this year’s corn demand. In October 2013, the Renewable Fuels Association reported that the proposed 1.4 billion gallon reduction in the ethanol mandate would reduce corn demand by 500 million bushels, and result in a reduction in corn prices.
However, with the recent rise in corn prices, there is speculation that U.S. EPA could be reversing course. If U.S. EPA backtracks on its plans there could be more drift in corn prices. Ethanol prices are not merely dependent on what action U.S. EPA choses to undertake. On the federal level, the United States Department of Agriculture (USDA) conducts a large amount of research regarding ethanol production in the United States. Much of this research is targeted toward the effect of ethanol production on domestic food markets. So the oil industry, food companies and livestock sector will all be strong voices to determine what’s up with ethanol prices. As yet, there is no final rule from U.S. EPA.
Posted on April 29, 2014
On April 18, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.
Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:
"Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)"
Judge Simon seems to have felt more compelled than persuaded.
"Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.
So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here."
One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.
Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.
Posted on April 21, 2014
Whether a wetland or modest stream is subject to Clean Water Act regulation as a “navigable water” of the United States (navigable in law) remains a muddy question. In Rapanos v. United States, the Supreme Court established a two-part test for determining CWA jurisdiction: the body of water must be “relatively permanent” and it must be adjacent (have a continuous surface connection) to navigable waters. Justice Kennedy’s concurring opinion says waters or wetlands sharing a “significant nexus” with traditionally navigable waters are subject to CWA jurisdiction.
In 2011, the EPA and Army Corps of Engineers (ACOE) released draft guidance on “waters of the United States” which expanded the waters over which the agencies planned to assert CWA jurisdiction, compared to pre-Rapanos. Then, in September 2013, the EPA’s Science Advisory Board released a draft scientific report, “Connectivity of Streams and Wetlands to Downstream Waters,” for public comment, stating that the final version of the report would be the basis for a joint EPA and ACOE rule on CWA jurisdiction. On March 25, 2014, the two agencies released a proposed rule stating that all tributaries of traditional navigable waters and interstate waters, and adjacent water bodies, are automatically jurisdictional because they share a “significant nexus” with navigable waters. The proposed rule appears to assert default jurisdiction over many seasonal and rain-dependent streams and wetlands near rivers and streams, provided they are “tributaries.” Beyond this, the proposed rule states that jurisdiction over other types of waters with more uncertain connections to downstream waters—such as unidirectional waters, non-adjacent wetlands, and other waters outside of flood zones and riparian areas—will be evaluated on a case-by-case basis. The official version of the proposed rule was published in the Federal Register yesterday with public comments due in ninety days.
Parties understandably confused can petition for case-specific jurisdictional determinations. While a decision on such a petition may be definitive, courts have refused to allow judicial review of such decisions because they are not “final decisions” under the Administrative Procedure Act. In Belle Co., LLC v. U.S. Army Corps of Engineers, a federal district court noted that jurisdictional determinations do not impose any new or additional legal rights or obligations, but merely remind the party of existing duties under the CWA. By contrast, the Supreme Court determined in Sackett v. EPA that compliance orders issued by the ACOE or EPA following or flowing from jurisdictional determinations are subject to judicial review.
Adding to the challenge of navigating these uncertain legal waters, many states and municipalities have expanded their statutory definitions of “waters” (e.g. artificial features and groundwater) and “wetlands” (e.g. soil types and buffers) to increase the breadth and depth of state and local regulation. So, update your navigational charts and prepare for some challenging sailing!
Posted on April 17, 2014
On April 15th, the D.C. Circuit Court of Appeals affirmed EPA’s rule setting limits for emissions of mercury and other air toxics from fossil-fuel-fired electric steam generating units. The focus of the decision – and the issue on which Judge Kavanaugh dissented – was whether EPA was required to consider the costs that would be imposed by the rule. EPA said no and the majority agreed.
Section 112(n) of the Clean Air Act required EPA to perform a study of the health hazards related to hazardous emissions from EGUs prior to regulating them. How was EPA to utilize the results of the study?
"The Administrator shall regulate [EGUs] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph."
The industry petitioners and Judge Kavanaugh took the position that Congress’s use of the word “appropriate” evidenced an intent to require EPA to consider costs. To Judge Kavanaugh, “that’s just common sense and sound government practice.” However, persuasive Judge Kavanaugh may be as a matter of policy, the majority was not persuaded that the law requires a consideration of cost.
As the majority noted, nothing in section 112(n) requires that EPA consider cost. Indeed, the word “cost” is not mentioned in section 112(n). Moreover, Congress required EPA to make the “appropriate and necessary” determination based on a study of health impacts, not a study of costs. Finally, as EPA and the majority noted, the Supreme Court, in Whitman v. American Trucking Ass’ns, c
autioned against finding authority – let alone a mandate – to consider costs in ambiguous provisions of the CAA, given that there are sections of the Act which do address costs.
I’m with Judge Kavanaugh as a matter of policy (though it’s worth noting that EPA in fact did a cost-benefit analysis and found that the benefits of the rule substantially outweigh its costs). On the law, however, the dissent seems pretty much a case of ipse dixit. When the rule was promulgated, I said that I would be “stunned” if the rule was not upheld on judicial review. Notwithstanding the dissent, I’d be equally stunned if the Supreme Court flips this decision. I don’t think that there’s anything here warranting Supreme Court review.
Posted on April 15, 2014
This week, the Environmental Council of the States (ECOS) publicly announced a memorandum prepared by ACOEL members concerning important issues arising under the Clean Air Act. In May 2013 ACOEL entered into a Memorandum of Understanding with ECOS to facilitate a relationship pursuant to which members of ACOEL will provide assistance on issues of interest to ECOS.
In accord with the President’s June 2013 Climate Action Plan, EPA announced plans to use existing Clean Air Act Section 111 authority to develop greenhouse gas emissions (GHG) standards for new and existing sources. Thereafter, ECOS contacted ACOEL and requested an extensive and neutral review of the history and background of section 111(d) of the Act. A diverse group of ACOEL members from academia, private law firms, and public interest groups volunteered and produced the attached comprehensive memorandum, which was well received by ECOS. This week, ECOS made the memorandum publicly available.
In announcing the memorandum, Dick Pedersen, the President of ECOS and Director of the Oregon Department of Environmental Quality, thanked the members of ACOEL for their significant time and effort in preparing the memorandum, and added that ECOS looks forward to working with ACOEL in the future. ACOEL hopes that this memorandum will serve as a valuable resource in connection with EPA’s anticipated rulemaking efforts in this area.
ACOEL: Memorandum for ECOS Concerning Clean Air Act 111(d) Issues pdf
Posted on March 24, 2014
While the world waits for the Supreme Court to decide whether EPA can regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act, EPA and state permitting authorities have moved ahead to issue GHG permits. Some of those permits are encountering legal challenges. The Sierra Club and citizen activists are challenging permits issued by EPA Regions as insufficiently stringent, and urging EPA to use its Prevention of Significant Deterioration (PSD) permitting authority to require greater use of solar energy and carbon capture and sequestration (CCS) at new facilities.
So far, EPA’s Environmental Appeals Board has rejected two citizen challenges to GHG PSD permits issued by EPA Regions. On March 14, 2014, the Board denied the Sierra Club’s petition for review of a GHG permit issued by Region 6 for a new natural gas-fired power plant in Harlingen, Texas. In re La Paloma Energy Center, LLC. (Those of you who follow events in Texas will recall that EPA is currently running the GHG permitting program in that state, but has proposed to approve the state’s application to assume responsibility for that program.) The Board rejected Sierra Club’s arguments that the permit’s GHG emission limits were not stringent enough to meet BACT standards and that Region 6 should have required La Paloma to consider adding a solar energy component to its power plant. The Board cautioned, however, that there is no “automatic BACT off-ramp” for solar energy alternatives, and emphasized that permitting authorities must consider suggestions for adding solar energy components at new facilities on a case-specific basis.
In 2012 the Board rejected similar arguments by citizen activists who urged Region 9 to use its PSD permitting authority to require a new hybrid (gas-solar) power plant in California to reduce GHG emissions by increasing its planned solar generation capacity. In re City of Palmdale. The proposed plant was to be fueled primarily by natural gas, with a modest (10%) solar power component to satisfy California renewable energy requirements. The decisions in both City of Palmdale and La Paloma relied heavily on the Regions’ findings that there was insufficient space at the project sites to accommodate the solar power generation capacity that the petitioners were advocating.
The Palmdale decision also upheld Region 9’s rejection of CCS as a BACT requirement for that facility based on cost considerations. The estimated annual cost of CCS would have been twice the project cost (annualized over 20 years) in that case. Sierra Club has renewed the debate over the affordability of CCS in a new PSD permit appeal that is currently pending before the Board. In re ExxonMobil Chemical Company Baytown Olefins Plant. Region 6 rejected the CCS option in this case based on a finding that the cost would be disproportionately high. Stay tuned for a Board decision in the next few months . . .
*Any views expressed herein are the views of the author and do not necessarily reflect the views of the U.S. Environmental Protection Agency or the United States.
Posted on March 12, 2014
Among other changes, the new standard now defines “migration” to include the movement of vapor in the subsurface. That change makes it more clear that the environmental professional conducting a Phase I must, when identifying releases and threatened releases, evaluate the potential for vapors to migrate from contaminated subsurface soils and ground water into the indoor air of buildings on the surface.
While many lawyers and environmental professionals believed the old standard already required an evaluation of the potential for vapor intrusion, there was no consensus, and there are many Phase I reports out there that do not evaluate that potential. Because treatment of vapor intrusion under the old standard was a topic of genuine dispute among practitioners, you might think we could accept this clarification and move on. Not so.
The USEPA rolled a grenade into the tent when, in its preamble to the final rule sanctioning E1527-13, it stated that it “. . . wishes to be clear that, in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting all appropriate inquires.” (78 Federal Register 79319 (December 30, 2013).
The USEPA’s clarification has prompted some discussion in the blogosphere about potential malpractice claims against environmental professionals who failed to address relevant vapor intrusion issues in past Phase I reports. Closely related is the question of whether landowners currently relying on one of CERCLA’s landowner liability protections may be at risk due to the inadequacy of their consultant’s work. These are legitimate concerns and only time will tell if theoretic liability leads to actual liability and litigation.
However, it does not appear that the sky is falling and there are reasons to suggest that a landside of litigation over this issue is unlikely. While litigation can be expected under the right (very limited) fact pattern, the following factors should alleviate concerns about widespread litigation:
- While the aggregate Phase I universe is vast, the portion of that universe affected by the vapor intrusion issue is very limited; involving only circumstances where subsurface contamination is known or suspected.
- Even when genuine vapor intrusion questions exist, a cause of action for malpractice requires damages. Simple receipt of a substandard Phase I report is not enough. The recipient of the report must experience damages related to the failure to address vapor intrusion. I see two such scenarios:
- A landowner faces liability for remediation of a vapor intrusion problem, and does not qualify for liability protection under CERCLA because the Phase I failed to evaluate the threat of vapor intrusion.
- A landowner discovers that a vapor intrusion problem reduces the value of its property, after relying on a Phase I that did not evaluate the threat of vapor intrusion.
- In the former situation, case law demonstrates that courts are reluctant to deny CERCLA liability protection to landowners who reasonably rely on an environmental professional’s Phase I report to satisfy AAI. Reliance on an environmental professional would seem particularly reasonable and appropriate regarding a technical issue such as whether or not an assessment should evaluate the threat of vapor intrusion. If landowner liability is improbable, the specter of derivative Phase I malpractice claims is also diminished.
- Concerning the latter (reduced property value) scenario, most Phase I reports are conducted in order to satisfy AAI and qualify for landowner liability protection. While use of the ASTM standard is not limited to that task, the standard directs the environmental professional to assume, absent other direction from the user, that satisfaction of AAI is the user’s purpose. If the user obtains the liability protection it bargained for, can it maintain a malpractice action? The answer to that question will depend upon the facts of each case, but I suspect that the user will face an uphill battle.
- Only after paring down potential vapor intrusion disputes to those involving actual relevant damages do we reach the substantive malpractice question of whether or not the failure to address vapor intrusion in a Phase I is a breach of a professional standard of care.
The answer to that breach of standard question is beyond the scope of this note and will require a descent into the bowels of the ASTM standard. I suggest that the USEPA’s proclamation is not dispositive because it addresses compliance with its own AAI requirement, not compliance with the ASTM standard guiding the environmental professional; a distinction that may make a difference.
For transactions in the pipeline when the December 31, 2013 final rule was promulgated, most will not be affected because they do not present the particular facts and circumstances (i.e., subsurface contamination) triggering a vapor intrusion assessment. In those transactions where vapor intrusion is an issue, however, it is key that AAI be completed prior to the acquisition of property. For pending transactions, deficient Phase I assessments should be revised or supplemented to address vapor intrusion potential. If the property has already changed hands, the new owner’s claim to any of the CERCLA landowner liability protections will be at risk.
How great a risk? Time will tell. But it is clear that good faith arguments that vapor intrusion need not be part of new Phase 1 assessments are no longer tenable.
Posted on February 18, 2014
The valleys and mountains of the Great Basin hold cold air in when a high pressure parks itself overhead, with the result that the valleys with significant populations, primarily the 100+ mile Wasatch Front, are subject to a wintertime PM2.5 grunge that builds up until the next storm front moves in to clear it out.
Although Salt Lake City and other parts of the state are in compliance with the annual PM2.5 NAAQS, exceedances of the 24-hour NAAQS have been recorded during inversion periods since 2006, when EPA lowered that standard from 65 μg/m3 to 35 μg/m3. As a result, Utah is going through an arduous PM2.5 state implementation plan (SIP) revision process to address the PM2.5 nonattainment.
Because we can’t change the topography around here or install fans large enough to blow air out of the valleys, the state must seek reductions in emissions that contribute to the wintertime PM2.5 exceedances. Nearly three-fifths of those emissions are from car and truck emissions. About thirty percent of the contributing emissions are from area sources and wood-burning fireplaces and stoves. And the rest of the emissions –only about a tenth of the PM2.5 precursor and direct emissions – are contributed by large industrial sources in the airshed.
The proposed SIP seeks some reductions from the large industrial sources, which must be retrofit not with RACT but with the equivalent of BACT, notwithstanding hundreds of millions of dollars of pollution control improvements already installed over the last decade. The rest of the PM2.5 emissions to be reduced during inversions must come primarily from mobile source and area emissions.
The modeling underlying the SIP shows that attainment will barely be reached by the 2019 attainment date. But, with the D.C. Circuit throwing out the PM2.5 implementation rule a year ago and requiring EPA to promulgate a new one under more restrictive provisions of the CAA and the predictable citizen’s suits, who knows if attainment can be achieved short of literally turning out the lights and leaving town.
The Utah Legislature is in session and legislators are falling over each other trying to show that they care about cleaner air. However, there is not much state legislators can do, given that the emissions and fuel standards for mobile sources are set by the federal government (with states having the option of adopting California standards under certain circumstances). So, the state is squeezed between the Wasatch Mountains on the one side and the Clean Air Act on the other. It might be easier to cart off the mountains than to bring the Clean Air Act requirements into alignment with the real world.
Posted on February 11, 2014
Last week, EPA released its second external review draft of an updated Policy Assessment on the national ambient air quality standard for ozone. It also released updated draft risk and exposure assessments. To no one’s surprise, the new drafts confirm support for lowering the ozone NAAQS from 75 ppb to a range of 60 ppb to 70 ppb.
Why is this not a surprise? Because, as I noted some time ago, the prior draft policy assessment also supported a NAAQS in the range of 60 ppb to 70 ppb. Moreover, the Clean Air Science Advisory Committee weighed in on the prior draft, supporting a standard in the 60 ppb to 70 ppb range. In fact, before getting cold feet, CASAC had indicated that the data would support a standard below 60 ppb.
Courts’ deference to CASAC determinations on these issues is pretty well established. It seems clear that EPA has to lower the NAAQS to at most 70 ppb in order to survive judicial review. It’s not even obvious that 70 ppb would stick, though that will be clearer after CASAC has reviewed this most recent draft Policy Assessment.
The other significant question is when EPA will actually issue the new standard. After all, EPA was prepared to issue a new standard in 2011 or early 2012, when the White House put the proverbial kibosh on EPA’s plans. Will EPA somehow manage to delay issuance of the new standard until after the November elections? Now that the Super Bowl is over, I think that the Vegas bookies are putting their money on after.
Posted on January 24, 2014
EPA has touted water quality trading for more than a decade as a viable tool for combating water pollution, particularly pollution due to excess nutrients and sediment. But the Clean Water Act contains no express authority for water quality trading or offsets, and some environmental groups view trading as a “license to pollute” that violates the Clean Water Act’s promise to eliminate the discharge of pollutants into waters of the United States.
Last month a federal district court issued a final ruling in the first reported challenge to the legality of water quality trading. The court dismissed the action without reaching the legality of water quality trading. Instead, the court held that the plaintiff environmental groups (Food and Water Watch and Friends of the Earth) lacked standing and that EPA’s “authorization” of trading in the Chesapeake Bay TMDL was not a final agency action. Food and Water Watch v. EPA, No. 1:12-cv-01639 (D.D.C. decided December 13, 2013).
Although the court’s decision did not address the substantive legality of water quality trading, the case still presents four interesting aspects that may prove instructive on what to expect in future challenges.
First, environmental groups split over the question of joining the challenge to water quality trading. It is widely rumored that Food and Water Watch actively solicited support from environmental groups involved in Chesapeake Bay issue but met with stiff resistance. It appears that the other environmental groups’ support for the Chesapeake Bay TMDL overrode any interest they might otherwise have had in supporting a challenge to the legality of water quality trading.
Second, the defense of water quality trading made for strange bedfellows. Three parties intervened as defendants. One was a group representing municipal point source dischargers who support the Chesapeake Bay TMDL (National Association of Clean Water Agencies). Two were non point source groups who are actively challenging the legality of the Chesapeake Bay TMDL in another case (American Farm Bureau and National Association of Home Builders). The non-point source representatives argued that the trading component of the Bay TMDL would be important and valuable to their members if their challenge to the validity of the Bay TMDL in the other case was unsuccessful.
Third, the court’s decision on standing, ripeness, and the question of final agency action suggests it may be difficult to litigate the basic legality of water quality trading until a program is fully established and permits allowing credit for trades are issued. EPA argued successfully that no actual or imminent injury to the plaintiffs was caused by the Chesapeake Bay TMDL’s express reference to trading as a means for meeting the waste load allocations. According to this argument, the TMDL did not compel any trades; it simply acknowledged that states in the Chesapeake Bay watershed might use trading as a tool in developing permits that implement the TMDL. Carrying this argument to its logical conclusion, one could envision the possibility that there would be no basis for private party standing to challenge the legality of a trading program until after a stream has been listed as impaired, a TMDL has been performed, a trading program has been established, and permits have been issued allowing credits for trades within the program. Litigating the legality of water quality trading at such a late stage would presumably face a significant task in unwinding the momentum of such a fully developed administrative structure.
Fourth, given the success of EPA’s standing and ripeness arguments, it seems unlikely that there will be any definitive judicial ruling on the legality of water quality trading any time soon. The partisan division in Congress makes clarifying legislative action even less likely. As a consequence, EPA’s success in defending against the Food and Water Watch lawsuit may have the ironic result of postponing the day when states and permit holders will have a clear and definitive answer regarding the basic legality of water quality trading.
Posted on January 23, 2014
As 2013 drew to a close, USEPA amended its All Appropriate Inquiries Rule (AAI Rule) and anticipates that purchasers and environmental professionals will “embrace” the recently published ASTM International E1527–13 "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process," commonly referred to as the “ASTM Phase I Standard.” Although the Agency had initially indicated the old flame of the ASTM E1527-05 standard was just as attractive, the final AAI Rule makes clear that USEPA considers the 2013 standard to have many new charms and recommends its use. Further, the Agency has indicated that the old standard is absolutely replaceable -- and plans a rulemaking to remove the 2005 standard, perhaps as early as this spring.
USEPA warns that the regulated community should not be naughty. The Agency will keep an eye on the new relationship and threatens that if the regulated community doesn’t get sweet on the new standard (if it is not being “widely adopted”), then USEPA may further modify the AAI rule to explicitly require activities under the updated standard.
The Agency believes the ASTM E1527–13 improves upon the E1527–05 standard and reflects evolving best practices and the level of rigor that will afford prospective property owners necessary information when making property transaction decisions and meeting continuing obligations under the CERCLA liability protections. In particular, the new ASTM E1527–13 standard enhances the previous standard with regard to the delineation of historical releases or recognized environmental conditions at a property. It also makes important revisions to the standard practice to clarify that all appropriate inquires and Phase I environmental site assessments must include, within the scope of the investigation, an assessment of the real or potential occurrence of vapor migration and vapor releases on, at, in or to the subject property.
USEPA, perhaps inadvertently, couldn’t let go without complimenting “the ex” – and may have created some litigation issues. The Agency went out of its way to opine that the prior standard already called for identification of vapor release issues and vapor migration issues. There has been some legitimate debate on whether the ASTM E1527-05 standard was clear on that point. Some attorneys anticipate additional malpractice litigation against environmental professionals where vapor issues weren’t adequately addressed in Phase I assessments issued between 2005 and 2014 that claimed to comply with the standard.
Apologies to the Gershwins and Nat King Cole, but I expect the ASTM E1527-13 is entirely embraceable – to the extent that environmental professionals are able to follow detailed consensus standards written by a team of engineers and lawyers. Many environmental lawyers have concluded that even in late 2013, most ASTM Phase I Standard site assessments that purported to meet the ASTM standards failed to measure up.
Posted on January 21, 2014
The EPA Audit Policy, “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” adopted in 1995, 60 Fed. Reg. 66,706 (Dec. 22, 1995), amended at 65 Fed. Reg. 19,618 (Apr. 11, 2000), was targeted by EPA for abandonment in 2012. Perhaps in response to resounding objections by industry and outside counsel, EPA has not yet dismantled this cherished avenue toward forgiveness.
For counsel productively utilizing the EPA’s Audit Policy, EPA’s announcement that it intended to abandon the Audit Policy, particularly in the context of Next Generation Enforcement and budgetary cutbacks in “boots on the ground” inspections, created significant concern that industry would be caught in a communication and policy void that would lead to more punitive yet unnecessary enforcement proceedings. While EPA has removed the possibility of e-reporting per its Audit policy electronic disclosure website, EPA has maintained regulated entities’ ability to utilize the Audit Policy by directly reporting to regional Audit Policy staff. See EPA’s Audit Policy website here. Hopefully, EPA will continue to recognize the many benefits resulting from continued support of the Audit Policy, particularly in the context of more remote enforcement strategies, fewer “boots on the ground” and heavier reliance on state enforcement resources.
Audit policy – History
In response to developing state audit privilege legislation, EPA developed an interim policy addressing the scope of “privilege” allowed for voluntary environmental audits and their findings. 60 Fed. Reg. 66,709 (March 31, 1995). Seeking to avoid litigation regarding the scope of privileged environmental audit findings, EPA’s interim policy offered incentives to conduct voluntary audits where the findings were disclosed and promptly corrected. EPA issued its final Audit Policy in 1995, with the specific purpose of enhancing protection of public health and the environment by encouraging regulated entities to voluntarily discover, disclose, correct and prevent violations of Federal enforcement law. The benefits offered by EPA’s 1995 final Audit Policy included reductions in the amount of civil penalties, possible elimination of gravity-based penalties, and a determination not to recommend criminal prosecution of disclosing entities. EPA’s adoption of the 1995 Audit Policy followed five days of dialogue, hosted by ABA’s SEER (then SONREEL) with representatives from regulated industry, states and public interest organizations which identified options for strengthening the former interim policy and included changes reflecting insight gained through this ABA dialogue, over 300 comments received and EPA’s practical experience in implementing the interim policy. Since its adoption, EPA has issued several guidance documents, including EPA’s Audit Policy Interpretive Guidance (January 1997), Audit Policy; Frequently Asked Questions (2007); and EPA’s Audit Policy: Tailored Incentives for New Owners, 73 Fed. Reg. 44, 991 (Aug. 1, 2008), all available here.
Enforcement budgetary constraints
In the face of fierce political opposition and severe budgetary cutbacks, EPA issued public statements regarding areas where resources would be cut back or eliminated. Specifically, on April 30, 2012, EPA’s OECA issued its “National Program Manager (NPM) Guidance” to EPA’s regional offices proposing to spend no resources processing self-disclosures under the Audit Policy beginning with EPA’s 2013 Fiscal Year. In the NPM Guidance, EPA stated its position that internal compliance reviews had become more widely adopted by the regulated community as part of good management, that most violations disclosed under the Policy were not in the highest priority enforcement areas for protecting human health and the environment, and that EPA could reduce its investment in the program to a limited national presence without undermining the incentives for regulated entities to do internal compliance reviews to find and correct violations with potentially a modified Audit Policy that is self-implementing. See the FY2013 OECA NPM Guidance (Publication Number – Final: 305R12001) available here.
With the issuance of the April 2012 NPM Guidance came a strong response by regulated entities. Members of the national environmental bar, including individual practitioners, the American College of Environmental Lawyers and the Corporate Environmental Enforcement Council, reached out to the EPA and requested discussion, urging EPA to retain the Audit Policy. See e.g., related ACOEL blog postings available here, and CEEC letter to Cynthia Giles, Assistant Administrative, EPA OECA (Feb. 8, 2013), available here.
Common arguments defending the continued implementation of the Audit Policy include the fact that the Audit Policy serves as the basis for a continued culture of compliance even in landscape of dynamic changes to industry and regulation, quantifiable benefits in achieving compliance, as well as serving as a consistent baseline for states adopting their own audit policies.
EPA’s Promotion of Next Generation Enforcement
In 2012, EPA began promoting its Next Generation Compliance initiative. See Next Generation Compliance article from Environmental Forum, republished here. With EPA’s NGC, EPA is seeking to streamline federal enforcement oversight with regulations adopting “built-in” compliance, advanced pollution monitoring, electronic reporting, increased transparency and innovative enforcement strategies. EPA’s examples of “built-in” compliance include standards for manufacturers of mobile sources and air pollution control equipment, where compliance with standards are certified initially by the manufacturer, rather than relying initially on post-installation field testing. Following installation of air pollution control equipment, EPA’s approach would utilize advanced pollution monitoring to evaluate compliance of operating air pollution control equipment. Advanced pollution monitoring would also include fence-line monitoring and remote sensing techniques including infrared cameras. Examples of electronic reporting include NPDES Electronic Reporting, see 78 Fed. Reg. 46006 (July 30, 2013) (proposed rule), and EPA’s Toxic Release Inventory electronic reporting data based, TRI-MEweb, available here. With electronic reporting, greater electronic availability of data allows greater transparency of reported data. Finally, innovative enforcement strategies build on advanced monitoring, electronic reporting and third-party verification, coupled with industry sector approaches, including industry wide recognition and notification of noncompliance, followed by set compliance deadlines and, if necessary, enforcement.
EPA’s Reduced Enforcement Goals for 2014-2018
On November 19, 2013, EPA published its Draft 2014-2018 Strategic Plan, with public comment ending on January 3, 2014. 78 Fed. Reg. 69412 (Nov. 19, 2013). Comparing EPA’s proposed 2014-2018 enforcement goals to its 2011-2015 enforcement goals shows that EPA intends to significantly cut back on the number of inspections as well as many other enforcement goals. Specifically, EPA is reducing its 5-year cumulative inspection and evaluation goal from 105,000 inspections to 70,000 inspections. EPA expects to initiate fewer civil judicial and administrative enforcement cases, setting its initiation goal at 11,600 compared to an earlier 19,500, and conclude fewer cases, 10,000 compared to an earlier 19,000. Compare Draft FY 2014-2018 EPA Strategic Plan, available here, to FY 2011-2015 EPA Strategic Plan, available here.
Implications of NGC and Reduction in Inspections
EPA’s Next Generation Compliance approaches, coupled with significantly reduced inspections, may seem like a relief to some. However, EPA’s NGC emphasizes remote monitoring methods and automatic electronic reporting. In other words, data will be reported electronically, potentially without the necessary context required for a full compliance evaluation. However, numbers alone do not allow a conclusive compliance determination. Reliance on mere data without the context achieved with an in-person inspection raises risks that enforcement actions, albeit reduced in number, may be allowed to proceed despite facts that mitigate against taking such action. Of course, this risk varies depending upon the regulatory program and may be less significant where delegated states maintain sufficient budgets for inspections. However, this concern remains magnified where qualitative data, such as, for example, fence-line monitoring and use of remote infrared cameras, may be relied upon in the Clean Air Act enforcement context to create a presumption of noncompliance, potentially collected in a manner that is divorced from actual quantitative point-source emission data and permitted parametric operating conditions which facilities rely on to demonstrate ongoing compliance. While regulated entities maintain documentation demonstrating ongoing compliance, the threat remains that such NGC techniques could mire entities in unnecessary enforcement actions where an in-person inspection could preempt such proceedings.
In this uncertain enforcement environment, regulated entities will likely want to continue to directly rely on the assurance provided by EPA’s Audit Policy, as well as state audit policies adopted pursuant to, and maintained consistent with, EPA’s Audit Policy and the policies and principles therein.
As of January 2014, EPA continues to allow regulated entities to avail themselves of EPA’s Audit Policy by reporting to named regional EPA Audit Policy staff. Hopefully, EPA’s dismantling of its electronic Audit Policy reporting program constitutes sufficient savings to allow EPA’s regional offices to continue accepting Audit Policy disclosures.
Posted on December 19, 2013
In Sackett v. EPA, the Supreme Court held that pre-enforcement review is available to challenge an order concluding that parties had violated the Clean Water Act by filling a wetland without a permit. Practitioners have wondered whether, in response to Sackett, EPA would take steps to avoid review, such as by issuing warning letters instead of orders. In a recent case, EPA employed another tactic. EPA withdrew an enforcement order, hoping thereby to avoid judicial review under Sackett by claiming that the case was now moot. Not so fast, a court in West Virginia concluded, EPA’s position is still reviewable. Alt v. EPA, 2013 WL 5744778 (N.D. W.Va. No. 2:12–CV–42, Oct. 23, 2013), available here.
In the Alt case, EPA issued an enforcement order against Lois Alt, the owner of a poultry farm, on the grounds that Alt failed to obtain a Clean Water permit for storm water discharges that allegedly contained manure. Alt filed suit in U.S. District Court in West Virginia challenging the EPA order based on the Supreme Court’s Sackett decision. The American Farm Bureau intervened because of concern over EPA’s position on agricultural storm water.
Subsequently, EPA withdrew the order against Alt, nominally because Alt had taken steps to remedy environmental harm -- or did EPA foresee an unhappy ending in court? In any event, EPA filed a motion to dismiss the lawsuit as moot. Alt opposed EPA’s motion to dismiss, arguing that EPA would likely resume its unlawful conduct after the case is dismissed. The district court denied the motion on the grounds that EPA had not changed its underlying position concerning whether the discharges were agricultural storm water exempt from permit requirements. The district court noted that EPA reserved the possibility of reissuing the order if there was a significant change in the poultry farm’s operations, and the intervenors showed that EPA’s alleged assertion of authority can be expected to continue. In short, EPA’s position was reviewable even though the order that provoked the lawsuit had been withdrawn by EPA. As Jimmy Reed said in his classic blues song, “You can run, but you can’t hide.”
If that wasn’t enough to ruin EPA’s day, the court went on to reach the merits of EPA’s position concerning the need for a NPDES permit and granted summary judgment for Alt. The court held that no permit was required because the discharges were exempt as “agricultural storm water discharges.” The court rejected EPA’s argument that the discharges did not have an agricultural purpose, concluding that the poultry operation was agricultural, that the incidental manure was related to the raising of poultry, and that the runoff from the farm was storm water caused by precipitation.
The Alt decision is significant both for its review of an EPA position underlying an order that had been withdrawn and for its decision concerning the agricultural storm water exemption.
Posted on December 17, 2013
Purchasers and lessees of commercial or industrial properties know to obtain Phase I environmental site assessments to identify the presence of contamination - so-called recognized environmental conditions (RECs) - because of the very substantial liabilities these conditions may create. And their lenders generally require them. The industry standard for Phase I’s is based on EPA regulations that flesh out Superfund’s “all appropriate inquiry (AAI)” standard. In those regulations, EPA expressly approved use of a standard developed by ASTM, i.e., E1527-05. ASTM recently issued a new standard, E1527-13, that EPA initially approved in a final rule in August, but, as a result of unfavorable comment, withdrew in October. Pending the agency’s promulgation of that rule’s companion proposal, expected by the end of this year, the question is which standard purchasers and lessees should use - and which standard should their lenders require - in the meantime.
In addition to providing information pertinent to managing environmental risks associated with contamination, the performance of a Phase I that satisfies AAI also may help establish a defense for the purchaser/lessee under Superfund should contamination be found. Superfund provides three transaction-related defenses that each require AAI, the most pertinent of which is the so-called bona fide prospective purchaser defense. Congress required that EPA promulgate standards establishing AAI and it is those regulations - and the approved ASTM standard - that have become the industry standard for Phase I’s.
As EPA notes, the new ASTM standard includes a number of differences from the prior version, which arguably only makes the standard more rigorous. Among other things, the new standard distinguishes between historical RECS that have been regulatorily resolved or that allow for unrestricted residential use, which are no longer RECs, and those that though regulatorily resolved, require either institutional or engineering controls because contaminants remain in place and that are now referred to as “controlled” RECs. It also clarifies that vapor intrusion - the potential for vapors from contaminants in soils and groundwater to migrate into buildings where they may concentrate at levels that pose threats to human health - is to be considered a REC, like groundwater migration, and not excluded from consideration because it may affect indoor air quality, which itself is generally not within the scope of AAI. The fact the two standards are different creates some regulatory uncertainty.
The response to this temporary dilemma is that purchasers, lessees and lenders should be able to have their cake and eat it too by having environmental professionals indicate that they have satisfied both standards. Environmental professionals that perform Phase I’s and satisfy ASTM E1527-13 presumably will be satisfying ASTM E1527-05 as well. EPA informally has suggested that environmental professionals use the new standard and, in their reports, conclude that they have satisfied both. Presumably, the environmental professional’s certification should reference both as well.