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October 29, 2014

Fourth Circuit to Address CERCLA's Intent-to-Dispose Standard


On October 30, the Fourth Circuit will hear oral argument in a closely watched Superfund case, Duke Energy Progress, Inc. v. Consolidation Coal Co. The appeal involves the “intent to dispose” standard for arranger liability that the Supreme Court set out in Burlington Northern v. United States.


CERCLA Arranger Liability
Liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) includes any person who “arranges for” the disposal or treatment of a hazardous substance. Five years ago, in Burlington Northern, the Supreme Court held that “an entity may qualify as an arranger . . . when it takes intentional steps to dispose of a hazardous substance.” In so holding, the Court established the endpoints of the arranger-liability spectrum.


Liability, the Court said, would attach if “an entity were to enter into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance.” But liability would not attach if an entity sold “a new and useful product” that the purchaser later, unbeknownst to the seller, disposed of in a manner that resulted in contamination.


Ward Transformer Site
This litigation involves cleanup costs for PCB contamination at the Ward Transformer Superfund Site, a former transformer sales and repair facility in North Carolina. The plaintiff, Consolidation Coal Co., and third-party plaintiff PCS Phosphate are appealing the district court’s dismissal of defendant Georgia Power on summary-judgment grounds. (The parties in agreed to use a test-case process “to streamline the litigation.” Carolina Power & Light Co. v. 3M Co., Nos. 5:08-CV-00460, 5:08-CV- 00463, at *2 (E.D.N.C. Apr. 30, 2013). Georgia Power agreed to serve as the test case for the defendants that allegedly sold used transformers to Ward.)


According to the parties’ filings, Georgia Power sold over 100 used transformers to Ward in the early 1980s, which Ward repaired prior to reselling them to third parties. Not all of the transformers were drained prior to shipment to Ward, and some had PCB-containing oil. Therefore, the district court conducted a fact-intensive inquiry to determine Georgia Power’s alleged intent for CERCLA liability purposes.


The district court held that specific intent to dispose of hazardous substances must be proven to meet the arranger-liability standard contemplated by Burlington Northern. Applying that standard to Georgia Power’s transactions, the plaintiffs argued that the fact that Ward had to repair the transformers prior their resale, including the removal of defective parts, constituted arrangement for disposal. The district court disagreed, holding that (1) the transformers were not leaking upon sale to Ward; (2) the transformers had marketable value, even if repairs were required; and (3) Georgia Power had no knowledge that Ward might spill any PCB-containing oils during the course of such repairs. The district court therefore concluded that Georgia Power could not be held liable as a CERCLA arranger as a matter of law.


The Fourth Circuit is expected to issue a decision by April 2015.


Doug Arnold, Sarah Babcock, and Geoff Rathgeber, of Alston & Bird, LLP,


 

October 10, 2014

NJ Supreme Court Allows Early Contribution Claims under Spill Act


Parties sued by the New Jersey Department of Environmental Protection (DEP) for remediation now have an immediate right to seek contribution from other potentially responsible parties. Following the unanimous ruling by the New Jersey Supreme Court in Magic Petroleum Corp. v. Exxon Mobil, parties conducting remediation no longer have to wait until after the remediation is complete, nor do they need to obtain written approval of a remediation plan from the DEP, before bringing contribution claims against other parties in an effort to recoup cleanup costs. This will allow courts to assign liability among parties prior to the completion of remediation, even though the total cost of the remediation may not yet be known.


In Magic, the DEP sued Magic Petroleum for expenses incurred during the remediation of hazardous material on land owned and operated by the company in Clarksburg, New Jersey. Magic Petroleum bore the entire cost of the cleanup due to the DEP’s determination that it was a discharger at the site. Magic Petroleum filed a contribution claim against the neighboring land owner, and several other parties, alleging that they were responsible for a portion of the cleanup costs. The trial court dismissed the claim and the Appellate Division affirmed, reasoning that, among other things, a contribution claim could only be filed after complete remediation of the site.


The supreme court looked at the history and purpose of the Spill Act, as well as the DEP’s authority to restore lands affected by environmental contamination. The court noted that the Spill Act was amended to clarify that dischargers ordered by the DEP to pay the entirety of cleanup costs were entitled to seek contribution from other responsible parties, and that such claims should be brought before a court, giving courts broad discretion to allocate the costs of cleanup and removal among various parties using appropriate equitable factors. Thus, under the Spill Act, the legislature established a private right of action in contribution so that dischargers designated by the DEP could share the cost of remediation with additional potentially responsible parties not initially designated by the DEP.


The supreme court also addressed the doctrine of primary jurisdiction (where a court favors allowing an agency an initial opportunity to decide an issue in which the court and the agency have concurrent jurisdiction). The court noted when there is concurrent jurisdiction, disputed factual issues should be evaluated by the agency because of its expertise, but legal issues should be left to the court to decide. In analyzing several factors, i.e., the “Gore factors,” which are often used by federal courts, the supreme court ultimately concluded that primary jurisdiction was not applicable to Magic Petroleum’s contribution claim because, among other reasons, contribution claims do not necessitate the expertise of the DEP. Assigning liability and analyzing expert testimony in contribution cases are matters within the conventional expertise of judges. Thus, the court concluded that the DEP and the courts share concurrent jurisdiction over the recovery of cleanup costs. Notably, the court recognized that it would be contrary to the stated goals of the Spill Act—which promotes prompt remediation—to force a discharger to bear the burden of the entire cleanup cost until such time as the remediation is complete. Site remediation can take many years and involves substantial expense. To force one party to shoulder those expenses could prevent remediation from proceeding promptly. Similarly, the court noted that compelling one party to pay all the cleanup costs would be adverse to the stated goals of the Spill Act, particularly when that one party was not entirely at fault for all of the contamination. Thus, the Court held that a party determined to be a discharger and held responsible for cleanup costs by the DEP is entitled to bring a contribution claim against other potentially responsible parties before the final amount of cleanup costs is determined.


Separately, the court also found that a contribution plaintiff need not obtain the DEP’s written approval of the investigation and remediation plan prior to filing a contribution claim.


The implications of this decision are particularly significant to the regulated community. For entities bearing the sole brunt of remediation, this decision is welcome news as it allows courts to make a percentage allocation of liability prior to the final tally of cleanup costs. Most spill cases go on for many years and involve multiple parties, some of which may have initially escaped the DEP’s crosshairs. Now, responsible parties will no longer be able to sit on the sideline and avoid paying their fair share until after remediation is complete.


Kevin R. Doherty, Blank Rome LLP, New York, NY


 

October 10, 2014

7th Cir. Addresses UAO Enforcement and CERCLA Arranger Liability


The U.S. Court of Appeals for the Seventh Circuit recently addressed several important Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) issues in litigation arising from the cleanup of polychlorinated biphenyls (PCBs) in the Lower Fox River in Wisconsin. They include whether the Environmental Protection Agency (EPA) is permitted to obtain permanent injunctive relief to enforce a unilateral administrative order (UAO) and the type of “intent” necessary to establish a valid claim for arranger liability under CERCLA.


United States v. P.H. Glatfelter Co., 2014 WL 4755483 (7th Cir. Sept. 25, 2014) and UAO Enforcement
In 2007, the EPA issued UAOs to several potentially responsible parties (PRPs) directing them to perform the remedial work for Operable Unit Nos. 2–5 in the Lower Fox River. NCR Corp. initially complied with the UAO, but reduced its work in 2011 before stopping work altogether in 2012. The EPA sued NCR and certain other UAO recipients and in 2012 obtained a preliminary injunction compelling NCR to resume UAO work in Operable Unit No. 4. The Seventh Circuit affirmed the preliminary injunction on appeal. United States v. NCR Corp., 688 F.3d 833 (2012). Following a subsequent bench trial, the district court ruled in the government’s favor and entered a permanent injunction requiring NCR and the other remaining non-settling PRPs to complete the work required by the UAO.


The Seventh Circuit vacated the permanent injunction and held that the equities a district court is required to consider when it imposes permanent injunctive relief can play no part in an action to enforce an EPA UAO. The appellate court added that when the UAO involves implementing a complex cleanup, permanent injunctive relief may run afoul of the “reasonable detail” requirement of Rule 65(d)(1)(C) of the Federal Rules of Civil Procedure, “which requires that very injunction ‘describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.’” The Seventh Circuit also distinguished its prior approval of the preliminary injunction, which required NCR to resume the UAO work, on the grounds that such relief can be appropriate in “emergency” situations. Lastly, the court noted that the EPA has other potential recourse in the event of UAO noncompliance, including seeking declaratory relief and civil penalties.


NCR Corp. v. George A. Whiting Paper Co., 2014 WL 4755491 (7th Cir. Sept. 25, 2014) and CERCLA Arranger Liability
In Burlington Northern & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 601 (2009), the U.S. Supreme Court held that a valid claim for CERCLA “arranger liability” requires showing that a defendant took “intentional steps to dispose of a hazardous substance.” 42 U.S.C. § 9607(a)(3). Applying that legal standard, the Seventh Circuit affirmed the district court’s ruling that NCR’s predecessor, Appleton Coated Paper Co., did not “arrange for disposal” when it sold a byproduct containing PCBs to recycling paper mills. Two recycling mills argued that CERCLA liability should attach because Appleton knew (or should have known) that the recycling mills would separate out the PCBs and discharge them into the Fox River. In other words, Appleton’s actions amounted to “intentional steps” to dispose of the PCBs in its byproduct given that Appleton knew that some of the PCBs would end up in the river.


The Seventh Circuit disagreed. In its view, these transactions constituted a sale of a useful product into a competitive market, even if it was not a “new” product and even though the sales proceeds did not cover the costs incurred in preparing the byproduct for sale to the recycling mills. The Seventh Circuit also noted that after Appleton sold its byproducts to the recycling mills, what was ultimately done with the PCBs embedded in the byproduct “was completely out of the seller’s hands.”


Conclusion
The breadth of CERCLA’s liability continues to be a moving target. In addition to these two Seventh Circuit opinions, there have already been a number of important appellate decisions this year, including rulings from the U.S. Supreme Court and the Second, Sixth, Eighth, and Ninth Circuits. Importantly, the Seventh Circuit’s holding in Glatfelter makes clear that CERCLA does not permit the EPA to make an end-run around the legal requirements for permanent injunctive relief. Similarly, the holding in Whiting reconfirms that CERCLA arranger liability is not limitless. The Fourth Circuit will be hearing oral argument later this month on another arranger-liability appeal, so we expect at least one more CERCLA appellate ruling soon.


Doug Arnold, Jonathan Wells, and Ronnie Gosselin, Alston & Bird


 

September 25, 2014

7th Circuit Reverses Parts of District-Court Decision in Fox River PCB Litigation


On September 25, 2014, the 7th Circuit Court of Appeals issued a long-awaited decision regarding the cost-recovery and contribution rights of numerous parties related to polychlorinated biphenyl (PCB) contamination in the Fox River and Green Bay. Of particular note, the court reversed the decision that Appvion (formerly Appleton Paper) had no right to seek cost recovery under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Appvion was originally identified as a potentially responsible party but later held by the court to only be liable as the contractual indemnitor of NCR Corp. The court of appeals also reversed the district court’s decision that NCR was 100 percent responsible for contribution based on its conclusion that the district court had only expressly considered one factor, i.e., the knowledge of the parties.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

March 21, 2014

No Class Action for Property-Damage Claim


In a decision dated January 17, 2014, the Seventh Circuit Court of Appeals in Parko et al. v. Shell Oil Co. et al., (2014 WL 187184) reversed a class certification on the grounds that issues common to the class members did not predominate over individual differences. The case involved a purported class of Roxana, Illinois, property owners allegedly impacted by contamination that may have occurred over a 90-year period. The appellate court expressed skepticism as to whether the plaintiffs could tie declining property values to alleged releases from the facility, especially considering values have declined overall in recent years. Even if there was viable link between the contamination and declining property values, the levels of contamination and injury would be different for each property and, as such, class certification was not appropriate.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

November 6, 2013

No NDPES Permit Needed for Poultry Discharges Outside Production Areas


In a decision with broad implications for production agriculture, a West Virginia federal judge concluded that Clean Water Act (CWA) permits are not required solely on the basis of dust, feathers, and chicken litter from poultry barns that are washed from areas outside of a facility’s production area to watercourses subject to federal jurisdiction by rainfall. In Lois Alt, d/b/a Eight Is Enough v. EPA¸the district court concluded that stormwater runoff containing dust, feather, manure/litter, and dander particles discharged from Alt’s poultry facility that landed outside the production area were agricultural stormwater discharges exempt from CWA permit requirements. The decision was yet another setback for the EPA’s lengthy efforts to require concentrated animal feeding operations (CAFOs) to obtain National Pollutant Discharge Elimination System (NPDES) permits despite the absence of discharges of pollutants from chicken and hog barns into federally regulated waters.


For over a decade, the EPA has attempted to require CAFOs to obtain NPDES permits. However, because permits are only required for point sources that discharge pollutants and because CAFOs are generally designed to not discharge pollutants, federal courts have twice invalidated EPA regulations that sought to impose broad permitting requirements on CAFOs. See Waterkeepers Alliance, Inc. v. EPA, 399 F.3d 486 (2nd Cir. 2005) and Nat’l Pork Producers Council v. EPA, 635 F.3d 738 (5th Cir. 2011). Instead, the EPA may only seek to require a CAFO to obtain an NPDES permit following “actual discharges” from their operations.


On November 14, 2011, the EPA issued an administrative compliance order (ACO) to Lois Alt, the owner of an eight-house broiler operation in West Virginia. In its ACO, the EPA determined that Alt violated the CWA by discharging pollutants without a permit and sought to compel her to obtain an NPDES permit or face civil penalties of up to $37,500 per day and criminal proceedings. In one of the first post-Sackett challenges to an ACO, Alt sought a declaration that the EPA exceeded its authority in determining that she violated the CWA, arguing that the agricultural-stormwater exemption applied to runoff from “farmyards”—areas outside a farm's production barns, manure storage, and composting areas. The EPA, recognizing the significance of an adverse judicial decision, attempted to moot the case by withdrawing the ACO against Alt. The district court declined to dismiss the case based upon the pendency of EPA administrative actions against other farmers on similar grounds.


The district court concluded that a CAFO’s “production areas” are limited to those used for housing animals and the storage of manure/litter, mortalities, and raw materials. “Agricultural stormwater discharge” is not defined in the CWA or EPA regulations. In using its “ordinary meaning,” the Northern District of West Virginia concluded that dust, feathers, and litter discharged from Alt’s operations were indisputably agricultural in nature and would have remained in place but for the precipitation event that conveyed stormwater (which included the discharged materials) to a watercourse subject to federal jurisdiction. Based thereon, the court concluded that runoff from areas outside of a facility’s production area are agricultural-stormwater discharges exempt from NPDES permitting requirements.


The district court’s ruling, if upheld on appeal, presents yet another setback for the EPA in its continuing efforts to require production agriculture facilities to obtain NPDES permits. The court’s opinion stands for the proposition that requiring poultry and livestock producers to obtain NPDES permits based on emissions of dust and other airborne particles incidental to production agriculture goes beyond the limits of the EPA’s authority under the Clean Water Act.


Stewart D. Fried and John G. Dillard, Olsson, Frank, Weeda, Terman, Matz, P.C., Washington, D.C.


 

October 16, 2013

Supreme Court Grants Certiorari in GHG Case


On October 15, 2015, the U.S. Supreme Court granted certiorari to review the D.C. Circuit’s decision in Coalition for Responsible Regulation v. EPA, 684 F. 3d 102, (D.C. Cir. 2012) in which the D. C. Circuit decided to unanimously uphold the rules in their entirety, prompting six petitions for review from states and industry groups. The court accepted all six petitions, consolidated them for argument but is limiting that argument to the question of whether the EPA’s determination that promulgation of its greenhouse gas (GHG) regulations for new motor vehicles necessarily triggered Clean Air Act (CAA) permitting requirements for stationary sources that emit GHGs as well was permissible.


While the Court held in its decision Massachusetts v. EPA several years ago that the EPA has the authority to regulate GHG emissions under the Clean Air Act definition of “air pollutant,” it has not yet reviewed actual regulations aimed at doing so. This review of the EPA’s determination that its regulation of motor vehicles triggered application of prevention of significant deterioration (PSD) and Title V permitting requirements to stationary sources emitting GHGs above the statutory threshold will allow the high court to clarify the extent of its earlier decision in that case and address the authority the EPA has to regulate GHG emissions from other sources under other regulations.


The Court will not review or hear argument on other challenges to the EPA’s regulations and decisions upheld by the D.C. Circuit, including the endangerment finding. However, because four justices dissented in Massachusetts v. EPA, both environmental groups who opposed certiorari and the EPA are probably experiencing the chills and trembling that is fitting of Halloween month, while the high court’s decision can be likened to an early Christmas gift for the petitioners.


Let’s hope the justices make the most of this second chance, and get it right in a way that achieves clarity for the regulated community; reflects the intention of Congress that designed the CAA programs; and produces energy and economic results that are reasonably related to the substance, quantities of emissions, and types of sources being regulated.


Karen Aldridge Crawford, Nelson Mullins Riley & Scarborough, Columbia, SC


 

October 10, 2013

Medical-Monitoring Class Certification Denied


On September 30, 2013, the Southern District of West Virginia excluded the expert testimony of the plaintiffs’ experts and denied the plaintiffs’ motion to certify two medical-monitoring classes covering 30 diseases, allegedly caused by 17 substances, retroactively spanning a decade of alleged release into the air and water, against seven defendants. Coleman v. Union Carbide Corp., Civ. Action No. 2:11-0366 (S.D. W.Va. Sept. 30, 2013).


The ruling is significant because Judge Copenhaver reached the defendants’ motion to exclude the opinions of two experts for the plaintiffs—Greg Haunschild and Randy Horsak—before ruling on the plaintiffs’ motion for class certification. To do so, the court relied on the U.S. Supreme Court’s March 2013 ruling in Comcast Corp. v. Behrend, holding that district courts may evaluate the merits of the plaintiffs’ claims at the class-certification stage. He excluded Haunschild’s opinion on air pollution and dispersion because it was generic and not class-specific. Haunschild did not model any “exposures by actual members of the putative classes,” and Judge Copenhaver therefore excluded his testimony because he incorrectly used a “regulatory-based, not an exposure-based, model.” Horsak’s opinion concerning the area affected by the alleged contamination was likewise excluded because he appeared to have relied on Haunschild’s conclusions.


Judge Copenhaver held that the plaintiffs did not have class-wide proof of exposure to meet their burden under Fed. R. Civ. P. 23(b)(2) without the expert opinions of Haunschild and Horsak. For this reason, among “a veritable host of other impediments to certification” that were not identified, the court denied the plaintiffs’ motion for class certification.


Diane Wizig and Meaghan Goodwin Boyd of Alston & Bird LLP


 

October 8, 2013

50-State Survey on Innocent Landowner and/or Bona Fide Purchaser Protections


The Subcommittee of Women Environmental Litigators, one of the groups under the umbrella of the Environmental Litigation Committee, initiated a 50-state survey to address a question that our members identified as one that frequently arises for environmental litigators and other attorneys who work on projects involving contaminated properties. The question we posed to each of the authors was: Describe any statutory or regulatory provisions that your state has that are similar, or have a similar purpose, to the innocent landowner and/or bona fide purchaser protections found in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601(35), (40). See also 40 C.F.R. Part 312. Examples of such state provisions could include, but may not be limited to, state CERCLA programs, innocent-purchaser protections under other programs, or voluntary-cleanup programs that would provide protection from state enforcement actions and/or third-party lawsuits arising from the contamination. To further focus the discussion for the individual states, we excluded state environmental audit privileges; state programs that manage funds financed by taxes, surcharges, or other fees for cleanups of petroleum tanks or dry cleaners; and environmental-covenant statutes. Each of those topics could be, or has already been, addressed in its own 50-state survey.


We hope that you find this compilation of state-law protections for purchasers of contaminated property useful in your practice. Individual state author information is provided as an appendix in alphabetical order by state.


Sandra Edwards, Maggie Witherup, and Gail Wurtzler, Editors, Environmental Litigation Committee


 

July 8, 2013

SCOTUS: CA Port's Environmental Regs Violate Federal Law


In American Trucking Associations, Inc. v. City of Los Angeles, California, No. 11-798 (June 13, 2013), the Court held that section 14501(c)(1) of the Federal Aviation Administration Authorization Act (FAAAA) of 1994, 49 U.S.C. § 14501(c)(1), expressly preempts certain provisions of an agreement that trucking companies must sign before they can transport cargo at the Port of Los Angeles because the provisions in the agreement have the “force and effect of law” and relate to “a price, route, or service of any motor carrier . . . with respect to the transportation of property.” Section 14501(c)(1) provides that “[A] State [or local government] may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” The specific provisions in the agreement require trucking companies to display designated placards on their vehicles with a phone number for reporting environmental or safety concerns and to submit a plan listing off-street parking locations for each truck when not in service. To ensure that every trucking company at the port would enter into the agreement, the port made it a misdemeanor punishable by a fine or imprisonment for a terminal operator to grant access to an unregistered trucking company.


The parties did not dispute that the port’s placard and parking requirements relate to a motor carrier’s price, route, or service with respect to transporting property. The only disputed issue was whether those requirements have the “force and effect of law.” The Court acknowledged that section 14501(c)(1) draws a rough line between a government’s exercise of regulatory authority and its own contract-based participation in the market. The Court also noted that the statute’s “force and effect of law” language excludes from the clause’s scope contractual arrangements made by a state when it acts as a market participant, not as a regulator. The Court, however, concluded that the specific provisions in the agreement were classic exercises of regulatory authority that forced terminal operators and trucking companies to alter their conduct, and thus the provisions in the agreement were preempted by section 14501(c)(1). According to the Court, when the government employs such a coercive mechanism, available to no private party, it acts with the force and effect of law.


Joseph M. Peltz, Friebert, Finerty & St. John, S.C., Milwaukee, WI


 

May 30, 2013

SCOTUS Ruling May Affect Environmental and Toxic-Tort Suits


The recent U.S. Supreme Court case on standing, Clapper v. Amnesty International (Feb. 26, 2013), may have implications for environmental and toxic-tort suits claiming long-term risk of injury. The Clapper case involved a challenge to the constitutionality of the federal wiretapping law by plaintiffs who claimed there was a reasonable likelihood they would eventually be subjected to the surveillance they claimed was unconstitutional. Reversing the Second Circuit, the Supreme Court held that “allegations of possible future injury” was not sufficient to establish standing. Instead, the plaintiffs must first show that the threatened injury must be “certainly impending” to establish Article III standing.


Because many environmental and toxic-tort issues involve long-term risks that may not be apparent immediately, this definition of the “actual or imminent” standard may apply to these types of claims as well. Environmental attorneys with cases where standing is a potential issue should consider the Clapper case and how it may apply to your arguments and defenses.


Maggie Witherup, Gordon Feinblatt, LLC, Baltimore MD


 

May 29, 2013

Ninth Circuit Upholds Deregulation of Genetically Engineered Plant


On May 17, 2013, the Ninth Circuit issued an opinion in Center for Food Safety v. Vilsack, in which it upheld the Animal Plant and Health Inspection Service's (APHIS) unconditional deregulation of a genetically engineered plant, Roundup Ready Alfalfa (RRA). RRA is genetically modified to allow farmers to control weeds through herbicide application without harming the alfalfa plant. APHIS determined that RRA was not a "plant pest" under the Plant Protection Act (PPA). The PPA charges APHIS with the duty of regulating organisms that cause "injury," "damage," or "disease" to other plants. The court’s opinion dealt with “whether the agency properly determined that RRA is not a 'plant pest' under the PPA."


Environmental groups and farmers’ organizations claimed that RRA would cross-pollinate with and alter the genetic structure of conventional alfalfa plants, a process referred to as transgenic contamination, which would harm the multi-billion-dollar organic-food industry. They also feared that RRA's deregulation would lead to glyphosate-resistant weeds. But the dangers of transgenic contamination and increased glyphosate usage are not “plant pest” harms under the PPA. Although the transgenic contamination of conventional alfalfa and increased herbicide use may be adverse environmental and economic effects, they do not constitute plant disease, injury, or damage, which are the harms that the PPA requires.


Accordingly, once the agency concluded that RRA was not a plant pest, it no longer had jurisdiction to continue regulating the plant. This meant that the agency had no obligation to consult under the Endangered Species Act (ESA) or analyze alternatives under the National Environmental Policy Act (NEPA). The court further determined that APHIS was not required to consider, sua sponte, whether RRA was a noxious weed, where a petition to do so was not filed with the agency. This decision could be significant in litigation involving genetically modified plant regulation, because it holds that, under the PPA, those plants that pose a risk of causing transgenic contamination resulting from cross-pollination or where increased herbicide resistance could develop are not considered “plant pests” and not subject to APHIS jurisdiction.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

May 28, 2013

The End of the Big Climate Change Suits?


Not long ago, there were numerous climate-change lawsuits pending throughout the country, the first of which to reach the Supreme Court being AEP v. Connecticut, 131 S. CT. 2527 (2011). In that case, the Court ruled 8–0 that corporations cannot be sued for their greenhouse-gas (GHG) emissions under the federal common law of nuisance, largely because the Clean Air Act (CAA) delegates the regulation and management of carbon dioxide and other GHG emissions entirely to the EPA; this delegation supercedes any rights under federal common law.


Since this decision, the other pending climate-change lawsuits have slowly been snuffed out. One of these was Native Village of Kivalina, et al. v. Exxon Mobil Corp., et al., in which a native Alaskan village sued various oil and gas companies on the basis that global warming had caused sea-level rises that required the seaside village to relocate or be destroyed. On May 20, 2013, the Supreme Court denied Kivalina’s petition for writ of certiorari in its public-nuisance lawsuit. This means that the Ninth Circuit’s original ruling in favor of the energy companies will stand. That Ninth Circuit opinion had been largely based on the AEP v. Connecticut opinion, finding that the CAA displaced the village’s claim for $400 million in damages to fund a relocation project. Kivalina had urged in its petition that the case be controlled by Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), which held that the Clean Water Act, a statute like the CAA, did not displace a federal common-law damages claim. The district court’s original dismissal of the Kivalina suit, upheld by the Ninth Circuit, is now final. (The case is U.S. Supreme Court No. 12-1072).


Another recent climate-change lawsuit to again face dismissal is Comer v. Murphy Oil, in the Fifth Circuit. This was actually a case that went through some bizarre procedural mangling, was heard and decided by the Fifth Circuit, then later vacated without a decision, opinion, or order. The plaintiffs tried again by filing a second version of Comer in Mississippi, which was dismissed by the trial court and heard by the Fifth Circuit. On May 14, 2013, the Fifth Circuit upheld the district court’s dismissal of the suit, relying on res judicata. The Fifth Circuit said that the trial court’s decision in the original Comer suit still represented a final judgment. Because this original dismissal was on the merits and had adjudicated the jurisdiction issues of standing and justiciability, that decision controlled and this second iteration of the suit would be dismissed on res judicata grounds.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

April 11, 2013

DOI Contempt Order on Second Post-Macondo Drilling Ban Reversed


On April 9, 2013, the Fifth Circuit released an opinion in Hornbeck Offshore Services v. Kenneth Salazar, No. 11-30936, reversing a contempt ruling against the Department of the Interior (DOI). Following the 2010 Deepwater Horizon explosion and oil spill, the DOI issued a moratorium, prohibiting all new and existing oil and gas drilling operations on the Outer Continental Shelf for six months. The district court enjoined enforcement of this moratorium. The DOI withdrew its original moratorium order, known as the “May Directive,” and replaced it with the “July Directive,” which continued the suspension of drilling and was the same in scope and substance as the May Directive, albeit with a more thorough explanation of reasons for the moratorium.


Hornbeck Offshore Services, a company that wanted to resume drilling operations and the original plaintiff in the injunction suit, argued that by replacing the May Directive with the July Directive, the DOI had chosen to disobey the district court’s order enjoining the moratorium. The district court agreed, concluding that the “plaintiffs have established the government’s civil contempt of its preliminary injunction order” by clear and convincing evidence. The Fifth Circuit, however, reversed. The Fifth Circuit noted that the injunction was not as clear and broad as Hornbeck claimed, and instead that the DOI’s actions were technically not contemptuous of the injunction “as drafted and reasonably interpreted.” The court noted, however, that “Our decision is a narrow one.”


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

April 4, 2013

Old Waste Deposit Excavation Can Give Rise to Sudden and Accidental Release


In The Narragansett Electric Co. v. American Home Assurance Co., et. al, (S.D.N.Y. Apr. 1, 2013), the Southern District of New York, applying Massachusetts law, reaffirmed its February 1, 2013, decision that Century Indemnity Co. had a duty to defend Narragansett Electric Co. in a lawsuit brought by the Commonwealth of Massachusetts related to waste byproducts Narragansett’s predecessor had deposited into an old sand and gravel pit between 1930 and 1945. The district court acknowledged that Massachusetts case law had previously found the “sudden and accidental” pollution exclusion to be unambiguous and that there was a temporal component to the phrase. However, the court went on to note that in the underlying lawsuit there were allegations that the waste deposits had been excavated in 1984 during a residential development by a codefendant and that such excavations resulted in temporally sudden and accidental releases of hazardous substances.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

April 4, 2013

EPA May Proceed with Enforcement Action Against DTE Energy


On March 28, 2013, the Sixth Circuit Court of Appeals ruled that the U.S. Environmental Protection Agency (EPA) did not need to wait until post-construction emissions data became available to challenge DTE Energy Corp.'s projection that a construction project was not a "major modification," and, thus, did not require a new source review (NSR) construction permit under the EPA's Clean Air Act regulations. United States v. DTE Energy Co., 6th Cir., No. 11-2328. In so ruling, the Sixth Circuit reversed a district-court order that provided a safe harbor for owners and operators of sources that complied with pre-project recordkeeping and reporting requirements from EPA enforcement until and unless post-project emissions data demonstrated that the projection was incorrect.


In 2010, DTE undertook construction on a project at its Monroe Power Plant in Monroe, Michigan. Prior to initiating construction, DTE performed the required pre-project emission projections and determined that the project would not increase emissions sufficient to require a permit under the NSR regulations. In accordance with state and federal regulations, DTE submitted its projections to the state permitting agency and began construction. A few months later, the EPA challenged DTE's pre-project projection in federal court, alleging that the project resulted in a "significant net emissions increase" and required a NSR construction permit.


On appeal, the Sixth Circuit confirmed that the NSR regulations cannot be read to provide the EPA with the authority to "second-guess" a source's pre-project projections. Such an interpretation would effectively transform a "project-and-report scheme . . . into a [required] prior approval scheme," which the court noted was inconsistent with the plain language of the regulations. Nonetheless, the Sixth Circuit found that contrary to the district court's ruling, nothing under the regulations precluded the EPA from bringing an enforcement action at any time to "ensure that the [pre-]project projection [was] made pursuant to the requirements of the regulations." In other words, the EPA does not need to wait until post-construction emissions data become available to challenge a source's pre-project emission projections. It is worth noting, however, that the dissent called the majority opinion "logically flawed and . . . legally incorrect" on grounds that the court's opinion was inherently contradictory. As the dissent explained, the NSR regulations do not require pre-construction approval from the EPA, but "if the EPA can challenge the operator's scientific preconstruction emission projections in court . . . that is the exact same thing as requiring prior approval."


Notably, the Sixth Circuit did not side with the EPA carte blanche. The court was quick to point out that its reversal did "not constitute endorsement of EPA's suggestion[]" that DTE's pre-project projection should have demonstrated that the project constituted a major modification and required an NSR permit. And the court challenged the EPA's suggestion that a source could not intentionally limit generation to limit its post-project emissions that otherwise could retroactively require a NSR permit.


The Sixth Circuit remanded the case to the district court for further proceedings on whether the DTE project did or did not constitute a major modification and require a NSR construction permit.


David M. Loring, Schiff Hardin LLP, Chicago, IL


 

April 2, 2013

Iowa Cities Win Appeal of EPA Wastewater Rule in Eighth Circuit


On March 25, 2013, a three-member panel of the Eighth Circuit Court of Appeals unanimously struck down two Environmental Protection Agency (EPA) wastewater-treatment rules challenged by a group of Iowa cities. The rules would have forced cities across the country to spend billions of dollars if the court had upheld them. According to court documents, the EPA had estimated that complying with the blending requirements alone would have cost cities across the country $150 billion in new equipment and wastewater-storage systems. Specific to the plaintiffs in this case, compliance would have cost Des Moines between $80 million and $200 million, Ottumwa up to $60 million, and Davenport about $250 million.


One rule affects the way that cities mix water to dilute bacteria levels before it is released into streams and lakes. Court documents stated that since 1994, the EPA has allowed cities to incorporate bacteria-mixing zones to help control pollutants in water that is eventually released.


The other challenged rule addresses how cities blend wastewater from two different treatment processes during heavy rain events when their facilities are sometimes overwhelmed with water flow. The EPA had established policies of allowing blending in the early to mid-2000s.


In 2011, the Iowa League of Cities, which represents more than 870 cities in Iowa, contacted U.S. Senator Chuck Grassley for help in clarifying the EPA rules. Responses that Grassley received in two letters from the EPA became the basis of the legal challenge.


In its letter regarding the first rule, the EPA stated that mixing zones should not be permitted in areas where swimming or other body contact is allowed with water. In its letter regarding the second rule, the agency said that it restricts the use of systems that blend water from different treatment systems within a city’s wastewater-treatment facility.


The court concluded that the EPA essentially created new limitations on state regulators and cities without first notifying the public of a change or accepting comment and stated that the letters had the effect of creating “a new legislative rule” in violation of proper rulemaking procedure. The court also found the EPA exceeded its legal authority granted in the Clean Water Act with that rule.


Thus, the court held that the EPA’s policies should be vacated because they were implemented without appropriate notice and opportunity for public comment. At its essence, the case reaffirmed the rule of law and reinforced the notion that the EPA must follow proper rulemaking procedure and other laws, rather than circumvent them by making rules by letter.


According to the U.S. Department of Justice, fielding questions on behalf of the EPA following the court’s ruling, the government is “currently reviewing the decision and would have no comment at this time.”


Corinne Martin, Stites & Harbinson, PLLC, Nashville TN


 

April 2, 2013

Supreme Court Reaffirms EPA's Right to Define Scope of Regulations


In 2006, the Northwest Environmental Defense Center sued certain timber-industry-related defendants claiming that their logging activities resulted in the discharge of pollutants without a permit into streams in state forests in Oregon where they were harvesting timber. In 2010, the Ninth Circuit overturned an Oregon federal district court's grant of a motion to dismiss the case, finding that ditches and culverts adjacent to logging roads were point sources that required federal National Pollutant Discharge Elimination System (NPDES) permits. On March 20, 2013, the U.S. Supreme Court issued its decision in Decker v. Northwest Environmental Defense Center, Case No. 11-338, overturning the Ninth Circuit's decision.


Decker is another in a series of disputes dating back 35 years over a U.S. Environmental Protection Agency (EPA)-created exception to the Clean Water Act known as the "Silviculture Rule," which is codified at 40 C.F.R. § 122.27. See, e.g., NRDC v. Costle, 568 F.2d 1369 (D.C. Cir. 1977) (holding that the EPA lacks the authority to categorically exempt point-source discharges from the NPDES program). The EPA intended the Silvicultural Rule to exempt certain activities related to the collection of natural resources such as log sorting and storage and rock crushing and gravel washing from needing NPDES permits. In Decker, the defendants who operated various logging roads contended that the Silvicultural Rule foreclosed the need for them to secure NPDES permits, and that potential impacts to water quality posed by the roads could be managed by state-level best-management practices. The defendants also contended that, even without the Silvicultural Rule, their activities were not "industrial activities" requiring NPDES permits under the EPA's Industrial Stormwater Rule, 40 C.F.R. § 122.26.


The Decker decision revolves around whether the literal wording of the Industrial Stormwater Rule could require logging roads to have permits even though the EPA intended for logging roads to be exempt from permitting. The Court found that the EPA's interpretation of the Industrial Stormwater Rule, which exempted "logging roads" from being "industrial" even though other logging-related facilities such as sawmills were "industrial," was permissible. The Court noted that the "regulatory scheme, taken as a whole, leaves open the rational interpretation that the regulation extends only to traditionally industrial buildings such as factories and associated sites and relatively fixed facilities." The Court further noted that the EPA's attempts to revise its regulations during litigation to clarify that logging roads were exempt from regulation provided additional support to the EPA's long-standing interpretation.


A disinterested observer might find the decision unexceptional because the EPA never intended for logging roads to require NPDES permits; because Decker represents just another instance of the Supreme Court overturning the Ninth Circuit in an environmental case; or because the EPA published a final rule immediately prior to the Supreme Court's oral argument in Decker in an attempt to trump the Ninth Circuit's ruling. This, however, probably short-changes this decision.


While the outcome of the case may have been preordained, the decision is notable because it contains signposts for future changes in what has long been a staid area of the law. For almost 70 years since the Supreme Court's decision in Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), agency interpretations of regulations previously issued by the agency were entitled to deference. Decker confirms that agencies continue to be entitled to deference in interpreting their own regulations. (See Slip. Op. at 14) (citing Chase Bank USA, N.A. v. McCoy, 562 U.S. __ (2011) (at Slip. Op. 12). But—as is emphasized in concurring and dissenting opinions signed by three members of the Court—the era of unquestioned deference to agency interpretations of ambiguous regulations may soon come to a close. (See Justice Roberts' concurrence joined by Justice Alito, and Justice Scalia's solo concurrence and dissent).


J. Michael Showalter and Bradley S. Rochlen, Schiff Hardin LLP, Chicago IL


 

March 20, 2013

First Circuit Sets Low Bar for CWA Pre-Suit Notice


On March 13, 2013, the U.S. Court of Appeals for the First Circuit held that pre-suit notice for a citizen enforcement action under the Clean Water Act (CWA) does not need to spell out every violation in detail. This holding in Paolino v. JF Realty, case number 12-2031, makes it easier for citizen enforcement actions to move forward, and may lead to increased enforcement actions by citizen groups in the future.


While state and federal authorities are authorized to enforce the CWA through suit, citizens are also given a more limited enforcement role. A citizen may bring a civil enforcement action in federal district court against a National Pollutant Discharge Elimination System permit holder for failure to comply with that permit’s conditions. At least 60 days before bringing suit, a citizen plaintiff must give notice of the alleged violations to the state in which the violations occurred, the EPA administrator, and the alleged defendant violators.


In the Paolino case, two citizen plaintiffs filed suit against the defendants in the U.S. District Court for the District of Rhode Island, alleging that the defendants were in continuing violation of the CWA because their pollutant-discharge permit was not in the name of the property’s current owner and because the property was continually discharging pollutants into U.S. waters.


The district court dismissed the suit, holding that the pre-suit notice had failed to describe the alleged violations with enough specificity. Confronting an issue of first impression within the First Circuit, the court of appeals reversed, holding that “the appropriate measure . . .  is whether the notice’s contents place the defendant in a position to remedy the violations alleged.” Under this standard, the First Circuit determined that the plaintiffs’ notice was sufficient because it allowed the defendants to identify the standards of the CWA that they were allegedly violating, and to remedy the situation if the allegations were accurate. This broad reading of the notice requirement means that pre-suit notice does not need to allege violations in detail, so long as a defendant can determine at least generally what the alleged violations are and how they can be remedied.


Going forward, it will be even more important for facility and property owners in Maine, New Hampshire, Massachusetts, and Rhode Island to be aware of the possibility of a citizen suit for all types of wastewater and stormwater discharges as lower procedural hurdles make these cases easier to bring.


Brian Rayback and John Formella, Pierce Atwood LLP, Portland, Maine


 

March 20, 2013

Two Polar Bear Decisions in Two Weeks


The end of February 2013 saw a flurry of news regarding the status of the polar bear under the Endangered Species Act. On February 20, the U.S. Fish and Wildlife Service (FWS) reissued its so-called 4(d) rule regarding the bear, outlining the rules “necessary and advisable” to protect it. Nine days later, the U.S. Court of Appeals for the DC Circuit upheld the FWS’s listing of the polar bear as a “threatened” species under the ESA. Each development is significant in its own right; together, they offer solid guidance as to where the FWS is heading on using the ESA to address climate change and how climate change is affecting the listing of potentially endangered species.


Endangered vs. Threatened
The latter question was at the heart of the litigation decided by the D.C. Circuit. There, the court faced the question of whether FWS correctly identified the polar bear as “threatened” rather than “endangered.” Under the ESA, the difference between the two is essentially whether the species is currently in danger of extinction (endangered) or whether it is likely to become endangered in the foreseeable future (threatened).


The Polar Bear’s Listing
The polar bear is heavily dependent on sea ice, and climate change is decreasing the amount of arctic sea ice. The FWS’s decision that the bear was threatened, rather than endangered, was based, essentially, on the service’s view of how quickly climate change was causing arctic sea ice to melt. If it is happening “quickly,” the FWS would list the bear as endangered. If it is happening very slowly, the FWS wouldn’t list the bear at all. The FWS took the middle path, deciding that climate change is happening fast enough that those species face the threat of extinction in the foreseeable future. Given the limitations of climate science, the FWS chose 45 years as the “foreseeable” future and the court upheld the FWS’s use of this time frame.


The  FWS’s View of Climate Change’s Impact on Species
The court upheld the FWS’s listing decision, doing so in the face of challenges on both sides of the decision—some argued that the bear shouldn’t be listed at all and others argued that it faces an imminent risk of extinction and should be considered endangered, not just threatened. The takeaways from the FWS’s listing decision and the court’s refusal to strike it down are that, at least for the ESA:


  • climate change is occurring;
  • it will have significant adverse impacts to species in the foreseeable future;
  • those impacts are still reversible.

The 4(d) Decision

So, because the FWS has determined that climate change is adversely affecting species, will it use the ESA to regulate climate change? That question was at the heart of the other major development: the FWS’s issuance of the “4(d)” rule for the polar bear. At a very high level, a 4(d) rule outlines the steps the FWS believes are necessary and advisable to protect a threatened species. These steps can include either restrictions on public action, such as limitations on development in the species’ habitat, or the allowance of otherwise prohibited activity, such as permitting certain specified, limited adverse impacts to the species.


Using the ESA to Regulate Climate Change
For the polar bear’s 4(d) rule, the main public-policy question was how to address activities outside of the bear’s range that increased the potential for climate change. Because we know that the polar bear needs sea ice to survive and that climate change is reducing arctic sea ice, would the FWS’s 4(d) rule attempt to protect the Bear from further reductions in sea ice by addressing activities that affect the climate change? Boiled down to its core, would the 4(d) rule require greenhouse-gas (GHG)-emitting projects far from the polar bear’s range to obtain an ESA permit for those emissions? The FWS’s rule says no.


The Takeaways
The rule is consistent with the FWS’s prior 4(d) rule for the polar bear, issued in 2008 and struck down by U.S. District Court for the District of Columbia in 2011. The rule is also consistent with Bush administration guidance addressing how the FWS should examine the ESA impacts of GHG emissions. It is therefore a reliable and useful marker as to the FWS’s view of the ESA. The new 4(d) rule is more likely to be upheld than the prior one—the prior one was struck down for largely procedural reasons and for a few inadequate findings that the FWS appears to have since corrected.


The takeaway here is that FWS has taken a consistent position over time on the use of the act to regulate GHGs. The service has used and will continue to use the act to protect species affected by climate change, but only from actions taken against them directly or in their range; it will not use the ESA to regulate GHGs on a national or global level.


Lowell Rothschild, Bracewell & Giuliani LLP, Washington D.C.


 

March 19, 2013

Attempt to Recoup Remediation Costs Through Subrogation Dismissed


In Chubb Custom Insurance Co. v. Space Systems/Loral, Inc. (No. 11-16272, Mar. 15, 2013), the 9th Circuit addressed an insurance company's subrogation suit against the defendants under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for recovery of insurance payments it made to its insured for environmental-response costs that the insured incurred in cleaning up pollutants released on its property. The trial court dismissed the suit, and the 9th Circuit affirmed the dismissal. The panel held that the insurance company lacked standing to bring suit under CERCLA’s section 107(a) because the insurance company did not incur any “costs of response” related to the removal or remediation of a polluted site. Furthermore, the common-law principle of subrogation does not apply to section 107(a). Also, the plaintiff could not bring a subrogation under section 112(c), because the insurance-company plaintiff did not allege that the insured was a "claimant," or that it had made a claim either to the Superfund or to a potentially liable party. 


William N. Kammer, Solomon Ward, San Diego, CA


 

March 19, 2013

First Circuit Addresses Requirements for CWA Pre-Suit Notices


On March 13, 2013, the First Circuit addressed the standard required to satisfy pre-suit notices under the Clean Water Act (CWA) in Paolino v. JF Realty, LLC (No. 12-2031, Mar. 13, 2013). The CWA pre-suit notice, described in 40 CFR § 135.3, is intended to identify the potential plaintiffs, provide basic contact information, and allow the putative defendants to identify and remedy the alleged violations. The pre-suit notice is mandatory and must be brought at least 60 days before a citizen enforcement action may be filed, and the failure to comply with the notice requirement will result in the dismissal of the suit. The court determined that “assessing whether these requirements have been met is a functional, fact-dependent and case-specific inquiry.” Here, given the facts available, the court determined that “these requirements have been satisfied and . . . the enforcement action may proceed.” Importantly, the court noted that “this does not mean that the defendants are precluded from asserting defenses under Fed. R. Civ. P. 12(b)(6); only that the suit is not barred in the district court.”


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

March 1, 2013

EPA's Final Rule on Particulate Matter Reversed and Remanded


In Sierra Club v. Environmental Protection Agency, No. 10–1413 (D.C. Cir. Jan. 22, 2013), the District of Columbia Circuit Court of Appeals issued a decision that may have a significant impact on parties seeking prevention of significant deterioration (PSD) permits.


In October 2010, the Environmental Protection Agency (EPA) issued a final rule establishing regulations for particulate matter less than 2.5 micrometers (PM2.5) under section 166 of the Clean Air Act (42 U.S.C. § 7476). In this rule, the EPA established significant impact levels (SILs) and a significant monitoring concentration (SMC) for PM2.5, screening tools the EPA uses to determine whether a new source may be exempted from certain requirements under section 165 of the act. After the Sierra Club sued the agency over promulgation of this rule, the EPA conceded that the SIL provisions needed to be revised. However, the agency continued to assert that the portions of the final rule establishing the SMC were valid.


The D.C. Circuit accepted the EPA’s concession about the SIL provisions and remanded those rules back to the agency for revising. With regard to the promulgation of the SMC, however, the court held that the EPA did not have the legal authority to adopt exemptions that would allow permit applicants to avoid mandatory pre-application ambient-air-quality monitoring in connection with emissions of the pollutant PM2.5 if the impact of the source on ambient air quality is below the significant monitoring concentration (SMC) adopted by the EPA. The court held that the EPA did not have de minimis authority to promulgate the SMC because “Congress was ‘extraordinarily rigid’ in mandating preconstruction air quality monitoring.” Subsection (e) of section 165 of the act requires that before a PSD permit application can be reviewed, either the state or the permit applicant must conduct an analysis of the ambient air quality at the proposed site and in areas the applicant's facility may affect. “We read § 165(e)(2) of the Act as an “extraordinarily rigid” mandate that a PSD permit applicant undertake preconstruction monitoring.”


The EPA had justified the SMC as providing relief from particularly onerous provisions of the PDS permit-application process, particularly a year-long preconstruction monitoring requirement. The court disagreed that such an exemption from even onerous requirements was possible: “The monitoring requirement is a regulatory function that provides benefits, and the statute precludes the EPA from exempting that requirement. Although the year-long preconstruction monitoring requirement may be onerous and, in some cases, EPA deems it more costly than beneficial, the EPA may not substitute its policy for that of Congress.”


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

February 14, 2013

Supreme Court Property Rights Cases Roundtable: Feb. 26, 2013


We hope you were able to join us for our committee roundtable on takings litigation in the Supreme Court on Tuesday, February 26, 2013. The roundtable addressed the interesting issue that, for the first time since 2005, the U.S. Supreme Court has three property-rights cases on its docket. One of them, Arkansas Game & Fish, regarding compensation for flooding, was decided in December. Another, Koontz, concerning the applicability of the Nollan and Dolan nexus tests, has been argued. The final case, Horne, a most unusual case about what might be described as raisin sequestration, is still on the sidelines. The panel of leading property rights and land-use lawyers provided their insight on each of the cases. Keep an eye out for future roundtables, podcasts, and other member benefits from the Environmental Litigation Committee!


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

January 10, 2013

Transfer of Polluted Water Not Discharge under CWA


On January 8, 2013, the U.S. Supreme Court reversed a Ninth Circuit decision and confirmed that the transfer of polluted water from an improved portion of a water body to an unimproved portion of a water body does not qualify as a discharge of a pollutant under the Clean Water Act (CWA).


In Natural Resources Defense Council, Inc. v. County of Los Angeles, 673 F.3d 880 (9th Cir. 2011), the Ninth Circuit held that the Los Angeles County Flood Control District was liable for stormwater discharges to two rivers from concrete channels owned and operated by the district. Id. at 900–01. Monitoring stations located in the channels detected pollutants in excess of limitations established in the district’s permit under the CWA. Id. at 889–90. The Ninth Circuit found that these channelized portions of the rivers were part of the district’s storm sewer system. Therefore, according to the Ninth Circuit, a discharge occurred when polluted water exited the concrete channels. Id. at 900.


The Supreme Court granted certiorari to answer a narrow question: “Under the CWA, does a ‘discharge of pollutants’ occur when polluted water ‘flows from one portion of a river that is navigable water of the United States, through a concrete channel or other engineered improvement in the river,’ and then ‘into a lower portion of the same river’?” Los Angeles County Flood Control District v. Natural Resources Defense Council, Inc., 568 U.S. __ (2013) (quoting Pet. for Cert. i., 567 U.S. __ (2012)). The Court answered that question in the negative, stating that no pollutants are added to a water body when water is merely transferred between two different portions of the water body. Id. The Supreme Court’s holding is consistent with its 2004 decision in South Florida Water Management District v. Miccosukee Tribe, 541 U.S. 95 (2004), which held that pumping polluted water from one part of a water body to another part of the same water body is not a discharge of pollutants under the CWA.


The Court declined to address any further issues raised by the case, including who ultimately bears responsibility for stormwater pollutants that are discharged to waters of the United States.


Megan Baroni, Robinson & Cole, Stamford, CT


 

January 10, 2013

Joint CLE features Environmental Panels and Speakers


The Environmental Litigation Committee is co-sponsoring its annual Joint CLE Conference with the Mass Torts Committee and Products Liability Committee at Steamboat, Colorado, January 31–February 2, 2013. Registration, schedules, and other information can be found here. An environmental break-out session will include information on what to expect in environmental litigation through the second Obama administration. Plenary sessions will provide general information of value to any practitioner and will include a panel of in-house attorneys predicting regulatory compliance trends, a panel on handling mass-tort settlements, and a panel of expert witnesses discussing the best methods for preparing and presenting their testimony.


Our committee members in the Colorado area have also reported heavy snowfall for attendees interested in the potential for skiing and snow activities while in town!


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

January 7, 2013

Court Affirms Finding Regarding Role of Expert Testimony in Proving Causation

 

In a per curiam opinion, the Fifth Circuit Court of Appeals reviewed the district court’s exclusion of expert testimony in a toxic tort case.


The plaintiff worked in a bottling plant using a machine manufactured and installed by the defendant. The plaintiff filed a personal injury suit in state court in Texas, claiming that the defendant proximately caused his severe lung disease. The defendant removed to federal district court and  filed motions to exclude the testimony of the plaintiff’s experts under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharm., Inc., as well as a motion for summary judgment. Regarding the defendant’s Daubert motion, the magistrate judge recommended excluding the expert opinions as unreliable and irrelevant. The district court adopted the report and recommendations, and granted the defendant’s motion for summary judgment.


On appeal, The Fifth Circuit first considered the lower court’s rulings under Rule 702 and Daubert. The court noted that under both, a court had broad discretion to determine whether evidence relied upon by an expert is sufficient to support the expert’s opinion. The circuit court reminded practitioners that the admissibility of expert testimony is governed by Rule 702.


The reliability element requires the expert opinion “be grounded in the methods and procedures of science and … be more than unsupported speculation or subjective belief.” The relevance element requires that the expert’s  “reasoning or methodology can be properly applied to the facts in issue.” Additionally, courts consider the following list of four nonexclusive factors when conducting a reliability inquiry. The proponent need not show that the expert’s testimony is correct but must prove by a preponderance of the evidence that the testimony is reliable.


The Fifth Circuit reviewed Supreme Court and Fifth Circuit case law, and confirmed that “in forming a reliable opinion regarding the effects of exposure to a particular chemical, an expert may extrapolate data from studies of similar chemicals.”  However, the court explained that to support a conclusion based on that reasoning, the extrapolation must be reasonable and scientifically valid, and, courts are free to reject a theory based on extrapolation when there is too great an analytical gap between the data and the opinion. After reviewing the specifics of the expert opinion regarding chemical exposure, the circuit court concluded that the district court did not abuse its discretion in dismissing the causation expert testimony as unreliable under Daubert after finding the theory presented too great an analytical gap between the data and the proffered opinion.


The plaintiff also alleged that the district court erred in granting the defendant’s motion for summary judgment because the plaintiff, without the expert testimony, could not prove the causation necessary to support the claim under Texas law. Under Texas law, “lay testimony establishing a sequence of events which provides a strong, logically traceable connection between the event and the condition is sufficient proof of causation.” The court of appeals reviewed the record, and concluded that there was a significant gap in time between the plaintiff’s exposure and the onset of symptoms, and such a gap rendered the fact finder unable to determine the cause of the plaintiff’s disease based solely on its common sense and general experience. Thus, the Fifth Circuit Court of Appeals affirmed the district court’s finding that the plaintiff needed the expert testimony to prove causation.


Read the full case note.


Keywords: litigation, business torts, expert testimony, Rule 702, causation, personal injury


Sofia Adrogue, Looper Reed & McGraw, P.C., Houston, Texas


 

January 3, 2013

EPA Releases Update on Ongoing Fracking Study


In December 2012, the EPA released an update on its ongoing study of hydraulic fracturing, or “fracking.” The study, commissioned by Congress in 2010, is looking at fracking’s impact on drinking water. It will not look at the effects of injecting wastewater deep underground, which some critics claim causes small earthquakes and threatens water supplies. The study so far has examined samples from five sites in Colorado, North Dakota, Pennsylvania, and Texas. The studies in North Dakota, Pennsylvania, and Texas are in shale plays and were chosen because they had experienced well blowouts that leaked fracking fluids or because area homeowners had complained about the decline in the quality of the drinking water.


The update on the study does not offer conclusions as of yet but instead outlines the issues to be explored. The study will look at the impact of the following:


  • large-volume water withdrawals from ground and surface waters on drinking-water resources
  • surface spills on or near well pads of hydraulic-fracturing fluids on drinking-water resources
  • injection and fracturing process on drinking-water resources
  • surface spills on or near well pads of flowback and produced water on drinking-water resources
  • inadequate treatment of hydraulic-fracturing wastewaters on drinking-water resources

The EPA also announced several changes to the study’s research plan since the publication of the initial study plan. It now plans to use and analyze data gathered in FracFocus, a new national registry of chemicals used in fracking that was jointly commissioned by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission in 2011. The original study plan also identified DeSoto Parish, Louisiana, within the Haynesville Shale, as a site for case study. Due to scheduling conflicts, though, this site will no longer be a party of the study. The EPA will also no longer conduct high-throughput screening assays of certain chemicals used in fracking or detected in flowback and produced water, per the recommendations of the EPA’s Science Advisory Board. Finally, because the Department of Energy is already studying the interactions between fracking and various rock formations, the EPA has decided not to look at this issue. Thus the study will no longer look at (1) how fracking fluids might change the fate and transport of substances in the subsurface through geochemical interactions and (2) the chemical, physical, and toxicological properties of substances in the subsurface that may be released by fracking.


The EPA does not expect the study to be completed until 2014.


Courtney Scobie, Ajamie LLP, Houston, TX


 

December 26, 2012

Maryland Farmers and Perdue Not Liable in Pollution Lawsuit


In a closely watched case with national implications, a federal judge in Maryland recently ruled that plaintiff Waterkeeper Alliance, Inc., a national environmental-advocacy group, failed to establish that waste from chicken houses had contaminated a ditch that drains to a river and ultimately to Chesapeake Bay. The judge also rejected arguments that Perdue, a poultry integrator for whom the farmers raise chickens, could be held responsible based on its oversight of the farmers’ operations.


The plaintiff filed suit against the farmers and Perdue claiming that pollutants from chicken litter had been discharged without a permit in violation of the Clean Water Act. Although the plaintiff’s notice-of-intent-to-sue letter alleged that the source of the pollution was a large uncovered pile of chicken manure located near a drainage ditch, the pile was later demonstrated to be treated biosolids intended to be used as fertilizer. By the time of trial, the plaintiff’s theory was that chicken litter was either blown out by the chicken-house exhaust fans or tracked out on shoes or equipment leaving the chicken houses. The plaintiff sought to hold Perdue liable as an operator, based on its supervision and control over the day-to-day operations of the chicken houses.


The judge ruled that the plaintiffs had not proven that high levels of nutrients in the drainage ditch came from the chicken houses, as opposed to the farm’s herd of cows, which deposited manure near the ditch and which were beyond the scope of the notice of intent. The judge recognized that although an integrator can be responsible as a farm operator in some circumstances, here there was insufficient evidence to impose liability on Perdue. The judge also commented that Perdue’s initiatives to educate its growers on environmental matters (which Perdue suspended because of this lawsuit) suggested that Perdue should be “commended, not condemned.”


The plaintiff was represented in the case by the University of Maryland Environmental Law Clinic. The case had drawn the political ire of some Maryland legislators and even the governor, who last year had urged the university to discontinue the lawsuit as a “state-sponsored injustice and misuse of taxpayer resources.” In his decision, the judge expressed concern with how the plaintiff’s theory of the case had evolved over time and with a plaintiff member’s “‘ends justifies the means approach,’” where truth can be ‘spun’ to achieve a desired goal.” The judge also commented that Waterkeeper’s pursuit of this lawsuit was not a responsible or effective use of the citizen-suit process.


The farmers were represented by George F. Ritchie, Maggie Witherup, and John Lee of the law firm Gordon Feinblatt, LLC in Baltimore, Maryland. Perdue was represented by Venable LLP in Baltimore, Maryland.


Margaret M. Witherup, Gordon Feinblatt LLC, Baltimore, MD


 

December 20, 2012

Historic CAA Settlement in Louisiana


According to a joint press release by the Environmental Protection Agency and the Department of Justice, Louisiana Generating, an electric-generating company owned by NRG Energy, Inc., agreed to a settlement at its Big Cajun II coal-fired power plant in New Roads, Louisiana, which will result in the elimination of over 27,300 tons of harmful emissions per year. The settlement, lodged in federal court November 21, 2012,  in Baton Rouge, will require Louisiana Generating to spend approximately $250 million to reduce air pollution and also requires the company to pay a civil fine of $3.5 million and spend $10.5 million on environmental-mitigation projects. Half the civil penalty—$1.75 million—will be allocated to the state of Louisiana. The settlement arises out of a 2009 lawsuit in which the Justice Department sued NRG Energy in 2009, alleging that the Big Cajun II power plant had operated since 1997 without any update to its air-pollution controls.


Louisiana Generating will reduce its emissions through a combination of new pollution controls, natural-gas conversion, and annual emission caps at all three units at the Big Cajun II plant. Emissions of sulfur dioxide will be reduced by approximately 20,000 tons and nitrogen oxides by about 3,300 tons. $10.5 million will be spent on various environmental-mitigation projects, including installing solar panels at local schools and government buildings, forestry and wetlands restoration, and funding the installation of charging stations for electric vehicles in the South Louisiana area.


The settlement marks the federal government’s 24th settlement under its national enforcement initiative to reduce emissions from coal-fired power plants under the Clean Air Act’s (CAA) New Source Review requirements—and, according to the government press release, is the largest such settlement in Louisiana history. The consent decree, is still subject to public comment and court approval.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

December 14, 2012

End of Year Revisions by the EPA on Water and CERCLA Issues


Although the calendar year is winding down, the EPA remains busy, releasing several revised regulations. One of these is a revision to its 1986 recommended water-quality criteria for recreational waters, specifically addressing concentration thresholds for fecal bacteria. The revisions were triggered by a 2006 federal lawsuit filed by the Natural Resources Defense Council, alleging that the EPA had failed to perform its mandatory duties to study and update water-quality regulations, which was settled with a consent decree declaring that new standards would be developed by the EPA before the end of the year.


The EPA has also issued a “Revised Enforcement Guidance Regarding the Treatment of Tenants under the CERCLA Bona Fide Prospective Purchaser Provision.” Aimed at encouraging the development of renewable-energy projects on brownfields sites by lessors of the sites, the revised guidance indicates that the agency will not pursue a lessor that meets the criteria of the “bona fide prospective purchaser defense.” This is an important defense to Superfund liability for prospective purchasers who can acquire property knowing of its contaminated status. Previously, tenants were not necessarily also protected by this defense. Now the EPA has decided to treat the tenant as a bona fide prospective purchaser in those situations in which the tenant shares all the qualities required of a bona fide prospective purchaser other than outright ownership of the property. The EPA’s goal is to encourage redevelopment of contaminated sites—and as the cover letter accompanying the revised guidance states, “[w]hile the impetus for this effort is linked to renewable energy development, the updated enforcement discretion guidance applies broadly, across all industries.”


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

December 4, 2012

ELC Hosts Roundtable Discussion on Implications of Dimant Decision


On Wednesday, November 28, 2012, the Environmental Litigation Committee (ELC) and the Expert Witnesses Committee joined forces to present a free roundtable for our members to hear from expert panelists about the New Jersey Supreme Court’s decision in NJDEP v. Dimant. Last month, in perhaps the most significant New Jersey environmental decision in the last 30 years, the New Jersey Supreme Court dealt a major blow to the NJDEP's strategy of pursuing business owners for cleanup costs under New Jersey's Spill Compensation and Control Act without sufficient evidence linking those businesses to the contamination and alleged damage at issue. Committee members could call in from anywhere and hear this panel of experienced New Jersey practitioners discuss the decision, its implications for future cleanup efforts, and the burden of proving causation that the decision imposes. The panel included Kevin J. Bruno, Blank Rome LLP, New York, NY (Moderator); Jerry Fitzgerald English, Lindabury, McCormick, Estabrook & Cooper, P.C., Summit, NJ; Irvin M. Freilich, Gibbons P.C., Newark, NJ; and Steven J. Picco, Saul Ewing LLP, Princeton, NJ.


Keep an eye out for future roundtables and other member benefits from our committee.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

November 16, 2012

BP Reaches $4 Billion Plea Deal on Criminal Charges


In a record-setting plea bargain, BP has agreed to pay $4 billion in criminal fines and penalties for its conduct involving the Deepwater Horizon Oil Spill. The company pled guilty to 11 counts of “misconduct or neglect of ship officers,” one count of “obstruction of Congress,” one count of violation of the Clean Water Act, and one count of violation of the Migratory Bird Treaty Act. The $4 billion is payable within five years of sentencing. $1.15 billion goes to the “Oil Spill Liability Trust Fund,” and $100 million will be paid to the “North American Wetlands Conservation Fund.” In addition, the company will be on probation for five years. As part of the plea deal, BP admitted that its “negligent conduct, among others, was a proximate cause of the deaths of eleven men and pollution resulting from the Macondo Well blowout.” BP also admitted to misrepresenting flow rates from the uncapped wellhead to Congress.


In addition, the Department of Justice unsealed indictments against two BP employees for 11 counts of seaman’s manslaughter, 11 counts of involuntary manslaughter, and one violation of the Clean Water Act. These employees were the highest-ranking BP employees on board the Deepwater Horizon rig at the time of the blowout and explosion.


Kevin J. Bruno, Blank Rome LLP, Princeton, NJ, and Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

October 30, 2012

EPA's Attempt to Regulate Cross-State Air Pollution Dismantled


The U.S. Court of Appeals for the Circuit of the District of Columbia issued a significant opinion in EME Homer City Generation v. EPA, D.C. Cir. No. 11-1302 on August 21, 2012, addressing the legality of the Environmental Protection Agency’s (EPA) most recent attempt to regulate sulfur dioxide and nitrogen oxides produced mostly by coal-fired electric-generating power plants in states east of the Mississippi River. This EPA regulation was known as the Transport Rule or the Cross-State Air Pollution Rule (CSAPR) and was intended to replace earlier federal attempts to regulate clean air in multi-state areas.


The State of Texas, along with a number of industry groups, challenged the EPA on whether it exceeded its statutory authority to issue CSAPR. In a lengthy opinion, the appellate court agreed with those challenges, and rejected and vacated CSAPR, with one judge dissenting.


The D.C. Circuit determined that CSAPR exceeded the statutory authority given to the EPA by Congress in two ways. First, the Clean Air Act (CAA) permits the EPA to only require an upwind state to reduce its own significant contribution to a downwind state’s air pollution. Instead of doing this, the EPA attempted to require upwind states to reduce more than their own significant contribution of air pollution to compensate for other downward states’ subsequent inability to make significant reductions. The court considered this step to be an act in excess of the CAA’s limited authority.


Second, the CAA allows states to first create their own solutions to implement reductions to air pollution within the broad outlines of a program instituted by the EPA. Under CSAPR, however, the EPA promulgated a program and immediately attempted to implement it with federal programs without first permitting states to design or choose their own implementation program. As noted by the court, “Whatever its merits as a policy matter, EPA’s Transport Rule violates the [Clean Air Act].”


The D.C. Circuit Court focused on the CAA’s deference to principles of federalism—principles that it felt were violated by the CSAPR: “The Federal Government sets air quality standards for pollutants. The states have the primary responsibility for determining how to meet those standards and regulating sources within their borders.” Recognizing that the EPA failed to respect these principles, the court completely vacated CSAPR and ordered the EPA to design a completely new rule. The court did notice this opinion was not meant to be an indictment of the principles reflected in CSAPR:


Our decision today should not be interpreted as a comment on the wisdom or policy merits of EPA’s Transport Rule. It is not our job to set environmental policy. Our limited but important role is to independently ensure that the agency stays within the boundaries Congress has set. EPA did not do so here.


Judge Rogers dissented, claiming the majority had disregarded both the plain text of the CAA and the jurisdictional limits of the court itself.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

October 30, 2012

NJDEP's Burden of Proof Raised in Establishing Spill Act Liability


On September, 26, 2012, in perhaps the most significant New Jersey environmental decision in the last 30 years, the New Jersey Supreme Court in New Jersey Department of Environmental Protection v. Dimant (A-2-11) (067933) dealt a major blow to the New Jersey Department of Environmental Protection’s (NJDEP) strategy of pursuing business owners for cleanup costs under New Jersey’s Spill Compensation and Control Act, N.J.S.A., 58:10-23.11 et seq. (Spill Act) without sufficient evidence linking those businesses to the contamination and alleged damage at issue. In a case of first impression, the court has made it clear that for the NJDEP to successfully pursue a claim for damages under the Spill Act, including claims for natural resource damages (NRD), the NJDEP must demonstrate, by a preponderance of the evidence, a “reasonable nexus or connection” between the alleged discharge by the defendant and the damage forming the basis for the NJDEP’s lawsuit. The unanimous decision will make the NJDEP’s claims for damages under the Spill Act much more difficult to prove, in particular those relating to historical discharges.


Dimant involved a cluster of residential wells in Bound Brook, New Jersey, found in 1988 to be contaminated with perchloroethylene (PCE), a chemical commonly used as a dry-cleaning agent and a degreaser in auto body shops. A state investigation launched that same year focused on several nearby businesses as potential discharge sources, including four dry-cleaning facilities, a former Mobil service station, and a Chevrolet dealership. As part of its investigation, NJDEP investigators found an exterior pipe leaking liquid containing PCE at one of the dry-cleaning facilities, Sue’s Clothes Hanger. Despite this finding, the NJDEP did not investigate the property further; nor did it take any enforcement action at that time. Nearly 16 years later, the NJDEP brought a Spill Act claim against Sue’s in 2004, alleging it to be responsible for a discharge under the Spill Act and liable for damages associated with the contamination of the residential wells in Bound Brook. Following a bench trial, the New Jersey State Court found that the NJDEP had failed to prove by a preponderance of the evidence that a discharge by Sue’s caused or contributed to the contamination in the Bound Brook wells. In particular, the NJDEP did not establish whether the exterior leak at Sue’s was “continuous or intermittent”; whether the leak entered the soil or evaporated on the pavement below the pipe; or whether the other nearby businesses using PCE in their operations could be ruled out as potential discharge sources. The trial court determined that absent such a “nexus” between a discharge by Sue’s and the contamination, the NJDEP could not compel contribution under the Spill Act for investigation, cleanup, or damages.


After the Appellate Division upheld the trial court’s ruling in an opinion approved for publication (see 418 N.J. Super. 530 (App. Div. 2011)), the NJDEP appealed to the New Jersey Supreme Court, arguing the court below had erred in requiring the state to demonstrate a factual connection between the damages alleged and a discharge by Sue’s. According to the NJDEP, liability for damages under the Spill Act could be demonstrated merely by showing that Sue’s was responsible for a discharge as defined by the act and that the substance discharged was found at the site. According to the NJDEP, it was not relevant, and not a required part of its case, to demonstrate that a discharge from Sue’s had caused or contributed to the damage at issue.


The New Jersey Supreme Court rejected the NJDEP’s argument and noted that “a party in Sue’s circumstances must be shown to have committed a discharge that was connected to the specifically charged environmental damage of natural resources—groundwater damage—in some real, not hypothetical way.” The court went to great lengths, through a parsing of the Spill Act’s language and an analysis of the legislative history, to contrast this additional “connection” requirement under the act and the less onerous standard of liability found under its federal counterpart, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court further noted that “[a] reasonable nexus or connection must be demonstrated by a preponderance of evidence.” Note that in adopting this “reasonable nexus” standard, the court declined to adopt the more stringent “proximate causation” standard advocated by Sue’s.


The Dimant decision will have an enormous and immediate impact on the manner in which claims for damages under the Spill Act are litigated, and companies confronted with such claims should be re-evaluating their defense strategies accordingly.


Kevin J. Bruno, Frank A. Dante, and Louis D. Abrams, Blank Rome LLP


 

October 24, 2012

5th Cir: Army Corps Immune from Most Katrina-Related Claims


On September 24, 2012, the Fifth Circuit issued a long-awaited opinion on the liability of the Army Corps of Engineers, developers of the various shipping channels and canals in and around the New Orleans area, for their liability following Hurricane Katrina, in the In re Katrina Canal Breaches Litigation suit (Nos. 10-30249, 10-31054, and 11-30808 (Sept. 24, 2012)). The court’s opinion, in a panel rehearing, addressed claims by various groups of New Orleans and St. Bernard Parish residents whose homes flooded following Hurricane Katrina—arguably due to the fault of the Army Corps in designing those shipping channels and canals in such a way that storm surge was maximized and levees were overtopped. The court first addressed the question of whether the Army Corps enjoyed immunity from claims that alleged that the corps was negligent in designing and maintaining the Mississippi Gulf River Outlet (MRGO). St. Bernard residents had attacked the Corps’ design and maintenance of this shipping channel, charging that it actually increased the catastrophic effects of Hurricane Katrina by increasing flooding throughout that parish. The Army Corps claimed that, pursuant to the Flood Control Act (FCA), the government enjoys immunity from damages caused by floodwaters released on account of flood-control activity or negligence therein. The court, however, determined that the MRGO was not a flood-control activity, and instead had been designed and operated purely as a shipping channel. Thus, immunity from FCA liability did not apply, meaning that certain plaintiffs living adjacent to the MRGO in St. Bernard Parish could proceed with their suit against the Army Corps.


Other groups of plaintiffs, however, did not fare as well. The court next considered claims from New Orleans plaintiffs. For those plaintiffs whose homes flooded due to the failure of actual flood-control canals such as the 17th Street Canal in New Orleans, even where those failures were caused by the Corps’ negligence, FCA immunity did apply and the Army Corps was found immune from liability.


The court went on to consider plaintiffs’ claims that the corps violated the National Environmental Policy Act (NEPA) by submitting inadequate environmental-impact statements. The court determined that, regardless of whether the Corps’ NEPA submissions were legally deficient, NEPA itself is a purely procedural statute and could not form the basis of a substantive environmental claim. Moreover, the corps had immunity over exercises of its discretionary functions—and compliance with NEPA was a matter of corps discretion and therefore immunized.


The court then held that the corps had no duty to maintain the original width of the planned MRGO channel, nor was the corps susceptible to liability for its decision to delay armoring the MRGO banks to protect against further erosion. The corps also enjoyed immunity from suits attacking its issuance of dredging permits for the 17th Street Canal, because these decisions too reflected the Corps’ exercise of its own discretion, and such discretion was immune from liability.


Lauren E. Godshall, Curry & Friend PLC, New Orleans, LA


 

October 18, 2012

Supreme Court Declines Review of CERCLA Decision


The U.S. Supreme Court recently denied a petition for a writ of certiorari in the case of Solutia, Inc., et al. v. McWane, Inc., et al. As a result, the Eleventh Circuit’s prior decision stands—that a potentially responsible party (PRP) may not elect remedies under CERCLA when seeking to recover costs sustained pursuant to a consent decree. In reaching that result, the Eleventh Circuit became the fourth federal court of appeals to so hold, joining the Second, Third, and Eighth Circuits. The appellants in one of those cases, Morrison Enterprises, LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir. 2011), also had filed a petition for a writ of certiorari, which was denied last year.


With this second denial of certiorari, it seems increasingly clear that a PRP with standing to bring a section 113 claim under CERCLA may not instead elect to seek recovery of its costs under section 107.


Sarah Babcock, Meaghan Boyd, and Doug Arnold, Alston & Bird LLP, Atlanta, GA


 

July 12, 2012

North Carolina Passes Fracking Legislation, Overrides Veto


The North Carolina legislature on July 2, 2012, overrode the governor’s veto to pass the state’s first fracking legislation. Senate Bill 820 was originally passed by the Republican legislature on June 21, but vetoed by Governor Beverly Perdue, a Democrat, on July 1. She said she supported fracking, but that the legislation contained insufficient environmental safeguards. Aided by an accidental vote in the House of Representatives, however, the Senate and House were able to muster the required three-fifths majorities to override her veto.


Senate Bill 820 creates the North Carolina Mining & Energy Commission of the Department of Environment & Natural Resources, and gives this commission the power to regulate fracking. It prohibits certain chemicals and constituents, including diesel fuel, in fracking fluids; requires the disclosure of all chemicals and constituents in fracking fluids, with an exception for trade secrets; requires the implementation of water and wastewater management plans; requires measures to mitigate impacts on infrastructure; requires safety devices and protocols; and requires notice, recordkeeping, and reporting. It also establishes a presumption that any water contamination within 5,000 feet of a wellhead is the responsibility of the well operator. This presumption can be rebutted by evidence that the contamination predated the drilling activity, based on a pre-drilling water test; that the operator was denied access to conduct a pre-drilling water test; or that the contamination was caused by something other than the drilling activity.


The new Mining & Energy Commission will consist of 15 members, including two members of a nongovernmental conservation interest, two representatives of the mining industry, two local elected officials, a representative of a publicly traded natural-gas company, a geologist, an engineer, and an attorney. Once the commission is formed, it will develop fracking regulations consistent with this legislation. The first drilling permits are not expected to be issued until 2014, at the earliest.


According to a recent U.S. Geological Survey, North Carolina contains 1.7 trillion cubic feet of natural gas in the Deep River Basin in Lee, Chatham, and Moore Counties in central North Carolina. USGS Releases Unconventional Gas Estimates for Five East Coast Basins, June 20, 2012. Based on 2010 consumption rates in North Carolina, that is a 5.6 year supply of natural gas.


Keywords: energy litigation, fracking, North Carolina


Jack Edwards, Ajamie LLP, Houston, TX


 

July 12, 2012

Recreational Gold Mining Threatens Coho Salmon


In Karuk Tribe of California v. US Forest Services, No. 05-16801 (9th Cir., June 1, 2012), The U.S. Forest Services has allowed “recreational” gold mining to occur along the banks of the Klamath River, once an important site during California’s “gold rush” era. “Recreational” gold mining, however, involves more than miners panning for gold by hand, and now involves gas-powered machinery that dredges the riverbed and deposits tailings.


The Karuk Tribe of California filed suit under the Endangered Species Act challenging the U.S. Forest Service’s failure to consult with federal agencies before allowing these gold-mining activities to proceed under a notice of intent (NOI) in critical habitat of a listed endangered species, the coho salmon. The Endangered Species Act requires consultation with the Fish and Wildlife Service or the National Oceanic and Atmospheric Administration Fisheries Service for any “agency action” that “may affect” a listed species or its critical habitat. The U.S. Ninth Circuit agreed with the Karuk Tribe, determining that the tolerated mining activities along the river violated the Endangered Species Act.


The Ninth Circuit found first that allowing mining on forest-service land was automatically an “agency action.”


Under our established case law, there is “agency action” whenever an agency makes an affirmative, discretionary decision about whether, or under what conditions, to allow private activity to proceed. The record in this case shows that Forest Service District Rangers made affirmative, discretionary decisions about whether, and under what conditions, to allow mining to proceed under the NOIs.


The court then addressed the second issue, i.e., whether the approved mining activities “may affect” a listed species or its critical habitat. Forest Service regulations require a NOI for all proposed mining activities that “might cause” disturbance of surface resources, which include fisheries and wildlife habitat. “In this case, the Forest Service approved mining activities in and along the Klamath River, which is critical habitat for threatened coho salmon. The record shows that the mining activities approved under NOIs satisfy the ‘may affect’ standard.”


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

July 12, 2012

Proposed Rule Would Make NAAQS Rule More Stringent


On June 29, 2012, the EPA proposed a new, more stringent national ambient-air-quality standard (NAAQS) for fine particulate matter (PM 2.5). The proposed revision would reduce the current annual PM 2.5 standard from 15 micrograms per cubic meter to a range of 12–13 micrograms per cubic meter.


This proposed rule is the agency’s response to a recent lawsuit by several states and environmental groups that demanded that the EPA enforce its non-discretionary duty under the Clean Air Act to complete a review of the national ambient-air-quality standards for particulate matter. The D.C. district court ordered the EPA to propose a new PM 2.5 standard.


In response, the EPA published its proposed rule, found in volume 77, no. 126 of the Federal Register (p. 38890, 6/29/2012), proposing the reduction to the PM 2.5 standard, “so as to provide increased protection against health effects associated with long-and short-term exposures (including premature mortality, increased hospital admissions and emergency department visits, and development of chronic respiratory disease),” while also proposing to retain the existing 24-hour PM 2.5 standard and the existing 24-hour PM 10 standard “to continue to provide protection against effects associated with short-term exposure to thoracic coarse particles.” In addition to strengthening the PM 2.5 NAAQS, the EPA is also proposing a new, separate PM 2.5 standard to measure haze of 28 or 30 deciviews. (A deciview is a measure of visibility.)


The EPA is currently seeking comments on the proposed new PM 2.5 rule. Comment on the proposed PM 2.5 rule must be received by August 31, 2012. The agency plans to issue the final standards by December 14, 2012.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

July 12, 2012

Another Climate-Change Lawsuit Dismissed


The D.C. district court dismissed a lawsuit brought by child-plaintiffs against the EPA and the Departments of Interior, Agriculture, Commerce, Energy, and Defense that sought to compel federal action on climate change. Unlike many of the prior climate-change lawsuits that have relied on theories of nuisance, the Alex L. v. Jackson, No. 11–02235 (D.D.C. May 31, 2012), suit argued that the federal agencies named as defendants had violated their fiduciary duty as custodians of the public trust to restore global atmospheric concentrations of carbon dioxide levels to less than 350 parts per million, and that they had “wasted and failed to preserve and protect the atmosphere” as a public-trust resource.


The court took issue with this application of the public-trust doctrine:


And while Plaintiffs have cited authority for the application of the doctrine in numerous natural resources, including ‘groundwater, wetlands, dry sand beaches, non-navigable tributaries, and wildlife,’ they have cited no cases, and the Court is aware of none, that have expanded the doctrine to protect the atmosphere or impose duties on the federal government. Therefore, the manner in which Plaintiffs seek to have the public trust doctrine applied in this case represents a significant departure from the doctrine as it has been traditionally applied.


(Opinion at p.2.)


Regardless of the merits of the public-trust doctrine as a mechanism of climate-change enforcement, however, the court ultimately determined that the court lacked subject-matter jurisdiction over the issue. The public-trust doctrine is one of state law, and the suit thus presented no federal cause of action.


Having made this determination, the court then went on at length to explain why courts in general are the wrong place to bring climate-change lawsuits, repeatedly noting that there are agencies specifically charged with the regulation of pollutants in the atmosphere, and concluding that “even if Plaintiffs allege a public trust claim that could be construed as sounding in federal common law, the Court finds that that cause of action is displaced by the Clean Air Act.”


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

June 28, 2012

D.C. Circuit Upholds EPA's Regulation of Greenhouse-Gas Emissions


The D.C. Circuit Court of Appeals has upheld the Environmental Protection Agency's (EPA's) recent regulations of greenhouse gases, in a per curium opinion in Coalition for Responsible Regulation et al. v. EPA, No. 09-1322 (D.C. Cir., June 26. 2012). In this case, various states and industry groups sued the EPA for its recent greenhouse-gas "timing and tailoring rules" for the Prevention of Significant Deterioration (PSD) and Title V permitting, and for its greenhouse-gas endangerment finding. Originally, the EPA released an endangerment finding that it used as a means to regulate greenhouse gases as a pollutant pursuant to its powers under the Clean Air Act. The timing and tailoring rules then introduced regulations requiring the reporting of greenhouse-gas emissions from stationary sources with an eye toward eventual reduction of all emissions.


The petitioners argued that these rule-makings were based on improper constructions of the Clean Air Act (CAA) and were otherwise arbitrary and capricious. The D.C. Circuit disagreed and declared that the EPA's interpretation of the Clean Air Act provisions was unambiguously correct. The court held that greenhouse gases could be considered “air pollutants” under section 202 and that the CAA therefore required the EPA to evaluate as a scientific matter whether the emission of greenhouse gases caused or contributed to environmental endangerment. The court also rejected claims that the scientific record used by the EPA in support of its endangerment finding was inadequate.


The court also refused to hear challenges to the tailoring rule, holding that the state and industry challengers were not injured by the rule and therefore had no standing. The opinion noted that the tailoring rule was intended to limit the impact of greenhouse-gas regulation only to the largest emitting sources, and as a result no petitioner could identify any injury it might suffer as a result of the rule. All of the petitions for review of the tailoring rules were dismissed for lack of jurisdiction, and the remainder of the petitions were denied.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

June 28, 2012

Fifth Circuit Addresses Citizen Suits under CWA, With Varying Results


The U.S. Fifth Circuit recently ruled on two different citizen suits brought under the Clean Water Act (CWA).


In the first, Louisiana Environmental Action Network v. City of Baton Rouge, No. 11-30549 (April 17, 2012), the court reversed a district-court opinion dismissing the suit. The defendants had argued that the citizen suit was barred under the "diligent prosecution" provision of the Clean Water Act—that is, where the EPA is already diligently prosecuting an action against the defendant to require compliance with the CWA, a citizen suit against the same defendant for the same CWA issue is barred. The district court ruled instead that the claims in the suit were rendered moot by the presence of a pre-existing consent decree between the EPA and the city of Baton Rouge. The Fifth Circuit disagreed that the consent decree mooted the issue and also noted that the "diligent prosecution" provision was non-jurisdictional in nature, meaning that the district court was not stripped from subject-matter jurisdiction over the suit through the EPA's pursuit of claims against Baton Rouge. Instead, the district court was obligated to hear the plaintiff's argument as to whether there really was a diligent prosecution by the EPA that would prevent the plaintiffs from bringing their suit. Accordingly, the Fifth Circuit reversed and remanded to the district court for a factual finding as to whether the EPA had engaged in a "diligent prosecution."


A few days later, a different panel of the Fifth Circuit issued an opinion in Atchafalaya Basinkeeper v. Stephen Chustz, No. 11-30471 (April 25, 2012), a case in which environmental groups sued the Atchafalaya Basin Program, alleging that the program violated the conditions of a CWA permit issued pursuant to 33 U.S.C. § 1344 by the Army Corp of Engineers. The district court dismissed the plaintiffs' case after determining that the CWA did not allow citizen suits to enforce the conditions of a section 1344 permit. The Fifth Circuit affirmed, based on a close reading of the CWA's citizen-suit provisions. The court determined that section 1344 permits are issued by the Army Corps of Engineers and that all enforcement responsibilities for these types of permits belongs solely to the Corps. "[T]here are no strong indicia of congressional intent to provide citizen suits for section 1344 permit condition violations."


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

June 1, 2012

California Seeks to Enact New Rules Regulating Fracking


The debate on fracking is heating up in California. The state currently does not regulate fracking differently from other extraction techniques. If Governor Jerry Brown gets his way, however, that soon may change. Governor Brown has asked the state legislature to increase the budget and size of the state’s oil-and-gas agency—the Division of Oil, Gas and Geothermal Resources—which is a division of the California Department of Conservation. The legislature preliminarily granted this request on May 9, 2012. Governor Brown hopes that the division’s increased resources will help it draft new fracking-specific regulations by 2014.


The California Department of Conservation hopes to enact fracking-specific regulations even sooner. It is currently holding a series of public workshops on fracking, and it hopes to have a draft of any new regulations by fall 2012. While the Department of Conservation’s regulations are merely in their infancy, when completed, they are expected to be some of the toughest in the country. Many expect that the state will impose stringent well-integrity standards and require disclosure of all chemicals used in the fracking process. The Department of Conservation is also commissioning an independent study to look at the effects of fracking on drinking water. The results of that study are expected to influence the draft regulations.


Keywords: litigation, energy litigation, California, hydraulic fracturing, fracking


Robert Carlton, Haynes and Boone, LLP, Houston, TX


 

June 1, 2012

EPA and DOI Release Proposed Fracking Regulations


The Environmental Protection Agency (EPA) recently released for public comment a draft permitting guidance for oil-and-gas hydraulic fracturing (fracking) activities using diesel fuels. The Safe Drinking Water Act’s (SDWA) Underground Injection Control (UIC) Program has a well-known “Halliburton loophole” that excludes most hydraulic fracturing activities from UIC permitting and regulations—except if those activities use diesel fuel. Because the major fracking companies at the time did not use diesel fuel, this essentially exempted fracking operations from EPA regulation—reflected in the fact that the EPA did not ever produce a guidance for permitting of fracking operations that do actually use diesel fuel.


However, times have changed and now the EPA, in addition to launching a long-term study on hydraulic fracturing, has also released its first draft guidance for the permitting of underground injections of fluids as part of fracking activities that use diesel fuel, per the agency’s statutory authority to do so under the SDWA. The guidance, if adopted, will require that a UIC permit be obtained prior to the injection of any diesel fuels. Controversy has already arisen about the definition of “diesel fuel” under the guidance; although the draft guidance uses a commonly accepted definition of “diesel fuel,” environmental groups have lobbied for a more expansive definition that would allow for a greater number of fracking operations to be regulated.


The EPA will take public comment on the draft guidance for 60 days upon publication in the Federal Register to allow for stakeholder input before it is finalized.


Around the same time, the Department of the Interior’s (DOI) Bureau of Land Management (BLM) also released new proposed fracking-related regulations on federal and tribal lands. The proposed rule would apply to BLM-managed mineral estate, including 700 million subsurface acres of federal estate and 56 million subsurface acres of Indian mineral estate. Once in place, the regulations will apply to a large number of wells. The BLM estimates that about 3,400 wells are hydraulically fractured on federal lands or Indian lands each year. The BLM proposal would revise the BLM’s existing drilling regulations (at 43 C.F.R. Part 3160). The proposal would enlarge the BLM’s review and pre-approval authority, require increased disclosure of additives used in hydraulic fracturing, expand regulation of well-bore integrity, and address issues related to the wastewater produced during hydraulic fracturing operations.  More specifically, the new regulations will require operators to:


  • submit a proposal for well stimulation that is approved by the BLM before the commencement of operations, including a plan on how to handle flowback water;

  • submit a subsequent report sundry notice after fracturing operations that includes, among a number of items, the disclosure of the chemicals used in the fracturing operations; and

  • isolate all usable water and other fracturing fluids to prevent future contamination.

Like the EPA with its proposal, the BLM is currently taking public comments on the draft and will then finalize the regulations.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA

 

May 23, 2012

Fifth Circuit Affirms Criminal Conviction for NPDES Violations


On May 15, 2012, the Fifth Circuit affirmed the conviction of Jeffrey Pruett, who was president and CEO of Louisiana Land & Water Co. and LWC Management Co., as well as separate criminal convictions against his two companies. Pruett had been responsible for operating 28 wastewater-treatment facilities, each of which required a National Pollutant Discharge Elimination System (NPDES) permit.


Following inspections by the EPA and the Louisiana Department of Environmental Quality, Pruett and his companies were charged numerous charges related to each of the 28 facilities. The jury found Pruett and the two companies guilty of knowingly violating effluent limitations at one facility, knowing violating record-keeping requirements at all facilities, and negligently violating operation and maintenance requirements at one facility. Pruett was sentenced to 21 months incarceration and a fine, and the two companies were also fined.


The defendants appealed to the Fifth Circuit. The court addressed an issue of first impression: whether 33 U.S.C. § 1319(c)(1)(A), which imposes criminal penalties for "negligent violations" of permit conditions, requires proof of ordinary or gross negligence. Pruett argued that proof of gross negligence should be required. The Fifth Circuit disagreed, affirming the district court's instruction to the jury on ordinary negligence, and holding that ordinary negligence is sufficient to establish criminal penalties.


The case is U.S. v. Pruett, No. 11-30572 (5th Cir. May 12, 2012).


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA

 

May 15, 2012

Federal Court Considers Climate Change Suit Dead in Water


In March 2012, a court in the Southern District of Mississippi again dismissed coastal Mississippi property owners' claims against the oil and coal industries for damages arising from Hurricane Katrina. See Comer v. Murphy Oil USA, Inc., No. 1:11-cv-220-LG-RHW (S.D. Miss. Mar. 20, 2012). The Comer plaintiffs alleged that the defendants' energy operations released harmful byproducts that, in turn, caused an increase of global warming, led to a more intense Hurricane Katrina, and produced massive damage to their coastal property. As explained below, this was the plaintiffs' second trip to federal court, as their first suit in 2007 was dismissed on causation and political-question grounds. After reviewing the new complaint, Chief Judge Louis Guirola held that the plaintiffs' claims were barred by the doctrines of res judicataand collateral estoppel. In addition, "in an abundance of caution," the court went further and found the plaintiffs' case should also be dismissed on alternate grounds, including the political-question doctrine, limitations, and standing.


Procedural History
In 2007, Judge Guirola dismissed the plaintiffs' original suit, in which the court found the plaintiffs lacked standing because their alleged damages arising from Hurricane Katrina were not "fairly traceable" to the defendants' actions and that their claims were non-justiciable under the political-question doctrine. The plaintiffs' appeal to a Fifth Circuit panel was successful, but in 2010, the defendants' petition for rehearing en banc was granted. Thereafter, with the disqualification of an appeals-court judge, the en banc panel lost its quorum, but, according to the Fifth Circuit rules, the plaintiffs' appeal was properly vacated. In early 2011, the U.S. Supreme Court denied the plaintiffs' petition for a writ of mandamus to reinstate their appeal. The plaintiffs were undeterred, and they re-filed their claims under the auspices of a Mississippi savings statute purportedly allowing re-filing.


Lack of Standing for Climate-Change Plaintiffs
Though the case was primarily dismissed on res judicata and collateral estoppel grounds, the main thrust of Judge Guirola's March 2012 opinion is its lengthy discussion on the plaintiffs' lack of standing. Although two federal courts of appeal found standing for climate-change plaintiffs, Judge Guirola makes clear that he does not agree. See Connecticut v. Amer. Elec. Power Co., 582 F. 3d 309 (2nd Cir. 2009) and Comer v. Murphy Oil USA, Inc., 585 F. 3d 855 (5th Cir. 2009). InJudge Guirola's March 2012 opinion, the court explained that plaintiffscould not show a causal connection between their injury and the defendants' conduct and thus could not demonstrate the second element needed to establish constitutional standing. While plaintiffs need not show proximate cause to survive a standing challenge, the court stated that the "injury [must] be fairly traceable to the defendant" and the "more attenuated or indirect the chain of causation between the defendant's conduct and the plaintiff's injury, the less likely the plaintiff will be able to establish the causal link sufficient for standing." The court disagreed with the plaintiffs' reliance on the Clean Water Act cases for the proposition that the plaintiffs need only allege the "defendants' emissions contributed to the kinds of injuries that they suffered." Instead, the court cited Native Village of Kivalina v. Exxonmobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009), and agreed with the defendants that statutory water-pollution claims are distinguishable from global-warming claims because, without federal standards limiting the discharge of greenhouse gases, the plaintiffs do not benefit from a presumption that any defendants' conduct harmed the plaintiffs. Here, the Comer plaintiffs could not show the defendants' emissions of greenhouse gases caused Hurricane Katrina and that their injuries would not have occurred absent such emissions.


What Comes Next?
Whether a Fifth Circuit panel will again reverse Judge Guirola's analysis regarding the plaintiffs' lack of standing remains to be seen. Even so, Judge Guirola dismissed the plaintiffs' claims on a litany of other grounds. Prognostication may be forthcoming, as oral arguments in Kivalina have already been heard before the Ninth Circuit, and that court will have the benefit of both the Fifth Circuit's panel decision for the Comer plaintiffs as well as Judge Guirola's dismissals.


Keywords: litigation, mass torts, Fifth Circuit, climate change, Hurricane Katrina, dismissal


Arlene Hennessey, King & Spalding, Houston, TX


 

May 14, 2012

Denver Court Dismisses Fracking Lawsuit


On May 9, 2012, the District Court for the City and County of Denver, Colorado, dismissed the lawsuit brought by William Strudley and his family against client Antero Resources and several other companies that developed natural-gas wells in the Piceance Basin in Western Colorado using hydraulic fracturing. The claims alleged that Antero and the other companies contaminated the Strudleys’ property and injured their health. Promptly after the case was filed, Antero brought to the court’s attention evidence calling into serious question the validity of the claims, including testing done by the Colorado Oil and Gas Conservation Commission that showed no contamination of the Strudley property. Based on this information, the court entered a “Lone Pine” case-management order at the beginning of the case that stayed most proceedings and required the Strudley family to come forward with sufficient evidence, including expert opinion, to show they were exposed to contamination and harmed. When the Strudleys failed to make an adequate showing, the court dismissed the case with prejudice in a detailed written opinion.


This legal victory is significant because, to our knowledge, it is the first hydraulic fracturing tort case to reach final judgment, and because the defense’s case-management strategy—requesting that evidence of causation and harm be presented to the court early in the proceedings—effectively saved all parties significant time and money by achieving an early dismissal.


Dan Dunn, a partner in the Denver office of Hogan Lovells US LLP, led the Antero defense team. Other members of the team were Andrew Lillie and Anna Edgar, associates in the Denver office of Hogan Lovells, and James Thompson and Robert Schick of the Houston office of Vinson & Elkins.


Daniel Dunn, Hogan Lovells US LLP, Denver, CO

 

May 1, 2012

Judge Requires NCR to Continue Paying for PCB Cleanup


On April 29, 2012, U.S. District Court Judge William C. Griesbach ruled that NCR Corp. is responsible for paying for the environmental cleanup of the Fox River in northeastern Wisconsin.


NCR and Appleton Papers stopped paying for the cleanup work in summer 2011, with Appleton Papers arguing that it was not a responsible party because it purchased assets in 1978, long after PCB usage had ceased. After Judge Griesbach recently agreed with Appleton Papers, the United States moved to compel NCR to proceed on its own.


The Fox River is the site of the largest PCB cleanup in the United States, with an expected cost of more than $1 billion.


NCR had made a divisibility argument, claiming it was responsible for only nine percent of the PCBs from the cleanup area. Judge Griesbach held NCR is free to later seek contribution from others. In an early ruling in a related contribution case, Judge Griesbach had ruled that NCR was not entitled to contribution because it was the original source of the PCBs.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI

 

April 30, 2012

No Insurance Duty to Defend in Climate-Change Lawsuit


The Virginia Supreme Court has again decided, following an initial decision and then a rehearing, the question of insurance coverage for defendants in climate-change lawsuits, in a case between a company sued as a defendant in a climate-change lawsuit and its insurance company. (AES Corp. v. Steadfast Ins. Co., --- S.E.2d ----, 2012 WL 1377054 (Va. 4/20/12)). The case addresses whether an insurer is liable when its insured is accused of contributing to global climate change and causing consequential environmental damage due to rising sea levels and extreme weather events. The insurance company, which had issued a comprehensive general liability policy covering the insured, argued that it was not obligated to defend its insured or cover any damages because the environmental problems alleged in the underlying climate change lawsuit were not "occurrences" as defined in the policy. The insured, AES Corp., is one of the named defendants in the well-known Native Village of Kivalina v. ExxonMobil Corp. climate-change lawsuits currently awaiting a decision on appeal in the Ninth Circuit. The Kivalina suit, which was filed by an Alaskan town threatened by rising sea levels, argues that emitters of greenhouse gases are liable for their excessive carbon-dioxide emissions, which in turn led to climate change and corresponding sea-level rise.


The supreme court determined that the underlying Kivalina complaint’s alleged damages were the “natural and probable consequence” of the insured’s intentional actions. AES Corp. therefore could not claim that the emissions of greenhouse gases were an “accident” or “occurrence” under the policy. The insurance company had no duty to defend AES Corp. against the claims in the Kivalina suit.


A concurrence by Judge Mims warned of the larger consequences of the decision, although agreeing that under the language of this policy, Steadfast had no duty to defend AES in the Kivalina suit.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA

 

April 4, 2012

Proposed Settlement and Delay of Trial in Deepwater Horizon MDL


On the eve of an expected trial in the Deepwater Horizon oil spill multi-district litigation, BP and the Plaintiffs Steering Committee (PSC) announced that a proposed $7.8 billion settlement "agreement in principle" had been reached, causing an indefinite continuance of the scheduled "Phase I" trial. Although the Phase I trial was ostensibly limited to a maritime-limitations action before Judge Barbier of the Eastern District of Louisiana, with Transocean attempting to establish the limits of its liability in the matter, the trial was nonetheless expected to address the relative fault of all named defendants in the April 2010 Gulf of Mexico explosion and oil spill.


In the weeks leading up to the Phase I trial, BP secured settlements with other major defendants, notably Cameron International Corporation (manufacturer of the rig's blow-out preventer) and Weatherford International, Inc. (manufacturer of the float collar used in the drilling process). BP did not, however, reach any agreements with Transocean, Ltd., who owned the rig, and Halliburton Energy Services Co., who was in charge of cementing operations. Instead, BP transferred to the Plaintiffs Steering Committee all rights and causes of action it may have against those parties.


The Eastern District then established a "Transition Process," intended to allow for the evaluation of claims already pending before Gulf Coast Claims Facility (GCCF), as well as any new claims submitted, until the proposed settlement is finalized and a "Court Supervised Claims Program" takes over from the GCCF.


The MDL trial may still occur, although it will now be limited to the federal and state government claims against the various defendants, as well as the PSC's attempts to recover from Transocean and Halliburton, and a new date has not yet been set. The court has also declared that a motion for preliminary approval of the proposed BP-plaintiffs settlement must be filed by mid-April.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA

 

April 2, 2012

Indiana Court Affirms Unenforceability of CGL Pollution Exclusion


In State Auto Mutual Ins. Co. v. Flexdar, Inc., No. 49S02-1104-PL-199, ___ N.E.2d ___ (Ind. Mar. 22, 2012), the Indiana Supreme Court affirmed longstanding Indiana precedent holding that the standard "pollution exclusion" typically appearing in commercial general liability (CGL) policies issued from approximately 1985 to 2005 is ambiguous and unenforceable as to most, if not all, types of environmental liabilities. This longstanding principle of Indiana law has been under assault in Indiana courts in recent years by insurers seeking to overturn this precedent.


The Indiana Supreme Court's opinion in Flexdar provides added security to policyholders whose policies are governed by Indiana law that their historical CGL coverage may be available to cover costs associated with government-mandated cleanups, as well as private-party lawsuits alleging bodily injury or property damage arising from environmental conditions. Policyholders who are either based in Indiana or who have substantial Indiana operations stand to potentially benefit from this ruling. It is important to note, however, that while the ruling means that coverage for environmental liabilities is not automatically excluded, coverage also is not automatically guaranteed as a result of this ruling. As always, all pertinent policy provisions and considerations must be evaluated to assess their impact on the availability of coverage in each particular matter.


In Flexdar, the Indiana Department of Environmental Management (IDEM) demanded that Flexdar, an Indianapolis-based rubber-stamp and printing-plate manufacturer, clean up trichloroethylene (a chemical solvent commonly known as TCE) that was found in soil and groundwater at Flexdar's manufacturing site. Flexdar sought insurance coverage from its liability insurer, State Auto, for the legal, investigative, and remediation costs of complying with IDEM's demand. State Auto then sued Flexdar, seeking a court determination that the "pollution exclusions" in its policies from 1997 to 2002 absolved it of any obligation to provide coverage to Flexdar for IDEM's demand. The State Auto policies contained not only the standard CGL "pollution exclusion," but also an Indiana-specific endorsement stating that the exclusion "applies whether or not such irritant or contaminant has any function in your business, operations, premises, site or location."


The Indiana Supreme Court succinctly summarized its holding in the opinion's first two sentences: "In this case we examine whether the language of a pollution exclusion in a commercial general liability policy is ambiguous. We hold that it is." Specifically, the court held that the definition of "pollutant" in the State Auto policies was ambiguous, rendering the "pollution exclusion" unenforceable. The State Auto policies defined "pollutant" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste." The court observed that if this definition were read literally, "practically every substance would qualify as a 'pollutant' . . . , rendering the exclusion meaningless." Because the definition of "pollutant" in the State Auto policies did not specifically identify TCE as a "pollutant," the court held that the "pollution exclusion" was ambiguous and unenforceable, and did not preclude coverage for Flexdar's environmental liabilities to IDEM.


In reaching this result, the court affirmed longstanding Indiana precedent, and confirmed the approach it had taken on the previous occasions on which it addressed this exclusion. See, e.g., American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) (gasoline not specifically identified as a "pollutant"; "pollution exclusion" unenforceable); Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996) (following Kiger); Freidline v. Shelby Ins. Co., 774 N.E.2d 37 (Ind. 2002) (carpet glue fumes not specifically identified as a "pollutant"; "pollution exclusion" unenforceable). The court noted that numerous Indiana Court of Appeals decisions also have reached similar results through the years.


Finally, the court observed that insurers have a simple remedy available if they wish to unambiguously exclude pollution coverage in their CGL policies: "By more careful drafting State Auto has the ability to resolve any question of ambiguity." The court noted that State Auto had in fact done so in 2005, after the State Auto policies at issue in Flexdar. State Auto's 2005 "pollution exclusion" endorsement specifically identifies TCE and a laundry list of other specific substances in the definition of "pollutant." Like State Auto, many insurers have begun to adopt this type of specific definition in Indiana, and after the Indiana Supreme Court's opinion in Flexdar, it is anticipated that many more insurers will do so. Accordingly, as with all insurance-coverage issues, the terms of the specific policies at issue must be examined to determine how they apply to a specific situation. Regardless, Indiana policyholders have now received powerful confirmation from the Indiana Supreme Court that coverage for environmental liabilities will not automatically be precluded under policies with the same "pollution exclusion" and "pollutant" language in the policies at issue in Flexdar.


Flexdar was decided on a 3–2 vote, with Justice Dickson concurring in Justice Rucker's opinion for the court; Justice David concurring in the result; and Chief Justice Shepard (who recently retired) joining in Justice Sullivan's dissent.


John P. Fischer, Charles M. Denton, and Adam K. Hollander, Barnes and Thornburg LLP


 

April 2, 2012

Supreme Court Expands Judicial Review of CWA Enforcement Orders


On March 21, 2012, the U.S. Supreme Court issued an important ruling addressing the enforcement authority of the U.S. Environmental Protection Agency (EPA) under the federal Clean Water Act. Sackett v. U.S. Environmental Protection Agency, 2012 WL 932018 (March 21, 2012). In a case involving an Idaho couple starting to construct a home on a small lot, the Court unanimously held that they were entitled to obtain early federal court review of an EPA compliance order asserting that they had illegally filled wetlands on their property. The ruling supersedes several decades of contrary lower-court precedent.


The Sacketts own a residential lot near Priest Lake, Idaho and, after receiving a county permit, placed dirt and rock on the property to build a house. They were then served with a compliance order from the EPA, which asserted that they had filled jurisdictional wetlands on their property and ordered them to immediately restore the site pursuant to an approved work plan. The EPA denied the Sacketts a hearing on this order and the Sacketts sued in federal court for review of the order claiming that the EPA’s action was arbitrary and capricious and denied them due process. The trial court dismissed the case for lack of jurisdiction, ruling that a compliance order was not judicially reviewable because of the “no pre-enforcement review” doctrine; this ruling was affirmed by the U.S. Court of Appeals for the Ninth Circuit.


The EPA and the U.S. Army Corps of Engineers have a robust menu of enforcement options under the Clean Water Act. The EPA often uses a section 309(a) compliance order, which usually asserts that an illegal fill of a jurisdictional water or wetland has occurred and which may direct the recipient to stop all activity in such areas, to remove the fill or to take certain specified (and often expensive) actions in response. The Clean Water Act does not explicitly address judicial review of a compliance order, but federal courts have uniformly adopted the federal-government position that such orders are not reviewable by the courts unless or until an enforcement action is filed. Thus, a recipient of the order is often in the untenable position of either complying with a federal-government order that it believes is factually or legally incorrect or refusing to comply and then waiting for the EPA to file a judicial enforcement action in which it is exposed to large penalties.


As a result, a Clean Water Act compliance order has become a powerful EPA enforcement tool. Because many order recipients do not have significant resources and/or do not want to provoke a federal-court enforcement action (which can be expensive to defend and in which the agencies may try to seek daily penalties of up to $75,000 per day for the original violation and the refusal to comply with the order), they often have no practical choice but to voluntarily comply with the compliance order without ever having the opportunity to contest the underlying violation. According to the Sacketts, the cost of complying with the order would have cost more than they paid to purchase the land.


The Supreme Court justices often take fragmented positions in their environmental case decisions. They issued a unanimous opinion here, however, which strongly criticized the government’s “no pre-enforcement review” approach. In his opinion for the Court, Justice Scalia wrote, “there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review. . . .”


The Court unanimously found that the compliance order qualified as a “final agency action” subject to judicial review and that the Clean Water Act does not preclude that review. The Court also wanted to preserve judicial review in the wetlands-enforcement arena because of the well-known problems in determining exactly what constitutes a jurisdictional wetland. Thus, Justice Alito observed in a concurring opinion that “[t]he reach of the Clean Water Act is notoriously unclear” and that “[a]llowing aggrieved property owners to sue under the Administrative Procedure Act is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem.”


The Sackett decision certainly has its limitations. The Court did not address the question of whether, at this pre-enforcement stage, the Sacketts could challenge not only the EPA's authority to regulate their land under the Clean Water Act but also the actual terms and conditions of the compliance order. It also did not determine whether the Sacketts had discharged material into waters of the United States—rather, it remanded the case to the lower courts to address this jurisdictional question. The Court also did not reach the issue of whether there is a constitutional due-process right to such pre-enforcement judicial review.


This ruling will have serious ramifications for Clean Water Act enforcement. The EPA will likely place less reliance on compliance orders because it will need to conduct a more extensive investigation to support them and prepare a thorough administrative record on which it can defend the order in litigation. The ruling is also likely to change the “dynamics” surrounding alleged violations because the EPA and the corps will probably rely more on less coercive tools for notifying parties of alleged violations, which could lead to early and more collaborative discussions and accompanying resolutions. Although the recipient will have the ability to challenge compliance orders in court, the EPA and the Corps may file enforcement counterclaims that “up the ante” in such litigation, thereby creating an additional litigation risk for compliance-order recipients who choose the judicial review route.


One important open question is whether parallel compliance-order provisions in other federal environmental statutes that do not have explicit pre-enforcement bars—such as the Resource Conservation and Recovery Act and the Clean Air Act—will also be similarly interpreted by the Courts to be judicially reviewable. The Sackett decision provides an excellent legal basis for such an argument.


Nonetheless, in the short term, the Sackett ruling represents a resounding ruling in favor of granting access to the courts for judicial review of Clean Water Act compliance orders.


Sandra Edwards, Farella Braun + Martel LLP, San Francisco CA


 

March 22, 2012

Supreme Court Supports Landowner Against EPA


In the much anticipated decision of Sackett v. U.S. Environmental Protection Agency, the U.S. Supreme Court ruled that a civil action could be brought under the Administrative Procedure Act (APA) challenging a U.S. Environmental Protection Agency (EPA) compliance order for Clean Water Act violations. Specifically, the Court found that such a compliance order was a final agency action, and the Clean Water Act does not preclude judicial review under the APA. The controversy centered around an EPA compliance order for the fill of onsite wetlands located on a single-family residential lot that was geographically separated by development from an established navigable waterway. While the decision did not address the merits of the actual Clean Water Act violation, it continued the Court’s recent expansion of property rights related to isolated wetlands and suggests that under the facts of the case, the U.S. Corps of Engineers and the EPA may have lacked jurisdiction. The decision seems certain to have widespread impacts on the issuance of compliance orders by federal agencies, particularly in marginal cases. It also gives private parties the judicial “ammunition” to challenge such orders where they were unable to do so before.


Rebecca Harrington, Alston and Bird, Los Angeles, CA


 

March 19, 2012

Municipal Oil and Gas Bans along the Marcellus Shale Upheld


In one week, two separate New York courts upheld municipal bans of hydraulic-fracturing operations (fracking). In the first ruling, on February 21, 2012, a New York state court upheld the ban enacted by the town of Dryden, a small town near Ithaca. The dispute arose after Dryden enacted a zoning ordinance in 2011that banned all oil and gas activity within the town's jurisdiction. Although the ordinance bans all oil and gas activity, the supporters of the ban primarily were motivated by opposition to the possible use of hydraulic fracturing to produce natural gas from the Marcellus Shale, which lies beneath Dryden. The ban was challenged in court by Anschutz Exploration Co., which had acquired a significant amount of mineral leases within the town's jurisdiction before the ban was enacted; Anschutz argued that a New York state law (New York Environmental Conservation Law § 23-0303) preempted local regulation of the oil and gas industry. The judge disagreed and determined that the ban was a local zoning law and therefore not preempted by state law. The judge noted in his opinion that the issue was one of first impression.


A few days later, another judge upheld a ban enacted by the town of Middlefield, another small town about 100 miles east of Dryden. Like the Dryden ban, the Middlefield ordinance banned all oil and gas activity within the town borders, despite being reportedly motivated by fracking concerns. Cooperstown Holstein Corp., a landowner that had granted mineral leases for its property, challenged the Middlefield ban on the same grounds as Anschutz raised in the Dryden ban, arguing that the same New York state law, section 23-0303, preempted local regulation of the oil and gas industry by individual towns. The judge disagreed, concluding that a local zoning ordinance preventing oil and gas activity in specific locations was not a law regulating the oil and gas industry, and therefore did not fall under the state-law restriction.


Appeals deadlines for both cases are looming and the outcome of each matter on appeal should be closely watched for the potential affect they may have on the ability of local municipalities to target and prevent hydraulic-fracturing operations despite state law allowing for this type of activity.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

March 16, 2012

Interactive Greenhouse-Gas-Emission Data Released by EPA


Nationwide greenhouse gas emissions are now available online. The Environmental Protection Agency’s (EPA’s) Greenhouse Gas Mandatory Reporting rule has led to the creation of an interactive Greenhouse Gas Data website. The site assembled all of the greenhouse-gas-emission data that was reported by all regulated facilities for 2010 from nine different industry groups, and includes maps of all facilities, data from individual reporting facilities, and emissions broken down by facility type, by state or county, or by greenhouse gas (the reported gases include carbon dioxide, nitrous oxide, methane, PFC-14, PFC-116, and HFC-23). Information can be viewed geographically; on a map; or broken down into pie charts, bar graphs, and other formats. The map view includes clickable links to individual reporting facilities.


Power plants were the largest source of direct emissions reported, accounting for 72.6 percent of the total emissions. Refineries came in second, accounting for 5.7 percent. Texas had the most reporting faculties, the largest amount of emissions from both power plants and refineries, and the highest amount of greenhouse-gas emissions. Interestingly, California had the second highest number of reporting facilities, but a significantly lower amount of greenhouse-gas emissions. Indiana had the second highest amount of reported greenhouse-gas emissions out of all states, and the largest amount attributable to the metals industry.


Because the mandatory-reporting program is expanding to include more sources, expect that next year's map will be more detailed and more thickly populated with data. New industries that will be reporting next year include electronics manufacturing, carbon dioxide sequestration and injection, and petroleum and natural gas systems.


The EPA states that the purpose of reporting this emissions data is to "provide a better understanding [of] the sources of GHGs and will guide development of the policies and programs to reduce emissions. The publically [sic] available data will allow [GHG] reporters to track their own emissions, compare then to similar facilities, and aid in identifying cost effective opportunities to reduce emissions in the future."


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

March 9, 2012

PRP May Not Elect Remedies under CERCLA When Recovering Costs


The Eleventh Circuit recently became the fourth federal court of appeals to hold that a potentially responsible party (PRP) may not elect remedies under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) when seeking to recover costs sustained pursuant to a consent decree. Solutia, Inc., et al. v. McWane, Inc., et al., -- F.3d --, 2012 WL 695007 (11th Cir. 2012). The case giving rise to this decision relates to the cleanup of polychlorinated biphenyls (PCBs) and other hazardous substances in Anniston, Alabama. Seeking to compel a cleanup of this contamination, the Environmental Protection Agency (EPA) filed a CERCLA enforcement action against plaintiffs-appellants Solutia and Pharmacia. The parties entered into a consent decree, under which Solutia and Pharmacia were required to perform certain cleanup activities in Anniston. Solutia and Pharmacia then filed suit against a group of PRPs, seeking recovery of their response costs under sections 107 and 113 of CERCLA.


In seeking to recover costs sustained pursuant to a consent decree under sections 107 and 113, Solutia and Pharmacia presented the court with an issue that the Supreme Court expressly left open in United States v. Atlantic Research Corp., 551 U.S. 128, 127 S. Ct. 2331 (2007), namely, whether a PRP that has a section 113 claim for cleanup expenses required by the United States pursuant to a consent decree may alternatively bring a cost-recovery suit under section 107. 551 U.S. at 139 n.6, 127 S. Ct. at 2338 n.6. The defendants-appellees argued to the court below that Solutia and Pharmacia should be limited to a section 113 remedy, because to hold otherwise would give PRPs an impermissible election between the more favorable terms of section 107 and the narrowly crafted relief under section 113. The magistrate judge agreed with the defendants-appellees, holding that when a PRP has a section 113 claim, as Solutia and Pharmacia did, that claim is the exclusive means for recovering response costs from other PRPs.


On appeal, the Eleventh Circuit acknowledged that the issue before it was one of first impression, but recognized that other federal appellate precedent meant the court was “not drawing on a completely blank slate.” Following the Second, Third, and Eighth Circuits, see Morrison Enter.,LLC v. Dravo Corp., 638 F.3d 594, 603 (8th Cir. 2011); Agere Sys., Inc. v. Advanced Envtl. Tech. Corp., 602 F.3d 204, 229 (3d Cir. 2010); Niagra Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112 (2d Cir. 2010), the court held that when a PRP has sustained costs pursuant to a consent decree and therefore has a cause of action under section 113, the PRP may not elect to recover its costs under section 107 instead. The Eleventh Circuit’s ruling relied upon the Supreme Court’s admonishment in Atlantic Research to read CERCLA “as a whole”; the court found that to permit an election of remedies between section 107 and 113 would undermine the structure of CERCLA. Quoting the Eighth Circuit’s decision on this issue, the court held “we must deny the availability of a § 107(a) remedy under these circumstances in order ‘[t]o ensure the continued vitality of the precise and limited right to contribution.’”


With the Eleventh Circuit’s ruling, every federal court of appeals to consider the issue has held that a PRP with a viable section 113 claim may not instead elect to recover its costs under section 107.


Meaghan Boyd and Sarah Babcock, Alston & Bird LLP, Atlanta, GA


 

February 23, 2012

No District Attorney Standing to Bring Citizen Suits Against Polluters


The Tenth Circuit ruled that a district attorney did not have standing to pursue a citizen suit under the Clean Water Act (CWA) against a neighboring municipality, in Thiebaut v. Colorado Springs Utilities, No. 10-1471. The district attorney for the Tenth Judicial District of Colorado filed suit against the City of Colorado Springs, claiming that the city violated the Clean Water Act by discharging raw sewage, non-potable water, and chlorine into the Fountain River. The Sierra Club also filed a CWA citizens suit against Colorado Springs for the same acts, and the two suits were consolidated.


The trial court dismissed the district attorney from the suit, holding that he lacked standing to pursue the suit because the Colorado legislature had not authorized him to pursue the suit and, further, the citizens of Colorado were able to represent their own interests. Associational standing was also not available because pursuing CWA actions was not considered "germane" to his office's purpose.


The Tenth Circuit affirmed on appeal and again on rehearing, stating first that the district attorney could not assert parens patriae standing because there was no specific legislative grant from the state of Colorado for the district attorney to represent its interests by filing a citizen suit alleging Clean Water Act violations against another municipality. The Tenth Circuit also determined that the district attorney lacked associational standing, echoing the trial court's holding that the CWA citizen suit was not "germane" to the purposes of a district attorney's office. In making this holding, the Tenth Circuit dismissed the district attorney's explanation that he was generally charged with protecting the environment of Colorado: " Nowhere in those statutory provisions has the Colorado Legislature granted district attorneys authority to protect the health, safety, and welfare of the people of Colorado by seeking to remedy violations of the CWA in federal court."


Finally, the Tenth Circuit dismissed the district attorney's unique "standing for one is standing for all" argument, in which the DA claimed that because the Sierra Club had standing to pursue the same CWA claims he was bringing, the DA should also be able to bring those claims. The Tenth Circuit rejected this argument and affirmed the trial court's grant of summary judgment in favor of the City of Colorado Springs.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

February 23, 2012

Circuits Diverge on Application of Rapanos Decision


The question of what is a wetland was not answered by the Supreme Court in the Rapanos v. United States decision, a 4–1–4 plurality that resulted in three entirely separate opinions: Justice Scalia's plurality opinion, Justice Kennedy's separate concurrence, and a four-judge dissent by Justice Stevens. Scalia called for a test of whether the connection to a navigable waterway was "relatively permanent" and looked for a "continuous surface connection" between the disputed property and the waters of the United States, eliminating seasonal or intermittent waterways from CWA coverage. Kennedy instead developed what he termed the "significant nexus" test, looking to see whether the disputed property "either alone or in combination with similarly situated lands in the region," significantly affects the chemical, physical, and biological integrity of other navigable waters.


As the Third Circuit noted recently in United States v. Donovan(10-4295): "The Rapanos opinions seem to present an analytical problem: the three opinions articulate three different views as to how courts should determine whether wetlands are subject to the CWA, and no opinion was joined by a majority of the Justices. So which test should apply?"


In Donovan, the Third Circuit was faced with a property owner whose acreage included channels that flowed, indirectly, into a navigable waterway. The Army Corps of Engineers characterized the property as a wetlands; the owner disagreed and placed fill material on part of his property, after which he was sued by the government for violating the CWA. The sole issue to be decided in Donovan was whether the property on which the property owner placed the fill material was subject to regulation under the CWA—that is, whether it was a "wetland." Turning to the set of tests offered in the Supreme Court's Rapanos decision, the Third Circuit noted the post-Rapanos disagreement between the federal circuits.


Since Rapanos, the Seventh and Eleventh Circuits have determined that Justice Kennedy's "significant nexus" test alone creates the applicable standard for CWA jurisdiction over wetlands. However, the First and Eighth Circuits have held that federal regulatory jurisdiction can be established over wetlands that meet either the plurality"s or Justice Kennedy's test from Rapanos.


The Third Circuit decided to cast its lot with the First and Eighth Circuits, stating: "We find that Rapanos establishes two governing standards and Donovan's reliance on pre-Rapanos case law is misplaced. We hold that federal jurisdiction to regulate wetlands under the CWA exists if the wetlands meet either the plurality's test or Justice Kennedy's test from Rapanos." The Court explained itself with the following:


In any given case, this disjunctive standard will yield a result with which a majority of the Rapanos Justices would agree. . . If the wetlands have a continuous surface connection with "waters of the United States," the plurality and dissenting Justices would combine to uphold the Corps' jurisdiction over the land, whether or not the wetlands have a "substantial nexus” (as Justice Kennedy defined the term) with the covered waters. If the wetlands (either alone or in combination with similarly situated lands in the region) significantly affect the chemical, physical, and biological integrity of "waters of the United States," then Justice Kennedy would join the four dissenting Justices from Rapanos to conclude that the wetlands are covered by the CWA, regardless of whether the wetlands have a continuous surface connection with "waters of the United States." Finally, if neither of the tests is met, the plurality and Justice Kennedy would form a majority saying that the wetlands are not covered by the CWA.


The Third Circuit also determined that the disputed lands were in fact wetlands; the channels on the property were perennial, and there was a continuous surface connection between the channels on the property and a navigable river. In addition, testing showed that the Donovan waters did significantly affect the chemical integrity of the downstream river. Thus under either test, a wetlands protected by the Clean Water Act was found. Clarity as to what definition of wetlands will ultimately prevail, however, was not found.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

February 22, 2012

Chevron Unable to Avoid U.S. Enforcement of Ecuadorian Judgment


On January 26, 2012, the Second Circuit Court of Appeals issued an opinion on the Chevron v. Camacho Naranjo et al.(11-1150-CV) matter, explaining the rationale behind its prior order on September 19, 2011, in this same appeal. That September order vacated a preliminary injunction granted by the district court that barred the enforcement of a $17.2 billion Ecuadorian judgment against Chevron.


Chevron, a potential judgment-debtor, sought a global anti-enforcement injunction against a group of Ecuadorians, prohibiting the latter from attempting to enforce an allegedly fraudulent judgment entered by an Ecuadorian court against Chevron. That group of Ecuadorians, also known as the Lago Agrio plaintiffs, had sued Chevron in Ecuador for polluting the Lago Agrio region during oil- and gas- extraction activities. The Lago Agrio plaintiffs ultimately obtained a $17.2 billion judgment against Chevron in Ecuador—a judgment that has not yet been collected. Chevron believes that the Lago Agrio plaintiffs plan to attempt to enforce and collect the judgment in a number of foreign jurisdictions, and so preemptively filed suit in New York, asking for an injunction to prevent the Lago Agrio plaintiffs from enforcing the judgment. (Chevron also believes that the judgment was obtained by fraud and therefore should not be collectable.)


Chevron had proactively sought relief from the Ecuadorian judgment based on New York's Uniform Foreign Currency Money-Judgment's Recognition Act, arguing that the Act's exceptions applied to prohibit New York courts from enforcing, or have discretion not to enforce, foreign judgments. The Second Circuit held that those exceptions do not create an affirmative cause of action: "The sections on which Chevron relies provide exceptions from the circumstances in which a holder of foreign judgment can obtain enforcement of that judgment in New York; they do not create an affirmative cause of action to declare foreign judgments void and enjoin their enforcement."


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

February 2, 2012

EPA Enforcement Action Challenged in Supreme Court


On January 9, 2012, the Supreme Court heard oral arguments in Sackett v. EPA, a case that will determine whether the recipient of a federal agency’s compliance order can challenge that order in court. Under the Administrative Procedure Act, a common mechanism used to sue federal agencies, only “final agency action” may be challenged. What constitutes “final agency action” under the law is sometimes a bit nebulous. But, as the Sacketts, Idaho, landowners allege, it should clearly include an order requiring them to comply with the Environmental Protection Agency’s (EPA) demand to cease construction of their home or face up to a $75,000-a-day penalty.


The Sacketts own land near Priest Lake, Idaho, where in 2007 they began preparing to construct their home, including bringing in fill dirt. After filling in the property, the EPA and the Army Corp of Engineers ordered that all construction preparation must be stopped because the agencies believed the land contained sensitive wetlands. Several months later, the EPA issued a compliance order informing the Sacketts that they must return the property to its wetland state before seeking a building permit, and that failure to comply could result in a daily fine.


When the Sacketts challenged the EPA’s compliance order in court, the agency argued that the order could not be challenged because it was not final agency action. The Idaho District Court and the Ninth Circuit agreed. They held that the proper time for the Sacketts and other similarly situated parties to challenge compliance orders is at the same time the EPA attempts to prove the violations to a judge (and tries to have fines levied).


The Sacketts have argued that the compliance order is mandatory because they either must essentially forfeit their land or pay fines that could ruin them financially. And even waiting to find out if the EPA will impose fines and the amount of those fines deprives them of the use of their land. The government, on the other hand, asserts that compliance orders are an efficient way to ensure the environment is protected and that allowing such orders to be subject to judicial review would subject an efficient process to protracted litigation.


If oral arguments are an indication of how the Supreme Court will rule, the Ninth Circuit’s holding will be overturned. Justices expressed concern about the amount of the penalty the compliance order threatens to impose on the Sacketts. The government responded that the $75,000-a-day fine was merely the maximum allowed by law—a theoretical amount. Court members did not seem persuaded that, while such a large amount was not probable, it was impossible.


Justice Alito expressed his rather scathing opinion of the government’s position when he questioned the deputy U.S. solicitor general:


Mr. Stewart, if you—if you related the facts of this case as they come to us to an ordinary homeowner, don’t you think most ordinary homeowners would say this kind of thing can’t happen in the United States? You don’t—you buy property to build a house. You think maybe there’s a little drainage problem in part of your lot. So, you start to build the house, and then you get an order from the EPA which says: You have filled in wetlands; so, you can’t build your house. Remove the fill, put in all kinds of plants, and now you have to let us on your premises whenever we want to. You have to turn over to us all sorts of documents, and for every day that you don’t do all this, you’re accumulating a potential fine of $75,000. And, by the way, there’s no way you can go to court to challenge our determination that this is a wetlands until such time as we choose to sue you.


The Supreme Court’s decision will have broad implications beyond the Clean Water Act and these particular facts, setting a precedent for what type of agency enforcement actions—be it payment of fines, injunctions, or orders of mandamus—against both small private parties and large public corporations can be challenged in court. 


J. Elizabeth Poole, Wiley Rein, LLP, Washington, D.C.


 

December 22, 2011

Wisconsin Court Affirms Contamination Testimony Ruling


On December 22, 2011, the Wisconsin Supreme Court affirmed a court of appeals ruling that trial judges have broad discretion to allow testimony about environmental contamination and remediation costs in property-condemnation proceedings. The court held that such evidence is clearly admissible in state condemnation proceedings, as long as they are relevant to the property's fair market value. The court declined to address whether the state could subsequently make a cost-recovery claim after it acquired and cleaned up the property. See 260 North 12th Street, LLC v. Wisconsin DOT, 2011 WI 103.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

December 22, 2011

Wisconsin Court Holds Non-Responsible Party May Be Held Liable


On December 19, 2011, a federal district court judge ruled that an otherwise non-responsible party who has contractually assumed environmental liabilities may be held directly liable under CERCLA in a section 107 action even if the party with whom it contracted is still in existence and financially capable. See United States of America v. NCR Corp. and Appleton Papers Inc., Case No. 10-C-910 (E.D. Wis., Dec. 19, 2011).


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

December 6, 2011

Wisconsin Court Lets Stand Medical Monitoring Ruling


The Wisconsin Supreme Court has declined to take up an issue of first impression in a state that has divided courts in other jurisdictions. On December 1, 2011, the court denied a petition to review the June 14, 2011, decision of the Wisconsin Court of Appeals holding that asymptomatic plaintiffs cannot recover medical-monitoring expenses. Alsteen v. Wauleco, Inc., 335 Wis.2d 473, 802 N.W.2d 212, 2011 WI App 105.


The complaint in Alsteen included both symptomatic and asymptomatic plaintiffs claiming personal injury and property damage arising out of the historical releases of a preservative called “Penta” over a 40 year period at a now closed window-manufacturing facility in Wausau, Wisconsin. The appeal only affected the claims of the plaintiffs who had no manifested illnesses or symptoms.


Ted Warpinski, Friebert, Finerty and St. John, S.C., Milwaukee, WI


 

September 21, 2011

Arizona Ruling Affects Joint Defense Groups


A recent attorney disqualification opinion from the District Court of Arizona may have important impacts on attorneys involved in joint defense groups, particularly relating to CERCLA cost recovery cases.


The case, Roosevelt Irrigation District v. Salt River Project, 10-290. D. Az., started out as a CERCLA cost-recovery action that included common-law claims by the Irrigation District against various potentially responsible parties (PRPs) for cleanup costs associated with wells in Phoenix, Arizona. The Irrigation District was represented by Gallagher & Kennedy (G&K), who became the subject of two sets of disqualification motions. The first noted that two G&K attorneys had previously represented the PRPs now being sued by G&K, and although those attorneys had been walled off from this case, there was still a conflict of interest that was imputed to the entire firm. The judge, basing his decision on an Arizona ethical rule about imputed conflicts of interest, found that this indeed created a conflict that could only be waived with informed consent in writing.


The second set of disqualification issues focused on joint-defense-group issues. Other attorneys in the G&K firm had previously been a part of a joint defense group also involved in a contamination cleanup lawsuit; parties that had been codefendants with G&K’s clients in the previous joint defense group were now defendants in the Irrigation District case. Those former codefendants now argued that there was a kind of attorney-client privilege created between themselves and G&K based on their shared involvement in the joint defense group, even though G&K represented another defendant in the group. The judge agreed, focusing on the language of the Joint Defense Agreement and determining that:


[J]oint defense agreements do give rise to an implied attorney-client relationship, which may include a duty of confidentiality. This relationship can lead to a disqualifying conflict of interest where information gained in confidence by an attorney "‘becomes an issue" -- specifically when the former representation was “the same or substantially related” to the current litigation and when the current client’s interests are “materially adverse” to the interests of the party asserting the conflict of interest. . . .

[Further,] conflicts of interest arising from joint defense agreements, and participation in joint defense groups, can be imputed to an entire law firm in accordance with the applicable ethical rules.

The case may be appealed but for the time being stands as an important reminder to counsel involved in joint defense groups that courts may impute disqualifying conflicts of interests to them that could eliminate potential clients or could affect joint information sharing and strategy development between codefendants in a joint defense group.


Lisa A. Decker, Snell & Wilmer, LLP, Denver, CO


 

September 6, 2011

GAO Issues Report on EPA Litigation


In August 2011, the Government Accounting Office (GAO) issued a report to Congress on its review of data involving environmental litigation in which the Environmental Protection Agency (EPA) was a party. The GAO’s objectives were to examine (1) trends, if any, in environmental lawsuits against the EPA from 1995 through 2010, including stakeholder comments on the factors affecting any trends, and (2) the Department of Justice’s recent costs for representing the EPA in defensive environmental lawsuits and the federal government’s recent payments to plaintiffs.

 


Bill Kammer , Solomon Ward Seidenwurm & Smith, LLP, San Diego, CA


 

June 20, 2011

High Court Reverses Second Circuit in Climate Change/Nuisance Case


On June 20th, the U.S. Supreme Court in AEP v. Connecticut reversed the Second Circuit and rejected the application of nuisance common law by the states. The Court held that the Clean Air Act vests in the EPA the authority to regulate greenhouse gas (GHG) emissions, including carbon dioxide. This decision furthers the decision in 2007 wherein the Supreme Court held that the EPA had the authority under the Clean Air Act to regulate emissions of carbon dioxide from vehicles. The states had filed suit because the EPA had not acted under the federal common law of nuisance, which the was the basis of the Second Circuit’s decision below. The conundrum caused by the case is that if Congress were to remove the authority under the Clean Air Act to regulate greenhouse gases the effect would be to resuscitate the federal common law of nuisance for states such as the Northeast states to return to court. The EPA has said it will regulate such gases by a series of proposals in May 2012.


In this closely watched case, eight states and three land trusts sought to impose limits on GHGs from five major electric power companies on the grounds that those emissions were a violation of federal common law because they contributed to global warming. The Supreme Court held that any federal common law right to seek to control such emissions judicially was displaced by the Clean Air Act. In an 8–0 decision authored by Justice Ginsburg, the Supreme Court overturned the Second Circuit’s ruling that the Clean Air Act did not displace federal common law on this issue. The Second Circuit’s decision was based in part on the fact that the EPA had not yet promulgated its rules regulating GHG emissions. (Justice Sotomayor did not take part in the Supreme Court’s decision on this case because she sat on the Second Circuit at the time that it issued its decision.) The Supreme Court disagreed, stating that the critical point was “that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law.” The fact that the EPA had not yet exercised that authority by issuing final regulations did not negate the delegation—or the displacement of federal common law.


While the Court was unanimous in its ruling on the EPA’s occupation of the GHG regulatory realm, article III standing was affirmed only by a divided Court. Specifically, the Court split 4–4 on the potentially key legal issue of whether federal courts have jurisdiction to hear such suits, or whether they are barred by the political-question doctrine. The split here means that the Second Circuit finding that the suits could proceed stands, although that ruling does not apply to other federal circuits.


Going forward, it should be noted that the Supreme Court did not address whether the plaintiffs could obtain relief under state nuisance law. The Second Circuit did not address the state-law claims because it decided the issue based on federal common law. The Court therefore left the potential availability of a claim under state nuisance law open for consideration on remand. As a result, the Supreme Court’s decision will not mean an immediate end to nuisance claims over climate change.


For further information please see the article by Christina M. Landgraf and Joel T. Bowers of Barnes & Thornburg LLP.


John H. Klock, Gibbons P.C., Newark, NJ and Robert L. Hines, Farella Braun & Martel LLP, San Francisco, CA


 

June 8, 2011

Cert Denied to GE's Petition Challenging EPA's Superfund Authority


In December 2010, General Electric (GE) filed a petition for certiorari with the U.S. Supreme Court, asking for review of a D.C. Circuit decision in Gen. Electric Co. v. Jackson, 610 F.3d 110 (D.C. Cir., 2010).


GE had originally sued the EPA in 2000, arguing that the EPA’s use of "unilateral administrative orders" (UAOs) violated the Due Process Clause of the Constitution. The EPA uses UAOs in ordering cleanup of Superfund sites from potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).


When the EPA determines that an environmental cleanup is necessary at a contaminated site, CERCLA gives the agency four options: (1) It may negotiate a settlement with potentially responsible parties (PRPs), (2) it may conduct the cleanup with “Superfund” money and then seek reimbursement from PRPs by filing suit, (3) it may file an abatement action in federal district court to compel PRPs to conduct the cleanup, or (4) it may issue a UAO instructing PRPs to clean the site. This last option, authorized by CERCLA section 106, is the focus of this case.


To use its UAO authority, the EPA must first determine “that there may be an imminent and substantial endangerment to the public health or welfare or the environment because of an actual or threatened release of a hazardous substance from a facility.” If the EPA makes such a determination, it must then compile an administrative record and select a response action. For remedial actions, the EPA must give notice to PRPs and the public, provide an opportunity to comment and submit information about the remedial plan, and give other participation opportunities to PRPs throughout the process. Once the UAO is issued, the PRP may either comply and then seek reimbursement from the EPA, or refuse to comply and force the EPA to bring an enforcement action in court. If, however, the PRP refuses to comply and the court finds that the PRP’s refusal was willful and without sufficient cause, the court may impose fines up to $37,500 per day. In addition, if the EPA decides to undertake remediation itself while the court action is proceeding, the court can also impose damages against the PRP of up to three times the actual cost incurred for clean up.


GE sued, arguing that the UAO provisions violated the Fifth Amendment because it deprived entities of their fundamental right to liberty and property without . . . constitutionally adequate procedural safeguards. In particular, GE argued that the UAOs deprive PRPs of two types of protected property: (1) the money PRPs must spend to comply with a UAO or the daily fines and treble damages they face should they refuse to comply; and (2) the PRPs’ stock price, brand value, and cost of financing, all of which, GE contends, are adversely affected by the issuance of a UAO. Because of the extremely large amount of potential fines faced by PRPs who refuse to comply, the “refuse to comply” option was, GE argued, only theoretical as no PRP could afford to face that risk. Thus, automatic compliance with a UAO was the only realistic option faced by any target of such an order.


The district court found that the EPA’s actions under the UAO provisions of CERCLA were not unconstitutional. The court of appeals agreed:


To the extent the UAO regime implicates constitutionally protected property interests by imposing compliance costs and threatening fines and punitive damages, it satisfies due process because UAO recipients may obtain a pre-deprivation hearing by refusing to comply and forcing EPA to sue in federal court. Appellant insists that the UAO scheme and EPA’s implementation of it nonetheless violate due process because the mere issuance of a UAO can inflict immediate, serious, and irreparable damage by depressing the recipient’s stock price, harming its brand value, and increasing its cost of financing. But such “consequential” injuries—injuries resulting not from EPA’s issuance of the UAO, but from market reactions to it—are insufficient to merit Due Process Clause protection.

GE then filed its petition with the Supreme Court, again arguing that stock prices were adversely affected without due-process protections when a UAO was issued and that the “refuse to comply” option was unrealistic, given the amount of potential fines faced. The EPA disagreed, noting that there were substantial opportunities for the PRP to receive notice and hearing throughout the UAO and enforcement process. The EPA also pointed out the PRPs’ option to start cleanup and then sue the EPA for reimbursement. In addition, the EPA argued that CERCLA itself does not impose treble damages plus penalties for noncompliance; only a federal court can impose fines or punitive damages for such noncompliance and only after the potentially responsible party has been given an opportunity to present its case, the government said.


The Supreme Court denied review on Monday, June 6, 2011. The Supreme Court case number was 10-681. The appellate opinion is available at 610 F.3d 110 and is attached here.


Lauren E. Godshall, Stone Pigman Walther Wittmann LLC, New Orleans, LA


 

May 23, 2011

Fourth Circuit Reversal in Major Endangered Species Act Case


Addressing an issue of first impression, the U.S. Court of Appeals for the Fourth Circuit on March 2, 2011, ruled in favor of Dow AgroSciences, LLC and Makhteshim Agan of North America, Inc., that federal district courts have jurisdiction to review Endangered Species Act “Biological Opinions” issued in connection with pesticide registrations. Dow AgroSciences, LLC, et al., v. National Marine Fisheries Service, No. 09-1968. The district court case was the first to address the scientific soundness of Endangered Species Act determinations relating to pesticides that are being made as a result of a series of lawsuits against the services and the Environmental Protection Agency (EPA). With its decision, the appellate court reversed a district court ruling that challenges to such opinions could not proceed until the EPA had taken action upon them and that such actions had to be brought in the appellate court.


Eric Andreas, Wiley Rein LLP, Washington, D.C.


 

May 20, 2011

ESI Cost Awards Could Increase Dramatically Following Ruling


Trial lawyers now recognize that discovery of ESI has become common in environmental cases. They also have seen the impact of that discovery upon their clients’ litigation budgets. Though it was an antitrust case, Race Tires America Inc. v. Hoosier Racing Tire Corp., 2011 W.L. 1748620 (W.D.Pa. May 6, 2011), involved motions to tax costs claimed by successful defendants that included almost $370,000 in e-discovery expenses. Judge McVerry analyzed the wording of 28 U.S.C. §1920(4) and concluded that e-discovery costs were the modern equivalent of making copies. Notably the costs allowed were the expenses of outside ESI vendors, but not the legal fees charged to review the harvested documents. Nevertheless, if other courts follow his reasoning, court costs awarded in federal cases could markedly increase.


William N. Kammer, Soloman Ward, San Diego, CA


 

April 6, 2011

Lawsuit Filed Challenging Colorado Uranium Mill


On February 4, 2011, a nonprofit group named Sheep Mountain Alliance, based in Telluride, Colorado, filed a lawsuit suit in Colorado state court against the Colorado Department of Public Health and Environment (CDPHE) and Energy Fuels Resources Corp. challenging CDPHE’s approval of a radioactive-materials license allowing for the construction of the first new conventional uranium mill built in the United States in more than 25 years.


CDPHE’s radiation program announced its approval of the radioactive-materials license for the Piñon Ridge Uranium Mill in western Montrose County, Colorado on January 5, 2011. The license was required before the owner of the mill, Energy Fuels Resources Corp., could construct a uranium/vanadium mill approximately 12 miles west of Naturita, Colorado.


CDPHE’s license approval concluded a lengthy period of significant outreach to the community, local government, and several state agencies regarding the license. Eight public meetings regarding the licenses were held in two counties near the mill. During the application review process, CDPHE submitted more than 400 technical questions to Energy Fuels and considered hundreds of comments from stakeholders. In addition, CDPHE imposed a number of conditions on Energy Fuels before construction could begin.


Energy Fuels had 60 days from license approval to decide whether to request a hearing on the license. Energy Fuels did not request a hearing. CDPHE issued the final license on March 7, 2011. The final license allows Energy Fuels to process an annual maximum quantity of ore at the mill not to exceed a daily operating average of 500 short tons of uranium and vanadium ore.


Shortly after CDPHE’s license approval, on February 4, 2011, Sheep Mountain Alliance filed suit in the District Court, City and County of Denver, against CDPHE and Energy Fuels. Sheep Mountain seeks a revocation of the license.


CDPHE filed a motion to dismiss the lawsuit on February 23, 2011. CDPHE’s motion argues that the Denver District Court lacks jurisdiction to grant Sheep Mountain the relief it seeks, and that Sheep Mountain has failed to sufficiently allege standing to challenge the license decision.


Energy Fuels filed its own motion to dismiss on March 10, 2011. Energy Fuels’ motion joins in the arguments presented in CDPHE’s motion and specifically asks the court to dismiss Sheep Mountain’s first claim for relief. Sheep Mountain’s first claim alleges that CDPHE issued Energy Fuels’ radioactive-materials license without conducting the necessary administrative procedures. Energy Fuels’ motion to dismiss argues that Sheep Mountain’s interpretation of the applicable statutes, as set forth in its first claim for relief, is legally incorrect, and that, as a result, the court must dismiss that claim. 


Briefing regarding the motions to dismiss will be completed by April 11, 2011.


Jacy T. Rock, Faegre & Benson LLP, Denver, CO


 

April 5, 2011

Mandatory Reporting of Greenhouse Gas Emissions Pushed Back


Eager to combat climate change but without national legislation creating a framework for its regulations, the Environmental Protection Agency (EPA) has been forging ahead on its own, issuing a series of rulemakings with the effect of launching its own greenhouse-gas (GHG) regulatory system. However, the major first step in this action, a mandatory reporting rule scheduled to go into effect on March 31, 2011, has been voluntarily pushed back until September 30, 2011.


The EPA was essentially directed by the Supreme Court, in the 2007 Massachusetts v. EPA, 546 U.S. 497, decision, to make an endangerment finding under the Clean Air Act with regard to greenhouse-gas emissions. Also in 2007, the Consolidated Appropriates Act (H.R. 2764, Public Law 110-161) delegated specific funds for the EPA to use in developing a rule to “require mandatory reporting of greenhouse gas emissions above appropriate thresholds in all sectors of the economy of the United States.” The EPA complied and, in December of 2009, it published its final endangerment and cause or contribute findings in the Federal Register. (79 Fed. Reg. 239 (Dec. 15, 2009)). The EPA found that current and projected concentrations of the six key greenhouse gases in the atmosphere threaten public health and welfare.


Following the endangerment finding, the EPA published its “Final Mandatory Reporting of Greenhouse Gases Rule,” which requires that large sources of greenhouse gases to report their emissions. (40 CFR part 98.) Facilities that emit 25,000 metric tons annually will be subject to this requirement—the concept being that measuring emissions itself can be an incentive to reduce emissions. A large number of industries are subject to these reporting requirements, including oil and gas refining; rubber, plastic, and chemical manufacturing; electricity generation; municipal solid-waste landfills and sewage treatment; and pulp and paper mills, among others. A full list of affected industries is available on the EPA’s website.


According to the EPA’s press release, the agency decided to push back the start date of its reporting program to work out problems with its online reporting tool. The rule makes online reporting of GHG emissions mandatory, and the EPA has developed an “Electronic Greenhouse Gas Reporting Tool (e-GGRT)” that industries must register with and use to comply with the reporting requirements. The EPA cited the e-GGRT tool as the reason for the delay, noting that it needed more time to "further test the system that facilities will use to submit data and give industry the opportunity to test the tool, provide feedback, and have sufficient time to become familiar with the tool prior to reporting."


Hoping to substantially increase this delay, on March 29, 2011, twenty attorneys general from nineteen states and Guam sent a letter to EPA Administrator Lisa Jackson, urging her to delay implementation of the program for three more years, citing the negative impact such additional regulation could have on state economic recovery.


Lauren E. Godshall, Stone Pigman Walther Wittmann, LLC, New Orleans, LA


 

April 5, 2011

No Damages for Contamination Site Already Undergoing Restoration


The New Jersey Superior Court recently ruled against the state’s Department of Environmental Protection (DEP) after the DEP sued Union Carbide Co. (UCC) for primary and compensatory restoration damages under the New Jersey Spill Act, notwithstanding UCC’s compliance with its ongoing site remediation program (SRP).  The UCC site had been the subject of an administrative consent order in the 1980s and UCC had been restoring the contaminated soil and groundwater in compliance with its SRP. The DEP, however, sued for primary and compensatory restoration damages, arguing that the groundwater remediation program was proceeding too slowly and that the state was entitled to damages.


The state first requested primary restoration damages, which consist of those remedial actions necessary to return the resource to the pre-discharge condition. The court refused, noting that there was no reason why the timeframe for groundwater recovery needed to be expedited, and that UCC was in compliance with the terms of its SRP.


The state also requested compensatory restoration damages, which consist of compensation for natural resource services lost from the beginning of the injury through the full recovery of the resource. The state urged the court to adopt its accounting method, resource equivalency analysis, which has previously been used in quantifying damages to wildlife after a spill. Pursuant to this damages accounting method, the state claimed it was entitled to the value of the cost of permanently protecting 200 acres of open space, including groundwater, or, in dollar terms, approximately $31.3 million.


The court disagreed and awarded no compensatory damages, holding that the resource equivalency analysis was not appropriate in the context of evaluating injury to groundwater, the lost service value of which can be more directly calculated. The court also went through the entire analysis submitted by the state and disagreed with many of the assumptions and conclusions drawn throughout.


Finally, the state alleged public nuisance and trespass tort claims for the invasion of a natural resource in the public trust. The court again disagreed that this could be considered a public nuisance, as the groundwater in question was never available for public use and was below private property.


Kevin J. Bruno, Blank Rome LLP, New York, NY


 

January 4, 2011

Michigan's Denial of Air Permits Ruled Unconstitutional


On December 15, 2010, the City of Holland (Michigan) Board of Public Works (BPW) obtained a significant victory in its lawsuit against the Michigan Department of Natural Resources & Environment (MDNRE) to challenge denial of an air-emissions permit for a proposed coal-fired-power-plant expansion at its James DeYoung generating facility. The Ottawa County Circuit Court granted Holland BPW’s motion for summary disposition, including the issuance of substantial declaratory relief and a writ of mandamus against the MDNRE.


In a written opinion issued shortly after its oral ruling, the court ruled unconstitutional Governor Jennifer Granholm’s Executive Directive 2009-2 compelling denial of air permits for coal-fired power plants if there are any feasible alternatives, and that the air permit denial—which was based on a purported lack of electric-generating “need” for the proposed project—was not based upon standards under Michigan’s air-pollution-control laws and was unauthorized and unlawful:


The court concludes that the MDNRE violated the constitution and exceeded its statutory authority by basing its denial of the Plaintiff’s application for a permit to install on electric generating need rather than upon whether the application met the air quality requirements of [Michigan’s Natural Resources and Environmental Protection Act] Part 55.

The court reversed the MDNRE’s denial of the air permit, remanded the matter to the MDNRE for further consideration, and issued a writ of mandamus directing the MDNRE to act on Holland BPW’s permit application within 60 days and without evaluating electric-generating need. The court also ordered that action on the air permit be based upon air-quality standards in effect as of August 20, 2010, before the new National Ambient Air Quality Standards for sulfur dioxide became effective, and before the Environmental Protection Agency’s new greenhouse-gas requirements take effect in January 2011. Finally, the court rejected the MDNRE’s argument that Holland BPW’s exclusive means of relief was through a statutory-appeal process, noting that the relief afforded by such a process was inadequate to redress the injury to Holland BPW.


Holland BPW was represented by Barnes & Thornburg LLP attorneys Charles M. Denton, Valerie B. Mullican and Joel C. Bowers. Michigan Attorney General Mike Cox and the Michigan Municipal Electric Association appeared as amici in support of Holland BPW, and the Sierra Club and the Natural Resources Defense Council appeared as amici in support of the Michigan DNRE. This matter was particularly unique because the Michigan Attorney General’s Office appeared on both sides of the case, simultaneously representing the Michigan DNRE and submitting an amicus brief in support of Holland BPW’s motion for summary disposition.


Charles Denton, Barnes & Thornburg LLP, Grand Rapids, MI


 

December 21, 2010

The Gulf Oil Spill Portal


The Gulf oil spill, also known as the BP spill or the Deepwater Horizon spill, was one of the most significant environmental accidents in history. The ABA Section of Environment, Energy, and Resources has developed a website for members and the public alike as a resource for information relating to the spill. The topical links provided relate to the environmental issues that have evolved since the incident occurred and contain basic information relating to those issues and ideas for useful resources. Additional links to section resources and outside websites provide more detailed information. The section will make an effort to update the information on this page on a periodic basis as the issues continue to develop.


 

December 21, 2010

United States Files Suit over Deepwater Horizon Oil Spill


On December 15, 2010, Attorney General Eric Holder announced that the Department of Justice has filed a civil lawsuit under the Clean Water Act and the Oil Pollution Act against nine defendants in the matter of the Deepwater Horizon oil spill. The lawsuit asks the court for civil penalties and a declaration of liability for all removal costs and damages caused by the oil spill, including damages to natural resources. For more information, please see the complaint.


 

EPA Issues Final Rule for Mandatory Reporting of Greenhouse Gas Emissions


On June 28, 2010, the EPA signed a final rule for mandatory reporting of greenhouse gases from magnesium-production facilities, underground coal mines, industrial-wastewater-treatment facilities, and industrial-waste landfills, thereby adding these four source categories to the list of source categories already required to report greenhouse gas emissions (GHGs) under the Greenhouse Gas Reporting Program set forth at 40 C.F.R. Part 98. Importantly, in this final rule, the EPA decided not to include ethanol-production and food-processing facilities as distinct subparts in the Greenhouse Gas Reporting Program, and also decided not to impose reporting requirements on coal suppliers at this time.


The four source categories noted above were added as part of a larger rulemaking effort to establish GHG reporting requirements. Part 98 requires the monitoring and reporting of GHGs and supply from all sectors of the economy, including fossil-fuel suppliers, industrial gas suppliers, and direct emitters of GHGs. It covers several GHGs, including carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated compounds. Methane is the primary GHG emitted from coal mines, industrial-wastewater-treatment systems, and industrial landfills, while the main GHG emitted from magnesium production is sulfur hexafluoride.


The EPA proposed 40 C.F.R. Part 98 on April 10, 2009 (74 F.R. 16448). The final 40 C.F.R. Part 98 was signed by the EPA’s administrator on October 30, 2009 (74 F.R. 56260). The October 2009 final rule, which became effective on December 29, 2009, included reporting requirements for facilities and suppliers in 31 subparts. The April 2009 proposal, however, included monitoring and reporting requirements for an additional 11 source categories that were not finalized in the October 30, 2009, action. The June 28, 2010, final rule includes monitoring and reporting requirements for 4 of the 11 source categories that were proposed but not finalized in the October 30, 2009, action, and amends the general provisions of 40 C.F.R. Part 98, Subpart A.


The June 28th final rule contains specific and detailed reporting and monitoring requirements for each of the four sources noted above, which will create new challenges, burdens, and costs for reporting facilities. For example, as a brief overview, the final rule requires each magnesium-production facility covered under the final rule to report total emissions at the facility level of certain gases in metric tons of gas per year resulting from their use as cover gases or carrier gases in magnesium production or processing. With regard to underground coal mines, each facility to which the rule applies must report: (1) quarterly CH4 liberation from ventilation and degasification systems; and (2) quarterly CH4 destruction for ventilation and degasification systems and resultant CO2 emissions, if destruction takes place onsite. For certain industrial-wastewater-treatment facilities, the final rule requires reporting of: (1) the amount of CH4 generated, recovered, and emitted from treatment of industrial wastewater using anaerobic lagoons or anaerobic reactors; (2) the amount of CH4 recovered and emitted from anaerobic sludge digesters; and (3) the amount of CH4 destroyed by and emitted from biogas collection systems and destruction devices. Finally, for industrial-waste landfills covered under the final rule, facilities must report: (1) annual CH4 generation and CH4 emissions from the industrial waste landfill; and (2) annual CH4 recovered (for landfills with gas collection and destruction systems).


Monitoring and reporting of GHGs for the four sources noted above, as well as other sources covered under 40 C.F.R. Part 98, is only required for sources with carbon dioxide equivalent emissions above certain threshold levels. The final rule requires the new categories to begin collecting emissions data on January 1, 2011, with the first annual reports submitted to the EPA on March 31, 2012. The final rule also contains recordkeeping requirements, which require reporters to keep records of additional data used to calculate GHGs. The EPA is developing an electronic reporting system to facilitate the collection of data under this rule.


In sum, the final rule, and the larger rulemaking effort, will result in a national inventory of GHGs by state, industry, and source category. While control of GHGs is not required at this time, this rulemaking effort may be a first step toward the future enactment of GHG reduction legislation


— Margaret Anne Hill and Rachel S. Wolfe


 

EPA Facility Inspections May Lead to Expanded Liability Due to Employee Participation


June 2010 (No. 1)
Environmental Law Update
On June 22, 2010, the U.S. Environmental Protection Agency (EPA) issued interim guidance advising EPA staff conducting Clean Air Act section 112(r) onsite compliance evaluations that an offer to participate in such evaluations should be provided to facility employees and employee representatives. The guidance was published in a memorandum dated April 2, 2010, issued by Mathy Stanislaus, assistant administrator of the Office of Solid Waste and Emergency Response, and Cynthia Giles, assistant administrator of the Office of Enforcement and Compliance Assurance. The guidance was issued, according to the memorandum, as a result of recent discussions between the EPA and labor and environmental group representatives.


Background
Section 112(r) of the Clean Air Act, 42 U.S.C.A. § 7412(r), imposes a “general duty” on owners and operators of stationary sources that produce, process, handle or store any listed substance or other extremely hazardous substance to identify hazards associated with those substances and to minimize any consequences from accidental releases of those substances. Owners and operators of stationary sources are also required to develop and implement a risk management plan when a listed substance is present in more than threshold quantities.


Section 112(r)’s listed substances are identified in 40 CFR § 68.130. The Clean Air Act does not define the phrase “other extremely hazardous substances,” but a list of extremely hazardous substances has been developed in connection with other environmental statutes such as the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.A. § 11001 et seq.


The EPA conducts evaluations and risk-management-plan audits of facilities subject to section 112(r) to ensure compliance with the statute and associated regulations. Section 112(r) grants employees and their representatives the same right to participate in onsite compliance evaluations as are provided for inspections conducted under the Occupational Safety and Health Act (OSHA), 29 U.S.C.A. § 651 et seq. However, the EPA has never issued formal guidance clarifying the specific OSHA rights to which xection 112(r) refers. Although not specifically stated in the memorandum, the guidance may be the EPA’s attempt to eliminate confusion and inconsistencies that resulted from the EPA’s failure to previously adopt guidance on this issue.


The EPA’s Guidance
The guidance states that the EPA staff should immediately begin offering employee and employee representatives the opportunity to participate in section 112(r) onsite compliance evaluations. EPA staff should follow OSHA standards as outlined in the OSHA Field Operations Manual until final guidance is issued. The guidance identifies specific provisions of the OSHA manual that may be particularly helpful for EPA staff, including:


  • providing advance notice of inspections to ensure employee and employee representative participation
  • conducting opening conferences to inform employees of the purpose of the inspection and closing conferences to discuss any apparent violations or issues
  • denying the right of participation to any person whose conduct interferes with a full and orderly inspection

The guidance advises EPA staff to document participation offers. In addition, EPA staff should include information concerning the nature, extent, and substance of the participation in the required section 112(r) compliance evaluation report.


Conclusion
The EPA expects to issue final guidance later this year on the participation of employee and employee representatives in section 112(r) onsite compliance evaluations. The EPA requests that state and local agencies with Clean Air Act section 112(r) delegation adopt similar procedures at that time, but they are not required to do so.


Until the EPA issues its final guidance, and despite the EPA’s reference to the OSHA Field Operations Manual, it is not clear that the EPA’s guidance will result in a more consistent approach to including employees and employee representatives in section 112(r) evaluations. Unlike the OSHA manual, which requires compliance officers to provide employees and employee representatives with the opportunity to participate in an onsite inspection or evaluation, the guidance merely states that EPA staff should provide such an opportunity. It remains to be seen whether the EPA’s final guidance will eliminate the subjectivity that is currently associated with an employee’s or employee representative’s ability to participate in the section 112(r) onsite compliance evaluation process.


Employee participation in section 112(r) compliance evaluations may be beneficial for a business when the employee provides information necessary to successfully resolve a potential issue or to demonstrate environmental health and safety compliance. However, employee participation in any type of inspection always comes with risks.


For example, an uninformed but well-meaning employee may draw attention to issues that would otherwise not be of concern to EPA inspectors. In addition, an unhappy or disgruntled employee has the ability to misrepresent a company’s environmental compliance and health and safety practices to the serious detriment of the company. As a result, it is very important for every business to understand its rights and obligations in connection with section 112(r) on-site compliance evaluations as well as for other types of EPA on-site inspections.


Notice: The purpose of this Environmental Law Update is to identify select developments that may be of interest to readers. The information contained herein is summarized from various sources, the accuracy and completeness of which cannot be assured. The update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.


See the EPA’s interim guidance |
See the OSHA Field Operations Manual |


 

Will the Supreme Court Decide Who’s to Blame for Climate Change?


Two federal courts of appeal have recently ruled on much-watched petitions for rehearing in climate-change lawsuits. The decisions have set up a possible showdown on the viability of nuisance claims premised on damages allegedly caused by the effects of greenhouse-gas emissions.


In Connecticut v. American Electric Power, the Court of Appeals for the Second Circuit rejected on March 5, 2010, requests both for rehearing by the original panel and for en banc review by the entire panel of circuit judges. The original panel’s September 2009 decision resurrected lawsuits brought by New York City, several states, and private land trusts against electric utilities that allegedly emit 10 percent of America’s man-made greenhouse gases. Premising their federal common-law suit on alleged harms resulting from climate change, the plaintiffs seek an injunction forcing the utilities to cap and then reduce their greenhouse-gas emissions.


The Second Circuit’s decision came on the heels of a decision just a week earlier in the case of Comer v. Murphy Oil Co. There, the Fifth Circuit reached the opposite conclusion by vacating its original decision and agreeing to rehear that matter en banc. In the October 2009 Comer decision, the Fifth Circuit allowed a putative class of Gulf Coast residents and property owners to proceed with a suit against energy, fossil fuel, and chemical companies for Hurricane Katrina damage. Instead of an injunction, the Comer plaintiffs seek compensatory and punitive damages, contending that the defendants’ combined greenhouse-gas emissions increased global surface-air and water temperatures, thus raising sea levels, thus compounding the storm, thus destroying the plaintiffs’ property. The original three-judge panel of the Fifth Circuit agreed with much of the Second Circuit’s American Electric Power decision. However, the Fifth Circuit’s decision to vacate its decision and rehear the case by the full panel of judges presents the distinct possibility that the Katrina claims will be dismissed, which could create a circuit-court split. The en banc argument is set for the week of May 24, and the parties are filing supplemental briefs regarding the rehearing.


The Second Circuit’s rehearing denial in American Electric Power started running a 90-day clock within which the defendants may petition for review by the U.S. Supreme Court. The Second Circuit has already agreed to stay the return of the case to the district court (called a mandate), indicating that the defendants will indeed seek the Supreme Court’s discretionary review.


Meanwhile on the West Coast, a third greenhouse-gas-nuisance suit, Native Village of Kivalina v. Exxonmobil Corp., is currently being briefed to the Court of Appeals for the Ninth Circuit. Expressly disagreeing with the Second Circuit’s reasoning in American Electric Power, the Northern District of California in September 2009 dismissed the plaintiffs’ federal nuisance claims for costs of future relocation that the plaintiffs assert will be necessitated by global warming. “It is illogical to conclude,” the district court held, “that the mere contribution of greenhouse gases into the atmosphere is sufficient to establish that a plaintiff’s injury is fairly traceable to a defendant’s conduct.” The Alaskan native village is asking the Ninth Circuit to overturn that dismissal.


For more detail on the underlying opinions and their import, see Who’s to Blame for Climate Change: Will a Jury Decide?


 

Comer v. Murphy Oil Vacated; Rehearing En Banc Granted


The opinion in Comer v. Murphy Oil USA, No. 07-60756 (5th Cir. Oct. 16, 2009), which concluded that a class of plaintiffs had standing to assert their claims against a class of defendant-greenhouse-gas-emitters, has been withdrawn by the Fifth Circuit Court of Appeals, which on March 1, 2010, vacated the original opinion and granted the defendants’ motion for an en banc rehearing. Eight of the fifteen judges signed the order, while the remaining seven were recused.


In their petition for rehearing en banc, the defendants first took issue with the original opinion’s conclusion that the case did not present a political question and in fact spent much of their argument focused on the political-question issue. The Comer plaintiffs had alleged that the defendants’ contributions to carbon dioxide in the atmosphere had contributed to global warming, which in turn contributed to increasingly severe weather patterns, including Hurricane Katrina, which damaged the plaintiffs’ property. The original opinion found that this did not present a political question. The defendants disagreed, arguing that the issue of climate change culpability calls for “an initial policy determination of a kind clearly for nonjudicial discretion.” Assuming that their relative liability for climate change should necessarily be balanced against the value of their activities to the nation’s economy, the defendants argued that “Balancing these competing and incommensurate interests, on an inherently national and international scale, requires a legislative judgment—one that the political branches have struggled for decades to make.”


The original Comer opinion held that the plaintiffs had standing to assert Mississippi-state-law-based claims such as nuisance, because the standing test called for a “fairly traceable” standard and the plaintiffs’ damages were “fairly traceable” to the defendants’ activities. The defendants’ petition also attacked this portion of the opinion, asserting that it conflicted with precedent and expanded the standing test much further than it had been ever applied before.


The petition spent almost no time on Judge Davis’s concurrence. Judge Davis originally stated that he would have affirmed the district court’s denial of the class-action certification based on the plaintiffs’ inability to establish causation—but because the rest of the court focused only on standing, he agreed to reverse on the ground of standing. The defendants’ petition mentioned Judge Davis’s reasoning in passing but focused primarily on the political question and “fairly traceable” arguments—perhaps hoping to stir the en banc court into a ruling that would prevent the plaintiffs from establishing standing to sue and thus preventing the copycat class actions sure to follow.


The rehearing will be held during the week of May 24, 2010. 


 

United States v. W.R. Grace


In the recent case of United States v. W.R. Grace, the government advanced a new theory of criminal liability under the Clean Air Act. This new theory of liability has the potential to extend the statute of limitations far beyond the five-year period applicable to most environmental crimes. While courts have used other doctrines, such as the discovery rule and the continuing-release theory, to toll the statute of limitations in the civil context, the W.R. Grace case represents the first attempt to extend the statute of limitations in a criminal prosecution for violations of the Clean Air Act.


More information about the potential impact of the W.R. Grace case on other environmental prosecutions and EPA enforcement priorities in 2010 will be presented at the “Environmental Enforcement Update” at next month’s Section Annual Conference in New York City. The program is scheduled for Friday, April 23, from 2:30 to 3:45 p.m. The panelists include Stacey Mitchell, who is the chief of the Environmental Crimes Section at the U.S. Department of Justice, and Cynthia Giles, who is the assistant administrator for the Office of Enforcement and Compliance Assurance at the U.S. Environmental Protection Agency. Click here for registration information.


 

Michigan Court of Appeals Denies Environmental Group’s Attempt to Force MDEQ/MDNRE CO2 Rulemaking


In Citizens for Environmental Inquiry v. Department of Environmental Quality, the Michigan Court of Appeals upheld an Ingham County Circuit Court decision dismissing an environmental group’s suit designed to force the Michigan Department of Environmental Quality/Michigan Department of Natural Resources and Environment (MDEQ/MDNRE) to promulgate a rule to regulate CO2 emissions. Among other claims, the Citizens for Environmental Inquiry sought a mandamus order that would force MDEQ/MDNRE to establish a rule that would limit CO2 emissions under Michigan’s Natural Resources and Environmental Protection Act statute that requires MDEQ/MDNRE to create rules “controlling or prohibiting air pollution.” Citing established case law, the court of appeals held that the plaintiffs could not demonstrate a “clear legal right to the performance of the specific duty” as required in mandamus actions. Upholding the circuit court’s dismissal, the court of appeals reasoned that because the plaintiffs could not show that unregulated CO2 emissions would harm them in a way different from the public in general, it could not establish a specific right necessary to force MDEQ/MDNRE action. 


 

Securities and Exchange Commission Press Release


The Securities and Exchange Commission (SEC) has released its Guidance Regarding Disclosure Related to Climate Change [PDF]. The guidance document is intended to do exactly that: provide the SEC’s views regarding existing disclosure requirements as they apply to climate-change matters. As the SEC notes, the guidance document is intended to assist companies in satisfying their disclosure obligations under the federal securities laws and regulations. 


 

Environmental Enforcement Update


As you know, the 2010 Section of Litigation Annual Conference in New York City is just around the corner. Our committee is sponsoring an “Environmental Enforcement Update” on Friday, April 23, from 2:30 to 3:45 p.m. The panelists include Stacey Mitchell, who is the chief of the Environmental Crimes Section at the U.S. Department of Justice, and Cynthia Giles, who is the assistant administrator for the Office of Enforcement and Compliance Assurance at the U.S. Environmental Protection Agency. This panel format will provide a unique opportunity to hear firsthand from senior environmental officials about the developing enforcement priorities for 2010 and coming years. In addition, our committee is cosponsoring with the Expert Witness Committee a program entitled “New Tools: What Attorneys Need to Know about the Federal Rule of Civil Procedure 26(a)(2)(B) Amendments.” The panelists will be the Hon. Mark Kravitz, Jeffrey Greenbaum, and Raymond Marshall. Our own Karen Crawford is the program chair. This panel will take an in-depth look at the litigation-practice implications presented by the restrictions on expert-related discovery imposed by revised Rule 26(a)(2)(B). We hope that you make every effort to attend. These should be outstanding programs. 


 

BPA Being Considered for Listing under Proposition 65


California’s Environmental Protection Agency’s Office of Environmental Health Hazard Assessment (OEHHA), the agency that oversees implementation of California’s Proposition 65 (more formally known as the Safe Drinking Water and Toxic Enforcement Act of 1986), announced on February 11, 2010, that it is considering adding bisphenol-A (BPA) to the Proposition 65 list of chemicals causing reproductive toxicity.


In response to a petition from the Natural Resources Defense Council, OEHHA has determined that BPA “appears to meet the criteria for listing” under what is known as the “authoritative bodies” mechanism, based on the findings of the National Toxicology Program’s Center for the Evaluation of Risks to Human Reproduction (NTP). In 2008, the NTP published a report on BPA concluding that the chemical causes developmental toxicity at high levels of exposure. OEHHA is now soliciting public comments as to whether BPA meets the regulatory criteria for listing. You can find the OEHHA notice here. Comments are due to OEHHA by April 13, 2010.


In July 2009, the Proposition 65 Developmental and Reproductive Toxicant Identification Committee voted not to list BPA under what is known as the “qualified expert” listing mechanism. However, there is more than one mechanism for listing a chemical and OEHHA is now assessing whether the NTP findings require that BPA be listed under the separate “authoritative bodies” mechanism.


If BPA is ultimately added to the list as a reproductive toxicant pursuant to Proposition 65, that will have a significant impact on companies that use BPA in their products or packaging, including companies not located in California whose products are sold in California, as many companies that have previously run afoul of Proposition 65 and its private enforcement mechanism can attest. Because many applications of BPA are for the purpose of ensuring food safety, reformulation may present its own risks that must be carefully considered. Companies that use BPA, or who rely upon suppliers who use BPA, should therefore carefully evaluate the regulatory criteria for listing, and submit comments to OEHHA prior to April 13, 2010. If OEHHA determines that BPA does meet the regulatory criteria for listing, there will be a second opportunity for comments, but it is important to weigh in at this stage, particularly since OEHHA has already determined that BPA “appears” to meet the criteria for listing.


 

SEC Issues Guidance on Shareholder Proposals That May Strengthen Climate-Change Resolutions


Recent Securities and Exchange Commission (SEC) guidance will make it more difficult for companies to ignore shareholder resolutions concerning climate change and other environmental and social issues. On October 27, 2009, the Division of Corporation Finance of the SEC issued Staff Legal Bulletin Number 14E, which provides guidance regarding shareholder proposals and the submission of requests for “no-action” under Rule 14a-8(i)(7) of the Securities Exchange Act of 1934. Such requests, when granted by the SEC, typically allow companies to disregard proposed shareholder resolutions focusing on policy issues.


The SEC guidance comes at a time when the agency appears to be reevaluating agency policies concerning climate disclosures. Based on SEC statements over the summer and more recently at an October 2, speech to the Corporate Counsel Institute, the agency is considering issuing interpretive guidance regarding climate disclosures.


In the past, SEC staff analyzed Rule 14a-8(i)(7) in the context of environmental proposals by evaluating whether a shareholder proposal, as a whole, related to the risks and liabilities faced by the company as a result of its operations. To the extent that a proposed resolution focused on a company’s internal assessment of its risks and liabilities, the SEC routinely permitted the company to exclude the proposal.


With this bulletin, the SEC gave companies notice that it will now focus on the subject matter to which the risk proposal pertains rather than whether the proposal relates to an evaluation of risk. If the underlying subject matter does not raise significant policy considerations, the proposal will likely be excludable. If, however, the underlying subject matter of the proposal “transcends the day-to-day business matters of the company and raises policy issues so significant that it would be appropriate for a shareholder vote, the proposal generally will not be excludable under Rule 14a-8(i)(7) as long as a sufficient nexus exists between the nature of the proposal and the company.” For example, if the SEC considers climate change an issue that “transcends day-to-day business matters,” a company would be required to issue a proxy statement for shareholder resolutions concerning climate change.


The practical implications of this SEC policy change are unclear. The revised policy may require companies to issue proxy statements for certain shareholder proposals that the company previously had been permitted to exclude. Further, it is likely that companies may see more risk-related shareholder proposals in the future. Regardless of the type of risk, companies should analyze all shareholder proposals to determine whether the subject matter of the proposal “transcends the day-to-day business matters” prior to submitting a no-action request.


— Peter R. Knight and Pamela K. Elkow


 

Comer v. Murphy Oil USA


(5th Cir., No.07-60758, Oct. 22, 2009)


The Comer case, along with the Second Circuit’s Connecticut v. Amer. Electric Co.opinion in September, is a new climate-change-related decision that could potentially usher in a new era of class actions alleging damages caused by the effects of climate change.


Comer involves a putative class action brought by private citizens, all of whom are property owners along the Mississippi Gulf Coast. The plaintiff class sued a variety of defendants, including energy, fossil fuel, and chemical companies, all of who were also greenhouse-gas emitters. The plaintiffs alleged that the activities of the defendants in emitting the greenhouse gases contributed to global warming, which in turn caused a rise in sea levels and also increased the damage to plaintiffs’ property caused by Hurricane Katrina. The plaintiffs assert claims based on Mississippi common-law actions of public and private nuisance, trespass, negligence, unjust enrichment, fraudulent misrepresentation, and civil conspiracy.


The defendants moved to dismiss the class action on the grounds that the plaintiffs lack standing and that their claims were nonjusticiable political questions. The Southern District of Mississippi granted the motion and dismissed the claims. The plaintiffs then appealed to the Fifth Circuit.


The Fifth Circuit found that the plaintiffs have standing to assert their public and private nuisance, trespass, and negligence claims. The court found that there was no political question presented by these claims. The court did dismiss the unjust enrichment, fraudulent misrepresentation, and civil conspiracy claims for lack of prudential standing.


What surprised many, however, was the finding that the plaintiffs had standing to assert the Mississippi-law-based claims such as nuisance. The Fifth Circuit noted that questions of standing involve the “fairly traceable” standard and that, based on the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497, 521-23 (2007), it is already accepted law that greenhouse gas emissions contribute to global warming, which in turn worsens weather conditions such as hurricanes. Thus, the plaintiffs’ injuries were in fact “fairly traceable” to the defendants’ emissions of greenhouse gases.


The state-law-based claims also did not present nonjusticiable political questions— another surprise to many observers. The court pointed out that common-law-based tort claims rarely present political questions. Moreover, the court noted that there was a history of allowing transboundary water-quality issues be determined in litigation, as well as a long record of ruling that state nuisance claims were not preempted by regulations such as the Clean Air Act and Clean Water Act.


This decision is a particularly important one, because of the fact that it was brought by a class of private plaintiffs. Should this case survive further pretrial motions and advance all the way to trial, there is the possibility of punitive damages, and therefore potential contingent-fee recoveries—and accordingly, potential copycat suits. However, there are still significant hurdles ahead for the plaintiffs. For example, causation will be extremely difficult to establish, based on the fact that the defendants’ emissions form an indistinguishable mass in the atmosphere with all greenhouse-gas emissions. In fact, in a concurrence, Judge Davis pointed out that he would have affirmed the district court on the grounds of lack of proximate cause. Given that the panel had chosen to address standing instead of cause, however, Judge Davis deferred to that decision and concurred with the remainder of the panel.

 


 

Operator Liability under CERCLA Examined; Right to Jury Trial Discussed


AMW Materials Testing, Inc. v. Town of Babylon

No. 08-1731-cv, (2d. Cir. October 19, 2009)


The Second Circuit Court of Appeals recently examined the scope of operator liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in AMW Materials Testing, Inc. v. Town of Babylon, Docket No. 08-1731-cv, (2d. Cir. October 19, 2009). The plaintiffs owned an industrial facility at which hazardous substances were stored. A fire broke out and the local fire department was called to the scene. After the building collapsed, the fire department used pay loaders to remove portions of the collapsed roof to gain access to the smoldering fire. As a result of the fire and building collapse, hazardous substances stored in the facility were released into the surrounding environment.


The plaintiffs commenced suit against the fire department and the Town of Babylon, asserting claims under CERCLA and state statutory and common law claims. One of the principal issues raised on appeal was whether the fire department was liable as an operator under section 107(a)(2) of CERCLA. Looking at United States v. Best Foods, 524 U.S. 51 (1998), the court noted that although the Supreme Court defined an operator as “someone who directs the working of, manages, or conducts the affairs of a facility,” it went further and added the requirement “that an operator must manage, direct, or conduct operations specifically related to pollution, that is operations having to do with the leakage or disposal of hazardous waste. . . .” Id. at 66–67. The Second Circuit had no hesitancy in concluding that the fire department did not have sufficient control over the hazardous materials “to manage, direct or conduct operations specifically related to pollution.” (Slip opin. at 12; emphasis in original.)


The Second Circuit also concluded that section 107(d)(2)—which provides an affirmative defense to state and local governments for costs or damages that result from actions taken in response to an emergency—was available, as an affirmative defense, to the defendants, notwithstanding a savings provision in CERCLA that provides that section 107(d) “shall not alter the liability of any person covered by the provisions of paragraphs (1), (2), (3) or (4) of subsection (a) of this section with respect to the release or threatened release concerned.”


Perhaps the most interesting aspect of the opinion is the court’s discussion of the right to a jury trial on the plaintiffs’ claims under section 107 of CERCLA. The district court concluded that the plaintiffs were not entitled to a jury trial because the relief sought was essentially a claim for restitution, which was grounded in equity rather than law. The Second Circuit noted that the courts that had previously considered this issue had uniformly concluded that section 107(a) provides for restitution, that restitution is an equitable remedy, and that there was, therefore, no right to a jury trial.


However, the court noted that all of the judicial precedent preceded the U.S. Supreme Court’s discussion of restitution in Great West Life & Annuity Co. v. Knudson, 534 U.S. 204 (2002), where the Court noted that not all relief “falling under the rubric of restitution was available in equity.” Id. at 212. Based on the analysis set forth in Knudson, the Second Circuit seriously questioned whether the restitution provided by section 107(a) is equitable, rather than legal, in nature. Unfortunately, the court determined that it did not have to decide the Seventh Amendment issue because it concluded that even if plaintiffs were entitled to a jury trial on their CERCLA claims, the defendants were entitled to judgment as a matter of law on the trial record.


Thus, it is a safe assumption that in the future, the issue of a party’s right to a jury trial in CERCLA litigation will be raised by litigants in section 107 lawsuits.


 

State of Connecticut, et al. v. American Electric Power Company Inc.


(2nd Cir. Sept. 21, 2009)


On September 21, 2009, the U.S. Court of Appeals for the 2nd Circuit ruled in State of Connecticut, et al. v. American Electric Power Company Inc., et al. to overturn a lower court ruling blocking the plaintiffs’ suit from proceeding. The panel—reduced to only two judges after Judge Sonia Sotomayor was elevated to the Supreme Court earlier this year—held that the issue of global warming is not a “political question” for Congress to determine as the lower court had held and the issue of liability could be adjudicated by federal courts.


The ruling states:


Given the nature of federal common law, where Congress may, by legislation, displace common law standards by its own statutory or regulatory standards and require courts to follow those standards, there is no need for the protections of the political question doctrine. The legislative branch is free to amend the Clean Air Act to regulate carbon dioxide emissions, and the executive branch, by way of the EPA, is free to regulate emissions. Either of these actions would override any decision made by the district court under the federal common law.

The lawsuit—which was brought by the states of California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont, and Wisconsin, as well as three land trusts, Open Space Institute Inc, Open Space Conservancy Inc and the Audubon Society of New Hampshire—was brought against American Electric Power Co Inc, Southern Co, Xcel Energy Inc, Cinergy Corp, and the Tennessee Valley Authority public power system.


 

Executive Order on Sustainability


October 5, 2009.  The Obama Administration has issued a new Executive Order titled “Federal Leadership in Environmental, Energy and Economic Performance” setting forth numerous sustainability efforts that will be undertaken by the various Federal agencies.



 

Michigan DEQ a Casualty of Recession


The State of Michigan announced that it would be “returning to the tradition of one department dedicated to this core mission” and merging the Department of Natural Resources and the Department of Environmental Quality (DEQ) together to form a new Department of Natural Resources and Environment (DNRE). For further information please follow the link to the press release.


 

Connecticut v. American Electric Power Co., Inc.


2009 WL 2996729 (2d Cir. Sept. 21, 2009)


In a decision that environmental groups are lauding as one of the most important climate-change decisions since Massachusetts v. EPA (549 U.S. 497 (2007)), the Second Circuit Court of Appeals vacated and remanded a lower court decision dismissing public nuisance claims, by several states and the City of New York against six electric power corporations, relating to the companies’ alleged contributions to climate change. Although other courts have generally dismissed such climate-change-related claims as presenting a non-justiciable political question, this court did not follow suit.


The court did acknowledge that any decision involving possible limits on carbon emissions is important in the context of global warming, but, holding that such nuisance claims do not present a non-justiciable political question, the court emphasized that not every case with political overtones is non-justiciable. According to the court, it is in error to equate a political question with a political case.


The other issue that has plagued these types of climate-change-related claims is whether one can prove causation. The court did not address whether the plaintiffs could ultimately prevail in proving causation but did hold that the plaintiffs satisfied the pleading standards, having sufficiently alleged present and future injuries that are “fairly traceable” to the defendants’ alleged conduct. According to the court, plaintiffs are not required to allege which specific injuries are caused by a particular defendant or that the defendants’ emissions alone caused their injuries.


The court’s decision marks a fairly dramatic shift in the courts’ reluctance to becoming involved in determining whether to and how best to regulate greenhouse gas emissions. The court also determined that federal legislation does not displace the federal common law of nuisance claims because the Environmental Protection Agency (EPA) has yet to determine that greenhouse gas emissions are Clean Air Act (CAA)-regulated pollutants or to regulate such emissions from stationary sources under the CAA. The court, however, did explain that it was expressing no opinion as to whether the regulation of greenhouse gas emissions.


— Karen Aldridge Crawford and Stacy Kirk Taylor


 

Supreme Court Upholds Issuance of Corps Permit


Coeur Alaska, Inc. v. Southeast Alaska Conservation Council

(No. 07-984, June 22, 2009)


In Coeur Alaska, Inc. v. Southeast Alaska Conservation Council, No. 07-984, the court addressed two questions under the Clean Water Act (CWA). The first was whether the act gives authority to the United States Army Corps of Engineers, or instead to the Environmental Protection Agency (EPA), to issue a permit for the discharge of mining waste, called slurry. The Corps of Engineers had issued a permit to petitioner Coeur Alaska, Inc. (Coeur Alaska), for a discharge of slurry into a lake in southeast Alaska. The second question was whether, when the Corps issued that permit, the agency acted in accordance with law. The Court held that the Corps was the appropriate agency to issue the permit and that the permit is lawful.


The state of Alaska and Coeur Alaska Inc., a gold mining company, were seeking to reopen Alaska’s Kensington Gold Mine. The Ninth Circuit had overturned a permit issued by the U.S. Army Corps of Engineers under section 404 of the Clean Water Act that allowed the company to dump dredged waste from the mine into the Lower Slate Lake in the Tongass National Forest. The Southeast Alaska Conservation Council and others filed a lawsuit objecting to the permit. They argued that the Corps violated sections 301(a), 301(e), and 306(e) of the CWA by issuing a permit for the discharge of process wastewater from a “froth-flotation mill” into a body of water protected by effluent limits promulgated by the EPA.


With regard to the first question, section 404(a) of the CWA grants the Corps the power to “issue permits . . . for the discharge of . . . fill material.” 86 Stat. 884; 33 U. S. C. §1344(a). But the EPA also has authority to issue permits for the discharge of pollutants. Section 402 of the act grants the EPA authority to “issue a permit for the discharge of any pollutant” “[e]xcept as provided in” section 404. 33 U. S. C. §1342(a). The Court held that because the slurry Coeur Alaska wishes to discharge is defined by regulation as “fill material,” 40 CFR §232.2 (2008), Coeur Alaska properly obtained its permit from the Corps of Engineers, under section 404, rather than from the EPA, under section 402.


The second question was whether the Corps permit is lawful. The environmental groups sued the Corps under the Administrative Procedure Act, arguing that the issuance of the permit by the Corps was “not in accordance with law.” 5 U. S. C. §706(2)(A). The environmental groups are Southeast Alaska Conservation Council, Sierra Club, and Lynn Canal Conservation (collectively, SEACC). SEACC argued that the permit from the Corps was unlawful because the discharge of slurry would violate an EPA regulation promulgated under section 306(b) of the CWA, 33 U. S. C. §1316(b). The EPA regulation, which is called a “new source performance standard,” forbids mines like Coeur Alaska’s from discharging “process wastewater” into the navigable waters. 40 CFR §440.104(b)(1). Coeur Alaska, the State of Alaska, and the federal agencies maintained that the Corps permit was lawful nonetheless because the EPA’s performance standard does not apply to discharges of fill material.


Reversing the judgment of the district court, the court of appeals held that the EPA’s performance standard applies to this discharge so that the permit from the Corps is unlawful.


— Andrew Mauck


 

Supreme Court Denies Standing to Challenge Timber Sale


Summers v. Earth Island Institute

(No. 07-463, March 3, 2009)


In Summers v. Earth Island Institute, No. 07-463, the U. S. Forest Service approved the Burnt Ridge Project, a salvage sale of timber on 238 acres of fire-damaged federal land. Respondent environmentalist organizations filed suit to enjoin the Service from applying its regulations exempting such small sales from the notice, comment, and appeal process it uses for more significant land management decisions, and to challenge other regulations that did not apply to Burnt Ridge. The district court granted a preliminary injunction against the sale, and the parties then settled their dispute as to Burnt Ridge.


Although concluding that the sale was no longer at issue, and despite the government’s argument that respondents therefore lacked standing to challenge the regulations, the court nevertheless proceeded to adjudicate the merits of their challenges, invalidating several regulations, including the notice and comment and the appeal provisions. Among its rulings, the Ninth Circuit affirmed the determination that the latter regulations, which were applicable to Burnt Ridge, were contrary to law, but held that challenges to other regulations not at issue in that project were not ripe for adjudication.


The Supreme Court reversed and held that the respondents lacked standing to challenge the regulations still at issue absent a live dispute over a concrete application of those regulations. In limiting the judicial power to “Cases” and “Controversies,” article III restricts it to redressing or preventing actual or imminently threatened injury to persons caused by violation of law. See, e.g., Lujan v. Defenders of Wildlife, 504 U. S. 555, 559–560. The standing doctrine reflects this fundamental limitation, requiring that “the plaintiff . . . ‘alleg[e] such a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court jurisdiction,” Warth v. Seldin, 422 U. S. 490, 498–499. Here, respondents can demonstrate standing only if application of the regulations will affect them in such a manner.


As organizations, respondents can assert their members’ standing. Harm to their members’ recreational, or even their mere aesthetic, interests in the national forests will suffice to establish the requisite concrete and particularized injury, see Sierra Club v. Morton, 405 U. S. 727, 734–736, but generalized harm to the forest or the environment will not alone suffice. Respondents have identified no application of the invalidated regulations that threatens imminent and concrete harm to their members’ interests. Respondents’ argument that they have standing based on Burnt Ridge fails because, after voluntarily settling the portion of their lawsuit relevant to Burnt Ridge, respondents and their members are no longer under threat of injury from that project. The remaining affidavit submitted in support of standing fails to establish that any member has concrete plans to visit a site where the challenged regulations are being applied in a manner that will harm that member’s concrete interests. Additional affidavits purporting to establish standing were submitted after judgment had already been entered and notice of appeal filed, and are thus untimely.


Respondents’ argument that they have standing because they have suffered procedural injury—that is, they have been denied the ability to file comments on some Forest Service actions and will continue to be so denied—fails because such a deprivation without some concrete interest affected thereby is insufficient to create article III standing. See, e.g., Defenders of Wildlife, supra, at 572, n. 7.


— Andrew Mauck


 

Center for Biological Diversity v. U.S. Environmental Protection Agency


The Center for Biological Diversity (CBD) has sued the Environmental Protection Agency (EPA) in an attempt to require that the agency regulate airborne carbon dioxide (CO2) emissions under the Clean Water Act (CWA). Center for Biological Diversity v. U.S. Environmental Protection Agency, No. 2:09-cv-00670-JCC (W.D. Wash.) (filed May 14, 2009). CBD alleges that the EPA has failed to comply with its obligations under the CWA “to protect the state of Washington’s ocean waters from the threat of ocean acidification.”


The complaint describes ocean acidification as a growing threat to the world’s oceans that is caused by absorption of CO2 from the atmosphere. Basically, CO2 uptake by ocean waters is alleged to cause them to become more acidic, which is measured by a decrease in pH. CBD pins the root cause of increased acidity on human-caused emissions of CO2 from power plants and other sources. At present, CBD alleges, the atmospheric CO2 concentration is around 386 ppm and that this will continue to rise over 2 ppm per year. The complaint further warns that increased ocean acidity impairs the ability of many species of marine animals to calcify their shells and predicts that this will have dire consequence on entire marine food web.


CBD brought its case under section 303(d) of the CWA and section 706 of the Administrative Procedure Act (APA). Section 303(d) requires states to identify and list impaired water bodies for which existing pollution controls are not stringent enough. Waters are considered impaired if they do not meet certain water quality standards that the states are required to set under sections 303(a)–(c) of the CWA. Once an impaired list is compiled, the EPA is required to either approve it or disapprove of it.


CBD asserts that pH of coastal waters off Washington has declined by more than 0.2 pH units, and that such a decrease violates Washington’s water quality standards for ocean waters. Despite this, CBD complains, Washington failed to list its ocean waters as impaired. The crux of the complaint, however, lies in the allegation that the EPA approved Washington’s list without identifying Washington’s ocean waters as impaired, and thus violated section 303(d) of the CWA and was arbitrary and capricious under the APA in doing so. Ultimately, CBD is asking the court for injunctive relief to force the EPA to disapprove of Washington’s impaired waters list and add ocean waters it alleges are impaired by ocean acidification.


Listing such waters could have wide-ranging implications. As CBD recognized in its complaint, once a water body is listed as impaired, the state or the EPA is required to place limits on the introduction of pollutants to prevent additional degradation. CBD argues that the CWA would require the EPA or the state to set limits on CO2 emissions that contribute to ocean acidification. This likely means only one thing—restrictions on CO2 emissions from power plants and other major emitting sources.


Eric Andreas


 

Supreme Court Determines Arranger Liability and Apportionment


On May 4, 2009, the Supreme Court addressed two important issues arising under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). First, the Court’s decision in Burlington Northern & Santa Fe Railway Co. v. United States, No. 07- 1601, limited the scope of arranger liability under CERCLA. Second, the court employed a simple mathematical formula for apportioning liability and avoiding joint and several liability for an indivisible, single harm.


The case arose from a typical CERCLA fact pattern. In the early 1990s, after the owner of a contaminated site became insolvent, the U.S. Environmental Protection Agency (EPA) and the California Department of Toxic Substances Control (DTSC) brought suit against two railroad companies and Shell Oil Company, seeking recovery of over $8 million in response costs that EPA and DTSC (the governments) had incurred responding to contamination at a site in Arvin, California. The district court found Shell liable as an arranger under 42 U.S.C. § 9607(a)(3), and the railroad companies liable as owners of a portion of the facility under 42 U.S.C. § 9607(a)(1)–(2). The district court concluded that the single harm was divisible among the responsible parties, and therefore did not impose joint and several liability on the railroad companies and Shell. The court apportioned the railroads’ liability based on three factors: the portion of the total site owned by the railroads, the duration of the railroads’ ownership interest compared to the length of the entire business operation, and the number of chemicals found on the railroads’ portion of the site compared to the total number of chemicals requiring remediation at the site. The court also apportioned Shell’s liability based on estimates of Shell’s chemical spills.


During the 1960s and 1970s, Shell shipped the pesticide D-D, a hazardous substance, to the site as a virgin material, intended for further redistribution. Originally, Shell shipped D-D in 55-gallon drums, however beginning in the mid-1960’s, Shell began shipping D-D in bulk. Shell, aware that these bulk shipments commonly resulted in spills and leaks during the transfer, provided its distributors with safety manuals, instituted a discount program for facilities with safety improvements, required inspection by a qualified engineer, and required distributors to certify compliance with applicable laws and regulations. Despite these controls, the site continued to be contaminated with delivery spills and equipment failures. Even though Shell never planned for the actual disposal of D-D, the district court and the court of appeals both held that Shell was liable as an arranger under a “broader” category of arranger liability because Shell knew that disposal of hazardous waste was a foreseeable byproduct of the transaction. The Ninth Circuit concluded that an entity could arrange for disposal even if it did not intend to dispose a hazardous substance.


Noting that arranger liability requires a fact-intensive inquiry, Justice Stevens, writing for the Court, applied the plain meaning of the word “arrange” to evaluate whether Shell was liable as an arranger. The Court found that the word “arrange” implies action directed to a specific purpose, and noted that the actor’s state of mind plays an indispensible role in making a determination of arranger liability. Thus, even though Shell’s efforts to reduce accidental spills “were less than wholly successful,” Shell was not liable as an arranger because Shell did not enter into the transaction with the intention that at least a portion of the product be disposed during the transfer. The lesson learned from this decision is that state of mind now plays an important role in determining arranger liability.


The Supreme Court also reviewed the district court’s decision to apportion liability among the railroads, which ultimately left the governments responsible for the orphan shares amounting to 91 percent of the remediation costs. The railroads owned a 0.9-acre parcel adjacent to the main 3.8-acre site, and the owner expanded its operations and began leasing this parcel in 1975. Both the governments and the railroads argued against apportionment, leaving the district court to independently apportion liability. Using simple math based on the size of the parcels, the length of operations, and the number of chemicals, the district court calculated the railroads’ proportionate share as 6 percent of the total remediation cost, and increased that percentage by 50 percent to account for “calculation errors.” The Supreme Court upheld this calculation, noting that divisibility may be established by volumetric, chronological, and geographic considerations. Justice Ginsburg, writing in dissent, noted that the Court’s independent calculation “deprived the government of a fair opportunity to respond to the Court’s theories of apportionment.” The same holds true for the railroads. Potentially responsible parties must recognize that they need to present evidence on apportionment, even if they argue against any finding of liability.


 

CERCLA Cost-Recovery Case by PRP Dismissed as Untimely


The U.S. District Court, Western District of Michigan, in the case of ITT Indus., Inc. v. BorgWarner, Inc., issued another CERCLA decision seeking clarity of the Sections 107/113 PRP causes of action. By Opinion filed March 31, the court granted Defendants' motion to dismiss the § 107(a) claim on the basis Plaintiff ITT could not "bring an untimely § 113 contribution claim under the guise of a § 107 cost recovery claim." The case involves two related Michigan "Superfund" sites, the NBFF site and the NBIA site. Plaintiff alleged a cost recovery claim under § 107, a contribution claim under § 113, and state law claims. The court had previously granted Defendants' motions to dismiss the cost-recovery and contribution claims, and dismissed the supplemental state law claims. The 6th Circuit Court of Appeals affirmed as to the contribution claim, but reversed as to the cost-recovery claim and remanded for further proceedings in light of the Supreme Court's decision in Atlantic Research. As to the NBIA site, the court noted the Supreme Court did not answer in Atlantic Research whether a PRP required to incur costs pursuant to a Consent Decree can bring a § 107(a) cost-recovery action. Plaintiff ITT had entered into a federal Consent Decree with the U.S.EPA concerning the NBIA site. The court held the only construction of § 107(a) doing justice to the statutory structure and the legislative history, which is also consistent with Atlantic Research, is where a party has been the subject of a CERCLA enforcement action and therefore can assert a claim under § 113(f), the party cannot also assert a claim under § 107(a). Plaintiff has filed a Motion for Reconsideration, and the case discovery is being concluded.


Charlie Denton represents one of the litigants in this case and provided this summary.


 

Entergy v. Riverkeeper


According to the Supreme Court, the Environmental Protection Agency (“EPA”) may now utilize a cost-benefit analysis when considering mandates under the Clean Water Act (“CWA”). In what the Washington Post classifies as a defeat for environmentalists, the EPA is now allowed to consider the cost of upgrading over 500 aging power plants balanced against the upgrade's environmental impact. Justice Scalia, writing for the majority, reasoned that preexisting regulations requiring the “best technology available...for minimizing adverse environmental impact” do not “unambiguously preclude cost-benefit analysis.” The EPA will now be able to consider the cost of replacing out-dated technology with the most effective and expensive closed-cooling systems versus allowing lower cost plans that would reduce the environmental impact to a lesser extent. Implementing closed-cooling systems would prevent 98% of the fish and other aquatic creatures squashed annually into cooling intake screens from being harmed, while less expensive alternatives would cost far less and reduce loss by 80-95%. The Bush administration advocated for cost-benefit analysis, but it is unclear whether the Obama administration will follow the same path—the decision only specifies the EPA “may” use cost-benefit analysis, not that it must. The Entergy v. Riverkeeper decision was handed down on April 1, 2009.


 

W.R. Grace & Co.– Conn. v. Zotos International, Inc.


The Second Circuit has issued the long awaited Zotos decision, holding that "a Consent Order with the DEC was not an administrative settlement cognizable under section 113(f)(3)(B)," and affirming "the District Court's decision that Grace may not bring an action for contribution against Zotos under that section." The decision also holds that Grace could sue under section 107.


 

District Court Rejects Substantive Due Process Challenge to CERCLA


After nine years of litigation, the U.S. District Court for the District of Columbia has rejected General Electric’s (GE) argument that the U.S. Environmental Protection Agency’s (EPA) “pattern and practice” of enforcement under section 106 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), violates the Due Process Clause of the Fifth Amendment. Section 106 authorizes the EPA to issue a “unilateral administrative order” (UAO) ordering a potentially responsible party (PRP) to clean up a hazardous waste site. The targeted PRP may choose to comply with the UAO, thus incurring heavy response costs and uncertain reimbursement from other PRPs, or it may choose not to comply with the order. If the PRP does not comply and a federal district court later determines that it lacked “sufficient cause” to do so, the PRP may face fines of up to $32,500 per day of noncompliance, and punitive damages of up to three times any costs resulting from the delay in cleanup. These penalties are in addition to the massive obligations already imposed by CERCLA on PRPs. GE argued that these stark alternatives presented by a UAO constitute a denial of due process because a PRP has no meaningful opportunity to challenge the UAO.


Applying the balancing test from the Supreme Court’s decision in Matthews v. Eldridge, the district court determined that the EPA is not required to provide additional procedural safeguards to protect the rights of PRPs facing a UAO. Of the thousands of UAOs issued by the EPA since 1982, GE was able to prove that only five were issued wrongly. Looking at this and at other factors, the Court decided that the relatively low risk of error did not warrant imposing on the EPA the additional burden of holding a hearing prior to the issuance of a UAO. The Court also rejected GE’s argument that the potential costs of noncompliance deprive PRPs of a meaningful choice to disobey a UAO it believes was wrongfully issued. The Court reasoned that because section 106 grants federal district courts broad discretion in imposing these penalties, PRPs have ample opportunity to challenge UAOs issued in error. The Court found evidence that 3.5 percent of targeted PRPs refused to comply with a UAO as convincing proof that PRPs do have a meaningful choice either to comply or not comply under section 106.


 

Plastics Engineering v. Liberty Mutual


The Wisconsin supreme court has issued a decision resolving key coverage questions concerning “long-tailed” exposure claims. Plastics Engineering v. Liberty Mutual, No. 2008AP333-CQ (Jan. 29, 2009). Certifying questions of law from the Seventh Circuit, the court addressed what constitutes an “occurrence” in an insurance contract where injuries are allegedly sustained by numerous individuals in various locations over many years. The court also considered whether to adopt an “all sums” or “pro rata” allocation approach to determining liability when an injury spanned multiple successive insurance policies.


For many years the plaintiff–appellees, Plastics Engineering (Plenco), manufactured and sold compounds containing asbestos and as a result, faced liability in a number of lawsuits asserting bodily injury or wrongful death as a result of exposure to these products. These asbestos-related injuries are alleged to have manifested long after exposure, and the exposures occurred at different times and different locations. The defendant-appellant, Liberty Mutual, provided various primary and excess policies to Plenco over years of alleged exposure and injury.


Liberty Mutual argued that under the clear reading of the policies, Plenco’s manufacture and sale of asbestos-containing products without warnings constituted “one occurrence,” regardless of how many people were injured, thus limiting recovery under each policy. To support this argument, Liberty pointed to the limitation of liability provision of the policies, which provides “all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.” (Page 16). The court ruled that this language was not intended to lump together all injured persons into “one occurrence”, but was rather intended to limit each individual injured person to one occurrence. Thus, the court ruled that under Wisconsin law, “each individual’s repeated and continuous exposure constitutes an occurrence,” thereby increasing the limits available for each claim. (Page 17).


Liberty Mutual had further argued that the occurrence should be interpreted from the standpoint of the insured, and that it is the sale without warning that is the occurrence. In rejecting that argument, the court relied upon the policy language defining “occurrence” as the “continuous or repeated exposure to conditions” that necessarily implied exposure to the injured person and not Plenco. (Page 20).


Next, the Wisconsin supreme court considered the extent of Liberty Mutual’s duty to defend and indemnify where the injured person claims an injury that did not occur entirely within the policy period. Liberty Mutual argued that it should not be responsible to defend or indemnify Plenco for injuries that occurred outside the policy period. The court rejected that argument and concluded that under Wisconsin law, once the policy is triggered, the insurer must fully defend that lawsuit and remain responsible for “all sums” up to the policy limits, even if the damage occurred only partly within the policy period.


The court acknowledged that other courts across the country have adopted the “pro rata” approach so that the insurer is liable only for the damages that accrued during the policy period. (Page 25, citing among other cases Sec. Ins. Co. of Hartford v. Lumberman Mut. Cas. Co., 826 A.2d 107, 118 (Conn. 2003).) The court chose instead to adopt the “continuous trigger” theory, so that all policies are triggered from exposure until manifestation. Once a policy is triggered, the insurer must pay all defense costs and all damages caused by an occurrence. However, in the years where no policy existed, no payments are required. The court justified its ruling by observing that the Liberty Mutual policies at issue contained no pro rata language to justify an allocation of responsibility to pay for damages. The court noted throughout its opinion that under Wisconsin law, it must construe all policy language in favor of the insured. The case will now return to the Seventh Circuit for a final decision.


 

Property Owners’ Vapor Intrusion Suit Allowed to Proceed Decades After Ground Water Contamination Discovered


A New York appellate court recently upheld the lower court’s denial of summary judgment to General Electric Company (GE), in a suit brought by residential property owners for damages to their properties allegedly resulting from soil vapor intrusion that had emanated from groundwater contamination discovered at a nearby GE industrial facility years earlier. Aiken v. General Electric Co., No. 505023 (3d Dep’t Dec. 4, 2008). Back in 1983, property owners had sued GE for damages to their properties allegedly caused by trichloroethane (TCE) and other chemicals in the groundwater that had contaminated their drinking water wells. That suit settled for an undisclosed amount.


The plaintiffs filed their vapor intrusion suit in 2006. GE moved for summary judgment arguing that the plaintiffs’ claims were time-barred because the claims were brought over twenty years after the groundwater contamination had been discovered. The plaintiffs argued they did not discover the vapor intrusion contamination until 2004, after results from air and soil tests, which the Department of Environmental Conservation (DEC) had required GE to perform, revealed that soil vapor from the contaminated ground water had permeated the air and soil of certain properties near GE’s facility. The court was swayed by the fact that prior to the testing, the DEC and GE had repeatedly assured the plaintiffs that there was no immediate health problem from the contaminated ground water and there was no risk from exposure to the contaminates in the air or soil. The court found that these assurances, coupled with the late disclosure, presented an issue of fact about when the “plaintiffs should have suspected, let alone discovered, that their properties had been damaged by soil vapor intrusion.”


Since the U.S. Environmental Protection Agency as well as many state environmental agencies, including the DEC, are increasingly requiring vapor intrusion evaluations at contaminated sites (including reevaluations at sites that have been cleaned up and closed), cases like Aiken are likely to proliferate in the future.


 

EPA Releases Proposed Effluent Limitations Guidelines


The Environmental Protection Agency (EPA) has recently released the news release, fact sheet, and prepublication copy of its proposed Effluent Limitations Guidelines for stormwater discharges from construction activities. When this proposed rule is published in the Federal Register, affected businesses will have 90 days to comment. The EPA expects states to implement the requirements of the rule in their construction stormwater general permits five years after it becomes final. Final promulgation of the rule is projected to be in December 2009.


The prepublication draft contains a lengthy preamble. The draft rule contains a “regulatory floor” consisting of specified best management practices and a 13 NTU turbidity limit for sites over 30 acres in areas with high rainfall and high clay content in soils. The proposed rule will significantly affect regulatory requirements for construction activities.


» Read More


 

EPA Board Weighs CAA Requirements in Utah Case


The Environmental Protection Agency’s (EPA) Environmental Appeals Board (EAB) issued a decision concerning whether Region VIII’s Prevention of Significant Deterioration (PSD) permit for the Deseret Power waste-coal-fired generating unit on Indian land in Utah was deficient because it failed to contain a Best Available Control Technology (BACT) limit for CO2. The Sierra Club argued that a monitoring and reporting provision under the part 75 regulations meant that CO2 “was subject to regulation under the Act” and therefore subject to the BACT requirement of Clean Air Act (CAA) Section 165. The EPA responded that the agency was bound by its historical interpretation of the term “subject to regulation under the Act,” which only described pollutants that are presently subject to a statutory or regulatory provision that requires actual control of a pollutant’s emissions. In the alternative, the EPA argued that the Part 75 monitoring/reporting provision is mandated by Section 821 of the public law that amended the CAA, but that Section 821 of that law is not actually “under the Act.”


The board rejected the EPA’s argument that Section 821 is not part of the CAA because that argument was at odds with the agency’s prior statements regarding the relationship between Section 821 and the act. Importantly, the board held that the EPA had wrongly believed that its discretion to require BACT for CO2 was limited by a historical agency interpretation. Therefore, the EAB remanded the permit to the region for it “to reconsider whether to impose a CO2 BACT limit and to develop an adequate record for its decision.” In doing so, the board commented that interested persons and the agency may be better served if the EPA addressed the interpretation of the phrase “subject to regulation under the Act” within an action of nationwide scope rather than through a specific permitting proceeding.


While the board stopped short of deciding that BACT for CO2 is required under the act, it made clear that a PSD permit decision that failed to include BACT for CO2 needed to be supported by the appropriate rationale within the administrative record. Many, if not all, of the recent PSD permits for coal-fired units likely have no such record, and those units currently in the PSD permitting process should now be guided by the board’s decision.


» Read More


 

Supreme Court to Review CERCLA Issues


The U.S. Supreme Court has decided to hear two consolidated cases: Burlington Northern & Santa Fe Railway Co. v. United States and Shell Oil Co. v. United States. (The Ninth Circuit’s decision in Burlington is discussed below in a prior news blurb.) These cases involve several issues arising under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), including when CERCLA liability is joint and several, when liability can be reasonably apportioned, and who can be held liable as an arranger for disposal. The latter issue involves, in part, the circumstances under which someone can be found liable for arranging for the sale of a useful product.


» Read More


 

Supreme Court Rules in Navy’s Favor in Sonar Case


The United States Supreme Court has quickly issued its decision in Winter v. National Resources Defense Council, et al., 07-1239, reversing the Ninth Circuit’s affirmance of a district court injunction blocking the Navy from conducting training activities off the California’s coast that utilized high intensity and mid-frequency sonar. The case arose under the National Environmental Policy Act (“NEPA”) and centered on the failure of the Navy to complete an Environmental Impact Statement (“EIS”) prior to undertaking the sonar training. While the District Court and Court of Appeals had allowed training to continue under certain conditions pending completion of the EIS, the Navy sought review of those conditions. The case was argued on October 8th and the decision was issued on November 12th.


The majority opinion was authored by Chief Justice Roberts and concluded that national security interests take precedence over the environmental impacts of the training exercises. While the sonar had the potential to injure marine mammals by affecting their behavioral patterns, those interest were “plainly outweighed” by the national security interests. According to the majority opinion, that the public interest lies with the Navy “does not strike us as a close question.” Justices Alito, Kennedy, Scalia and Thomas all joined in the opinion. In a separate opinion, Justice Breyer concurred in part and dissented in part. The concurrence was joined in by Justice Stevens and agreed that the preliminary injunction should be vacated because the lower courts had failed to explain how the balance of equities favored the plaintiffs. Justice Ginsburg authored a dissenting opinion, joined by Justice Souter, which focused on the Navy’s failure to complete the EIS process mandated under NEPA.


 

Sierra Club v. Johnson


The Eleventh Circuit issued an opinion in Sierra Club v. Johnson, 07-11537 upholding the ability of Title V permit issuing authorities to issue operating permits without incorporating terms to address unproven allegations of noncompliance even where the permittee is the subject of a pending Clean Air Act (“CAA”) enforcement action. The court’s decision contrast with the Second Circuit's opinion in NYPIRG v. Johnson, 427 F.3d 172 (2d Cir. 2005).


The case addressed whether the CAA required the USEPA to object to the issuance of Title V renewal permits to two power plants, both of which are currently defending a civil enforcement action brought by the EPA for alleged violations of the CAA’s New Source Review program. The civil enforcement action currently remains pending but has been administratively closed since 2001. The Eleventh Circuit acknowledged that plant owner has maintained a vigorous defense against EPA’s allegations, noting that the parties “remain locked in a protracted dispute over the applicability of [Prevention of Significant Deterioration] requirements.”


In denying the Sierra Club’s petition for review, the Eleventh Circuit decided that, even though the statute requires EPA to object to the issuance of Title V permits when faced with a demonstration that the permits do not comply with the CAA, EPA has the discretion to determine when such a “demonstration” is adequate under the Act. In this case, the plaintiffs’ demonstration of noncompliance consisted solely of EPA’s issuance of a Notice of Violation (“NOV”) and subsequent filing of a complaint in a civil enforcement action in federal district court.


The court acknowledged that, given the fact that both an NOV and a complaint need only be predicated on “any information available,” the allegations contained in the NOV and complaint do not conclusively establish the fact of noncompliance with the Act. Rather, they are “merely initial steps in an enforcement action.” Therefore, EPA reasonably concluded that, without more, they do not adequately demonstrate noncompliance. Consequently, a permit issued to the source need not include permit terms to address the alleged noncompliance.


The court explicitly stated that it was unpersuaded by the reasoning of the Second Circuit in NYPIRG v. Johnson. In addition to pointing to the “exceedingly low” standard of “any information available,” the court declined to assign heightened significance to a complaint filed by the EPA (as opposed to other plaintiffs in civil litigation) based on its “privileged” position with respect to monitoring permittees’ compliance with the Act and developing the basis for an enforcement action. Like any other complaint, the truth of the allegations made in an EPA-issued complaint “must be proven over the course of a proceeding.”


The Eleventh Circuit’s decision complements the July 2008 decision of the Seventh Circuit in a similar case involving Title V permit renewals issued to Midwest Generation facilities. Citizens Against Ruining the Environment v. EPA, Case Nos. 07-3197, 07-3198 & 07-3199, 2008 U.S. App. LEXIS 15975 (7th Cir.) (decided July 28, 2008). That case was factually distinct in that the NOV utilized in plaintiffs’ “demonstration” of noncompliance was not issued until after EPA had declined to object to issuance of the renewal permit. Therefore, unlike the Eleventh Circuit, the Seventh Circuit explicitly declined to comment on the Second Circuit’s decision in NYPIRG, concluding that, because of its factual distinctions, it would not resolve the matter currently before it. Nevertheless, consistent with the approach of the Eleventh Circuit, the Seventh Circuit upheld EPA’s decision not to object to issuance of the permits, deferring to EPA’s reasonable interpretation of what constitutes an adequate demonstration of noncompliance with the CAA. The Seventh Circuit also acknowledged the distinction between EPA’s complementary permitting and enforcement authorities, and found it reasonable for the EPA Administrator to engage in extensive fact-finding and analysis regarding contested violations in the enforcement context, rather than the permitting context.


 

Winter v. National Resources Defense Council


The United States Supreme Court has agreed to take another environmental case, Winter v. National Resources Defense Council et al, 07-1239. The Ninth Circuit affirmed an injunction by the district court blocking the Navy from conducting training activities off the California coast that involve the use of high intensity and mid frequency sonar. NRDC and other groups argued that the Navy violated the National Environmental Policy Act (NEPA) because it failed to prepare an Environmental Impact Statement (EIS). The sonar allegedly could harm marine animals and whales.


The Supreme Court also agreed to hear the case of Summers v. Earth Island Institute, 07-463. Earth Island and other groups filed suit against the United States Forest Service for approving the sale of timber from a burnt area of the Sequoia National Forest without providing for any notice or comment or an appeal. Although the parties reached a partial settlement and the Forest Service rescinded its decision, the groups went ahead with their lawsuit. The Ninth Circuit upheld a nationwide injunction against the Forest Service. One of the key issues in the case is whether plaintiffs have standing.


These cases are in addition to the two environmental cases before the Supreme Court, as reported previously, Entergy Corp v. EPA, 07-588 (consolidate with other cases) and Couer Alaska v. Southeast Alaska Conservation Council, 07-984.


 

Sierra Club v. EPA


In Sierra Club v. EPA, 04-1243, the United States Court of Appeals for the District of Columbia struck down USEPA's 2006 rule prohibiting states from establishing their own air pollution monitoring requirements. The court did so based on language under the Clean Air Act that "each permit must include adequate monitoring requirements." For each permit, the court held, the agency must gather emission limits and determine appropriate monitoring requirements.


 

August 2008


The USEPA is launching an interim policy that offers incentives to new owners who correct environmental violations at recently acquired regulated facilities. Under the interim policy, new owners may receive lower penalties than long-time owners. Under the current USEPA Audit Policy, the agency offers reduced penalties to companies that self-audit their facilities, promptly disclose and correct any violations discovered, and take steps to prevent future violations. Under the interim policy announced today, an owner who acquires a new facility may get additional penalty reductions from disclosing an even greater range of violations.


The new interim policy will be in effect immediately and EPA will accept public comment until October 30, 2008. The policy may change in light of these comments. The significance of this change is that buyers of properties and facilities that may be contaminated or have significant ongoing permit compliance issues will have incentives to report those problems promptly to get reduced penalties. This may be a significant benefit to buyers, and they should be aware of this opportunity.  On the other hand, sellers should be aware that their shortcomings may or will be brought to the attention of the regulatory agencies soon after closing, and there is no relief for them. Any seller contemplating a transaction in the near future should be conducting (or updating) compliance assessments and correcting those problems that can be corrected before closing. For those that cannot be corrected right away, seller should seek a compliance order/agreement or negotiate with the buyer to reduce this risk.


EPA also announced a pilot project that allows regulated facilities nationwide to self-disclose environmental violations in a secure environment on EPA’s Website under the Agency's audit policy. This electronic self-disclosure system, or eDisclosure, should reduce transaction costs for companies by ensuring that each disclosure contains complete information. Under the pilot, regulated facilities nationwide will be able to use eDisclosure to disclose violations of the Emergency Planning and Community Right-to-Know Act (for example, failure to submit toxic chemical release forms to EPA’s Toxic Release Inventory). Regulated facilities located in Arkansas, Louisiana, New Mexico, Oklahoma and Texas will be able to disclose violations of all environmental laws. Based on the results of the pilot, EPA will consider expanding eDisclosure to other states in the near future.


EPA’s audit policy provides incentives to companies that voluntarily discover, promptly disclose and correct and prevent future environmental violations. EPA may reduce or waive penalties for violations if the facility meets the conditions of the policy. EPA will not waive or reduce penalties for repeat violations, or violations that resulted in serious actual harm. Since 1995, more than 3,500 companies have disclosed and resolved violations at nearly 10,000 facilities under the audit policy.


» EPA Audit Policy
» Electronic Self-Disclosure under the EPA Audit Policy


 

Mather v. Willet


In Mather v. Willet, 07-3454, the Second Circuit held that plaintiffs waived their claims under the Clean Water Act before 1999 regarding large scale dairy operations that were alleging discharging hazardous pollutants. The court also held that the CWA permit shield prohibited claims between 1999 and 2006. And the court held that plaintiffs' RCRA claims were prohibited under the statutes non-duplication provision.


 

July 2008


The United States Supreme Court will review a decision from the United States Court of Appeals for the Ninth Circuit that barred discharge of liquefied gold mining waste into an Alaskan mountain lake. The underlying cases are Coeur Alaska Inc. v. Southeast Alaska Conservation Council, No. 07-984 and Alaska v. Southeast Alaska Conservation Council, No. 07-990. The state of Alaska and Coeur Alaska Inc., a gold mining company, are seeking to reopen Alaska's Kensington Gold Mine. The Ninth Circuit overturned a permit issued by the U.S. Army Corps Of Engineers under Section 404 of the Clean Water Act that allowed the company to dump dredged waste from the mine into the Lower Slate Lake in the Tongass National Forest. The Southeast Alaska Conservation Council and others filed a lawsuit objecting to the permit. They argued that the Corps violated Sections 301(a), 301(e), and 306(e) of the CWA by issuing a permit for the discharge of process wastewater from a "froth-flotation mill" into a body of water protected by effluent limits promulgated by EPA. The petitioners assert that the case has both economic and administrative law importance whereby the economic benefits of mining to a region must be considered in evaluating environmental concerns.


 

July 2008


A panel of the Ninth Circuit imposed joint and several liability upon Shell Oil Company, which sold chemicals to the defunct facility owner, and two railroad companies that owned part of the land that was contaminated. United States v. Burlington Northern, 2008 WL 763257 (9th Cir. Mar. 25, 2008). Rejecting a district court's 191-page opinion apportioning liability based on years of ownership and the percentage of the facility owned by the railroads, the panel stated that the proper time to focus on such factors is at the contribution phase, not the liability phase. The panel affirmed the finding of joint and several arranger liability of Shell for chemicals that were spilled on the site by the buyer of Shell's product, which was shipped by a common carrier F.O.B. delivery point. Eight circuit judges dissented from the order denying rehearing en banc, stating that the district court's reliance on percentage and time of ownership finds support in the Restatement and other circuits, and that the panel's interpretation of CERCLA arranger liability creates intra and inter circuit conflicts and imposes liability on a defendant that lacked control over products spilled following sale.

 


 

July 2008


In North Carolina v. Environmental Protection Agency, No. 05-1244, the U.S. Court of Appeals for the District of Columbia Circuit vacated EPA's Clean Air Interstate Rule, finding "more than several fatal flaws." The rule was to use an emissions trading plan to reduce ozone and fine particle pollution from power plants that is transported across state boundaries and was to help so-called downwind states attain EPA air quality standards for ozone and fine particles. The D.C. Circuit struck down the agency's method for allocating emissions allowances for upwind states and its interpretation of protections for downwind states, leading the judges to vacate the entire rule.


Describing the “cross-referenced allegations” as “disjointed” and “conclusory,” Judge Cooper “scoured the 175 pages of the [amended complaint]” and found that the plaintiffs had failed to establish the defendants’ scienter or the material falsity of the alleged statements.


This decision marks one of the first 12(b)(6) dismissals of a subprime-related 10-b-5 litigation. Given the heightened sensitivity to subprime-related litigation and the current financial crisis, Judge Cooper’s decision reinforces the importance of requiring plaintiffs to demonstrate the bona fides of their complaint and fulfill the mandates of the PSLRA and recent Supreme Court precedent.


Now in bankruptcy, Fremont General was one of the largest subprime originators in the country. Plaintiff has 45 days to file an amended complaint.


 

Piney Run v. County Commissioners


In Piney Run v. County Commissioners, 523 F.3d 1299 (Apr. 28, 2008), the 4th Circuit held that a citizens' group could not sue the County for alleged Clean Water Act violations because the State Department of the Environment was diligently prosecuting the matter pursuant to a Consent Judgment with the County.


 

May 2008


The United States Department of Interior listed the polar bear as a "threatened" species under the federal Endangered Species Act. While such a listing would typically create review requirements only for projects in Alaska, in this case the listing was made to address the impacts of global warming. At least theoretically, any "major federal action" in the US needed to approve a new source of greenhouse gas emissions would have to conduct an ESA review to determine the impact on polar bears prior to receiving approval. To protect against this result, the Secretary of DOI announced:


To make sure that the Endangered Species Act is not misused to regulate global climate change, I will take the following specific actions:


First, to provide clarity and certainty to those regulated under the Endangered Species Act, the Fish and Wildlife Service will propose what is known as a 4(d) rule that states that if an activity is permissible under the stricter standards imposed by the Marine Mammal Protection Act, it is also permissible under the Endangered Species Act with respect to the polar bear. This rule, effective immediately, will ensure the protection of the bear while allowing us to continue to develop our natural resources in the arctic region in an environmentally sound way.


Second, Director Hall will issue guidance to Fish and Wildlife Service staff that the best scientific data available today cannot make a causal connection between harm to listed species or their habitats and greenhouse gas emissions from a specific facility, or resource development project, or government action.


Third, the Department will issue a Solicitor’s Opinion further clarifying these points.


Fourth, the ESA regulatory language needs to be clarified. We will propose common sense modifications to the existing regulation to provide greater certainty that this listing will not set backdoor climate policy outside our normal system of political accountability.