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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:

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:

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.

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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.

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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.

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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.