Category: Environmental Law

Biden Administration Proposes That Federal Contractors Must Disclose GHG Emissions

Last Thursday, the Biden Administration proposed that all federal contractors (except those receiving less than $7.5 million annually in contracts) be required to, among other things, disclose their GHG emissions.  Specifically, according to the press release issued by the White House, “Federal contractors receiving more than $50 million in annual contracts would be required to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions, disclose climate-related financial risks, and set science-based emissions reduction targets” and “Federal contractors with more than $7.5 million but less than $50 million in annual contracts would be required to report Scope 1 and Scope 2 emissions.”  The Biden Administration further announced that “[t]his proposed rule leverages widely-adopted third party standards and systems . . . including the CDP environmental reporting system, the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations, and the Science Based Targets Initiative (SBTi) criteria.”  It should be noted that this proposed rule is also quite similar to the climate disclosures proposed by the SEC–an unsurprising observation, as both were proposed by the Biden Administration and relied upon the same third-party standards (e.g., the TCFD).

The significance of this proposed rule–beyond the regulatory burden imposed upon federal contractors, which is substantial–is that the Biden Administration is signaling its commitment to, and reliance upon, climate-related financial disclosures as a key tool to address the challenge of climate change.  Thus, regardless of the legal challenges that the SEC proposal (and any similar regulatory rule) will be subject to, it is clear that the impetus for these types of disclosures will continue, including through other means at the government’s disposal.  Bearing this in mind, it would be rational for companies to take steps to generate the information necessary for these sort of disclosures, and to prepare to issue them–as this regulatory pressure is unlikely to dissipate soon.

“Today, the Biden-Harris Administration is taking historic action to address greenhouse gas emissions and protect the Federal Government’s supply chains from climate-related financial risks. In support of President Biden’s Executive Orders on Climate-Related Financial Risk and Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, the Administration is proposing the Federal Supplier Climate Risks and Resilience Rule, which would require major Federal contractors to publicly disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets.”

For more Federal Legal News, click here to visit the National Law Review.
©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

EPA’s Contaminant List Includes All PFAS

We previously reported on the EPA’s announcement for its Draft Fifth Contaminant Candidate List (CCL 5), which contemplated listing all PFAS as an entire class on the Contaminant List. On October 28, 2022, the EPA issued its prepublication version of the final CCL 5 rule. The EPA’s contaminant list final version is the first step in the Safe Drinking Water Act regulatory process, which will allow the EPA to begin its assessment into any of the over 12,000 PFAS as to whether they should be included in a drinking water enforceable limit. Such a move would build upon the EPA’s current progress towards regulating PFOA and PFOS with an enforceable drinking water limit, and open the door to significant future enforcement action and litigation.

EPA’s Contaminant List and PFAS

On October 28, 2022, the EPA announced its Final Fifth Contaminant Candidate List (CCL 5). The CCL is a list of contaminants that are currently not subject to any proposed or promulgated national primary drinking water regulations, but are known or anticipated to occur in public water systems. Contaminants listed on the CCL may require future regulation under the Safe Drinking Water Act (SDWA). On the CCL 5 are 66 individual chemicals, but notably PFAS as an entire class are also listed on the CCL 5. Simply because PFAS are listed on the CCL 5 does not guarantee that regulation will occur; however, it does open doors to research that are not otherwise available without the listing on the CCL.

The EPA’s contaminant list rule is not the only step the agency has taken with respect to PFAS and drinking water, but developing the CCL is the first step under the Safe Drinking Water Act (SDWA) in potentially regulating drinking water contaminants. SDWA requires EPA to publish a list of currently unregulated contaminants that are known or anticipated to occur in public water systems and that may require regulation. EPA must publish a CCL every five years. The CCL does not create or impose regulatory burden on public water systems or state, local, or Tribal governments. EPA has completed four rounds of CCLs since 1996. The last cycle of CCL, CCL 4, was published in November 2016. EPA began the development of the CCL 5 in 2018 by asking the public to nominate chemicals, microbes, or other materials for consideration for the CCL 5.

Impact On Businesses and Litigation

Many companies assume that any regulation under the Safe Drinking Water Act will not impact them, as virtually no industries, aside from water utilities, have any direct impact on drinking water. However, this belief provides a false sense of security that must immediately be dispelled. There are three specific ways that drinking water limits for PFAS will trigger scrutiny on environmental practices of businesses: (1) elffluent discharges into water sources; (2) waste sent to landfills that may leach into drinking water sources; and (3) properties abutting or in the vicinity of water sources.

Direct industry effluent discharges into water sources (which may not be drinking water sources, but may feed into drinking water sources) will be the low-hanging fruit target for local environmental agencies at the state level. Companies must ensure that they have all permitting in order, and it is advisable that the permitting specifically encompasses PFAS. Failing to do so will cause issues down the line when local environmental regulatory bodies look to determine, even retroactively, who PFAS water polluters are or were, as those agencies seek to hold businesses responsible for the costs associated with cleaning up PFAS in drinking water.

Companies that send their industrial waste to landfills are also well advised to do a full compliance check. While many companies do not use PFAS directly in their own manufacturing processes, do the parts or other raw materials used in the manufacturing process have PFAS contamination issues? If so, a company could unknowingly send PFAS-laden industrial waste products to landfills, and so these are questions that companies must get answers to. Over time, it is possible that the PFAS may leach out of the landfill and find their way into local water sources. Environmental regulatory agencies will look to these sites, the owners of the sites, and potentially companies sending waste to the sites as responsible parties for PFAS contamination in waterways.

Finally, even businesses having nothing to do with PFAS or manufacturing from which PFAS could be a contaminant need to follow news regarding PFAS regulations. For example, has the property on which your business sits ever had fires that have required a local fire department to extinguish flames using foam (historically, a PFAS containing product)? What did the owner of the site prior to you use the site for? Were there possible PFAS contamination issues stemming from that prior business? Did your due diligence reports and tests when purchasing the property take PFAS into consideration? If PFAS were a contaminant on the land on which your business now operates, local environmental agencies will pursue cleanup costs from any such business regardless of knowledge or intent, and regardless of whether the PFAS issues were the result of a prior company on the site. These investigations and remediations can be extremely expensive and disruptive to businesses.

Should the EPA broaden its regulations for PFAS in drinking water to include more than PFOA and PFOS, this will trigger considerable enforcement action at the state level to identify responsible parties and ensure that the parties pay for remediation costs. Historically, this has also led to civil litigation, as companies identified as responsible parties litigate the percent allocation that they are responsible for the alleged pollution, and look to bring in additional companies to reduce allocation shares for remediation costs.

Conclusion

Future regulatory steps for certain PFAS under the Safe Drinking Water Act will require states to act (and some states may still enact stronger regulations than the EPA). Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus. In states that already have PFAS drinking water standards enacted, businesses and property owners have already seen local environmental agencies scrutinize possible sources of PFAS pollution much more closely than ever before, which has resulted in unexpected costs. Companies absolutely must begin preparing now for regulatory actions that will have significant financial impacts down the road.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.

U.S. Fish & Wildlife Service Proposes New Regulations Creating General Eagle “Take” Permits for Certain Wind Energy and Power Line Infrastructure Projects

The U.S. Fish and Wildlife Service recently published a proposed rule revising regulations that authorize permit issuance for eagle incidental take and eagle nest take under the Bald and Golden Eagle Protection Act (the “Act”). In addition to retaining the individual permits already available under the Act, the new rule proposes creation of a “general” permit for qualifying wind energy and power line infrastructure projects.

The Act generally prohibits the “take,”[1] possession, and transportation of bald eagles and golden eagles, except pursuant to federal regulations. However, the Act also authorizes the Secretary of the Interior to issue regulations to permit the take of these eagle species for various purposes. Under the current regulations, there are 2 permit types for the incidental take of eagles and eagle nests, which are issued on an individual, project-specific basis. Due, in part, to inefficiencies in the application review and approval process, issuance of these project-specific eagle take permits has – historically – been relatively rare. The Service acknowledges that, while participation in the permit program by wind energy projects has increased since 2016, it still remains well below the Service’s expectations.

According to the Service, the purpose of the new regulations is to: (i) increase the efficiency and effectiveness of permitting; (ii) facilitate and improve compliance with the regulations; (iii) and increase the conservation benefit for eagles. The Service proposes to do this by creating a general permit program to streamline the permitting process and provide more timely and cost-effective coverage for affected industries.

General permits would be available to authorize incidental take by activities that occur frequently enough for the Service to have developed a standardized approach to permitting. Specifically, the Service proposes activity-specific eligibility criteria and permit requirements in 4 new sections based on activity and type of take: (i) incidental eagle take for permitting wind energy; (ii) incidental eagle take for permitting power lines; (iii) bald eagle disturbance take; and (iv) bald eagle nest take. As part of the revised application process, a general permit applicant would self-identify as eligible and register with the Service. The applicant is then required to submit an application containing all requested information and fees, as well as certification that the applicant meets the eligibility criteria and would implement permit conditions and reporting requirements.

Two particular proposed general permits – for wind energy and power line projects – could prove particularly useful for renewable energy developers.

Wind Energy Projects

The core general permit eligibility criterion for wind energy projects would be a relative eagle abundance threshold, which a project would need to be below in order to qualify for a general permit. The proposed rule includes specific abundance thresholds for bald and golden eagles, applicable during 5 defined portions of the year. For project eligibility, seasonal bald or golden eagle abundance at all existing or proposed turbine locations must be lower than all 5 seasonal thresholds listed. Presently, the Service estimates that nearly 80% of all existing wind-energy turbines in the coterminous United States are located in areas under the proposed relative abundance thresholds for both species and thus eligible for a general permit under this proposal. The Service plans to offer publicly available online mapping resources depicting areas that qualify. However, at this time, we note that under the proposed rule, Alaska would be excluded from the general permitting program.

In addition to falling below the relative eagle abundance thresholds, wind energy projects would also need to be sited more than 660 feet from bald eagle nests and more than 2 miles from golden eagle nests to be eligible for a general permit.

For existing projects where not all turbines are located within an area below the designated thresholds of relative abundance, the project operator would need to apply for an individual permit and request consideration for a general permit in the application. The Service would review the project and issue a letter of authorization if it determines it is “appropriate” to extend general permit coverage.

Although the Service has not yet promulgated a complete set of conditions for wind energy project general permits, the proposed rule requires permittees to implement all practicable avoidance and minimization measures to reduce the likelihood of take. Permittees would also be subject to a 4 discovered-eagle permit condition, under which discovery of 4 eagle mortalities at a wind energy project covered by a general permit would prohibit the project from reapplying for additional 5-year general permits. Such a project would have to apply for an individual permit.

Power Lines

In the proposed rule, the Service acknowledged that it has sufficient understanding of how eagles interact with power lines to develop a general permit for eagle take resulting from power-line infrastructure.

While the proposed rule does not include detailed eligibility criteria, the Service contemplates 6 key conditions for the new power line general permit:

  1. All new construction and reconstruction of pole infrastructure must be electrocution-safe for bald eagles and golden eagles, except as limited by human health and safety.
  2. All new construction and reconstruction of pole infrastructure must be electrocution-safe for bald eagles and golden eagles, except as limited by human health and safety. All new construction and reconstruction of transmission lines must consider eagle nesting, foraging, and roosting areas in siting and design, as limited by human health and safety. Specifically, the Service recommends siting utility infrastructure at least 2 miles from golden eagle nests, 660 feet from a bald eagle nest, 660 feet from a bald eagle roost, and 1 mile from a bald eagle or golden eagle foraging area.
  3. A reactive retrofit strategy must be developed that governs retrofitting high-risk poles when an eagle electrocution is discovered. A reactive retrofit strategy responds to incidents in which eagles are killed or injured by electrocution.
  4. A proactive retrofit strategy must be developed and implemented to convert all existing infrastructure to be electrocution-safe, prioritizing poles identified as the highest risk to eagles.
  5. A collision-response strategy must be implemented for all eagle collisions with power lines. If an eagle collision is detected, a strategy must outline the steps to identify and assess the collision, consider options for response, and implement a response.
  6. An eagle shooting response strategy must be developed and implemented when an eagle shooting is discovered near power-line infrastructure.

Service review and approval would not be required prior to obtaining coverage under either of these general permits. Rather, according to the Service, the general permit authorization would be “generated” using permit conditions and reporting requirements for the proposed activity. Under the proposed rule, upon submitting an application, the Service will “automatically issue a general permit to authorize the take requested in the application.”

The Service intends to conduct annual audits for a small percentage of all general permits to ensure applicants are appropriately interpreting and applying eligibility criteria. The maximum term for wind energy and power line project general permits would be 5 years; after expiration, with certain narrow exceptions, projects could reapply for new 5-year general permits.

Finally, because the Service will undertake environmental review to support its final rule, obtaining coverage under the general permits would not require project-specific environmental review under the National Environmental Policy Act. However, applicants for the general permit must certify, among other things, that: (i) the activity for which take is to be authorized does not affect a property that is listed, or is eligible for listing, in the National Register of Historic Places; or (ii) that the applicant has obtained, and is in compliance with, a written agreement with the relevant State Historic Preservation Officer or Tribal Historic Preservation Officer that outlines all measures the applicant will undertake to mitigate or prevent adverse effects to the historic property.

The Service is accepting comments on the proposed rule until November 29, 2022. The Service hosted an initial listening session for the general public on October 20th, and will host an additional listening session on November 3, 2022.

FOOTNOTES

[1]Under the federal Endangered Species Act, “take” is defined as any action “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”

Article By S. Keith Garner and Daniel S. Maroon of Sheppard, Mullin, Richter & Hampton LLP

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Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Supreme Court Questions Whether Highly Compensated Oil Rig Worker Is Overtime Exempt

On October 12, 2022, the Supreme Court of the United States heard oral arguments in a case regarding whether an oil rig worker who performed supervisory duties and was paid more than $200,000 per year on a day rate basis is exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).

The case is especially significant for employers that pay exempt employees on a day rate. It could have a major impact on the oil and gas industry in the way that it recruits, staffs, and compensates employees who work on offshore oil rigs and at remote oil and gas work sites. In addition, depending on how the Supreme Court rules, its decision could have much broader implications.

During the arguments in Helix Energy Solutions Group, Inc. v. Hewitt, the justices questioned whether, despite the employee’s high earnings, he was eligible for overtime compensation because he was paid by the day and not on a weekly salary basis. There is no express statutory requirement that an employee be paid on a “salary basis” to be exempt from overtime requirements, but such a requirement has long been included in the regulations issued by the U.S. Department of Labor (DOL) applicable to the FLSA’s white-collar exemptions. Notably, Justice Brett Kavanaugh suggested during the arguments that the regulations may be in conflict with the text of FLSA, although Helix did not raise this issue in its petition for certiorari.

Background

The case involves an oil rig “toolpusher,” an oilfield term for a rig or worksite supervisor, who managed twelve to fourteen other employees, was paid a daily rate of $963, and earned more than $200,000 annually. Between December 2014 and August 2017, when Michael Hewitt was discharged for performance reasons, he worked twenty-eight-day “hitches” on an offshore oil rig where he would work twelve-hour shifts each day, sometimes working eighty-four hours in a week. After his discharge, Hewitt filed suit alleging that he was improperly classified as exempt and therefore was entitled to overtime pay. The district court ruled in favor of Helix.

In September 2021, a divided (12-6) en banc panel of the U.S. Court of Appeals for the Fifth Circuit held that Hewitt was not exempt from the FLSA because his payment on a day-rate basis did “not constitute payment on a salary basis” for purposes of the highly compensated employee (HCE) exemption that is found in the FLSA regulations.

The Fifth Circuit further concluded that the employer’s day-rate pay plan did not qualify as the equivalent of payment on a salary basis under another FLSA regulation because the guaranteed pay for any workweek did not have “a reasonable relationship” to the total income earned. In other words, the court found that the employee was not exempt because the $963 he earned per day was not reasonably related to the $3,846 the employee earned on average each week.

Oral Arguments

Oral arguments at the Supreme Court focused on the interplay between the DOL’s HCE regulation, 29 C.F.R. § 541.601, and another DOL regulation, 29 C.F.R. § 541.604(b), which states that an employer will not violate the salary basis requirement under certain limited circumstances even if the employee’s earnings are computed on an hourly, daily, or shift basis.

At the time of Hewitt’s employment, the HCE exemption required an employee to be paid at least $455 per week on a “salary or fee basis” and to earn at least $100,000 in total annual compensation. Those threshold amounts have since been increased to $684 per week and $107,432 per year.

The other regulation, 29 C.F.R. § 541.604(b), states that an employee whose earnings are “computed on an hourly, a daily or a shift basis” may still be classified as exempt if the “employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily, or shift rate for the employee’s normal scheduled workweek.”

Hewitt earned double the minimum total compensation level for the HCE exemption. Since the minimum salary level for the exemption was only $455 per week, and Hewitt was guaranteed that he would be paid at least $963 per week for each week he worked at least one day, Helix argued that he was exempt from the FLSA’s overtime requirements because the HCE exemption was completely self-contained and to be applied without regard to other regulations, including the “salary basis” test and the minimum guarantee regulation. Hewitt argued that the HCE exemption required compliance with either the “salary basis” test or the minimum guarantee regulation since he was admittedly paid on a day rate basis.

However, Justice Ketanji Brown Jackson suggested that it was not that simple. Justice Jackson said the question of salary basis is more about the “predictability and regularity of the payment” for each workweek. “What he has to know is how much is coming in at a regular clip so that he can get a babysitter, so that he can hire a nanny, so that he can pay his mortgage,” Justice Jackson stated. Justice Jackson echoed the language of the salary basis test requiring that an exempt employee be paid a predetermined amount for any week in which she performed any work.

Similarly, Justice Sonia Sotomayor asked Helix, “so what you’re asking us to do is take an hourly wage earner and take them out of 604, which is the only provision that deals with someone who’s not paid on a salary basis.” Justice Sotomayor additionally raised the FLSA’s goal of “preventing overwork and the dangers of overwork.”

In contrast, Justice Clarence Thomas suggested that Hewitt’s high annual compensation relative to the average worker is a strong indication that he was paid on a salary basis and should be exempt. “The difficulty is just, for the average person looking at it, when someone makes over $200,000 a year, they normally think of that as an indication that it’s a salary,” Justice Thomas stated.

Justice Kavanaugh asked if the issue of whether the DOL regulations conflict with the FLSA is being litigated in the courts. He said, “it seems a pretty easy argument to say, oh, by the way, or maybe, oh, let’s start with the fact that the regs [sic] are inconsistent with the statute and the regs [sic] are, therefore, just invalid across the board to the extent they refer to salary.” He further stated, “if the statutory argument is not here, I’m sure someone’s going to raise it because it’s strong.”

Key Takeaways

It is difficult to predict how the Supreme Court will rule in this case. A decision that requires strict adherence to the regulation’s reasonable relationship test, even when the minimum daily pay far exceeds the minimum weekly salary threshold, would have a significant negative impact on the manner in which certain industries compensate their workers. It also could lead to even more litigation by highly compensated employees, many of whom make more money without receiving overtime pay than what many people who currently are paid overtime compensation make.

Depending upon its breadth, a decision that the regulations are in conflict with the statutory text of the FLSA could provide a roadmap for additional challenges to other parts of the regulations. This could have a wide-ranging impact, as the DOL currently is in the process of preparing a proposal to revise its FLSA regulations. Then again, if a future litigant takes up Justice Kavanaugh’s invitation to challenge whether the salary regulations are overbroad compared to the language of the FLSA, the current effort to revise the regulations regarding exemptions for executive, administrative, and professional employees may be moot.

Article By Andrew P. Burnside, Steven F. Pockrass, and Zachary V. Zagger of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more supreme court and litigation legal news, click here to visit the National Law Review.

© 2022, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

California PFAS Legislation Will Dramatically Impact Businesses

We previously reported on three significant pieces of California PFAS legislation that were before California’s Governor Newsom for ratification. Two of the bills were passed, which means that several categories of products will have applicable PFAS bans. The third bill was not signed by the Governor, which would have required companies to report certain data to the state for goods  sold in or otherwise brought into California that contain PFAS.

With increasing attention being given to PFAS in consumer goods in the media, scientific community, and in state legislatures, the California PFAS bills underscore the importance of companies anywhere in the manufacturing or supply chain for consumer goods to immediately assess the impact of the proposed PFAS legislation on corporate practices, and make decisions regarding continued use of PFAS in products, as opposed to substituting for other substances.  At the same time, companies impacted by the PFAS legislation must be aware that the new laws pose risks to the companies involvement in PFAS litigation in both the short and long term.

California PFAS Bills

One of our prior reports was on the first significant PFAS bill that Governor Newsom was expected to sign into law – AB 2771 – and which was indeed passed into law. The bill prohibits the manufacture, sale, delivery, hold, or offer for sale any cosmetics product that contains any intentionally added PFAS. The law would go into effect on January 1, 2025. The bill defines a cosmetics products as “an article for retail sale or professional use intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance.”

The second bill signed into law by the Governor is AB 1817, which bans the use of PFAS in textiles manufactured and sold in California. More specifically, the bill prohibits, beginning January 1, 2025, any person from “manufacturing, distributing, selling, or offering for sale in the state any new, not previously owned, textile articles that contain regulated PFAS” and requires a manufacturer to use the least toxic alternative when removing PFAS in textile articles to comply with these provisions. The bill requires a manufacturer of a textile article to provide persons that offer the product for sale or distribution in the state with a certificate of compliance stating that the textile article is in compliance with these provisions and does not contain any regulated PFAS. The bill specifically regulates three categories of textiles:

(1) “Textile articles” means textile goods of a type customarily and ordinarily used in households and businesses, and include, but are not limited to, apparel, accessories, handbags, backpacks, draperies, shower curtains, furnishings, upholstery, beddings, towels, napkins, and tablecloths;

(2) “Outdoor apparel” means clothing items intended primarily for outdoor activities, including, but not limited to, hiking, camping, skiing, climbing, bicycling, and fishing; and

(3) “Apparel”, defined as “clothing items intended for regular wear or formal occasions, including, but not limited to, undergarments, shirts, pants, skirts, dresses, overalls, bodysuits, costumes, vests, dancewear, suits, saris, scarves, tops, leggings, school uniforms, leisurewear, athletic wear, sports uniforms, everyday swimwear, formal wear, onesies, bibs, diapers, footwear, and everyday uniforms for workwear…outdoor apparel and outdoor apparel for severe wet conditions.

The bill that California’s Governor vetoed was AB 2247, which would have established reporting requirements for companies that utilize products or substances that contain PFAS and which are used in California in the stream of commerce. “The bill would [have] require[d], on or before July 1, 2026, and annually thereafter, a manufacturer, as defined, of PFAS or a product or a product component containing intentionally added PFAS that, during the prior calendar year, is sold, offered for sale, distributed, or offered for promotional purposes in, or imported into, the state to register the PFAS or the product or product component containing intentionally added PFAS, and specified other information, on the publicly accessible data collection interface.”

Impact of California PFAS Legislation On Businesses

California PFAS legislation places some of the most significant and widely used consumer products in the crosshairs with respect to PFAS. While other states have banned or otherwise regulated PFAS in certain specific consumer goods, California’s bills are noteworthy given the economic impact that it will have, considering that California is the fifth largest economy in the world.

It is of the utmost importance for businesses along the whole cosmetics supply chain to evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate these compounds. One major point of contention among members of various industries is whether to regulate PFAS as a class or as individual compounds.  While each PFAS compound has a unique chemical makeup and impacts the environment and the human body in different ways, some groups argue PFAS should be regulated together as a class because they interact with each other in the body, thereby resulting in a collective impact. Other groups argue that the individual compounds are too diverse and that regulating them as a class would be over restrictive for some chemicals and not restrictive enough for others.

Companies should remain informed so they do not get caught off guard. States are increasingly passing PFAS product bills that differ in scope. For any manufacturers, especially those who sell goods interstate, it is important to understand how those various standards will impact them, whether PFAS is regulated as individual compounds or as a class. Conducting regular self-audits for possible exposure to PFAS risk and potential regulatory violations can result in long term savings for companies and should be commonplace in their own risk assessment.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.

Federal Agencies Announce Investments and Resources to Advance National Biotechnology and Biomanufacturing Initiative

As reported in our September 13, 2022, blog item, on September 12, 2022, President Joseph Biden signed an Executive Order (EO) creating a National Biotechnology and Biomanufacturing Initiative “that will ensure we can make in the United States all that we invent in the United States.” The White House hosted a Summit on Biotechnology and Biomanufacturing on September 14, 2022. According to the White House fact sheet on the summit, federal departments and agencies, with funding of more than $2 billion, will take the following actions:

  • Leverage biotechnology for strengthened supply chains: The Department of Health and Human Services (DHHS) will invest $40 million to expand the role of biomanufacturing for active pharmaceutical ingredients (API), antibiotics, and the key starting materials needed to produce essential medications and respond to pandemics. The Department of Defense (DOD) is launching the Tri-Service Biotechnology for a Resilient Supply Chain program with a more than $270 million investment over five years to turn research into products more quickly and to support the advanced development of biobased materials for defense supply chains, such as fuels, fire-resistant composites, polymers and resins, and protective materials. Through the Sustainable Aviation Fuel Grand Challenge, the Department of Energy (DOE) will work with the Department of Transportation and the U.S. Department of Agriculture (USDA) to leverage the estimated one billion tons of sustainable biomass and waste resources in the United States to provide domestic supply chains for fuels, chemicals, and materials.
  • Expand domestic biomanufacturing: DOD will invest $1 billion in bioindustrial domestic manufacturing infrastructure over five years to catalyze the establishment of the domestic bioindustrial manufacturing base that is accessible to U.S. innovators. According to the fact sheet, this support will provide incentives for private- and public-sector partners to expand manufacturing capacity for products important to both commercial and defense supply chains, such as critical chemicals.
  • Foster innovation across the United States: The National Science Foundation (NSF) recently announced a competition to fund Regional Innovation Engines that will support key areas of national interest and economic promise, including biotechnology and biomanufacturing topics such as manufacturing life-saving medicines, reducing waste, and mitigating climate change. In May 2022, USDA announced $32 million for wood innovation and community wood grants, leveraging an additional $93 million in partner funds to develop new wood products and enable effective use of U.S. forest resources. DOE also plans to announce new awards of approximately $178 million to advance innovative research efforts in biotechnology, bioproducts, and biomaterials. In addition, the U.S. Economic Development Administration’s $1 billion Build Back Better Regional Challenge will invest more than $200 million to strengthen America’s bioeconomy by advancing regional biotechnology and biomanufacturing programs.
  • Bring bioproducts to market: DOE will provide up to $100 million for research and development (R&D) for conversion of biomass to fuels and chemicals, including R&D for improved production and recycling of biobased plastics. DOE will also double efforts, adding an additional $60 million, to de-risk the scale-up of biotechnology and biomanufacturing that will lead to commercialization of biorefineries that produce renewable chemicals and fuels that significantly reduce greenhouse gas emissions from transportation, industry, and agriculture. The new $10 million Bioproduct Pilot Program will support scale-up activities and studies on the benefits of biobased products. Manufacturing USA institutes BioFabUSA and BioMADE (launched by DOD) and the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) (launched by the Department of Commerce (DOC)) will expand their industry partnerships to enable commercialization across regenerative medicine, industrial biomanufacturing, and biopharmaceuticals.
  • Train the next generation of biotechnologists: The National Institutes of Health (NIH) is expanding the Innovation Corps (I-Corps™), a biotech entrepreneurship bootcamp. NIIMBL will continue to offer a summer immersion program, the NIIMBL eXperience, in partnership with the National Society for Black Engineers, which connects underrepresented students with biopharmaceutical companies, and support pathways to careers in biotechnology. In March 2022, USDA announced $68 million through the Agriculture and Food Research Initiative to train the next generation of research and education professionals.
  • Drive regulatory innovation to increase access to products of biotechnology: The Food and Drug Administration (FDA) is spearheading efforts to support advanced manufacturing through regulatory science, technical guidance, and increased engagement with industry seeking to leverage these emerging technologies. For agricultural biotechnologies, USDA is building new regulatory processes to promote safe innovation in agriculture and alternative foods, allowing USDA to review more diverse products.
  • Advance measurements and standards for the bioeconomy: DOC plans to invest an additional $14 million next year at the National Institute of Standards and Technology for biotechnology research programs to develop measurement technologies, standards, and data for the U.S. bioeconomy.
  • Reduce risk through investing in biosecurity innovations: DOE’s National Nuclear Security Administration plans to initiate a new $20 million bioassurance program that will advance U.S. capabilities to anticipate, assess, detect, and mitigate biotechnology and biomanufacturing risks, and will integrate biosecurity into biotechnology development.
  • Facilitate data sharing to advance the bioeconomy: Through the Cancer Moonshot, NIH is expanding the Cancer Research Data Ecosystem, a national data infrastructure that encourages data sharing to support cancer care for individual patients and enables discovery of new treatments. USDA is working with NIH to ensure that data on persistent poverty can be integrated with cancer surveillance. NSF recently announced a competition for a new $20 million biosciences data center to increase our understanding of living systems at small scales, which will produce new biotechnology designs to make products in agriculture, medicine and health, and materials.

A recording of the White House summit is available online.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental, energy, and resources legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

Tax Credits in the Inflation Reduction Act Aim to Build a More Equitable EV Market

In February of this year, it was high time for me to buy a new car. I had driven the same car since 2008, and getting this-or-that replaced was costing more and more every year. As a first-time car buyer, I had two criteria: I wanted to go fast, and I wanted the car to plug in.

Like many prospective purchasers, I started my search online and by speaking with friends and who drove electric vehicles, or EVs for short. I settled on a plug-in hybrid sedan, reasoning that a plug-in hybrid electric vehicle (PHEV) was the best of both worlds: the 20-mile electric range was perfect for my short commute and getting around Houston’s inner loop, and the 10-gallon gas tank offered freedom to roam. In the eight months since I’ve had the car, I’ve bought less than ten tanks of gas. As the price of a gallon in Texas soared to $4.69 in June, the timing of my purchase seemed miraculous.

When it was time to transact, the dealer made vague mention of rebates and tax credits, but didn’t have a comprehensive understanding of the details. Enter Texas’s Light-Duty Motor Vehicle Purchase or Lease Incentive Program (LDPLIP). Administered by the Texas Commission on Environmental Quality (TCEQ), the program grants rebates of up to $5,000 for consumers, businesses, and government entities who buy or lease new vehicles powered by compressed natural gas or liquefied petroleum gas (propane), and up to $2,500 for those who buy or lease new EVs or vehicles powered by hydrogen fuel cells.

Rebates are only available to purchasers who buy or lease from dealerships (so some of the most popular EVs in the U.S. don’t qualify). There is no vehicle price cap, nor is there an income limit for purchasers. In June of 2022, the average price for a new electric vehicle was over $66,000, according to Kelley Blue Book estimates. But the median Texan household income (in 2020 dollars) for 2016-2020 was $63,826.

According to the grant specialist to whom I initially sent my application, the TCEQ has received “a vigorous response” from applicants, however, the TCEQ is limited in the number of rebate grants that it can award: 2,000 grants for EVs or vehicles powered by hydrogen fuel cells, and 1,000 grants for vehicles powered by compressed natural gas or liquefied petroleum gas (propane).

The grant period in Texas ends on January 7, 2023, but on July 5, 2022, the TCEQ suspended acceptance of applications for EVs or vehicles powered by hydrogen fuel cells. As of the writing of this post, the total number of applications received and reservations pending on the program’s website is 2,480.

In comparison with Texas’s rebate program, the EV tax credits in the Inflation Reduction Act of 2022 demonstrate a commitment to building a more equitable EV market. While EVs may be cheaper to own than gas-powered vehicles—especially when gas prices are high—a lot of lower and middle-income families have historically been priced out of the EV market. The IRA takes several meaningful steps towards accessibility and sustainability for a more diverse swath of consumers:

  • Allows point-of-sale incentives starting in 2024. Purchasers will be able to apply the credit (up to $7,500) at the dealership, and because sticker price is such an important factor for so many purchasers, this incentive will make buying an EV more attractive up front.
  • Removes 200,000 vehicle-per-manufacturer cap. Some American manufacturers are already past the maximum. Eliminating the cap means bringing back the tax credit for many popular and affordable EVs, which should attract new buyers.
  • Creates income and purchase price limits. SUVs, vans, and pickup trucks under $80,000, and all other vehicles (e.g. sedans) under $55,000, will qualify for the EV tax credit. For new vehicles, purchaser income will be subject to an AGI cap: $150,000 for individuals and $300,000 for a joint filers.
  • Extends the tax credit to pre-owned EVs. As long as the purchase price does not exceed $25,000, purchasers of pre-owned EVs (EVs whose model year is at least two years earlier than the calendar year in which the purchase occurs) will receive a tax credit for 30% of the sale price up to $4,000. The income cap for pre-owned EVs is $75,000 for individuals and $150,000 for a joint filers.

A purchaser who qualifies under both programs can get both incentives. Comparing Texas’s state government-level incentives and those soon to be offered at the federal level reveals a few telling differences—new vs. used, income caps, purchase price caps, post-purchase rebates vs. up-front point-of-sale incentives—but the differences all fall under the same umbrella: equity. The IRA’s tax credits are designed, among other things, to make purchasing an EV more attractive to a wider audience.

Of course, the EV incentive landscape has greatly changed since the Energy Improvement and Extension Act of 2008 first granted tax credits for new, qualified EVs. The LDPLIP wasn’t approved by the TCEQ until late 2013, so the U.S. government has arguably had more time to get it right. Some might say that the fact that Texas’s program offers the purchaser of the $150,000+ PHEV the same opportunity to access grant funds as the purchaser of the $30,000 EV means that the LDPLIP is even more “equal.”

It is worth noting that the IRA also sets a handful of production and assembly requirements. For instance, to qualify for the credit, a vehicle’s final assembly must occur in North America. Further, at least 40% the value of the critical minerals contained in the vehicle’s battery must be “extracted or processed in any country with which the United States has a free trade agreement in effect” or be “recycled in North America”—and this percentage increases each year, topping out at 80% in 2027. There is also a rising requirement that 50% of the vehicle’s battery components be manufactured or assembled in North America, with the requirement set to hit 100% in 2029. It is unclear whether automotive manufacturers and the U.S. critical mineral supply chains will be able to meet these targets—and that uncertainty may cause a potential limiting effect on the options a purchaser would have for EVs that qualify for the tax credit.

Time will tell whether the intentions behind the EV tax credits in the IRA have the effect that this particular blogger and PHEV owner is hoping for. While we wait to see whether this bid at creating an equitable EV market bears fruit, we can at least admire this attempt at, as the saying goes, “giving everyone a pair of shoes that fits.”

Article By Dania Abbasi of Foley & Lardner LLP

For more energy and environment legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Ethylene Oxide Verdict First of Its Kind, and It’s Eye Opening!

Our prior reports discussed when an ethylene oxide case would go to verdict, and what the ensuing result would look like.  We no longer need to speculate.  On September 19, 2022, a Cook County (Illinois) jury awarded $363 million to a plaintiff who alleged that she developed breast cancer as a result of ethylene oxide emissions from the Sterigenics Willowbrook plant.  This was the first ethylene oxide personal injury case to go to trial, but there are hundreds of cases behind it waiting their turn.

Trial

After a five week trial in the Circuit Court of Cook County, Illinois, Law Division (Sue Kamuda v. Sterigenics et al, case number 2018-L-010475), the jury returned a verdict in the amount of $363 million.  Plaintiff had requested $21 million in compensatory damages and $325 million in punitive damages.

Plaintiff Kamuda argued that the ethylene oxide utilized at the Willowbrook plant, opened in 1984 and used primarily to sterilize medical equipment, caused serious cancer and reproductive health risks. Kamuda alleged that the company failed to analyze how long the chemical would stay in the air in the Willowbrook community or the distance it would travel. Further, Kamuda argued that Sterigenics recklessly failed to install emission controls decades earlier to reduce releases of the chemical.

For its part, Sterigenics argued that plaintiff Kamuda’s reliance on risk assessment and regulatory studies inaccurately led to her assertion that her breast cancer resulted in part from the plant’s ethylene oxide emissions.

Notably, the facility was closed a few years ago after the state of Illinois issued a seal order in February 2019 directing that ethylene oxide emissions had to be reduced significantly. Ultimately, the company decided to keep the facility closed.

Analysis

With this very large jury verdict, plaintiff firms will surely be pushing to get their ethylene oxide cases to trial, or, at a minimum, leverage steep pre-trial settlements.  Further, plaintiff firms will surely recruit new plaintiffs who allege some type of cancer as a result of residing in the vicinity of an ethylene oxide plant.

The next ethylene oxide case to go trial is scheduled for two weeks from now in the same court, though with different plaintiff counsel and judge, as well as a different alleged disease (leukemia).

We note that it remains to be seen whether the Kamuda verdict will be appealed. It also remains to be seen whether this verdict is aberrational or is a bellwether for future trials. Will juries return verdicts based on one type of cancer but not for another?  We will continue to report as these ethylene oxide trials go to verdict and analyze the ramifications.

Article By David A. Goldman of CMBG3 Law

For more environmental, energy, and resources legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.