Category: Environmental Law

Grants Available for Specialty Crops – March 26 Deadline

Varnum LLP

In early February 2015, a spokesperson for the Michigan Department of Agricultural and Rural Development (MDARD)announced the availability of a series of grants for Michigan specialty crop growers. The grants are funded by the Crop Block Grant Program, an initiative of the United States Department of Agriculture Ag Marketing Servicesprogram.

The grants are designed to increase the competitiveness of Michigan’s specialty crops sector. Funding will go toward myriad uses, including – but not limited to – research, education, marketing, nutrition, food safety, environmental concerns, and the general promotion of the specialty crop industry.

The grants will likely range from $10,000 to $100,000. Applications are due to MDARD no later than 3 p.m. on March 26, 2015. Eligible applicants include non-profits; local, state and federal governmental entities; and for-profit organizations.

ARTICLE BY

Aaron M. Phelps
John W. Sturgis VII
OF
Varnum LLP

EPA Expands the Definition of Solid Waste Rule

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The United States Environmental Protection Agency (EPA) is cracking down on alleged sham recycling with the issuance of a final “Definition of Solid Waste” Rule. The rule aims to reestablish hazardous waste restrictions eased by the Bush administration in 2008. Rulemaking on the Definition of Solid Waste, Pre-Publication version (Dec. 9, 2014) (to be codified at 40 CFR Parts 260 and 261) (the Rule). The 2008 rule exempted hazardous secondary materials that would be reclaimed from the definition of solid waste. Doing so, according to EPA, effectively de-regulated 1.5 million tons of materials, such as arsenic, benzene, trichloroethylene, lead and mercury. Environmental groups and EPA claim that the deregulation resulted in third-party recyclers over-accumulating materials, increasing the risk of accidents and environmental releases. Consequently, the Rule redefines certain materials as hazardous waste and implements stricter controls on facilities and processes.

The new Rule has the potential to affect numerous industries because it changes what may be recycled, and how, without being subject to hazardous waste requirements. EPA has grouped the regulatory changes into six major categories, outlined below.

1. Exclusion for hazardous secondary materials that are legitimately reclaimed under the control of the generator. The Rule retains the exclusion from solid waste for companies who recycle the waste they generate.

2. Verified Recycler Exclusion. The Rule will also replace the transfer-based exclusion with an exclusion for verified recyclers reclaiming hazardous materials. A more restrictive framework for generators will result, as the responsibility shifts to the generator to ensure that it is sending hazardous secondary materials only to a recycler or intermediate facility that has obtained the proper RCRA permit or solid waste variance. The solid waste variance procedure replaces a “reasonable efforts” environmental audit process in the 2008 Rule and requires EPA or state involvement before recycling operations begin.

3. Remanufacturing Exclusion. The Rule excludes from the definition of hazardous waste certain higher-value hazardous spent solvents that are remanufactured into commercial-grade products. This new exclusion, according to EPA, will encourage sustainable materials management and reduce the environmental effects of raw materials use. Facilities may submit a rulemaking petition to request the addition of other higher-value hazardous secondary materials to the remanufacturing exclusion.

4. Prohibition of Sham Recycling and Revisions to the Definition of Legitimacy. The Rule tightens the standards required to show “legitimate recycling,” now mandating the following:

  1. The hazardous secondary material must provide a useful contribution to the recycling process or product;

  2. The recycling process must produce a valuable product or intermediate;

  3. The hazardous secondary material must be managed as a valuable commodity; and

  4. The recycled product must be comparable to a legitimate product or intermediate.

The Rule confirmed the exclusion from solid waste for commodity-grade recycled products, such as scrap metal, and in-process recycling.

5. Revisions to Solid Waste Variances and Non-Waste Determinations. Companies may seek a variance to conduct recycling or reclamation, or they may apply for a non-waste determination on a particular waste stream or product.

6. Deferral on Revisions to Pre-2008 Recycling Exclusions. The new Rule declines to supersede pre-2008 recycling exclusions and exemptions. Thus, any existing facilities operating under a pre-2008 solid waste exclusion determination are not subject to a re-determination unless the state chooses to revisit the regulatory determination. However, all facilities will have to comply with the recordkeeping requirements for speculative accumulation and legitimate recycling.

Although the Rule will become effective six months after publication, most states (those that are authorized to enforce RCRA) must individually adopt the Rule before it becomes effective in those States. Such states will have until July 1, 2016 to adopt the new federal rules, though a one-year extension may be available if a statutory amendment is needed. Compliance will likely require a significant investment in proactive planning and new protocols.

ARTICLE BY

Erin E. Guffey
OF
Schiff Hardin LLP

The Road to Paris 2015: Contrasting Media Perspectives on the US-China Accord on Climate Change and Clean Energy

Covington BUrling Law Firm

As has been widely reported, on November 12 President Obama and China’s President Xi Jinping released a joint announcement on climate change and clean energy cooperation.  Beyond the announced greenhouse gas emission targets—for the U.S., to reduce emissions 26-28% below 2005 levels by 2025; for China, (i) to peak CO2 emissions by around 2030, with the intention to try to peak earlier, and (ii) to increase the non-fossil fuel share of primary energy consumption to around 20 percent by 2030—we note the following.

Differing reporting in the U.S. and China.The climate announcement received starkly different emphasis in U.S. and Chinese media.  In the United States, the announcement was the lead or among the lead news stories in all major outlets we surveyed, including The New York Times, The Los Angeles Times, The Washington Post, The Wall Street Journal and USA Today.  In China, People’s Daily led with Obama’s and Xi’s talks generally, with the two parties reaffirming their goal, expressed at the Sunnylands Summit in 2013, of developing a “new pattern of major power relations” between the two counties—but placed news of the emissions announcement in a separate story on page 2.  Jiefang Daily gave similar treatment to the announcement. Cankao News, which has a conservative reputation, likewise discussed the emissions targets on the second page of the lead story.  And Beijing News, which is considered more liberal, mentioned the climate announcement in the lead’s subtitle, but only discussed its substance on the third page of coverage of the talks, on page 8 of Thursday’s edition.  (Links to Chinese editions.)

The contrasting coverage reflects different economic and political contexts in the two nations.  Beyond the substance of the agreement and fact that China is for the first time publicly stating a specific goal to peak emissions, the story’s heightened newsworthiness in the United States also likely reflects the American media’s sense of surprise, the back story of secret climate negotiations, economic tension between federal mandates and free markets, the chronically polarized politics of U.S. climate and energy policy, and the currently heightened executive vs. legislative branch posturing following last week’s elections.  By contrast in China, secrecy and surprise of policy announcements are common, national economic planning with detailed, prescriptive goals is a foundation of the economy, and divided government and partisan politics are non-existent.  To the extent that the announcement was important inside China, it seemed important for instrumental reasons—because, together with the broader dialogue of mutual cooperation, it demonstrated China’s stature in the bilateral relationship—not primarily because action on climate change is important for its own sake.

Implications for Paris 2015.The joint announcement has been described as an important break-through leading-up to next year’s global climate talks.  With the world’s largest carbon emitters staking out goals to reduce carbon emissions, lesser emitters will find it more difficult to resist similar commitments.  More significantly, the joint announcement has served to establish China as standard-setter, together with the United States.  Its stature already established, China should be less inclined to oppose the United States in Paris for the sake of demonstrating its influence in multilateral negotiations.

Ashwin Kaja contributed to this article.

ARTICLE BY

W. Andrew Jack
Daniel B. Levine
OF
Covington & Burling LLP

United States Supreme Court Round-Up: Key Opinions from 2013 to 2014 and Upcoming High-Profile Business Disputes

Andrews Kurth

The 2013–2014 term of the United States Supreme Court resulted in a wide range of decisions of importance to business. In this article, we highlight some of the key opinions and explore their likely impacts. We also preview a few of the high-profile business disputes the Supreme Court has agreed to hear next term.

Key Business Cases from the 2013–2014 Term

American Chemistry Council v. Environmental Protection Agency: Holding: The Environmental Protection Agency (EPA) reasonably interpreted the Clean Air Act to require sources that would need permits based on their emission of chemical pollutants to comply with “best available control technology” for greenhouse gases. Effect: The decision reinforces the Supreme Court’s previous recognition that the EPA has the power to regulate greenhouse gases as pollutants. However, portions of the decision strongly cautioned the EPA against overreach, stating that the agency may not “bring about an enormous and transformative expansion in [its] regulatory authority without clear congressional authorization.” These comments suggest that the Supreme Court may take a hard line when the Obama Administration’s other climate regulations eventually go to court.

Daimler AG v. Bauman: Holding: A foreign company doing business in a state cannot be sued in that state for injuries allegedly caused by conduct that took place entirely outside of the United States. Effect: Daimler makes it much harder for plaintiffs to establish general jurisdiction over foreign entities. The opinion re-characterizes general jurisdiction as requiring the defendant to be “at home” in the state, a circumstance that the Supreme Court suggested will generally be limited to the places where the defendant is incorporated or where it has its principal place of business. Moreover, the fact that a domestic subsidiary whose activities are imputed to the foreign parent may be “at home” in the state will not make the foreign parent “at home” in that locale for purposes of general jurisdiction.

Halliburton v. Erica P. John Fund, Inc.: Holding: Plaintiffs in private securities fraud actions must prove that they relied on the defendants’ misrepresentations in choosing to buy stock. Basic v. Levinson’s holding that plaintiffs can satisfy this reliance requirement by invoking a presumption that the price of stock as traded in an efficient market reflects all public, material information, including material misstatements, remains viable. However, after Halliburton, defendants can defeat the presumption at the class certification stage by proving that the misrepresentation did not in fact affect the stock price. Effect: While investors will continue to pursue class actions following large dips in stock prices, the Halliburton decision helps to level the playing field by providing defendants a mechanism to stop such suits at the class certification stage.

Lawson v. FMR LLC: Holding: Employees of privately held contractors or subcontractors of a public company are protected by the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 (SOX). Effect: Following Lawson, there will likely be an increase in SOX litigation against public and non-public companies. Because many of the issues concerning the scope and meaning of SOX have yet to be resolved, lower courts will continue to wrestle with defining the parameters of the law. Questions left unanswered byLawson include whether the whistleblower’s accusation must be related to work he or she performed for the company and whether the contract with the public company must have some relation to public accounting or securities compliance.

Chadbourne & Park LLP v. Troice: Holding: The Securities Litigation Uniform Standards Act of 1988 (SLUSA) does not preclude state-law class actions based on false representations that the uncovered securities that plaintiffs were purchasing were backed by covered securities. Effect: SLUSA bars the bringing of securities class actions “based upon statutory or common law of any state” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with a purchase of sale of covered securities.” The statute defines “covered securities” to include only securities traded on a national securities exchange or those issued by investment companies.

U.S. v. Quality Stores: Holding: Severance payments to employees who are involuntarily terminated are taxable wages for purposes of the Federal Insurance Contributions Act. Effect: Employers should, under most circumstances, treat severance payments to involuntarily terminated employees as wages subject to FICA taxes. There are exceptions, however, and employers should therefore seek legal counsel to assist in determining the tax status of a particular severance arrangement.

Business Cases to Watch in the 2014–2015 Term

Integrity Staffing Solutions v. Busk: Whether time spent in security screenings is compensable under the Fair Labor Standards Act.

Mach Mining v. Equal Employment Opportunity Commission: Whether and to what extent a court may enforce the Equal Employment Opportunity Commission’s mandatory duty to conciliate discrimination claims before filing suit.

Omnicare v. Laborers District Council Construction Industry Pension Fund: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, a plaintiff may plead that a statement of opinion was untrue merely by alleging that the opinion itself was objectively wrong, or must the plaintiff also allege that the statement was subjectively false through allegations that the speaker’s actual opinion was different from the one expressed.

Young v. UPS: Whether, and in what circumstances, an employer that provides work accommodations to non-pregnant employees with work limitations must provide work accommodations to pregnant employees who are similar in their ability or inability to work.

As in recent years, the Supreme Court continues to grant review on more and more cases involving matters of concern to U.S. businesses. Andrews Kurth attorneys are available to provide further detail and guidance on the decisions highlighted here, and on any other issues of concern to your company that have reached the high court.

ARTICLE BY

Kelly Sandill
OF
Andrews Kurth

EPA Issues Changes to Due Diligence Requirements for All Appropriate Inquiries (AAI) Under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

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2005 ASTM No Longer Accepted Effective Oct. 6, 2015

On October 6, 2014, EPA issued a final rule mandating the use of the 2013 standard, ASTM E1527-13, for conducting Phase I Environmental Site Assessments for satisfaction of All Appropriate Inquiries (“AAI”) under CERCLA. [Click here for a copy of EPA’s preamble to the final rule, published in the federal register today].

In December 2013, EPA adopted a new AAI rule allowing use of the updated 2013 standard and continuing to allow use of the 2005 standard, ASTM E1527-05. The reference to both standards was widely criticized as a source of confusion in due diligence requirements. Prospective owners/operators were strongly encouraged to use the 2013 standard; however, they had flexibility to decide whether to use the 2013 or 2005 standard for each particular site.

Today’s revised AAI rule removes the reference to the 2005 standard, thus allowing use of only the 2013 standard for entities performing AAI. The new rule does not modify the 2013 standard; it merely mandates the use of it for AAI.

Notably, the new rule will not become effective until October 6, 2015, giving prospective property owners/operators and consultants one year to complete site assessments that are currently being performed consistent with the 2005 standard. Though EPA’s expectation is that entities will no longer use the 2005 standard and transition to the 2013 standard, the EPA’s rule allows use of the 2005 standard for property acquired prior to the effective date of October 6, 2015.

The primary differences between the 2013 and 2005 standards are:

  1. The 2013 standard requires evaluation of the potential for the release of subsurface vapor contamination (vapor migration), and more clearly identifies vapor migration as a recognized environmental condition. The 2005 standard did not explicitly require an analysis of vapor migration
  2. The 2013 standard clarifies existing and adds new definitions, which as a result, revises the potential scope of assessment. For example, the term “Controlled Recognized Environmental Condition” was added to the standard to include past releases that have been addressed but allow contamination to remain in place.
  3. The 2013 standard requires a more extensive review of agency files and historical site documents.

Overall, the 2013 standard is considered more comprehensive and thorough based on today’s realities and is touted by EPA in its final rule preamble as “the consensus-based, good customary business standard.”

Copyright © 2014 Ryley Carlock & Applewhite. A Professional Association. All Rights Reserved.
ARTICLE BY

Bert H. Acken
Jon Steeler
Julie A Rosen
OF
Ryley Carlock & Applewhite, A Professional Corporation

House Passes Bill to Prevent EPA Overreach

Varnum LLP

The U.S. House of Representatives recently passed legislation prohibiting the U.S. Army Corps of Engineers and the Environmental Protection Agency (EPA) from developing, finalizing, adopting, implementing, applying, administering, or enforcing the EPA rule defining what constitutes “waters of the United States” under the Clean Water Act.

This Waters of the United States Regulatory Overreach Protection Act of 2014, H.R. 5078, comes as a response to a move by the EPA in April of this year that proposed changes to how the EPA will define “waters of the United States.” The EPA’s update uses scientific terms from hydrogeology to define which waters are covered under the Clean Water Act.

Farmers, however, have criticized the EPA update as 80 pages of technical and legal jargon. After Congressional hearings, the House passed The Waters of the United States Regulatory Overreach Protection Act of 2014. This bill will go to the Senate next for consideration.

ARTICLE BY

Aaron M. Phelps
Sherry X. Lin
OF
Varnum LLP

United Nations: A Renewed Focus on Climate Change This Week in New York

Covington BUrling Law Firm

Regardless of your perspective on the subject, expect significantly increasing media and public attention around climate change and greenhouse gas emissions this week.

The Secretary General of the United Nations, Ban Ki-moon, is convening a Climate Summit on Tuesday in conjunction with the meeting of the UN General Assembly in New York.  More than 120 world leaders are expected to attend this gathering, making it significant and historic to have so much focus on this issue.  The Climate Summit prompted activists to put together a People’s Climate March on Sunday calling for action by the assembled world leaders.  Hundreds of thousands of people reportedly joined the march in New York — creating media and popular momentum– and demonstrations also occurred in cities around the world.

This focus on climate change has come to be known as Climate Week in New York City.  One of the most notable features of it is the role that businesses are playing in promoting private sector innovation for clean energy solutions, accounting for their climate-related activities, and even advocating for clearer governmental climate emissions policies.  The week is filled with dozens of meetings and forums featuring such business approaches.  Today, for example, Apple’s CEO Tim Cook will be joining Climate Week opening day events to discuss his company’s approach, and dozens of CEOs will be attending a Private Sector Forum tomorrow at the UN.  These meetings include financial firms and investors, as well as greenhouse gas emitters.  The Carbon Disclosure Project (CDP) will be at the New York Stock Exchange on Tuesday to release its annual survey of company reporting on carbon emissions, showing that some 70% of the S&P 500 companies voluntarily report on their carbon emissions.  Several major companies are expected to announce commitments to power 100% of their operations from renewable energy.

The business discussions in New York will increasingly center on a call for companies to put an internal price on carbon, as a complement to efforts to have governments establish regulatory mechanisms — such as emissions limits or trading schemes — that likewise impose such a price.  A carbon price is believed to sharpen the business focus on climate change risks, costs and opportunities.  The UN Global Compact and the World Bank are promoting leadership criteria for companies based on such reporting.  Indeed, a just released report  from the Carbon Disclosure Project (CDP) shows that some 150 companies have developed internal carbon pricing schemes.  It would not be surprising for calls for company pricing policies to increasingly appear in future shareholder resolutions.

This increasing private sector focus complements the accelerating pace of the official UN negotiations.  Interestingly, the Climate Summit is merely an effort by the Secretary General to enhance the focus on the climate treaty negotiations, which are happening elsewhere.  The next step is the annual meeting of the parties of the UN Framework Convention on Climate Change in Lima, Peru in early December to continue with drafting a framework.  Countries will then submit emissions reduction commitments in the Spring, with an effort  to reach a global agreement at the Paris meeting of the parties in December 2015.  Yesterday, the Major Economies Forum of the largest nations met to tackle these issues and discuss next steps to accomplish such an agreement.  Several observers see this meeting as a demonstration of the increasing importance of this issue, as for the first time that meeting consisted of country Foreign Ministers (Secretary of State Kerry attended) rather than simply energy or environmental officials.  Issues around addressing the growing emissions from rapidly developing economies, such as China and India — which currently sit outside of the existing UN framework — remain central to the ultimate success of this endeavor.

Key to the United States’ position are the significant emissions reductions that would be derived from the Environmental Protection Agency’s recently proposed rules for existing power plants. They are a central piece in fulfilling the President’s international pledge in 2009 that the United States would reduce its carbon emissions by 17% by the year 2020.  The President’s speech this week will be important in setting a trajectory for how much further the United States may be willing to go after 2020.

The UN’s chief climate change official, Christian Figueres, speaking at a small gathering yesterday, regards the week’s activities as an indication that the climate issue may be reaching a tipping point.  She characterizes the public demonstrations as a statement that the nations of the world “must” address climate change, the business actions as a demonstration that governments “can” address climate change, and believes that governmental leaders are now poised to assert that they “will” address it.  While the outcomes may not be fully settled for some time, companies can expect to see a renewed public focus on these issues and will likely find that they present a range of increasing risks and opportunities.

ARTICLE BY

Gary S. Guzy
OF
Covington & Burling LLP
© 2014 Covington & Burling LLP

Report on State Preparedness to Implement EPA Clean Power Plan

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States are well positioned to implement the Environmental Protection Agency’s (EPA) Clean Power Plan, according to a new study conducted by Analysis Group Senior Advisor Susan Tierney and Vice Presidents Paul Hibbard and Andrea Okie. The report, “EPA’s Clean Power Plan: States’ Tools for Reducing Costs & Increasing Benefits to Consumers,”is based on a careful analysis of states that already have experience regulating carbon pollution. It finds that those states’ economies have seen net increases in economic output and jobs. “Several states have already put a price on carbon dioxide pollution, and their economies are doing fine. The bottom line: the economy can handle – and actually benefit from – these rules,” said Dr. Tierney.

The EPA’s proposed Clean Power Plan would regulate carbon emissions from existing fossil-fueled power plants using EPA’s existing authority under the Clean Air Act. The draft rules, due to be finalized next year, allow a variety of market-based and other approaches states can choose from to cut greenhouse gas emissions from power plants.

The Analysis Group team analyzed the carbon-control rules already in place in several states to see what insights they might hold for the success of the national rule. The report was based on states’ existing track records, rather than projecting costs and benefits that might be expected under the Clean Power Plan. The report, funded by the Energy Foundation and the Merck Family Fund, was released at the summer conference of the National Association of Regulatory Utility Commissioners (NARUC) in Dallas, Texas.

Read the report

ARTICLE BY

Susan F. Tierney, PhD
Paul J. Hibbard
Andrea Okie
 
OF
Analysis Group, Inc.

Energy and Environmental Law Update: Week of 8/25/2014

Mintz Levin Law Firm

Now that summer is drawing to a close, let’s check in on one important bill that lost momentum just as the summer was beginning. Remember the Senate Finance Committee’s tax extenders package (S. 2260), which the committee marked up on a bipartisan basis in mid-May? The one that was poised to pass the Senate but that surprisingly failed to reach cloture after Senate leadership blocked Republican amendments on the bill? At the time, congressional staff and lobbyists—and even Majority Leader Harry Reid (D-NV) —suggested that the extenders package would come up again in the lame duck session after the November election. The House was not expected to vote on an extenders package before then anyway, so the Senate delay would not really impact the timing of final passage of this two-year extension of more than 50 tax provisions.

Well, that was then. Today, almost two months before the mid-term elections, the future of the clean energy provisions in an extenders package—particularly the production tax credit (PTC) and investment tax credit in lieu of the PTC—depends a great deal on which party wins control of the Senate. Republicans are more confident that they can win the necessary six seats to take back the top chamber; and if they do, they will have more leverage in the lame duck about what the contents of an extenders package would be. The $84 billion EXPIRE Act of 2014 not only extends the PTC by two years but also extends key clean energy depreciation benefits and tax credits, including a $1-per-gallon credit for biodiesel and a 50-cent-per-gallon credit for alternative fuels. Senate Democrats strongly support the clean energy provisions. Certain Republicans, such as Chuck Grassley (R-IA), remain staunch supporters of the PTC and biodiesel credits, but many other Republicans are eager to eliminate or scale back the PTC and other clean energy provisions. If Senator Orrin Hatch (R-UT) learns he will be chairman of the Finance Committee next year in a Republican chamber, he has less of an incentive to work with current Chairman Ron Wyden (D-OR) and Democrats during the lame duck session. He can simply hold out and put forward his own extenders bill next year with popular provisions like the research and experimentation (R&D) credit and without clean energy incentives.

The extension of a handful of relatively popular and less controversial business and individual extenders such as the R&D credit and bonus depreciation are more assured. House Republicans, as part of a “tax-reform-lite” effort, have passed several bills making select provisions such as these permanent. For clean energy advocates, they have to cling to the more popular parts of the overall package and make sure their provisions are not trimmed away when Congress eventually takes it up. The business community, which wants many of the non-energy provisions in the EXPIRE Act extended, also must be much more vocal if the bill is to rise to the front of the agenda.

If Democrats do manage to hold onto control of the upper chamber, they very likely will be dealing with a reduced majority, and that too will give Republicans more leverage. With all the competing priorities in a very short legislative period, it will be difficult for the package to be enacted before the end of the year. Another retroactive extension in early 2015 could be possible. Congress has let the PTC lapse several times since 1992 before renewing it again. While it’s hard to avoid feeling a feeling of déjà vu when faced with another “will-they-or-won’t-they” end-of-year extension, this time also seems different. Many legislators thought the previous PTC extension would be the last one, so the stakes are high. Anti-PTC campaigns financed by conservative groups and utilities ratchets up the pressure on lawmakers. One possible way to blunt some Republican opposition would be to modify the PTC and either reduce the amount of the credit or include a deadline by which projects must complete construction—or both.

Several scenarios exist where even a change of control in the Senate would not preclude the passage of a tax extenders package. A short-term extension would give lawmakers some breathing room to debate tax reform. Some Republicans from wind-friendly states might prefer the clean energy provisions to pass under a Democratic watch rather than under Republican leadership in the new Congress. In this optimistic scenario, the lame duck session could mirror the productive session of 1980.

Ironically, election results in any one of three bio-energy and wind states–Colorado, South Dakota, and Iowa—could help decide the balance in the Senate and the fate of clean energy tax credits.

ARTICLE BY

Bryan M. Stockton
 
OF 
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

EPA Clarifies Standards for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Assessments

Covington BUrling Law Firm

In a move designed to provide greater certainty to those purchasing, selling, or evaluating industrial or commercial properties, the Environmental Protection Agency (EPA)recently proposed to remove any lingering effect of ASTM International’s E1527-05, a nine-year-old industry standard practice for evaluating potentially contaminated sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

As explained in detail in our February 24, 2014 E-Alert, “Amended All Appropriate Inquiries (AAI) Rule Offers New Due Diligence Standard, Focuses on Vapor Releases,” the EPA referenced and countenanced ASTM International’s updated framework, E1527-13, as an alternative due diligence standard to ASTM E1527-05.  Issued on June 16, 2014, the Proposed Rule would clarify Phase I Environmental Site Assessment (ESA) standards by replacing ASTM E1527-05 with ASTM E1527-13.  Yet these requirements still leave significant uncertainty in the absence of more detailed guidance about how to conduct vapor intrusion evaluations.

I.  Background

International standards organization ASTM International modeled E1527-05 on the EPA’s All Appropriate Inquiries (AAI) Rule in 2005.  The AAI Rule is a due diligence standard that allows buyers of potentially contaminated properties who conduct an investigation meeting the rule’s requirements to preserve certain defenses to federal cleanup liability under CERCLA when conducting Phase I ESAs.  See 40 C.F.R. § 312 (2013).  The ASTM E1527-05 framework was developed to provide guidance for such investigations, and instructed would-be purchasers to undertake all appropriate inquiries regarding the condition of a property before completing its sale.  Any buyer who conducted such inquiries in compliance with ASTM E1527-05 could then qualify for certain landowner liability protections under CERCLA, including the innocent landowner, bona fide prospective purchaser, and contiguous property owner defenses.

Last December, the EPA amended the AAI Rule to allow a purchaser to satisfy Phase I ESA requirements by following either ASTM E1527-05 or ASTM E1527-13.  See 78 Fed. Reg. 79319 (Dec. 30, 2013).  As explained in our February 24, 2014 E-Alert, the 2013 framework included new regulatory file review requirements, updated definitions of certain key terms, including “de minimis condition,” “release,” “Recognized Environmental Condition,” and “Historical Recognized Environmental Condition,” and expanded ASTM E1527-05’s definition of “migrate/migration” to include vapor migrations.

II.  Proposed Rule

The EPA amended the AAI Rule through direct final rulemaking, an approach whereby an agency publishes a rule and a notice of proposed rulemaking simultaneously because it expects that the rule will prove non-controversial.  But the move nonetheless introduced confusion because in endorsing both ASTM E1527-05 and ASTM E1527-13, it recognized two distinct standards.

Responding to that criticism, the EPA has now proposed to replace ASTM E1527-05 with ASTM E1527-13 for purposes of the AAI rule so as “to reduce any confusion associated with the regulatory reference to a historical standard” and “promote the use of the standard currently recognized by ASTM International as the consensus-based, good customary business standard.”  Amendment to Standards and Practices for All Appropriate Inquiries, 79 Fed. Reg. 34480 (proposed June 16, 2014) (to be codified at 40 C.F.R. 312), at 11.  Besides removing all references to ASTM E1527-05, the Proposed Rule would not alter the substance of the AAI Rule.

III.  Implications

ASTM E1527-13 incorporates new language about the need to evaluate soil vapor risk when conducting Phase I ESAs.  Soil vapor intrusion is of particular focus with respect to TCE and other volatile organic compounds, but can also involve other contaminants.  The EPA has suggested, however, that a vapor intrusion evaluation may already have been required under ASTM E1527-05.  In its preamble to the rule offering ASTM E1527-13 as a new due diligence standard, the agency stated that it “in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting all appropriate inquires.”  78 Fed. Reg. 79319 (Dec. 30, 2013).  It is unclear, however, whether the EPA intended this statement to reflect near contemporary Phase I ESAs (conducted after ASTM E1527-13 was developed) or instead intended to suggest that the obligation has always existed.  Consequently, there may be future disputes as to whether a Phase I ESA not describing an evaluation of soil vapor intrusion actually satisfied the AAI Rule.

ASTM E1527-13 leaves open a number of key questions about vapor intrusion evaluations.  Neither ASTM E1527-13 nor the AAI Rule describes, for example, what levels in soil gas or groundwater should lead to concern or what levels would require mitigation.  The EPA and various states are developing guidance in this area to further clarify acceptable levels, how evaluations are to be conducted, whether one can evaluate risk based upon groundwater conditions alone, whether an evaluation must consider multiple lines of evidence, what vapor levels would be deemed acceptable in a residential setting, and what actions are required to mitigate risk.[1]

IV.  Conclusion

Consultants have already been transitioning toward the ASTM E1527-13 standard.  Should the Proposed Rule be adopted, ASTM E1527-05 will still satisfy the AAI Rule for properties acquired between November 1, 2005 and the effective date of the new action.  The EPA also anticipates providing for a delayed effective date of one year following any final action, to give those still using the previous framework time to complete ongoing investigations and become familiar with the updated standard.

However, it is important to recognize the potential that the EPA may claim that a failure to evaluate soil vapor, where otherwise appropriate, is a requirement under ASTM E1527-05 and not only ASTM E1527-13.  It is therefore essential that potentially-affected individuals keep current on EPA developments with respect to the evaluation of soil vapor intrusion, and obtain sound and up to date advice from environmental professionals.

[1]  See http://www.epa.gov/oswer/vaporintrusion/index.html.

ARTICLE BY

Kamila Lis
E. Donald Elliott
Theodore L. Garrett
Gary S. Guzy
Lawr
ence A. Hobel
 
OF
Covington & Burling LLP