Environmental Law Archives - Page 33 of 43

Supreme Court Finds that CERCLA Does Not Preempt Statutes of Repose – Comprehensive Environmental Response, Compensation, and Liability Act

On June 9th, the Supreme Court issued its opinion in CTS Corp. v. Waldburger et al., No.13-339 (June 9, 2014) (slip op.) [link], in which it held that CERCLA section 309, 42 U.S.C. § 9658, does not preempt statutes of repose, reversing the Fourth Circuit. Section 9658(a) preempts state law statutes of limitation for personal injury and property damage claims related to the release of a hazardous substance. Justice Kennedy, writing for the majority, reaffirmed the oft-repeated “presumption against preemption” in reasoning that Section 9658 does not preempt state statutes of repose. Statutes of limitations bar claims after a specified period of time based on when the claim accrued, whereas statutes of repose bar suits brought after a specified time since the defendant acted, regardless of whether the plaintiff has discovered the resulting injury.

CTS Corporation (“CTS”) operated an electronics plant in Asheville, North Carolina from 1959 to 1985. CTS, which manufactured and disposed of electronics and electronic parts, contaminated its property with chlorinated solvents. CTS sold the facility in 1987, and portions of the property were sold off. Owners of those parcels, and adjacent landowners, brought suit against CTS in 2011, alleging that they discovered contamination on their properties in 2009.

The District Court found that N.C. Gen. Stat. § 1-52(16), North Carolina’s statute of repose, barred the suit. That section prohibits a “cause of action [from] . . . accru[ing] more than 10 years from the last act or omission of the defendant giving rise to the cause of action.” The Fourth Circuit reversed on the basis of CERCLA preemption, finding that section 9658 was ambiguous because it did not explicitly list “statutes of repose.”

The main issue at oral argument before the Supreme Court was whether the distinction between statutes of repose and statutes of limitation actually existed when Congress enacted Section 9658. As Justice Scalia said, “. . . I used to consider them when I was in law school and even as late as 1986 [when section 1958 was added by Congress], I would have considered that a statutes of limitations. Now, you think Congress is smarter. They know the law better.” Although other justices seemed to agree—and the distinction had only begun to be made in the 1980s—a 1982 Senate Superfund Study Group Report made that distinction and recommended that the few states that have statutes of repose repeal them. Despite the overlap between statutes of repose and statutes of limitation, the Court found the distinctions important—statutes of repose are not related to the accrual of any cause of action and cannot be tolled. Because the Study Report made the distinction between the two, and because section 9658 fails to mention “statute of repose” and is not written in a way to suggest that it is intended to include both, the Court reversed.

The Court cited, as additional support for its conclusion the “well-established ‘presumptions about the nature of pre-emption.’” The presumption against preemption counsels courts, when interpreting the text of a preemption clause susceptible of more than one possible reading, to “ordinarily accept the reading that disfavors pre-emption.” The Fourth Circuit failed to mention this presumption (although the dissent relied on it).

This opinion follows recent Superfund cases in the Supreme Court in two respects. First, the Supreme Court attempts to apply the “natural reading” of the statutory text rather than to reach out to interpret the statute broadly to effectuate its “remedial purpose.” Indeed, Justice Kennedy explicitly derides that rationale for interstitial lawmaking. Second, the Supreme Court attempts to preserve ordinary state law principles to the greatest extent possible. So, for example, United States v. Bestfoods, 524 U.S. 51 (1998), was very respectful of state corporation law, and so too Waldburger is respectful of state tort law. In this way, one might consider today’s decision to be fairly unremarkable.

The majority does not even address Justice Ginsburg’s dissent in which she and Justice Breyer worry that personal injuries with long latencies—like cancers—will go uncompensated. But some of the long latencies arise not from the progress of some disease but of slow migration of a hazardous substance, in a groundwater plume for example. Indeed, to the extent that many environmental toxic tort claims rest on allegations of property damage or diminution in value, the cancer model may be misplaced.

Curbing Greenhouse Gas (GHG) Emissions – Good for the Environment, Bad for Investors?

On June 2, 2014, EPA issued a proposed rule to control greenhouse gas emissions (GHGs) from the electric power generation sector of the United States. EPA’s goal is to obtain a reduction of GHG emissions in 2030 from this sector of 30% from the baseline year 2005. The 2005 baseline allows EPA to take credit for GHG emission reductions that have occurred since that time without any regulatory obligation. The proposal establishes GHG emission targets for each State (expect the District of Columbia and Vermont who do not have goals under the rule). Interim emission targets must be obtained in the 2020-2029 timeframe with final targets obtained by 2030.

The proposal does not suggest any particular emission limit on particular plants, but imposes the obligation on the States to derive a plan to achieve the reductions. The only penalty for noncompliance in the proposal is that EPA would impose an EPA-developed plan within the State if it fails to submit an approvable plan. While EPA has not dictated any particular approach a State may employ, the proposal favors a cap and trade or carbon tax system as the primary manner to obtain GHG emissions reductions.

So here are the two burning questions from the perspective of investors. First, will this rule actually survive in anywhere near this form? Second, when will affected power projects need to start ramping up investment in order to comply with the rule, i.e., when should investors start to worry about financial capacity?

In terms of a “review for reality,” many industry experts suggest that it is nearly impossible to obtain the proposed 6% efficiency improvement at existing coal-fired power plants without major capital improvements, which could require complex Clean Air Act permitting under other provisions of the law. Other goals can only be achieved through substantial purchases of carbon credits (i.e., offsets) or the implementation of technologies that haven’t yet been proven to be commercially viable. (You’ve likely heard the aspirations to develop carbon capture and sequestration.) EPA also assumes that natural gas-fired power plants will be running at 70% capacity year-round, which may be difficult to achieve in practice. Finally, EPA assumes that energy efficiency improvements at the consumer level will be obtained at a rate of 1.5% every year until 2030 – an ambitious goal.

In terms of a “review for timing,” this is only the beginning of a very long process. After the usual rounds of public comment, EPA has targeted issuance of the final rule by June 1, 2015. Then the lawsuits will start. Then a new President with his/her own views will take office. Plus, even under the EPA’s own best case scenario, the proposed rule allows states until June 2016 to submit plans, with the potential for extension to June 2017. Once a state submits a plan, EPA must approve or disapprove it through notice and comment rulemaking. The proposal allows for EPA to complete the review of the plans within 12 months of the state plan submittal. If a state doesn’t submit a plan or EPA disapproves the plan, EPA must make a plan for the state. State plans must begin to meet an interim goal in 2020 and must achieve their final goal by 2030. Plus, State plans and EPA approval/disapproval present a separate source of litigation and associated delay.

So no need for panic dumping of carbon-intensive investments just yet, but keeping an eye on the process would be wise, including consideration of whether, if your industry investments are large enough, you should participate in, or form/join a group to participate in, the comment-making phase plus working with members of Congress. The earlier the involvement, the greater the opportunity to help shape the results.

Article By:

Of:

Bracewell & Giuliani LLP

EU Sanctions And The International Oil And Gas Industry

The international oil and gas industry is continuously tasked with adapting to an ever evolving sanction-regulated environment. The level of sanction activity and implementation in recent years has been unprecedented, partly as a result of the political events which gave rise to the Arab Spring and the opposition to Iran’s nuclear programme. The recent crisis in the Ukraine, and associated sanctions against Russia, have sparked further debate around the need for effective, targeted punitive measures and the consequences they may have for Europe.

This article considers the EU’s sanction regime, explores the effect it has on international oil and gas companies and addresses the short-comings of the EU’s decentralised system.

What are sanctions?

Sanctions are political policy instruments used to encourage jurisdictions acting in contravention of international law to adopt standards supported by the wider global community. They impose measures designed to cause damage to the targeted government, non-state entity or individual (“Target”) in order to force it to undertake, or prevent it from undertaking, certain behaviour. They may inhibit the Target from accessing foreign markets for trade or deny it from pursuing financial and other forms of commerce. The professed ultimate objective of a sanction is to preserve or restore global peace and security.

What is the source of EU sanctions?

The UN Security Council imposes sanctions through Security Council resolutions which are binding on the EU. The EU implements all sanctions imposed by the UN Security Council through legislation enacted by the European Council. The process typically results in a European Council regulation which has direct effect in EU member states’ separate legal systems, creating rights and obligations for those subject to them, and overrides national law. Additionally, the EU may decide to impose self-directed sanctions or restrictive measures which go further than a UN Security Council resolution in circumstances in which the EU deems such action to be necessary.

Why do EU sanctions affect international oil and gas companies?

Over the past two decades, the EU has engaged in an active use of restrictive measures in the form of economic and financial sanctions, embargoes and restrictions on admission to a country. Economic and financial sanctions typically take the form of asset-freeze measures which involve the use of funds and economic resources by Targets or persons acting for and on behalf of Targets, and the provision of funds and economic resources to designated Targets. Embargoes may prohibit trade in certain goods, and activities relating to such trade, with Targets (including the flow of arms and military equipment). Visa or travel bans can be imposed preventing certain persons from entering the EU or transit through the territory of EU member states. These sanction measures are part of the EU’s strategy to support the specific objectives of the Common Foreign and Security Policy.

At the time of writing, the EU has announced asset freezes and travel bans against around twenty individuals in Russia and the Ukraine. Companies conducting their business in the oil and gas sector should be particularly vigilant to ensure they act in compliance with EU sanctions, as Ukrainian and Russian entities and individuals who operate in this industry may increasingly become sanction targets.

US sanctions are questionable under international law because they apply extra-territorially to third state parties involved in business activities with the Target. Unlike the US, the EU has refrained from adopting legislation with extra-territorial effect. However, the EU’s recent sanctions against Iran displayed a greater resemblance to those levied by the US than had previously been the case. For example, sanctions were imposed prohibiting the provision of key resources to various parts of the Iranian oil and gas industry, as well as the provision of financial services to that sector. As a result of EU financial sanctions most, if not all, banks and other financial institutions have declined from conducting any business relations with the Iranian regime.

It is clear that EU sanctions are wide reaching and their scope has a significant impact on business activities. They will apply to international oil and gas companies in the following situations:

within EU territory, including its airspace;
on board of aircrafts or vessels under the jurisdiction of an EU member state;
to EU nationals, whether or not they are in the EU;
to companies and organisations incorporated under the law of a member state, whether or not they are in the EU (this captures branches of EU companies in non-EU countries); and
to any business done in whole or in part within the EU.

The corporate behaviour, performance and conduct of international companies are powerful channels through which the objectives of sanctions against Targets are achieved. Since an international oil and gas company has little option but to observe EU sanctions to the extent such company falls within the EU’s jurisdiction, these restrictive measures are likely to play a big part in a company’s commercial decision making processes.

Why are EU sanctions difficult to manage?

A principal reason why EU sanctions are difficult for international oil and gas companies based in various EU member states to manage largely stems from the fact that the European Union lacks a centralised licensing body. Instead, the responsibility for implementing and enforcing EU sanctions is delegated to the relevant competent authorities of the EU member states. The potential for variance and discrepancy is rife in a system where there are twenty-eight EU member states, each with their individual national resource constraints and self-centred policy objectives.

Typically, the competent authorities of EU member states are responsible for:

granting exemptions and licences;
establishing penalties for sanction violations;
coordinating with financial institutions; and
reporting upon the implementation of sanctions to the European Commission.

There have been calls for a central EU licensing body which would produce a single licensing and exemption policy for EU member states. Although EU guidelines on sanctions and best practices for the effective implementation of restrictive measures go some way to plug the gap, arguably a more comprehensive regime for implementing sanctions is required to provide a better level of certainty to international businesses operating in the realms of the EU.

Managing the risks

International oil and gas companies have always had to function in politically active climates. As sanctions initiated by multilateral organisations such as the UN and EU become more fashionable, so too does the exposure to political risk that these companies will face. Given the considerable levels of investment that can only be recouped over extended periods of time, and in accordance with pre-determined contractual apportionments, international oil and gas companies need to be able to recognise, assess and manage these political risks effectively.

Oil and gas companies can relieve the risks imposed on them by sanctions through political lobbying, taking pre-emptive measures and by reacting quickly to sanctions once they are implemented. Commercial negotiations will need to focus on the allocation of risk as a result of one party’s failure to perform or withdrawal from the contract on the grounds of applicable sanctions.

International oil and gas companies need to be proactive and consider both the legal solutions and pre-cure safeguards. Time and effort should be spent focusing on drafting and negotiating the relevant contractual documentation, following a careful risk assessment, instead of deferring to dispute resolution provisions. For instance, careful construction of force majeure provisions can allocate each party’s obligations in the circumstance where an event outside of a party’s control causes contractual performance to become impossible. Thus, whilst conventional force majeure clauses relating to physical events afford relief to an affected party from its liabilities under the contract, oil and gas companies should consider expanding such contractual provisions to cover sanctions and other restrictive measures imposed on them by the UN and EU.

To avoid falling foul of existing EU sanctions, oil and gas companies should also consider putting in place comprehensive compliance procedures and systems to implement applicable sanction regimes. Penalties for breach of sanctions can be severe; a person guilty of a sanction-related offence may be liable on conviction to imprisonment and/or a fine. Falling foul of sanctions also means that a transaction can immediately become unlawful.

Conclusion

In view of the economic significance of the EU, the application of economic financial sanctions can be a powerful tool. But like a chain is no stronger than its weakest link, the effectiveness and success of the EU’s sanction regime depends on all EU member states applying, implementing and enforcing EU sanctions in a consistent manner.

The current EU sanction regime warrants a fully integrated approach which would undoubtedly benefit its policy objectives and move some way to reducing the unduly high economic cost that international oil and gas companies face when operating their businesses in the EU.

In voicing the sentiments of Henry Kissinger: “No foreign policy – no matter how ingenious – has any chance of success if it is born in the minds of a few and carried in the hearts of none”, perhaps now, in the dawn of the recent events which have taken place in the EU’s backyard in the Ukraine and Russia, the EU should further global security measures by tightening its ranks and implementing a more centralised, and better monitored, sanction regime.

Article By:

Rebecca Downes

Of:

Andrews Kurth

2nd Conflict Minerals Reporting and Supply Chain Transparency Conference- June 23-25, Chicago, IL

The National Law Review is pleased to bring you information about the 2nd Conflict Minerals Reporting and Supply Chain Transparency Conference, June 24-25, 2014, presented by Marcus Evans.

Click here to register.

Where

Chicago, IL

When

June 24-25, 2014

What

The 2nd Sustaining Conflict Minerals Compliance Conference will break down each SEC filing requirement as well as examine direct filing examples from specific companies. Discussions will tackle key issues including refining conflict minerals teams to create a more successful conflict minerals management program, managing and developing consistent communication within the supply chain, and building an IT program that will continue to secure data from the various levels of the supply chain.

This conference will allow organizations to benchmark their conflict minerals management program against their peers to more efficiently meet SEC expectations and amend their program for future filings. Seating is limited to maintain and intimate educational environment that will cultivate the knowledge and experience of all participants.

Key Topics

Scrutinize the Securities and Exchange Commission (SEC) requirements and evaluate external resources for a more efficient conflict minerals rule with Newport News Shipbuilding, Huntington Ingalls Industries
Engineer a sustainable conflict minerals program for future filings with Alcatel-Lucent
Integrate filings and best practices from the first year of reporting with BlackBerry
Maintain a strong rapport with all tiers of your supply chain to increase transparency with KEMET
Obtain complete responses moving throughout the supply chain with Global Advanced Metals

EPA’s Power-Plant Cooling Water Rule Takes a Surprise Endangered Species Turn

A surprise awaits those who reach page 334 of the 559-page preamble to EPA’s final cooling-water-intake rule – a potentially significant expansion of the Endangered Species Act.

The rule, which EPA has not yet officially published, is intended to protect aquatic species affected by cooling water intake at power plants and other large facilities. It is the result of a lawsuit by environmental groups, settled by EPA, and delayed on several occasions. Most recently, the rule was hung up as a result of concerns voiced by the U.S. Fish and Wildlife Service and National Marine Fisheries Service (the Services) about whether the final rule would do enough to protect threatened and endangered species. EPA thought it would; the Services disagreed. The Services’ concerns eventually caused EPA to miss a court-ordered deadline to publish the final rule.

Now that the rule is out, it appears that, in order to finally get the Service’s approval, EPA included in the final rule a first-of-its kind process that expands the Endangered Species Act to entities that previously didn’t have to comply with it. Understanding why requires a paragraph of background:

The ESA applies to (1) anyone who might harm or harass a listed species and (2) federal government actions in general. Federal government compliance typically involves a process under Section 7 of the Act called “consultation,” which essentially involves the agency working with the Services to determine if the action will harm species or their habitat. Many federal environmental responsibilities are carried out at the state level, including issuing clean water act permits like the ones involved in the 316(b) rule. But states don’t have to engage in consultation when they undertake these federal responsibilities. Until now.

EPA’s 316(b) rule doesn’t call the new process consultation, but it looks a lot like it. Consultation involves the federal action agency, in concert with the Services, determining whether the action will jeopardize the recovery of protected species or adversely modify their habitat. Often, if the Services conclude that there might be an ESA issue, they recommend project changes to eliminate the possibility. Since projects can’t go forward if the Services believe species or their habitat will be adversely affected, these recommended changes are usually adopted by the action agency.

The new 316(b) process looks very similar: The state drafts a 316(b) permit for a facility’s cooling-water intake structure. But rather than finalize it and send it to the facility, which they do for every other clean water act permit, the state will send a copy of the draft 316(b) permit to the Services. The Services may then provide “recommendations” on the permit. If they do, the state must include those recommendations in the permit and the facility receiving the permit must implement them. If not, the facility is in violation of 316(b).

In other words, just as in consultation, the Services are consulted about impacts to species and their habitat. If the Services have concerns, they will provide recommended changes to the State permit writer. The State has to adopt those changes and the facility has to implement them or else the project can’t go forward. Thus, for the first time, states issuing federal permits will have to function like a federal agency for Section 7 purposes. We’ve attached a copy of the Services’ flowchart of the process below (in the flowchart, the state is referred to as the “Director.”).

We’ll be following this process closely, both to see if it is challenged and to see if it spreads to other federal clean water or clean air act permitting carried out at the state level.

EPA

Article By:

Lowell M. Rothschild

Of:

Bracewell & Giuliani LLP

Phosphorus in Wisconsin: The Clean Waters, Healthy Economy Act

On April 23, 2014, Wisconsin Governor Scott Walker signed the Clean Waters, Healthy Economy Act (Act) into law. This legislation establishes the basis for creating a multi-discharger variance for point sources struggling to meet Wisconsin’s stringent numeric phosphorus water quality criteria. Although several conditions must be met before it is available to permit holders, this legislation could have significant impacts on Wisconsin agribusinesses that hold Wisconsin Pollution Discharge Elimination System (WPDES) permits, as well as agricultural produces that may be targeted for non-point source reductions of phosphorus. In addition, since the Environmental Protection Agency (EPA) has noted that it generally favors these multi-discharger permit approaches, Wisconsin’s approach may be replicated in other areas of the country that are considering stricter water quality standards for nutrients like phosphorus and nitrogen.

What does the Act do?

Very simply, the Act sets in motion the collection of economic information to justify a multi-discharger variance based on a finding of adverse widespread social and economic impact. The Act requires the Department of Administration (DOA) to look at costs of compliance for categories of point source dischargers statewide. If the DOA finds that the “cost of compliance with water quality based effluent limitations for phosphorus by point sources that cannot achieve compliance without major facility upgrades” would cause substantial adverse social and economic impacts on a statewide basis, then the Department of Natural Resources (DNR) will seek approval from the EPA for a variance under 40 CFR Part 131. The Act also defines the criteria for qualifying for the variance and what a point source must do if it opts into the variance.

How would this multi-discharger variance work for permit holders?

Agribusinesses that hold WPDES permits may be eligible for the variance. To qualify, permit holders will need to:

1) Demonstrate the economic determination made by the DOA applies to the source;

2) Certify the permittee cannot achieve compliance without a major facility upgrade (defined to mean the addition of both new treatment equipment and a new treatment process); and

3) Agree to comply with the requirements of the variance.

Once DNR has confirmed these requirements have been met, the permittee may participate in the variance for up to four permit cycles as long as it meets the discharge limits established by the multi-permit variance and takes steps to reduce phosphorus contributions from other sources.

First, the permit must comply with decreasing phosphorus discharges. These concentrations begin at 0.8 mg/L in the first permit term and then drop to 0.6 mg/L and 0.5 mg/L in the third and fourth permit term, respectively. In the fourth permit for which the variance is available, the DNR will require the permittee to achieve – by the end of the term of that permit – the water quality based effluent limit for phosphorus that would apply without the variance.

Second, while complying with these reduced discharge limits, the permittee must also undertake some activity to reduce phosphorus contributions from other sources in its watershed. This concept borrows from Wisconsin’s EPA-approved adaptive management program, and requires the permittee to:

1) Enter into a binding, written agreement with the DNR under which it implements a project or plan designed to reduce phosphorus contributions from other sources; or

2) Enter into a binding, written agreement that is approved by DNR with another person under which the other person implements a project or plan designed to phosphorus contributions from other sources; or

3) Make a payment to the counties of the watershed in which the permittee is located. These payments are calculated by multiplying $50/lb times the difference between what the permittee is currently discharging, and what the permittee would discharge if its effluent met a target limit. The target limit is either the limit set by a TMDL (total maximum daily load), if applicable, or 0.2mg/L if no TMDL is approved.

How might the Act affect producers as nonpoint sources?

Counties that receive money through this program must use at least 65% of the amounts received to fund cost-sharing for projects governed by 281.16(3)(e) or (4) (the state’s nonpoint source program). These must be applied to projects that have been prioritized by their potential to “reduce the amount of phosphorus per acre entering the waters of the state, based on an assessment of land and land use practices in the county.” Up to 35% can be used for staffing, or toward modeling or monitoring to evaluate the amount of phosphorus in waters for planning purposes. In Wisconsin, producers that are not currently meeting state performance standards may be asked to install certain practices when cost share dollars are available. The Act has the potential to increase the amount of cost share dollars available to county work in this area.

What’s Next for the Act?

Before this program is available to permittees, a number of things must happen. First, the DOA must complete an economic study that demonstrates compliance with the phosphorus standard will have adverse and widespread social and economic impact. This study must also identify the categories of dischargers that will be eligible for the multi-discharger variance. Second, EPA must approve the variance before it may be implemented in Wisconsin. Finally, permittees would need to apply for the variance to alter any existing permit conditions that have been imposed to implement the phosphorus standard. Look for further updates in 2015!

Article By:

Angela A. James

Of:

Michael Best & Friedrich LLP

Which Way is the Wind Blowing? U.S. Supreme Court Upholds EPA’s Cross-State Air Pollution Rule

On April 29, 2014, the U.S. Supreme Court issued a decision upholding EPA’s Cross-State Air Pollution Rule (also known as the Transport Rule). The Transport Rule restricts air emissions from upwind states that in EPA’s judgment contribute significantly to nonattainment of the National Ambient Air Quality Standards(NAAQS) in downwind states. According to EPA’s regulatory impact analysis, the Rule is expected to have significant cost implications for electric generating utilities, and much of the costs could occur in Midwestern and Southern states that were identified in the Transport Rule as contributing to nonattainment of the NAAQS for states along the East Coast.

The Transport Rule was promulgated pursuant to what is often called the “Good Neighbor” provision of the Clean Air Act. In the Rule, EPA established a two-step approach for restricting emissions in upwind states. First, EPA used air modeling to determine which upwind states contributed more than one percent to the NAAQS for 8-hour ozone and PM2.5 in downwind states. Second, EPA determined the level of emission reductions that could be achieved in downwind states based on cost estimates for reducing emissions. For example, EPA concluded that significant emission reductions could be obtained for a cost of $500 per ton of NOx reduced, but that at greater than $500 per ton the emission reductions were minimal. The Agency then translated those cost estimates into the amount of emissions that upwind states would be required to eliminate. Lastly, EPA developed a Federal Implementation Plan (FIP) detailing how states were to comply with the emission budgets assigned under the Transport Rule.

As we previously reported in August 2012, the Transport Rule had been struck down by the U.S. Court of Appeals for the District of Columbia on Aug. 21, 2012. The Court of Appeals struck down the rule primarily for two reasons. First, the court found the cost estimates that EPA used as a basis to justify emission reductions would in some cases result in requirements for upwind states to reduce their emissions more than necessary to eliminate “significant” contributions to nonattainment in downwind states. The court held that EPA could only require reductions proportionate to a specific upwind state’s contribution to a downwind state’s nonattainment status. Second, the court held that states should have been given an opportunity to develop their own implementation plans before EPA required states to follow the FIP in the Transport Rule.

In reversing the Court of Appeals, the U.S. Supreme Court concluded that the Clean Air Act does not require EPA to mandate only proportionate reductions in emissions from upwind states. The court argued that the “proportionality approach could scarcely be satisfied in practice” because there are multiple upwind states that each affect multiple downwind states. The Court concluded that the proportionality approach would mean that “each upwind State will be required to reduce emissions by the amount necessary to eliminate that State’s largest downwind contribution,” but that would result in cumulative emission reductions and “costly overregulation.” The court also concluded that it was appropriate for EPA to use cost as a means of allocating emissions, instead of the proportionality approach favored by the D.C. Circuit.

Regarding the FIP approach, the court held that after EPA issues a NAAQS, each state is required to propose a State Implementation Plan (SIP), including requirements to satisfy the Good Neighbor provision of the Clean Air Act. Therefore, the Court held it was appropriate for EPA to establish a FIP because the statutory deadline to propose SIPs that complied with the Good Neighbor provision had passed. The court rejected the D.C. Circuit’s conclusion that it was premature to establish a FIP before EPA had made a determination regarding each upwind state’s contribution to downwind states’ nonattainment.

Supreme Court Justice Antonin Scalia, joined by Justice Clarence Thomas, authored a dissent in the case agreeing with the D.C. Circuit that costs are not contemplated as a basis for reducing emissions under the Good Neighbor provision. Further, the dissent addressed the majority opinion’s assertion that the proportionality approach would result in “costly overregulation.” The dissent stated, “over-control is no more likely to occur when the required reductions are apportioned among upwind States on the basis of amounts of pollutants contributed than when they are apportioned on the basis of cost.” The dissent went on to note, “the solution to over-control under a proportional-reduction system is not difficult to discern. In calculating good-neighbor responsibilities, EPA . . . would set upwind States’ obligations at levels that, after taking into account those reductions, suffice to produce attainment in all downwind States. Doubtless, there are multiple ways for the Agency to accomplish that task in accordance with the statute’s amounts-based, proportional focus.”

At this juncture, it is unclear whether EPA will need to promulgate additional rules to implement the Transport Rule as many of the Transport Rules’ deadlines have already expired. Additionally, it is unclear whether other legal challenges to the Transport Rule, including challenges to whether the Rule satisfies regional haze emission requirements, will delay final implementation of the Rule. Those challenges have been stayed since the D.C. Circuit Court of Appeals vacated the rule in 2012 but appear to be able to proceed now that the vacatur has been overturned by the U.S. Supreme Court. There are also questions as to whether the Transport Rule, which was designed to help meet the 1997 ozone NAAQs of 80 ppb, will need to be reworked by EPA to meet the stricter 2008 ozone NAAQs of 75 ppb. It is also possible that estimates of emission cuts expected from the original the Transport Rule will change given the move by several power plants to convert from coal to natural gas in recent years.

A copy of the U.S. Supreme Court’s decision is available here.

Article By:

Michael H. Elam

Hae Park-Suk

Of:

Barnes & Thornburg LLP

United States Environmental Protection Agency (USEPA) Takes First Step Toward Possible Federal Regulation of Hydraulic Fracturing

On May 9th the United States Environmental Protection Agency (USEPA) initiated a process that may result in federal regulation of the fluids used in hydraulic fracturing(fracking). In the past 10 years, United States production of oil and gas has skyrocketed, due in part to the increased use of fracking technologies that use high‐pressure injection of fluids, sand, and chemicals to stimulate the release of oil and gas from geological formations which were difficult to access with other techniques. While fracking technologies have been in use for some time, environmentalists have argued that the public lacked adequate information to assess whether chemicals used in fracking posed represented threats to human health or the environment.

Last Friday, the USEPA issued an Advance Notice of Proposed Rulemaking under Section 8 of the Toxic Substances Control Act (TSCA) soliciting comment on whether companies must publicly disclose the chemicals used in the fracking process. The notice starts the public participation process and seeks comment on

The types of chemical information that could be reported under TSCA;
The regulatory and non-regulatory approaches to obtain information on chemicals and mixtures used in hydraulic fracturing activities;
Whether fracking-related chemicals should be regulated through a voluntary mechanism under the Pollution Prevention Act of 1990.

According to the USEPA, this process will help inform its efforts to facilitate transparency and public disclosure of chemicals used during hydraulic fracturing and will not duplicate existing reporting requirements. James Jones, the USEPA’s assistant administrator for the Office of Chemical Safety and Pollution Prevention, said that the “EPA looks forward to hearing from the public and stakeholders about public disclosure of chemicals used during hydraulic fracturing, and we will continue working with our federal, state, local, and tribal partners to ensure that we complement but not duplicate existing reporting requirements.”

The notice includes a list of questions to be considered by stakeholders and the public in formulating their comments. The USEPA anticipates that the notice will publish in the Federal Register by the week of May 19, 2014. The comment period closes 90 days after publication in the Federal Register. When published, comments may be submitted through regulations.gov with reference to docket ID number EPA-HQ-OPPT-2011-1019.

The Prepublication Copy Notice can be found at http://www.epa.gov/oppt/chemtest/pubs/prepub_hf_anpr_14t-0069_2014-05-09.pdf and more information from the USEPA on hydraulic fracturing can be found at http://www2.epa.gov/hydraulicfracturing

Article By:

Edward Casmere

J. Michael Showalter

Of:

Schiff Hardin LLP

West Virginia Chemical Spill Prompts Wave of Lawsuits

The January 9th, 2014 chemical release at a Freedom Industries, Inc. facility in West Virginia has shown, yet again, that major environmental releases are likely to prompt major environmental lawsuits. As a result of the spill of 7,500 gallons of 4-MCHM, a chemical foam used to wash coal, 300,000 residents of nine counties were told not to use tap water for anything other than toilet-flushing or firefighting, area businesses were forced to close, and hospitals took emergency measures to conserve water.

More than 60 lawsuits were filed in state court by residents and business owners in eight counties against West Virginia-American Water Company and Freedom Industries. The suits assert personal injury claims ranging from emotional distress and requests for medical monitoring to property-related claims such as trespass. Freedom Industries and the water supply company promptly removed the 62 actions to federal court, which Plaintiffs moved to remand. On April 18th, U.S. District Court Judge John T. Copenhaver, Jr. issued an order consolidating the cases for the limited purposes of adjudicating a motion to remand the actions to state court. See Desimone Hospitality Servs. LLC v. West Virginia-American Water Co., No. 2:14-CV-14845 (S.D. W. Va., Apr. 18, 2014). Citing Federal Rule of Civil Procedure 42(a), Judge Copenhaver explained that consolidation was particularly appropriate here because “[t]he risk of inconsistent adjudications, substantial expense to the parties, and inefficient use of court resources markedly increases here if the court declines consolidation to some extent.” See Desimone Hospitality Services LLC, slip op. at 23-24.

In addition to these suits, non-profit groups also have filed an emergency petition with the West Virginia Supreme Court of Appeals accusing the state’s Department of Environmental Protection and the Department of Health and Human Resources of failing to perform their legal duties to protect the public’s health in response to the spill. See Covenant House v. Huffman, No. 14-0112 (W. Va. February 7, 2014).

Article By:

Daniel M. Krainin

Gayatri M. Patel

Mackenzie S. Schoonmaker

Of:

Beveridge & Diamond PC

Massachusetts' Highest Court Upholds State's Endangered Species Regulations

In a long-awaited ruling, the Massachusetts Supreme Judicial Court affirmed the legality of the “priority habitat” regulations created by the Division of Fisheries and Wildlife (DFW) of the Massachusetts Department of Environmental Protection under the Massachusetts Endangered Species Act (MESA). In Pepin v. Division of Fisheries and Wildlife, SJC No. 11332 (February 18, 2014), the petitioners challenged the DFW’s establishment of “priority habitat” regulations “for which MESA makes make no express provision.”

MESA does expressly authorize DFW to designate certain areas as “significant habitats” of endangered or threatened species. Land designated a “significant habitat,” entitles an owner to (i) advance written notice that the land is being considered for designation as a significant habitat, (ii) a public hearing before any decision on the proposed designation is made, and (iii) an opportunity to appeal and seek compensation under the “takings” clause of the U.S. Constitution. Arguably to avoid paying just compensation, the DFW has never designated land “significant habitat.”

Instead, the DFW promulgated regulations establishing a second type of protected habitat denoted “priority habitat,” to protect species that are either endangered or threatened, or that fall into a third category of “species of special concern.” Delineations are “based on the best scientific evidence available.” A sixty-day public comment period follows the reevaluation of the priority habitat map every four years and a final map is posted on the DFW’s web site. The DFW reviews projects in a “priority habitat” on a case-by-case basis to determine whether it would result in either (i) a “no” take, (ii) a “conditional” no take, or (iii) a take. Even if DFW finds the project would be a “conditional” no take or a “take,” the project may proceed under DFW-imposed conditions or a “conservation and management permit.”

Here, the petitioners’ property consists of two building lots, totaling approximately 36 acres. In 2006, the property was delineated a priority habitat for a species of special concern (eastern box turtle). Challenging the validity of the “priority habitat” regulations, the petitioners maintained that MESA’s creation of the “significant habitat” designation with critical procedural protections meant that all landowners were entitled to the same protections whenever property development is restricted under MESA. Citing the broad authority granted by MESA, the Court rejected this view and instead found that that statute “extends to the formulation of the priority habitat concept as a means of implementing MESA’s prohibition on takes.” The Court refused to “substitute [its] judgment as to the need for a regulation, or the propriety of the means chosen to implement the statutory goals, for that of the agency, …[where] the regulation … [was] rationally related to those goals.” The petitioners could not overcome the presumption of validity accorded “duly promulgated regulations of an administrative agency….”

The Court also ruled that in deciding the petitioners’ challenge to the application of the priority habitat mapping guidelines to their property, a Division of Administrative Law Appeals (DALA) magistrate judge properly ruled in favor of the DFW even without a hearing because the petitioners failed to meet their burden of demonstrating that the DFW improperly delineated their property as priority habitat.

Article By:

Brian C. Levey

Marc J. Goldstein

Of:

Beveridge & Diamond PC

Category: Environmental Law

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