Tag: Environmental Law

Source Aggregation: Recent Court Decision Addresses Whether Certain Facilities are “Adjacent”

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On February 23, 2015, the U.S. District Court for the Middle District of Pennsylvania issued a decision finding eight compressor stations to be “separate sources” under the Clean Air Act and State of Pennsylvania regulations.  Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., 4:11-CV-1360, 2015 WL 769757 (M.D. Pa. Feb. 23, 2015).  This case addresses a concept known as “source aggregation,” also referred to as “single source” or “co-location.”  This is the concept where a regulatory agency views multiple facilities or activities as a “single source,” air emissions from which must be aggregated to determine whether certain permitting thresholds are met, such as the Clean Air Act’s Title V or New Source Review major source programs.

As discussed in detail in the following sections, there are many EPA determinations, advisory letters and memoranda discussing whether certain facilities are “adjacent” under the source aggregation test, but there have not been many court decisions. Thus, this District Court decision in Citizens for Pennsylvania’s Future is notable because it is one of only a few cases that provide guidance on this issue. In addition, the Court decision itself is important in that there are now two federal court decisions holding that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.

With these insights, read on to see why facility operators need to be aware of how states in which they operate interpret the “adjacency” element of the source aggregation test and why possibilities for controversy remain.

Underlying Facts in Citizens for Pennsylvania’s Future

In Citizens for Pennsylvania‘s Future, the operator of eight compressor stations, Ultra Resources, Inc., obtained eight separate minor source permits for each of its compressor stations. The compressor stations were scattered across two counties.  The shortest linear distance between any two of the compressor stations was more than ¾ mile apart, and the furthest linear distance was nearly 4½ miles apart.  If lines were drawn between all of the compressors, the total area within the lines would be less than 5 square miles.

Each compressor station was connected to a central metering and regulating station, but the compressor stations were not connected to each other.  While none of the compressor stations individually had the capacity to emit more than 100 tons per year (tpy) of nitrogen oxide (NOx), collectively the eight compressor stations could potentially emit more than 100 tpy of NOx.  The applicable major source permitting threshold for NOx discussed in Citizens for Pennsylvania’s Future was 100 tpy.

An environmental group, Citizens for Pennsylvania’s Future (known as “PennFuture”) filed a citizen suit against Ultra Resources, claiming that the eight compressor stations should be considered a single source of air emissions; and therefore, emissions from the eight stations should be aggregated.  PennFuture argued that because the aggregated NOx emissions would exceed major source thresholds, Ultra Resources was in violation of the Clean Air Act and certain Pennsylvania regulations for not having obtained a major source permit under the nonattainment New Source Review program.

Ultra Resources filed a Motion for Summary Judgment, arguing that the compressor stations were separate sources and that it properly obtained separate minor source permits for each of the compressor stations.  The February 23, 2015 Court decision was issued in response to Ultra Resources’ Motion for Summary Judgment.  The contested issue addressed by the Court decision was whether the eight compressor stations were properly considered to be separate sources or whether they should be deemed a single source.

Source Aggregation Test and the “Adjacent” Element

The federal New Source Review program defines a single source using a three-part test, under which facilities are a single source if they: (1) are under common control; (2) have the same two-digit, i.e., major industry grouping, SIC code; and (3) are co-located, i.e., they are located on adjacent or contiguous properties. 40 C.F.R. § 51.166(b)(5) and (6) (defining a “stationary source” under the New Source Review program); 40 C.F.R. § 52.21 (b)(5) and (6) (defining a “stationary source” under the New Source Review program, as applied to delegated state programs).  Each element must exist to be deemed a single source.

The State of Pennsylvania adopted a similar test in its regulation, defining a “facility” as “[a]n air contamination source or a combination of air contamination sources located on one or more contiguous or adjacent properties and which is owned or operated by the same person under common control.”  25 Pa. Code § 121.1.

In Citizens for Pennsylvania’s Future, the Court explained that it was undisputed that the compressor stations were under common control and that they were not located on contiguous properties.  Because Pennsylvania’s regulatory definition of a source, quoted above, does not contain the SIC code element, that element was not discussed in the case.  Thus, the Court’s inquiry focused on whether the compressor stations were “adjacent.”

The term “adjacent” is not expressly defined in the Clean Air Act or in the U.S. Environmental Protection Agency (EPA) regulations.  Over the many years of Clean Air Act implementation, EPA has interpreted the term to entail a review of not only whether facilities are physically proximate, but also whether the facilities are functionally interrelated.

EPA’s assessment of whether facilities are functionally interrelated has been controversial.  Some have touted the consideration of functional interrelatedness as useful to assess whether the subject facilities approximate the “common sense notion of a plant,” which EPA has described as a fundamental feature of a single source.  See EPA, Final Rule, Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans, 45 Fed. Reg. 52676, 52695 (Aug. 7, 1980).  Others have opposed the consideration of functional interrelatedness as inserting too much subjectivity to the source aggregation test and as varying from the plain meaning of the language used in the regulatory definition of a source.

While various EPA guidance materials discuss whether certain facilities are “adjacent,” such as EPA decisions, opinions and memoranda, and while some states have developed their own such guidance materials, there have not been many court decisions.  Thus, Citizens for Pennsylvania’s Future is one of the few court cases addressing this controversial topic.

District Court’s Analysis of Whether the Compressor Stations were “Adjacent”

The Citizens for Pennsylvania’s Future Court reviewed several resources to guide its analysis of whether the eight compressor stations were “adjacent.”  The Court discussed the 2012 U.S. Court of Appeals for the Sixth Circuit decision in Summit Petroleum Corp. v. EPA, 690 F.3d 733, which directed EPA to apply the plain meaning of the term “adjacent” as determinative.  Summit Petroleum involved a gas sweetening plant and approximately 100 sour gas wells scattered across 43 square miles and ranging from 500 feet to 8 miles in distance from the sweetening plant.  EPA had concluded the sweetening plant and gas wells were a single source, based on EPA’s consideration of the functional interrelatedness of the plant and wells.

On appeal filed by the operator, the Sixth Circuit held that EPA’s consideration of functional interrelatedness was improper and, under the Clean Air Act’s definition of a source, EPA must determine whether the sweetening plant and gas wells are “close to,” “next to,” “adjoining,” or “physically proximate.”  The District Court in Citizens for Pennsylvania’s Future acknowledged that the Sixth Circuit decision in Summit Petroleum was non-binding; however, the District Court ultimately followed the Sixth Circuit’s conclusion that the plain meaning of the term adjacent is determinative in the source aggregation analysis.

The District Court also reviewed relevant Pennsylvania decisions and guidance interpreting Pennsylvania’s definition of a source.  Unlike most other states in the U.S., Pennsylvania has adopted guidance to help address the question of what is adjacent.  The Pennsylvania guidance reviews the dictionary definition of “adjacent” and provides that the plain meaning of the term “adjacent” should be the dispositive factor when determining whether sources are located on adjacent properties.  However, the guidance also states that functional interrelatedness may be considered when performing a source aggregation analysis. The guidance further provides that properties located within ¼ mile are considered adjacent.  For properties located further than ¼ mile apart, a case-by-case review must be performed.  Thus, the guidance does not foreclose the possibility that facilities located further than ¼ mile apart may be deemed adjacent based on a case-by-case consideration of functional interrelatedness.

Following its review of Summit Petroleum and the Pennsylvania guidance, the District Court applied the plain meaning of “adjacent” and concluded that the Ultra Resources’ compressor stations were not sufficiently “close to” or “near” enough to each other to be considered “adjacent.”  Although the Court held that the plain meaning of “adjacent” should be determinative, the Court noted that, given the Pennsylvania guidance, functional interrelatedness could be considered on a case-by-case basis.

Even looking at functional interrelatedness, the Court concluded that because the compressor stations were not connected to each other and they operated independently of one another, and despite the fact that each station was connected to a metering and regulating station for ultimate deposit into a transmission pipeline, the compressor stations were not functionally interrelated anyhow. Therefore, the Court granted Ultra Resources’ Motion for Summary Judgment concluding that the compressor stations were not adjacent and, as such, were not a single source and were properly permitted as separate sources.

Import of Citizens for Pennsylvania’s Future

The recent District Court decision in Citizens for Pennsylvania’s Future is noteworthy as one of the few court cases that offers guidance on this controversial topic.  The outcome of the Court decision itself is also significant because there are now two federal court decisions that reached similar conclusions that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.  Though, unlike the Sixth Circuit’s decision in Summit Petroleum, there was a Pennsylvania policy which was relevant in the District Court’s analysis of adjacency in Citizens for Pennsylvania’s Future and the District Court acknowledged that pursuant to the Pennsylvania policy the consideration of functional interrelatedness may be appropriate on a case-by-case basis.

Thus, Citizens for Pennsylvania’s Future highlights that facility operators need to be aware of how states in which they operate have interpreted the “adjacency” inquiry of the source aggregation test and be alert to any future guidance and court decisions on this controversial topic.

Source Aggregation: Recent Court Decision Addresses Whether Certain Facilities are "Adjacent"

RCA Logo

On February 23, 2015, the U.S. District Court for the Middle District of Pennsylvania issued a decision finding eight compressor stations to be “separate sources” under the Clean Air Act and State of Pennsylvania regulations.  Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., 4:11-CV-1360, 2015 WL 769757 (M.D. Pa. Feb. 23, 2015).  This case addresses a concept known as “source aggregation,” also referred to as “single source” or “co-location.”  This is the concept where a regulatory agency views multiple facilities or activities as a “single source,” air emissions from which must be aggregated to determine whether certain permitting thresholds are met, such as the Clean Air Act’s Title V or New Source Review major source programs.

As discussed in detail in the following sections, there are many EPA determinations, advisory letters and memoranda discussing whether certain facilities are “adjacent” under the source aggregation test, but there have not been many court decisions. Thus, this District Court decision in Citizens for Pennsylvania’s Future is notable because it is one of only a few cases that provide guidance on this issue. In addition, the Court decision itself is important in that there are now two federal court decisions holding that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.

With these insights, read on to see why facility operators need to be aware of how states in which they operate interpret the “adjacency” element of the source aggregation test and why possibilities for controversy remain.

Underlying Facts in Citizens for Pennsylvania’s Future

In Citizens for Pennsylvania‘s Future, the operator of eight compressor stations, Ultra Resources, Inc., obtained eight separate minor source permits for each of its compressor stations. The compressor stations were scattered across two counties.  The shortest linear distance between any two of the compressor stations was more than ¾ mile apart, and the furthest linear distance was nearly 4½ miles apart.  If lines were drawn between all of the compressors, the total area within the lines would be less than 5 square miles.

Each compressor station was connected to a central metering and regulating station, but the compressor stations were not connected to each other.  While none of the compressor stations individually had the capacity to emit more than 100 tons per year (tpy) of nitrogen oxide (NOx), collectively the eight compressor stations could potentially emit more than 100 tpy of NOx.  The applicable major source permitting threshold for NOx discussed in Citizens for Pennsylvania’s Future was 100 tpy.

An environmental group, Citizens for Pennsylvania’s Future (known as “PennFuture”) filed a citizen suit against Ultra Resources, claiming that the eight compressor stations should be considered a single source of air emissions; and therefore, emissions from the eight stations should be aggregated.  PennFuture argued that because the aggregated NOx emissions would exceed major source thresholds, Ultra Resources was in violation of the Clean Air Act and certain Pennsylvania regulations for not having obtained a major source permit under the nonattainment New Source Review program.

Ultra Resources filed a Motion for Summary Judgment, arguing that the compressor stations were separate sources and that it properly obtained separate minor source permits for each of the compressor stations.  The February 23, 2015 Court decision was issued in response to Ultra Resources’ Motion for Summary Judgment.  The contested issue addressed by the Court decision was whether the eight compressor stations were properly considered to be separate sources or whether they should be deemed a single source.

Source Aggregation Test and the “Adjacent” Element

The federal New Source Review program defines a single source using a three-part test, under which facilities are a single source if they: (1) are under common control; (2) have the same two-digit, i.e., major industry grouping, SIC code; and (3) are co-located, i.e., they are located on adjacent or contiguous properties. 40 C.F.R. § 51.166(b)(5) and (6) (defining a “stationary source” under the New Source Review program); 40 C.F.R. § 52.21 (b)(5) and (6) (defining a “stationary source” under the New Source Review program, as applied to delegated state programs).  Each element must exist to be deemed a single source.

The State of Pennsylvania adopted a similar test in its regulation, defining a “facility” as “[a]n air contamination source or a combination of air contamination sources located on one or more contiguous or adjacent properties and which is owned or operated by the same person under common control.”  25 Pa. Code § 121.1.

In Citizens for Pennsylvania’s Future, the Court explained that it was undisputed that the compressor stations were under common control and that they were not located on contiguous properties.  Because Pennsylvania’s regulatory definition of a source, quoted above, does not contain the SIC code element, that element was not discussed in the case.  Thus, the Court’s inquiry focused on whether the compressor stations were “adjacent.”

The term “adjacent” is not expressly defined in the Clean Air Act or in the U.S. Environmental Protection Agency (EPA) regulations.  Over the many years of Clean Air Act implementation, EPA has interpreted the term to entail a review of not only whether facilities are physically proximate, but also whether the facilities are functionally interrelated.

EPA’s assessment of whether facilities are functionally interrelated has been controversial.  Some have touted the consideration of functional interrelatedness as useful to assess whether the subject facilities approximate the “common sense notion of a plant,” which EPA has described as a fundamental feature of a single source.  See EPA, Final Rule, Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans, 45 Fed. Reg. 52676, 52695 (Aug. 7, 1980).  Others have opposed the consideration of functional interrelatedness as inserting too much subjectivity to the source aggregation test and as varying from the plain meaning of the language used in the regulatory definition of a source.

While various EPA guidance materials discuss whether certain facilities are “adjacent,” such as EPA decisions, opinions and memoranda, and while some states have developed their own such guidance materials, there have not been many court decisions.  Thus, Citizens for Pennsylvania’s Future is one of the few court cases addressing this controversial topic.

District Court’s Analysis of Whether the Compressor Stations were “Adjacent”

The Citizens for Pennsylvania’s Future Court reviewed several resources to guide its analysis of whether the eight compressor stations were “adjacent.”  The Court discussed the 2012 U.S. Court of Appeals for the Sixth Circuit decision in Summit Petroleum Corp. v. EPA, 690 F.3d 733, which directed EPA to apply the plain meaning of the term “adjacent” as determinative.  Summit Petroleum involved a gas sweetening plant and approximately 100 sour gas wells scattered across 43 square miles and ranging from 500 feet to 8 miles in distance from the sweetening plant.  EPA had concluded the sweetening plant and gas wells were a single source, based on EPA’s consideration of the functional interrelatedness of the plant and wells.

On appeal filed by the operator, the Sixth Circuit held that EPA’s consideration of functional interrelatedness was improper and, under the Clean Air Act’s definition of a source, EPA must determine whether the sweetening plant and gas wells are “close to,” “next to,” “adjoining,” or “physically proximate.”  The District Court in Citizens for Pennsylvania’s Future acknowledged that the Sixth Circuit decision in Summit Petroleum was non-binding; however, the District Court ultimately followed the Sixth Circuit’s conclusion that the plain meaning of the term adjacent is determinative in the source aggregation analysis.

The District Court also reviewed relevant Pennsylvania decisions and guidance interpreting Pennsylvania’s definition of a source.  Unlike most other states in the U.S., Pennsylvania has adopted guidance to help address the question of what is adjacent.  The Pennsylvania guidance reviews the dictionary definition of “adjacent” and provides that the plain meaning of the term “adjacent” should be the dispositive factor when determining whether sources are located on adjacent properties.  However, the guidance also states that functional interrelatedness may be considered when performing a source aggregation analysis. The guidance further provides that properties located within ¼ mile are considered adjacent.  For properties located further than ¼ mile apart, a case-by-case review must be performed.  Thus, the guidance does not foreclose the possibility that facilities located further than ¼ mile apart may be deemed adjacent based on a case-by-case consideration of functional interrelatedness.

Following its review of Summit Petroleum and the Pennsylvania guidance, the District Court applied the plain meaning of “adjacent” and concluded that the Ultra Resources’ compressor stations were not sufficiently “close to” or “near” enough to each other to be considered “adjacent.”  Although the Court held that the plain meaning of “adjacent” should be determinative, the Court noted that, given the Pennsylvania guidance, functional interrelatedness could be considered on a case-by-case basis.

Even looking at functional interrelatedness, the Court concluded that because the compressor stations were not connected to each other and they operated independently of one another, and despite the fact that each station was connected to a metering and regulating station for ultimate deposit into a transmission pipeline, the compressor stations were not functionally interrelated anyhow. Therefore, the Court granted Ultra Resources’ Motion for Summary Judgment concluding that the compressor stations were not adjacent and, as such, were not a single source and were properly permitted as separate sources.

Import of Citizens for Pennsylvania’s Future

The recent District Court decision in Citizens for Pennsylvania’s Future is noteworthy as one of the few court cases that offers guidance on this controversial topic.  The outcome of the Court decision itself is also significant because there are now two federal court decisions that reached similar conclusions that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.  Though, unlike the Sixth Circuit’s decision in Summit Petroleum, there was a Pennsylvania policy which was relevant in the District Court’s analysis of adjacency in Citizens for Pennsylvania’s Future and the District Court acknowledged that pursuant to the Pennsylvania policy the consideration of functional interrelatedness may be appropriate on a case-by-case basis.

Thus, Citizens for Pennsylvania’s Future highlights that facility operators need to be aware of how states in which they operate have interpreted the “adjacency” inquiry of the source aggregation test and be alert to any future guidance and court decisions on this controversial topic.

New Pennsylvania Department of Environmental Protection Well Transfer and Status Change Procedures Detailed

Steptoe Johnson PLLC

The Pennsylvania Department of Environmental Protection has developed new instructions for handling oil and gas well transfers and status and ownership changes. DEP is asking operators that as they update their well inventories that they be aware of these requirements when they submit information back to the appropriate DEP district office. The instructions summarized here are in a Power Point presentation distributed by the DEP’s Seth Pelepko and readers are advised to contact Seth directly for a copy of his detailed presentation.

The presentation lists four areas of focus. They are:

1) Well Transfers;

2) Well Status Changes;

3) Well Type Changes and

4) All Other Changes.

Well transfer details consume the largest portion of the presentation. Here operators are directed to complete the DEP’s Application for Transfer of Well Permit (5500-PM-OG0010) and to use the presentation’s checklist to ensure all necessary information is included. The checklist identifies the 7 steps operators must complete in addition to a permit holder resolution document. It is noted that the Department has 45 days from the date of receipt to approve or deny the transfer request. Part of this process involves the DEP completing a compliance history analysis of both parties involved in the transfer.

Well status changes require the operator determine the actual status of the well (plugged, inactive, active or never drilled) and to submit the proper documentation to DEP so they can make the necessary changes to their database.

Well types beyond production are storage, injection or observation. Any changes in the type classification must be submitted to the DEP along with the necessary documentation.

ARTICLE BY

Gary E. Slagel
Steptoe & Johnson PLLC

EPA Expands the Definition of Solid Waste Rule

SchiffHardin-logo_4c_LLP_www

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

Department of Interior Announces January Auction Date for Martha’s Vineyard Wind Energy Leases

Mintz Levin Law Firm

On November 24th, the Department of the Interior’s Bureau of Ocean Energy Management (BOEM) announced that it would be auctioning off four commercial leases for the Wind Energy Area (WEA) south of Martha’s Vineyard on January 29th. The area to be leased, which is identical to the area proposed in the Proposed Sale Notice published this past June, encompasses more than 1,160 square miles of open water – a tract larger than the state of Rhode Island. The project is slated to become the largest off-shore wind tract in federal waters in the United States.

Martha's Vineyard Wind Energy

If and when it is fully developed, the Martha’s Vineyard WEA has the potential to increase wind generation capacity by four or five Gigawatts (GW). According to the BOEM, which framed the announcement as part of the Obama Administration’s ongoing efforts to curb carbon pollution and mitigate climate change, a fully-developed Vineyard WEA would support 800 turbines and produce enough energy to power 1.4 million homes in the United States. Secretary of the Interior Sally Jewell said the auction will “triple the amount of federal offshore acreage available for commercial-scale wind energy projects,” making it the largest competitive wind energy lease sale to date.

Several advocacy organizations, including the New England Fishery Management Council and the Massachusetts Audubon Society, had previously voiced concerns about possible harm to aquatic and aviary life, but the Bureau’s most recent Environmental Assessment (EA) concluded that “reasonably foreseeable environmental effects associated with the commercial wind lease issuance and related activities would not significantly impact the environment.”

Twelve companies are qualified to bid for the four leases, including Deepwater Wind New England, EDF Renewable Development, Energy Management, Fishermen’s Energy, Green Sail Energy, IBERDROLA RENEWABLES, NRG Bluewater Wind Massachusetts, OffshoreMW, RES America Developments, Sea Breeze Energy, US Mainstream Renewable Power (Offshore) and U.S. Wind. For more information about the auction announcement, please visit the BOEM’s website.

ARTICLE BY

Sahir Surmeli
Jordan M. Collins
OF
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

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

Watt's New? Michigan Energy News – September 2013

Varnum LLP

Still Getting Ready to Make Good Energy Decisions

After reviewing and analyzing the submissions from seven public forums and from the 114 questions posted on the web for feedback, Energy Office Director Steve Bakkal and MPSC Chairman John Quackenbush will be issuing four reports on the following schedule:

■ Renewable Energy: Draft report release for comments – 9/20/13

Due date for public comments – 10/11/13

Release final report – 11/4/13

■ Additional Areas: Draft report release for comments – 10/1/13

Due date for public comments – 10/22/13

Release final report – 11/15/13

■ Electric Choice: Draft report release for comments – 10/15/13

Due date for public comments – 11/1/13

Release final report – 11/20/13

■ Energy Efficiency: Draft report release for comments – 10/22/13

Due date for public comments – 11/6/13

Release final report – 11/26/13

All this material will be posted at: www.michigan.gov/energy

Net Metering Participation Increases

The Michigan Public Service Commission issues an annual report on electric customers participating in the statewide net metering program required under the Clean, Renewable, and Efficient Energy Act of 2008. [Under net metering, when a customer produces electric energy in excess of its needs, energy is provided back to the serving utility and the customer receives a credit.] In 2012 the size of the net metering program increased 55 percent to 9,583 kW. The number of net metering customers has gone from 53 in 2008 to 1,330 in 2012. While most of the recent increase was due to new solar installations, a 535 kW methane digester in Great Lakes Energy Cooperative’s service territory is Michigan’s first Category 3 (methane digester up to 550 kW) modified net metering project.

Methane-to-Methanol Plant Operational

Oil wells also produce natural gas. When there is no way to get the natural gas to market it is usually “flared”. Now Gas Technologies LLC of Walloon Lake has demonstrated its 25-foot, portable, singlestep, gas-to-liquids plant in a Kalkaska County oil field. This first in the industry process can monetize stranded natural gas, biogas, coal mine methane, and landfill gas. www.gastechno.com

Adopt-A-Watt Helps Library

Dearborn’s Henry Ford Centennial Library has installed 25 energy efficient street lights and an electric vehicle charging station under the national Adopt-A-Watt program. Modeled on the AdoptA-Highway program, sponsorships are sold to fund new, energy-efficient equipment, alternative fuel vehicles and other green technologies for financially challenged public agencies. The agencies then realize the cost savings into the future.

Restrictive Wind Zoning Struck Down by Michigan Court

Forest Hill Energy recently won a court order striking down alleged “police power” ordinances passed by townships attempting to regulate the construction and operation of wind turbines. The Clinton County Zoning Ordinance already had extensive wind energy provisions. Nonetheless, three townships passed ordinances that were more restrictive to wind energy development than the county zoning. The additional restrictions related to height, noise, setbacks, and shadow flicker. Forest Hill Energy brought suit seeking a declaration that the townships’ “police power” actions were really zoning ordinances in disguise. The Clinton County Circuit Court ruled that since the townships were subject to the county’s zoning, the township ordinances were invalid because they were inconsistent with the county’s zoning plan—the townships could not get a “second bite at the zoning apple.” Forest Hill Energy had already obtained a special use permit for the construction of a 39 turbine project in January of 2012, and now expects to move forward with construction in late 2013.

More Wind Farms to Commence Construction in 2013

NextEra’s 150 MW Pheasant Run Wind projects are commencing construction this fall, with the energy to be sold to DTE Electric Company. The two projects will be located in Brookfield, Fairhaven, Grant, Oliver, Sebewaing and Winsor townships, all in Huron County. The Michigan Public Service Commission approved a 20 MW power purchase agreement (PPA) for DTE Electric Company with Big Turtle Wind Farm, LLC. The twenty year PPA has estimated pricing of up to 5.3 cents per kilowatt-hour. The project will have more than 50 percent Michigan-sourced content, and brings the DTE renewable energy portfolio to 9.8 percent. Consumers Energy will begin construction on its 105 MW Cross Winds Energy Park in Akron and Columbia townships in Tuscola County before the end of the year.

Michigan Shorts

ΩΩ Bay City Electric, Light & Power has signed a 20-year contract to purchase 4.8 MW of energy from the Beebe Community Wind Farm at a price starting at 4.5¢/kWh and increasing to 7.2¢/kWh Ω Revolution Lighting Technologies has acquired Relume Technologies, a Michigan manufacturer of LED lighting products and control systems Ω The City of Ypsilanti has set a goal to have 1000 solar roofs within the city limits by 2020 Ω DTE Energy is offering its customers the opportunity to buy BioGreenGas derived from the Sauk Trail Hills Landfill in Canton Ω Lansing Board of Water & Light has announced it will purchase energy from eight wind turbines in Gratiot County under a power purchase agreement with Exelon Wind ΩΩ

Virtual Solar Engineering Center Meeting with Success

GreenLancer.com, a Detroit-based solar energy technology company, has announced its initial $500,000 in funding. The company, launched in 2011, combines state-of-the-art cloud computing with a national network of green energy engineering freelancers (“greenlancers”). Their goal is to reduce the soft costs associated with solar energy projects. Initial investors include Bizdom (Detroit), Start Garden (Grand Rapids), Blue Water Angels (Midland), Northern Michigan Angels (Traverse City), and a private investor. The company has projects in 33 states and six foreign countries.

Converting Corn Stalks into Biofuel

Using a fungus and E. coli bacteria, University of Michigan researchers have turned inedible waste plant material into isobutanol. The waste used in the initial work was corn stalks and leaves. Isobutanol has 82 percent of the energy in gasoline, whereas ethanol has only 67 percent. It also has the added advantage over ethanol of not mixing easily (or absorbing) water. So it is a viable candidate to replace ethanol as a gasoline additive. The fungi turns the plant roughage into sugars that are then converted by escherichia coli to isobutanol. Through bioengineering the researchers believe they can produce a variety of petroleum-based chemicals through this same process.

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Working with 3rd Party Providers to Make Dodd Frank Conflict Mineral Compliance Easy

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At your firm or within your company dealing with conflict minerals, you might have recently heard the buzz about the latest Dodd Frank Conflict Mineral Compliance requirements. If these requirements affect the way law firms or companies do business, then working towards compliance initiatives remains a priority.

Regulatory Assessment and Scope Analysis

This involves examining the law firm’s client or company seeking compliance product portfolio and doing an analysis of whether the product are affected by the law and therefore must be in compliance, or “in scope” Vs “out of scope.” It can also include:

  • Examining corporate obligations
  • Determination of key regulatory compliance decision points
  • Creation of a conflict minerals technical document

Creation of a Compliance Plan

This involves creating an end to end compliance plan and associated processes

  • All activities detailed in chronological order
  • Creation of application of due diligence standards
  • Responsibilities assigned to personnel
  • Determination of compliance communication pathways

Software Set Up

Industry standard to date for the majority of companies in scope of this regulation involve using a software platform to manage the large amount of data and suppliers that will be surveyed.Vendor Selection

  • Vendor Selection
  • Decisions to integrate with Enterprise Resource Planning system  (ERP), which is used to design and manage resources within a company, as well as Product Lifecyle Management (PLM), used to design, manufacture and plan the development of products
  • Methodology of supplier communication

Supplier Engagement

This portion of the process involves communication and data collection from the supply chain. Includes:

  • Data collection methodology
  • Reporting and analytics of the data collected
  • Corrective action and addressing problem suppliers

Reporting

Once data has been collected firms enter the reporting phase to complete the process for the first year. This process is then replicated year over year. With the infrastructure in place firms enter the “maintenance” phase of compliance.

Standard practise in the compliance industry has also seen that Law firms or the company seeking Dodd Frank compliance are engaging 3-4 outside service providers.

They are usually:

1.       Law firms: To determine exact requirements and legal requirements.

2.       Software: To provide the platform for data collection, management and analytics.

3.    Accounting: To audit the data collected and ensure strong data backing the program.

4.    Consulting: To develop the processes, work with /train suppliers and help with data collection.

Assisting your clients with Dodd Frank Conflict Mineral Compliance does not have to be complicated. Working through the 5 step process above and working with other 3rd party providers makes compliance at any level easy.

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Argentina Legal Highlights (Volume II, 2013)

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Latin American Region Enviromental Report, Second Quarter, 2013

Packaging Waste Management Bill Introduced in Chamber of Deputies

On April 11, 2013, a bill (No. 1859-D-2013; the “Bill”) was introduced in the Chamber of Deputies that would create a national, comprehensive packaging-waste management system. The Bill would apply to most packaging and packaging waste, and would regulate most entities that are involved with the packaging of products, the marketing of packaged goods, or the recycling or recovery of packaging waste. (Arts. 2, 7) A covered entity could comply with its responsibilities through one of two methods. (Art. 9) One option would allow it to pay a fee and participate in a provincially or municipally administered Packaging-Waste Management Program (Programa de Gestión de Residuos de Envases), which would set requirements for collection, transportation, temporary storage, processing, and recovery of packaging waste. (Arts. 10-23) Alternatively, a covered entity could administer its own government-approved Deposit and Return System (Sistema de Depósito, Devolución y Retorno). (Arts. 24-26) The Bill was referred to the committees on Industry, Natural Resources and Conservation of the Human Environment, and Budget and Finance.

Reference Sources (in Spanish):

Battery Waste Bill Introduced in Chamber of Deputies

On April 25, 2013, a battery waste management bill (No. 1859-D-2013; the “Bill”) was introduced in the Chamber of Deputies. The Bill would cover nearly all batteries, with the exception of industrial and car batteries. (Art. 2) Most of the obligations established by the Bill would fall on battery producers: i.e., manufacturers, importers, brand owners, and resellers. These companies would be responsible for collection and management of battery waste and required to implement one of the following waste-management options: (a) establishing their own Individual Battery Waste Management System (Sistema de Gestión Individual de Residuos de Pilas y Acumuladores ); (b) participate in an Integrated Battery Waste Management System (Sistema Integrado de Gestión de Residuos de Pilas y Acumuladores); or (c) establish a deposit-and-return system. (Art. 5) Regardless of the option chosen, approval of the Secretariat of Environment and Sustainable Development (Secretaría de Ambiente y Desarrollo Sustentable) would be required. (Arts. 6-8) The Bill would also set standards for battery collection, treatment, recycling, and disposal (Arts. 9-10), impose labeling requirements (Art. 15), and require equipment manufacturers to make battery removal easy (Art. 16). Under the Bill, as under current Argentine law, used batteries would be deemed hazardous by definition, and thereby subject to Argentina’s extensive restrictions on transport, storage and handling of hazardous wastes. (Art. 3)

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Mexico Legal Highlights (Volume II, 2013)

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Latin American Region Enviromental Report, Second Quarter, 2013

Mexico Enacts Landmark Environmental Liability Law

On June 7, 2013, Mexico published its long-awaited Federal Environmental Liability Law (Ley Federal de Responsabilidad Ambiental; the “Law”), establishing the types of harms that incur liability and specifying which parties have standing to sue for environmental restoration.  The scope of occurrences that create liability under the Law is broad: “Any person or entity who by act or omission directly or indirectly occasions a harm to the environment, will be liable and will be obligated for the reparation of the harm or, when reparation is not possible, to environmental compensation.”  (Art. 10)  The Law provides important exceptions, stating that “environmental harm” is not deemed to have occurred if: (1) the activity that caused it was previously authorized through an environmental impact assessment process; or (2) the limits (i.e., of emissions, etc.) established by the relevant laws or regulations were not exceeded.  (Art. 6)  Where there is a qualifying activity and harm, the Law grants standing to the following: (1) the inhabitant of the community adjacent to the environmental harm; (2) Mexican environmental non-profit organizations; (3) the federal government through its environmental prosecution office (Procuraduría Federal de Protección al Ambiente; commonly known as “PROFEPA”); and (4) the state governments through their prosecutorial offices or institutions that exercise environmental protection functions.  (Art. 28)

The Law enumerates the factors that judges must observe in the issuance of judgments, both in determining the appropriate measure of liability (Art. 39) and in the elements that a judicial decision must contain (Art. 37).  Rather than money damages, the principal restoration due under the Law is either remediation of the harm or “compensatory” investment in other environmental improvements.  For cases of intentional causation of environmental harm, in addition to requiring restoration, courts may assess “economic sanctions” (apparently a counterpart to punitive damages) ranging from 300 to 50,000 (for individuals) or 1,000 to 600,000 (for companies) times the daily minimum wage in Mexico City.  (Art. 19)  The Law provides for two forums in addition to the existing court system: first, the Law envisions the creation of District courts specialized in environmental issues to be established within two years (Art. 30; Third Transitory Art.); second, the Law encourages the use of alternative dispute resolution in parallel with formal judicial proceedings (Arts. 47-51).   The statute of limitations for bringing actions under the Law is twelve years from the date on which the environmental harm and its effects were caused.  (Art. 29)

Reference Sources (in Spanish):

Mexico Regulates Vehicle Greenhouse Gas Emissions

A new Official Mexican Standard (Norma Oficial Mexicana; “NOM”), NOM-163-SEMARNAT-ENER-SCFI-2013, limits the emissions of greenhouse gases allowed from passenger vehicles and light trucks sold in Mexico.  The emission limits are mandatory for new vehicles up to 3, 857 kilograms, and apply to the fleets of vehicles sold by a given company in model-years 2014-2016; however, companies that sell less than 500 vehicles per model-year are exempt.  (Art. 2)  The bulk of NOM-163 sets forth the parameters and methodology used to calculate corporate targets and actual averages of carbon dioxide emissions (reported in grams of carbon dioxide per kilometer) and its equivalent in terms of fuel efficiency (reported in kilometers per liter).  Companies that registered sales of between 501 and 2,500 vehicles in 2012 may opt for an alternative, potentially less stringent program that requires emissions reductions of approximately 25% from 2012 levels.  (Art. 6)  A credit system will be established in order to incentivize the use and development of high-efficiency vehicles.  (Art. 5.5.2)

Reference Sources (in Spanish):

Mexico Issues Product Stewardship Requirements for Plastics

Through a May 21, 2013, decree (the “Decree”) amending the General Law for the Prevention and Integral Management of Wastes (Ley General para la Prevención y Gestión Integral de los Residuos; the “Waste Law”), Mexico has enacted product stewardship requirements for plastics at both the beginning and end of their life.  The Decree provides for the issuance of Official Mexican Standards (Normas Oficiales Mexicanas; “NOMs”) that establish environmental and technical criteria for the plastic and expanded polystyrene materials used in products and packaging and which becomes wastes.  (Art. 7(VI))  The NOMs must consider the principles of reduction, recycling and reuse.  Unlike the technical standards of most countries, most NOMs stand as binding law (i.e., without being incorporated by legal provisions), so criteria developed in Mexico can potentially have a direct impact on materials used internationally.  At the end of life, the Decree subjects plastics and expanded polystyrene to the producer take-back requirements that apply to special management wastes.  (Art. 28)  For certain circumstances, plastics and expanded polystyrene had already been included in the regulation on special management waste take-back plans, NOM-161-SEMARNAT-2011, issued in February 2013.  Their inclusion in the Waste Law may be intended to backfill a legal gap, and could also be used as authority to expand take-back requirements for these materials.

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Mexico Will Establish Voluntary Sustainability Certification for Goods and Services

On May 24, 2013, Mexico amended its General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección del Ambiente; “LGEEPA”) to provide for the establishment of a certification and labeling program for environmentally sustainable goods and services.  Specifically, LGEEPA now directs the Secretariat of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales; “SEMARNAT”) “to promote the identification of those products, goods, inputs and services with lesser environmental impact.”  (Art. 37 bis)  Such identification would be through a voluntary marking or certificate, and would have to be based on environmental criteria taking into account the life cycle of the product or service to be certified.  The new LGEEPA text also includes a broadly worded directive for SEMARNAT to issue regulations on the “requirements, specifications, conditions, procedures, goals, parameters and permissible limits that must be observed . . . in the use of natural resources, in the development of economic activities, in the production, use and disposition of goods, in inputs and in processes.”  (Art. 36)

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