Tag: Environmental Law

What To Expect From a President Perry on the Environment? Some Texas-Sized Clues

Posted on August 19, 2011 in the National Law Review an article by Jim Morris and Evan Bush of Center for Public Integrity regarding  Texas Gov. and Republican presidential candidate Rick Perry’s environmental stance: 

From climate change denial to stances against EPA and Supreme Court, candidate resists feds, aids businesses and helped a billionaire donor

What would President Rick Perry’s environmental agenda look like?

As Texas governor, Republican presidential candidate Rick Perry often relied on Bryan Shaw, chairman of the state’s environmental regulatory agency, second from right. Harry Cabluck / Associated Press

For clues, one need only examine Perry’s record as governor of Texas, where the chairman of the state environmental agency writes vitriolic letters to the U.S. Environmental Protection Agency and questions the science behind climate change.

Bryan Shaw , a 2007 Perry appointee to the Texas Commission on Environmental Quality who became the agency’s chairman in 2009, opined in a guest column in the El Paso Times last month that a new EPA rule designed to reduce cross-state air pollution from coal-fired power plants was in fact “aimed at cutting Texas jobs, cutting Texas economic growth, increasing Texas energy costs, and harming Texas energy security.”

The column closely followed a statement by Perry himself, who called the rule “another example of heavy-handed and misguided action from Washington, D.C.”

Perry’s gubernatorial campaign received more than $5 million in contributions from energy companies and their employees during the 2009-2010 election cycle, according to data compiled by the nonpartisan National Institute on Money in State Politics . Among Perry’s largest contributors during the cycle: Houston oilmen Jeffrey Hildebrand and Gary Petersen , and Valero Energy Corp . Oil and gas companies consistently are among the state’s biggest polluters.

Perry recently told the Christian Broadcast Network that he prays for President Obama every day, asking in particular that “his EPA back down these regulations that are causing businesses to hesitate to spend money.”

Shaw, in June 30 testimony before the a Senate clean air and nuclear safety subcommittee, attacked another EPA rule meant to limit emissions of mercury and other toxic compounds from coal- and oil-fired power plants. Shaw maintained, among other things, that “any health benefits [from the rule] would be insubstantial compared to the cost of regulation” and expressed concern that “the reliability of the Texas electrical power system will be severely compromised.”

And in a testy letter to EPA Administrator Lisa Jackson and Regional Administrator Al Armendariz a year ago, Shaw and Texas Attorney General Greg Abbott said they would defy EPA regulations – stemming from a 2006  U.S. Supreme Court decision , Massachusetts v. EPA – requiring Texas to begin issuing permits for greenhouse gas emissions from industrial sources.

Shaw declined Wednesday, through a spokeswoman at the agency he chairs, to be interviewed byiWatch News . Catherine Frazier, a spokeswoman in the governor’s office, said “the governor is proud of [Shaw’s] leadership and expects he will put Texas’s interests at the top of his decision-making.”

Frazier said that Perry, like Shaw, finds the science linking human activities to climate change to be “very questionable.” The EPA, she said, “continues to impose burdensome, job-killing mandates on Texas and the governor believes there needs to be a balanced approach to protecting jobs and protecting the environment. Texas has created a model for how to accomplish that goal.”

Environmental activists in Texas say they grew worried about Shaw when he disclosed during his 2009 confirmation hearing that he didn’t believe the science on climate change was “fully settled.”

“He denies the science no matter what it is – climate change, ozone, mercury,” Jim Marston, director of the Environmental Defense Fund’s Texas office, said of Shaw. “All the other scientists around the world are wrong. Somehow, the laws of physics and chemistry don’t apply in Texas, apparently.”

“Adhering to the party line is [Shaw’s] guiding compass,” said Matthew Tejada, executive director of Air Alliance Houston , an environmental group that closely follows the commission Shaw chairs. “Every decision, policy, program or position that the TCEQ takes at the commission level is being guided by that compass – what can it do to strike back at an imaginary federal foe and what can it do to coddle industry here in the state.”

Shaw is a former associate professor in Texas A&M University’s Biological and Agricultural Engineering Department. His views on global warming contrast sharply with some of his former A&M colleagues – notably, the entire Department of Atmospheric Sciences, which declared in a statement several years ago that it is “very likely that humans are responsible for the recent warming.”

Loathsome though it may be to environmentalists, Shaw’s and Perry’s anti-EPA posture sits well with at least some members of the Texas business community.

“I think our political leaders in the state have done an excellent job protecting the environment while allowing the state’s economy to flourish in the past 10 years,” said Alex Mills, president of theTexas Alliance of Energy Producers. The EPA, under Obama, has “gone wacko,” Mills said, adding that a Perry administration would feature a “much more hands-off approach” to environmental regulation.

What some critics find most worrisome is Perry’s apparent willingness to reward major donors.

In 2009, the TCEQ approved a low-level radioactive waste dump for Andrews County in West Texas. The dump, expected to open next year, will accept waste from Texas and other states and be operated by Waste Control Specialists, owned by Dallas billionaire Harold Simmons.

Records show that Simmons and his wife have donated roughly $1.2 million to Perry’s campaigns since 1998, according to the National Institute on Money in State Politics. In 2004, Simmons helped finance the “Swift Boat” ads attacking the military record of Democratic presidential candidate John Kerry.

Karen Hadden, executive director of the Austin-based Sustainable Energy and Economic Development (SEED) Coalition , fought licensing of the dump, saying radioactive leakage threatens groundwater and could lead to serious transportation accidents. The term “low-level” is a misnomer, Hadden said; in fact, the dump will take everything but uranium fuel rods from nuclear power plants and plutonium components of nuclear bombs.

An eight-member TCEQ team unanimously advised against licensing the facility in 2007 but was overruled by top-level managers (not including Shaw). Three members of the team, including Glenn Lewis, left the agency in protest.

“We came to the conclusion that it was an unsuitable site geologically because of the immediate vicinity of groundwater,” Lewis told iWatch News . Nonetheless, he said, “We were immediately instructed to begin drafting a license” for Waste Control Specialists.

Asked if he believed Simmons’s relationship with Perry was behind the order, Lewis said, “I’m 99 to 100 percent sure. From the first day I reported for duty on this team, the other members were quite resigned to the fact that if Simmons is behind this, he’s going to get his license.”

The company and the candidate deny any favorable treatment.

“I think the record’s pretty clear there is absolutely no evidence of special treatment of any kind,” said Chuck McDonald, a Waste Control Specialists spokesman. “The licensing process was a long and arduous one. It took five years.”

Frazier, Perry’s spokeswoman, said the Andrews County dump “is supported by that community. It’s a project that will create jobs and bring them economic development opportunities.”

Questions also were raised about a 2005 Perry executive order expediting the state permitting process for coal-fired power plants. At the time, a Dallas-based utility and major Perry contributor, TXU, wanted to build 11 such plants; plans for eight of the 11 were scrapped in 2007 after TXU was acquired by two private equity groups.

In 2008, The Center for Public Integrity and Fort Worth Weekly reported that TXU’s coal plants exceeded federal emission limits nearly 650 times between 1997 and 2006, putting more than 1.3 million pounds of lung-damaging sulfur dioxide into the air.

A growing body of science suggests greenhouse gases produced by human activities – chiefly deforestation and the burning of fossil fuels – are responsible for shifting temperatures and other changes in climate across the globe that could threaten people and wildlife and exacerbate international frictions over scarce resources.

Reprinted by Permission © 2011, The Center for Public Integrity®. All Rights Reserved.

Power NY Act of 2011 Swings the Door Open for Renewable Development

Posted in the National Law Review on August 17, 2011 an article written by attorneys: David A. Domansky, Joseph G. Tirone and Brian J. Kelly of Bracewell & Giuliani LLP regarding Power NY Act of 20ll which Gov. Cuomo recently signed into law:

 

On August 4, 2011, Governor Cuomo signed into law the Power NY ACT of 2011 (A. 8510/S. 5844), a comprehensive energy bill that, among other things, reimplements and significantly revises Article X of the New York State Public Service Law. As revised, new Article X provides power project developers a more efficient, streamlined “one-stop” siting process. The new law was sought and supported by both business and environmental groups to remedy a patchwork of inconsistent local siting rules throughout New York, which have hampered project development efforts. Old Article X, which expired on January 1, 2003, was limited to power plants with 80-megawatts or more of nameplate generating capacity. New Article X reduces the capacity threshold to 25-megawatts, thereby allowing smaller generation projects, such as wind, solar and other renewable project developers, an opportunity to take advantage of the streamlined siting process.

Creation and Composition of the Review Board

Following the expiration of former Article X, developers were required to seek the requisite regulatory and environmental permits mandated by state and local laws from the various state and municipal regulatory authorities who had jurisdiction over the site where the proposed power project was to be developed. Under new Article X, the siting and licensing of electric generation facilities of at least 25-megawatts, or the increase in nameplate capacity by 25-megawatts or more of a current power facility, will fall within the purview of the New York State Board on Electric Generation Siting and the Environment (“Board”).The seven member Board will consist of five state agency officials (Department of Environmental Conservation, Department of Economic Development, Department of Health, Department of Agriculture and Markets and the New York State Energy Research and Development Authority), as well as two ad hoc members who are required to reside in the community in which the proposed facility is to be located. The Board will be tasked with determining if the contemplated project should receive a Certificate of Environmental Compatibility and Public Need (“Certificate”), which must be obtained before commencement of any site development or facility construction.

Filing Process

New Article X separates the Certificate process into two distinct phases, a pre-application preliminary scoping statement (the “Pre-Application”) and the actual Certificate application. In  the Pre-Application, an applicant is required to provide the Board with, among other things: (a) a description of the proposed facility and its environmental setting; (b) potential environmental and health impacts resulting from the construction and operation of the proposed facility; (c) proposed studies or programs of studies designed to evaluate the potential environmental and health impacts; (d) measures proposed to minimize environmental impacts; and (e) identification of all other state and federal permits required for the construction, operation or maintenance of the proposed facility.

Prior to submission of the Pre-Application, the applicant must meet with interested parties, including community groups and interested state agencies to address these groups’ concerns  with regard to the proposed facility. Following the applicant’s submission of the Pre-Application, the applicant has the ability to enter into side agreements or stipulations to address any concerns regarding the siting and location of the proposed facility. Once completed, the applicant is then required to file a Certificate application with the Board, which includes: (a) a description of the site and facility to be built; (b) an evaluation of the anticipated environmental and health impacts and safety and security ramifications that the facility will have on the surrounding community; (c) a comprehensive environmental impact analysis; and (d) a comprehensive demographic, economic and physical description of the community within which the facility is to be located, compared and contrasted with the county and with the adjacent communities in which the facility is proposed.

Board Decision Process and Timeline

New Article X requires that the Board issue a final decision on a Certificate application no later than: (a) 12 months after submission of a Certificate application deemed complete by the Board for a new-build facility, and (b) six months after the submission of a complete Certificate application deemed complete by the Board for modifications to (1) an existing facility, or (2) the site of a new facility adjacent or contiguous to an existing facility, provided the new facility would result in greater operating efficiencies and lower environmental impact than the original facility.

New Article X also requires that the Board schedule a hearing on the Certificate application no later than 60 days after the date the Board determines the Certificate application is complete. After conducting and taking testimony at the hearing, the Board may grant the Certificate if it finds that: (a) the facility is a beneficial addition to or substitution for the electric generation capacity of New York; (b) the construction and operation of the facility will serve the public interest; (c) the facility’s environmental impact has been minimized or eliminated to the maximum extent practicable; and (d) the facility complies with all state and local laws and regulations.

Any appeal of the Board’s decision denying or granting a Certificate is first heard by the Board itself. The application for rehearing must be filed no later than 30 days after issuance of the Board’s decision. The Board is required to render a decision on the application no later than 90 days after the expiration of the period for filing rehearing petitions. Thereafter, an aggrieved party may seek judicial relief in the Appellate Division of the New York Supreme Court. Such proceeding must be initiated within 30 days after the issuance of a final decision by the Board on the application for rehearing.

© 2011 Bracewell & Giuliani LLP

It's Not Easy Being Green: Understanding and Avoiding the Pitfalls of Green Marketing

Recently posted in the National Law Review an article by Anne E. Viner of Much Shelist Denenberg Ament & Rubenstein P.C. regarding the idenfication of “green” products and services:

A current trend among businesses is to identify their products and services as “green,” “environmentally safe,” “ozone friendly” or otherwise good for the environment. Companies do this to show that they are good stewards of the Earth and to attract customers who are interested in purchasing products that are “environmentally friendly.” But what does that phrase—or similar terminology—really mean? What sort of information must a business have in order to support these kinds of claims? Not surprisingly, there are a number of federal and state regulations, rules and guidelines that govern green marketing.

The Federal Trade Commission (FTC) Act prohibits deceptive representations in advertising, labeling, product inserts, catalogs and sales presentations. If statements concerning the environmental benefits of a product or service cannot be substantiated, they may be found to be deceptive by the FTC. Customers, competitors and environmental citizen groups often monitor green marketing and can file administrative complaints with the FTC if a company’s claims are misleading. Such complaints not only hurt businesses monetarily (legal expenses, administrative penalties, etc.), but can also damage the goodwill that the environmental claim was attempting to establish.

Federal Guidance

To help businesses determine when green marketing claims are acceptable and when they have gone too far, the FTC and the United States Environmental Protection Agency (EPA) have developed guidelines to ensure that environmental marketing claims do not mislead consumers. Advertising, labeling, promotional materials, presentations and other forms of marketing that run afoul of the guidelines created by the FTC and EPA can result in such conduct being declared unlawful under the FTC Act.

The following guidelines apply broadly to all environmental marketing efforts—whether they are consumer-focused claims or business-to-business claims directed at suppliers, affiliated companies, distributors or other customers:

  • Clearly identify whether the advertised environmental benefit is with the product itself, the packaging, a service, or some other portion or component of the product, service or packaging. For example, if a box of aluminum foil is labeled “recyclable” without further elaboration, this claim would be considered deceptive if any part of either the box or the foil cannot be recycled.
  • Avoid overstatements of environmental benefits. For example, a package might be labeled “50% more recycled content than before” after the manufacturer upped the amount of recycled material from 2% to 3%. Although the claim is technically true, it gives a false impression that the amount of recycled material was significantly increased.
  • Be ready to substantiate any comparisons between products. For example, if an ad claims that a package creates “less waste than the leading national brand,” the advertiser must be able to substantiate the comparison with calculations comparing the relative solid waste contributions of the two packages. If it cannot, the ad runs afoul of the FTC Act and may create liability.

The guidelines created by the FTC and EPA also address the following specific environmental claims:

  • Avoid general, unqualified terms (such as “environmentally friendly” and “green”) that cannot be quantified and may convey a wide range of meanings to customers. The broader the term (a brand name like Eco-Safe, for example), the more likely it will be found deceptive by the FTC.
  • Reliable, scientific evidence must support claims that a product or package is degradable, biodegradable or photodegradable, as well as compostable or made with recycled, pre-consumer or post-consumer products. For example, if a shampoo is advertised as “biodegradable” with no qualifications, the manufacturer must have reliable scientific evidence that the product, which is customarily disposed of in sewer systems, will break down and decompose into elements found in nature in a short period of time. These specific terms have precise environmental meanings, and the guidelines give numerous examples of acceptable and deceptive uses of them.

The Guidelines in Action

Assume that a manufacturer wants to identify its entire product line of plastic buckets as being “made of recyclable material.” However, only one type of bucket in the line is made of post-consumer plastic and the post-consumer content averages just 20% annually. How can the manufacturer properly advertise the recycled content of its bucket line? According to the FTC and EPA guidelines, it is deceptive to identify the entire line as “green” or as being “made of recycled materials.” These broad, unquantifiable terms should also be avoided when advertising the one type of bucket that actually is made from post-consumer plastic. However, it is acceptable to use the 20% annual average of recycled material in marketing that particular bucket type. Such averaging is permissible, provided the company’s claims can be substantiated with scientific evidence.

The FTC Act and related guidance is just one example of regulations that are potentially applicable to green marketing claims. The EPA has established additional regulations and guidance under its Consumer Labeling Initiative and EPA Environmentally Preferable Procurement Program. The International Organization for Standardization also has developed environmental labeling criteria for products sold worldwide. Many states have their own environmental disclosure and marketing requirements as well.

Given the numerous requirements associated with environmental marketing, along with the potential risks of being found deceptive, it really isn’t easy being green. So, before your business makes any environmental claims about its products or services, carefully consider how you will state the environmental benefits, whether they can be supported with scientific evidence and what regulations may govern your claims.

© 2011 Much Shelist Denenberg Ament & Rubenstein, P.C.  

Eastern Population of Gopher Tortoise Eligible for Endangered Species Act Protection

Recently posted in the National Law Review an article about The United States Fish & Wildlife Service (USFWS) has released its listing decision for the eastern population of gopher tortoise by Ivan T. Sumner of Greenberg Traurig, LLP.

The United States Fish & Wildlife Service (USFWS) has released its listing decision for the eastern population of gopher tortoise. The USFWS has determined that listing the eastern population of the tortoise as Threatened under the Endangered Species Act (ESA) is warranted, however, it is precluded from doing so at this time due to higher priority actions and a lack of sufficient funds to commence proposed rule development. The western population is already listed as Threatened and will continue to be protected under the ESA. In the interim period of time the USFWS  will place the eastern population of the tortoise on its candidate species list until sufficient funding is available to initiate a proposed listing rule. The USFWS did not provide any time estimate on that front. Candidate species do not receive any statutory protection under the ESA. The gopher tortoise in Florida is still protected under Florida laws and policies implemented  by the Florida Fish and Wildlife Conservation Commission.

©2011 Greenberg Traurig, LLP. All rights reserved.

California's Green Chemistry Rulemaking Renewed

Published in the National Law Review on July 21, 2011 an article by Gene Livingston of  Greenberg Traurig, LLP about  California’s Department of Toxic Substance Control’s announcement of the new target date for new draft regulations to implement California’s Green Chemistry Law.

The new Director of California’s Department of Toxic Substance Control, Debbie Raphael, announced that mid-October is the new target date for new draft regulations to implement California’s Green Chemistry Law. The law called for regulations to be in place by January 1, 2011. However, universal opposition last year to the previously proposed regulations rendered that date impossible. Raphael, demonstrating political acumen, has the support of the legislative authors of the law to take the time needed “to get it right.”

Raphael promised to meet with stakeholders between now and mid-October to inform the rulemaking process, and after the draft regulations are released to seek comments from the Green Ribbon Science Panel at its November 14-15, 2011 meeting on the scientific aspects of the draft regulations. Then, the Director and her staff will produce regulations to launch the formal rulemaking proceeding.

Raphael laid out the principles that will guide the development of the regulations. They have to be “practical, meaningful, and legally defensible.” Those principles are easily embraced by political leaders, business interests, and environmentalists. There is something for everyone. The challenge will be getting consensus on what is practical but still meaningful with numerous aspects of the regulations, starting, for example, with selecting chemicals of concern, prioritizing the products containing chemicals of concern, describing the life cycle factors to assess existing chemicals and products and their possible alternatives, and imposing regulatory mandates, ranging from labels to bans of products.

The resolution of these aspects and others in the regulations will determine whether the green chemistry program sinks of its own weight, stifles innovation, drives up the cost of products, eliminates products in the California market, or becomes a model for other states, stimulates innovation, expands sustainable product development, results in fewer toxic products, and less toxic waste.

The green chemistry regulations can affect every manufacturer selling products in California as well as their suppliers, distributors, and retailers. They need to be aware of the rulemaking activities occurring in California during the next six months, a time period that will be critical as DTSC seeks to write regulations that are indeed practical, meaningful, and legally defensible.

©2011 Greenberg Traurig, LLP. All rights reserved.

IRS Defends Discretion to Withhold Section 1256 Exchange Designation for ISOs

Recently posted at the National Law Review by William R. Pomierski of  McDermott Will & Emery an article about the IRS defending its decision not to designate independent system operators as qualified board or exchange:

The IRS defended its decision not to designate independent system operators asqualified board or exchange (QBE) principally on the grounds that, as a matter of law, it is not required to designate any exchanges as QBEs under Category 3 of Section 1256 Contracts.

In Sesco Enterprises, LLC (Civ. No. 10-1470, D.N.J. Nov. 16, 2010), the Internal Revenue Service (IRS) defended its discretion to refrain from extending qualified board or exchange status under Code Section 1256 to U.S. Federal Energy Regulatory Commission (FERC)-regulated independent system operators.  The district court dismissed the taxpayer’s claim that the IRS acted arbitrarily and capriciously when it refused to classify electricity derivatives that traded on independent system operators as “Section 1256 Contracts.

Section 1256 Contracts in General

For federal income tax purposes, a limited number of derivative contracts are classified as Section 1256 Contracts.   Absent an exception, Section 1256 Contracts are subject to mark-to-market tax accounting and the 60/40 rule.  The 60/40 rule characterizes 60 percent of the net gain or loss from a Section 1256 Contract as long-term and 40 percent as short-term capital gain or loss.  Corporate taxpayers often view Section 1256 Contracts as tax disadvantageous, relative to economically similar derivatives that are not taxed as Section 1256 Contracts, such as swaps, unless the business hedging or some other exception is available.

Section 1256 Contract classification is limited to regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options and dealer securities futures contracts, as each is defined in the Internal Revenue Code.   Unless a derivative falls within one of these categories, it is not a Section 1256 Contract, regardless of its economic similarity to a Section 1256 Contract.

Except for foreign currency contracts, Section 1256 Contracts are limited to derivative positions that trade on or are subject to the rules of a qualified board or exchange (or QBE).  QBE status is extended only to national securities exchanges registered with the U.S. Securities and Exchange Commission (SEC) (a Category 1 Exchange); domestic boards of trade designated as contract markets by the U.S. Commodities Futures Trading Commission (CFTC) (a Category 2 Exchange); orany other exchange, board of trade or other market that the Secretary of the Treasury Department determines has rules adequate to carry out the purposes of Code Section 1256 (a Category 3 Exchange).

Category 1 and Category 2 Exchange status is automatic.   Category 3 Exchange status, however, requires a determination by the IRS.  In recent years, Category 3 Exchange designation has been extended to four non-U.S. futures exchanges offering products in the United States: ICE Futures (UK), Dubai Mercantile Exchange, ICE Futures (Canada) and LIFFE (UK).

Sesco Challenges IRS Discretion to Withhold Category 3 Exchange Designation

According to its website, the taxpayer in Sesco (Taxpayer) is an electricity and natural gas trading company. The facts of the case indicate that it traded electricity derivatives (presumably INCs, DECs, Virtuals and/or FTRs) on various independent system operators or regional transmission organizations regulated by the FERC (collectively, ISOs).  Because ISOs are not regulated by the SEC or the CFTC, they cannot be considered Category 1 or Category 2 Exchanges for purposes of Code Section 1256.  To date, no ISO has been designated as a Category 3 Exchange by the IRS.

According to the facts in Sesco, the Taxpayer took the position on its return that derivatives trading on ISOs were Section 1256 Contracts eligible for 60/40 capital treatment.  The IRS denied Section 1256 Contract status on audit.  Somewhat surprisingly, a footnote in Sesco suggests, without any further discussion, that the IRS agreed with the Taxpayer’s position that these electricity derivatives qualified as “regulated futures contracts” under Code Section 1256 except for satisfying the QBE requirement.

During the examination process, the Taxpayer apparently requested a private letter ruling from the IRS that the relevant ISOs were Category 3 Exchanges.   According to the district court, “The IRS refused, asserting that the request for a QBE determination must be made by the exchange itself.”  The Taxpayer then asked one of the ISOs to request Category 3 Exchange status, but the ISO declined to do so.  Taxpayer then filed suit challenging the IRS’s adjustments and asserted that the IRS “acted arbitrarily and capriciously and abused its discretion when it refused to make a QBE determination except upon request from the ISO.”  In essence, the Taxpayer was attempting to force the IRS to designate the ISOs at issue as QBEs.

The IRS defended its decision not to designate the ISOs as QBEs principally on the grounds that, as a matter of law, it is not required to designate any exchanges as QBEs under Category 3.   After briefly considering the wording of Code Section 1256 and the relevant legislative history, the court agreed with the IRS position and dismissed the case on procedural grounds (lack of jurisdiction).

Observations

Although the District Court’s decision in Sesco may be of little or no precedential value due to the procedural aspects of the case, the decision nevertheless is important in that it reflects what has long been understood to be the IRS’ position regarding Category 3 Exchange status, which is that Category 3 Exchange status is not automatic and requires a formal determination by the IRS.  Sesco also confirms that the IRS believes QBE classification can only be requested by the exchange at issue, not by exchange participants.

Unfortunately, Sesco does not address the separate question of whether the IRS could have unilaterally designated the ISOs at issue as QBEs without the participation of the exchanges.  Sesco also raises, but does not address, the issue of whether derivatives traded on exchanges that are not “futures” exchange can be considered “regulated futures contracts” for purposes of Code Section 1256.  These are critical questions that will become more relevant in the near future as the exchange-trading and exchange-clearing requirements imposed by the Dodd-Frank derivatives reform legislation begin to take effect.

© 2011 McDermott Will & Emery

Bill Allowing More Offshore Drilling Introduced to Congress

Posted today at the National Law Review by Sabrina Mizrachi of Greenberg Traurig, LLP – news on the Infrastructure Jobs and Energy Independence Act introduced in Congress yesterday……

The Infrastructure Jobs and Energy Independence Act was introduced on May 12, 2011, and seeks to allow more offshore drilling in order to reduce U.S. reliance on imported fuels and create jobs. The bill was introduced by a bipartisan group of four congressmen, Democrats Jim Costa of California and Tim Walz of Minnesota in collaboration with Pennsylvania Republicans Tim Murphy and Bill Shuster.

The bill contains no new taxes or increase of existing taxes, and would allow drillers to reach natural-gas reservoirs that could fuel industry in the U.S. for 63 years and the U.S. oil industry for 80 years, and also create 1.2 million jobs per year.

©2011 Greenberg Traurig, LLP. All rights reserved.

EPA, Clean Air Act & Climate Change: Consider the Facts

This week’s guest blogger at the National Law Review is Jon D. Sohn of  McKenna Long & Aldridge LLP.  Jon provides a great overview of some recent hearings and proposed legislation impacting greenhouse gas regulations at both the state and federal levels:

The U.S. Environmental Protection Agency (EPA) has taken a lot of hits from those opposed to greenhouse gas regulations in the past week.  In the House of Representatives, tough hearings led by U.S. Rep. Ed Whitfield, (R-KY), Chairman of the House Subcommittee on Energy, were held with EPA Administrator Lisa Jackson. Jackson’s testimony followed that of lead witness Senator James Inhofe (R-OK) who promoted his upcoming book, “The Hoax,” which takes aim at the science of climate change.  The House subsequently passed an amendment to the proposed Continuing Resolution that would strip EPA of its authority to regulate GHG emissions and significantly decrease funding for environmental and clean energy programs. Meanwhile, outside of Washington, D.C., the first two permits considered by EPA suggest cleaner facilities and job creation can be compatible with new regulations as opposed to some of the concerns expressed in the hearings and continuing resolution.

This past week, South Dakota issued a draft permit for Best Available Control Technology for greenhouse gases under the Clean Air Act (CAA) to the Hyperion Energy Center. Project owners describe the facility as a “HEC is a 400,000-barrel per day (BPD) highly-complex, full-conversion refinery which will produce clean, green, transportation fuel such as ultra-low sulfur gasoline (ULSG) and ultra-low sulfur diesel (ULSD).” South Dakota regulatory officials found that significant energy efficiency improvements to the refinery were the most cost-effective manner to move forward.  The officials considered carbon capture & storage as an alternative path, but decided that while the technology is technically feasible it is not cost-effective or environmentally appropriate in this instance.  EPA will now have 30-days to review the decision, but don’t expect any radical changes to the State-level decision. Construction will create an estimated 4,500 jobs and when finished, 1,826 permanent jobs will be created for the ongoing operation of the refinery and associated utility plant according to company officials.

In Louisiana, State regulators recently approved an air quality construction and operating permit that includes emissions control requirements for greenhouse gases as well.  The permit clears the way for an iron production facility, the initial phase of the construction of a larger Nucor iron and steelmaking facility in St. James Parish. Under the permit granted, the greenhouse gas limits rely on energy efficiency measures and set a 13 million British thermal units of natural gas per metric ton of direct reduced iron. State regulators estimate the plant will emit 3.39 million metric tons of carbon dioxide per year.  500 construction jobs and 150 permanent jobs will be created according to Nucor, although they would like the facility to be larger and note regulatory uncertainty as a cause of concern. On the other hand, some environmental groups including the Tulane Law Clinic may challenge that the permit is not strict enough. EPA will now conduct a review here as well.

Congress would be well-advised to consider these case studies as it moves forward in its deliberations.

© 2011 McKenna Long & Aldridge LLP

EPA and Corps Issue Draft Guidance on Waterways and Wetlands That Fall Under Federal Jurisdiction as Part of Obama Administration’s Just Released Clean Water Framework

Recently posted by Linda H. Bochert of  Michael Best & Friedrich LLP – details about the recent draft guidance issued about when a wetland is subject to federal jurisdiction: 

Five years after the US Supreme Court issued the decision that was supposed to – but didn’t – clarify when a wetland is subject to federal jurisdiction, the United States Environmental Protection Agency (“EPA”) and Army Corps of Engineers (“Corps”) are seeking public comment on draft guidance intended to explain how such decisions are to be made.

The Draft Guidance on Federal Jurisdiction

On April 27, 2011, EPA and the Corps issued “Draft Guidance on Identifying Waters Protected by the Clean Water Act” (“Draft Guidance”). The Draft Guidance interprets two key Supreme Court decisions, often referred to as Rapanos and SWANCC. Rapanos is the 2006 Supreme Court decision in the consolidated cases of Rapanos v. United States and Carabell v. United States Army Corps of Engineers, 547 UW 715 (2006); SWANCC is the 2001 Supreme Court decision in Solid Waste Agency of Northern Cook County v. Army Corps of Engineers, 531 U.S. 159 (2001). The Draft Guidance addresses both wetlands and waterbodies and is limited to whether the federal Clean Water Act applies; it does not determine what state laws or regulations might apply.

After years of confusion, the 2006 decision in Rapanos was widely anticipated to provide a clear test for when a wetland is subject to federal jurisdiction. It failed to do so. The court split three ways, with no point of view supported by a majority of the justices. The prevailing view since Rapanos has been that a wetland is subject to federal jurisdiction if it satisfies either of two tests:  1) the wetland must be immediately adjacent to a navigable body of water that has a relatively permanent flow; or 2) there is a “significant nexus” between the wetland and a body of water that was, is, or could be made navigable. But stating the tests and applying them are two different things – and application of that two-part test has been anything but clear-cut.  For more on Rapanos andSWANCC, see our June 29, 2006 Client Alert: Wetlands and Water Bodies Must Have “Significant Nexus” with a Navigable Water to Fall Under the Jurisdiction of the Clean Water Act.

The EPA and the Corps are taking another run at it. The Draft Guidance is carefully described as “consistent with Supreme Court decisions and existing agency regulations” – presumably to combat anticipated criticism that it either overreaches or underreaches the current state of the law, although the critics have already begun to weigh in. 

Under the Draft Guidance, federal jurisdiction would apply to wetlands that:

  • are adjacent to either traditional navigable waters or interstate waters
  • directly abut relatively permanent waters
  • are adjacent to jurisdictional tributaries to traditional navigable waters or interstate waters if there is a “significant nexus”

    And federal jurisdiction would apply to waterbodies that are:

  • traditional navigable waterbodies
  • interstate waterbodies
  • non-navigable tributaries to traditional navigable waters that are relatively permanent (contain water at least seasonally)
  • tributaries to traditional navigable waters or interstate waters if there is a “significant nexus”
  • in the category of “other waters” – including some that are physically proximate to other jurisdictional waters and some that are not, based on fact specific circumstancesFollowing the 60-day public comment period, EPA and the Corps intend to finalize the Guidance and then initiate formal rulemaking.  The message of that process is that the agencies want to identify as much of the anticipated controversy about their interpretation as possible before drafting a federal regulation implementing that interpretation.

    Effect in Wisconsin

    Implementation of the Draft Guidance is not likely to have a significant impact in Wisconsin.   As far as waterbodies are concerned, Wisconsin has historically taken a broad view of navigability for purposes of state jurisdiction.  With respect to wetlands, as explained in our June 2006 Client Alert following the SWANCC decision the Wisconsin Legislature extended the jurisdiction of the Wisconsin Department of Natural Resources (“WDNR”) to include “nonfederal wetlands”.  Wis. Stat. §. 281.36(1m). Thus, a nonfederal wetland may still be subject to state water quality standards and permit requirements implemented by WDNR, even if it does not come within federal jurisdiction under the Clean Water Act. 

    The Clean Water Framework

    The Draft Guidance is part of the Obama Administration’s national Clean Water Framework also released on April 27, 2011. The Clean Water Framework “recognizes the importance of clean water and healthy watersheds to our economy, environment and communities” and is composed of the following initiatives:

    • promoting innovative partnerships
    • enhancing communities and economies by restoring important water bodies
    • innovating for more water-efficient communities
    • ensuring clean water to protect public health
    • enhancing use and enjoyment of our waters
    • updating the nation’s water policies – this initiative includes the Draft Guidance
    • supporting science to solve water problems

     

    © MICHAEL BEST & FRIEDRICH LLP

Superfund Recycling Equity Act (SREA) Fee Shifting: PRP Group Liable for Third-Party Defendants’ Attorneys' Fees

Recent Guest Blogger at the National Law Review   Thomas A. Barnard  of  Taft Stettinius & Hollister LLP   explains a recent federal district court ruling that a PRP group seeking contribution under CERCLA must pay the attorneys’ fees incurred by a mining company targeted by the PRP group for contribution:  

The Superfund Recycling Equity Act (“SREA”) fee shifting provision puts PRP groups seeking contribution under CERCLA from generators of “recyclable material” at risk of paying the generators’ attorneys’ fees if the generator’s defense succeeds.  A federal district court recently ruled that a PRP group seeking contribution under CERCLA must pay the attorneys’ fees incurred by a mining company targeted by the PRP group for contribution.  Evansville Greenway and Remediation Trust v. Southern Indiana Gas and Electric Co., Inc.., No. 07-00066 (S.D. Ind. Feb. 25, 2011), Dkt. 917.

Previously, district courts have refrained from awarding defense fees under SREA on the grounds that it would result in “manifest injustice” because the retroactive application of SREA (enacted in 1999) would impose a fee-shifting component that did not exist when the contribution actions were initiated.  See, e.g., RSR Corp. v. Avanti Development Inc., 2000 WL 1449859 at *4 (S.D. Ind. 2000) (“The plaintiffs made their decisions about whom to sue at a time when CERCLA did not allow a prevailing party in a contribution action to obtain costs and fees from its burden.  To burden that decision now with the imposition of the attorney and expert fees of any defendant that prevails under the SREA seems inconsistent with the ‘familiar considerations of fair notice, reasonable reliance, and settled expectations’ mentioned by the Supreme Court.”); see also U.S. v. Mountain Metal Co., 137 F.Supp.2d 1267, 1282 (N.D. Ala 2001).

In Evansville Greenway, the court determined that the third-party defendant, Solar Sources, Inc., qualified for an exemption to CERCLA liability established by SREA.  Specifically, the court found that Solar Sources had “arranged for recycling” because it sold scrap metal that met a “commercial specification grade for which a market existed,” and that a “substantial portion of the scrap was made available for use in the manufacture of a new product.  This satisfied the SREA requirements for scrap metal generators set forth in 42 U.S.C. 9627(d). 

Having determined that Solar Sources prevailed in its SREA defense, the court then awarded attorney and expert fees under the statute’s fee-shifting provision, 42 U.S.C. 9627(j).  Without referring to the prior case law interpreting this section, the court matter-of-factly awarded the fees “as we are required to do under the statute.”  The third-party complaint against Solar Sources was filed by the PRP group in 1999, after SREA was enacted, but the court did not discuss this timing in awarding defense fees.

Accordingly, PRP groups must carefully consider the risk of liability for defense fees and expenses prior to filing contribution actions against generators of material that potentially falls within the scope of SREA’s exemption.

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