Does the Concept of Regulatory Takings Comport With Original Intent?

Last Friday, the Supreme Court issued an important regulatory takings case, refining the test to be used to determine what is the appropriate unit of property to use to assess the impact of a regulation.  It’s an interesting case and I think that the Court probably got it right.  However, that’s not what caught my eye about the case.  To me, Justice Thomas’s dissent is the most intriguing.

Justice Thomas, while joining the principal dissent, separately acknowledged that the Court’s regulatory takings jurisprudence “has never purported to ground those precedents in the Constitution as it was originally understood.”  In other words, the original decision on regulatory takings, Pennsylvania Coal Co. v. Mahon, made the concept of a regulatory taking up out of whole cloth.  Nice of Justice Thomas to concede that.  Justice Thomas would like to see whether the concept:

can be grounded in the original public meaning of the Takings Clause of the Fifth Amendment or the Privileges or Immunities Clause of the Fourteenth Amendment.

I have another idea.  Why don’t the conservatives on the Court admit as a group that the concept of a regulatory taking cannot in any way be seen as consistent with original intent.  The liberals on the court could take a different path and acknowledge that the concept has outlived its usefulness.  They could then unanimously overrule Mahon.

On this front, I note that Justice Gorsuch, who has quickly emerged as the great hope of original intent scholars, did not participate in the case.  If he wants to really demonstrate his credentials, why not show them by supporting original intent, even in the regulatory takings area, where conservatives like the concept, but can’t find any basis for it in the actual words of the Constitution?  That would prove he really means it.

Is It a Dividend? Is It a Tax? Could President Trump Care Less?

In February, I posted about the formation of the Climate Leadership Council and its push for what it calls its “Carbon Dividend” plan.  In essence, it’s a gradually increasing carbon tax.  The plan would be revenue neutral, with the proceeds being returned to taxpayers.  Thus, the name.  I loved the idea and I still love it.  I particularly love that the tax starts at $40/ton – that’s a serious number.

However, as I noted in February, the founders of the CLC are a who’s who of the old-line GOP establishment – precisely those whom President Trump would generally refer to as “losers”, unless he could spare the time to come up with something more derogatory.

The CLC has now brought on a number of corporate heavyweights, including GM and four of the world’s largest oil and gas companies (BP, ExxonMobil, Shell, and Total), among others.  They published their support in a Wall Street Journal ad.  In a cheerful bit of optimism, the program is now called “The Consensus Climate Solution.”  The ad describes the plan as “Pro-Environment, Pro-Growth, Pro-Jobs, Pro-Competitiveness, Pro-Business and Pro-National Security.”  Who could be against it?  Here’s a hint.  I think that the tag line would work better if phrased as follows:

Pro-Environment, Pro-Trump, Pro-Growth, Pro-Trump, Pro-Jobs, Pro-Trump, Pro-Competitiveness, Pro-Trump, Pro-Business, Pro-Trump, and Pro-National Security (and Pro-Trump)

Seriously, this is no time for cynicism.  This is a great plan.  A tax starting at $40/ton would have real impact.  (The most recent RGGI auction price?  $2.53/ton.)  As I noted earlier this week, we need smart people of good will and of all political stripes advocating solutions if we’re going to get anywhere.

Trump may call you losers, but, men and woman of the CLC, I salute you!

D.C. District Court Determines that Dakota Access Environmental Assessment was Inadequate

On June 14, 2017, the District Court for the District of Columbia issued a decision in Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers. The Court found that the Army Corps of Engineers (“the Corps”) had not adequately considered several issues in its environmental assessment (“EA”) for the Dakota Access Pipeline, and that therefore the Corps’ decision-making was arbitrary and capricious.

The EA was undertaken pursuant to the National Environmental Policy Act (“NEPA”), which requires that any permitting federal agency take a “hard look” at the environmental impacts of a federally permitted project. A federal agency must take a “hard look” but has substantial discretion regarding whether to permit a project so long as the agency’s review is not arbitrary and capricious. Although the District Court found much of the EA to be adequate, it found the Corps’ EA to be arbitrary and capricious in certain key areas, as described below.

Controversial Impacts from a Scientific Perspective

The Court found that the Corps failed to consider the extent to which the pipeline’s effects might be controversial from a scientific perspective, which can be a basis for the Corps to find that a project might have significant impacts on the environment. Such a finding would in turn prompt the Corps to carry out an Environmental Impact Statement (“EIS”).

Notably, an EIS is lengthier and typically involves more formal consultation than an EA. Whether the Corps should have carried out an EIS for the pipeline’s crossing at Lake Oahe, just upstream of tribal reservation land, is a key source of contention in the lawsuit.

The Potential Effects of an Oil Spill

The Court also found that the Corps failed to adequately consider the effects of an oil spill, which led to several deficiencies in its EA.

For example, the Court found that the Corps did not adequately consider the potential impacts of a spill on several tribal treaty rights, including fishing and hunting rights on and near Lake Oahe. The Court did find, however, that the Corps had adequately considered potential impacts of a spill on tribal water rights.

The Court also found that the Corps’ environmental justice methodology was faulty, as it focused only on construction impacts on majority white and relatively well-off communities within 0.5 miles of the Lake Oahe crossing, even though a spill could affect communities more than 0.5 miles downstream from the crossing.

The Standing Rock Sioux Tribe is located 0.55 miles downstream from the crossing but was not part of the main environmental justice analysis. The final EA devoted a separate section to environmental justice impacts specifically on the Standing Rock Sioux, but the Court criticized the Corps’ analysis because it focused on construction impacts and barely mentioned spill impacts, even though the Court suggested that the latter are of greatest relevance because the tribe is downstream and relies on water from Lake Oahe.

What Now?

The Court remanded the matter to the Corps for reconsideration. This could lead to a revision of the Corps’s EA, or could prompt an EIS.

The Court noted that in most instances the remedy in such a situation is to vacate the administrative decision and halt the activity until the administrative process is adequately carried out, but there are exceptions.  The Court asked the parties to brief whether the Dakota Access should be allowed to continue to operate the pipeline during the Corps’ review process.

Protection for Tribal Rights

Notably, the decision confirms several of the tribes’ bases for claiming that the Corps’ EA was inadequate. The decision may lead to stronger protection of tribal rights in the future.

For instance, it will almost undoubtedly prompt the Corps to devote more time in the future to analyzing the potential impacts of oil spills on treaty rights and to environmental justice considerations. The Corps’ permitting decisions have been overturned a number of times for failure to adequately consider reserved treaty rights, such as hunting and fishing rights, but never in such a high-profile case. The decision may also cause the Corps to select a zone for the environmental justice analysis that is more than 0.5 miles downstream at water crossings.

Future of the Pipeline

It is possible that Dakota Access will face a temporary halt in its operations, although the Court may instead rule that the company can continue to operate the pipeline during the Corps’ deliberations. This creates a degree of uncertainty that could have business implications for the pipeline and the company that constructed it.

Over the next few months, however, it is quite possible that the Corps will take the statutorily mandated “hard look” required by NEPA and re-approve the project — with or without an EIS. The tribes could, of course, further litigate the issues after the Corps’s new evaluation, increasing uncertainty and cost for the project. One of the parties might also appeal the District Court’s decision, which would create a more extended period of uncertainty.

Considerations for Financial Institutions

Meanwhile, the case and related controversies may have an effect on standards that financial institutions apply to such projects.

On May 18, 2017, presumably in reaction, at least in part, to strong public criticism of the institutions financing the Dakota Access Pipeline, the Equator Principles financial institutions — which include 80 banks, such as Citigroup, Barclays, Credit Suisse, Wells Fargo, and JP Morgan — launched a working group to examine whether they should continue to assume that domestic law is adequate in high-income countries.

The Equator Principles financial institutions, which provide the vast majority of the world’s project finance, apply the IFC Performance Standards — a specific set of environmental and social screens — to their review of investments in developing countries. At the moment, these standards are not applied to projects in high-income countries such as the United States, where domestic law is currently deemed to be sufficient. Notably, 10 of the 80 Equator Principles financial institutions — including ABN Amro and BNP Paribas — recently issued a statement calling for application of the IFC Performance Standards in high-income countries.

More information on some of the differences between the IFC Performance Standards and U.S. law — as they relate to indigenous peoples, security, and community engagement — can be found in a recent report, published by Foley Hoag, that was commissioned by the financial institutions that lent to the Dakota Access pipeline. More information about the Foley Hoag report is available here.

Attorneys General Continue to Battle the Trump Administration Over Environmental Regulations

Democratic Attorneys General have continued their efforts to combat the Trump administration’s attempts to roll back environmental regulations developed under the Obama administration in two recent actions. Thirteen AGs, including Massachusetts AG Maura Healey, sent a letter last week to Scott Pruitt, the Administrator of the Environmental Protection Agency, threatening legal action if the agency takes steps to weaken or delay the greenhouse gas emissions standards that were established in 2012 for cars and light-duty trucks for model years 2022-2025. A coalition of states led by democratic AGs also filed a lawsuit in the District Court for the Northern District of California against the Department of Energy on Tuesday, alleging that the agency’s failure to publish final energy efficiency standards for five categories of appliances and industrial equipment violates several federal laws.

The dispute regarding GHG emissions standards for light-duty vehicles began in March when Department of Transportation Secretary Elaine Chao and Administrator Pruitt announced that the EPA would revisit the Midterm Evaluation process, which is required by the GHG emissions regulations. While the EPA had issued a Final Determination of the Midterm Evaluation on January 12 that left in place the unaltered emissions standards for model years 2022-2025, the agency now intends to make a new Final Determination by April 2018.

In their letter to Administrator Pruitt, the AGs responded to a May letter from Pruitt to California Governor Jerry Brown in which Pruitt argued that the first Midterm Evaluation process was legally flawed. Pruitt claimed that the EPA did not allow sufficient opportunity for public comment, did not submit a draft Technical Assessment Report and draft decision to the Office of Management and Budget, and acted prematurely. The AGs countered that the evaluation was “lawful and fully supported by the record” and that EPA concluded that “the current standards are feasible at a reasonable cost, will achieve significant carbon dioxide emissions reductions, and will provide significant economic and environmental benefits to consumers.” The letter stating the signatories’ intent to “vigorously pursue appropriate legal remedies” to preserve the current emissions standards was signed by the attorneys general of Connecticut, Delaware, the District of Columbia, Iowa, Maine, Maryland, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and the Secretary of Pennsylvania’s Department of Environmental Protection.

Many of those same attorneys general brought suit on behalf of the people of their states claiming that the DOE is violating the Energy Policy and Conservation Act, the Federal Register Act, and the Administrative Procedure Act by failing to publish in the Federal Register the energy efficiency standards for portable air conditioners, uninterruptable power supplies, walk-in coolers and freezers, commercial boilers, and air compressors, which the plaintiffs allege were required to be published by March 15. The complaint states that DOE’s failure to finalize the standards undermines their interest in, among other things, increased energy efficiency and reduced energy use within their jurisdictions, and protecting their populations and environments. In May, the DOE published a final rule regarding the energy conservation standards for ceiling fans after plaintiffs filed similar lawsuits challenging delayed energy efficiency standards. Tuesday’s suit was brought by California, Connecticut, Illinois, Maine, Maryland, Massachusetts, New York, Oregon, Pennsylvania, Vermont, Washington and the City of New York.

Climate Change Skeptics Occasionally Become Believers, But Believers Don’t Become Skeptics. Why Is That?

On Friday, Greenwire published a very interesting interview with Jerry Taylor, every climate advocate’s favorite Libertarian. The interview chronicles Taylor’s journey from climate skeptic to climate believer.  For those of you who don’t know his story, Taylor left the Cato Institute to found the Niskanen Center, where he works on promoting Libertarian solutions to climate change.

I’ve seen stories about Taylor before and Greenwire’s piece is an excellent interview (and thanks to Greenwire for taking this out from behind its pay wall and making it available for free!).  The real reason I’m posting about it, though, is that it got me thinking.  Taylor is not the only climate skeptic who’s become a believer – but one sure does not see many stories about climate believers becoming skeptics.

One might wonder why that is, though I confess that the answer seems obvious to me.  Reading the Taylor interview, which does go through his conversion in detail, brought home the point that, if one has an open mind, the conversion process can only run one way.

Climate skeptics like to talk as though they are scientific heroes, fighting today’s dogma until some paradigm shift reveals to the world that they were right all along.  However, in the world of scientific revolutions, the revolutionaries pile decade of evidence upon decade of evidence before the new paradigm overwhelms the old.  Sorry, but that’s not the case here.  Climate skeptics seem to me to be much more like those who point to gaps in the fossil record and somehow create an entire edifice that they think undermines evolution.

We’re still waiting for the intelligent design paradigm shift and we’re going to be waiting a long time for the climate skeptic paradigm shift.  In the meantime, believers of all stripes should welcome Jerry Taylor.  We need all kinds of smart people advocating for all kinds of solutions to climate change.  Let’s hope he brings more Libertarian believers to the fight.

The Latest on Shareholder Climate Activity: BlackRock Begins Explaining Its Votes

We previously noted BlackRock’s recent shareholder votes in favor of increased reporting of climate risks by ExxonMobil and Occidental.  Now, BlackRock has stepped it up a notch by including “vote bulletins” on its investment stewardship web page.  The bulletins will be provided:

in relation to certain high profile proposals at company shareholder meetings. Although we currently explain many of these votes in our quarterly reports, the explanation is usually anonymized and high level. Given the interest in certain votes, we decided it was more effective to explain our approach and decision publicly on the day of the meeting, or shortly thereafter, so interested clients and others can be aware of BlackRock’s vote when it is of most relevance to them.

One fun tidbit from the ExxonMobil bulletin — BlackRock voted against the reelection of two independent directors, as a protest against ExxonMobil’s policy refusing to make independent directors available to meet with BlackRock.

BlackRock must have concluded that, if it wants its increased shareholder activism to have an impact, it needs to get the word out.  I assume that BlackRock is hoping for a bandwagon effect.  We’ll see how effective it is, but I sure don’t see shareholder climate activism decreasing any time in the foreseeable future.

MassDEP Issues Final Pile Field Determination: Get Fixin’!

Back in September and February, we wrote about MassDEP’s Proposed Interpretation of Chapter 91 regulations, which attempted to provide guidance to the regulated community on the conditions under which a historic pile field can contribute to the “project shoreline” — the outer boundary of a development proposal.  Triggered by proposed redevelopment of Lewis Wharf, the proposed interpretation essentially stated that if the piles comprising a pile field were no longer visible at “Extreme High Water”, they could not be considered part of the pile field forming the project boundary.   This draft interpretation raised a host of concerns, including whether it imposed a de facto obligation on pile field owners to keep their piles in tip top shape or risk losing their development rights.   The interpretation also appeared to be imposing a regulatory burden without the proper notice-and-comment accompanying a regulatory revision.  MassDEP received nearly 200 pages of comments on the proposed interpretation.

Clippership Wharf site, East Boston.  Source:  The GroundTruth Project.

 

In last week’s Environmental Monitor, MassDEP announced its Final Interpretation.  So how’d they do?

  • Very few substantive changes were made to the policy, except to replace the reference to “Extreme High Water Mark” with “High Water Mark”, a term that is already defined under the regulations.  Okay, now property owners needn’t worry that a King Tide alone will strip them of their development rights.
  • MassDEP stuck to its original approach stating that an “existing pile field” does not include “any broken piles that are not visible at high water” or any piles “cut at or near the mudline”

So, are property owners with decaying pile fields up a creek without a paddle?  Not necessarily.

  • MassDEP emphasized throughout that “its application of its interpretation is limited specifically to the Lewis Wharf project”, that the application of the regulations “will be dependent on the facts in any situation”, and that the interpretation is not “intended to serve as a new regulation or an amendment to an existing regulation.”
  • MassDEP also stated that this interpretation “will not affect the ability of current license holders to remedy violations or make repairs and modifications arising from decay, damage, changes in sea level or any other occurrence with authorization from the Department, pursuant to 310 CMR 9.22, 9.24 and 9.26”

What is a pile field owner to do?   It may seem a bit like economic waste, but exercise your rights under existing regulations to repair and replace those decaying piles first, then apply to MassDEP for a Chapter 91 License with your new-and-improved, higher-than-high-tide pile field in place.

It remains to be seen whether this approach is available to Lewis Wharf, but the door appears to be slightly open.

(See attached for a redline showing the changes between the draft and final interpretation.)

Attorney General Sessions Bars Settlement Payments to Third Parties: RIP SEPs?

Earlier this week, Attorney General Sessions issued a brief memorandum barring DOJ from entering into any civil or criminal settlement that would provide for a payment by a defendant to any non-governmental person that is not a party to the dispute.

Where does this leave the common practice of mitigating enforcement penalties through the implementation of Supplemental Environmental Projects?  Hanging on by a thread, I’d say.

The memo does have two exceptions potential relevant to environmental cases.  First, it only applies to “non-governmental” persons and entities.  Thus, if a SEP can be structured so that a governmental entity receives the benefit of the SEP, that would still seem to be kosher.  Second, the prohibition does not apply to:

an otherwise lawful payment that directly remedies the harm that is sought to be redressed, including, for example, harm to the environment.

As practitioners know, EPA and DOJ have historically required some kind of nexus between the SEP and the alleged harm resulting from the alleged violation, but in my experience DOJ would be hard-pressed in most cases to demonstrate that the SEP payment “directly remedies the harm.”

Corporate defendants often want to implement SEPs, either because they think that the money is better spent on the SEP than on a penalty or because they believe that they will receive a public relations benefit.  This thus seems an example of biting off the corporate defendant’s nose to spite the NGO’s face, but what do I know.

Finally, I love the sentence in which the AG states that “[i]t has come to my attention that certain previous settlements” involved SEPs.  It’s not as though EPA or DOJ were hiding the fact that SEPs are frequent part of settlements.  In fact, they are generally trumpeted by the government.  This feels to me a little like Claude Rains in Casablanca.  “I am shocked, shocked, to find that SEPs are being entered into here.”  

Trump’s “2 for 1” EO: Can You Say “Arbitrary and Capricious”?

On Monday, on behalf of our client, the Union of Concerned Scientists, Foley Hoag filed an amicus brief in support of the plaintiffs in the case challenging President Trump’s Executive Order 13771, the so-called “2 for 1” EO.  One paragraph from the brief pretty much summarizes the argument:

It is important to note, as Executive Order 13771 acknowledges, that agencies are already required, where not prohibited by law, to ensure that the benefits of regulations exceed their costs. Thus, the only impact of the Executive Order is to prohibit agencies from promulgating regulations whose benefits exceed their costs, unless they eliminate two other regulations whose benefits also exceed their costs. This is the definition of unreasoned decisionmaking. It is also a thumb in the eye of Congress, which enacted public health and environmental statutes in order to benefit the public.

Put simply, I think that the EO is indefensible.  It’s not about regulatory reform.  It’s a transparent attempt to halt environmental regulation in its tracks, without regard to the benefit those regulations provide.

It is a bitter irony that the government is defending the EO in part on the basis that it is just another in a long line of regulatory reform EOs, when in fact the EO is a repudiation of those prior orders, not an extension of them.  This order is not about cost-benefit analysis; it is about cost-only analysis.  By definition this approach ignores the public benefits that the underlying statutes are intended to provide.  Thus, the “savings clause” cannot save the EO, because there is nothing left to save.

Shareholders at ExxonMobil Vote in Favor of Climate Change Reporting

On May 31, shareholders at Exxon Mobil Corp. (“ExxonMobil”) voted in favor of a climate change resolution asking the company to publish an annual report on the business impact of measures designed to limit global temperature increases to 2 degrees centigrade, the target set by the Paris Agreement.

The non-binding resolution passed with more than 62% of the votes cast. Specifically, the resolution asks that,

…beginning in 2018, ExxonMobil publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies, at reasonable cost and omitting proprietary information. The assessment… should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree target.

Several large financial firms, including BlackRock, Inc., supported the resolution, which was opposed by corporate management. As noted previously, BlackRock had previously supported a similar shareholder resolution which passed at Occidental Petroleum on May 12.

Notably, the resolution passed on the day in which many media outlets reported that the United States will rescind its support for the Paris Agreement. President Trump intends to make a formal announcement regarding the Trump Administration’s position on the Paris Agreement on June 2. Many American companies, including ExxonMobil, have argued that the United States should remain a party to the Agreement.

Shareholders Are Getting Restless; Climate Change Resolution Passes at Occidental

In March, I noted BlackRock’s increasing concern over climate.  One element of its statement was “potential support for shareholder resolutions on climate risk”, where “management’s response to our prior engagement has been inadequate.  Turns out that they meant it.

Earlier this month, shareholders at Occidental Petroleum approved a climate reporting proposal – over the directors’ opposition – proposed by CalPERS and supported by BlackRock, which is apparently Occidental’s largest shareholder.  True to its word, a statement from BlackRock noted that there was indeed a “lack of response” by the company’s management to previously expressed concerns about Occidental’s climate risk reporting.

Who’s next?  ExxonMobil shareholders vote on a similar proposal on May 31.

Hat tip to Sarah Altschuller and our CSR blog for bringing this to my attention.

Superfund Reform, Part 2: Giving Credit Where Credit Is Due

Last week, I offered less than fulsome praise of EPA Administrator Pruitt’s announcement that he was taking control of remedial decisions for big Superfund sites.  Now, he’s followed up with a memorandum announcing establishment of a task force to look at ways to reform Superfund implementation.  While he’s still plainly wrong in putting Superfund “at the center of the agency’s core mission,” I have to confess that I think he otherwise has pretty much hit a home run with the latest memorandum.

Let’s start with the basics.  Superfund is a mess.  It’s one of the most poorly written statutes in Congressional history, and Superfund cleanups take way too long, are way too expensive, and fail to deliver bang for the buck in either risk reduction or productive reuse.

In a perfect world, Superfund would be amended to privatize cleanups and put cost-effective risk-based cleanups at the center of the program.  However, Scott Pruitt cannot unilaterally amend Superfund.  Heck, he may not realize it, but even Donald Trump cannot unilaterally amend Superfund.

Given this reality, Pruitt’s memorandum identifies all of the appropriate goals for meaningful administrative reform.  They include:

  • a focus on identifying best practices within regional Superfund programs, reducing the amount of time between identification of contamination at a site and determination that a site is ready for reuse

  • overhaul and streamline the process used to develop, issue or enter into prospective purchaser agreements, bona fide prospective purchaser status, comfort letters, ready-for-reuse determinations

  • Streamline and improve the remedy development and selection process, particularly at sites with contaminated sediment, including to ensure that risk-management principles are considered in the selection of remedies

  • Reduce the administrative and overhead costs and burdens borne by parties remediating contaminated sites, including a reexamination of the level of agency oversight necessary.

The last is my personal favorite.

I somehow expect I’m not going to be praising this administration on a regular basis, but I can still acknowledge when they get something right.  Let’s just hope that the task force is for real and comes up with a set of meaningful administrative improvements.

Fingers crossed.

Scott Pruitt Just Solved All of the Problems with Superfund. Not.

Last week, EPA Administrator Pruitt issued a memorandum requiring that all Superfund remedies estimated to cost at least $50 million be approved by the Administrator.  I’m not optimistic that this will cure, or even ameliorate, what ails CERCLA.  

First, the memorandum gets off on precisely the wrong foot.  Administrator Pruitt states that:

 The Superfund program is a vital function of the U.S. Environmental Protection Agency, and under my administration, Superfund and the EPA’s land and water cleanup efforts will be restored to their rightful place at the center of the agency’s core mission.

What’s the problem with this statement?  When EPA has actually looked at the top risks addressed by its programs, risks from Superfund sites never even make the list.  Except for a limited set of circumstances, Superfund has been a colossal waste of money, resources, and focus for EPA.  If Administrator Pruitt wants to reform Superfund, he shouldn’t be “placing it at the center of the agency’s core mission.”  He should be further deemphasizing it.

Even if one assumes that this is just puffery, the new approach is flawed on the merits, for at least two reasons.

First, the problem with Superfund is that it’s the last bastion of command and control regulation.  I understand that Pruitt may want to take the reins precisely to reduce the number of ukases issuing from the regional offices.  However, the underlying problem will remain; he just thinks he’ll be providing kinder, gentler, command and control.  Wouldn’t it be better to support fundamental reform of CERCLA, to create a privatized program, such as in Massachusetts and other states?

Finally, while PRPs might just wish Superfund went away, in the real world, PRPs just want certainty and timely decisions.  Aside from a few cases where Pruitt might put the kibosh on expensive remedies that don’t eliminate real risks, I fear that in the majority of cases, all that will happen will be that cleanup decisions will be delayed; PRPs will pay more as a result of such delays.

This administration continues to give regulatory reform a bad name.

Will There Be a Trial on Climate Change Public Trust Claims? It’s Looking that Way.

Last November, the District Court of Oregon denied the motion of the United States to dismiss claims that the United States had violated a public trust obligation it owes to US citizens to protect the atmosphere from climate change.  Not surprisingly, the government sought interlocutory appeal.  On Monday, Magistrate Judge Thomas Coffin issued a Finding and Recommendation that the request for interlocutory appeal be denied.  Since certification of interlocutory appeals is discretionary with the District Court, it looks as though there’s going to be a trial on the plaintiffs’ claims.

I found the really interesting part of the F&R to be the Court’s summary of the United States’ answer, filed on January 13, 2017, just a week before the inauguration.  In it, the government admitted what I’m sure the plaintiffs are describing as “all kinds of good stuff.”  Allegations from the complaint that the government admitted include:

That there is a scientific consensus that the buildup of GHGs (including CO2) due to human activities (including the combustion of fossil fuels) is changing  the global climate at a pace and in a way that threaten human health and the natural environment.

That climate change is damaging human and natural systems, increasing the risk of loss of life, and requiring adaptation on larger and faster scales than current species have successfully achieved in the past, potentially increasing the risk of extinction or severe disruption for many species.

That current and projected atmospheric concentrations of six well-mixed GHGs, including CO2, threaten the public health and welfare of current and future generations, and this threat will mount over time as GHGs continue to accumulate in the atmosphere and result in ever great rates of climate change.

I can understand why the Obama administration might move to dismiss this case on political question grounds, while admitting to many of the underlying allegations, including these.  I can also imagine that the Trump administration might want to defend this case on the merits as well.

This case may take longer to resolve than I had previously thought.

Not “Too Big to Fail.” Too Big to Comply.

Last year, the 5th Circuit Court of Appeals vacated the decision by District Judge David Hittner not to impose any penalties on ExxonMobil for violations alleged in a Clean Air Act citizens’ suit concerning ExxonMobil’s Baytown facility.  At the time, I asserted that the case was largely a win for ExxonMobil.

Last week, Judge Hittner, in an opinion which was admirably scrupulous in not trying to dodge the 5th Circuit remand, imposed a $20 million penalty against ExxonMobil.  I still think ExxonMobil should declare victory.

Why?

Because Judge Hittner reiterated all the same issues I noted last May:

  • Deviation reports, by themselves, do not constitute evidence of violations
  • There is no need for a declaratory judgment
  • There is no need for an injunction
  • ExxonMobil demonstrated good faith efforts to comply.

Ultimately, the court simply utilized the available evidence concerning the economic benefit of noncompliance, determined that benefit to be approximately $14 million, added a 50% multiplier, and set the penalty at the resulting $20M.  Given that he found more than 16,000 days of penalties and the maximum penalty was more than $500M, it indeed seems like a pretty good result for ExxonMobil.

The complexity of Baytown is almost beyond comprehension.  It is subject to more than 120,000 separate permit conditions.  Exxon spends more than $500M annually on maintenance at Baytown; the $20M is thus only 4% of the annual Baytown maintenance budget — just a drop in the bucket.

This is not a criticism of Judge Hittner or ExxonMobil.  The Judge was clearly sympathetic to ExxonMobil, but I still think he took the remand order seriously and did a thorough job in assessing the violations and determining the appropriate penalty.  It appears that he was justified in concluding the ExxonMobil had made good faith efforts to comply.

The bottom line is that ExxonMobil is just too big to comply.  Maybe the big banks should have tried that argument.