Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

Two recent decisions from the Southern District of Texas make clear that, like pornography, the courts know arranger liability under CERCLA when they see it. Both cases involve defendants in private cost recovery actions arising out the Tex Tin Superfund Site in Texas City, Texas. The Tex Tin Settling Defendants Steering Committee (known by the mellifluous acronym TTSDSC) brought suit against Dow Chemical and Bayer USA, alleging that each had arranged for the disposal of hazardous materials at the Tex Tin Site. Dow Chemical obtained summary judgment that it was not liable for its shipments of hydrochloric acid – HCl – to the Site. Bayer Chemical was not so lucky. The Court denied Bayer’s motion, related to its shipment of nickel catalyst to the Site.

The Court began each decision acknowledging that decisions regarding arranger liability are necessarily site- and fact-specific. It then enumerated the relevant factors, which include: “whether the person (1) intended to engage in a transaction for the purpose of waste disposal; (2) owned or possessed the waste; (3) had some actual involvement in the decision to dispose of the waste, or, alternatively had an obligation to control the disposal of the waste; (4) and/or controlled the waste disposal regardless of whether it owned or possessed the waste.” The Court also noted that liability may only be imposed “if the material in question constitutes ‘waste’ rather than a 'useful product.’”

With these helpful guidelines, let’s figure out who’s liable at Tex Tin. 

Dow Chemical sent HCl to Tex Tin. Dow produced HCl as a byproduct from the manufacture of other chemical products. It thus appears that HCl production was not the primary intent of Dow’s operations. However, Dow did sell HCl to numerous customers and had a dedicated Marketing Manager for HCl sales. The HCl was used the by Tex Tin site operators without any further processing.

Bayer send nickel catalyst to Tex Tin. The nickel was apparently sufficiently useful that the site operator paid Bayer $.50/pound. However, the nickel required processing at the Tex Tin site and the price paid by Tex Tin was substantially below the market price of nickel of $2.96/pound during the period of the sales to Tex Tin. Based on these facts, the court was not prepared to grant summary judgment to Bayer.

Given that these decisions were at the summary judgment stage, they both seem reasonable on their facts. It would have been interesting to see what the Court would have done if the TTSDSC had also filed a summary judgment motion against Bayer. It will also be interesting to see what happens at the trial, if the case does not settle. The bottom line is that there is no less uncertainty on this issue than there ever was – good for lawyers; not so good for clients.

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Opening yet another front in the effort to force EPA to take more aggressive action to combat global warming, the Environmental Defense Fund recently announced its intent to sue EPA for its failure to update emissions standards with respect to emissions of methane from landfills. As EDF has alleged, Section 111 of the Clean Air Act requires that EPA update its New Source Performance Standards every eight years. EPA last updated the landfill NSPS in 1996.

Of course, at the time EPA last promulgated landfill NSPS, climate change was not part of the equation. Now, it is. Methane is a potent greenhouse gas, 21 times more potent than CO₂. Although landfills have increasingly made efforts to capture methane for waste-to-energy projects, these efforts are apparently not fast enough or comprehensive enough for EDF.

Specifically, in its 1996 promulgation, EPA determined that energy recovery from landfill methane was not available. EDF, in its Notice, cites sources indicating that energy recovery is now feasible, even at smaller landfills. 

The likelihood that EPA will revisit this issue in the limited time remaining to the current administration seems vanishingly small. However, there is no doubt that this issue will be revisited in the next administration. Given methane’s potency as a greenhouse gas, it seems likely that regulations will target this area, whether as part of a revision to NSPS or as part of a broader strategy aimed directly at climate change. Once cap and trade programs expand beyond the power generation sector, as seems likely, regulators are certainly going to be looking at reductions from landfills, among other non-power sources.

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Has the D.C. Circuit had second thoughts about its decision to vacate EPA’s Clean Air Interstate Rule? As we noted last month, after Congress pretty much threw up its hands at efforts to salvage some part of CAIR, EPA, states and private stakeholder were left wondering how to proceed. Now, the Court may have provided a life-line to CAIR. In surprise Order issued last week, the Court requested additional briefing on the scope of its decision to vacate the rule.

The order does not suggest any retreat by the Court from its decision that the regulations have several serious flaws. However, on the remedy side, the Court appears to have realized that no one was really expecting CAIR to be vacated in its entirety – and that no one knows what to do if the vacatur stands. Thus, the Order requests briefing on two subjects: (1) whether indeed any party seeks vacatur and (2) whether the court should stay its mandate until EPA promulgates a revised rule.

Of course, the Court is not bound to any specific approach just because it has asked for briefing. However, it seems unlikely that the Court would request the briefing if it did not at the least have serious concerns regarding the impact its vacatur of CAIR would have on the stability and predictability of regulations in this area. Once more, we can only say: stay tuned.

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It’s not really a surprise, but the nation’s financial woes have begun to affect state government. On Wednesday, Governor Deval Patrick announced a set of wide-ranging budget cuts, intended to save more than $1 Billion. The cuts were made necessary by a steep drop in tax revenue and predictions that the drop will continue for the rest of the state fiscal year. The Governor’s stated intention is to avoid cuts in local aid and education funding and this announcement did avoid any cuts in these areas.

Therefore, it is not surprising that agencies such as the Executive Office of Energy and Environmental Affairs and the Department of Environmental Protection have had to make cuts, though the Governor apparently did take into account the severity of the cuts made at DEP during the last downturn, and spared DEP more than what might have been expected.

One area where the cuts may be felt is in the speed of environmental permitting and responsiveness to the regulated community. Among the cuts at DEP are $100,000 from the Clean Air Operating Permit and Compliance Program and $45,000 from the Hazardous Waste Cleanup Program. Although Governor Patrick has frequently trumpeted his goal of having DEP and other permitting agency respond “at the speed of business,” such cuts cannot help but slow down DEP’s ability to respond to permit applications and other filings by businesses.

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The new Determination of Need Guidelines for Environmental and Human Health Impact adopted by the Massachusetts Department of Public Health are further evidence that sustainability and green development are much more than just buzzwords in Massachusetts. It appears that this administration is serious about incorporating green development principles into all executive branch decision-making.

In brief, the Guidelines require a health care facility applying for a Determination of Need (“DoN”) for new construction or gut renovation to meet LEED-HC “silver level” green building standards. The scope of the Guidelines’ impacts could not be broader, implicating site selection, water and electricity use, and choice of construction materials. And because the Guidelines take effect as soon as January 1, 2009, it is likely that projects already under consideration will need to meet the new standards.

I look at the Guidelines as just one example of how the “green” movement is reaching into all corners of our economy. In the past, environmental regulation was concentrated on industries such as mining, agriculture, manufacturing, and power generation. This is changing. Today, government is taking steps to ensure that businesses in a wide variety of industries take cognizance of their water use, energy efficiency, and greenhouse gas impacts. It certainly appears that any types of facility subject to government funding or approval should be thinking about green development in general and LEED certification in particular. If health care facilities must meet LEED standards, why not affordable housing or education institutions funded by the Commonwealth? Why not municipal facilities? Indeed, more than a dozen municipalities in the greater Boston area already incorporate LEED or similar green building standards into their zoning bylaws. 

While this changing regulatory landscape is certain to impose up-front costs in complying with these standards, there may also be business opportunities for organizations that are proactive in addressing these issues. Companies and organizations that get out ahead of the curve will be well-positioned to take competitive advantage of the real push for green development.

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On October 7, 2008, the Environmental Protection Agency (EPA) issued a new final rule (the “Rule”) that exempts certain recycled hazardous secondary materials from RCRA’s “cradle to the grave” regulatory system.

Hazardous waste is regulated under Subtitle C of the Resource Conservation and Recovery Act (RCRA). A hazardous secondary material can only be classified as a hazardous waste if it is first determined to be a solid waste as defined in Section 261.2 of the RCRA regulations. Previously, Section 261.2 classified some hazardous secondary materials, but not others, as solid wastes even when recycled. As complying with RCRA can be expensive and burdensome, Section 261.2 likely deterred many companies from recycling hazardous secondary materials deemed to be solid waste.  

The new Rule now explicitly excludes from the definition of solid waste three categories of hazardous secondary materials that are “legitimately” recycled. First, the Rule excludes hazardous secondary materials that are generated and reclaimed under the control of the generator (i.e., generated and reclaimed on-site, by the same company, or under “tolling” agreements). Second, the Rule excludes materials that are transferred by a generator to a reclamation facility (or an intermediate facility prior to recycling at a reclamation facility), provided that certain conditions are met. Finally, the Rule provides a procedure for applying for a case-by-case “non-waste determination” when the hazardous secondary material is legitimately recycled in a continuous industrial process or indistinguishable in all relevant aspects from a product or intermediate. The new exclusions and non-waste determination are, however, not available for materials that are: (1) considered inherently waste-like; (2) used in a manner constituting disposal; or (3) burned for energy recovery.       

For a hazardous secondary material to be “legitimately” recycled under the new exclusions or a non-waste determination, the following factors must be met: (1) the material must provide a useful contribution to the recycling process; and (2) the recycling process must make a valuable new intermediate or final product. Two additional factors must be considered, but are not mandatory: (3) whether the recycled material is managed as a valuable commodity; and (4) whether the recycled product contains toxic constituents at significantly greater levels than a non-recycled product made from virgin materials. EPA has long assessed the legitimacy of recycling activities under RCRA based on substantially these same four factors. See 53 FR 522. This Rule merely codifies the factors with minor adjustments.

Overall, the Rule is a helpful example of deregulation that should facilitate recycling without sacrificing environmental protection. The facilities most likely to benefit from the rule will include manufacturers that generate or already recycle hazardous secondary materials.  The most common types of recyclable materials that would be affected by the rule are metal-bearing secondary materials and solvents.

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As pretty much everyone knows, in order to improve its prospects for passage, the Senate added certain tax provisions to the financial bailout bill – also know as the Emergency Economic Stabilization Act of 2008, or H.R. 1424 – enacted earlier this month. One of the provisions included in the EESA was an extension of the brownfields tax incentive.

The brownfields tax incentive, originally enacted as part of the Taxpayer Relief Act of 1997, and codified as Section 198 of the internal revenue code, allows developers to immediately expense the cost of remedial work at brownfields sites, rather than having to capitalize such costs. The incentive actually expired as of December 31, 2007, but the EESA provision extends that date to December 31, 2009.

Historically, this tax incentive has been used only rarely used. In a report from 2007, the Congressional Research Service identified several possible reasons why. One issue is that the taxpayer must obtain certification from the relevant state environmental agency that the property qualifies as a brownfields site. However, more relevant here, the report noted that Congress’s failure to make the provision permanent – it has expired and been renewed several times at this point – is a significant factor in its limited utility. 

Given that the EESA renewal of the provision only continues this stop and start quality, it is not obvious that the provision will find any greater utility now than previously. Nonetheless, for those who are aware of it and whose property qualifies, extension of the provision is certainly good news.

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