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

If environmental lawyers have been wondering when they’re going to get their share of economic stimulus, it’s time to stop wondering. Last week, Cynthia Giles, EPA’s Assistant Administrator for Enforcement and Compliance Assurance, announced that her office would be focusing on higher impact cases.  Giles also noted that, by the end of this month, EPA would have more than 200 criminal investigators.

If it weren’t for one statement by Giles, I don’t think that this would be news. Enforcement numbers always fluctuate. Environmental and watchdog groups always criticize EPA and state agencies when the numbers go down, and EPA and state agencies always respond to that criticism.

What caught my eye, however, was this. According to the Daily Environment Report, Giles said that the best measure of the effectiveness of EPA’s enforcement efforts is

how many people are charged and how many people are convicted, and on those scores I think we're doing pretty well.

Sorry. I don’t buy it. If everyone’s complying, then no one gets charged and no one gets convicted. I’m not naïve. Not everyone does comply and vigorous enforcement is necessary to ensure that compliance does happen. In fact, most of my clients are large corporations who comply with environmental laws and they often appreciate vigorous enforcement, because it helps ensure a level playing field. 

At the same time, however, it’s important to recognize that enforcement numbers don’t particularly correlate with the level of compliance. Nor are they a good measure of whether environmental agencies are doing their job well. Instead, enforcement numbers are mostly just red meat to advocacy groups who either want scalps, want to pressure agencies to do more, or both.

Giles’s remarks may be good news for environmental lawyers, but that doesn’t mean that more enforcement is the best use of government resources to increase environmental protection.

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My partner Robby Sanoff blogged last week about the “Illusion of Finality in CERCLA.” His post addressed City of Emeryville v. Sherwin-Williams, in which the 9^th Circuit Court of Appeals held that a person who was not a party to a prior settlement could bring a contribution claim against such a settling party, at least where the new claim involved contamination at a downgradient property, rather than the property that was the subject of the first settlement.

City of Emeryville seems to have been rightly decided. The only real lesson it teaches is that a PRP who wants to settle and achieve finality must do everything possible to ensure that all potentially liable parties are brought to the table and that the site is properly defined.

However, a case from earlier this summer just came to my attention. Its lesson is different. Its lesson is that CERCLA is just plain nuts, and judges’ efforts to harmonize its decisions can do more harm than good. Ashland v. Gar Electroplating teaches that there is no finality under CERCLA and that parties who step up to the plate to settle with the government and perform cleanups can be subject to joint and several cost recovery claims brought by recalcitrants. Alice in Wonderland, here we come.

Although Ashland seems wrong, Judge Lisi’s decision is a not surprising consequence of the simplistic CERCLA jurisprudence announced by Justice Thomas in Aviall and Atlantic Research. In holding that contribution claims are limited to those who have been the subject of litigation or certain kinds of settlements with the United States or a state, and that PRPs not subject to suits or administrative orders can bring cost recovery actions under § 107 of CERCLA, the Supreme Court has opened a Pandora’s Box.

What evil genie was loosed in Ashland? The facts are too complicated for a complete recital, but some history is required. Here goes:

1.                   The government sued a number of parties, including United Technologies, under CERCLA. The claims related to the Davis Liquid Waste Site, in Smithfield, Rhode Island.

2.                   The defendants brought third-party claims against a number of other PRPs, including Ashland.

3.                   Some original defendants (including this firm’s client, Ciba-Geigy) settled.

4.                   The United States went to trial against UT and obtained a finding of liability. UTC then settled with the government and agreed to perform a portion of the remedy. It also agreed to allocate sums recovered from the third-party defendants with the government.

5.                   A number of third-party defendants, not including Ashland, settled with UTC – and the government. 

6.                   The case against Ashland (and some other non-settlors) went to trial. Ashland was found liable. The judge allocated liability and imposed a percentage share on Ashland. 

7.                   At some point, EPA directly notified Ashland that it was a PRP and sent Ashland an administrative order on consent, requiring it to perform certain groundwater cleanup.

8.                   It is not clear if Ashland signed the AOC, but, according to an EPA affidavit, Ashland agreed to perform certain cleanup work.

9.                   Ashland spent approximately $2 million performing the work.

10.               It then brought claims under § 107 of CERCLA.  It had no contribution claim, because nothing had happened to bring Ashland under the ambit of § 113.

11.               The United States and the State of Rhode Island both filed amicus briefs on behalf of those sued by Ashland, arguing that their respective settlements with UTC barred Ashland’s claims.

Faced with these facts, what did Judge Lisi do? First, she found that Ashland does have a right to bring claims under § 107. Because it was not sued by the United States or Rhode Island, Ashland was not limited to contribution claims.

Second, Judge Lisi found that the allocation previously reached in the private action was not applicable to this case, precisely because the private case was for contribution and this case is a claim under § 107, which is assumedly one for joint and several liability. While Judge Lisi noted that the defendants in this action can bring counterclaims for contribution, the burden is on them to prove that the harm is divisible. 

As someone might say, OMG. Here’s what Justice Thomas has done to us. The recalcitrant party has a joint and several claim against those who settled with the government, and the burden is on the good guys to prove that liability should not be joint and several. 

If I may be permitted to gloat, I raised this specter following Aviall and Atlantic Research, and was generally told not to worry; the district courts would find ways to reach practical results. Plan B would seem to be the 1^st Circuit Court of Appeals. Plan C? I can’t wait to see what Justice Thomas would make of this fine mess.

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A recent amendment to the EPA’s Mandatory Reporting of Greenhouse Gases Rule (40 CFR part 98) requires companies that report their emissions to also provide information on corporate ownership,  North American Industry Classification System (NAICS) codes, and whether any of the emissions come from a cogeneration unit. The goal behind collecting this information is to gain a better understanding of the aggregate greenhouse gas (GHG) emissions from corporations and specific industry sectors, and identify potential differences in emissions between otherwise similar facilities due to cogeneration. Such information can be used to guide future GHG regulations and mitigation strategies. The rule was signed by Administrator Jackson last week and is to be published the Federal Register shortly. 

The final rule requires facilities and suppliers reporting GHG emissions (large industrial facilities that emit 25,000 metric tons or more per year, plus suppliers of fossil fuels and industrial gases, and a few others) to include, in their first annual GHG emission report due on March 31, 2011,  the name and address of each US parent company and a breakdown of the percentage share that each parent owns. It also requires the facilities to report any NAICS codes that apply to the facility – both the primary code as well as any others that are appropriate.

The third requirement takes the form of a checkbox indicating whether the report includes emissions from a cogeneration unit, defined by EPA as “a unit that produces electrical energy and useful thermal energy for industrial, commercial, or heating or cooling purposes, through the sequential or simultaneous use of the original fuel energy.”  In the final rule, EPA notes that there are no current programs that require facilities to identify whether they have cogeneration units – EPA’s Combined Heat and Power Partnership is only a voluntary program, and while the Energy Information Administration collects information on cogeneration from power generators greater than 1 megawatt, this program likely does not cover all of the facilities and suppliers subject to 40 CFR part 98.

The information collected on cogeneration through this rule is just a start, and useful primarily to merely identify the facilities using cogeneration. As EPA correctly notes, the information likely will not be sufficient to determine the quantity of GHG emissions occurring from particular NAICS sectors or cogeneration units within an individual reporting facility, or the degree to which cogeneration emissions at the applicable facilities displace onsite use of fossil fuel or other emissions from centralized electric generation. Nonetheless, information on the types and characteristics of facilities that use cogeneration could be important to the future development of GHG mitigation strategies.

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In City of Emeryville v. The Sherwin-Williams Company, the Ninth Circuit recently underscored that CERCLA settlements can be a risky business that don’t always produce finality, particularly when neither the United States nor a state is a party. 

The Ninth Circuit decision grew out of a federal court action by the City of Emeryville involving contamination at a manufacturing facility that had been operated by Sherwin-Williams. Sherwin-Williams settled that suit and obtained what it thought was broad protection against contribution claims based on contamination “at, on, under, and emanating from” the facility.

After Sherwin-Williams had performed its obligations under the settlement, the Emeryville Redevelopment Agency filed a lawsuit in state court involving contamination at a property adjacent to the former Sherwin-Williams facility. Sherwin-Williams was a defendant in that new action, as were the City of Emeryville and other parties who had not been involved in the federal court action. When the City of Emeryville and those other parties cross-claimed against Sherwin-Williams, Sherwin-Williams went back to federal court to enforce its settlement and its contribution protection. The District Court agreed with Sherwin-Williams and ruled that the settlement barred any claims in the state court action by the City of Emeryville and the other parties to the extent those claims were based on contamination migrating from the former Sherwin-Williams facility. 

On appeal, the Ninth Circuit agreed that claims by the City of Emeryville were barred but ruled that claims by the other parties who had not been included in the original federal action or who had not received notice of the settlement could not be precluded.   According to the Ninth Circuit, the broad contribution protection authorized by Section 113(f)(2) of CERCLA is triggered only when the settlement involves either the United States or a state and the City of Emeryville was not a state no matter how hard Sherwin-Williams claimed it was. The Ninth Circuit went on to hold that a federal court in approving a CERCLA settlement has authority to provide contribution protection but only with respect to parties who are PRPs with respect to the site that is the subject of the settlement.

Although it may seem like a harsh result for Sherwin-Williams, it’s hard to disagree with the reasoning of the Ninth Circuit.   While it is fair to hold the City of Emeryville to the deal it made and bar its contribution claims against Sherwin-Williams, it would be palpably unfair to bar claims by parties that did not participate in the original settlement, did not know of the settlement, and had no reason to know of it because they were not PRPs with respect to the former Sherwin-Williams facility. Whether or not the state court ultimately limits Sherwin-Williams’ liability for the adjacent property based on its undertakings in its settlement with the City of Emeryville, the lesson seems clear. Finality in Superfund settlements can be illusory, particularly where the settlement does not involve the federal or state government. 

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Technology geeks such as myself love nanotechnology. I think it’s the future of everything – including the solution to environmental problems ranging from climate change to Superfund cleanups. However, there are concerns about the toxicity of nanomaterials.

Last Friday, EPA took a significant step in the regulation of nanomaterials by publishing significant new use rules – SNURs – for both single- and multi-walled carbon nanotubes. Any person manufacturing, importing, processing, or using SWCNT or MWCNT (and you’ve got to love nanotechnology, if only for the proliferation of new acronyms), will be subject to the SNURs. The SNURs are based on consent agreements EPA had previously entered into with the original manufacturer of the nanotubes. Redacted copies of the consent agreements can be found at EPA's regulation page.  

In terms of substance, the rules include both a worker protection component, requiring impervious clothing and use of full-face respirators in certain contexts, and a requirement to prevent releases of the nanotubes to water.  Uses in which the nanotubes have been fully reacted or enclosed in a polymer matrix are exempt from the rules.

If nanomaterials really hold the promise that we hope, we’re going to start seeing many more of these rules in the next few years. It must say something that we can track the progress of a new technology by the number of regulations issued by EPA, but I don’t think I’ll go there today.

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Discussion of the Smart Grid usually focuses on efficiencies that may be achieved by a system that responds to real time information about energy production, distribution and consumption. But the development of this advanced digital infrastructure, with two-way capabilities for communicating information, controlling equipment, and distributing energy, also presents some legitimate information security and privacy concerns. For example, a disgruntled employee or a terrorist with the right computer skills could penetrate a network and alter load conditions to destabilize the grid in unpredictable ways. The grid may also be compromised by inadvertent events such as equipment failures and natural disasters. 

On the privacy side, the Smart Grid will greatly expand the amount of data that can be monitored, collected, aggregated and analyzed. For example, information about specific appliances and generators used by consumers can be tracked from the electric information “signatures” they produce. The driver of an electric vehicle will also leave an electrical roadmap of her travels. 

In response to these concerns, the National Institute of Standards and Technology (NIST) released guidance earlier this month entitled Smart Grid Cyber Security Strategy and Requirements. The three-volume guidance document is intended for “Smart Grid stakeholders” including vendors of energy information and management services, equipment manufacturers, utilities, system operators, network specialists and regulators. 

• Volume 1 presents a risk assessment framework and describes high-level security requirements;
• Volume 2 focuses on privacy issues in personal dwellings and recommends how entities that participate in the Smart Grid might address these issues; and
• Volume 3 is a compilation of supporting analyses and references.

Kudos to anyone who can decipher the NIST’s “Logical Reference Model” pictured below. Nevertheless, the guidance provides a useful framework for addressing these complex issues.

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When clients are threatened with citizen suits – and particularly when the threatened litigation involves a matter where EPA or a state regulatory agency is heavily involved, the clients always want to know why they can’t somehow get rid of the citizen suit, given that EPA is on the case. The answer is that they can – but only in limited circumstances.

The recent decision in Little Hocking Water Association v. DuPont confirmed this answer in the context of RCRA. The Little Hocking Water Association provides public water to certain communities in Ohio, directly across the Ohio River from a DuPont plant which uses , also known as PFOA or C8 – also known as the contaminant du jour. According to the complaint, the Little Hocking wells have among the highest concentrations of C8 of water supply wells anywhere and its customers have among the highest C8 blood levels anywhere. Little Hocking Water Association thus sued DuPont under RCRA’s citizen suit provision, claiming that DuPont’s release of C8 had created an “imminent and substantial endangerment."

Section 7002 of RCRA contains provisions precluding such citizen suits if either EPA or a state “has commenced and is diligently prosecuting” an action under RCRA to abate the endangerment. In the DuPont case, releases of C8 from the DuPont facility had been the subject of at least two administrative orders on consent entered into by DuPont and EPA. However, consent orders aren’t the same as “an action” under § 7002 or § 7003 of RCRA – and they thus do not preclude a citizen suit.

DuPont tried the next best argument – that EPA had primary jurisdiction over the regulation of C8 – and that the existence of EPA’s regulatory authority and the issuance of the consent orders meant that the courts should defer to EPA. DuPont’s argument was that a court could not fashion a remedy in the case without essentially establishing a new cleanup standard for C8 and that doing so is the job of EPA, not the courts.

The Court gave the primary jurisdiction argument short shrift. As the Court noted, using the doctrine of primary jurisdiction in citizen suits would dramatically reduce the scope of such suits. Since Congress provided a citizen suit mechanism – and provided very specific, discrete, circumstances in which citizen suits are precluded – it doesn’t make sense to use primary jurisdiction to establish another defense, particularly where the defense would almost eliminate the remedy. 

The bottom line? If you don’t want to face a citizen suit (and you’re not in compliance), get yourself sued by EPA or your state regulatory agency. The mere existence of EPA or state regulation, even if requirements are embodied in a consent order, is not enough.

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On a day when ClimateWire reported that thousands of walruses are stuck on land because their usual summer home – sea ice – has disappeared, I’m beginning to wonder whether EPA’s stationary source GHG rules are similarly at risk. It may not be difficult for EPA to brush off a fairly over the top letter from Texas which basically asked EPA “What part of ‘hell no” don’t you understand?”

However, today Greenwire reports that Governor Freudenthal of Wyoming – a Democrat – is asking EPA to defer enforcement of GHG stationary source regulation. So is Ben Grumbles, head of the Arizona Department of Environmental Quality. Grumbles may be a Republican, but he was head of the water office under the Bush EPA, so he has to have some idea of the legal pressure for EPA to regulate GHGs following Massachusetts v. EPA. 

In addition to these latest requests from the states, ClimateWire had a separate story today which noted that Senate efforts to bar EPA from regulating GHG may still be alive and that Democrat Senators Nelson and Dorgan may support attaching the legislation to the EPA appropriations bill. Readers of this blog know that I am a fan of Senator Graham’s willingness to consider climate legislation, but EPA has to be worried if it is counting on Senator Graham’s prediction that the amendment will fail.

I have long said that EPA’s regulations are here to stay, because they are not only defensible, they are - in some form, at least - pretty much mandated by Massachusetts v. EPA. However, where the prevailing metaphor for the November elections is that of a GOP tsunami, one has to wonder whether there is a realistic possibility that, one way or another, EPA regulation of GHG under existing authority could be subject to significant delay.

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The Regional Greenhouse Gas Initiative (RGGI) auction program celebrated its second birthday this week by holding the 9th regional auction of CO₂ allowances.  As today's report highlights, the auction brought a bittersweet first for the 10-state program: unsold allowances from both the current and future regulatory periods.  Bidders bought only 75% of the 45.6 million 2010-vintage allowances offered and just 61% of the 2013-vintage allowances, with both auctions closing at the mandatory floor price of $1.86.   Not surprisingly, given these results, participation in the auction was down -- the 2010 auction garnered bids from 45 entities, 92% of whom were regulated generators or their affiliates, down from March's relatively robust participation of 51 bidders.   According to today's report, regulated entities have purchased 84% of all allowances sold in Auctions 1-9, and through trading on the secondary market, will hold 95% of the allowances in circulation, once the allowances sold in Auction 9 are distributed.

Under the RGGI rules, the leftover allowances from this week's auctions may be sold at a future date, or a state may choose to retire them.  Since many people believe RGGI allowances to be over-subscribed, retiring some or all of these leftover allowances might be one way for the RGGI states to re-balance the market and encourage further reductions in emissions. 

Even at the floor price, the RGGI proceeds keep growing.  In the last 2 years, the auctions have brought in $729, 281,959 for the 10 states, who are collectively investing 80% of the funds in state-based energy programs: 60% in energy efficiency programs, 10% to accelerate deployment of renewable energy technologies, and 10% to direct consumer benefit programs, such as assistance to low-income ratepayers.  RGGI, Inc. noted in its press release accompanying the market monitor report the hopes that this "auction and invest" design will be a model for a national program as well as other regional programs like the Western Climate Initiative and the Midwest Greenhouse Gas Reduction Accord. Since regional programs are likely to be the model for the foreseeable future, this certainly seems like a possibility.

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Sometimes, the headline writes the story. EPA’s TMDL program under the Clean Water Act has been the subject of so much litigation since its inception that EPA has a web page devoted to the status of litigation on the establishment of TMDLs.

Bringing things close to home, the Conservation Law Foundation and the Coalition for Buzzards Bay filed suit late last month, challenging implementation by MassDEP and EPA of the TMDL program for certain embayments on Cape Cod and Nantucket. (Full disclosure time – this firm represents the CBB on unrelated matters.)

The law suit claims that MassDEP erred in determining the waste load allocation, or WLA, in establishing the TMDLs for the embayments, because it failed to identify septic systems, stormwater systems, and wastewater treatment systems as point sources. (Since we also represent wastewater treatment system operators – though none that are the subject of these TMDLs – I think that, like Joe Friday, this is going to be a “Just the facts, ma’am,” post.)

With respect to stormwater systems, MassDEP determined that systems located less than 200 feet from the embayments were point sources, but that those farther away were not. The basis for this determination, according to the complaint, was that the more proximate systems in fact discharge to surface waters, whereas the more distant ones discharge to groundwater, so that there is no point source discharge to surface water. 

The complaint does not identify the basis for MassDEP’s conclusion that septic systems are not point sources, but presumably it is also based on a conclusion that the systems discharge to groundwater and thus are not point sources of surface water pollution.  

Without commenting on the merits – just the facts, ma’am – I will note that a determination that septic systems and stormwater drainage systems that discharge initially to groundwater are point sources under the CWA would have dramatic consequences for the regulation of nutrient pollution under the CWA. In situations where there are industrial sources of these pollutants, those industrial sources might be quite pleased to have someone else bear share of the burden of reductions necessary to meet the TMDL. Given the brouhaha over how state agencies would cope with permitting hundreds or thousands of new stationary sources under EPA’s Clean Air Act PSD program for GHGs, however, I cannot imagine that MassDEP – or other state environmental agencies – would eagerly assume the responsibility for permitting septic systems.

Why do I foresee more litigation in the TMDL program’s future?

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I have previously expressed my distaste for public nuisance litigation to require reductions in GHG emissions. It cannot be more than a tactic in a war to the plaintiffs, because the chaos resulting from regulation of a global problem through a series of individual law suits has to be obvious to everyone. Now, apparently, that chaos is also obvious to the Obama administration, because it has filed a brief with the Supreme Court, asking the Court to accept a certiorari petition filed by the defendants in American Electric Power v. Connecticut, the 2^nd Circuit case in which the Court of Appeals held that the nuisance claims could proceed. 

The United States cited two reasons why the government should take the case and vacate the appellate decision. First, the brief states that the petitioners failed to demonstrate “prudential standing.” In other words, while they may have Article III standing, federal courts should “refrain from adjudicating ‘generalized grievances more appropriately addressed in the representative branches.’” As the brief notes:

The problem is not simply that many plaintiffs could bring such claims and that many defendants could be sued. Rather, it is that essentially any potential plaintiff could claim to have been injured by any (or all) of the potential defendants. The medium that transmits injury to potential plaintiffs is literally the Earth’s entire atmosphere – making it impossible to consider the sort of focused and more geographically limited effects characteristic of traditional nuisance suits….

Second, and perhaps more importantly, the administration has argued that EPA’s recent regulatory efforts with respect to GHG, including the mobile source rule and the PSD / Title V rules for stationary sources – which occurred after the 2^nd Circuit decision – have “displaced” federal nuisance law. Since the Second Circuit specifically addressed the displacement argument and found for the plaintiffs in part precisely because EPA had not yet regulated GHG, EPA’s intervening regulatory actions certainly would seem to provide a basis for remanding the 2^nd Circuit decision. I think that’s an easy call for the Supreme Court to make.

Perhaps not surprisingly, the plaintiffs’ attorneys were dismayed by the filing of the brief.  According to GreenWire, Matt Pawa, one of the plaintiffs’ attorneys, said that:

We feel stabbed in the back. This was really a dastardly move by an administration that said it was a friend of the environment. With friends like this, who needs enemies?"

My take is a little different. Why don’t the plaintiffs’ attorneys thank the administration for promulgating the various GHG regulations, admit that the nuisance cases were a tactic to move Congress and the administration, claim a partial victory, because they at least got EPA moving, fold up their tents, and go home.

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