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

As Superfund practitioners know, federal NPL sites are generally settled on the basis that the PRPs will first attain interim cleanup levels, though final cleanup levels are not determined until EPA is actually ready to issue its certification of completion of the remedy. Moreover, EPA insists that, should any ARARs change during the course of the cleanup, whatever standards are in effect at the time of site closure will be applied.

We saw the impact of this on the ground in 2001, when EPA revised the Safe Drinking Water Act maximum contaminant level, or MCL, for arsenic from 50 ppb to 10 ppb. The new MCL became an ARAR for Superfund, and the expected date to attain cleanup standards suddenly got pushed back at a number of Superfund sites.

Even at the time, it was not clear that 10 ppb was the last word. EPA’s proposed rule had provided for a 5 ppb standard, but EPA eased off in response to public comment; small water suppliers can have great difficulty in attaining a 5 ppb standard. 

Earlier this year, EPA announced the availability of a new toxicological review of arsenic. That review suggested greater cancer risks from arsenic. Yesterday, EPA’s Science Advisory Board issued a report generally supportive of the new toxicological review. If the result is a further tightening of the MCL, more stringent cleanups, through the ARARs process, will follow ineluctably. 

I don’t normally post about developments this far from concrete regulatory changes. However, given the way the Superfund cleanup process works, PRPs negotiating cleanups of sites with arsenic groundwater contamination have to begin to factor this issue into their strategy now, because it’s not too early to starting thinking about cleanup cost estimates for alternative - meaning lower - arsenic MCLs.

Having put you on notice, I now have to tell one war story; if you don’t feel the need for a war story, you can stop reading here. In 1991, I was involved in negotiating the settlement for the cleanup of the Coakley Landfill Site, in southern New Hampshire. The federal government was a PRP. In Coakley, the government made a substantial (seven figure) contribution to the settlement. However, because the private PRPs had argued in negotiations with EPA that there was no need to treat groundwater – notwithstanding that the ROD remedy selected by EPA required groundwater treatment – the federal government as PRP insisted on getting a refund of the share of its payment attributable to the groundwater remedy, should EPA finally certify completion of the remedy without there ever having been an active groundwater treatment system in operation.

A few years later, the PRPs indeed persuaded EPA to eliminate active groundwater treatment. At the time, the expected date for certification of completion was 2007. In 2001, EPA changed the arsenic MCL from 50 ppb to 10 ppb. I don’t need to tell you that there is an arsenic issue at the Coakley Site. Now, the expected date for certification of completion is 2021. If, before then, EPA were to further lower the arsenic MCL, who knows what will happen to the expected date for certification of completion? The private PRPs may never have to reimburse the federal government!

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Last March, I noted that Gina McCarthy’s belief that, in the near term, the biggest impact on GHG emissions would come from EPA’s traditional regulatory programs, rather than through GHG regulation. A report recently released by Credit Suisse indicates that she might be right. Looking at EPA’s upcoming promulgation of the Clean Air Transport Rule and the mercury MACT rule, Credit Suisse predicts that between 50 and 69 gigawatts of old coal plants will be retired between 2013 and 2017 as a result of implementation of the two rules. Credit Suisse also predicts that approximately 100 gigawatts of capacity will require significant additional investment to comply with the rules.

For those with money to invest, Credit Suisse recommends clean plants in dirty markets – a not surprising conclusion. 

For those more interested in the regulatory side of things, it is worth noting that the Credit Suisse analysis is admittedly fairly simplistic. They pretty much just looked at small plants lacking scrubbers as candidates for closure. As the report puts it:

environmental control costs are non-linear (they’re more expensive on a unit of capacity basis at a small coal plant) and because these plants are generally older and less efficient in energy conversion.

Without details about individual plants, the Credit Suisse approach is certainly reasonable. I note only that, where plants are not closed, installation of scrubbers for SO₂ or SCRs for NO_x actually increases GHG emissions, because scrubbers and SCR require additional station service, making the plants less efficient to operate than previously. Overall, I don’t doubt that the closure of coal plants will outweigh the decrease in efficiency in the coal plants that remain operational, but both effects should be included in any analysis of the impact of the Transport Rule and the MACT rule on GHG emissions.

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Could carbon-intensive industries and businesses overlooking sustainability soon see their credit ratings fall as a result?   Perhaps. According to an article in yesterday’s Daily Environment Report, Standard & Poor’s (S&P) is working on ways to integrate the risks of greenhouse gases into its corporate credit ratings system. The move seems to be driven by factors such as tightening of the EU emissions trading scheme in its third phase, beginning in 2012, but might apply to US companies as well.  The article reports that S&P could include carbon in their credit rating analysis on a global scale, as early as the first half of 2011. 

As the article highlights, developing a methodology to consider emissions directly generated by a company, those indirectly associated with its activities (such as use of electricity, supply chain and employee travel), and the potential for carbon costs to passed through to consumers would be “fiendishly complex,” and the methodology that S&P adopts will have to go through a rigorous review before being put in place. 

One possible option to build from is the Carbon Disclosure Project’s (CDP) questionnaire, which is the only global greenhouse gas reporting system. In September, CDP released its 2010 report on the S&P 500 (as well as reports on many other groupings of the 4,700 companies they ask to complete their questionnaire). That report shows that in 2010, some 70% of the S&P 500 companies responded to the CDP questionnaire, detailing risks and rewards, such as how they plan to capitalize on commercial opportunities related to climate change, and 59% also disclosed their carbon emissions, at least in part.  The CDP reports also show, however, that these US companies are still behind their global peers.

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One of the first lessons I learned as a summer associate, more years ago than I care to remember, is that the probability of a successful estoppel claim against the government is approximately the same as the probability that there is a Santa Claus. After the recent decision from the District of New Jersey in FMC Corporation v. American Cyanamid, the probability of a successful estoppel claim may still be low, but it isn’t zero. 

FMC involves claims concerning the Higgins Farm Superfund Site, in Franklin, New Jersey. According to the decision, FMC contacted the State of New Jersey in 2001 in order to obtain information concerning the scope of its potential liability. One of the questions involved natural resource damages. New Jersey determined that it would not assess NRD for the site and that conclusion was communicated by telephone to FMC in late 2002. As settlement negotiations continued, in 2003, New Jersey actually provided to FMC a copy of the memorandum that had been prepared documenting that no NRD would be assessed. 

The reason for the determination apparently was a NJDEP policy that, where no off-site groundwater contamination existed, no NRD would be assessed. However, that policy changed later in 2003, after a change in administration at NJDEP. Ultimately, in 2006, NJDEP filed suit against FMC seeking natural resource damages. In responding to FMC’s motion to dismiss, NJDEP made the argument most of us would expect:

the doctrine of waiver should not be applied under these circumstances [because] a government agency may change policies for the benefit for the public without creating rights in parties who claim to have relied on the old policy.

The Court wasn’t buying it. While acknowledging that “the application of waiver or estoppel principles to government actions is to be most strictly limited,” the Court concluded that New Jersey had expressly waived its right to recover NRD. It was significant to the Court that NJDEP did not qualify the waiver in any way. Given the absence of qualifying language, the Court concluded that to allow NJDEP to bring NRD claims after such an unqualified waiver “would serve to completely alter the calculus of the litigation and undermine settlement negotiations that parties engage in with the State.”

The biggest lesson of FMC will probably be for government attorneys – make sure you qualify your waivers. Nonetheless, it does suggest that, at least in the right case, the government will be held to its promises. 

Merry Christmas, FMC.

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With Kyoto Protocol commitments expiring in 2012, will international climate change litigation be used to push governments towards a binding international agreement to reduce greenhouse gas (GHG) emissions? Does a country like Bangladesh, threatened with almost total submersion due to the impacts of sea level rise, have a case under public international law against major emitters such as the United States or China? These are some of the questions addressed in a working paper entitled International Climate Change Litigation and the Negotiation Process, recently released by the Foundation for International Environmental Law and Development.

Certainly, the stakes are high. For example, the paper notes that by 2020, between 75 and 250 million people in Africa are expected to be exposed to increased water stress due to climate change. Other countries will face sea level rise, heat waves, droughts, floods, desertification, invigorated disease vectors. Moreover, actions to reduce GHGs cannot wait. According to the Hadley Center at the UK’s Meteorological Office, for every year that peak GHG emissions are delayed, the world is committed to another 0.5° C of warming.

While the environmental consequences of climate change may be clear, the legal and procedural issues are thorny. After reviewing the literature on international climate change litigation, the authors concluded that

international law is ill-equipped to deal with a complex situation such as global warming. The primary legal rules are vague and the majority of harm is yet to occur.

Some of the questions discussed in the paper are listed below. (To followers of the nuisance based claims being litigated in the U.S. courts, this list may sound awfully familiar.)

• What level of harm must be demonstrated? Is it sufficient to show a risk of significant harm?
• How would a claimant State demonstrate that the environmental harm caused by climate change is attributable to the accused State? Is each State actor responsible only for its share of the damage caused or are all States jointly and severally liable?
• What is the standard of proof for causation, and what is the role of the precautionary principle in lowering the standard of proof?
• The primary legal consequence when an international obligation has been breached is the discontinuation of the wrongful act. In the context of climate change, what quantity of GHG emissions must be reduced? Whose emissions? Under what time frame? What is the likelihood that an international organ such as the International Court of Justice would prescribe a remedy that would answer these questions?
• Does the UN Climate Convention represent a comprehensive scheme that precludes State vs. State litigation under principles of general international law?

Developing country governments may be understandably reluctant to challenge the actions of donor nations, but given the glacial pace of international climate change negotiations, the enormous stakes for certain countries, and the urgency of the issue, the paper suggests that we may see a State vs. State dispute in the not-to-distant future.

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As EPA begins to regulate nanomaterials more aggressively, but as concerns remain regarding EPA regulatory efforts, private efforts to regulate nanomaterials continue. ASTM recently announced that it is forming a new subcommittee on Nano-Enabled Consumer Products. The focus of the subcommittee will be on uses of nanomaterials containing silver. In particular, ASTM noted that it would be considering the following possibilities:

Standards for measurement of silver in textiles and liquids (including atomic spectroscopy to  assess mass)

Standards for evaluating the form of silver in textiles and liquids (including: electron microscopy to evaluate size, shape and chemical composition; ultraviolet-visible spectrophotometry to evaluate size using surface plasmon resonance absorbance)

Standards for assessment of nanosilver exposure potential from use of textile and liquid consumer products (including: release from consumer products in biological fluids [skin surface, lung, gastrointestinal tract]; release from consumer products in environmental matrices [air, water, soil] throughout a product lifecycle).

There is little doubt that nanomaterials are a brave new world – one which indeed scares some people, notwithstanding nanotechnology’s promise. We are also entering into a brave new world of nanotechnology regulation – one which scares me a bit, notwithstanding my recognition that some careful regulation of nanomaterials may be appropriate.

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In a crisply written opinion by Judge Posner, the 7^th Circuit Court of Appeals just reversed a district court judgment against Cinergy in the NSR case involving Cinergy’s power plant in Wabash, Indiana, and directed that judgment enter for Cinergy. It is not obvious that the case will have wide applicability, but it is certainly worth noting.

The first key issue in Cinergy was whether proposed new projects would be subject to NSR review if they were expected to result in an increase in annual emissions or only if they would result in an increase in the hourly emissions rate. In an earlier ruling, the 7^th Circuit decided that annual emissions, rather than the hourly rate, was the appropriate test provided for in the statute and regulations.

However, when the case came to trial, a twist occurred. The jury only found violations with respect to four projects. All of those projects occurred between 1989 and 1992 – and during that time, Indiana’s SIP stated that the applicable test was whether a project would result in an hourly emissions rate increase. Even more complicated, EPA had approved the SIP, even though it also told Indiana that the SIP had to be changed. Indiana had apparently changed its rules prior to 1989, but failed to submit a SIP modification until 1994. The Court ruled that EPA must be held to the SIP that it approved and that was in effect at the time of the projects.

The Clean Air Act does not authorize the imposition of sanctions for conduct that complies with a State Implementation Plan that EPA has approved. The EPA approved Indiana’s plan with exceptions that did not include [the improper test.]

Calling EPA’s approval of the SIP a “blunder,” the Court said that EPA must live with it.

It’s not obvious that this decision will have much relevance outside cases in Indiana involving projects implemented during the time Indiana’s SIP contained the wrong test. However, it is a lesson that the details do matter – in particular, the details of the relevant SIP.

The second aspect of the case is also a lesson in the nitty-gritty of litigation – and may have broader applicability. With respect to NOx emissions [it is not clear why the NOx allegations were not controlled by the prior part of the decision], EPA relied on two experts to testify that the projects would result in increases in annual emissions. However, both experts relied on a formula used for baseload power plants. Unfortunately for EPA, the Wabash facility is a cycling plant, not a baseload plant. The model used by EPA's experts assumes that an increase in capacity would result in a proportionate increase in output. However, that assumption is not valid for a cycling plant. The Court thus ruled that the experts’ opinions should not have been admitted; without them, EPA had no evidence of increased emissions and judgment had to enter for Cinergy.

This aspect of the case provides a cautionary lesson for the government (though I wouldn’t start dancing in the street if I were defending one of these cases). I think that there has been a sense that, if the government wins the legal battle on the issue of annual emissions v. hourly emissions rate and wins the routine maintenance argument, then the defendants are sunk. This case is a reminder that the facts still matter and that the government has to prove its case based on evidence regarding the specific projects being challenged.

What a notion.

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Earlier this week, I posted about the dire prospects for climate change legislation following the fall elections. The alternative to legislation has always been regulation under existing Clean Air Act authority, so it’s appropriate as a follow-up to briefly examine the pressures on EPA as it moves forward with its stationary source GHG regulations. Two headlines from the trade press today brought home just what a tightrope EPA is walking.

The first headline, from the Daily Environment Report, was to the effect that a “Ban on New Source Construction [Is] Possible In States Without Greenhouse Gas Permitting.” Specifically, Raj Rao, of EPA's Office of Air Quality Planning and Standards, said states that have not taken steps to implement permitting requirements by Jan. 2 could face the construction ban.

The second headline might be described as a corollary of the first. Today’s GreenWire notes that “New rules spark bipartisan fury in midterm elections.” Well, duh. Is it any surprise that in the face of continuing unemployment near 10%, regulations that even EPA acknowledges might result in construction bans in some states would be a topic of debate in congressional elections? In fact, the GreenWire piece was not even primarily about the GHG regulations and made no mention of the potential construction ban. It was largely about other EPA rules, such as the boiler MACT rule.

I have a certain amount of sympathy for EPA on this one. As I’ve noted previously, to a certain extent, EPA is just doing its job. On GHGs, it really has no choice but to regulate. While I have doubts about the legality of the Tailoring Rule, the alternative is only more onerous. The boiler MACT rule is another matter – and is complicated enough to warrant several posts of its own. However, EPA’s options are limited given the stringent provisions Congress itself wrote – and a Republican President signed into law. On conventional pollutants, the science is driving EPA towards lower and lower NAAQS, and more stringent rules on emitters follow like night follows the day.

Just so my friends in the regulated community don’t think I’ve gone soft, I will point out that it is at the least disingenuous for Administrator Lisa Jackson to say, as she was quoted in GreenWire, that:

The Clean Air Act does not place our need to increase employment in conflict with our needs to protect public health.

Somehow, that message has never gotten to the EPA and DOJ lawyers briefing appeals of EPA regulations, where those opposing the regulations say that they are uneconomic, while EPA's invariable rejoinder is that the Clean Air Act doesn't allow for the consideration of the cost of regulations in deciding how stringently to regulate.

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It’s been obvious for some time that Republican victories in next month’s elections will only make it more difficult to pass climate legislation. However, perhaps the most telling reminder of the difficulty in passing climate legislation came last week from the Democrats, not the GOP. Governor Joe Manchin, running for Senator Byrd’s seat, was endorsed by the West Virginia Coal Association. Among the bullets noted in the press release, the WVCA noted that:

Governor Manchin opposes any form of Cap & Trade legislation that threatens the jobs that our coal mining families depend on for their livelihoods. 

The press release also notes that Manchin would work to pass legislation prohibiting EPA from regulating carbon using existing Clean Air Act authority. According to Greenwire, Bill Rainey, the President of the WVCA stated that “we've witnessed this governor put his finger in the chest of EPA officials."

In fact, given that he is from West Virginia, it appears that Manchin has been a good governor and would probably be a good senator – someone who could perhaps work across the aisle with senators like Lindsey Graham. However, while Tea Party types often talk about RINOs – Republicans in Name Only – environmentalists have to look at someone like Governor Manchin and think that, at least on climate change, he’s a DINO.

The environmentalists’ problem, even aside from potential losses in November, is that, on climate change, a newly-elected Senator Manchin would not be the only DINO.

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