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

Earlier this week, the Massachusetts DEP issued a package of regulatory reforms. While the focus of the package was on finding ways for MassDEP to implement its mission with fewer resources, a number of the reforms are specifically targeted at facilitating the development of renewable energy. If you want to see more about that angle, you can take a look at our client alert about the reforms.

On the non-energy side, my personal favorite is MassDEP’s expressed willingness to review the role of its hazard ranking system in the state Superfund, or Chapter 21E, program. Given the way the 21E program now operates, the HRS has outlived its usefulness and could be eliminated completely without any adverse impacts to human health or the environment.

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E&E Daily reported this week that Congressional Democrats are opposing the Regulatory Accountability Act of 2011. H.R. 3010 would codify a requirement for cost-benefit analysis of major regulations in the Administrative Procedures Act. According to the report, John Conyers, ranking member on the House Judiciary Committee stated that the RAA

would amend the Administrative Procedure Act in ways that would effectively halt agency rulemaking and undermine public health and safety rules.

Excuse me?

The guts of the RAA would be to:

·         Require cost-benefit analysis for all rules expected to cost more than $100,000,000

·         Require cost-effectiveness for rules going beyond statutory minimum requirements – If EPA wants to impose rules that would cost more than the minimum requirements necessary to implement a statutory requirement, it must demonstrate that the marginal cost of the increased stringency is outweighed by the marginal benefit.

·         Set some limits on agency promulgation of guidance. I am particularly taken with the provision that would authorize the Administrator of the Office of Information and Regulatory Affairs to “issue guidelines for use by the agencies in the issuance of major guidance and other guidance.” My Massachusetts readers will recall the effort by NAIOP to require that our MassDEP issue “Guidance on Guidance”, setting ground rules on the use of guidance. The NAIOP ground rules are fairly similar to those in the RAA.

I’m sorry. I am not a political consultant, but I still don’t get the Democrats’ opposition to this. There is definitely stuff in the RAA that is easy not to like. That’s fine, but when Democrats oppose cost-benefit analysis, it just sounds dumb. It plays into the anti-regulatory crowd’s hands. It suggests that there isn’t a regulation out there that Democrats don’t like and that Democrats don’t care whether regulations actually benefit society.

My advice, for what it’s worth? The Democrats should take up the mantle of cost-benefit analysis. Challenge the GOP to demonstrate that they are not simply using cost-benefit analysis as a cudgel to stop all regulations, by making clear that the Democrats regard cost-benefit analysis, not as a way to end regulation, but as a valuable tool to make sure the regulatory process works as it should.

I remain an optimist.

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More than 20 years ago, in the Tanglewood East decision, the 5^th Circuit Court of Appeals held that a developers could potentially be liable under CERCLA for conducting site development activities that moved contamination on the site, exacerbated conditions, and required additional cleanup. There have not been many reported cases on this issue since then, so the decision earlier this week in Saline River Properties v. Johnson Controls seemed noteworthy. 

The factual discussion was pretty sparse, but it seems undisputed that Johnson Controls had previously owned the property, the property was contaminated, and Johnson Controls was remediating it under a state administrative order. Saline became the operator of the property and at some point “destroy[ed] the building slab.” Johnson Controls alleged that this resulted in migration of contamination that would not otherwise have occurred. 

For the court, these allegations were sufficient for Johnson Controls’ claim to survive Saline’s summary judgment motion.  The court distinguished cases holding that “passive migration” does not constitute disposal:

Here, more is alleged than just passive migration. [Johnson Controls] alleges that Saline took the affirmative action of breaking up the concrete slab, which caused hazardous substances beneath the barrier to migrate into additional soils and groundwater. The Court concludes that [Johnson Controls] has created a genuine issue of material fact as to whether Saline caused a release or disposal at the facility.

I don’t regard the decision as a surprise, but it is a useful lesson (if costly to Saline) for developers.  Perform your due diligence before purchasing contaminated property and make certain that your redevelopment plans are appropriate given site conditions.

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Does anyone remember cost benefit analysis? As I recall, it was an economic tool that many in the academic and business communities wanted to use to discipline EPA’s more grandiose regulatory efforts. EPA has now used it for years; it routinely provides analyses showing that the benefits of its rules far exceed the costs that they impose.

As I have previously pointed out, that really shouldn’t be the end of the story, because unless EPA goes farther, and performs rigorous cost-effectiveness analysis, we could still be wasting big bucks. Even if a regulation provides $100B in benefits for only $90B in costs, wouldn’t we want to know if a different regulatory structure could obtain $90B in benefits for only $10B in costs? While that might be a hypothetical, it’s not a totally unreasonable one. Nonetheless, at least EPA is doing some C-B analysis and I think it likely that most, if not all, of EPA’s rules do result in greater benefits than costs.

These musings were triggered by the announcement by EPA yesterday that it would not be revising the coarse particulate matter, or PM₁₀, standard, the result of which will apparently be to allow dust emissions from farming operations to escape federal regulation. I don’t have a view on the merits of tougher PM₁₀ regulation. Based on a quick review of EPA’s technical analysis, it appears to be a close question. Either way, though, I’m confident that Congressional opposition to a more stringent PM10 standard stems from a new development – opposition to cost-benefit analysis from those opposed to environmental regulation. 

The new approach, seen in the North Carolina legislation on which I commented earlier this year, opposes costly regulation, regardless of its benefits. The rhetoric is that this is not the time to impose new regulations, because the economy cannot afford it – as though there is a time when people can afford to get cancer or heart disease. 

So, where are we today? Environmentalists support environmental regulation, looking only at the benefits it provides. Others oppose environmental regulation, looking only at the costs it imposes. Altogether, a sad state of affairs.

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As part of its efforts to control the impact of mountaintop removal mining, EPA has implemented a number of changes – both procedural and substantive – into how § 404 permit applications for such activities will be reviewed. None of these changes have gone through notice and comment rulemaking. As we previously noted, Judge Reggie Walton already expressed skepticism about EPA’s mountaintop removal guidance. Last week, in the latest decision in National Mining Association v. Jackson, Judge Walton shot down EPA’s “Enhanced Coordination Process”, or ECP, for reviews of section 404 permit applications.

Although EPA described the modifications as the types of procedural changes that are within agencies’ inherent authority, Judge Walton was having none of it. He concluded that EPA’s authority under the CWA is subject to certain unambiguous limitations. 

The statutory language explicitly establishes the Secretary of the Army, acting through the Corps, as the permitting authority, which strike the Court as an express limitation. … The statute is therefore not ambiguous…. Thus, if a responsibility involving the permitting process has not been delegated to the EPA by Congress, that function is vested in the Corps as the permitting authority.

Under the Multi—Criteria Resource Assessment, or MCIR [don’t ask me why it’s “MCIR” and not “MCRA”], EPA, not the Corps, initially applies § 404(b) guidelines, and EPA directs the Corps how to process mountaintop removal § 404 permit applications.  To Judge Walton, these changes exceed EPA’s statutory authority under the CWA.

Judge Walton also concluded that the ECP, including the MCIR violated EPA’s obligation to provide notice and an opportunity to comment on the change in rules that the ECP represents. For those of you who are not APA geeks, the APA exempts from the obligation to provide notice and comment “rules of agency organization, procedure, or practice.” While the ECP sounds procedural – after all, the word “process” is in the label – Judge Walton concluded that the rules were substantive and required notice and comment under the APA. To Judge Walton,

The fact that the creation of the MCIR Assessment removed the task of applying the 404(b)(1) guidelines to pending permits from the Corps and bestowed it upon the EPA signifies a substantive, rather than a procedural, change to the permitting framework. … [I]t is apparent that the MCIR Assessment and the EC Process “effectively amend” the Section 404 permitting process by conferring additional reviewing authority on the EPA – authority that the statute reserves for the Corps. American Mining therefore compels a finding that the MCIR Assessment and the EC Process are legislative rules. 

Another day, another defeat for EPA. The APA lives.

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EPA may have had problems in court in recent years defending its regulations, but it has generally fared much better in its enforcement cases. Earlier this week, however, EPA suffered what will be, if it is affirmed, a devastating defeat in its PSD/NSR enforcement initiative. In United States v. EME Homer City Generation, Judge Terrence McVerry concluded that the government could get no relief against either the former owners of the facility or the current owners or operator. No penalties. No injunctive relief. No relief under state law. Nothing. Nada.

The facts here were typical of NSR enforcement cases. The facility, in Homer City, Pennsylvania, had implemented a number of projects from 1991 through 1996 which, EPA alleged, required PSD permits. No permits were sought. The owners at the time of the changes sold the plant in 1999. It was sold again in 2001 and is currently operated by one entity and owned by a group of LLCs. 

The court’s analysis was thorough, yet straightforward. According to the court, PSD requirements are one-time, pre-construction requirements. With respect to civil penalties, the United States acknowledged that the five-year statute of limitations precluded claims against the former owners. The court gave the claim against the current owners and operator short shrift. The court concluded that

The alleged PSD violations constitute singular, separate failures by the Former Owners to obtain pre-construction permits, rather than ongoing failures to comply with whatever hyupothetical conditions might have been imposed during the PSD permittingprocess. Thus, the United States was required to file suit to recover civil penalties for an alleged PSD program violation within five years of the construction project.

The big news from the decision is the court’s refusal to grant injunctive relief. While Judge McVerry described the statute as complex and ambiguous, he did not find the decision before him difficult. With respect to the current owners/operator, injunctive relief could not be imposed on them, because no remedy can be imposed without a liability finding. Because the failure to obtain PSD permits was solely attributable to the former owners, the current owners/operator are not liable for the violation. No liability; no injunction. 

The court found the question somewhat more difficult with respect to former owners. They would be liable for the original violation, if proved, and the five-year statute of limitations does not apply to injunctive relief. The court punted on whether it had authority to issue an injunction against former owners, resting its decision instead on the court’s broad discretion to grant or deny equitable relief. Describing injunctive relief as “a rare and extraordinary remedy,” the court concluded that it would be inappropriate to grant relief against former owners where, since they no longer own the facility, injunctive relief against the former owners is not necessary to prevent future violations by the former owners. 

Finally, the court concluded that the current owners/operator did not violate their Title V permit, because the permit does not include any requirement to meet BACT. The court flat-out rejected the idea that the Title V permit could somehow be found to “incorporate” BACT requirements that should have been included in the Title V permit because they should have been included in PSD permits, because the former owners should have applied for them. 

In short, the government was too late to bring claims against the former owners, and could not establish liability against the current owners. Thus, it could get no relief against anyone.

It is difficult to square this opinion with the general rule interpreting police power statutes broadly to effectuate their purposes, because this decision means that there will be some circumstances in which there is a violation with no remedy, even where the impacts of that violation are still being felt, or seen, or inhaled, today. However, the decision is careful and thoughtful and I wouldn’t automatically assume that it will be reversed on appeal. Not a good day for EPA.

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Written by Gare A. Smith, reposted with kind permission from www.csrandthelaw.com.

Corporate social responsibility and nuclear power? Indeed. In September, the very first code of conduct for the nuclear power plant industry was launched.

The development of the "Principles of Conduct" was facilitated by the Carnegie Endowment for International Peace. Representatives of all of the major exporters of nuclear power plants participated in the drafting process, which was initiated in 2008. I had the honor of being selected by the Carnegie Endowment to help facilitate the negotiations.

The Principles set forth expectations in the following areas: 

1. Safety, Health, and Radiological Protection; 
2. Physical Security;
3. Environmental Protection and the Handling of Spent Fuel and Nuclear Waste;
4. Compensation for Nuclear Damage;
5. Nonproliferation and Safeguards; and
6. Ethics.

While the Principles were initiated prior to the Fukushima nuclear accident, the completed text reflects certain initial lessons learned from that disaster, especially in the area of safety. At the time of the Principles' launch, Richard Giordano, Chairman of the Board of Trustees for the Carnegie Endowment, observed

Whatever lessons particular countries draw from Fukushima over time, new nuclear plants will continue to be built, some in countries that have only recently begun to utilize nuclear power. It is therefore imperative that nuclear energy is implemented safely and responsibly in both emerging and developed markets. 

I was especially involved in the drafting of Principle 6, which focuses on ethics. Principle 6 helps nuclear exporters meet three primary objectives:

1. Safeguarding the environment and the wellbeing of communities near nuclear power plants, including through effective communication with those communities;
2. Respecting human rights, including the fundamental labor rights of employees; and
3. Fighting corruption.

Principle 6 is important because it addresses measures to mitigate the potential effects of nuclear power on communities and the environment. Principle 6 states that the exporters will work with their customers to consult with communities near nuclear power plants regarding the social and environmental effects of planned activities. The exporters also agree to take sustainable development into account in their activities.

Principle 6 also states that the exporters will respect the fundamental labor rights of their employees, including the right to collective bargaining. They also pledge to respect the Universal Declaration on Human Rights -- a commitment which has implications for their interactions not only with employees, but also with communities and other stakeholders.

Finally, Principle 6 addresses the challenge of corruption, which can arise in the context of large infrastructure projects. The exporters commit to having internal programs in place to fight corruption, and to seek a reciprocal commitments from customers.

The Principles represent a significant new development for the nuclear industry.  As stated on the Principles'  website, 

The Principles of Conduct reflect a recent trend in the management of global challenges. Leading industries, including those in the oil and gas, apparel and pharmaceutical sectors, increasingly have recognized the value of their reputations as socially responsible actors to their long-term business success.

Ultimately, the launch of these new Principles reflects a convergence of international expectations regarding corporate behavior and self-discipline: companies in every industry are expected to demonstrate responsible stewardship with regard to the social and environmental impacts of their operations.

To date, the following companies have adopted the Principles:

• AREVA
• ATMEA (an AREVA-Mitsubishi joint venture)
• Atomstroyexport
• Candu Energy (the successor exporting company to Atomic Energy of Canada Limited)
• GE Hitachi Nuclear Energy
• Hitachi-GE Nuclear Energy
• Korea Electric Power Company (KEPCO)
• Mitsubishi Heavy Industries (including Mitsubishi Nuclear Energy Systems, a subsidiary)
• Toshiba
• Westinghouse Electric Company

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Last night, the United States Senate voted to reject President Obama’s $447 billion jobs plan. Recall that the bill, filed by the President on September 12 and styled the “American Jobs Act of 2011”, includes a mix of tax cuts, extensions of expiring jobless benefits, and new spending on infrastructure – including roads, railways and schools. The bill also includes an expansion of the discretionary TIGER grant programs, and the increasingly popular TIFIA loan program. Big picture, it was designed by the White House as its plan to keep the country out of a recession in the coming year.

Last week, the President stated that:

In Maine, there is a bridge that is in such bad shape that pieces of it were literally falling off the other day. And, meanwhile, we’ve got millions of laid-off construction workers who could right now be busy rebuilding roads, rebuilding bridges, rebuilding schools. This jobs bill gives them a chance to get back to work rebuilding America. Why wouldn’t we want that to happen? Why would you vote against that?”

While the President’s plan seems to be failing in the Congress, at least there is the beginning of a conversation about our infrastructure needs, and some signals that it may be reconsidered in piecemeal fashion. In late September, Chief Executive Officers from some of America’s largest corporations, including Doug Oberhelman of Caterpillar, Matthew Rose of BNSF Railway and Scott Davis of UPS, called for a renewed commitment toward infrastructure investment, writing:

Our transportation infrastructure has become inadequate to meet the needs of the 21st Century economy. We must prioritize and invest in our aging infrastructure now if we are to maintain our economic competitiveness and leadership in the global economy."

Attention to the issue is past due. As just one reason why, last month the Texas Transportation Institute released a report in which it estimated that urban road congestion made U.S. drivers buy 1.9 billion gallons of extra fuel in 2010 and caused them to pay an extra $101 billion in total costs.

While the conversation is overdue, it may also be familiar to long-time observers. In 1982, when America was also in a recession, Ronald Reagan found a way to support an increase in the Federal gas tax from 4 cents per gallon to 9 cents per gallon (now at 18.4 cents) – noting in his address to the nation on November 27, 1982 that it wasn’t really a tax but a fee that would cost the average user about $30 per year, that “America cannot afford throwaway roads or disposable transit systems”, and that “we simply cannot allow this magnificent system to deteriorate beyond repair.”

Proving, once again, that the issues don’t go away if we fail to pay attention to them.

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The most popular suite of tools to measure and manage greenhouse gases just got a lot more complete -- allowing companies to track the impact of their products from natural resources and raw materials, through manufacturing, use and disposal, and providing a detailed framework to measure companies’ “everything else” Scope 3 emissions.   

The Greenhouse Gas Protocol Initiative (a collaboration between the World Resources Institute and the World Business Council for Sustainable Development) finalized its two newest global greenhouse gas standards on October 4. The GHG Protocol are the most widely used suite of accounting tools for measuring, managing and reporting greenhouse gas emissions -- for instance, in 2010, more than 85% of the nearly 2,500 respondents to the Carbon Disclosure Project survey used these standards. With the addition of the two new standards -- the Corporate Value Chain (Scope 3) Accounting and Reporting Standard and the Product Life Cycle Accounting and Reporting Standard -- companies have more guidance on a methodology and common language to report the impacts of their operations as they span the supply chain and the life cycle of their products. The GHG Protocol website even includes a cute video to explain what Scope 3 emissions are and why they claim these new protocol will save the world.

The new standards, which have taken three years to develop, involved the input of close to 2,500 partners, and were actively road-tested by 60 companies from 17 countries. The final standards have been influenced by the many comments received since they were published in draft form last November, and are intended to build upon the GHG Corporate Standard from 2004 which details how to report Scope 1 emissions (direct emissions from sources a company owns or controls, like factory smokestacks and company-owned cars) and Scope 2 emissions (indirect emissions attributable to the electricity, heat and cooling the company directly consumes).

Scope 3 emissions, which include everything else, are the great unknown variable in greenhouse gas reporting. They contain the vast majority of emissions, and accordingly, have the biggest opportunities for reductions. The authors of these new standards hope that they provide companies with a “treasure map” to identify and locate these opportunities to help both the environment and the business’s bottom line. At the very least, these protocol will simplify and reduce the costs for companies taking on a Scope 3 inventory, and improve the relevance, completeness, consistency, transparency and accuracy of the emissions reported each year. 

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As some of our clients know all too well, I am spending much time these days defending citizen suits. As federal and state agency budgets get slashed, we’re only going to see more such suits, unless a Tea Party-controlled Congress amends the relevant statutes to cut back on citizen suit provisions. 

In a move that will facilitate citizen enforcement, EPA announced last week that it has yet again upgraded its Enforcement and Compliance History Online, or ECHO, data base. As Cynthia Giles, EPA’s Assistant Administrator for Enforcement said:

EPA is committed to providing the public with easy to use tools that display facility compliance information and the actions EPA and the states are taking to address pollution problems in communities across the nation. EPA is proud to announce our latest effort under the President’s White House Regulatory Compliance Transparency Initiative and we will continue to take steps to make meaningful enforcement and compliance data available as part of an open, transparent government.

In other words, if we don’t have the resources to sue the polluters, we’ll at least try to make sure that NGOs do. 

It’s difficult to be against increased transparency – and I’m not. I will note, though, that ECHO is not perfect. I frequently see mistakes when I review information about our clients. I certainly would advise clients to review ECHO periodically to ensure that they know what information EPA is providing to the public about their compliance status.

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