Yes, Virginia, Selling a Building Known to Contain PCBs Can Constitute An Arrangement for Disposal

Some cases just make you wonder what people were thinking.  I’m not  sure even Donald Trump would have tried to get away with what Dico, Inc., tried to get away with.

In 1994, EPA issued an administrative order, requiring Dico to address PCBs in insulation in buildings it owned in Des Moines, Iowa.  Without informing EPA, Dico sold the buildings.  Dico did not inform the buyer of the buildings about either the presence of PCBs or the EPA order.

When EPA sought recovery of costs incurred in addressing the contamination resulting from the building demolition – and punitive damages for violating the order – Dico had the temerity to defend the case on the ground that it was the sale of a useful product, rather than an arrangement for disposal.

Last week, the 8th Circuit Court of Appeals affirmed the District Court’s judgment imposing liability on Dico and awarding the United States its full costs of response and punitive damages equal to the costs of response.  These are among the key findings affirmed by the Court of Appeals:

  • Dico knew that the buyer would demolish the buildings.
  • The buildings were no longer commercially useful.
  • Dico did not advertise sale of the buildings or seek any other buyers.
  • Dico had reason to believe that the buyer would not discover the contamination.
  • The cost to remediate the PCBs far exceeded the purchase price.

I think that Dico got off lucky.  The court could easily have imposed the full treble damages allowed under CERCLA.  You do almost have to admire Dico’s unmitigated gall.  You don’t see anything quite that brazen very often.

Reason Number 42,659 For Putting a Price On Carbon

I don’t work in the oil and gas industry.  This lede from Bloomberg Environment (subscription required) may not be news to anyone in the industry, but it absolutely blew me away:

America’s hottest oil patch is producing so much natural gas that by the end of last year producers were burning off more than enough of the fuel to meet residential demand across the whole of Texas.

In short, oil companies are flaring more than 500 million cubic feet/day.  That can’t even compete with some other countries.  Russia apparently flares almost 20 billion cubic meters/year.

After stunned amazement, my next reaction was to wonder why any good engineer wouldn’t be horrified as such waste, even aside from the climate impacts.  Then I realized that engineers are practical people.  If there’s no economic cost to flaring, then it’s not waste to them.

That’s why this is reason number 42,659 for putting a price on carbon.  Methane combustion yields about 2.74 tons of CO2 per ton of methane, so it has an effective global warming potential of 2.74.  That means a carbon price of $40/ton of CO2 would be about $110/ton of methane.

At that price, would smart oil and gas engineers figure out ways to eliminate flaring?

Can You Say “Pyrrhic Victory”?

In 2008, EPA issued an administrative order to Chantell and Michael Sackett, requiring them to remove what EPA had concluded was illegally placed fill on their property in Northern Idaho.  Litigation followed, including a fairly well-known Supreme Court decision.

After the Supreme Court ruled that the Sacketts were entitled to appeal the administrative order, the case was remanded to the District Court.  On March 31, the Court granted the government’s summary judgment motion and upheld the original order.  The Sacketts’ property does include waters of the United States and the filling violated the Clean Water Act.

The decision was fairly straightforward and I think would be upheld under any likely definition of WOTUS, but I note the following:

  • Because the 2015 WOTUS rule is stayed in Idaho, the Court utilized the prior rule in adjudicating the case.
  • Based on the Army Corps’ 1987 Wetlands Delineation Manual, the Court easily concluded that EPA was not arbitrary and capricious in concluding that wetlands indicators were present on the Sacketts’ property.
  • The Court found that there was a “significant nexus” between the wetlands on the Sacketts’ property and Priest Lake, a traditional the navigable water.  (Following Rapanos, the 9th Circuit had adopted the Kennedy significant nexus test.)

Like many examples of lengthy, contentious, litigation, this case can be seen as a Pyrrhic victory for both sides.  While the Sacketts had deep-pocket support from the Pacific Legal Foundation and others, what they cared about was the ability to build a home on their property.  This decision means that they cannot do so, giving their famous Supreme Court win a decidedly Pyrrhic feel.

On the other hand, EPA prevented the Sacketts from building on their property, but the agency presumably cared more about being able to issue administrative orders that aren’t subject to pre-enforcement review.

They both lost what they cared about the most.  Litigation, thy name is irony.

Disposing of Coal Combustion Residuals Just Got Much More Expensive — At Least in North Carolina!

On Monday, the North Carolina Department of Environmental Quality issued determinations with respect to six Duke Energy coal plants, requiring that Duke close coal combustion residual surface impoundments at the plants by excavating and removing all coal ash from the impoundments.  DEQ did so notwithstanding that the impoundments all received “low-risk” classifications by DEQ.

According to Greenwire (subscription required), the directives will increase the cost of complying with CCR requirements at these plants by $4B-$5B.

Why did DEQ require Duke Energy to remove all coal ash from on-site impoundments?  Because it concluded that removing the coal ash “is more protective than leaving the material in place.”

Count me skeptical of DEQ’s conclusion.  First, do landfills qualified to take CCR in these volumes even exist?  We’re talking about a very substantial volume of waste.  Second, what about years of truck traffic to remove all the CCR and the environmental costs and nuisance impacts of that work?

The DEQ directives were based on state law provisions, so for now coal plant operators outside North Carolina have nothing to fear.  However, what happens if other states get the idea that replicating the North Carolina statutory requirements would be a good idea?  Then we might really find out how much capacity is required to move and redispose of all of the CCR currently in surface impoundments at coal plants in the United States.

I hear Yucca Mountain has some extra capacity.  I’m sure Nevada would love to have the nation’s CCR!

The Clean Peak Standard Starts to Take Shape

The Massachusetts Department of Energy Resources has released its Clean Peak Standard Straw Proposal, providing its thinking on the implementation of that part of An Act to Advance Clean Energy, from 2018.  As a reminder, the basic idea is that a “Qualified RPS Resource,” installed after January 1, 2019, may obtain “clean peak certificates” for energy generated during seasonal peaks.  Existing Qualified RPS Resources may obtain CPCs if they are paired with battery storage installed after January 1, 2019.

Here is DOER’s current position on some of the important issues to be resolved.

  • If existing Qualified RPS Resources seek to pair with new battery storage, the storage must be at least equal to 25% of the nameplate capacity of the resource.
  • Once qualified, all electricity delivered by the Qualified RPS Resource would be eligible to obtain CPCs
  • DOER has proposed definitions of the peak periods for each season
  • Qualified Resources will generate CPCs based on the average output during the peak period on any particular day
  • There will be multipliers, proposed by DOER at 3X, during summer and winter peaks.
  • DOER is proposing a separate, 15X multiplier, calculated after the fact, based on generation during the prior month’s actual peak hour
  • DOER is considering including a “resilience multiplier,” but none is proposed in the Straw Proposal

There’s a lot more to the proposal than this summary can encapsulate.  Comments are due April 12, 2019.

It certainly seems as though DOER is moving forward to meet its goal of promulgating the Clean Peak Standard by Q1 of 2020.  Just another state policy for ISO-NE to incorporate into the wholesale markets!

Second 83C Offshore Wind RFP Submitted to Massachusetts DPU for Approval

The Massachusetts electric distribution companies (“Distribution Companies”), together with the Massachusetts Department of Energy Resources, have asked the Massachusetts Department of Public Utilities to approve a second request for proposal(“RFP”) for long-term offshore wind contracts in accordance with Section 83C of the Green Communities Act (“83C”).  Pursuant to 83C, the Distribution Companies are authorized to solicit up to 1600MW of offshore wind energy generation in staggered rounds of procurements.  After the success of the first 83C solicitation last year resulting in the award of an 800MW contract to our client Vineyard Wind, the new RFP seeks to solicit the remaining 800MW of offshore wind energy generation currently authorized under the Act.  The new RFP as proposed would require submissions in August with the announcement of awards in November of this year.

Just In Case You Wondered Whether PFAS Are Really a Big Deal

If you were thinking that PFAS were important, but you’ve been unsure just how big a deal they are, you need look no further than the Statewide PFAS Directive issued by the New Jersey Department of Environmental Protection.  Some of my colleagues in New Jersey may correct me, but I think that the Directive may be the most wide-ranging order I’ve ever seen issued by an environmental agency.  (And I know that NJDEP denies that the Directive is in fact an “order.”  Can you say “walks like a duck”?)

The Directive represents NJDEP’s attempt to frame a comprehensive approach towards the contamination resulting from the use of PFAS in New Jersey.  That’s all well and good.  Nonetheless, it’s not obvious that significant concerns about PFAS are enough to justify this Directive.  Here are some of the provisions that might give one pause.

  • NJDEP declares that “PFAS compounds constitute a statewide public nuisance” (Am I the only one who has never previously heard of such a thing?)
  • 3M is subject to the Directive even though, as far as one can tell, it has no operations in New Jersey.  The Directive states that:

3M is a person in any way responsible for PFOA and PFOS discharged in New Jersey as the primary manufacturer of PFOA.

Doesn’t this sound much more like a lead paint kind of products liability case, rather than an environmental statutory claim?  I love that 3M was “in any way responsible.”

  • Despite the rather Draconian provisions of the Directive, it explicitly provides that it:

is not a formal enforcement order, a final agency action or a final legal determination that a violation has occurred.  This Directive is not subject to pre-enforcement review and may not be appealed or contested

Failure to comply may nonetheless result in treble damages, even against 3M, which, as noted, does not operate in New Jersey and is not alleged in the Directive to have arranged for the disposal of any PFAS in New Jersey.

The PFAS tsunami is fully underway.

Any Press Is Good Press

Yesterday, the Washington Post (subscription required) published an article about the Trump Administration’s inability to defend many of its policies in court. Yours truly was among those quoted.  I liked the story and it was largely accurate, including its quotes from me, except that Fred Barbash stated that I had “been looking forward to deregulation under Trump.”  On that issue, I can only say that Fred and I had a misunderstanding, because I was never looking forward to deregulation under Trump.

Aside from the relatively unimportant and mildly humorous issue related to me maintaining credibility with a number of people whom I respect, I’m doing this post because that line highlights an important issue – there’s a significant difference between deregulation and regulatory reform.  I think much of our environmental regulatory structure could benefit from reform, but I don’t question the benefits of environmental regulation and I don’t support “deregulation.”

Indeed, as the article demonstrates quite well, President Trump has shown no interest in regulatory reform.  He just wants to kill as many regulations as possible – or at least persuade his supporters that that’s what he wants to do.  Like so many things about this President, he doesn’t actually care about results as much as he cares what his supporters think about him – that’s one reason why the article is a valuable piece of reporting.

And that’s also part of the reason why, as I said in the article, Trump has set regulatory reform back for years.  If we want widespread public support for regulation, we have to persuade people that regulations benefit them.  That’s why environmentalists shouldn’t fear cost benefit analysis and cost-effectiveness analysis; we need economic analysis to demonstrate the benefits of regulation.  We have a President who thinks all regulations are bad, but who cares only about the cost of regulations, not their benefits.  As a result,  cost-benefit analysis and cost-effectiveness analysis get a bad name.

And that’s bad for everyone.

Would the Last Generator to Leave the Wholesale Competitive Energy Market Please Turn Off the Lights?

On Friday, Connecticut announced that it had reached agreement with Dominion, Eversource, and United Illuminating to keep the Millstone nuclear plant operating for 10 more years.  Not coincidentally, on the same day, the six New England Governors announced their “Commitment to Regional Cooperation on Energy Issues.”  An important element of that commitment is to work with ISO New England:

to evaluate market-based mechanisms that value the contribution that existing nuclear generation resources make to regional energy security and winter reliability.

Another important element is to:

work together on a mechanism or mechanisms to value the important attributes of [clean energy] resources, while ensuring consumers in any one state do not fund the public policy requirements mandated by another state’s laws.

Good luck with all that.  I support maintaining nuclear generation.  I support clean energy procurements, such as those mandated by the Massachusetts legislature known as 83C and 83D.  However, we’ve got to recognize the impact that these procurements are increasingly having on the competitive wholesale market.  We need to remember that electricity restructuring was a huge success, resulting in lower prices and reduced GHG emissions.

If we continue to rely on out-of-market procurements to attain various attributes that policy makers in different states value, nothing will remain of the competitive wholesale market.

Will the last competitive generator please turn out the lights?  After all, that’s just good demand management.

When Is Property Damage From a Release “Expected or Intended”? Only After the Owner Learns of the Spill and Ignores It

Any good trial lawyer will tell you that the law is about telling stories.

Once upon a time, Timothy and Stacy Creamer bought a house.  Only after they closed did they realize that some strategically placed rugs were hiding the evidence that, “up from the ground come a bubblin’ crude.”

Unlike Jed Clampett, rather than finding themselves millionaires, the Creamers found themselves with a million dollar liability – literally.

This being a law story, of course the sellers were bankrupt.  The Creamers thus pursued the sellers’ insurer.  The case ended up in the Appeals Court, which held that the Creamers could pursue their claims under the policy.

The insurer, Arbella, made three arguments in support of its summary judgment motion.  The Court rejected them all.  In order, the Court held that:

  1. The property damage was caused by an occurrence.  Arbella argued that the damage was caused by the sellers’ fraud, not by the original release of oil.  However, as the Court pointed out, the Creamers’ had claims based on Chapter 21E, the Commonwealth’s superfund law.  Since Chapter 21E is a strict liability statute, the Creamers’ damages were caused by the release, not by the sellers’ fraud.  (But see number 3, below!)
  2. The loss occurred during the policy period.  Following precedent, the Court concluded that, so long as the property damage occurred during the policy period, it did not matter that the harm to the claimant did not occur until later.
  3. At least some of the damage was not “expected or intended.”  This is the most significant part of the case.  While preserving Creamers’ claims, the Court split the baby on this one.  It held that the original release was not expected or intended, but that, once the sellers discovered the spill without doing anything about it, any further damage was “expected” by the seller.  The Court thus remanded for a determination by the Superior Court how much of the total property damage was “expected.”

The Creamers will thus get their day in court, but, depending on when the sellers learned of the contamination, their recovery could be significantly limited.  They certainly will not get enough to move to Beverly Hills.  No swimming pools or movie stars for the Creamers.

Injunctions In RCRA Citizen Suits — Broad, But Not Infinite

Two recent cases illustrate the potential scope of, and the potential limitations on, injunctive relief in RCRA citizen suits.  First up, Schmucker v. Johnson Controls.

Contamination was detected at the Johnson Controls manufacturing facility in Goshen, Indiana.  In response, Johnson Controls performed substantial remediation under the auspices of the Indiana Department of Environmental Management’s Voluntary Remediation Program.  Nonetheless, significant contamination remains at the site,… More

An NSR Enforcement Decision – Last of a Dying Breed?

Late last month, Federal Judge Rodney Sippel ruled that EPA could obtain injunctive relief against Ameren Missouri in the long-running NSR enforcement case concerning Ameren’s Rush Island Plant.  The Court had already ruled that Ameren had violated the Clean Air Act by failing to obtain a PSD permit prior to implementing substantial modifications at the plant.

Having lost at the liability stage, Ameren took three shots at avoiding injunctive relief.  Three strikes and Ameren’s out.  The Court concluded that:

  • It has it has authority to issue an injunction for a past violation, even where EPA has withdrawn its penalty claim.  The Court distinguished cases where ownership had changed since the modifications were made.
  • Federal courts may make determinations regarding what constitute BACT.
  • It has authority to require emissions reductions at other facilities owned by Ameren, in order to compensate for the excess emissions occurring at Rush Island due to the NSR violation.  This may be the most significant aspect of the decision.

The Court did deny EPA’s motion for summary judgment that BACT requires installation of flue gas desulfurization at Rush Island.  However, as long as Ameren isn’t closing Rush Island, I would not expect that to be a heavy lift for EPA at trial.

Given EPA’s decision to deemphasize NSR enforcement, I don’t know how many more of these cases we’re going to see.  With that in mind, I’m going to note what I said about the NSR enforcement program when the liability decision was issued in this case:

Put simply, why would we decide to regulate existing facilities only when they make significant upgrades that make them more efficient?  Wouldn’t it make more sense to regulate the existing facilities that remain inefficient?

Governor Baker Shows Support for Offshore Wind Industry

Governor Baker addressed a room full of offshore wind stakeholders at “The Future of Offshore Wind” Forum hosted by the Environmental League of Massachusetts on Wednesday morning.  He applauded the developers, environmental groups, legislators and local students for the progress made in recent years which has led to a dramatic decrease in the price of offshore wind energy to ratepayers in recent years.

Thanks to a bill Governor Baker signed into law in 2016,… More

When Is A Regulatory Denial a Regulatory Taking? Not Very Often, At Least in Massachusetts

On Tuesday, the Massachusetts Appeals Court denied a regulatory takings claim brought by a plaintiff whose development plans for her property in Falmouth were denied by the Falmouth Conservation Commission.  Plaintiff’s evidence showed that the property was worth $700,000, if developable, and $60,000, if not.  

The Court ruled, in conformity with the “vast majority” of decisions in other states, that there is no right to a jury trial on the question whether a regulatory taking has occurred. This question is obscure, arcane, boring, and the decision seems correct.

On the merits, the decision is probably right, though the notion that the plaintiff would receive a “windfall” if compensated, because her parents bought the lot for $49,000 in 1975 and it’s now worth $60,000 even after the alleged taking, seems somewhere between silly and downright offensive.

I’d still like to put regulatory takings jurisprudence on a firmer footing.  I’ve been making this argument since 2009, but I’m hoping that someday, somewhere, some judge will listen.  Here’s the idea, adopted from my then law school professor, Guido Calabresi.

The rationale behind the Wetlands Protection Act is that certain activities harm the public good by damaging important public resources.  Sounds like a nuisance to me.  What happened was that, as we started basing our environmental regulatory programs on statutes, rather than on common law, the common law ceased developing in the way that it had over centuries.  We don’t have to figure out any more whether new development would constitute a nuisance, because we can simply prohibit it under the WPA.

To me, though, it would make more sense to utilize the lens of nuisance law.  We should ask whether, in the absence of the WPA, the common law would have advanced in such a way that developments that harm wetlands resources would now be considered a nuisance.  If so, then no compensation is due.  No one is  entitled to compensation for having to abate a nuisance.

Rather than trying to figure out the extent to which a regulation interferes with someone’s “investment-backed expectations,” why not figure out whether we are just making landowners conform to expected norms of behavior or whether we are instead simply imposing on one person the costs necessary to obtain a general benefit?

Citizen Plaintiffs Lose a Climate Suit — Let Me Count the Ways

Yesterday, Judge Paul Diamond dismissed climate litigation brought by the Clean Air Council and two minor plaintiffs.  Like the Juliana case in Oregon, the plaintiffs argued that the government had violated the their rights by failing to take robust action against climate change.  Here are some of the failures that Judge Diamond identified in the complaint.

First, he found the plaintiffs did not have standing.  Why not?

  • No injury in fact
  • No traceability
  • No redressability

Judge Diamond also ruled that prudential concerns regarding separation of powers compelled a conclusion that plaintiffs did not have standing:

Article III standing exists “to prevent the judicial process from being used to usurp the powers of the political branches.” These considerations preclude me from acting as a “virtually continuing monitor[] of the wisdom and soundness of Executive action.”

Next, Judge Diamond ruled, in the alternative, that plaintiffs failed to state a claim.  Why not?

  • No due process right to a life-sustaining climate
  • No “state-created danger”
  • No substantive due process violation
  • No federal public trust

I’ll note that, having found plaintiffs did not have standing, it was actually improper for him to reach the question of whether the complaint stated a claim, because, in the absence of standing, the Court had no further jurisdiction.

That Judge Diamond went out of his way to drive four additional stakes into plaintiffs’ complaint reminds me of the Black Knight in Monty Python and the Holy Grail.  That the plaintiffs are likely to claim that this defeat is only a flesh wound – and they might be right in the long run – only strengthens the analogy.