During 2014, the United States Environmental Protection Agency (EPA) issued a number of important policy decisions and new regulations and courts issued opinions in key environmental cases. This “Year-In-Review” summarizes some of these actions, focusing on those that likely will have precedential impacts and may represent long-term trends affecting the environment and regulated entities during 2015 and beyond. Issues related to shale gas and hydraulic fracturing are not addressed in this Year-in-Review but are covered in Sidley’s Shale and Hydraulic Fracturing blog available here.
EPA’s Regulation of GHG. On June 23, 2014, the United States Supreme Court issued a decision restricting EPA’s authority to regulate greenhouse gas (GHG) emissions from new and modified stationary sources under the Prevention of Significant Deterioration (PSD) and Title V permitting programs. A copy of the decision, Utility Air Regulatory Group v. EPA, 134 S. Ct. 2427 (2014), is available here.
In a series of rulemakings and interpretive memos, EPA adopted an interpretation of the Clean Air Act, under which stationary sources would be required to obtain construction and operating permits under the PSD and Title V programs whenever a facility emits GHGs above certain threshold levels. However, because those thresholds were based on conventional pollutants, which are emitted in much smaller quantities than GHGs, EPA altered these statutory thresholds in the Tailoring Rule so that only large industrial sources would be subject to permitting obligations at the outset. The Supreme Court rejected EPA’s interpretation, holding that EPA could not impose permitting obligations on such facilities based solely on their GHG emissions, but instead could regulate GHG emissions from such sources only if the source first triggered permitting obligations based on emissions of some other pollutant. The Court found EPA’s interpretation unreasonable because it “claim[ed] to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy.” UARG, 134 S. Ct., at 2444.
The Supreme Court’s two-part holding allowed all parties to claim partial victory in the case because, while EPA’s interpretation of the Clean Air Act was invalidated and numerous facilities were allowed to proceed to construction without permits, the Court did find that EPA had limited authority to regulate GHG emissions under the PSD permitting program for those facilities that required permits based on emissions of pollutants other than GHGs. Rather than vacating the Tailoring Rule, the Court remanded the case to the D.C. Circuit for further proceedings. While the D.C. Circuit has not yet issued an order on motions concerning implementation of the Court’s decision, briefs filed by the parties make clear that, at a minimum, EPA will have to complete a new rulemaking to revise or replace the Tailoring Rule with new PSD regulations that are consistent with the Supreme Court’s ruling.
Cross-State Air Pollution Rule. The United States Supreme Court issued a decision in EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584 (2014) on April 29, 2014, reversing a prior D.C. Circuit decision vacating EPA’s Cross-State Air Pollution Rule (Transport Rule) and remanding the case to the D.C. Circuit for further proceedings. A copy of the decision is available here. The Transport Rule is the EPA’s most recent effort to implement the Clean Air Act’s Good Neighbor Provision, which instructs states to prohibit upwind sources from emitting air pollutants that “contribute significantly” to downwind states’ ability to attain National Ambient Air Quality Standards (NAAQS). In the Transport Rule, EPA determined that states were subject to the rule if their emissions contributed more than one percent of the total emissions in a downwind non-attainment area and then required states to impose cost-based emissions reductions, regardless of the degree to which the state contributed to downwind non-attainment. At the same time, EPA established a Federal Implementation Plan (FIP) for all states covered by the Transport Rule without first giving the states an opportunity to implement the Transport Rule through State Implementation Plans (SIPs).
After several states and regulated entities challenged the rule, the D.C. Circuit, in December 2011, stayed implementation of the rule pending judicial review. The D.C. Circuit later vacated the Transport Rule on several grounds, holding that the emission reductions imposed by EPA could require states to reduce their emissions below a level EPA deemed significant, that EPA failed to adhere to proportionality requirements between upwind states, and that EPA failed to ensure that the collective obligations imposed on all upwind states would not result in over-control. The D.C. Circuit also held that EPA unlawfully imposed FIPs without first giving states the opportunity to prepare their own SIPs to reduce downwind emissions.
The Supreme Court disagreed in part, holding that the Clean Air Act did not dictate any particular method for allocating emission reductions among upwind states and, as a result, EPA’s approach to allocating reduction obligations among upwind states was entitled to deference. At the same time, the Supreme Court found that EPA could not require states to reduce their downwind contribution below EPA’s significance threshold or beyond the level needed to achieve downwind attainment status, and expressly left open the opportunity for individual states to bring “as applied” challenges on these grounds. The Supreme Court also affirmed EPA’s action to issue FIPs immediately upon promulgation of the Transport Rule. The Supreme Court remanded the case back to the D.C. Circuit for further proceedings, where the stay on implementation of the Transport Rule was lifted. The D.C. Circuit is now preparing for oral argument on several as-applied challenges to the Transport Rule, as well as a number of issues that were not resolved in the first instance by the D.C. Circuit when it vacated the Transport Rule in 2013.
Statute of Limitations in Environmental Enforcement Cases. In 2013, the Third and Seventh Circuits decided landmark cases involving the applicable statute of limitations (SOL) and PSD/New Source Review (NSR) under the Clean Air Act.
On July 8, 2013, the Seventh Circuit handed down its decision in United States v. Midwest Generation, LLC, 720 F.3d 644 (7th Cir. 2013), which significantly limits the time-frame available for EPA to pursue PSD/NSR cases. A copy of the decision is available here. The Midwest Generation case, which arose out of a 2009 enforcement matter brought by the U.S. and the State of Illinois against Midwest Generation, the current owner, and Commonwealth Edison, the former owner, of several coal-fired power plants. The claims concerned alleged modifications made primarily during the 1990s by Commonwealth Edison to its power plants without a PSD/NSR pre-construction permit in violation of the Clean Air Act, as well as Midwest Generation’s continued operation of those power plants.
Historically, the majority of courts have held that the five-year SOL applicable to such matters bars civil penalty claims for PSD/NSR violations based on the determination that the failure to obtain a pre-construction permit is a discrete, one-time violation. However, courts have allowed claims for injunctive relief to proceed, noting that nothing in the Clean Air Act prohibits the government from seeking injunctive relief past the five-year SOL. In Midwest Generation, the district court, and later the Seventh Circuit, broke with tradition by ruling that the government was not entitled to injunctive relief either. The Seventh Circuit concluded that PSD violations were not “continuing violations” of the Clean Air Act for purposes of the five-year SOL; instead, the violation is completed when construction commences without a permit. Further, the Court noted that the SOL is not tolled by any time period involved in discovering plant modification events.
The ramifications of this decision are fairly plain: PSD/NSR cases must be brought within five years of the alleged violation to obtain any relief, including injunctive relief. Because EPA has traditionally asserted its PSD/NSR claims based on actions that occurred a decade or more earlier, the Midwest Generation decision suggests a change in enforcement strategy may be in EPA’s future.
In United States v. EME Homer City Generation, L.P., 727 F.3d 274 (3rd Cir. 2013), the Third Circuit took a position very similar to that of the Court in Midwest Generation. A copy of the decision is available here. In EME Homer City, EPA alleged the former owner of a coal-fired power plant had failed to obtain the appropriate PSD/NSR permit for modifications it had made to the plant years earlier, and that the current owner violated PSD/NSR requirements for operating a modified plant that had not originally obtained the appropriate PSD/NSR permits. The district court ultimately dismissed all claims made by EPA, concluding that, as against the former owners, the civil penalties claim had expired with the five-year SOL. In relation to the injunctive claims, the district court determined that relief was not available against the former owners because injunctive relief is designed to prevent future violations; the former owners no longer owned or operated the plant and therefore posed no risk of violating the PSD program in the future. The Third Circuit affirmed dismissal using slightly narrower reasoning. The Third Circuit held that injunctive relief, as specifically contemplated by the text of the Clean Air Act, is forward looking. Accordingly, since the former owners were not currently violating the Clean Air Act and because the former owners could not violate the Act in the future, injunctive relief was not available. In relation to the current owners, the court held that the PSD program only addressed construction and modification, and did not address ongoing conditions of operation. Therefore, because the current owners had not constructed or modified the plant, they could not be liable for violating the PSD requirements, and no relief, injunctive or otherwise, was available against them.
The impact of these decisions is beginning to trickle down to current district court cases. For example, only nine months after the Midwest Generation decision, the Northern District of Indiana reconsidered its ruling on injunctive relief in United States v. U.S. Steel Corp., 16 F. Supp. 3d 944 (N.D. Ind. 2014). A copy of the decision is available here. In U.S. Steel, EPA sued U.S. Steel Corporation alleging violations of the Clean Air Act’s PSD program and air quality standards. In particular, EPA sought both damages and an injunction relating to construction conducted by U.S. Steel in 1990 at its currently-owned plant in Gary, Indiana. The monetary penalty claims were originally dismissed by the court on the basis that they were brought over 20 years after the applicable five-year SOL had expired; however, the injunctive claims remained after the court ruled that the SOL did not bar injunctive relief.
In the wake of Midwest Generation, U.S. Steel asked the court to reconsider its ruling. Upon reconsideration, the court held that the injunctive relief claims could not stand based on the Seventh Circuit decision. The court made a point to note that the Midwest Generation holding was unusual and that the basis for the Seventh Circuit’s application of the SOL to injunctive claims was unclear. Still, the court was certain that the holding of Midwest Generation called for dismissal of the claims for injunctive relief with respect to the 1990 modifications.
The full effect of these cases will continue to evolve as additional courts weigh the SOL and one-time versus continuing violation issues.
CERCLA Divisibility Defense. The Seventh Circuit in September gave hope to companies that have sought to limit their Superfund liability through the defense of divisibility, following a string of cases that had narrowed the availability of a divisibility defense. United States v. P.H. Glatfelter Co., 768 F.3d 662 (7th Cir. 2014), available here. Courts generally hold that Superfund liability is joint and several, but the Supreme Court had held in Burlington Northern & Santa Fe Ry. v. United States, 556 U.S. 559 (2009), that parties could avoid joint and several liability if they could prove that a “reasonable basis for apportionment” exists. In the wake of Burlington Northern, however, most courts have rejected divisibility defenses, finding that the defendant had not shown a reasonable basis for apportionment. The Seventh Circuit decision in P.H. Glatfelter, however, vacated a district court decision rejecting the defense and remanded with instructions to give a closer look to the defendant’s proposed basis for apportionment. The decision may revive efforts to establish divisibility defenses at Superfund sites, efforts which the Burlington Northern case had inspired but which subsequent decisions had dimmed.
Upcoming EPA Rulemaking Litigation. Looking forward to 2015, there are a number of significant cases regarding EPA rulemakings that are pending before the Supreme Court and the D.C. Circuit. First, in Michigan v. EPA, S. Ct. Case No. 14-46, the Supreme Court is reviewing challenges to EPA’s Mercury and Air Toxics Standards by several states and regulated entities on the grounds that EPA improperly failed to take costs into consideration in setting standards for regulated utilities. A decision is expected by the end of the Supreme Court’s term. The D.C. Circuit is expected to issue decisions on challenges to a series of related rulemakings in United States Sugar Corp. v. EPA, D.C. Cir. Case No. 11-1108 (National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial and Institutional Boilers and Process Heaters or “Boiler MACT”), American Forest and Paper Association v. EPA, D.C. Cir. Case No. 11-1125 (Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources: Commercial and Industrial Solid Waste Incineration Units), American Chemistry Council v. EPA, D.C. Cir. Case No. 11-1141 (National Emission Standards for Hazardous Air Pollutants for Area Sources: Industrial, Commercial and Institutional Boilers and Process Heaters), and Eco Services Operations LLC v. EPA, D.C. Cir. Case No. 11-1189 (Identification of Non-Hazardous Secondary Materials that Are Solid Waste). Petitions for review are also expected in response to EPA’s recently finalized Definition of Solid Waste Rule, 80 Fed. Reg. 1694 (Jan. 12, 2015). Additional petitions for review will likely follow EPA’s finalization of other pending rulemakings, such as those discussed below.
Ozone NAAQS. On December 17, 2014, EPA proposed to revise the NAAQS for ozone from 75 parts per billion (ppb) to a level between 65 and 70 ppb. EPA has also requested comment on a range of options, including reducing the standard to 60 ppb or maintaining the current standard. NAAQS must be established at levels that are requisite to protect public health and welfare with an adequate margin of safety; EPA cannot consider costs in setting the NAAQS. EPA is required to review, and if necessary revise, NAAQS every five years. Once EPA revises a NAAQS, states have primary responsibility for implementing the revised standard through SIPs.
The current standard, finalized during 2008, is 75 ppb, and states are still in the process of implementing rules to achieve those standards. In fact, the Transport Rule discussed above is meant to assist in achieving the 1997 ozone and 2006 PM-2.5 NAAQS. While the difference between the current standard and EPA’s proposal is only 5-10 ppb, the potential impacts of such a change are significant. This link provides a comparison of the air quality control regions that would not meet the new standard. EPA also has prepared a useful map showing the progress the country has made towards meeting the 1997 ozone standard, which was 84 ppb. This pattern of setting a standard, making progress towards that standard, and then a lowering of the standard (or increasing the stringency of the standard, depending on your perspective) has repeated. The new standard would be the third reduction in the ozone NAAQS since the 1977 Clean Air Act Amendments were enacted.
Reducing the existing standard will have significant and wide-spread impacts across the economy. First, while many parts of the country have attained the existing standard of 75 ppb, a large number of areas have ambient ozone concentrations above the proposed standard and would be classified as ozone non-attainment areas by EPA. In order to achieve or maintain attainment with the revised NAAQS, states, in their implementation plans, may impose additional requirements to reduce emission of ozone precursors on existing industrial sources and potentially on motor vehicles, construction equipment and small businesses. The revised standard will also affect new or modified stationary sources under the NSR program. New and modified sources in attainment areas must obtain a PSD permit based on Best Available Control Technology and must demonstrate that their emissions will not cause any area to exceed the NAAQS. In non-attainment areas, such sources must obtain a Non-Attainment New Source Review permit based on a more stringent Lowest Achievable Emission Rate and must obtain emissions reductions from other sources to offset their own emissions. EPA has proposed a number of other measures to mitigate the impact of the new standard on some sources seeking PSD permit, and to aid states in implementing the revised standard.
EPA is accepting comments on the proposed revisions to the ozone NAAQS until March 17, 2015 and, in accordance with a court order, is expected to finalize the revisions by October 1, 2015. Litigation over the new standard is likely to follow.
CO2 Emission Limits for New Power Plants. On January 8, 2014, EPA published a revised proposal to regulate carbon dioxide (CO2) emissions from new fossil fuel-fired power plants and withdrew a previous proposal published in 2012. The proposal has had an immediate effect on new power plants because, unlike most regulations, New Source Performance Standards (NSPS) under Section 111(b) of the Clean Air Act take effect immediately at the time of proposal. EPA is required to base NSPS on the best system of emission reduction that is adequately demonstrated. The proposal would set separate NSPS for coal- and natural gas-fired power plants, but has effectively banned the construction of new coal-fired power plants.
For coal-fired power plants, EPA has proposed an emission limit of 1,100 lbs CO2/MWh based on the installation of partial carbon capture and storage (CCS) technology. EPA asserts that CCS is adequately demonstrated for coal-fired power plants. Others have argued that there are no commercial-scale power plants with CCS operating anywhere in the world and the heavy subsidies given to facilities under construction are unlikely to be replicated. In contrast, EPA’s proposed NSPS for natural-gas fired power plants, which range from 1,000 lbs CO2/MWh to 1,100 lbs CO2/MWh depending on the size of the facility, do not require any additional emission control technology. If finalized, natural gas-fired electric generating units (EGUs) will remain viable while new coal-fired units likely will not be an option in the foreseeable future.
CO2 Emission Limits for Existing Power Plants. On June 18, 2014, EPA published a related proposal to regulate CO2 emissions from existing fossil fuel-fired power plants under Section 111(d) of the Clean Air Act. EPA asserts that, by 2030, the proposal would reduce CO2 emissions by 25 percent from a 2005 baseline. Section 111(d) is a rarely used provision that allows EPA and the states to regulate emissions from certain categories of existing sources after it establishes emissions limits for new sources in the same category. In contrast to NSPS for new sources, EPA’s role in regulating existing sources is limited and states have primary authority to develop implementation plans that regulate existing sources based on guidance provided by EPA. EPA’s authority to regulate existing fossil fuel-fired power plants under Section 111(d) is questionable, because the Clean Air Act bars EPA’s authority from applying Section 111(d) to source categories (such as coal-fired power plants) that are already regulated under Clean Air Act Section 112 regulations for hazardous air pollutants.
In sharp contrast to prior Section 111(d) rules that have relied on technology-based emission controls, EPA has proposed broad statewide emission reduction goals that incorporate all aspects of the electricity sector in an effort to reduce electricity generation by coal-fired power plants. In addition to reducing CO2 emissions from coal-fired power plants through heat rate improvements, the proposed state-wide CO2 emission targets are based on reductions in coal-fired electricity generation due to increased operating capacity at existing and under-construction natural gas-fired power plants, avoiding retirement of nuclear power plants, increasing renewable energy generation through 2030, and improving energy efficiency. States would be free, however, to identify other opportunities to reduce CO2 emissions from electricity generation, including through the use of multi-state cap and trade programs, such as the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and AB32 in California. The existing power plant proposal is less stringent than the standards for newly constructed power plants; however, modified and reconstructed coal-fired power plants would still be required to implement significant emissions reductions based on heat rate improvements and the use of more efficient boilers. Again, EPA did not propose additional emission control technology for natural gas-fired EGUs.
The comment period for both proposals has already closed. Prior to the close of the comment period on the proposed rule for existing power plants, several entities including Murray Energy and a coalition of states led by West Virginia, brought lawsuits in the D.C. Circuit challenging the proposed rule. While they rely on different procedural grounds, petitioners in each case allege that EPA cannot regulate existing coal-fired power plants under Section 111(d) of the Clean Air Act because those plants are already subject to regulation under Section 112. EPA has responded by arguing that the petitions are premature in the absence of a final rule and that the petitioners’ interpretation of the Clean Air Act is incorrect. Oral argument is scheduled for April 16, 2015.
EPA was expected to issue final rules in early 2015, but has since indicated that final rules may not be ready until sometime in the summer of 2015.
Startup, Shutdown Malfunction Rules. EPA issued a proposed rule in February 2013 and a supplemental proposed rule in September 2014 addressing the treatment of air emissions during startups, shutdowns or malfunctions (SSM). A consent decree requires EPA to finalize the rule by May 2015 and revised SIPs would then be due by November 2016. A link to EPA’s webpage containing background on the proposal is available here.
Through these proposals, EPA is saying that the following are not allowed in any SIP:
- No “Director’s discretion” for determining when and if an SSM event is a violation of law;
- No “automatic” exemptions from enforcement for SSM events; and
- No “narrowly tailored” “affirmative defenses” can be provided that would prevent a federal or citizen’s action.
In other words, EPA now says that a state can have an affirmative defense, but only to the extent that the defense bars a state’s action for penalties. A state action for injunctive relief must remain available and the federal government, as well as citizen’s rights, cannot be restricted. EPA suggests that it may elect to use “enforcement discretion” when appropriate. However, this would leave regulated entities to deal with state and citizen group enforcement, and EPA suggests that such companies may plead their case to a judge who has discretion on penalties and other relief. EPA also systematically is removing SSM provisions from Maximum Achievable Control Technology (MACT) standards issued under Section 112 of the Clean Air Act.
Many emissions limitations were written assuming that the SIP or MACT would contain SSM provisions that provided some form of relief. Similarly, some equipment cannot comply unless it is operating in a steady state. Prior state rules that provided a defense for unavoidable malfunctions (e.g., grid power losses, etc.) also would be invalid under EPA’s proposal. And, because these proposals apply nationally, the impact will be widespread. To some extent, there may be fixes for these problems, such as site-specific limitations, but these fixes may place significant burdens on regulated entities and state permitting agencies. In addition, care should be exercised during the reopening of any MACT standard for which EPA intends to remove the SSM provisions.
Next Generation Compliance Initiative. EPA has begun implementation of its Next Generation Compliance Initiative (Next Gen), an integrated strategy to identify and implement “modern” approaches to compliance. At its core, the Next Gen policy utilizes advanced monitoring and information technology to gather information about emissions sources, and identify potential issues at regulated facilities. It further increases a facility’s accountability to EPA and the general public by making the monitoring information publicly available, on company and EPA websites or through other methods. EPA views Next Gen as a way to maintain and extend its presence and enforcement capabilities even in the face of reduced and uncertain funding. The agency also plans to use information gathered through Next Gen monitoring activities to inform future rulemakings.
As part of this Next Gen initiative, on June 30, 2014, EPA published a proposed rule for the Petroleum Refinery Sector Risk and Technology Review and New Source Performance Standards (Proposed Refinery NSPS) which, if promulgated as proposed, would require covered refineries to conduct fence line monitoring for benzene and electronically report results. If a refinery’s monitored benzene concentrations exceed a set “action level,” the refinery would be required to take corrective action to reduce its emissions. In addition to any regulatory corrective action requirements, EPA anticipates that measures such as these will increase transparency and cause companies to undertake further voluntary actions to reduce emissions. If successful, one can anticipate that EPA would extend the use of these techniques to other industries.
On the enforcement front, on January 7, 2015, EPA issued a memorandum instructing enforcement staff to incorporate Next Gen “tools” in civil enforcement settlements, other than expedited settlements, whenever possible. Next Gen tools can include:
- Advanced monitoring (e.g., fence-line monitoring of air pollutants at a facility’s border, mobile monitors and use of infrared cameras to “see” emissions), generally defined as:
- Monitoring that is not yet in widespread use;
- Provides real-time or near real-time data to facilitate facility investigation and response to elevated pollution levels;
- Is less expensive and easier to use; and
- Provides data of acceptable quality.
- Independent third-party verification of a settling party’s compliance with settlement obligations;
- Electronic reporting; and
- Public accountability through increased sharing/transparency of data.
EPA encourages staff to include one or more of these components in settlements as injunctive relief, mitigation or Supplemental Environmental Projects.
Coal Ash Rule for Electric Utilities. EPA issued the first ever federal regulation for coal ash disposal at electric utilities, on December 19, 2014. EPA first proposed a coal ash rule in 2010, in response to the TVA Kingston coal ash spill in Tennessee. EPA’s proposal included alternatives to regulate coal ash either as solid waste, under Subtitle D of the Resource Conservation and Recovery Act (RCRA), or as a type of hazardous waste, under Subtitle C of RCRA. After years of comments, public hearings and stakeholder meetings, EPA ultimately determined that coal ash would be treated as solid waste and fall within the scheme of Subtitle D. Many environmental groups have expressed disappointment with EPA’s decision to not regulate coal ash as hazardous waste, indicating that the new rule may become subject to years of protracted litigation.
The new rule is scheduled to go into effect six months after publication in the Federal Register. The rule includes minimum requirements for design and operation, location restrictions, groundwater monitoring and corrective action and closure requirements and post-closure care for all new and currently operating coal ash impoundments and landfills. Additionally, any existing unlined impoundment that is causing groundwater contamination must stop receiving coal ash and either retrofit or close, in most circumstances. Results of required inspections and monitoring must be posted on public websites by the regulated entity. Notably, the rule does not require cleanup or closure of non-operating coal ash landfills or impoundments at inactive power plants because EPA stated that it believes it does not have authority to regulate activities at inactive facilities.
Revised Definition of Solid Waste. EPA’s revised Definition of Solid Waste (DSW) Rule was signed on December 10, 2014, and published on January 13, 2015. The rule is scheduled to become effective on July 13, 2015. The DSW Rule revises the definition of solid waste used to determine the applicability of the hazardous waste requirements of Subtitle C of RCRA. In particular, it excludes from the definition of hazardous waste certain hazardous secondary materials that are “legitimately” recycled, by either the waste generator or a “verified recycler.” EPA has adopted a definition of “legitimate recycling” to address the problem of “sham recycling.” According to EPA, the DSW Rule will not only encourage recycling innovation, but also protect human health and the environment from the mismanagement of hazardous waste, especially in environmental justice communities. Notably, the DSW Rule no longer allows exports under the verified recycler exclusion. Because RCRA is primarily implemented by the states, EPA will be working with states to help facilitate adoption of the new rule. States that had adopted EPA’s 2008 version of the DSW Rule, including Illinois, New Jersey and Pennsylvania, will be required to modify their program to meet the new, more stringent, federal standards. Both industry and environmental groups have indicated that litigation over the final rule is likely.
Revised Definition of Waters of the United States. On April 21, 2014, EPA and the U.S. Army Corps of Engineers published a joint proposal to define the term “Waters of the United States.” This term defines the scope of the federal government’s jurisdiction under the Clean Water Act, including the authority to require National Pollutant Discharge Elimination System (NPDES) permits under Section 402 and “dredge and fill” permits under Section 404. Historically, the definition of Waters of the United States has been the subject of considerable controversy and has been addressed several times by the Supreme Court. Most recently, in Rapanos v. United States, 547 U.S. 715 (2006), the Court failed to produce a majority opinion, resulting in two competing standards: the Scalia test and the Kennedy test. Since then, different jurisdictions have applied varying approaches to defining Waters of the United States based on one or both of the tests from Rapanos. The current proposal is intended, in part, to provide clarity and uniformity in how waters of the United States are defined.
The current proposal divides potential waters of the United States into three categories. First, certain waters are categorically jurisdictional waters, including traditional navigable waters, interstate waters, territorial seas, impoundments, tributaries of other jurisdictional waters, and waters adjacent to other jurisdictional waters. Second, certain areas are categorically excluded from waters of the United States, including, for example, waste treatment systems, upland ditches and groundwater. For waters falling between these two extremes, a case-by-case assessment based on the Kennedy test is needed to determine whether there is a significant nexus between the waters at issue and other jurisdictional waters. While based on the Kennedy test, the proposed rule is arguably broader than either of the Supreme Court approaches in Rapanos due to the broad definitions EPA applies to other terms such as “tributary,” “adjacent,” “floodplain,” and “riparian area.”
Comments on the proposed rule were due in November 2014 and a final rule is expected later in 2015.
Revised Phase I ASTM Standard. In early 2013, ASTM International revised its standard for Phase I Environmental Site Assessments (ESA). This revised standard, ASTM 1527-13, was endorsed by EPA in a Final Rule issued on December 30, 2013. This Final Rule determined that ASTM 1527-13 satisfied the “all appropriate inquiries” (AAI) process of evaluating the environmental condition of real property, a prerequisite to asserting defenses to liability under CERCLA. Then, in October 2014, EPA published a rule removing mention of the former Phase I ASTM standard – ASTM 1527-05 – from the AAI rule, establishing that this previous ASTM standard should no longer be used in conducting AAI.
The most significant differences between the two standards include revisions and updates to the defined terms associated with identifying the import of environmental concerns. The new standard also strongly recommends conducting a regulatory file review of any property or any adjoining property (within the required search distance) that appears on a federal, state or tribal environmental database; if such a review is not completed, the environmental professional conducting the Phase I ESA must explain his or her reason for choosing not to conduct such review within the Phase I ESA report. The new standard also emphasizes assessing the real or potential occurrence of vapor migration and vapor releases.
EPA’s endorsement of the new standard certainly was expected, but its analysis of vapor migration issues in the preamble to the October 2014 rule surprised many. Down-playing the differences between the two rules, EPA claimed that the old ASTM 1527-05 standard always included a requirement to identify indications of vapor migration or vapor releases. Yet, not all environmental professionals, it seems, read the previous ASTM standard to explicitly include such a requirement. While vapor intrusion concerns (associated specifically with air in the indoor environment) may have been more regularly assessed in the later years of ASTM 1527-05, many, if not a majority, of the Phase I ESAs completed under ASTM 1527-05 made no mention of vapor migration or release issues.
EPA’s statement on vapor migration has generated some litigation concerns, including some discussion regarding whether the statements made by EPA in its preamble might serve as a basis for claims of professional negligence against environmental consultants who, working under the ASTM 1527-05, did not include such an evaluation.
Significant agricultural biotechnology legal developments in 2014 include passage of a food labeling law in Vermont and two decisions by the United States District Court for the District of Hawaii that struck down local ordinances that would have imposed onerous restrictions on cultivation of genetically engineered plants in the counties of Kauai and Hawai’i.
Vermont Food Labeling Requirements. On May 8, 2014, Vermont Governor Peter Shumlin signed into law Act 120, which establishes mandatory labeling requirements for food products sold for human consumption that contain ingredients produced through genetic engineering. A copy of Act 120 is available here. In addition, the law also prohibits use of the word “natural” or any “words of similar import” on product labels or advertising of covered foods. The requirements are scheduled to go into effect July 1, 2016. On June 12, 2014, the Grocery Manufacturers Association, Snack Food Association, International Dairy Foods Association and National Association of Manufacturers filed a complaint in the U.S. District Court for the District of Vermont seeking declaratory and injunctive relief. The Plaintiffs’ complaint asserts five counts variously alleging violations of the First, Fifth and Fourteenth Amendments to the United States Constitution, the Commerce Clause and the Supremacy Clause of the United States Constitution and the doctrine of preemption. Defendants representing the state moved to dismiss the complaint, and on September 11, 2014, Plaintiffs moved for a preliminary injunction enjoining the Defendants from implementing Act 120 until after resolution of the litigation. After briefing on these matters, oral argument was held on January 7, 2015.
Hawaiian GMO Regulations. On August 25, 2014, the U.S. District Court for the District of Hawaii issued an order granting summary judgment in favor of Plaintiffs Syngenta Seeds, Inc., Syngenta Hawaii, LLC, Pioneer Hi-Bred International, Inc., Agrigenetics, Inc. and BASF Plant Sciences LP in a challenge to the County of Kauai’s Ordinance 960, which, if it had been allowed to go into effect, would have imposed significant restrictions and reporting requirements on pesticides use, and the planting of so-called “genetically modified organisms” in Kauai County, Hawaii. The Court ruled that Hawaii’s comprehensive state regulatory scheme for pesticides preempts Ordinance 960 and enjoined the County from implementing or enforcing the Ordinance. A copy of the decision, Syngenta Seeds, Inc. v. County of Kauai, Civ. No. 14-00014 BMK, is available here.
As enacted, Ordinance 960 would have subjected specified agricultural entities to pesticide use disclosure requirements, and would have required all commercial agricultural entities that “intentionally or knowingly possess any genetically modified organism” to disclose specific information about such crops in annual reports to the County of Kauai Office of Economic Development and the Hawaii State Department of Agriculture. In addition to the mandatory reporting and disclosure requirements, Ordinance 960 also would have imposed pesticide use restrictions in the form of large mandatory buffer zones.
Plaintiffs challenged the County’s authority to enact and enforce Ordinance 960 on numerous bases, including that the Ordinance is preempted under both federal and state law. The Court found in favor of the Plaintiffs on their claims of preemption under Hawaii state law, finding that, under a “comprehensive statutory scheme test,” the pesticide use restrictions of Ordinance 960 are preempted on the basis that the state’s statutory scheme and administrative rules cover the same subject. The Court also ruled that the requirements for annual GMO reporting requirements are impliedly preempted under the state’s comprehensive regulatory scheme. The Court declined to rule on the other claims, ruling that its finding that the Ordinance is preempted under Hawaii State law rendered the remaining claims moot.
Following the Syngenta decision, on November 26, 2014, the U.S. District Court for the District of Hawaii granted summary judgment in favor of plaintiffs in Hawaii Floriculture and Nursery Ass’n v. County of Hawaii, Civ. No. 14-00267 BMK, Nov. 26, 2014. A copy of the decision is available here. Hawaii Floriculture was a challenge to Hawaii County Ordinance 13-121 (codified as Hawaii County Code §§ 14-128 et seq.), which generally prohibited open air cultivation, propagation, development or testing of genetically engineered (GE) plants. While the Ordinance did provide for specific exemptions, including for cultivation of genetically engineered papaya under specified conditions and continued cultivation of GE crops in “specific locations where genetically engineered crops or plants have been customarily open air cultivated, propagated or developed” prior to the effective date of the Ordinance, if such locations were registered in accordance with requirements of the Ordinance it nonetheless constituted a significant burden on individuals and entities who desired to utilize agricultural biotechnology techniques.
Plaintiffs challenged Ordinance 13-121 on multiple grounds, including that it was preempted under federal and state law. In addressing the claim that Ordinance 13-121 was preempted, the Court noted that the similarities to Syngenta, determining that the same analysis was applicable before concluding that Hawaii state law impliedly preempts the Ordinance. With respect to federal preemption, the Court ruled that Ordinance 13-121 is preempted by the express preemption clause of the Plant Protection Act to the extent that the Ordinance prohibited field testing of plants permitted by USDA as “regulated articles” that are “plant pests” or “noxious weeds” under the Plant Protection Act. The Court ruled that Ordinance 13-121 is not impliedly preempted by federal law.
SB 445 (Hill) Underground Storage Tanks. While there was some speculation that the State Underground Storage Tanks (UST) Fund would not be kept solvent, SB 445 injects new funds into the program and thus extends the current State Water Resources Control Board program for remediation of releases from underground storage tanks from 2016 to 2026. A storage fee of $.02 per gallon of petroleum in tanks will be used to fund the resurrected UST Cleanup Fund. The bill also imposes deadlines which, in the longer run, should ease the cost strain on UST cleanups. Specifically, owners and operators of single-walled USTs must permanently close their tanks by December 31, 2025. Remote and rural UST owners are afforded more funds to replace single-walled USTs. Also, UST owners or operators must meet existing federal and state financial assurance requirements by January 1, 2019, without relying on the UST Cleanup Fund. Thus we can expect to see more private insurance entering the market. There are also streamlining provisions which allow an UST Cleanup Fund subaccount to fund investigation and remediation of contaminated sites. The bill also authorizes loans and grants to help small businesses meet UST requirements, creates an orphan site subaccount, funds school district UST cleanups and creates an expedited claim process to fund expedited reviews. Some properties with prior “no further action” determinations can be qualified for additional funding, under some conditions.
SB 1261 (Jackson) Hazardous Materials Business Plans. Mostly technical changes to the reporting and disclosure of hazardous materials by businesses are included in SB 1261. Throughout most of the state, auditing of hazardous materials business plans is conducted by the local Certified Unified Protection Agency (CUPA). Entities which file business plans with CUPAs now have new requirements as to what materials are included in their inventories, so they should update their business plans to account for new information. Most significant is a new definition of “consumer product” (consumer products generally were exempt from reporting to the CUPA). A CUPA also is authorized to require a facility to report certain materials they determine to be hazardous if the CUPA finds a public health or safety risk at a given facility. Given that many CUPAs are local fire departments, this authority could grant more discretion to local first responders in conveying their views on optimal chemical use or storage layout and what quantities should be allowed at some facilities. All that said, this bill also exempts certain unstaffed facilities from needing business plans. Additionally, certain gasses used to cool computer rooms may no longer require reporting in business plans.
AB 380 (Dickinson) OES Information from Railroads. In an effort to manage risk of rail transportation of certain petroleum products, rail carriers must submit information to the state Office of Emergency Services (OES) concerning their transport of hazardous materials and Bakken crude oil. OES assembles the information state-wide, but then also conveys the reported information to each CUPA possibly affected, if OES determines that a release, accident or other condition might trigger a response by a particular CUPA. In essence, this reporting program is akin to the hazardous materials business plan stationary sources are required to submit to CUPAs. Now, hazardous materials releases attributable to mobile sources are being accounted for under CUPA authority as well. Rail carriers must maintain a communications center capable of providing information about an accident or another unauthorized release of a hazardous material or crude oil.
AB 333 (Wieckowski) Medical Waste. For years, some medical waste in California was subject to unclear, unenforced and virtually impossible to achieve standards for management based on original legislation from 1990. This 1990 legislation had not kept up with the times. This bill aims to clarify and standardize handling practices through amendments to the Medical Waste Management Act. For one, federal requirements are imported into state law (which helps minimize confusion and inconsistent mandates). Handing procedures are clarified. Provisions are made for the generation of medical waste, including “one-off” waste generation from an exceptional event, and transporter obligations are clarified. While this area still remains difficult, the State at least is trying to harmonize hazardous waste and medical waste management regimes.
SB 1281 (Pavley) Reporting of Water Used in Oil and Gas Drilling Operations. On a monthly basis, oil and gas well operators are required to submit information about the disposition of water, including water composing all or part of an injected fluid or gas, to the Department of Oil, Gas and Geothermal Regulation (DOGGR). Quarterly reporting to DOGGR also is required on the treatment of water and the use of treated or recycled water in oil and gas field activities. DOGGR is to circulate forms for the reporting mandates to ensure the necessary information is provided.
AB 2738 Proposition 65. This is largely a technical bill which requires a citizen enforcer to advise a target defendant that there are low-cost and non-litigation options to cure an alleged violation, provided the violation alleged falls into certain specified categories. This is not major reform, but a common sense mandate to communicate settlement options to a targeted defendant.
SB 1090 (Leno) Furniture Flame Retardants. Manufacturers of upholstered furniture must label their products to identify certain flame retardant chemicals. The Bureau of Electronic and Appliance Repair, Home Furnishings and Thermal Insulation is authorized to assess fines for labeling violations. Given the long shelf life of furniture—units can remain unsold in the California marketplace for years—manufacturers should keep careful track of inventory manufacture dates.
AB 1826 (Chesbro) Organic Wastes. As of January 1, 2016, cities and counties must develop an organic waste recycling program (except for remote areas). As of April 1, 2016, “businesses” generating organic wastes must arrange for recycling services for that waste. “Business” includes a multi-family residential building containing five units or more and generating at least eight cubic yards of organic wastes per week. By April 1, 2017, a covered “Business” is one generating at least four cubic of organic wastes yards per week. CalRecycle may lower the latter threshold to two cubic yards or more by January 1, 2020 if it makes certain findings.
SB 270 (Patilla) Single-Use Plastic Bags. Effective January 1, 2015, California now bans many single-use plastic and paper carryout bags traditionally used by retailers and grocers. By July 1, 2016, foodmarts and convenience food stores also will be unable to use single-use plastic and paper carry out bags. There are exceptions, including the thin bags used for grocery store produce and clothing retailers’ use of plastic sheet bags draped over clothes sold on a hanger. Stores may provide reusable bags or still use paper bags at the point of sale, but a 10 cents charge is mandated and the proceeds are to be retained by the store for “administrative” costs of this program. Persons who use food stamp benefits for women, infants and children and those receiving SNAP benefits need not pay any charges. Fines may be imposed on retailer violators. Interestingly, the State appropriated $2 million from an existing CalRecycle recycling market development account to pay former manufacturers of single-use bags to train employees on how to manufacture bags meeting requirements for reusable bags.
AB 2282 (Gatto) Recycled Building Water Systems. The California Building Standards Commission (CBSC) is required to adopt mandatory building standards, for certain zones where there is or will be access to a water recycling facility, to install recycled water systems in newly constructed commercial and public buildings and single- and multi-family dwellings.
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|Byron F. Taylor
|David T. Buente Jr.
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