During 2014 the Environmental Protection Agency (EPA) issued a number of important policy decisions and new regulations, and the courts issued opinions in key environmental cases. This update summarises 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.
EPA regulation of GHG
On June 23 2014 the Supreme Court issued a decision restricting the EPA's authority to regulate greenhouse gas (GHG) emissions from new and modified stationary sources under the prevention of significant deterioration and Title V permitting programmes.(1)
In a series of rulemakings and interpretive memos, the EPA adopted an interpretation of the Clean Air Act, under which stationary sources would be required to obtain construction and operating permits under the prevention of significant deterioration and Title V programmes 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, the 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 the EPA's interpretation, holding that the 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 the EPA's interpretation to be unreasonable because it "claim[ed] to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy".(2)
The Supreme Court's two-part holding allowed both sides to claim partial victory in the case because, while the 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 the EPA had limited authority to regulate GHG emissions under the prevention of significant deterioration permitting programme 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 DC Circuit for further proceedings. The DC Circuit has now issued an order vacating certain provisions and instructing the EPA to engage in a rulemaking to implement the decision.
Cross-state air pollution rule
On April 29 2014 the Supreme Court issued a decision in EPA v EME Homer City Generation, LP(3) reversing a prior DC Circuit decision vacating the EPA's cross-state air pollution rule (the 'Transport Rule') and remanding the case to the DC Circuit for further proceedings.(4) The Transport Rule is the EPA's most recent effort to implement the Clean Air Act's 'good neighbour' 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 the EPA determined that states were subject to the rule if their emissions contributed more than 1% 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, the EPA established a federal implementation plan for all states covered by the Transport Rule without first giving the states an opportunity to implement the Transport Rule through state implementation plans.
After several states and regulated entities challenged the rule, in December 2011 the DC Circuit stayed implementation of the rule pending judicial review. The DC Circuit later vacated the Transport Rule on several grounds, holding that:
- the emission reductions imposed by the EPA could require states to reduce their emissions below a level that the EPA deemed significant;
- the EPA failed to adhere to proportionality requirements between upwind states; and
- the EPA failed to ensure that the collective obligations imposed on all upwind states would not result in over-control.
The DC Circuit also held that the EPA unlawfully imposed federal implementation plan without first giving states the opportunity to prepare their own state implementation plan 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, the EPA's approach to allocating reduction obligations among upwind states was entitled to deference. At the same time, the Supreme Court found that the EPA could not require states to reduce their downwind contribution below its 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 the EPA's action to issue federal implementation plans immediately on promulgation of the Transport Rule. The Supreme Court remanded the case back to the DC Circuit for further proceedings, where the stay on implementation of the Transport Rule was lifted. The DC Circuit has since heard 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 court 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 and prevention of significant deterioration/new source review under the Clean Air Act.
On July 8 2013 the Seventh Circuit handed down its decision in United States v Midwest Generation, LLC,(5) which significantly limits the timeframe available for the EPA to pursue prevention of significant deterioration/new source review cases. The Midwest Generation case arose out of a 2009 enforcement matter brought by the United States 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 prevention of significant deterioration/new source review 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 statute of limitations applicable to such matters bars civil penalty claims for prevention of significant deterioration/new source review 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 statute of limitations. 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 prevention of significant deterioration violations were not "continuing violations" of the Clean Air Act for purposes of the five-year statute of limitations; instead, the violation is completed when construction commences without a permit. Further, the court noted that the statute of limitations is not tolled by any time period involved in discovering plant modification events.
The ramifications of this decision are fairly clear: prevention of significant deterioration/new source review cases must be brought within five years of the alleged violation to obtain any relief, including injunctive relief. Because the EPA has traditionally asserted its prevention of significant deterioration/new source review claims based on actions that occurred a decade or more earlier, the Midwest Generation decision suggests that a change in enforcement strategy may be in the EPA's future.
In United States v EME Homer City Generation, LP(6) the Third Circuit took a position that was very similar to that of the court in Midwest Generation. In EME Homer City the EPA alleged that the former owner of a coal-fired power plant had failed to obtain the appropriate prevention of significant deterioration/new source review permit for modifications it had made to the plant years earlier, and that the existing owner violated prevention of significant deterioration/new source review requirements for operating a modified plant that had not originally obtained the appropriate prevention of significant deterioration/new source review permits. The district court ultimately dismissed all claims made by the EPA, concluding that, as against the former owners, the civil penalties claim had expired with the five-year statute of limitations. 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 prevention of significant deterioration programme in the future. The Third Circuit affirmed dismissal using slightly narrower reasoning. The Third Circuit held that injunctive relief, as specifically contemplated by the Clean Air Act, is forward looking. Accordingly, since the former owners were not currently violating the Clean Air Act and could not violate the act in the future, injunctive relief was not available. In relation to the existing owners, the court held that the prevention of significant deterioration programme addressed only construction and modification, and did not address ongoing conditions of operation. Therefore, because the existing owners had not constructed or modified the plant, they could not be liable for violating the prevention of significant deterioration requirements, and no relief –injunctive or otherwise – was available against them.
The impact of these decisions is beginning to trickle down to 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 US Steel Corp.(7) In US Steel the EPA sued US Steel Corporation alleging violations of the Clean Air Act's prevention of significant deterioration programme and air quality standards. In particular, the EPA sought both damages and an injunction relating to construction conducted by US Steel in 1990 at its plant in Gary, Indiana. The monetary penalty claims were originally dismissed by the court on the basis that they were brought more than 20 years after the applicable five-year statute of limitations had expired; however, the injunctive claims remained after the court ruled that the statute of limitations did not bar injunctive relief.
In the wake of Midwest Generation, US Steel asked the court to reconsider its ruling. On 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 statute of limitations 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 statute of limitations and one-time versus continuing violation issues.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) divisibility defence
In September 2014 the Seventh Circuit gave hope to companies that have sought to limit their Superfund liability through the defence of divisibility, following a string of cases that had narrowed the availability of a divisibility defence.(8) 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(9) that parties could avoid joint and several liability if they could prove that a "reasonable basis for apportionment" exists. However, in the wake of Burlington Northern, most courts have rejected divisibility defences, finding that the defendant had not shown a reasonable basis for apportionment. In contrast, the Seventh Circuit decision in PH Glatfelter vacated a district court decision rejecting the defence 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 defences 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, a number of significant cases regarding EPA rulemakings are pending before the Supreme Court and the DC Circuit. First, in Michigan v EPA(10) the Supreme Court is reviewing challenges to the EPA Mercury and Air Toxics Standards by several states and regulated entities on the grounds that the 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 DC Circuit is also expected to issue decisions on challenges to a series of related rulemakings.(11) Petitions for review have also been filed in response to the EPA's recently finalised Definition of Solid Waste Rule.(12) Additional petitions for review will likely follow the EPA's finalisation of other pending rulemakings, such as those discussed below.
Rulemaking and policy developments
On December 17 2014 the EPA proposed to revise the NAAQS for ozone from 75 parts per billion (ppb) to a level between 65ppb and 70ppb. The EPA has also requested comment on a range of options, including reducing the standard to 60ppb 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; the EPA cannot consider costs in setting the NAAQS. The EPA is required to review, and if necessary revise, NAAQS every five years. Once the EPA revises a NAAQS, states have primary responsibility for implementing the revised standard through state implementation plans.
The existing standard, finalised in 2008, is 75ppb, 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 standard and the EPA's proposal is 5ppb to 10ppb, the potential impact of such a change is extraordinary. This link provides a comparison of the air quality control regions that would not meet the new standard. The EPA also has prepared a useful map showing the progress that the country has made towards meeting the 1997 ozone standard, which was 84ppb. This pattern of setting a standard, making progress towards that standard and then lowering the standard (or increasing the stringency of the standard) has been 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 widespread effects across the economy. First, while many parts of the country have attained the existing standard of 75ppb, a large number of areas have ambient ozone concentrations above the proposed standard and would be classified as ozone non-attainment areas by the EPA. In order to achieve or maintain attainment with the revised NAAQS, in their implementation plans states 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 new source review programme. New and modified sources in attainment areas must obtain a prevention of significant deterioration permit based on best available control technology and 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. The EPA has proposed a number of other measures to mitigate the impact of the new standard on some sources seeking prevention of significant deterioration permit and to aid states in implementing the revised standard.
The EPA is expected to finalise the revisions by October 1 2015. Litigation over the new standard is likely to follow.
Carbon dioxide emission limits for new power plants
On January 8 2014 the EPA published a revised proposal to regulate carbon dioxide 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, the New Source Performance Standards (NSPS) under Section 111(b) of the Clean Air Act take effect immediately at the time of proposal. The 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, the EPA has proposed an emission limit of 1,100 pounds (lbs) of carbon dioxide per megawatt hour (MWh) based on the installation of partial carbon capture and storage technology. The EPA asserts that carbon capture and storage is adequately demonstrated for coal-fired power plants. Others have argued that there are no commercial-scale power plants with carbon capture and storage operating anywhere in the world and the heavy subsidies given to facilities under construction are unlikely to be replicated. In contrast, the EPA's proposed NSPS for natural-gas fired power plants, which range from 1,000lbs carbon dioxide/MWh to 1,100lbs carbon dioxide/MWh depending on the size of the facility, require no additional emission control technology. If finalised, natural gas-fired electric generating units will remain viable while new coal-fired units likely will not be an option in the foreseeable future.
Carbon dioxide emission limits for existing power plants
On June 18 2014 the EPA published a related proposal to regulate carbon dioxide emissions from existing fossil fuel-fired power plants under Section 111(d) of the Clean Air Act. The EPA asserts that by 2030 the proposal would reduce carbon dioxide emissions by 25% from a 2005 baseline. Section 111(d) is a rarely used provision that allows the EPA and the states to regulate emissions from certain categories of existing source after it establishes emissions limits for new sources in the same category. In contrast to NSPS for new sources, the 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 the EPA. The EPA's authority to regulate existing fossil fuel-fired power plants under Section 111(d) is questionable because the Clean Air Act bars the EPA's authority from applying Section 111(d) to source categories (eg, coal-fired power plants) that are already regulated under Section 112 of the Clean Air Act regulations for hazardous air pollutants.
In sharp contrast to prior Section 111(d) rules that have relied on technology-based emission controls, the 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 carbon dioxide emissions from coal-fired power plants through heat rate improvements, the proposed state-wide carbon dioxide 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.
However, states would be free to identify other opportunities to reduce carbon dioxide emissions from electricity generation, including through the use of multi-state cap and trade programmes (eg, the Regional Greenhouse Gas Initiative in the northeast and AB32 in California). Modified and reconstructed coal-fired power plants would be required to implement significant emissions reductions based on heat rate improvements and the use of more efficient boilers. Again, the EPA did not propose additional emission control technology for natural gas-fired electric generating units.
The comment period for both proposals has already closed. Before 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 DC Circuit challenging the proposed rule. While they rely on different procedural grounds, the petitioners in each case allege that the 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. The 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 was held on April 16 2015.
The EPA was expected to issue final rules in June 2015, but has since indicated that final rules may not be ready until late 2015.
Start-up, shutdown malfunction rules
The EPA issued a proposed rule in February 2013 and a supplemental proposed rule in September 2014 addressing the treatment of air emissions during start-ups, shutdowns or malfunctions. A consent decree requires the EPA to finalise the rule by May 2015 and revised state implementation plans will then be due by November 2016.(13)
Through these proposals, the EPA is saying that the following are not allowed in any state implementation plan:
- no 'director's discretion' for determining when and whether a start-up, shutdown or malfunction event is a violation of law;
- no 'automatic' exemptions from enforcement for start-up, shutdown or malfunction events; and
- no 'narrowly tailored' affirmative defences that would prevent a federal or citizen's action.
In other words, the EPA now says that a state can have an affirmative defence, but only to the extent that the defence bars a state's action for penalties. A state action for injunctive relief must remain available and the federal government, as well as citizens' rights, cannot be restricted. The 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 the EPA suggests that such companies may plead their case to a judge who has discretion on penalties and other relief. The EPA is also systematically removing start-up, shutdown or malfunction provisions from maximum achievable control technology (MACT) standards issued under Section 112 of the Clean Air Act.
Many emission limitations were written assuming that the state implementation plan or MACT would contain start-up, shutdown or malfunction 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 defence for unavoidable malfunctions (eg, grid power losses) would also be invalid under the EPA's proposal. Because these proposals apply nationally, the impact will be widespread. To some extent, there may be fixes for these problems (eg, 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 the EPA intends to remove the start-up, shutdown or malfunction provisions.
Next-Generation Compliance Initiative
The 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 utilises 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 the EPA and the general public by making the monitoring information publicly available, on company and EPA websites or through other methods. The 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 the EPA published a proposed rule for the Petroleum Refinery Sector Risk and Technology Review and 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 exceeded 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, the 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 the EPA would extend the use of these techniques to other industries.
On the enforcement front, on January 7 2015 the 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 (eg, 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.
The 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
On December 19 2014 the EPA issued the first federal regulation for coal ash disposal at electric utilities. The EPA first proposed a coal ash rule in 2010, in response to the TVA Kingston coal ash spill in Tennessee. The EPA's proposal included alternatives to regulate coal ash either as solid waste, under Subtitle D of the Resource Conservation and Recovery Act, or as a type of hazardous waste under Subtitle C of the act. After years of comments, public hearings and stakeholder meetings, the EPA ultimately determined that coal ash will be treated as solid waste and fall within the scheme of Subtitle D. Many environmental groups have expressed disappointment with the 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 take 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 operational coal ash impoundments and landfills. In addition, 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 clean-up or closure of non-operating coal ash landfills or impoundments at inactive power plants because the EPA stated that it believes it does not have authority to regulate activities at inactive facilities.
Revised definition of 'solid waste'
The EPA's revised Definition of Solid Waste 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 rule revises the definition of 'solid waste' used to determine the applicability of the hazardous waste requirements of Subtitle C of the Resource Conservation and Recovery Act. 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". The EPA has adopted a definition of 'legitimate recycling' to address the problem of sham recycling. According to the EPA, the Definition of Solid Waste 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 rule no longer allows exports under the verified recycler exclusion. Because the Resource Conservation and Recovery Act is primarily implemented by the states, the EPA will work with states to help facilitate adoption of the new rule. States that had adopted the EPA's 2008 version of the Definition of Solid Waste Rule – including Illinois, New Jersey and Pennsylvania – will be required to modify their programme 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 the EPA and the US 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 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(14) 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 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 that the 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. This revised standard, ASTM 1527-13, was endorsed by the EPA in a final rule issued on December 30 2013. This final rule determined that ASTM 1527-13 satisfied the 'all appropriate inquiries' process of evaluating the environmental condition of real property, a prerequisite to asserting defences to liability under CERCLA. Then, in October 2014 the EPA published a rule removing mention of the former Phase I ASTM standard – ASTM 1527-05 – from the all appropriate inquiries rule, establishing that this previous ASTM standard should no longer be used in conducting all appropriate inquiries.
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 environmental site assessment must explain his or her reason for choosing not to conduct such review within the Phase I environmental site assessment report. The new standard also emphasises assessing the real or potential occurrence of vapour migration and vapour releases.
The EPA's endorsement of the new standard was expected, but its analysis of vapour migration issues in the preamble to the October 2014 rule surprised many. Downplaying the differences between the two rules, the EPA claimed that the old ASTM 1527-05 standard always included a requirement to identify indications of vapour migration or vapour releases. Yet not all environmental professionals, it seems, read the previous ASTM standard explicitly to include such a requirement. While vapour 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 environmental site assessments completed under ASTM 1527-05 made no mention of vapour migration or release issues.
The EPA's statement on vapour migration has generated some litigation concerns, including some discussion regarding whether the statements made by the 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.
On August 25 2014 the US District Court for the District of Hawaii issued an order granting summary judgment in favour 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, had it been allowed to go into effect, would have imposed significant restrictions and reporting requirements on pesticides use and the planting of 'genetically modified organisms' in Kauai County, Hawaii. The court ruled that Hawaii's comprehensive state regulatory scheme for pesticides pre-empts Ordinance 960 and enjoined the county from implementing or enforcing the ordinance.(15)
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 would also have imposed pesticide use restrictions in the form of large mandatory buffer zones.
The plaintiffs challenged the county's authority to enact and enforce Ordinance 960 on numerous bases, including that the ordinance is pre-empted under both federal and state law. The court found in favour of the plaintiffs on their claims of pre-emption under Hawaii state law finding that under a comprehensive statutory scheme test, the pesticide use restrictions of Ordinance 960 are pre-empted 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 genetically modified organisations reporting requirements are impliedly pre-empted under the state's comprehensive regulatory scheme. The court declined to rule on the other claims, ruling that its finding that the ordinance is pre-empted under Hawaii state law rendered the remaining claims moot.
Following the Syngenta decision, on November 26 2014 the US District Court for the District of Hawaii granted summary judgment in favour of the plaintiffs in Hawaii Floriculture and Nursery Ass'n v County of Hawaii.(16) Hawaii Floriculture was a challenge to Hawaii County Ordinance 13-121 (codified as Hawaii County Code §§ 14-128 and following), which generally prohibited open air cultivation, propagation, development or testing of genetically engineered plants. While the ordinance did provide for specific exemptions – including cultivation of genetically engineered papaya under specified conditions and continued cultivation of genetically engineered 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 parties that desired to utilise agricultural biotechnology techniques.
The plaintiffs challenged Ordinance 13-121 on multiple grounds, including that it was pre-empted under federal and state law. In addressing the claim that Ordinance 13-121 was pre-empted, the court noted the similarities to Syngenta, determining that the same analysis was applicable before concluding that Hawaii state law impliedly pre-empts the ordinance. With respect to federal pre-emption, the court ruled that Ordinance 13-121 is pre-empted by the express pre-emption clause of the Plant Protection Act to the extent that the ordinance prohibits field testing of plants permitted by the Department of Agriculture 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 pre-empted by federal law.
California regulatory developments
Underground storage tank fund and compliance upgrades
SB 445 Underground Storage Tanks
While there was some speculation that the State Underground Storage Tanks Fund would not be kept solvent, SB 445 injects new funds into the programme and thus extends the existing State Water Resources Control Board programme for remediation of releases from underground storage tanks from 2016 to 2026. A storage fee of $0.02 per gallon of petroleum in tanks will be used to fund the resurrected Underground Storage Tanks Clean-Up Fund. The bill also imposes deadlines which, in the longer run, should ease the cost strain on underground storage tanks clean-ups. Specifically, owners and operators of single-walled underground storage tanks must permanently close their tanks by December 31 2025. Remote and rural underground storage tank owners are afforded more funds to replace single-walled underground storage tanks. Also, underground storage tank owners or operators must meet existing federal and state financial assurance requirements by January 1 2019 without relying on the Underground Storage Tank Clean-Up Fund. Thus, we can expect to see more private insurance entering the market. Streamlining provisions also allow an Underground Storage Tank Clean-Up Fund sub-account to fund investigation and remediation of contaminated sites. The bill also:
- authorises loans and grants to help small businesses to meet underground storage tank requirements;
- creates an orphan site sub-account;
- funds school districts underground storage tank clean-ups; 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.
Solid waste and recycling
AB 1826 Organic Waste
As of January 1 2016 cities and counties must develop an organic waste recycling programme (except for remote areas). As of April 1 2016, businesses generating organic wastes must arrange for recycling services for that waste. The term '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 Single-Use Plastic Bags
Effective January 1 2015, California has banned many single-use plastic and paper bags traditionally used by retailers and grocers. By July 1 2016, foodmarts and convenience food stores will also be unable to use single-use plastic and paper 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 $0.10 charge is mandated and the proceeds are to be retained by the store for the administrative costs of this programme. Persons that 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.
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(1) Utility Air Regulatory Group v EPA, 134 S Ct 2427 (2014), available here.
(4) A copy of the decision is available here.
(5) 720 F 3d 644 (7th Cir 2013), available here.
(6) 727 F 3d 274 (3d Cir 2013), available here.
(7) 16 F Supp 3d 944 (ND Ind 2014), available here.
(8) United States v PH Glatfelter Co, 768 F 3d 662 (7th Cir 2014), available here.
(11) United States Sugar Corp v EPA DC Cir Case 11-1108 (National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial and Institutional Boilers and Process Heaters); American Forest and Paper Association v EPA, DC Cir Case 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, DC Cir Case 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, DC Cir Case 11-1189 (Identification of Non-hazardous Secondary Materials that Are Solid Waste).
(13) Background on the proposal is available here.
(15) Syngenta Seeds, Inc v County of Kauai, Civ 14-00014 BMK, available here.
(16) Civ 14-00267 BMK, Nov 26, 2014, available here.
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