March 11, 2010
Last week, Senator Charles Schumer (D-NY) introduced legislation that would restrict the flow of federal stimulus funds for clean energy projects to those meeting certain standards for the provision of domestic benefits. According to Schumer’s press release, this bill, the American Renewable Energy Jobs Act (S. 3069), “would require that aid flow only to clean-energy projects that rely on materials manufactured in the United States and create the bulk of jobs here at home, rather than overseas.” The bill is a response to a report issued by the Investigative Reporting Workshop at American University, which stated that 79 percent of the $2 billion in stimulus grants issued for clean energy projects have so far gone to foreign companies. The bill also responds to a controversial proposal by a US-China joint venture to apply for $450 in stimulus funds to create a wind farm in West Texas.
The U.S. wind energy industry has strongly opposed Schumer’s bill. In a statement issued last week, the American Wind Energy Association criticized the study relied on by the bill as “deeply flawed” and argued that the bill itself would put American jobs at risk. This week, wind energy lobbyists have urged Washington lawmakers to oppose the bill and create a federal mandate that utilities generate some power from renewable sources.
March 8, 2010
On February 18, 2010, the Council on Environmental Quality (“CEQ”) released a long-anticipated draft guidance document addressing how the effects of climate change and greenhouse gas (“GHG”) emissions should be analyzed under the National Environmental Policy Act (NEPA).
The CEQ guidance stresses that NEPA “demands informed, realistic governmental decision making.” Accordingly, the guidance instructs federal agencies to include a discussion of climate change within the scope of its NEPA analysis when an analysis of the direct and indirect of GHG emissions from proposed actions “may provide meaningful information to decision makers and the public.”
To put some meat on the bones of its overarching standard for “meaningful information”, the guidance deems projected direct annual CO2-equivalent GHG emissions from a proposed action of 25,000 metric tons or more “an indicator that a quantitative or qualitative assessment may be meaningful to decision makers and the public.”
However, the 25,000 metric ton figure is not a firm standard. The guidance makes clear that impacts from long-term projects with emissions below 25,000 metric tons annually may also warrant analysis. The Guidance goes on to list a number of technical documents that can assist agencies in quantifying GHG emissions for the purpose of a NEPA review. The Guidance also states expressly that the 25,000 ton standard should not be seen as an indicator of the significance of potential impacts of an action.
Apart from GHG emission, the Guidance also provides that, when appropriate, agencies should consider the potential effects of climate change on, or in combination with, a proposed action. According to the Guidance, climate change effects should be considered in the analysis of projects designed for long-term utility and located in climate-change vulnerable areas. It states that as such “the observed and projected effects of climate change that warrant consideration are most appropriately described as part of the current and future state of the proposed action’s ‘affected environment.’” The Guidance emphasizes that, in light of the uncertainties associated with climate change predictions, in considering the future effects of climate change, monitoring programs should be considered for inclusion in NEPA decision documents.
The draft Guidance specifically does not address what climate-change related impacts rise to the level of “significance” – thus requiring the preparation of an EIS. Rather, it seems to assume that agencies will analyze climate change within whatever NEPA document is otherwise being prepared for an action. However, CEQ has asked for comment on whether the final Guidance should address significance.
The Guidance attempts to strike a balance between requiring an assessment of GHG emissions and climate change impacts within the scope of NEPA review where it would be meaningful, while limiting the scope of such review so it does not run afoul of the “rule of reason,” the principle that agencies should focus on the usefulness of the potential information to the decision making process when determining the scope of its NEPA review. To that end, CEQ makes clear that agencies should use the NEPA scoping process “to set reasonable spatial and temporal boundaries” on any GHG assessment and, most importantly, “focus on aspects of climate change that may lead to changes in the impacts, sustainability, vulnerability and design of the proposed action and alternative courses of action.” It is clear that CEQ is not looking for wholly academic discussions of climate change in NEPA EAs and EISs, and also does not want a discourse on “wholly speculative effects.” Rather, the Guidance favors a discussion of GHG emissions and climate change in a manner where it could meaningfully impact the decision making process subject to the NEPA review, such as cases where the NEPA review could be used “to reduce vulnerability to climate change impacts, adapt to changes in our environment, and mitigate the impacts of Federal agency actions that are exacerbated by climate change.” In that vein, the Guidance emphasizes the importance of comparing the climate change-related effects of various project alternatives.
Thus, the emphasis of the Guidance is precisely where it should be – to provide information and analysis consistent with NEPA’s “rule of reason.” Of course, like most things NEPA, the devil is in the details. While this draft Guidance document, when finalized, will provide some useful broad overarching principles to determine the scope of any GHG/climate change analysis, as well as some specific tools to assist agencies in conducting that analysis, it will be left to the agencies – and ultimately the federal courts – to grapple with these issues in the context of the myriad federal actions with the potential to cause GHG/climate change impacts or that are potentially vulnerable to climate change impacts.
CEQ will receive public comment on the guidance documents for 90 days. The guidance documents and instructions for submitting comments are available here: www.whitehouse.gov/ceq/initiatives/nepa.
March 5, 2010
The Court of Appeals for the Second Circuit recently issued a decision in Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., — F.3d —-, 2010 WL 626064 (2d Cir. Feb. 24, 2010), another in a series of cases that attempt to chart the contours of liability of potentially responsible parties (“PRPs”) under CERCLA. Following its cleanup of a contaminated site along the Hudson River under an administrative consent order with the New York State Department of Environmental Conservation (“DEC”), Niagara Mohawk Power Corp. (“Niagara”), itself a PRP, commenced a cost recovery and contribution action against other PRPs.
The District Court ruled that Niagara could not seek contribution costs under Section 113(f)(3)(B) of CERCLA because DEC did not have the authority to resolve CERCLA liability without a specific agreement with the EPA and, thus, the administrative consent order did not resolve Niagara’s CERCLA liability. The Second Circuit reversed this ruling, holding that Niagara could maintain a contribution action against former owners and operators of the site pursuant to §113(f)(3)(B).
Section 113(f)(3)(B) allows a party to seek contribution from other PRPs when the party “has resolved its liability to the United States or a state for some or all of a response action in an administrative or judicially approved settlement.” Because Niagara had administratively settled its CERCLA claims with the DEC, the court concluded that §113(f)(3)(B) provided the proper mechanism for Niagara’s claims; settlement of claims with the federal government or express federal approval of the state administrative settlement was not required. In addition, the court held that because Niagara’s claims fit squarely within the requirements of §113(f)(3)(B), to allow Niagara to proceed with a cost recovery action under §107(a) would be inappropriate. This ruling should clarify that a DEC administrative consent order is sufficient to permit the settling party to bring a CERCLA contribution action.
The District Court granted summary judgment in favor of certain defendants on the grounds that Niagara had failed to raise a genuine issue of material fact as to whether hazardous substances had been released on defendants’ properties. Defendants had argued that Niagara’s failure to identify evidence that they had caused any release of hazardous substances entitled them to summary judgment. The Second Circuit reversed, holding that a party seeking contribution need not establish the precise amount of hazardous material discharged to demonstrate PRP liability and to move its CERCLA claims past the summary judgment stage; application of this standard will make it more difficult for PRPs to exit a litigation by moving for summary judgment. Whether the amount of hazardous waste deposited by a particular PRP is minimal does not erase liability, but presents an issue for appropriation of costs.
Former site owner Chevron, one of the defendants seeking summary judgment, argued that it could not be held liable for Niagara’s costs because it never engaged in any activities that could have produced manufactured gas production waste—the type of waste Niagara was required to remediate under the consent order. The Second Circuit held, however, that because Niagara was required to investigate and identify all hazardous waste, it could seek contribution for Chevron’s share of the investigation costs.
The Second Circuit also overruled the District Court’s finding that a genuine issue of material fact existed as to whether Niagara’s cleanup was consistent with the National Contingency Plan (“NCP”). Noting the presumption that actions undertaken by the government are consistent with the NCP, the court held that a PRP could establish consistence by conducting a response action under the monitoring and ultimate approval of a state environmental agency. Niagara’s adherence to the DEC consent order established the cleanup’s NCP consistency.
March 2, 2010
The US Environmental Protection Agency today announced that it has decided to add the Gowanus Canal in Brooklyn, NY to the National Priorities List, which will render the canal a Superfund site under the federal Superfund statute, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).
February 26, 2010
In April 2008, EPA promulgated regulations governing renovations in target housing (i.e., any housing constructed prior to 1978) and child-occupied facilities. The rule was designed to ensure that owners and occupants of target housing and child-occupied facilities receive information on lead-based paint hazards prior to the commencement of renovations and to ensure that firms performing such work are certified and safe work practices followed. (A copy of the final rule is available here.)
Pre-renovation notice requirements had been in effect since 1999; the April 2008 regulation simply specified a new pamphlet to be distributed to owners and occupants as of December 22, 2008. (A copy of that pamphlet is available here.)
However, the new regulations also require that, as of April 22, 2010, all renovations in target housing or child-occupied facilities be conducted by certified renovators and in accordance with specified lead-safe work practices. This represents a sea change in addressing lead paint issues in pre-1978 housing and child-occupied facilities. The term “renovations” is broadly defined in the regulations to include any “modification of any existing structure, or portion thereof, that results in the disturbance of painted surfaces” and includes such activities as modification of painted doors, window repair, and weatherization projects.
Significantly, and unlike the abatement requirements of New York City’s lead paint law, the EPA regulations go beyond rental housing and apply to work performed in co-ops and condominiums. Owners of rental properties performing renovation work themselves will need to be certified and ensure that the lead-safe work practices are followed. Where outside contractors are used, it will be prudent to ensure that the contracts require EPA certification. For co-ops and condominiums, it also would be prudent for the corporation or homeowners’ association to take steps to ensure that all work performed within the building complies with these new rules. Thus, alteration agreements for owner renovations may need to be changed and other steps taken to ensure that the EPA disclosure and renovation rules are followed by contractors working in the building.
For more information and assistance in ensuring that you are ready for these new regulations, contact Steven Russo or David Yudelson.
February 23, 2010
On February 18, 2010, New York’s highest court held in Lighthouse Pointe Property Associates LLC v. New York State Dep’t of Envtl. Conservation, — N.E.2d –, 2010 WL 546058 (N.Y.), 2010 N.Y. Slip Op. 01377 (Feb. 18, 2010) (“Lighthouse”), that the New York State Department of Environmental Conservation (“DEC”) improperly excluded property in Monroe County from the Brownfield Cleanup Program (“BCP”). DEC contended that the property was not eligible for the program because the level of contamination was not sufficiently high to warrant admission into the BCP.
Rejecting DEC’s argument, the Court emphasized the expansive nature of the BCP statute, which defines eligible property, or a brownfield, as “any real property the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.” N.Y. Envtl. Conserv. L. § 27-1405. The Court noted that this “low eligibility standard” is “consistent with the statute’s legislative history,” which evinces the statute’s aim of remedying development disincentives arising from strict, joint, and several liability for environmental cleanups. The Court declined to remit the matter to DEC for further consideration, and ordered the property admitted into the BCPbased on the extensive record supporting eligibility.
The Court of Appeal’s decision in Lighthouse is consistent with three recent brownfield decisions in which the Appellate Division struck down DEC’s efforts to exclude property from the BCP based on factors not provided in the BCP statute. In HLP Properties, LLC v. New York State Dep’t of Envtl. Conservation, — N.Y.S.2d –, 2010 WL 455321 (1st Dep’t Feb. 11, 2010) (“HLP”) and East River Realty Co., LLC v. New York State Dep’t of Envtl. Conservation, 68 A.D.3d 564, 891 N.Y.S.2d 359 (1st Dep’t Dec. 17, 2009) (“ERRC”), the First Department rejected DEC’s argument that the property in question did not meet the eligibility criteria for a “brownfield” because the site would have been remediated even without participation in the BCP. In Destiny USA Dev., LLC v. New York State Department of Envtl. Conservation, 63 A.D.3d 1568 (4th Dep’t June 5, 2009) (“Destiny”), the Fourth Department rejected DEC’s efforts to exclude property from the program based on non-statutory economic factors set forth in a DEC guidance document.
The Lighthouse decision reflects that New York courts will properly ensure that DEC follows statutory mandates and will invalidate improper exclusion of properties from the BCP.
SPR represented HLP and ERRC in connection with their challenges to DEC’s exclusion of their property from the BCP. For more information, please contact Daniel Riesel, Mark Chertok, Jeff Gracer, or Michael Bogin.
February 22, 2010
In a noteworthy ruling, the United States District in the Northern District of Illinois held that an owner of industrial equipment leased to the operator of a plating facility is strictly liable as a current owner of a “facility” under Section 107(a) of Superfund (also known as CERCLA). United States v. Saporito, 2010 WL 489703 (N.D. Ill Feb. 9, 2010) (“Saporito“).
In Saporito, the federal government sought to recover over $1.5 million in cleanup costs at the site of a former plating facility. The government sought summary judgment against Saporito, on the grounds that he was a current owner of a facility within the meaning of CERCLA, “based on his undisputed ownership of equipment used in the plating process.” Saporito opposed the motion on the grounds that there was no evidence that the equipment he owned and leased to the operator was connected to any release or threatened release of hazardous substances causing the cleanup, and because the equipment had been leased to someone who actually operated the plating facility.
The District Court rejected both arguments, holding that CERCLA is a strict liability statute that did not require proof of a connection between the property owned by the defendant and the incurrence of CERCLA cleanup costs. The court, relying on ELF Atochem North American, Inc. v. United States, 868 F. Supp. 707, 709 (E.D. Pa. 1994), held that the plating line owned by Saporito was “no less a facility than the land on which it operated.” The court further observed that just as CERCLA extends liability to a landowner who may not even be aware of pollution-producing activities of its lessee, it similarly extends to owners of equipment “whose lessee is using the equipment in a similar manner.”
Saporito also argued that if he is an owner of a CERCLA “facility” and thus a current owner PRP, he should be entitled to a defense for owners who are protecting a security interest. The District Court rejected that argument as well, finding that Saporito’s ownership interest was not “primarily to protect a security interest,” a necessary element of the defense.
The District Court’s ruling, if upheld on appeal, has the potential to significantly broaden the scope of CERCLA liability. CERCLA’s broad definition of “facility” explicitly encompasses “equipment,” so that aspect of the court’s ruling is not controversial. CERCLA, however, only holds liable the current owner of a facility “from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance . . . . “ 42 U.S.C. 9607(a). Thus, the District Court appeared to err in holding that the government did not have to establish that the equipment owned by Saporito (the plating line) was connected to the release or threatened release of a hazardous substance giving rise to response costs that the government sought to recover. The court confused the fact that, once liability is established, CERCLA holds such parties strictly liable, with the requirement that to establish liability based on ownership of a “facility” the CERCLA plaintiff must show that such facility caused the release or threatened release at issue. Once a party qualifies as a liable party under Section 107(a) liability is strict in the sense that there is no need to prove negligence or fault. However, that does not mean that a CERCLA plaintiff need not link the “facility” to the release or threatened release giving rise to the cleanup costs.
Accordingly, we predict that unless resolved out-of-court this case should be reversed on appeal. The court in this case was likely influenced by the fact that Saporito had been at certain times involved in the operation of the plating operation, and was not merely an owner of equipment leased to an unconnected third-party operation. Nevertheless and despite the flaw in its reasoning, the Saporito decision makes clear that owners of industrial equipment leased to third-parties should consider taking steps to mitigate potential CERCLA liability, especially in instances where a plaintiff can establish that the equipment in question played a role in the release of hazardous substance causing contamination. In such instances the owner of the equipment, even if not involved in the operations of the plant, could be held liable as the current “owner” of a CERCLA “facility” under a proper reading of CERCLA’s strict liability scheme.
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