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June 29, 2009

House of Representatives Passes Climate Change Legislation

By: Jonathan Kalmuss-Katz — Filed under: Climate Change Law, Emerging Issues — Posted at 1:47 pm

On Friday evening, by a seven vote margin, the House of Representatives approved H.R. 2454, the American Clean Energy and Security (ACES) Act.  Introduced by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), the bill would reduce greenhouse gas emissions from roughly 7,400 power plants, industrial facilities, and other major sources to 17 percent below 2005 levels by 2020, with an 83 percent reduction required by 2050.  These limits would be enforced through a system of emissions allowances, the total number of which will correspond with bill’s overall emissions cap.

Covered facilities would have to reduce their emissions to match their supply of allowances, purchase allowances from other regulated sources, or buy offsetting reductions from sectors not covered under the cap (e.g., domestic agriculture, international forestry).  Implementation of this “cap-and-trade” approach is modeled in part after the Regional Greenhouse Gas Initiative (RGGI), a program created in 2005 to regulate carbon dioxide emissions from power plants in 10 Northeastern and Mid-Atlantic states, including New York.

As described in an earlier post, the House bill would preempt RGGI and other state cap-and-trade programs between 2012 and 2017, the first five years of the new federal program.  Sources with unused RGGI allowances could trade them in for federal credits based on the average auction price for the year in which the RGGI allowances were issued.  In its last auction earlier this month, the price of future RGGI allowances fell significantly, reflecting this possible preemption and the limits the House ACES bill imposes upon the exchange of RGGI credits.

In a last-minute change intended to protect the international competitiveness of vulnerable U.S. industries, by 2020 the House bill could require U.S. importers to purchase special allowances covering the manufacturing-related emissions of aluminum, steel, and other goods produced overseas under less stringent greenhouse gas controls.  This weekend President Obama criticized this international reserve allowance program, which could function as a tariff on certain carbon-intensive products and is likely to draw complaints under World Trade Organization (WTO) agreements.  A report released last week by the WTO and the United Nations Environment Programme (UNEP) provides an in-depth analysis of these trade-related climate issues.

The climate debate now moves to the Senate, where Barbara Boxer (D-CA), chair of the Environment and Public Works Committee, is likely to play a leading role.  A global warming bill crafted by Boxer, Sen. Joe Lieberman (I-CT), and former Sen. John Warner (R-VA) passed out of that committee in the last Congress, but fell to a filibuster on the Senate floor.  This year, however, the prospects for federal legislation are greater given the threat of EPA rulemakings that could regulate greenhouse gases under the existing Clean Air Act,  preparations for upcoming international negotiations in December, and the Obama Administration’s emphasis on addressing climate change.

June 24, 2009

Supreme Court Holds Army Corps Has Primary Authority Over Discharge of Fill Material

On Monday, June 22, 2009, the Supreme Court, in Coeur Alaska Inc. v. Southeast Alaska Co., 2009 WL 1738643 (2009), held  that the Army Corps of Engineers (the “Army Corps”) has authority to issue a permit for the discharge of mined rock slurry from a gold mine into an Alaskan lake as fill material under Section 404 of the Clean Water Act (“CWA”), and that the Environmental Protection Agency (“EPA”) is not required to regulate the mined rock as a pollutant under Section 402 of the CWA.

In 2005, the Army Corps. issued a permit to Coeur Alaska Inc. (“Coeur”) with respect to reopening the Kensington Gold Mine, north of Juneau, Alaska.  Couer’s plans included use of a “froth flotation” technique that churns mined rock in tanks of water, causing gold-bearing materials to float to the surface.  Once the gold is skimmed off the top, a mixture of crushed rock and water is left behind.  This mixture, known as slurry, is typically disposed of in tailing ponds.  Coeur proposed an alternative disposal method that would involve pumping 4.5 million tons of slurry into Lower Salt Lake and then discharging purified lake water into a downstream creek.  The Army Corps approved of Coeur’s plan and issued a fill permit under Section 404 of the Clean Water Act.

Environmental groups challenged the permit by arguing that EPA, and not the Army Corps, had authority to issue the permit.  The environmental groups claimed that the Army Corps permit violated the CWA’s new source performance standards (“NSPS”) which prohibit the “discharge of process wastewater to navigable waters from mills that use the froth-flotation process” for mining gold. 40 CFR §440.104(b)(1).  The U.S. District Court of Alaska found for the Army Corp by holding that the permit was properly issued under the CWA.  The Ninth Circuit Court of Appeals reversed and blocked the permit, holding that the discharge was “prohibited by clearly applicable and specific performance standards.”  486 F.3d 638 (9th Cir. 2007).

In a 6-3 decision, the Supreme Court found that the agencies’ permitting authority under the CWA was mutually exclusive, with the Army Corps’ authority extending over permits for the discharge of “dredged or fill material” and the EPA’s authority applying to permits for the discharge of “any pollutant,” except where the permit is for the disposal of fill material.   Consequently, the Court established that the Army Corps had sole authority to issue permits to discharge slurry because slurry is a type of “fill material.”   Both agencies define “fill material” as material changing the bottom elevation of water and “discharge of fill material” to include “placement of … slurry, or tailings or similar related materials.” 40 CFR § 232.2.

The dissent touted the CWA’s “text, structure, and purpose” as a mandate to adhere to EPA’s pollution-control requirements.  It argued that the pollution-control mandate was intended to be read throughout the CWA and adherence to the mandate was one of the main reasons the EPA and not the Army Corps, should have jurisdiction over the permit process to dispose of slurry.

June 19, 2009

Senate Committee Clarifies Wetlands Jurisdiction

By: Jonathan Kalmuss-Katz — Filed under: Clean Water Act, Wetlands — Posted at 3:55 pm

Yesterday, the Senate Environment and Public Works Committee passed legislation clarifying the scope of the Clean Water Act, restoring federal jurisdiction over wetlands regardless of their connection to navigable waterways. The bill would overturn two recent Supreme Court decisions, Solid Waste Agency of North Cook County v. United States Army Corps of Engineers, 531 U.S. 159 (2001) (“SWANCC”) and Rapanos v. United States, 547 U.S. 715 (2006) (“Rapanos”), which had limited federal wetlands protections and sown conflicts among lower federal courts.

Section 404 of the Clean Water Act regulates the discharge of dredged or fill material into “navigable waters,” defined as “the waters of the United States, including the territorial seas.” The Environmental Protection Agency and Army Corps of Engineers, which issues wetlands fill permits, had historically interpreted “navigable waters” to cover a broad range of lakes, rivers, streams, and wetlands that were not navigable in fact – limited by the constraints of the Constitution’s Commerce Clause. In SWANCC, however, the Supreme Court suggested that the Clean Water Act covers only those wetlands with a “significant nexus” to waters that were actually navigable, rejecting the Army Corps’ more expansive interpretation. A divided Supreme Court further muddied the waters in Rapanos, with the plurality opinion limiting Clean Water Act jurisdiction to wetlands with a surface connection to navigable waterways or seasonal tributaries, and a key concurrence by Justice Kennedy retaining SWANCC’s significant nexus test.

Appellate courts have struggled to reconcile Rapanos’s multiple standards, and earlier this year the Obama administration called on Congress to clarify the Clean Water Act’s scope. The Environment and Public Works Committee responded with a bill that replaces the phase “navigable waters” with “waters of the United States” and “reaffirms Federal Jurisdiction over all waters of the United States, as the [Clean Water Act] was applied and interpreted” prior to SWANCC and Rapanos.” An amendment by Sen. Max Baucus (D-MT) at yesterday’s mark-up excludes “prior converted cropland” and “waste treatment systems,” including agricultural waste ponds and lagoons.

While the bill passed out of the Senate Committee 12-7, Sens. Jim Inhofe (R-OK) and Mike Crapo (R-ID) have already announced their plans to put a hold on it, meaning 60 votes would be needed to bring the legislation to a floor vote.

June 11, 2009

Two New Reports Focus on Failure to Disclose Climate Change Risk in Corporate Filings

Two reports released on June 3 criticize current disclosure of climate change risk by many public companies and call for specific climate change disclosure  guidance from the Securities and Exchange Commission (SEC).  Reclaiming Transparency in a Changing Climate: Trends in Climate Risk Disclosure by the S&P 500 from 1995 to the Present (pdf), commissioned by the Center for Energy and Environmental Security, Environmental Defense Fund, and Ceres, analyzed approximately 6,400 10-K filings by S&P 500 companies, in the utilities, energy, materials, industrial, financial, consumer products, and IT & technology sectors.  The report found that “there is an alarming pattern of non-disclosure by corporations regarding climate risks” and that: (1) 76.3% of 2008 annual reports filed did not include any mention of climate change; (2) only 5.5% of 2007 annual reports identified at least one risk posed by climate change and articulated a strategy for managing and mitigating that risk; (3) less than 10% of companies in the financial sector discussed climate change in their 10-K filings; and (4) the utilities sector had the highest disclosure rate.

The second report, Climate Risk Disclosure in SEC Filings (pdf), prepared by The Corporate Library, assessed climate risk disclosures in the Quarter 1, 2008 filings of 100 global companies in the electric utilities, coal, oil and gas, transportation, and insurance sectors.  The report concluded that most companies failed to discuss their greenhouse gas emissions or their position on climate change in their filings.  The utilities sector had the highest ranking, of “fair”, because 3 of the 26 companies studied disclosed the risk climate change posed to their businesses and 2 companies disclosed actions to address climate change.

Both investors and regulators are demanding greater disclosure of climate risks.  For example, the Global Framework for Climate Risk Disclosure was developed by investors to encourage standardized reporting from companies.  The New York Attorney General subpoenaed five major energy companies in 2007 raising concerns that the companies did not disclose material information about increased climate risks.  The subpoenas have resulted in two of the companies entering into settlement agreements with the Attorney General’s Office.  (See Jeff Gracer’s article, Disclosure of Climate Change Risk to Investors: A Critical Issue in Search of National Standards (pdf) for information.)  Unless and until the SEC issues more specific guidance, the New York State Attorney General’s settlement framework may represent the most complete articulation of factors to be considered in connection with disclosure of climate change risk.

June 9, 2009

Appellate Decision Orders State To Admit Contaminated Properties Into New York’s Brownfield Cleanup Program

On Friday, June 5, the Appellate Division, Fourth Department, in Destiny USA Development, LLC v. DEC, CA 08—1855 (4th Dept. June 5, 2009), substantially upheld a lower court decision from Syracuse that:

  • Holds the New York State Department of Environmental Conservation (DEC) improperly interpreted the Brownfield Cleanup Act when it excluded contaminated properties from the state’s Brownfield Cleanup Program (BCP); and
  • The Fourth Department also upheld the lower court’s order requiring DEC to admit the properties into the BCP.

The Destiny decision expressly cited and followed reasoning adopted by two lower courts regarding DEC’s improper exclusion of contaminated properties in Manhattan from the BCP.  HLP Properties, LLC v. DEC, 21 Misc. 3d 658 (Sup. Ct. N.Y. Cty. 2008); East River Realty Co., LLC v. DEC, 22 Misc. 3d 404 (Sup. Ct. N.Y. Cty. 2008).   SPR is counsel to HLP and East River Realty.

In a case now pending before the Court of Appeals, the Fourth Department upheld DEC’s exclusion of property from the BCP when contamination present at a property was not sufficient in DEC’s judgment to require remediation.  Lighthouse Pointe Property Association, LLC v. DEC, 61 A.D. 3d 88 (App. Div. 4th Dept. 2009).  In Destiny, by contrast, DEC acknowledged that contamination was present at levels above cleanup standards and did not dispute that remediation was required; it sought instead to exclude the property based on non-statutory economic factors set forth in a DEC guidance document.  Quoting HLP and a Court of Appeals decision, the Fourth Department held that DEC could not exclude property that meets statutory eligibility criteria based on non-statutory guidance factors.

The Lighthouse decision is expected to be heard by the Court of Appeals in the fall of 2009.  Meanwhile, the Fourth Department’s recent decision in Destiny demonstrates that New York courts remain ready, willing and able to ensure that DEC follows statutory mandates and does not improperly exclude properties from the BCP.

Recently, however, legislation has been introduced in the New York State Senate that would retroactively cap the qualified tangible property tax credit available for successful litigants in pending BCP cases, but not provide increased site remediation tax credits afforded to other property owners under BCP amendments enacted in 2008.   Questions have been raised about whether such legislation is unconstitutional and represents unwarranted legislative interference with pending litigation.

SPR represents HLP and East River Realty in connection with their successful court challenges to DEC’s exclusion of their properties from the BCP, which are currently on appeal to the Appellate Division, First Department.  For more information, please contact Daniel Riesel, Mark Chertok, Jeff Gracer, or Michael Bogin.

June 8, 2009

The Bigger Better Bottle Bill Comes to a Halt

By: Laurie Wheelock — Filed under: Emerging Issues, New York Environmental Law, Solid Waste — Posted at 9:00 am

On Friday, May 29, 2009, Judge Thomas P. Griesa of US District Court in Manhattan issued a preliminary injunction, halting the implementation of the “Bigger Better Bottle Bill” (the “Bill”) until April 1, 2010.  The Bill represents the expansion of the current Bottle Bill, known as the New York State Returnable Container Act, N.Y. Envtl. Cons. L. 27-1000 (1982).  Originally enacted in 1982, the Bottle Bill combats the problem of beverage can or bottle litter, by requiring containers—aluminum cans, glass, and plastic bottles for soft drinks, mineral and soda water, as well as beer and liquor—to carry a five cent deposit.  Retailers, distributors, redemption centers, and bottlers are required to collect and redeem the five cent deposit on such beverage containers.

The Bill sought to expand the definition of “container” by including all bottles of water sold in the state.  Governor David A. Paterson’s office introduced the Bill to the state Legislature in January 2009, with a definition of “water” that included drinks made with sugar, such as juices, iced teas, or sports drinks.  The state legislature was hesitant to accept this definition and after negotiations, the Bill redefined “water” to include “any beverage identified through the use of letters, words or symbols on its product label as a type of water, including any flavored water or nutritionally enhanced water, provided, however, that ‘water’ does not include any beverage identified as a type of water which a sugar has been added.” N.Y. Envtl. Cons. L. § 27-1012.10.

Some New Yorkers found the distinction between water with sugar added and water with no sugar added particularly odd since last year Governor Paterson’s office introduced legislation to place an “obesity tax” on all drinks made with sugar.  The “obesity tax” legislation was dropped shortly after it was introduced but the distinction between types of water was passed along with the Bill in April.  Judith Enck, Governor Paterson’s Deputy Secretary for the Environment, recently answered questions about the distinction, stating that “[t]he Legislature only wanted to do water” and that “this was a necessary compromise to get the bill through.”


June 5, 2009

Gowanus Cleanup Prompts Debate Over Use of Superfund

Last night, the Gowanus Canal Conservancy hosted a debate, moderated by Ted Wolff of Manatt, Phelps & Phillips, between SPR’s Dan Chorost and Riverkeeper’s Josh Verleun, on the topic of the U.S. Environmental Protection Agency’s proposal to add Brooklyn’s Gowanus Canal to the Superfund National Priorities List (“NPL”). The Canal borders the communities of Park Slope, Cobble Hill, Carroll Gardens and Red Hook, and empties into New York Harbor. Since the 1860s, the Gowanus has hosted numerous industrial operations, including manufactured gas plants, mills, tanneries, and chemical plants. Decades of industrial discharges from these historic uses, as well as stormwater runoff and combined sewer overflows, have resulted in portions of the Gowanus Canal needing to be remediated.

While virtually everyone agrees that cleaning up the Gowanus is an important public goal, its inclusion in the Superfund program is by no means the only, or best, option for achieving that goal. SPR represents several owners and prospective owners of properties on or near the Gowanus, and SPR attorneys David Yudelson and Ashley S. Miller have written a briefing paper arguing that Superfund listing should be undertaken only as a last resort (pdf).

At yesterday’s Gowanus Canal Conservancy debate, Dan Chorost argued that there are better alternatives to a Superfund listing, since an EPA listing would disrupt ongoing cleanup efforts, generate years of lawsuits among potentially responsible parties, threaten much-need private investment in the area, and ultimately delay the cleanup of the Gowanus. The City of New York has prepared a detailed alternative cleanup plan for the Gowanus that calls for EPA oversight without including the Gowanus on the NPL. Josh Verleun of Riverkeeper argued that despite Superfund’s limitations, it is nonetheless the appropriate mechanism for cleaning the Gowanus, and the federal government is best situated to undertake the remediation.

EPA recently extended until July 8, 2009 the public comment period for its proposed NPL listing of the Gowanus Canal. To submit a comment to EPA, click here.  For more information on this issue, contact Dan Chorost.

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