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July 31, 2009

NY High Court Annuls Approval of Industrial Facility For Failure to Respond to Comments in Environmental Review

By: Ashley S. Miller — Filed under: Environmental Impact Review, Land Use & Development, SEQRA — Posted at 9:00 am

New York’s highest court has annulled an approval by the Town of Chili (Monroe County) Planning Board of a proposed metal shredding facility on the grounds that the environmental review of the facility, undertaken pursuant to the State Environmental Quality Review Act (“SEQRA”), was inadequate.  The Court of Appeals held that the environmental review failed to consider the risk of fires and flying projectiles from explosions at the facility that could adversely impact aircraft at an adjacent airport.  Anderson v. Town of Chili Planning Board, 2009 WL 1850972 (No. 173 SSM 17, June 30, 2009).  The risks to aircraft had been raised in a public comment submitted after the Planning Board had received input from the Town’s fire marshal and airport approval from the country planning agency.  Because the environmental review was never updated to account for this risk, the Court of Appeals remanded the matter to the Planning Board for further proceedings.

The metal shredding facility was proposed by applicant Metalico Rochester, Inc., and the environmental review was conducted by the Planning Board with input from other relevant agencies and officials.  As part of the SEQRA review, the Town’s fire marshal required installation of a fire-suppression system, and identified other measures to minimize the risk of explosions.  The facility complied with height restrictions, and received airport approval from the county planning agency.  The public then raised the potential risk to the adjacent airport, and the Planning Board failed to respond.  The SEQRA process was concluded when the Planning Board adopted a Negative Declaration for the facility and issued a conditional use permit.  Petitioners sued to challenge the SEQRA review and Planning Board approval.  The trial court dismissed the petition, finding the SEQRA review sufficient.

The Appellate Division Fourth Department affirmed, with two justices dissenting.  Anderson, 59 A.D.3d at 1017.  While the majority appellate opinion noted that, “[t]he risk to aircraft was not specifically addressed in the [Environmental Assessment Form] or at the public hearing” that fact did not sway its decision.  Instead, the majority held over dissent that despite the fact that “the precise concern” of potential impacts to aircraft was not addressed, viewed in light of the SEQRA “rule of reason,” the approval should be upheld.

The Appellate Division dissenters—whose reasoning was adopted by the Court of Appeals—disagreed, writing that, “it is not enough that the Planning Board considered the views of the Fire Marshal … inasmuch as it appears that neither had considered the risk to airplanes using nearby runways.”  Id. at 1020. The dissent noted that petitioners had raised the potential risk of “explosions in the shredder resulting in fires and the risk of flying projectiles from the shredder with respect to airplanes using nearby runways” only after the fire marshal’s review and recommendations on the project.  Ultimately, these concerns were found by the dissent and the Court of Appeals to be “sufficiently serious that they should have been addressed explicitly” before the applications were approved.

The case highlights the need for lead agencies and applicants to carefully analyze comments in the SEQRA process for their significance and, if necessary, respond to comments with additional substantive analysis.  Failure to respond to comments that raise potentially significant issues creates a litigation risk, which may result in reversal and remand of a project approval.

Newslink: “Cash for Clunkers” Program May be Out of Cash

By: Ashley S. Miller — Filed under: Emerging Issues, Newslink, Sustainable Development, Transportation — Posted at 8:56 am

CNN reports that the “Cash for Clunkers” initiative, which allowed consumers a rebate for trading in a car of lower gas mileage, may already have run through its allotment of $1B due to high demand.

UPDATE: The New York Times reports the House has authorized an additional $2B for the program.

July 30, 2009

New Petition Urges EPA Climate Regulation

On July 29, the Institute for Policy Integrity (IPI), a non-profit sponsored by the NYU Law School, petitioned the Environmental Protection Agency (EPA) to regulate greenhouse gas emissions from vehicle and aircraft fuels under the Clean Air Act.  While a number of similar petitions have been filed since the U.S. Supreme Court declared in 2007 that EPA could regulate global warming pollution in Massachusetts v. EPA, 549 U.S. 497, this one stands out for both its timing and content.

Notably, this is the first such petition filed under the Obama Administration.  EPA has yet to respond to any of the pending petitions.  It appears that the Obama administration is hoping that Congress will enact new cap-and-trade legislation, which could provide EPA with a detailed roadmap for future greenhouse gas regulation.  In April, however, EPA proposed a finding that greenhouse gasses endanger public health and welfare, opening the door to future regulation under the existing Clean Air Act if Congress does not pass new legislation.

The IPI petition claims that EPA not only can regulate greenhouse gas emissions from fuels, but also can establish an emissions trading system for the entire transportation sector using its current authority.  This argument, also advanced in a recent IPI report, would replace EPA’s traditional, “command-and-control” regulation with a cap-and-trade system for global warming pollution – a move often thought to require separate authorization from Congress.

IPI’s petition requests a response from the agency within 180 days, and if the agency delays the Institute could pursue legal action to compel a decision.  But IPI has said that it too favors a legislative response to climate change, like the American Clean Energy and Security Act that passed the House of Representatives last June.  The Senate is expected to take up its own climate bill this fall, with petitions like IPI’s reminding lawmakers that if they do not limit greenhouse gas emissions, EPA is likely to do so on its own.

New York City Council Passes Bicycle Access Bill, Provides Commuters with Commuting Alternative – Biking to Work

Starting in November, New York City commuters will be able to bike to work less worry about where they will store their bicycles.  The Bicycle Access to Office Buildings Bill (“BAOB”), which New York City Council passed Wednesday 46-1, will require commercial building owners and managers to allow employees of the building’s tenants to enter with their bicycles if the building has a freight elevator.

Under the BAOB, tenants may request bicycle access, which must be granted unless the building owner can certify that the building’s freight elevator is not safe for use to transport bicycles, or there is secure alternate covered off-street parking or secure indoor no-cost parking within three blocks of the building.  Although the BAOB requires building owners to provide bike access, it does not require building owners to provide bike storage.  Employees will keep their bicycles in their offices.

New York City Transportation Commissioner Janette Sadik-Khan stated: “Every day, biking becomes a more established part of our transportation network and this legislation literally opens the door to making cycling an even more attractive and serious transportation option.  Improved access is also a tremendous boon for businesses who want to encourage cycling among their employees, and it’s a catalyst for engineering a greener, greater New York City.”

Newslink: Obama Energy Funding Pledges Under Scrutiny

The Times’ Andy Revkin posts an interesting take on the Obama Administration’s pledge to invest $150B to stimulate energy innovation–and how much of that money is slated for traditional “research & development,” and how much may go towards deployment of existing technologies.  Read more at Revkin’s Dot Earth blog, below.

July 29, 2009

Class Action Challenges Adequacy of Environmental Disclosures in Spinoff of Subsidiary

On July 10, 2009, the Alaska Electrical Pension Fund (“Fund”) filed a class action in the U.S. District Court for the Southern District of New York against the Kerr-McGee Corporation (“Kerr-McGee”) and several of its officers and directors.  (See Complaint, Alaska Electrical Pension Fund v. Kerr-McGee Corp., 2009 Civ. 6220 (S.D.N.Y. July 10, 2009).)

The Fund alleges that Kerr-McGee made false and misleading statements in a public offering incident to the spin-off of Tronox Corporation (“Tronox”), which at the time of the offering was a wholly-owned subsidiary of Kerr-McGee.  (Id. at 5.)  The registration statement for Tronox stated:

As of September 30, 2005, our financial reserves for all active and inactive sites totaled $239.4 million, $160.6 million of which are classified as noncurrent liabilities.  We believe we have reserved adequately for the reasonably estimable costs of known environmental contingencies.  However, additional reserves may be required in the future due to the previously noted uncertainties.

The complaint alleges that: (1) Kerr-McGee knew these estimates materially underestimated actual environmental liability because an internal investigation had determined that Tronox’s environmental liabilities were at least $400 million and perhaps as high as $900 million; (2) Kerr-McGee purposefully chose not to reveal these estimates to investors, thereby allowing Kerr-McGee to profit significantly from Tronox’s inflated stock price; and (3)  Tronox operated as an independent company for only a short period before earnings losses due to negative environmental assessments caused stock prices to plummet.  Tronox filed for bankruptcy in January 2009.

Lawsuits of this type are likely to become more common in tough economic times, as environmental costs contribute (or are perceived to contribute) to declines in stock price.  Great care is necessary to accurately disclose environmental risks in public offerings and to make such disclosure consistent with internal assessments so that disclosure cannot be second-guessed with the benefit of 20-20 hindsight.

July 28, 2009

Wal-Mart Introduces New Initiative to Promote Sustainability in the Supply Chain

By: Jessica Albin — Filed under: Climate Change Law, Emerging Issues, Sustainable Development — Posted at 4:06 pm

Wal-Mart is asking its suppliers to provide information about the life cycle and environmental impact of the goods sold at its stores.  On July 16, Wal-Mart announced its Sustainability Product Index, a 15 question questionnaire covering the following topics: (1) Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions; (2) Material Efficiency: Reducing Waste and Enhancing Quality; (3) Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials; and (4) People and Community: Ensuring Responsible and Ethical Production.

Notably, questions include whether suppliers measure their greenhouse gas emissions, have a process for managing social compliance at the manufacturing level, and set publicly-available water use reduction and solid waste reduction targets.  In addition, Wal-Mart plans to create a consortium of universities that will collaborate with retailers, suppliers, non-governmental organizations, and governments to develop a database about the lifecycle of products.  Suppliers’ answers to the questionnaire will be used as the basis of the database, which customers will ultimately be able to utilize to evaluate the sustainability of the products they buy.

At Wal-Mart’s “Sustainability and Milestone Meeting,” Mike Duke, the President and CEO of Wal-Mart, stated that if done correctly, “the index will drive higher quality and lower costs . . . [and create] more innovative products that lower carbon output . . . that promote clean air and water . . . and that create a more transparent and responsible supply chain.”  Wal-Mart’s top tier, U.S.-based suppliers will be asked to complete the questionnaire by October 1.  The company will develop timelines for its out-of-country suppliers on a country-by-country basis.

Wal-Mart’s Sustainability Product Index and information about the “Sustainability and Milestone Meeting” are available here.

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