December 29, 2009
Last week, New York City’s Department of Environmental Protection (“DEP”) called upon New York State’s Department of Environmental Conservation (“DEC”) to rescind its Draft Supplemental Generic Environmental Impact Statement (“DSGEIS”) addressing natural gas drilling in the Marcellus Shale formation. The Marcellus Shale formation, which contains large quantities of natural gas, extends from Ohio and West Virginia through parts of Pennsylvania and into New York’s Southern Tier. Notably, the formation includes lands in the watershed that provides drinking water to New York City and, in total, approximately half of the state’s population.
DEP has taken the position that any drilling in the watershed should be banned due to risks posed to the drinking water supply by the technique used to extract gas from the underground shale, known as high-volume hydraulic fracturing. In its comments on the DSGEIS, DEP makes a number of arguments to support its contention that the DSGEIS does not adequately analyze the potential significant adverse environmental impacts of drilling in the Marcellus Shale formation, including the following:
The DSGEIS does not adequately analyze the possibility that contaminants may spill into surface waters or migrate underground into natural drinking water supplies or water supply tunnels;
- The DSGEIS’s requirements for the disclosure of the chemicals used in the hydraulic fracturing process are insufficiently protective of human health and the environment;
- The DSGEIS engages in “segmentation” in violation of the New York State Environmental Quality Review Act (“SEQRA”) by failing to adequately analyze potential significant adverse environmental impacts associated with waste disposal, surface water withdrawals, induced growth, cumulative impacts, air quality impacts, pipeline construction, and ancillary infrastructure;
- The no-drill buffer zones proposed in the DSGEIS are inadequate to protect New York City’s drinking water supply; and
- The DSGEIS does not sufficiently analyze alternatives to hydraulic fracturing, and does not at all address alternatives to natural gas development.
DEP also issued a report in conjunction with its comments.
The comment period for DEC’s DSGEIS has been extended to December 31, 2009. While New York City’s interest in upstate drilling is based primarily on potential impacts to its watershed and water supply infrastructure, upstate municipalities are likely to focus on other issues, including tax revenues, road and truck traffic impacts, noise impacts, and preemption of local regulatory authority.
December 18, 2009
In a significant decision on eligibility of property for the New York Brownfield Cleanup Program (“BCP”), on Thursday, December 17, the First Department of the New York State Supreme Court, Appellate Division, held that the Department of Environmental Conservation (“DEC”) improperly excluded three Manhattan properties from the BCP that qualified under the Program’s definition of a “brownfield site.” In so holding, the appellate court affirmed the judgment of the lower court, which had set aside the DEC’s decision to exclude the properties. East River Realty Co., LLC v. New York State Department of Environmental Conservation, — N.Y.S.2d —-, 2009 WL 48411151 (1st Dept. Dec. 17, 2009) (“ERRC“).
DEC had argued that the property in question did not meet the eligibility criteria for a “brownfield.” Generally a brownfield is defined as property whose redevelopment or reuse of may be complicated by the presence or potential presence of a contaminant. The DEC contended that the property would have been redeveloped even without participation in the BCP, rendering it ineligible for the program. In a unanimous decision, the Court rejected DEC’s argument that a property may be deemed ineligible for participation in the BCP on the ground that the property would have been remediated regardless of such participation.
In rejecting DEC’s denial of eligibility under its application of a “but for” test, the Court cited two recent brownfield cases that similarly found DEC’s reliance on extra-statutory factors arbitrary and capricious. See Destiny USA Dev., LLC v. New York State Department of Environmental Conservation, 63 A.D.3d 1568 (4th Dept. 2009); HLP Props., LLC v. New York State Department of Environmental Conservation, 21 Misc. 3d 658 (Sup. Ct. N.Y. County 2008).
ERRC reaffirms the approach taken by the courts in Destiny and HLP, where the courts have required DEC to adhere to the eligibility criteria set forth in the BCP enabling statute, and struck down DEC eligibility decisions which seek to rely on factors outside the statute.
In addition to its reversal of DEC’s eligibility determination, the ERRC decision upheld the court below’s order that DEC accept the subject properties into the BCP. The Court agreed that given the sufficiency of evidence before the lower court, remand to the agency was not required.
SPR represented ERRC in connection with its challenge to DEC’s exclusion of the subject property from the BCP. For more information, please contact Daniel Riesel, Mark Chertok, Jeff Gracer, or Michael Bogin.
December 17, 2009
The Manhasset Lakeville Water District has secured a $2.75M settlement for costs incurred in response to contamination of the aquifer underlying the Water District’s service area. Sive Paget & Riesel represented the Water District in its efforts to recover these costs.
The Water District provides drinking water to its 45,000 customers in Manhasset, Great Neck, and New Hyde Park, NY. After Freon-22 was detected in the aquifer waters, the Water District was forced to build a treatment system to remove the contaminants and render the water safe for public consumption in compliance with New York State drinking water quality standards.
SPR assisted the Water District in locating parties that were potentially responsible for the contamination, investigating the historic source of the contamination, and bringing a federal litigation in the Eastern District of New York against the owners of the source of the contamination for recovery the Water District’s costs. The litigation asserted federal claims under the citizen suit provisions of the Safe Drinking Water Act (SDWA) and the Resource Conservation and Recovery Act (RCRA).
The Water District has now settled certain of its claims in that litigation for $2.75M. These settlement funds will offset costs incurred to build the treatment system, legal and engineering fees, as well as the ongoing operation and maintenance costs of removing contaminants from the drinking water supply. The settlement also serves as an important example to public water districts, demonstrating that ratepayers need not bear the burden of addressing environmental contamination in the water supply.
The following SPR attorneys represented the Water District in this matter: David Yudelson, Daniel Riesel, Dan Chorost, and Ashley Miller.
December 15, 2009
Green Inc. reports that Mayor Michael Bloomberg, who is currently in Copenhagen, Denmark for the United Nations Framework Convention on Climate Change (“UNFCCC”) Conference of the Parties, is advocating that a wind power complex be constructed off the shores of Long Island, similar to the giant wind turbines in the North Sea off the coast of Denmark. Mayor Bloomberg and his sustainability director, Rohit Aggarwala, have called on government agencies and utilities in New York to create a 700-megawatt offshore wind power complex. The project would cost $3 billion and be the largest wind project in the world.
Mayor Bloomberg argues that wind power is “a lot better than digging up coal and transporting it and belching pollutants into the air” and is superior to “buying foreign oil.” He goes on, “it’s good for the planet long term. It’s good for the air right now … and it makes economic sense.” However, offshore wind power has been the subject of opposition by some New York residents who claim that wind farms may negatively impact views, and may cause other potential impacts. In response, Mayor Bloomberg notes that the wind power complex he is proposing would be further offshore than the previous proposals which have garnered opposition. With greater distance, however, comes greater expense and complexity from a permitting and operations perspective.
If the project does come to fruition, it will provide less than one percent of New York City’s peak electricity needs, with 350 megawatts distributed to Long Island and 350 megawatts distributed to New York City. In response to questions about whether New York should spend billions of dollars on a project that will meet just a percentage of electricity needs, Mr. Aggarwala stated that the wind project is just one part of the bigger energy efficiency picture, which includes a new natural gas plant in Astoria that will displace older, less efficient facilities, and new legislation in New York City aimed at improving energy efficiency in the city’s buildings.
December 8, 2009
On Monday, December 7, the U.S. Environmental Protection Agency (“EPA”) formally determined that greenhouse gases endanger public health and welfare. This endangerment finding is a direct response to the Supreme Court’s 2007 decision in Massachusetts v. EPA, which held that greenhouse gases are pollutants covered by the Clean Air Act and ordered the agency to determine whether or not emissions of greenhouse gases from motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.
EPA’s endangerment finding for greenhouse gases marks the first in a series of steps that the agency is poised to take in order to regulate greenhouse gas emissions. The endangerment finding itself triggers the regulation of emissions from motor vehicles; specifically, it allows the EPA to finalize greenhouse gas emission standards for light-duty vehicles, which were proposed on September 15, 2009. After these vehicle standards are finalized and promulgated, greenhouse gases will be considered to be “regulated pollutants” that are also subject to permitting requirements under the Clean Air Act’s Prevention of Significant Deterioration (“PSD”) program for stationary sources. In order to make such regulation practicable, the EPA has proposed a “tailoring rule” to exempt from PSD requirements sources that emit fewer than 25,000 tons of carbon dioxide per year. Environmental organizations and others have questioned whether EPA has the legal authority to create a higher threshold for greenhouse gases than presently applies to other pollutants.
The endangerment finding for greenhouse gases, along with the regulations it will engender, are likely to be challenged in court. Even if these actions do not survive judicial scrutiny, they represent a concerted effort to regulate greenhouse gases beyond mere reporting requirements. Notably, the specter of complex greenhouse gas regulation by the EPA may increase the sense of urgency in Congress to forge legislation that will offer a comprehensive, coherent, and cost-effective approach to the problems posed by climate change.
December 4, 2009
On November 19, The AES Corporation (“AES”) entered into a settlement with the Attorney General of the State of New York (“NYAG”) regarding disclosure of climate change risk to investors. This is the third such settlement with the NYAG by a major power company (the other two settling power companies were Xcel Energy and Dynegy). The terms of the NYAG settlements provide a useful roadmap for climate change disclosure, and should be studied carefully by energy, industrial and other companies with significant carbon footprints. In brief summary, the settlement requires each company (on an annual basis) to:
- Analyze material financial risks associated with GHG laws and regulation. This includes:
- identification of current GHG laws and regulations in the states and countries where the companies operate (including the Regional Greenhouse Gas Initiative (RGGI);
- discussion of expected trends in GHG laws and regulations; and
- analysis of the material financial impact (if any) of these laws and regulations on the company’s business.
- Analyze material financial risks from climate change litigation. This includes:
- a description of any climate change litigation involving the company the outcome of which is likely to have a material financial effect; and
- any climate change-related decisions issued by the Supreme Court of the United States, the US Court of Appeals or any court in any jurisdiction in which the company operates, that the company concludes are likely to have a material financial impact on the company’s business.
- Analyze material financial risks from the physical impacts of climate change. This includes material financial risks to the company arising from increases in sea level and changes in weather conditions (such as extreme weather, droughts or water shortages and changes in temperature).
- Analyze strategies to manage climate change risk and GHG emissions. To the extent that the company’s GHG emissions (or the impacts of climate change on company operations) materially impact its financial exposure, the company is required to:
- state its current position on climate change;
- estimate its GHG emissions for the reporting year;
- identify expected GHG emission from new plants that are subject to federal or state permitting;
- include strategies to reduce its climate change risk and adapt to the physical impacts of climate change;
- identify the results of such strategies; and
- address the company’s corporate governance process applicable to climate change issues, including the role of the board of directors and whether officer compensation is based on meeting climate change objectives.
Only a few days after the AES settlement was announced, the NYAG joined a supplemental petition to the Securities and Exchange Commission (SEC) filed by a coalition of institutional investors, asset managers and environmental organizations renewing its call for interpretive guidance on climate risk disclosure. The supplemental petition cites a number of new developments that make the need for national guidance on climate change risk even more compelling than it was when the coalition filed its original petition in 2007. Those developments include:
- Increasing scientific evidence that climate change is happening at a more rapid pace than had previously been predicted;
- Current EPA regulations requiring reporting of greenhouse gas (GHG) emissions;
- The progression of proposed cap and trade legislation through Congress;
- EPA’s proposed finding that GHGs endanger human health and welfare;
- EPA’s proposed “tailoring rule” that would require GHG permitting under the Clean Air Act for large stationary sources; and
- Recent appellate court decisions recognizing standing and federal court jurisdiction over climate change claims.
In a speech before the Corporate Counsel Institute at Northwestern University School of Law on October 9, SEC Commissioner Elisse B. Walter stated:
We are taking a very serious look at our disclosure system in [the climate change] area. Although I’ve stated publicly that we are not an agency populated with climate experts, we are taking affirmative steps to better educate ourselves. I have recently met with a number of experts who analyze the risks and opportunities posed by climate change. Discussions at these meetings have confirmed my belief that climate change is a very serious issue. And I believe that it is time for us to consider issuing interpretive guidance regarding disclosure in this area.
Although Commissioner Walter was speaking for herself and not making an official pronouncement on behalf of the SEC, two working groups have been created within the SEC to study the issue. It appears that the petition filed in 2007 seeking interpretive guidance from the SEC on climate change disclosure is receiving more favorable consideration now than was the case under the prior administration.
December 3, 2009
Earlier this week, the New York Power Authority (NYPA) released a request for proposals for the development of offshore wind power projects in the New York State waters of Lake Erie, Lake Ontario, or both. According to the NYPA, this initiative represents the first wind power development in a fresh water body in the United States. Other offshore wind power initiatives in the Great Lakes include the acquisition of a 4.4 gigawatt project by the Canadian energy company Canadian Hydro and the exploration of such projects by U.S. firms such as Duke Energy.
The Great Lakes Offshore Wind Project aims to generate 120 to 500 megawatts of power. One megawatt powers about 800 homes in New York. The successful implementation of the project would help New York meet its requirements under the state’s renewable portfolio standard, which requires that 25 percent of its electricity come from renewable sources by 2013.
Proposals from developers are due on June 1, 2010, and the state will announce any winners by December 2010. Power purchase agreements are to be completed by May 31, 2011.