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February 26, 2010

New Lead-Based Paint Requirements Under EPA’s Renovation, Repair And Painting Rule Go Into Effect In April 2010

By: Steven C. Russo — Filed under: Compliance, Emerging Issues, Lead Paint — Posted at 1:04 pm

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

Court of Appeals Overturns Improper Exclusion of Property from Brownfield Cleanup Program

By: Vicki Shiah — Filed under: Administrative Law, Brownfield Cleanup, New York Environmental Law — Posted at 1:51 pm

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

Federal District Court Holds Lessor Of Industrial Equipment Liable As A “Current Owner” Under Superfund

By: Steven C. Russo — Filed under: CERCLA/Superfund, Emerging Issues — Posted at 5:01 pm

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.

February 16, 2010

Once Again, First Department Overturns Improper Exclusion of Property from Brownfield Cleanup Program

On Wednesday, February 11, the First Department of the New York State Supreme Court, Appellate Division, held for the second time that the Department of Environmental Conservation (“DEC”) improperly excluded a Manhattan property from the Brownfield Cleanup Program (“BCP”) HLP Properties, LLC v. New York State Department of Environmental Conservation, — N.Y.S.2d —-, 2010 WL 455321 (1st Dept. Feb. 11, 2010) (“HLP”).

As it has argued in several cases, DEC contended that the property in question did not meet the eligibility criteria for a “brownfield” because the Site was already subject to a voluntary cleanup agreement.  In a unanimous decision, the Court held that DEC had “improperly departed from statutory criteria,” noting that this result was “compelled” by its recent decision in East River Realty Co., LLC v. New York State Department of Environmental Conservation, 68 A.D.3d 564, 891 N.Y.S.2d 359 (1st Dept. 2009) (“ERRC”), which rejected such arguments by DEC.  As it had held in ERRC, the First Department also held that remand to DEC for a new determination was unnecessary in light of the extensive record before it.

HLP represents the third consecutive Appellate Division decision striking down DEC’s efforts to exclude properties from the BCP based on extra-statutory factors.  See also Destiny USA Dev., LLC v. New York State Department of Environmental Conservation, 63 A.D.3d 1568 (4th Dept. 2009) (“Destiny”).

The Court of Appeals will soon address related issues in a different context, having recently heard oral argument in an appeal where DEC’s exclusion of property was upheld based on DEC’s conclusion that the contaminants at issue did not exceed levels that would require remediation.  Lighthouse Point Property Assocs. v. New York State Department of Environmental Conservation, 61 A.D.3d 1438 (4th Dept. 2009).  HLP, ERRC, and Destiny all involved sites where the contaminant levels were significantly above DEC’s remediation standards, and where DEC conceded that remediation was necessary.

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.

U.S. Department of Commerce Announces New Climate Service

By: Jessica Albin — Filed under: Climate Change Law, Emerging Issues — Posted at 4:20 pm

On February 8, 2010, the Department of Commerce announced that it would create a new Climate Service within the National Oceanic and Atmospheric Administration (“NOAA”), to be called NOAA Climate Service.  NOAA Climate Service will integrate NOAA’s climate science and provide an accessible source of climate change related planning information for governments, industries, academia, and the general public.  NOAA stated that:

Individuals and decision-makers across widely diverse sectors – from agriculture to energy to transportation – are increasingly asking NOAA for information about climate change in order to make the best choices for their families, communities and businesses. To meet the rising tide of these requests, this newly proposed line office would be dedicated to bringing together the agency’s strong climate science and service delivery capabilities.

During his announcement, Secretary of Commerce Gary Locke, stated that “NOAA Climate Service will help tackle head-on the challenges of mitigating and adapting to climate change [and] [i]n the process, we’ll discover new technologies, build new businesses and create new jobs.”

In conjunction with its announcement, the Department of Commerce also unveiled a new website:  The Climate Service must now be approved by appropriations committees within Congress.

February 5, 2010

SEC Issues Interpretive Guidance on Climate Change Disclosure

On January 27, 2010, in response to petitions filed by institutional investors and other investor groups, the Securities and Exchange Commission (“SEC”) published an interpretive release to provide greater guidance to public companies regarding the Commission’s existing disclosure requirements as they apply to climate change matters (the “Guidance”).

The SEC’s action follows settlements entered into by the New York State Attorney General’s office with three major power companies mandating more extensive disclosure of climate change risks, and the EPA’s recently-finalized rule mandating a wide array of companies to publicly report their greenhouse gas emissions.

During comments announcing the decision, SEC Chair Mary Schapiro emphasized that the Guidance is not meant create new law, and instead is aimed at providing consistency among corporate climate change disclosures, which have been marked by significant variability in scope and content, even among companies within the same industry.

The Guidance was approved by a 3-2 vote of SEC Commissioners, divided along party lines. Dissenting Commissioners objected to the SEC using its interpretive power to address areas that are not within its competence and expertise.  The Guidance also has been heavily criticized by certain Republican members of Congress.

Although the Guidance does not technically create new legal obligations, it does, in practice, advance principles that public companies must carefully consider when updating and revising their environmental disclosures.  Although some critics have questioned whether the Guidance will really solve the problem of variability in climate change disclosure due to potentially different interpretations of the materiality standard, it will, at the very least, promote more careful attention to corporate disclosure of climate change issues and very likely drive companies toward more fulsome disclosure.

Many of the key principles articulated in the Guidance reiterate fundamental tenets of good corporate disclosure that the SEC has been applying for years, but when applied specifically to climate change matters, they create a formidable set of challenges for companies making disclosure decisions.  For example:

  • In determining whether a climate change risk is material, the company should ask whether there is a substantial likelihood that a reasonable investor would consider the information important, and resolve doubts in favor of disclosure;
  • Disclosure of a known trend or uncertainty regarding climate change (such as future legislation or regulation) is required unless management determines that it is not reasonably likely to occur or is not material;
  • The time horizon of an analysis underlying a disclosure may be relevant to a registrant’s assessment of whether a future trend or uncertainty is reasonably likely to occur or is material; and
  • Companies should address, when material, their difficulties in assessing the effect of the amount and timing of uncertain events and provide an indication of the time periods in which resolution of the uncertainties is anticipated.

In light of these uncertainties, companies would be well advised to consider certain core issues as they relate to disclosure of the risks and effects of climate change, including the following potential concerns as they may be relevant and material to a particular company’s business:

  • Companies should assess whether they have sufficient disclosure controls and procedures in place to process information pertaining to climate change disclosure;
  • Because climate change is a rapidly developing area, companies should regularly assess their potential disclosure obligations in light of new developments;
  • Climate change disclosure should consider the material impacts of current and reasonably anticipated future international accords, as well as federal, state, and local laws and regulations;
  • Companies should consider the extent to which their plants and operations are subject to current and reasonably anticipated material physical impacts associated with climate change; and
  • Companies should consider whether the indirect consequences of climate change regulation will create new material risks or opportunities that could impact their profitability.

It remains to be seen how these principles will be applied, but, taken together, they point toward increased analysis and disclosure of climate change risk by public companies.