June 8, 2010
Last week, the Environmental Defense Fund (“EDF”) and Kohlberg Kravis Roberts & Co. L.P. (“KKR”), a leading private equity firm, announced that a program to implement environmental best practices at several KKR portfolio companies yielded $160 million in savings over the past two years. KKR’s Green Portfolio Program launched in 2008 in conjunction with EDF’s Green Returns program, an initiative that aims to improve both environmental and business performance in companies owned by private equity firms.
According to EDF, the first eight KKR-owned companies to enroll in the Green Portfolio Program, which include such well-known names as Sealy and HCA, collectively avoided “over $160 million in operating costs, 345,000 metric tons of CO2 emissions, 8,500 tons of paper, and 1.2 million tons of waste.”
EDF reports that the Green Portfolio Program has expanded from its initial eight companies “to include approximately 20 percent of the companies in KKR’s global private equity portfolio.” In addition to its work with KKR, EDF has also collaborated with the Carlyle Group, another major private equity firm, to create an environmental due diligence screening tool which helps to identify opportunities for environmental improvements in prospective portfolio companies.
The recent success of the Green Portfolio Program has implications beyond the involved portfolio companies and their investors at KKR. It suggests that for any business, enlightened environmental management can improve profitability. Private equity firms, in particular, are focusing on sound environmental stewardship as an essential ingredient to the success of their portfolio companies.
For more information about environmental management strategies, contact Jeffrey Gracer.
June 4, 2010
The New York State Electronic Equipment Recycling and Reuse Act was signed into law by Governor Paterson on May 28, 2010. Beginning April, 2, 2011, the Act requires manufacturers to accept electronic waste for collection, handling, and recycling or reuse. Covered electronic equipment includes computers (as well as accessories such as monitors, keyboard and printers), televisions, and “small electronic equipment,” which includes portable digital music players, video recorders and video game consoles. The Act sets state-wide collection standards that slowly increase over the first three years. In addition, the Act sets manufacturer-specific acceptance standards based on their market share. The Act requires “convenient collection” from consumers, but does not include the “direct collection” requirement that was the focus of industry’s litigation concerning similar electronic waste legislation passed by the City of New York in 2008.
The Firm represented the Natural Resources Defense Council in connection with an amicus brief filed by NRDC in the litigation challenging the City law. NRDC has been a staunch supporter of producer responsibility principles. The State Act preempts the challenged City law, effectively mooting that litigation. A copy of the Act is available here.
In response to the oil spill from the Deepwater Horizon well and drilling rig in the Gulf of Mexico, the White House Council on Environmental Quality (“CEQ”) announced on May 17, 2010 that it would conduct a thirty-day review of the U.S. Department of Interior, Minerals Management Service’s (“MMS”) environmental polices for oil and gas exploration and development in the Outer Continental Shelf. CEQ has primary authority for implementing the National Environmental Policy Act (“NEPA”) and may review and require that agencies revise their policies if they do not fully comply with NEPA. 40 C.F.R. § 1507.3. CEQ stated that the review will “be holistic, i.e., from leasing decisions to drilling and production.” 75 Fed. Reg. 29996, 29996 (May 28, 2010).
MMS implements a four-stage process for oil and gas development, which includes: “(1) [p]reparing a nationwide 5-year oil and gas development program, (2) planning for and holding a specific lease sale, (3) approving a company’s exploration plan, and (4) approving a company’s development and production plan.” 75 Fed. Reg. at 29996. The agency must consider NEPA’s requirements during each stage. However, MMS has also promulgated regulations defining certain “categorical exclusions,” or categories of actions for which the agency found not to have a significant effect on the environment, and therefore, an individual environmental review is not prepared.
In April 2007, MMS developed a multi-sale environmental impact statement (“EIS”) for lease sales in the Outer Continental Shelf, which included the Deepwater Horizon project. Based on an environmental assessment under the multi-lease sale EIS, MMS determined that the Deepwater Horizon project fit within the following categorical exclusion:
Approval of an offshore lease or unit exploration. [sic] development/production plan or a Development Operation Coordination Document in the central or western Gulf of Mexico (30 CFR 250.2) except those proposing facilities: (1) In areas of high seismic risk or seismicity, relatively untested deep water, or remote areas, or (2) within the boundary of a proposed or established marine sanctuary, and/or within or near the boundary of a proposed or established wildlife refuge or areas of high biological sensitivity; or (3) in areas of hazardous natural bottom conditions; or (4) utilizing new or unusual technology.
516 DM 15.4(C)(10).
Because of this determination, MMS did not analyze the potential significant adverse environmental impacts of the Deepwater Horizon project.
As part of its review, CEQ is requesting public comment on current MMS NEPA practices, policies, and procedures relating to oil and gas exploration and development in the Outer Continental Shelf. Specifically, CEQ is requesting input on the following issues:
- Whether substantive issues exist and how those issues should be analyzed during the NEPA process.
- Whether the current permitting process and NEPA submissions allow for comprehensive evaluation of all relevant issues.
- Whether using categorical exclusions has been effective for oil and gas activities in the Outer Continental Shelf.
- Whether MMS’s use of Categorical Exclusion Review has been an effective tool for reducing paperwork without compromising necessary review under NEPA.
- Whether public engagement has been a part of MMS NEPA practice, particularly with respect to categorical exclusions.
- What resources are available to federal, tribal, state, and local government agencies to participate in MMS NEPA reviews.
Comments should be submitted “as soon as possible” because CEQ’s review ends June 17. 75 Fed. Reg. at 29997.
June 3, 2010
Following its decision to grant en banc review of a Mississippi district court’s dismissal of a class action suit claiming that various oil and energy companies contributed to climate change, the Fifth Circuit Court of Appeals dismissed the appeal after it lost a quorum of judges necessary to hear the scheduled en banc appeal. Comer v. Murphy Oil USA, — F.3d —, 2010 WL 2136658 (5th Cir. May 28, 2010). Eight of the court’s sixteen judges recused themselves from hearing the case, presumably because they held stock in the defendant companies, leaving the court one judge shy of the requisite nine for a quorum.
Absent a quorum, five of the remaining eight Fifth Circuit judges concluded that they lacked judicial authority over the case and dismissed the appeal. Because the prior panel decision had been vacated when the court granted rehearing en banc, the dismissal of the appeal effectively reinstated the district court decision, which had dismissed the case. Three judges dissented from the Fifth Circuit’s dismissal, arguing that other alternatives were available for the Court to hear the appeal. Some have questioned whether dismissal of the appeal on narrow technical grounds signaled an unwillingness to reach the merits of what has become a highly troublesome issue for the courts.
The Fifth Circuit’s dismissal of Comer stands at odds with a Second Circuit decision handed down last fall that is currently the subject of a petition for certiorari to the Supreme Court. Connecticut v. American Electric Power Co., 582 F.3d 309 (2d Cir. 2009) (“CT v. AEP”). In CT v. AEP, the Second Circuit reversed the lower court’s dismissal of a lawsuit alleging that climate change creates a public nuisance and rejected the argument that such suit presents a non-justiciable political question. The Fifth Circuit’s dismissal order noted that the Comer plaintiffs also could petition for review by the Supreme Court. Given what could be seen as an effective split in the circuits, Supreme Court review now seems more likely.
June 2, 2010
In Coalition of Battery Recyclers Association v. EPA, 2010 WL 1929879 (May 14, 2010), the D.C. Circuit recently upheld an EPA rule revising the primary and secondary National Ambient Air Quality Standards (NAAQS) for air-borne lead (Pb) pollution against challenges by industry representatives. The case arose from consolidated petitions for review under the Administrative Procedure Act filed by two industry representatives alleging that the revised standards were overprotective. The circuit panel, Judge Rogers writing, rejected the petitions, holding that the new standards were supported by substantial record evidence and were not arbitrary and capricious.
Sections 108 and 109 of the Clean Air Act (CAA) require the EPA administrator to establish NAAQSs for air pollutants that are found to “endanger public health or welfare.”[1] Health impacts associated with airborne lead exposure include anemia, slowed physiological development, and IQ loss.[2] EPA began regulating lead under the CAA since 1978, but did not revise its NAAQSs for the pollutant for three decades.[3]
On November 12, 2008, EPA issued a final rule that tightened primary and secondary NAAQS for lead to .15 µg/m3.[4] The revisions were responsive to scientific evidence that the previous standards were inadequate to protect against certain health risks, particularly neurological effects in children.[5] While the previous NAAQS for lead were calculated by focusing on a “target population mean blood lead level,” the 2008 aims at reducing mean health effects on children from lead below an “allowable air-related IQ loss” target of 2 IQ points.[6] EPA calculated that this goal demands a .15 µg/m3 standard. The rule also revised the averaging time to a 3-month period with a maximum and established revised data handling procedures.[7]
Petitioners’ first set of arguments focused on the adequacy of the studies EPA cited in the record to support its selection of a .15 µg/m3 standard. They contended that “(A) EPA did not provide sufficient record support for basing the standard on preventing a decrease of more than two IQ points, (B) reliance on particular studies relating blood lead levels and IQ was arbitrary and capricious, and (C) selection of a lead standard of 0.15 μg/m3 was arbitrary and capricious when measured as an average over a rolling three-month period.”[8] The court found that the record did support EPA’s conclusions, notwithstanding admitted imprecision in its methodology, given that “by its nature the finding of risk is uncertain and the Administrator must use his [or her] discretion to meet the statutory mandate.”[9]
Petitioners also alleged that EPA failed to respond to comments or to disclose information relevant to its reliance on one study (the Lanphear study) for evidence of the effects of lead on IQ at blood lead levels below 10 μg/dL and for the nonlinearity of these effects.[10] The court found that EPA had adequately responded to comments and complied with necessary disclosure requirements.
Finally, petitioner Doe Run Resources, Inc. separately challenged EPA’s legal conclusion that it lacked statutory authority under the CAA to consider the natural presence of lead sulfides in determining compliance with the lead NAAQS.[11] Applying the two-step Chevron analysis, the court concluded at step one that EPA’s statutory mandate to designate “any area that does not meet [NAAQS]” for a given pollutant to be in “nonattainment” clearly prohibited EPA from considering local bioavailability of lead sulfides in its analysis.[12] The court added that even if the CAA is ambiguous, EPA’s interpretation that it lacks authority effectively “to waive NAAQS attainment requirements in the manner requested by Doe Run” was reasonable, and therefore permissible under Chevron step two.[13]
The Battery Recyclers decision has several implications. Aside from ensuring the continued existence of EPA’s new lead standards, it confirms EPA’s ability, under the CAA, to select NAAQSs designed specially to protect “sensitive populations” (here, young children) as well as its ability, in rulemaking, to rely on reasonable methods of approximation (such as IQ measures and extrapolations of data plots) to fulfill its statutory mandate even when absolute scientific precision is impracticable.
Dan Mach is a summer associate at Sive, Paget & Riesel, PC.
[1] 42 U.S.C. 7408(a)(1) and 7409(b).
[2] 73 Fed. Reg. 66964, 66983.
[3] Id. at 66983.
[4] Id. at 66965.
[5] Id. at 66983-84.
[6] Coalition of Battery Recyclers Association v. EPA, No. 09-1011, slip op. at 4-5 (D.C. Cir. May 14, 2010) (“Battery Recyclers”).
[7] 73 Fed. Reg. at 67012-20.
[8] Battery Recyclers, slip op. at 6.
[9] Id. at 13 (citing Natural Resources Defense Council v. EPA, 824 F.2d 1146, 1165 (1987)).
[10] Battery Recyclers, slip op. at 16-17.
[11] Id. at 18-19.
[12] Id. at 19-20.
[13] Id. at 20.
June 1, 2010
On May 27, 2010, Mayor Bloomberg announced the release of a landmark report analyzing climate change adaptation needs and strategies in New York City. The report was compiled by the New York City Panel on Climate Change, an expert panel convened by the Mayor to provide climate change-related advice to the New York City Climate Change Adaptation Task Force. Described in a City press release as “one of the most comprehensive studies on climate change adaptation undertaken by a municipality,” the report addresses the following issues:
- Predicted changes to New York City’s climate;
- Effects of such changes on the City’s energy, transportation, water, waste, and communications infrastructure;
- Models for mitigating harm to City infrastructure;
- Impact of federal, state, and local environmental laws on current and potential climate change adaptation efforts in New York City;
- Role of the insurance industry in developing climate change adaptation strategies based on risk assessment; and
- Strategies for monitoring climate change.
Pamela Esterman, an SPR principal, was a contributing author of the report; she co-authored Section 5.3, which discusses how the National Environmental Policy Act (NEPA), the New York State Environmental Quality Review Act (SEQRA), and the New York City Environmental Quality Review (CEQR) may provide useful legal frameworks for the identification of climate change adaptation needs.
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