September 28, 2010
Yesterday, the Environmental Protection Agency (“EPA”) announced the addition of Newtown Creek between Brooklyn and Queens to the Superfund National Priorities List (“NPL”). The listing, which is expected to be formally published this Wednesday, will initiate an EPA-led cleanup of the Creek, beginning with a remedial investigation into the sources of contamination and an expanded search for potentially responsible parties (“PRPs”).
The 3.8 mile-long waterway contains decades of industrial contamination. It is the second Brooklyn waterway added to the federal Superfund list this year, as EPA designated the Gowanus Canal as an NPL site in March 2010. New York City, the New York State Department of Environmental Conservation, and local community groups all supported Newtown Creek’s addition to the NPL. However, some have raised concerns regarding the listing’s potential effect on planned developments along the Creek, which include proposed affordable housing and open space.
EPA first proposed the Newtown Creek listing a year ago, taking public comment on its plan through last December. As of July 2010, EPA had identified six possible PRPs for the Newtown Creek contamination: BP America, Inc., Brooklyn Union Gas Company d/b/a National Grid NY, the City of New York, ExxonMobil Oil Corporation, Phelps Dodge Refining Corporation and Texaco, Inc. More PRPs are likely to be added following the listing as EPA attempts to recover its investigation and remediation costs.
September 23, 2010
The past few weeks have seen new developments in EPA’s initiative to study the effects of hydraulic fracturing on public drinking water supplies. Hydraulic fracturing uses high-pressured water, combined with chemicals, to release natural gas present underground in shale formations. The use or proposed use of this process has raised concerns across the country that this process has contaminated, or will contaminate, drinking water supplies.
On September 9, EPA announced that it had issued a voluntary information request to nine natural gas companies, seeking information on the chemical composition of fluids used in the hydraulic fracturing process, data on the impacts of the chemicals on human health and the environment, standard operating procedures at their hydraulic fracturing sites, and the locations of sites where fracturing has been conducted. The request was made in the context of limited public knowledge about the exact composition of hydraulic fracturing fluids; according to the New York Times, “most companies that make the fluids used in hydraulic fracturing have declined to disclose their formulas, arguing that the exact components are trade secrets.” Not surprisingly, industry’s lack of transparency with respect to the composition of hydraulic fracturing fluids has engendered concern, anxiety, or suspicion among advocacy groups and residents of areas affected by hydraulic fracturing.
In its Information Request, EPA seeks the information within thirty days and has indicated that it may treat certain data as Confidential Business Information at a company’s request, protecting such information from public disclosure. Adding teeth to its request, EPA alludes to a potential for litigation should the companies fail to provide a proper response. Industry representatives have indicated that the natural gas companies will cooperate with EPA’s request.
On September 13-14, EPA convened a public meeting in Binghamton, NY to discuss the scope and methods of its hydraulic fracturing study. About 500 people attended, reflecting a high level of concern, from a range of perspectives, about hydraulic fracturing and natural gas development. Although pre-hearing rallies reflected the passion with which people on all sides of the issue view the prospect of natural gas development via hydraulic fracturing, EPA was commended for “running a meeting in a way to keep the discourse civil and the comments, for the most part, on the substance.”
September 22, 2010
With the U.S. Senate unlikely to take up global warming legislation before the mid-term elections, national attention is shifting back to the states, where efforts to curb greenhouse gas (“GHG”) emissions are already underway. States and regional partnerships were some of the earliest architects of domestic climate programs, prodding the federal government and offering a model for national policy. Today, however, many of these state programs are facing new threats of their own.
As described in a September 16 New York Times article, a proposal on the ballot in California this November would suspend implementation of the state’s 2006 Global Warming Act (“AB 32”), which requires the reduction of state-wide GHG emissions to 1990 levels by 2020. In 2008, California outlined a series of policies that would achieve that goal – including existing vehicle greenhouse gas controls, a strengthened renewable electricity mandate and a new cap-and-trade program. But the pending ballot initiative (“Proposition 23”) would suspend the climate law until California’s unemployment rate falls to or below 5.5% for four consecutive quarters, a far cry from the state’s current rate of over 12% unemployment.
The suspension of AB32 could threaten the progress of the Western Climate Initiative (“WCI”), collaboration between seven Western states and four Canadian provinces to reduce their collective greenhouse gas emissions to 15 percent below 2005 levels by 2020. While WCI members planned to launch a regional GHG trading program by 2012, its success rests heavily on California; a recent analysis from Barclays PLC warned that the regional program’s future “will fully depend on the outcome of … Proposition 23.” Over the last year, two members of the WCI (Utah and Arizona) have announced their plans not to participate in the trading scheme.
The New York State Assembly has twice passed a bill to cap and reduce statewide GHG emissions, though the State Senate has yet to take up the legislation. New York remains an active participant in the Regional Greenhouse Gas Initiative (“RGGI”), which recently celebrated its second anniversary with its ninth auction of GHG emissions allowances. A fully functional carbon dioxide trading program covering power plants in 10 Northeastern and Mid-Atlantic states, RGGI has been held up as a model for national legislation, and market monitors have praised its “fair and transparent” auction process.
RGGI’s latest clearing price for a ton of carbon dioxide was just $1.76, however, roughly 1/10 of the price of GHG permits in European trading. The low price is due to a combination of lower than expected energy demand and RGGI’s modest emissions reduction targets. Moreover, in response to growing budget deficits, New York and New Jersey both diverted RGGI auction proceeds that had been earmarked for clean energy projects to fund general budgetary purposes.
While RGGI moves forward, supporters and opponents of global warming legislation are looking to the California ballot initiative as a bellwether for state climate programs nationwide, and perhaps federal policy as well.
September 21, 2010
On August 31, 2010, Governor David Paterson signed into law the New York State Smart Growth Public Infrastructure Policy Act, which is intended to address sprawl by requiring certain state agencies to approve, undertake and fund infrastructure projects in a manner that is consistent with smart growth principles. The new legislation will affect a variety of projects throughout the state. The Act is codified as new Article 6 of the Environmental Conservation Law (“ECL”) and will become effective on September 29, 2010.
As explained in Act itself:
It is the purpose of this article to augment the state’s environmental policy by declaring a fiscally prudent state policy of maximizing the social, economic and environmental benefits from public infrastructure development through minimizing unnecessary costs of sprawl development including environmental degradation, disinvestment in urban and suburban communities and loss of open space induced by sprawl facilitated by the funding or development of new or expanded transportation, sewer and waste water treatment, water, education, housing and other publicly supported infrastructure inconsistent with smart growth public infrastructure criteria.
ECL § 6-0105.
“State infrastructure agency” is defined to include a variety of state agencies and authorities, including the Departments of Environmental Conservation, Transportation, Education, Health, and State, the New York State Environmental Facilities Corporation, the New York State Housing Finance Agency, the Housing Trust Fund Corporation, the Dormitory Authority, the Thruway Authority, the Port Authority of New York and New Jersey, the Empire State Development Corporation, the New York State Urban Development Corporation, and “all other New York authorities”. ECL § 6-0103(2)
These agencies must ensure that any public infrastructure they “approve, undertake, support or finance” is, to the extent practicable, consistent with specified criteria, which include, inter alia;
- to advance projects located in municipal centers;
- to foster mixed land uses and compact development, downtown revitalization, brownfield redevelopment, the enhancement of beauty in public spaces, the diversity and affordability of housing in proximity to places of employment, recreation and commercial development and the integration of all income and age groups; and
- to promote sustainability by strengthening existing and creating new communities which reduce greenhouse gas emissions and do not compromise the needs of future generations,
ECL §§ 6-0107(1), (2)(b), (2)(e), (2)(j). The CEO of a state infrastructure agency must attest to the proposed project’s conformance to the relevance criteria in a smart growth impact statement. ECL § 6-0107(3). If the project does not meet the relevant criteria or “compliance is considered to be impracticable”, the agency shall prepare a statement of justification of such noncompliance. Id. Although not addressed in the legislation, it appears that such statements could be incorporated into an environmental impact statement (“EIS”) prepared under the New York State Environmental Quality Review Act (“SEQRA”). For projects for which no EIS is required, however, the agency will need to prepare a separate statement to satisfy the requirements of the Smart Growth Act.
September 8, 2010
According to an article published last week in the New York Times, major banks conducting business in the United States appear to be increasingly wary of financing mountaintop removal mining. This practice, a form of surface mining, involves the use of explosives to remove the tops of mountains to expose coal seams beneath. While viewed by industry as an efficient, legal, and relatively safe means of coal extraction, mountaintop removal mining has been sharply criticized by environmental advocates. The adverse impacts of this practice include habitat destruction and water pollution from mining overburden that is deposited in neighboring valleys. The practice is not illegal, although bills have been introduced in Congress that would effectively disallow the placement of such fill into valley streams – for example the Clean Water Protection Act and the Appalachia Restoration Act.
In recent years, as the practice has engendered more controversy, several of the nine banks known to finance companies that conduct mountaintop removal mining in Appalachia have indicated an intention to apply greater scrutiny to, and/or phase out, financing of mountaintop removal mining. However, according to a report issued jointly by the Sierra Club and the Rainforest Action Network, which ranks responsiveness to mountaintop removal mining concerns, some of the banks’ statements are vaguely worded — allowing significant leeway for continued financing of mountaintop removal mining — or do not provide for public accountability.
The substantive impact of the banks’ policy statements remains to be seen. While some may view such statements as a harbinger for the eventual demise of a “dirty” practice, mining industry representatives have told the New York Times that funding has not become problematic, and that the mining companies will not have trouble finding new lenders in the event that existing lenders sever ties.
For more information on environmental due diligence and corporate transactions, please contact Jeff Gracer.
September 2, 2010
On August 16, the White House Council on Environmental Quality (“CEQ”) issued a report (“CEQ Report”) summarizing the findings of a thirty-day review of the U.S. Department of Interior (“DOI”) Minerals Management Service’s (“MMS”) environmental polices for oil and gas exploration and development in the Outer Continental Shelf (“OCS”). CEQ found that MMS’s reliance on the “tiering process” (where prior programmatic environmental reviews are incorporated into later site-specific analyses) was not transparent and led to confusion and concern regarding whether MMS sufficiently evaluated and disclosed environmental impacts. CEQ stated that in order for information from one level of review to be effectively included in subsequent reviews, assumptions made by MMS must be independently tested by other agencies, and site-specific environmental impacts should also be evaluated.
The report presents seven recommendations “to promote robust and transparent implementation of the National Environmental Policy Act (NEPA) practices, procedures, and policies.” (CEQ Report at 4.) BOEM, the successor agency to MMS, has committed to using these recommendations as guideposts to reform its NEPA policies and practice.
CEQ’s recommendations to BOEM are:
- Perform careful and comprehensive NEPA review of individual deepwater exploration, operation, development, production, and decommissioning activities, including site-specific information where appropriate.
- Track and take into account all mitigation commitments made in NEPA and decision documents that are relied upon in determining the significance of environmental impacts, from the initial Programmatic EIS through site-specific NEPA analyses and decision.
- Ensure that NEPA analyses fully inform and align with substantive decisions at all relevant decision points; that subsequent analyses accurately reflect and carry forward relevant underlying data; and that those analyses will be fully available to the public.
- Ensure that NEPA documents provide decisionmakers with a robust analysis of reasonably foreseeable impacts, including an analysis of reasonably foreseeable impacts associated with low probability catastrophic spills for oil and gas activities on the OCS.
- Review the use of categorical exclusions for OCS oil and gas exploration and development in light of the increasing levels of complexity and risk and the consequent potential environmental impacts associated with deepwater drilling. Determine whether to revise these categorical exclusions.
- Continue to seek amendments to the Outer Continental Shelf Lands Act to eliminate the 30-day decisional timeframe for approval of submitted Exploration Plans.
- Consider supplementing existing NEPA practices, procedures, and analyses to reflect changed assumptions and environmental conditions, due to circumstances surrounding the BP Oil Spill.
CEQ also solicited public comments to assist its review of MMS’s environmental policies and practices. Among the thirty comments that CEQ received are those stating that Environmental Impact Statements (“EIS”) should be prepared with a greater level of specificity, and individual lease sales should require an EIS that comprehensively evaluates all stages of OCS activity; that categorical exclusions have not been applied appropriately, and their use has enabled MMS to avoid further analyses and public participation at every stage of oil and gas development; and that procedures for oil and gas development should be published as rules, rather than guidelines, not guidelines to ensure compliance.
The CEQ Report details the review process used by MMS prior to undergoing reform, linking to the environmental documents that the agency relied on in authorizing activities in the OCS. Additionally, it identifies the BP oil spill as significant new information that likely requires MMS (now BOEM) to reevaluate the conclusions it reached in prior NEPA reviews, environmental analyses and studies.
Following the release of the CEQ Report, Secretary of the Interior Ken Salazar and BOEM Director Michael R. Bromwich announced that the DOI will undertake a comprehensive review of its NEPA policies and use of categorical exclusions for offshore oil and gas development activities. During this review, BOEM will restrict its use of categorical exclusions to activities involving “limited environmental risk.” Development activities that potentially involve significant environmental risk, and which previously fell within a categorical exclusion, will need individual environmental assessments. A notice of this comprehensive review will be published in the Federal Register. BOEM stated that its new approach to NEPA will take into account the CEQ Report’s recommendations.
BOEM Director Bromwich’s August 16 memo regarding the use of categorical exclusions in the Gulf of Mexico region is available here.
MMS is undergoing reform and reorganization and has been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEM”).