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December 14, 2010

New York Imposes Partial Moratorium on Hydraulic Fracturing and Requires Further Environmental Review

On December 13, Governor David A. Paterson issued Executive Order No. 41, effectuating a moratorium on horizontal hydraulic fracturing drilling for natural gas (known as “fracking”) until at least July 1, 2011, but allowing vertical fracking.  Two days earlier, the Governor vetoed legislation that would have imposed a moratorium on horizontal and vertical fracking  until May 15, 2011.

The Governor’s Executive Order requires the New York State Department of Environmental Conservation (“NYSDEC”) to finish its review of public comments submitted to a Draft Supplemental Generic Environmental Impact Statement (“SGEIS”) analyzing the impacts of fracking, and make any necessary revisions. The NYSDEC must also publish a revised Draft SGEIS by June 1, 2011, accept public comments on that document for at least thirty days, and issue a report to the Governor identifying any regulatory conditions that must be included in fracking permits to protect public health and the environment.

In a press release issued December 11, Governor Paterson stated that he vetoed the legislation because, although it “was well intentioned, [it] would have a serious impact on our State if signed into law. Enacting this legislation would put people out of work – work that is permitted by [NYSDEC] and causes no demonstrated environmental harm, in order to effectuate a moratorium that is principally symbolic.”

Representatives of the oil and gas industry applauded Governor Paterson’s veto of the bill. While praising the Executive Order’s moratorium on horizontal fracking and its requirement of additional public review, some environmental groups expressed concern that the Order includes a loophole for vertical drilling by oil and gas companies.  The Natural Resources Defense Counsel (“NRDC”) stated that oil and gas companies may drill vertical wells now, with the intention of converting them to horizontal wells later, which could potentially circumvent the on-going environmental review process. NRDC also expressed concern that the industry could drill a number of closely spaced vertical wells in lieu of one horizontal well, creating “significant additional surface disturbance and environmental impacts.”

NYSDEC reviewed over 14,000 comments to the Draft SGEIS over the course of several months.  Because the Draft SGEIS must now be revised and re-released for public comment, which NYSDEC must review, the issuance of the Final SGEIS will most likely be delayed until at least the fall of 2011.

December 13, 2010

Court Denies Stay of EPA Climate Rules

EPA can enforce its climate change regulations while litigation challenging those regulations is pending, a federal appeals court ruled last Friday.  The denial of a motion to stay the implementation of EPA’s rules removed one of the final barriers to implementation of the Agency’s first-ever stationary source greenhouse gas (“GHG”) limits, which are scheduled to begin phasing in on January 2, 2011.

In the motion for a stay, coalitions of industry, state, and other challengers argued that the climate rules were unlawful and would cause irreparable injury if not enjoined.  Without addressing the merits of the regulations themselves, the D.C. Circuit Court of Appeals found that the challengers had not shown that “certain” harm would “directly result” from the rules’ implementation, as required for a stay.

This ruling means that EPA’s rules are likely to take effect as scheduled, as legislation that would delay or freeze funding for EPA’s stationary source GHG regulations is not expected to pass before Congress adjourns this month.  The incoming Congress may take up similar legislation next year, either as a stand-alone measure or an amendment to a spending bill.  In the meantime, EPA is in the process of finalizing rules to ensure that its forthcoming stationary source GHG controls only affect certain new and modified facilities emitting at least 75,000 tons of GHGs annually.  These implementing rules are currently being reviewed by the White House Office of Management and Budget, and are scheduled to take effect before EPA’s January 2 regulatory deadline.

The suits against EPA’s suite of greenhouse gas regulations will be heard by a single three-judge panel on the D.C. Circuit, with briefing scheduled to begin next year.  While that litigation is pending, the Supreme Court will hear arguments on whether EPA’s challenged climate rules displace federal common law remedies aimed at addressing global warming.

For more information on climate-related litigation and regulations, contact Jeffrey Gracer.

December 9, 2010

New York Legislators Pass Bill Imposing Moratorium on Permits For Hydraulic Fracturing

On November 29, 2010, the New York State Assembly passed a bill imposing a state-wide moratorium on new authorizations for hydraulic fracturing.  An identical bill was passed in the New York State Senate in August. The bill, which has been sent to Governor Paterson for signing, suspends until May 15, 2011 the issuance of new permits “for the drilling of a well which utilizes the practice of hydraulic fracturing for the purpose of stimulating natural gas or oil in low permeability natural gas reservoirs, such as the Marcellus and Utica shale formations.”  The purpose of the moratorium is to “afford the state and its residents the opportunity to continue the review and analysis of the effects of hydraulic fracturing on water and air quality, environmental safety and public health.”

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. Both the New York State Department of Environmental Conservation (“DEC”) and the federal Environmental Protection Agency (“EPA”) are currently undertaking studies of the environmental impacts of hydraulic fracturing.  However, the EPA study will not be complete by the end of the moratorium, and the DEC study may not be complete by then either.

DEC is reviewing the environmental impacts of hydraulic fracturing in New York through the preparation of a Supplemental Generic Environmental Impact Statement (“SGEIS”) pursuant to the State Environmental Quality Review Act (“SEQRA”).  DEC released a Draft SGEIS on September 30, 2009.  The Final SGEIS has not yet been released.  In April 2010, the DEC announced that the watersheds supplying drinking water to New York City and Syracuse would be excluded from the final study, placing these areas in a regulatory limbo that some have characterized as a de-facto ban on drilling in those areas.

The EPA’s study, the initial results of which are expected to be released in late 2012, focuses on effects of hydraulic fracturing on public drinking water supplies.  The agency has recently sought information from natural gas companies through information requests and a subpoena about 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.

As might be expected, several environmental advocacy groups praised the moratorium, while representatives from the natural gas industry criticized it, stating that it would jeopardize jobs and state tax revenue and noting that natural gas companies would first seek to drill in states that could offer a more “hospitable” regulatory environment.

December 6, 2010

Supreme Court Grants Review in Key Climate Change Lawsuit

By: Jonathan Kalmuss-Katz — Filed under: Climate Change Law, Constitutional Issues, Supreme Court — Posted at 1:36 pm

On December 6, the Supreme Court granted review of the climate tort suit Connecticut v. American Electric Power (“AEP”), setting the stage for a major decision on the availability of common law remedies for climate-related harms.

Justice Sonia Sotomayor, who presided over oral arguments in the case while a judge on the Second Circuit, did not participate in the Supreme Court’s consideration of the petition for review.  Justice Sotomayor is expected to recuse herself when the case comes before the Court.

The case arises out of a 2004 suit filed by eight states (including New York), three land trusts and New York City against five electric utilities and one of their subsidiaries, alleged to be the “five largest emitters of carbon dioxide in the United States.”  The plaintiffs claimed that the power companies’ greenhouse gas (GHG) emissions constituted a public nuisance under federal common law and the common law of 20 states where the defendants operated power plants, and sought an injunction requiring “each defendant to … cap its carbon dioxide emissions and then reduce them by a specified percentage each year ….”

In 2005, United States District Judge Loretta A. Preska dismissed the suit under the political question doctrine, reasoning that the policy determinations required to set and implement a GHG emissions cap were of the type reserved for Congress and the President.  Connecticut v. Am. Elec. Power Co., 406 F. Supp. 2d 265, 272 (S.D.N.Y. 2005), vacated and remanded 582 F.3d 309 (2d Cir. 2009).  In a footnote, the Court withheld judgment on whether the plaintiffs would have been able to establish standing to bring their suit.  Id. at 271, n. 6.

The Second Circuit heard an appeal from the dismissal order in 2006, with then-Circuit Court Sotomayor sitting on the three-judge panel.  Following a three-year delay and Sotomayor’s nomination to the Supreme Court, the remaining two judges reversed the District Court and remanded the case for further consideration, ruling that: (a) the suit was not barred by the political question doctrine, (b) the plaintiffs had standing to litigate the dispute, and (c) the common law claims had been not been displaced by EPA’s then-unfinalized proposals to regulate GHGs under the Clean Air Act.  Connecticut v. Am. Elec. Power Co., 582 F.3d 309 (2d Cir. 2009).

The defendants petitioned for Supreme Court review of the Second Circuit decision last August.  In a move that took many by surprise, the Obama Administration filed a brief in support of the utilities’ petition, arguing that the plaintiffs lacked “prudential standing” and that the finalization of the EPA climate regulations which were pending at the time of the Second Circuit decision had displaced the federal common law relief sought by the states.

The Supreme Court’s decision could set key precedent for other pending climate tort suits and for environmental litigation more broadly.  The standing doctrine – which requires litigants to establish a particularized injury caused by the opposing party and redressable by judicial action – is often highly contested in environmental cases, especially those involving harms like global warming which have broad impacts and multiple causes.  While the Supreme Court found that a similar set of state plaintiffs met the constitution’s standing requirements in its 2007 climate change decision Massachusetts v. EPA, a rejection of the current suit on “prudential standing” grounds could give lower courts broad discretion to dismiss pending and future climate litigation.  If Justice Sotomayor recuses herself, the Court may end up deadlocked between the four Massachusetts v. EPA dissenters and the four remaining justices, a split which would leave the Second Circuit decision on the books but would not set binding precedent for other courts.

The Supreme Court could also conclude that EPA climate regulations finalized since the Second Circuit decision have displaced the common law remedies sought by the plaintiffs.  Many of those regulations are currently facing their own legal challenges, however, creating the possibility that the rules central to this displacement argument could themselves be overturned.

Oral arguments and a decision in the Connecticut v. AEP case are expected over the coming year.  For more information on pending global warming litigation and EPA’s climate rules, please contact Jeffrey Gracer.