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July 31, 2012

Finalized DEC Power Plant Regulations Address Framework for Environmental Justice Analysis

By: Priya Murthy — Filed under: Emerging Issues, Environmental Impact Review, New York Environmental Law — Posted at 1:37 am

The New York State Department of Environmental Conservation (“DEC”) has finalized regulations requiring new or expanding power plants in New York to evaluate potential disproportionate environmental impacts on minority and low-income communities.  The regulations are the first in the country to require an environmental justice (“EJ”) analysis in the siting of major electric generating facilities; their requirements could provide practical experience for incorporating environmental justice considerations into other governmental decisions.

Some comments from the regulated community in response to the proposed rules found the new EJ requirements to be unduly burdensome, citing the costs and delay the process would incur. (See the full assessment of public comments here.) However, others have praised New York’s efforts, expressing their hope that the regulations could become a good model for what an environmental justice analysis looks like – not just for power plants but for a whole host of environmental actions. Cecil Corbin-Mark, Policy Director for West Harlem Environmental Action, Inc. (WE ACT for Environmental Justice), described the regulations as a “significant improvement over [the previous framework], and one that brings a new level of focus to the impacted communities. It’s a good step forward.”

The regulations, initially proposed in January 2012, are intended to assess and reduce disproportionate environmental impacts in “overburdened” communities. In its response to public comments on the proposed rules, DEC explained that there is no definition of “overburdened” under New York law.  However, the regulations use the same long-established demographics on race, ethnicity and income used in CP-29, the Department’s Environmental Justice Policy, which establishes a mechanism for identifying potential “environmental justice areas.”

According to the Department’s policy, an “environmental justice area” is defined as an area containing a minority or low-income community that may bear a disproportionate share of environmental impacts. A “low-income community” means a contiguous area where 23.59% or more of the population has an annual income that is less than the poverty threshold. A “minority community” means a contiguous area where the minority population is equal to or greater than 51.1% in an urban area or 33.8% in a rural area. These percentage thresholds are based on census block groups and may be revised to reflect updated demographic data.

Following the proposed siting of a new plant, the newly finalized regulations establish an “Impact Study Area” of at least a one-half mile radius around the proposed location of the facility, with a greater area considered on occasion due to “site-specific factors.” The applicant must then determine whether the Impact Study Area contains one or more EJ areas by identifying if there is a minority or low-income community within the Impact Study Area, based on the thresholds summarized above. If no area meeting the definition of minority or low-income community is present within the Impact Study Area, an EJ area is still considered to be  present if: (1) a contiguous area has a minority or low-income population that is above 75% of the stated thresholds, and (2) reasonably available air quality data reveals that the Impact Study Area may bear a disproportionate share of negative environmental consequences resulting from multiple sources when compared to the county as a whole, or if in New York City, when compared to the city as a whole.

If an EJ area is present in the Impact Study Area, an application to site a power plant there must analyze any significant adverse environmental impacts to the EJ area resulting from the plant’s operation or construction. The requirements for a full EJ analysis are described in an earlier SPR blog post.

The regulations also require the applicant to identify, analyze, and implement mitigation measures that will avoid any disproportionate significant adverse environmental impacts to the maximum extent possible. Consistent with the authorizing statute for the EJ rules, the Department has revised its proposed regulations to clarify that if the impacts cannot be avoided or minimized, the applicant must still offset the impacts. While the statutory text requires mitigation and offsets to be evaluated “using verifiable measures,” the regulations offer no further descriptions of mitigation or offset measures and no examples of how the measures must specifically benefit affected EJ areas. Concerned parties await the regulations’ implementation to see how these requirements will be interpreted in practice.

These regulations were issued pursuant to Article X of the Public Service Law (“Article X”), which was reauthorized last summer to reestablish a comprehensive regulatory regime for power plant siting.  Article X displaces the State Environmental Quality Review Act (“SEQRA”) process for covered projects, but mandates several of its own environmental analyses of facilities’ impacts. Review under the new Article X process is just beginning this year; it remains to be seen how DEC’s new environmental justice regulations will be implemented, or whether similar requirements will be incorporated into SEQRA in the future.

For more information about DEC’s new EJ regulations for power plants, contact Jeffrey Gracer.

Priya Murthy is a Summer Associate at Sive, Paget & Riesel.



July 20, 2012

Lenders Fear Environmental Liability in Brazil

By: Renata Soares Piazzon — Filed under: Due Diligence & Corporate Transactions, Emerging Issues — Posted at 4:12 pm

Recent court cases in Brazil are creating significant concern within the financial community that public prosecutors and courts may impose liability on banks — without regard to fault — merely because they provided financing for activities that later caused pollution. As a result, lenders should carefully evaluate the environmental aspects of projects in Brazil and the current state of the liability regime before disbursement of any loan.

Brazil’s national environmental law (Federal Law No. 6,938/1981) requires the polluter, independently of fault, to indemnify or repair the damages caused to the environment and to third parties affected by its activity.  Moreover, “polluter” is defined broadly to include any entity that is directly or indirectly responsible for the activity that caused environmental degradation. Under these provisions, all parties involved in environmental damage are jointly and severally responsible for its remediation.

In December 2009, the Superior Court of Justice, Brazil’s highest federal court of appeals on non-constitutional matters, issued a decision involving damage to a mangrove area allegedly caused by a hardware manufacturer.  The decision would not have attracted much attention by lenders had the court not gone on to state that, “for the purpose of evidencing the chain of causation in environmental damage, equivalent liability attaches to those who do, those who don’t do when they were supposed to, those who fail to do, those who don’t care about others doing, those who finance what others do, and those who benefit when others do.”  This statement, and in particular its reference to “those who finance what others do,” has created significant concern that banks could find themselves enmeshed in a web of environmental liability based on the action or inaction of their borrowers.

A well-known opinion by one of the judges who ruled in the mangrove case reinforced the notion that an “indirect polluter” could include not only banks, but also the environmental agency, engineer, architect, real estate developer, and broker that are deemed to be facilitating or enabling the environmental harm.

As a result of these interpretations, two class action lawsuits were filed in 2011 by the Federal Prosecutor against Banco da Amazônia S.A. (“BASA”) and Banco do Brasil (“BB”).  The main allegation against the banks in those cases is that they failed to comply with Brazilian environmental legislation when they granted credit for cattle raising on lands located in the Amazon Region.  The Federal Prosecutor asserted that, without that credit, the allegedly unlawful cattle raising, and the consequent deforestation in the Amazon Region, would not have occurred.

These cases are still in preliminary stages and have not been decided on the merits. Nonetheless, their mere filing has turned into one of the top environmental concerns in Brazil.  It is not yet clear whether the court will accept the banks’ contention that they exercised due diligence in granting the credits and that they did not directly or indirectly approve of any unlawful activity by their borrowers.

The uncertainty that now bedevils financial institutions in Brazil may chill responsible lending activity and cause unwarranted disruption until the law is clarified to better define what lenders can do to ensure that they do not attract environmental liability.

For more information about this topic, contact Renata Soares Piazzon at renata.piazzon@loboderizzo.com.br.

Renata Soares Piazzon, an attorney in the Sao Paulo office of Lobo & de Rizzo Advogados, completed a two-month exchange program at SPR.



July 13, 2012

RGGI Update: Regional Cap-and-Trade Program Survives New York Challenge But Faces Others

By: Maggie Macdonald — Filed under: Climate Change Law, Emerging Issues — Posted at 12:33 pm

The Regional Greenhouse Gas Initiative (“RGGI”) – a cap-and-trade program designed to limit power plant emissions in 10 Northeastern states – has been under close scrutiny in recent months as a result of lawsuits in New Jersey and New York, and legislation in New Hampshire.   Each of these developments demonstrates the polarization and controversy that continue to surround greenhouse gas regulation, and RGGI in particular, years after the regional trading program first took effect.

In New York, three members of Americans for Prosperity, a conservative political action group, brought a lawsuit against Governor Cuomo, the New York State Department of Environmental Conservation, and the New York State Energy Research and Development Authority challenging RGGI’s validity on multiple grounds.  In a decision issued last month, the Supreme Court, Albany County dismissed the action, holding that plaintiffs lacked standing to bring the lawsuit because they did not suffer a distinct injury.  It also ruled that plaintiffs’ claims would have been barred (regardless of their lack of standing) based on their failure to bring a timely challenge.  The court agreed with the state defendants’ arguments that businesses have adjusted their practices based on RGGI, numerous programs would lose funding if RGGI were invalidated, and that plaintiffs provided no reason why their action was delayed until 2011, approximately six years after the RGGI program was adopted in New York.

In New Jersey, the Natural Resources Defense Council and Environment New Jersey have filed a lawsuit challenging Governor Christie and the New Jersey Department of Environmental Protection’s (“NJDEP’s”) decision to withdraw New Jersey from RGGI.  The Plaintiffs allege violations of the New Jersey Administrative Procedure Act, claiming that the Governor and NJDEP failed to provide adequate notice of their withdrawal decision or opportunity for public comment.

In New Hampshire, new legislation was enacted which modifies the state’s participation in RGGI.  The bill, which became law without the signature of Democratic Governor John Lynch, was passed in the state’s Republican-controlled legislature after efforts to withdraw the state from RGGI were vetoed by Governor Lynch.  The law provides for rebates to ratepayers and diverts funds from the state Public Utilities Commission’s energy efficiency programs.  In passing this legislation, New Hampshire also broke with seven other RGGI states by prohibiting the retirement of unsold allowances from the first 14 auctions, effectively diluting the value of new credits.  Perhaps most notably, the law allows for New Hampshire to opt out of RGGI if two other states withdraw, or if one state with over 10% of the program’s allowances withdraws.

For more information on RGGI and other climate change initiatives, contact Jeffrey Gracer or Maggie Macdonald.