March 5, 2010
The Court of Appeals for the Second Circuit recently issued a decision in Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., — F.3d —-, 2010 WL 626064 (2d Cir. Feb. 24, 2010), another in a series of cases that attempt to chart the contours of liability of potentially responsible parties (“PRPs”) under CERCLA. Following its cleanup of a contaminated site along the Hudson River under an administrative consent order with the New York State Department of Environmental Conservation (“DEC”), Niagara Mohawk Power Corp. (“Niagara”), itself a PRP, commenced a cost recovery and contribution action against other PRPs.
The District Court ruled that Niagara could not seek contribution costs under Section 113(f)(3)(B) of CERCLA because DEC did not have the authority to resolve CERCLA liability without a specific agreement with the EPA and, thus, the administrative consent order did not resolve Niagara’s CERCLA liability. The Second Circuit reversed this ruling, holding that Niagara could maintain a contribution action against former owners and operators of the site pursuant to §113(f)(3)(B).
Section 113(f)(3)(B) allows a party to seek contribution from other PRPs when the party “has resolved its liability to the United States or a state for some or all of a response action in an administrative or judicially approved settlement.” Because Niagara had administratively settled its CERCLA claims with the DEC, the court concluded that §113(f)(3)(B) provided the proper mechanism for Niagara’s claims; settlement of claims with the federal government or express federal approval of the state administrative settlement was not required. In addition, the court held that because Niagara’s claims fit squarely within the requirements of §113(f)(3)(B), to allow Niagara to proceed with a cost recovery action under §107(a) would be inappropriate. This ruling should clarify that a DEC administrative consent order is sufficient to permit the settling party to bring a CERCLA contribution action.
The District Court granted summary judgment in favor of certain defendants on the grounds that Niagara had failed to raise a genuine issue of material fact as to whether hazardous substances had been released on defendants’ properties. Defendants had argued that Niagara’s failure to identify evidence that they had caused any release of hazardous substances entitled them to summary judgment. The Second Circuit reversed, holding that a party seeking contribution need not establish the precise amount of hazardous material discharged to demonstrate PRP liability and to move its CERCLA claims past the summary judgment stage; application of this standard will make it more difficult for PRPs to exit a litigation by moving for summary judgment. Whether the amount of hazardous waste deposited by a particular PRP is minimal does not erase liability, but presents an issue for appropriation of costs.
Former site owner Chevron, one of the defendants seeking summary judgment, argued that it could not be held liable for Niagara’s costs because it never engaged in any activities that could have produced manufactured gas production waste—the type of waste Niagara was required to remediate under the consent order. The Second Circuit held, however, that because Niagara was required to investigate and identify all hazardous waste, it could seek contribution for Chevron’s share of the investigation costs.
The Second Circuit also overruled the District Court’s finding that a genuine issue of material fact existed as to whether Niagara’s cleanup was consistent with the National Contingency Plan (“NCP”). Noting the presumption that actions undertaken by the government are consistent with the NCP, the court held that a PRP could establish consistence by conducting a response action under the monitoring and ultimate approval of a state environmental agency. Niagara’s adherence to the DEC consent order established the cleanup’s NCP consistency.
February 23, 2010
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 16, 2010
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.
January 29, 2010
On January 26, 2010, shareholders for twelve natural gas companies requested disclosure of environmental and financial risks associated with extracting gas from the underground Marcellus Shale formation through hydraulic fracturing or “hydofracking. ” This proposed process has received a great deal of attention in recent months. Environmental organizations and others have expressed concern that the fracturing chemicals utilized in the process have not been disclosed to the public and are guarded by companies as a trade secret.
The companies from which shareholders are seeking reports include Cabot Oil & Gas Corp., Chesapeake Energy, Exxon Mobil Corp., Hess Corp., El Paso Corp., Energen Corp., EOG Resources, EQT Corp., Range Resources, Ultra Petroleum Corp., Williams Companies Inc., and XTO Energy Inc. In addition to seeking information about the chemicals to be utilized, shareholders are requesting increased transparency of potential environmental impacts, substitution of less-toxic fracturing fluid, and adoption of best practices for drilling activities. As quoted by BNA, Larisa Ruoff of Green Century Capital Management, one of a group of advocacy organizations leading the new shareholder campaign, said “[s]hareholders believe that through the adoption of best practices and policies to phase out the most toxic chemicals used in this process, companies can ensure that they are both protecting the environment and their balance sheets from unnecessary and potentially devastating risks.”
January 14, 2010
The parties to a lawsuit challenging New York State’s participation in, and its rules to implement, the Regional Greenhouse Gas Initiative (“RGGI”) have reached a settlement. On December 23, 2009, a proposed consent decree in the matter of Indeck Corinth, L.P. v. Paterson, No. 5280-09, was filed with the Supreme Court of the State of New York in Albany. The litigation, which commenced on January 29, 2009, was brought against Governor Paterson, various State entities, and Consolidated Edison (“ConEd”) by Indeck Corinth, the operator of a gas-fired energy co-generation facility that held a long-term contract with ConEd. Two other gas-fired energy co-generation facilities with long-term ConEd contracts later intervened in support of Indeck. As described in the proposed consent decree, Indeck alleged that New York’s participation in RGGI was outside the scope of the State’s lawful authority (ultra vires) and unconstitutional, and that the rules implementing RGGI were arbitrary, capricious, and not supported by a proper record. Indeck contended that its long-term contract prevented it, unlike other generators without such contracts, from passing on to ratepayers the costs of complying with New York’s rules implementing RGGI (“RGGI Rules”).
RGGI is an agreement among ten Northeast and Mid-Atlantic states, including New York, to limit greenhouse gas emissions through a cap-and-trade system. As summarized by the New York State Energy Research and Development Authority (“NYSERDA”), the agreement “calls for states to cap power sector carbon emissions through 2014 and then reduce emissions by 2.5 per year for the next four years, resulting in a 10 percent reduction by 2018.” The RGGI Rules were promulgated by the New York State Department of Environmental Conservation (“DEC”) (codified at 6 NYCRR Part 242) and by NYSERDA (codified at 12 NYCRR Part 507). As summarized by the DEC, the RGGI Rules “require power plant owners in New York to obtain sufficient allowances to cover their annual CO2 emissions,” primarily by purchasing them at auctions or through a secondary market, but with “a limited number of allowances” allocated at no charge to power generators with long-term contracts that prevent them from passing the cost of such allowances to ratepayers.
The settlement provides that ConEd will pay Indeck and the intervenors for the cost of allowances in excess of those allocated to them under DEC rules, and that NYSERDA will allot a portion of RGGI proceeds to offset ConEd’s costs. According to NYSERDA, the settlement “maintains the number of set-aside allowances and the size of the emissions cap,” and is “designed to be ratepayer neutral,” with provisions for NYSERDA to partially fund efficiency and infrastructure improvements for ConEd, which should offset consumer costs.
The Court has not yet entered the proposed consent decree as an order. Although not required by law to do so, the State seeks public comment on the settlement agreement, which will be considered in the Court’s approval process. The 30-day comment period began on December 30, 2009. Comments will be collected by the New York Attorney General’s office; instructions for submitting comments are available here.
January 4, 2010
On December 30, Sive, Paget & Riesel (“SPR”) submitted a comment letter on behalf of the Natural Resources Defense Council (“NRDC”) addressing deficiencies in the Draft Supplemental Generic Environmental Impact Statement (“DSGEIS”) prepared by the New York State Department of Environmental Conservation (“NYSDEC”) regarding proposed natural gas extraction from the Marcellus Shale formation in the Southern Tier of New York State. SPR’s comment letter, prepared by Steven Barshov and Jessica Steinberg, focused principally on matters of concern to towns and other units of local government within whose territory such proposed natural gas drilling would occur.
SPR’s comment letter identified multiple deficiencies in the DSGEIS related to potential impacts of concern to units of local government, including traffic, noise, visual, community character and land use impacts. SPR’s comment letter also encouraged DEC to adopt regulations that would provide units of local government with meaningful advisory input to NYSDEC during well permitting. Access a complete copy of SPR’s comment letter—which is attached to NRDC’s comment letter—here (pdf).
December 29, 2009
Last week, New York City’s Department of Environmental Protection (“DEP”) called upon New York State’s Department of Environmental Conservation (“DEC”) to rescind its Draft Supplemental Generic Environmental Impact Statement (“DSGEIS”) addressing natural gas drilling in the Marcellus Shale formation. The Marcellus Shale formation, which contains large quantities of natural gas, extends from Ohio and West Virginia through parts of Pennsylvania and into New York’s Southern Tier. Notably, the formation includes lands in the watershed that provides drinking water to New York City and, in total, approximately half of the state’s population.
DEP has taken the position that any drilling in the watershed should be banned due to risks posed to the drinking water supply by the technique used to extract gas from the underground shale, known as high-volume hydraulic fracturing. In its comments on the DSGEIS, DEP makes a number of arguments to support its contention that the DSGEIS does not adequately analyze the potential significant adverse environmental impacts of drilling in the Marcellus Shale formation, including the following:
The DSGEIS does not adequately analyze the possibility that contaminants may spill into surface waters or migrate underground into natural drinking water supplies or water supply tunnels;
- The DSGEIS’s requirements for the disclosure of the chemicals used in the hydraulic fracturing process are insufficiently protective of human health and the environment;
- The DSGEIS engages in “segmentation” in violation of the New York State Environmental Quality Review Act (“SEQRA”) by failing to adequately analyze potential significant adverse environmental impacts associated with waste disposal, surface water withdrawals, induced growth, cumulative impacts, air quality impacts, pipeline construction, and ancillary infrastructure;
- The no-drill buffer zones proposed in the DSGEIS are inadequate to protect New York City’s drinking water supply; and
- The DSGEIS does not sufficiently analyze alternatives to hydraulic fracturing, and does not at all address alternatives to natural gas development.
DEP also issued a report in conjunction with its comments.
The comment period for DEC’s DSGEIS has been extended to December 31, 2009. While New York City’s interest in upstate drilling is based primarily on potential impacts to its watershed and water supply infrastructure, upstate municipalities are likely to focus on other issues, including tax revenues, road and truck traffic impacts, noise impacts, and preemption of local regulatory authority.
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