President Trump Signs Resolutions Eliminating Regulatory Requirements

Posted in Coal, Federal, Mining, Oil & Gas

Last week, President Donald J. Trump signed two congressional resolutions overturning rules that impact the energy extraction and mining industries. On Tuesday, February 14, President Trump signed a resolution eliminating a June 2016 SEC rule that required companies engaged in the commercial development of oil, natural gas, or minerals to disclose payments, including taxes, royalties and fees, made to foreign governments. Supporters of the rule, promulgated under the Dodd-Frank Act, claimed it was aimed to root out potential corruption, but critics feared that it would hurt U.S. businesses’ ability to compete with foreign energy and mining companies by imposing significant compliance costs.

On February 16, the President signed another resolution that overturned the Department of Interior’s “Stream Protection Rule.”  The rule was intended to define the phrase “material damage to the hydrologic outside the permit area” as used in the Surface Mining Control and Reclamation Act (SMCRA) at 30 U.S.C. § 1260(b)(3).  It imposed several new monitoring and permitting requirements for coal mines, and was widely criticized by the coal industry for its likely effect on jobs.

These laws mark just the second and third times that the Congressional Review Act of 1996, 5 U.S.C. § 801 et seq. (CRA), has been used successfully to overturn a federal regulation. (The first successful use occurred in 2001 when President George W. Bush signed a congressional resolution overturning an OSHA ergonomics rule.)

The CRA requires federal agencies to submit rules to Congress for review and allows Congress to vote to overturn the regulation within approximately 60 legislative days. The CRA also prohibits the issuing agency from issuing a rule that is “substantially in the same form” as the prior rule unless the rule is specifically authorized by a subsequent law. 5 U.S.C. § 801(b)(2). Given how seldom the CRA has been utilized, courts have yet to weigh in on what constitutes a rule “substantially in the same form.” But legal challenges are likely to arise – if not now, then in a subsequent administration – as the CRA is used more often. 

In the coming weeks, President Trump’s administration is poised to invoke the CRA to overturn other regulations issued late in President Obama’s Administration. In fact, the Department of Interior’s “Methane and Waste Prevention Rule” was recently overturned by Congress pursuant to the CRA and awaits the president’s signature.

We will continue to provide updates as this (and other rules affecting the energy sector) are considered for review.

 

Help! The DEP Guidance Document I Need is Missing!

Posted in DEP, Guidance Documents, Pennsylvania

The Pennsylvania Department of Environmental Protection (“DEP”), as is typical of government agencies, regularly releases guidance documents explaining how to interpret or apply its programs and regulations. Once drafted and again once finalized, these documents are published in DEP’s Online Library, where they can be accessed through browser searches or directly through the eLibrary.  But what do you do when you can’t find a particular guidance document you’re pretty sure exists?  A colleague or consultant may ask you to clarify a technical point and refer to a document by name or description, or you may need to verify the proper procedure for a risk assessment; your next step is to perform a browser search or check the applicable folder in DEP’s eLibrary.  With any luck, the document is easily found, but some searches result in no returns or broken links.  DEP’s website sometimes contains draft guidance documents, but no final version.

DEP’s guidance documents serve as useful tools in understanding the Department’s regulations. They can provide insight regarding the appropriate procedures for completing testing or remediation of a site, or submitting required paperwork or reports to the Department.  Guidance documents are often helpful in the resolution of legal disputes, providing answers to questions left open by regulations.  In many cases, these documents serve as key documents in completing a project or wrapping up a matter.  In some cases, however, diligent searches for particular guidance prove fruitless.  This may mean the desired document has been rescinded.

The DEP’s Policy for Development and Publication of Technical Guidance sets out the procedures for its development of guidance documents; these procedures also govern the rescission of such guidance.  When developing technical guidance, DEP staff must first draft the guidance document for several levels of internal review and approval.  After approval of a draft guidance document by the Department’s Policy Office, the draft, including a request for public comment, is published in the eLibrary and in the Pennsylvania Bulletin.  At the conclusion of the public comment period, DEP staff reviews any comments received.  Subject to Policy Office review, the final guidance document is then published in the eLibrary and the PA Bulletin.

If a DEP Bureau Director determines that an existing guidance document is no longer necessary, that guidance document can be rescinded. Similar procedures for developing guidance are followed, with one significant difference—the rescission process lacks a notice and comment period.  Upon deciding to rescind a guidance document, the Bureau Director must submit a Notice of Intent to Rescind Guidance to DEP’s Policy Office.  This Notice consists of a short memo identifying the guidance intended for rescission and describing why rescission is sought and the effects rescission will have.  This Notice must be published in the PA Bulletin.  After receiving Policy Office approval of an intended rescission, the Bureau Director shall publish a Notice of Rescission in the PA Bulletin.  This Notice is very brief, identifying the guidance document’s DEP ID Number, title, description, and effective date.  The rescinded guidance document is then removed from DEP’s eLibrary with little fanfare.  When searching for a DEP guidance document you believe may have been rescinded, therefore, checking the PA Bulletin may provide verification or lead you to replacement guidance, alleviating the need for and frustration of repeated searching.

New York State Proposes Revisions to Its Environmental Review Regulations

Posted in NEPA, New York, Real estate

Late last month the New York State Department of Environmental Conservation (DEC) proposed to revise its Part 617 regulations, which are the rules governing the conduct of environmental impact review under New York’s “Little NEPA,” known as the State Environmental Quality Review Act (SEQRA). The proposal was officially noticed in today’s issue of the New York State Register and DEC’s Environmental Notice Bulletin. The proposed rules offer alterations in a number of key areas:

Lessening the Type I Threshold

Under SEQRA, all possible actions fall into one of three classes: Type I actions, which are presumed to have an environmental impact requiring an Environmental Impact Statement (EIS), Type II actions, which are presumed to not have an impact and are exempt from further SEQRA review, and unlisted actions. Both Type I and unlisted actions require an environmental assessment to determine whether an EIS is required. To reduce some uncertainty and promote new policy goals, DEC has changed the requirements so that fewer actions fall in the unlisted gray area. The rules propose lowering a number of thresholds for what would be deemed Type I actions, sweeping in a greater number of residential subdivision and parking lot projects than under current regulations.

Areas where the threshold for a Type I action was changed include:

  • Large residential subdivisions, defined as 200 units or more in a municipality of less than 150,000, 500 units for a municipality with a population between 150,000 and 1 million, and 1000 units in a municipality with a population above 1 million
  • Parking lots adding:
    • 500 additional spaces for a municipality with a population of less than 150,000
    • 1000 additional spaces for a municipality with a population greater than 150,000
  • For actions near landmarked or registered historic places, or near sites that have been determined to be eligible for listing on the State Register of Historic Places, any activity that meets 25 percent of a given threshold for an action is considered a Type I action. This cuts back Type I coverage, which previously swept in all activities near landmarks and historic places.

Expanding the List of Type II Exempt Actions and Promoting Smart Growth

DEC also added a number of new actions to the list of Type II projects, eliminating the need for an environmental review of lower impact activities like reusing a building or selling property by public auction. The list of proposed actions also evidences a clear policy preference toward encouraging both environmentally friendly and socially equitable development, reducing the regulatory burden for green infrastructure, solar energy, and affordable housing projects. It also includes favorable treatment for “infill” development projects that are considered smart growth because they avoid suburban sprawl. These revisions are significant as they represent a new approach to the Type II exempt list, focusing not merely on the lack of impact from such actions, but also seeking to release certain types of development that are deemed environmentally or socially preferred from more exhaustive environmental review.

Some key new type II actions include:

  • Retrofit of an existing structure or facility to incorporate green infrastructure;
  • Installation of fiber-optic or other broadband cable technology in existing highway or utility rights of way
  • Installation of cellular antennas or repeaters on an existing structure that is not subject to federal, state, or local landmarking
  • Subdivisions of four or fewer lots involving less than 10 acres of land
  • Development on a “previously disturbed” site within a “municipal center”
  • Reuse of a commercial or residential structure where the use is consistent with zoning
  • Anaerobic digesters

Scoping

Scoping—the previously optional public process under which the lead agency determines what issues need to be assessed in an EIS—will no longer be optional under the new SEQRA rules. This is currently the practice under New York City’s rules; if adopted this would be the practice throughout the state.

Limiting Factors to be Considered in Order to Expedite Environmental Review

One of the greatest complaints about the SEQRA process is that it moves too slowly. The proposed SEQRA revisions do not include changes that will significantly address that problem, but do attempt a few minor revisions that may in certain instances result in a slightly shorter review. The addition of mandatory scoping is employed to limit what would be required in a subsequently-published EIS to the issues identified in such scope. Under the regulations as currently written, tremendous uncertainty exists as to whether an EIS sufficiently identifies all potential areas of environmental concern; even if a lead agency engages in optional scoping, a draft EIS could still be found inadequate for failing to address a concern that was raised after the scoping process ended. Moreover, under current rules, a lead agency can reject a draft EIS even if they meet the requirements outlined by the optional scoping process. The new rules attempt to address those uncertainties.

First, the draft rule proposes that “Information submitted following completion of the final scope and not included by the project sponsor in the draft EIS cannot be the basis for the rejection of a draft EIS as inadequate.” This means that any issues raised after the final scope was produced would be treated as comments to the EIS, permitting a project sponsor to address those concerns after the fact.

The rules also attempt to further clarify what constitutes an “adequate” EIS. Under the proposed rules, an EIS “is adequate with respect to scope and content for the purpose of commencing public review if it meets the requirements of the final written scope, section 617.9(b) of this Part, and provides the public and involved agencies with the necessary information to evaluate project impacts, alternatives, and mitigation measures.” This revision is aimed at addressing the rare cases where a lead agency refuses to certify a draft EIS as complete for the purposes of commencing public review even though the matters specified in the scope have been addressed.

Finally, the proposed rule revisions provide that if an agency rejects a DEIS for inadequacy, they must accept a subsequently filed DEIS if it meets the list of deficiencies they provided upon review, avoiding circumstances where agencies seek to move the goal posts in successive iterations of preliminary draft EISs.

Environmental Cases in the Pa. Appellate Courts During 2016

Posted in Articles, Court Cases, Pennsylvania

This month, my column in the Pennsylvania Law Weekly surveys the decisions in the Pennsylvania appellate courts during 2016 addressing environmental issues.  The cases cover the Environmental Rights Amendment, impacts of oil and gas drilling, stormwater, land contamination, air pollution, the Alternative Energy Portfolio Standards Act, solid waste management, and enforcement procedure.  Read Environmental Cases in the Pa. Appellate Courts During 2016, 40 Pa. L. Weekly 131 (Feb. 7, 2017), by clicking here.

 

Further Update on Challenging Wetlands Permitting Decisions – the Latest Ruling in Hawkes

Posted in Court Cases, Permitting, Wetlands

In a previous post we predicted that the U.S. Supreme Court would affirm an Eighth Circuit decision holding that a landowner can obtain immediate judicial review of a wetlands “jurisdictional determination” (JD) by the U.S. Army Corps of Engineers, and the Court did affirm that decision near the end of last Term. See U.S. Army Corps of Engineers v. Hawkes Co., Inc., 136 S. Ct. 1807 (2016). The high Court held that approved JDs expressing the Corps’ view on the scope of wetlands subject to federal permitting jurisdiction constitute “final” agency action that is subject to judicial review even though JDs are typically issued near the beginning, not the end, of the wetlands permit application process. Recognizing the practical impact of a potentially erroneous JD – it requires the landowner either to submit to the extensive and costly wetlands permitting process or to proceed without a permit and risk enforcement action – the Court determined that landowners may avoid those equally unattractive options by obtaining a prompt judicial determination of the JD’s validity (discussed on our blog July 1, 2015).

In Hawkes, the landowners immediately filed suit to challenge a JD finding that 150 acres of wetlands were subject to the Corps’ permitting requirements. Although their challenge to the JD was delayed somewhat by their trip to the Supreme Court, on remand, the Hawkes’ challenge was upheld by the district court in a recent decision invalidating the JD and holding that the wetlands it addressed are not subject to federal permitting jurisdiction. Hawkes Co. Inc., et al. v. U.S. Army Corps of Engineers, 2017 WL 359170, (D.Minn. Jan. 24, 2017). The JD in question determined that the wetlands on the Hawkes’ property had a “significant nexus” to a navigable river (the Red River) nearly 50 miles away, which required a finding that the wetlands “significantly affect the chemical, physical, and biographical integrity” of that river. Before the landowners in Hawkes filed suit, they pursued an administrative appeal of the JD to the designated Corps Review Officer, arguing that the Corps had not provided site-specific data showing that the wetlands have more than a “speculative” or “insubstantial” effect on the chemical, physical, or biographical integrity of the Red River. The decision in that administrative appeal agreed that the administrative record lacked sufficient documentation to support a finding that the wetlands on the Hawkes’ property had a nexus to the Red River that was more than speculative or insubstantial. The decision identified specific reasons the record was deficient as well as the actions needed to complete the record, and remanded the matter to the Corps staff.

On remand, the Corps staff issued a Revised JD, but did not conduct any additional site evaluations or add any significant material to the administrative record. Instead, the Revised JD merely recharacterized the record material and added additional argument about the wetlands’ nexus to the Red River. As the district court explained, “the Revised JD [was] based on essentially the same information and documentation that was already determined by the Review Officer to be insufficient for establishing more than a speculative or insubstantial nexus between the Wetlands and the Red River.” The district court therefore declared the Revised JD to be arbitrary and capricious and held it invalid. Importantly, the court also rejected the Corps’ claim that the proper remedy was another remand to the Corps to cure the deficiencies in the Revised JD. Noting that the Corps had two opportunities already to demonstrate that the Hawkes’ wetlands had a significant nexus to the Red River, the court found that “[a]llowing the Corps a third bite at the apple would force Plaintiffs back through a ‘never ending loop.’” Rather than subjecting the Hawkes to further protracted permitting and litigation activity, the court enjoined the Corps from asserting jurisdiction over the wetlands in question.

The district court’s remand decision in Hawkes is significant both for its invalidation of the Corps’ Revised JD as arbitrary and capricious and for the injunction remedy it imposed in lieu of allowing the Corps another opportunity to establish jurisdiction over the Hawkes’ wetlands.

 

 

President Trump’s Action Impacts Pipeline Operators by Requiring U.S.-Sourced Materials and Equipment for Pipeline Construction, Retrofits, Repairs, and Expansions

Posted in Energy, Environment, GT Alert

On Jan. 24, 2017, President Trump took four executive actions that affect the oil and gas pipeline industry. In the first two, he directed the appropriate agencies to take expedited actions to the extent permitted by law to review and grant permits necessary to build the Keystone XL project and the Dakota Access pipeline. In a third action, he issued an executive order to streamline the permit and approval process for high priority infrastructure projects by directing the Chairman of the White House Council on Environmental Quality (CEQ) to designate “high priority” projects entitled to special stewarding through an expedited permitting process by the head of the relevant agency, and set up a reporting process directly to the president if the agency head fails to meet the schedule. These actions are likely to be viewed positively by the oil and gas industry.

Continue Reading.

EPA Issues Final Hydraulic Fracturing Report, Concluding that The Practice “Can Impact Drinking Water Resources under Some Circumstances”; Follow-on Federal Regulation Highly Unlikely

Posted in EPA, Hydrofracking, Water

When Congress first tasked the Environmental Protection Agency in 2009 with studying the impacts of hydraulic fracturing on drinking water resources, pundits on both sides of the debate collectively held their breath: at last, they thought, there would be an independent, comprehensive, scientific study of the oil and gas extraction technique.

Seven years in the making, EPA’s final report, dubbed, “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic Fracturing Water Cycle on Drinking Water Resources in the United States,” (EPA-600-R-16-236ES) and issued December 13, was greeted not with a bang, but a whimper. Environmentalists who had hoped that the study might represent a scathing indictment of the technique were disappointed, as were industry representatives who hoped that the EPA would issue an unassailably clean bill of health.

Hampered by an uncertain budget and its failure to secure the participation of private companies in prospective case studies, the EPA concluded, seemingly unremarkably, that activities throughout the hydraulic fracturing water cycle – from water withdrawal through disposal of produced water – “can impact drinking water resources under some circumstances.” But, the agency said, it could not quantify the frequency of impacts on a national level.

In addition to finding that spills of hydraulic fracturing chemicals had sometimes reached drinking water resources, the EPA also identified incidents of the well injection process itself contaminating drinking water resources. One such incident resulted from improper well cementing, while another stemmed from a burst production casing.

The final assessment clarifies the findings in the agency’s June 2015 draft final report. There the EPA concluded that it had not found “evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.” Industry greeted this conclusion enthusiastically, while environmentalists and others cried foul.

Last August the agency’s own Science Advisory Board (SAB) sharply criticized the statement as unsupported by the data and not reflective of the significant data gaps in the agency’s research. The SABspecifically faulted the EPA’s failure to provide updates on allegations of drinking water contamination in Pavillion, Wyoming, Parker County, Texas and Dimock, Pennsylvania – the small town at the center of the 2010 documentary Gasland which featured now infamous scenes of homeowners setting tap water alight.

The final report relegates discussion of these high-profile matters to three brief text boxes, which collectively reflect uncertainty in determining the precise source and mechanism of contamination and suggest that additional data may be available that would allow other researchers to draw more certain conclusions.

While the 666-page report said little about Pavillion, Parker County and Dimock, the EPA researchers concluded that six hydraulic fracturing activities are “more likely than others to result in more frequent or more severe impacts” to drinking water: water withdrawals; chemical spills; injection of fluids into wells with inadequate mechanical integrity; injection of fluids directly into groundwater; inappropriate discharge of fracturing wastewater into streams and lakes; and storage of fracturing wastewater in unlined pits.

While the EPA could not pinpoint the overall incidence of impacts, the report contains some clues. Regarding well integrity, for example, the EPA found that in 0.5% of the 28,500 hydraulic fracturing jobs it surveyed, “all of the protective barriers intended to prevent [ ] fluid migration had failed, leaving the groundwater source vulnerable to contamination.” Chemical spills, meanwhile, ranged from about 0.4 to 12.2 reported spills per 100 wells. While those numbers may seem modest, they, along with documented impacts, nevertheless contravene the pre-study message that there were no known cases of drinking water contamination stemming from hydraulic fracturing.

In a different political environment, regulators might have relied on these numbers to support additional rulemaking at the federal level to protect drinking water resources from hydraulic fracturing impacts. The incoming Trump administration, however, has made no secret of its disdain for EPA and its regulations on fossil fuel production and use. Absent an environmental catastrophe, new federal requirements on hydraulic fracturing are highly unlikely.

More than ever, regulation of these activities will fall to the states. For now, though, with oil and gas prices at or near historic lows – and with a continuingly cooled pace of oil and gas exploration and production activities – states may be loath to issue new regulations or take aggressive enforcement action.

 

Massachusetts Releases Draft Regulations to Further Reduce GHG Emissions

Posted in Greenhouse Gas, Massachusetts, Regulatory

The Massachusetts Department of Environmental Protection (MassDEP) recently released draft regulations for public comment which aim to further reduce greenhouse gas (GHG) emissions from various industry sectors in Massachusetts, including transportation, electricity generation, and natural gas pipelines. Public comments on these regulations are due by Feb. 24, and can be submitted in writing to MassDEP or orally at hearings MassDEP will be holding throughout the state.

Background

These regulations are the latest effort to reduce GHG emissions in Massachusetts, which started with the 2008 enactment of the Global Warming Solutions Act, M.G.L. chapter 21N, (GWSA). That statute mandated an 80 percent reduction (relative to a 1990 baseline) in statewide GHG emissions by 2050. In addition, the statute mandated that MassDEP set an interim GHG emissions reduction target between 10 percent and 25 percent for 2020 from the 1990 baseline. MassDEP elected to adopt the higher end of that range and set the GHG emissions reduction target for 2020 at 25 percent below the 1990 baseline.

The GWSA also required MassDEP to adopt “regulations establishing a desired level of declining annual aggregate emission limits for sources or categories of sources that emit greenhouse gas emissions.” M.G.L. c. 21N, § 3(d). MassDEP concluded that existing regulations limiting sulfur hexafluoride leaks, a state low emissions vehicle (LEV) incentive program, and Massachusetts’ ongoing participation in the regional CO2 cap and trade program (known as the Regional Greenhouse Gas Initiative or RGGI) satisfied this mandate.

A citizens group sued MassDEP to force the promulgation of additional regulations to ensure that the 25 percent GHG emissions reduction target was met by 2020. The Massachusetts Supreme Judicial Court last year ruled in favor of the citizens group, holding that MassDEP was obligated by the statute to promulgate regulations that “address multiple sources or categories of sources of greenhouse gas emissions, impose a limit on emissions that may be released, limit the aggregate emissions released from each group of regulated sources or category of sources, set emission limits for each year, and set limits that decline on an annual basis.” Kain v. DEP, 474 Mass. 278, 281-82 (2016). 

Following this ruling, Governor Baker issued Executive Order 569 (“Establishing an Integrated Climate Change Strategy for the Commonwealth”), which established a number of policy directives regarding climate change mitigation and adaptation. One of those directives set a schedule for MassDEP to issue GHG emission reduction regulations, specifically draft regulations, by Dec. 16, 2016, and final regulations by Aug. 21, 2017. Keeping to that schedule, MassDEP held pre-proposal stakeholder meetings this past fall and then released draft regulations last month.  

Regulatory Details 

In drafting the GHG emissions reduction regulations to conform with the GWSA and the Kain decision, MassDEP concluded the regulations must: (1) be mass-based limits; (2) decline annually; (3) limit the aggregate emission levels of existing and new sources within a category; (4) be enforceable; and (5) ensure reductions within Massachusetts. MassDEP also elected to include a margin of error to ensure the 25 percent reduction target was met by 2020. As of 2013, GHG emissions within Massachusetts had been reduced by 19.7 percent, leaving a 5.3 percent gap to close in order to meet the 25 percent reduction target. MassDEP estimates that its draft regulations will reduce GHG emissions by another 7.2 percent, thereby providing some margin of error for achieving the 2020 reduction target. 

The regulations target the following areas for emissions reductions: (1) CO2 emissions from vehicles, (2) CO2 emissions from other transportation sources, (3) methane emissions from natural gas distribution systems, (4) CO2 emissions from electricity generation, (5) sulfur hexafluoride emissions from utility switchgear, and (6) clean energy standard for retail electricity generators. Of these, nearly all of the proposed 7.2 percent GHG emissions reductions are concentrated in the transportation and electricity generation industries. 

MassDEP calculates that, unlike other industry sectors, GHG emissions from the transportation sector in Massachusetts have increased since 1990 and now represent the largest share (40.8 percent) of the statewide GHG emissions. The draft regulations propose a 3.1 percent reduction by 2020, nearly all of which MassDEP forecasts will be achieved through its existing regulations (310 CMR 7.40) promoting the use of Low Emissions Vehicles (LEVs). The draft regulations (310 CMR 60.05 and 60.06) also propose reducing CO2 emissions from mobile equipment and buildings used by state transportation agencies, but MassDEP openly acknowledges that the anticipated reduction (0.01 percent) are more symbolic than meaningful. 

In contrast to the transportation sector, the electricity generation sector in Massachusetts reduced GHG emissions by 42 percent from 1990 to 2013, and now accounts for 21.5 percent of the statewide GHG emissions. The draft regulations propose a further reduction of 4.0 percent. MassDEP justifies this reduction on the fact that, as other sectors like transportation and commercial and residential buildings increasingly rely on electricity over petroleum, it becomes more important to reduce GHG emissions from electricity. The draft regulations propose doing so by imposing an annually increasing requirement for power from clean energy sources (310 CMR 7.75) and other GHG emissions reduction measures including a credit trading program (310 CMR 7.74). 

Citing the fact that the global warming potential of sulfur hexafluoride is 23,900 times that of CO2, MassDEP is proposing to create a declining annual, aggregate limit for the permissible sulfur hexafluoride emissions from gas-insulated switchgear used by large utilities (specifically, Eversource and National Grid). This limit is stated as a proposed leak rate, which the draft regulations (310 CMR 7.72) would decrease from 3.5 percent in 2015 to 1.0 percent by 2020. 

Finally, the draft regulations (310 CMR 7.73) propose to reduce methane emissions (which have 25 times the global warming potential of CO2) from natural gas distribution systems in Massachusetts. The proposed regulations piggyback on an existing natural gas leak detection and elimination program and set declining annual methane emission limits from main and service lines owned by gas companies that have previously approved plans to replace leak-prone gas infrastructure. 

Additional Interim Reduction Limits?

During the last legislative session, the Massachusetts Senate unanimously passed S. 2092, which would have added interim GHG emission reduction limits for 2030 and 2040 (respectively, 35-45 percent and 55-65 percent from the 1990 baseline). The House did not take up the Senate bill, allowing it to expire at the end of the legislative session. Comments made during a recent legislative hearing on MassDEP’s draft GHG emissions reduction regulations indicate that the Senate bill may be re-filed in the next legislative session with the intention of forcing the House (and Governor Baker) to respond to the Senate’s proposal for additional interim GHG emission reduction standards.

 Conclusion

Given the relatively narrow focus of MassDEP’s proposed regulations, their near-term impact will be limited primarily to the transportation, gas distribution, and electricity generation sectors. Beyond 2020, however, substantially larger statewide GHG emissions reductions may be achieved and there is legislative interest in setting interim reduction targets that could mandate that most of the remaining GHG emissions reductions are achieved in the next two decades. From that perspective, these regulations represent the opening salvo of what will likely be a significant regulatory effort to further reduce statewide GHG emissions in the next several decades – an effort that will likely proceed regardless of how federal climate policy evolves in the next few years.

 

Investors in Many Syndicated Conservation Easement Deals Must Notify the IRS

Posted in Real estate, Transactional

The IRS has designated certain syndicated conservation easement transactions as “listed transactions.” This will require taxpayers who have invested in such transactions to file a notice with the IRS. It will also result in reporting and list maintenance obligations for professionals (law firms, accountants, appraisers, etc.) who provided material advice on such transactions. If the required notice is not provided, severe penalties will be imposed.

Conservation easements, a tax planning technique that has gained popularity with real estate developers, have been under IRS scrutiny for over a decade. Syndicated conservation easements are those offered to prospective investors in a partnership or other pass-through entity that purport to give investors the opportunity to obtain a charitable contribution deduction for donation of the easement. The IRS just increased the heat by classifying these syndicated conservation easement deals as listed transactions. The notice required to be given to the IRS by law may result in a close examination of the reported deals; consequently, taxpayers considering going into a syndicated conservation easement transaction should be extremely cautious.

The tax code allows a charitable contribution deduction for the donation of a qualified conservation contribution (QCC) if several conditions are satisfied.  A QCC can either be for an open space conservation easement or a facade easement for a certified historic structure. With an open space easement, the donor puts a perpetual deed restriction on the property which limits development. With a façade easement, alteration of the exterior is restricted. The amount of the charitable deduction that may be claimed is based on the reduction in value to the real property as a result of the development restriction, which must be documented by a qualified appraisal. The IRS claims in many syndicated conservation easement transactions that the value of the affected real property prior to the recording of the development restriction is greatly overstated, thereby artificially increasing the value of the charitable contribution. The IRS has successfully challenged the over-valuation of many QCC’s, and designating these deals as listed transactions will allow the Service to easily identify these transactions for a closer look and likely denial of the deduction.

IRS Notice 2017-10 which was released on Dec. 23, 2016, says that a conservation easement is a listed transaction where: (1) the investor receives promotional materials describing the transaction; and, (2) the amount of the charitable deduction claimed to be available to the investor is 2.5 times greater than the amount invested. The IRS Notice says that taxpayers who have invested in such a listed transaction on or after Jan. 1, 2010, must disclose the investment for tax years that are open under the statute of limitations as of Dec. 23, 2016. For most taxpayers, this means that a disclosure will need to be made for deals entered into on or after Jan. 1,  2013; however, if the investor extended the statute of limitations for the 2010, 2011, or 2012 tax years, the notice requirements may still be required for deals entered into on or after Jan. 1, 2010.

The required notice of involvement in such transactions is filed on IRS Form 8886.

In addition, Notice 2017-10 says that advisors who provide material assistance with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out  the easement transaction since 2010 also are required to report the transaction to the IRS and maintain a list of investors in the deal. A material advisor in a listed transaction must file IRS Form 8918 to comply with this notice requirement.

For more information on filing obligations if you have either invested in or acted as a material advisor on a syndicated conservation easement transaction, please contact your Greenberg Traurig attorney.

EPA’s Amendments to the Standards for Hazardous Waste Generators

Posted in Articles, EPA, Hazardous Waste, Pennsylvania, RCRA, Solid waste

Last month, the U.S. Environmental Protection Agency published its amendments to, and reorganization of, the regulations governing generators of hazardous waste, 81 Fed. Reg. 85,732 (Nov. 28). These rules govern the hundreds of thousands of enterprises nationally that produce wastes characterized or listed as hazardous under the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Sections 6901-91i. For the most part, these amendments do not change the requirements that generators face, but merely reorganize the regulations in a way that will make old guidance and citations obsolete. However, the final rule also codifies a number of EPA interpretations of the rules found in letters and memoranda that the EPA has written over the years. In addition, in some respects the rules will change when this rulemaking becomes effective on May 30, 2017.

Read more from my article in The Legal Intelligencer supplement, PA Law Weekly by clicking here.

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