Second Circuit Examines Collateral Source Rule in CERCLA Cost Recovery and Contribution Case

Posted in Court Cases

On September 11, 2014, the Second Circuit issued its decision in New York State Electric & Gas Corp. v. FirstEnergy Corp., No. 11-4143, a CERCLA cost recovery and contribution case arising from the cleanup of coal tar contamination at sixteen manufactured gas plants in New York.  New York State Electric & Gas Corp (“NYSEG”) filed a section 107(a) cost recovery action against FirstEnergy Corporation, alleging FirstEnergy bore liability as a successor to NYSEG’s former parent company.  FirstEnergy brought section 113(f) contribution counterclaims against NYSEG and I.D. Booth, Inc., a current owner of one of the sixteen sites.  The district court found NYSEG could recover under its section 107(a) claims, while FirstEnergy could recover contribution from I.D. Booth.

On appeal, the Second Circuit decided a number of issues.  Among them was whether NYSEG’s award against FirstEnergy could be reduced by a portion of the $20 million NYSEG had received in a prior insurance recovery.  The district court and Second Circuit both found that the “collateral source rule” does not apply in the CERCLA context.  The collateral source rule prevents payments from a collateral source from reducing an otherwise recoverable award.  The district court had held that the collateral source rule was barred by Section 114(b) of CERCLA, 42 U.S.C. § 9614(b).  The $20 million award had been allocated among 38 sites, so the district court reduced NYSEG’s contribution recovery here by 42.1 percent (16/38) of the $20 million award, or $8,421,052.  The Second Circuit affirmed.

If you’ll recall, David Mandelbaum previously discussed the collateral source rule on this blog.  That examination of cases found that courts have generally held that the collateral source rule does not apply in the CERCLA context, but that courts will often apply an equitable analysis to avoid an unfair double recovery.  Here, the Second Circuit found that, although there was no risk of NYSEG obtaining a double recovery, it was within the district court’s “broad discretion” to equitably reduce NYSEG’s recovery based on the insurance recovery.  Accordingly, the Second Circuit seems to endorse an equitable analysis, rather than some mechanical rule, when addressing prior insurance recoveries in CERCLA contribution cases.

In addition, the Court of Appeals held (1) a covenant not to sue did not preclude NYSEG’s cost recovery claims; (2) that there could be no direct liability for a parent that did not sufficiently participate in the activities of the plant during its ownership of the plant; (3) FirstEnergy was liable on a veil piercing theory; (4) NYSEG’s claims were barred as to certain sites by CERCLA’s statute of limitations provision; (5) the district court’s allocation of liability based on total gas production was not in error; (6) the district court did not err by not reducing recovery based on economic benefit of the cleanup or based on delay in cleaning up; and (7) I.D. Booth was not entitled to a third-party defense under section 107(b)(3) because it did not exercise due care with respect to the cleanup, as I.D. Booth caused delays in negotiations and, in turn, the cleanup.


Climate Adaptation: The Concrete Example of Floating Homes

Posted in Climate Change

Last month, Kerri Barsh posted about a floating villas project planned for a man-made lake north of Miami.  Her post is here. A few weeks later, we noticed press coverage about another floating home project conceived as a response to climate change and sea level rise, although otherwise quite different.  WetLand is an exhibit at the Philadelphia Fringe Arts Festival.  For a description click here. That got us thinking, and, with the deadline for my monthly column in the Pennsylvania Law Weekly upon me, we explored what these kinds of projects mean as real — not hypothetical — examples of climate adaptation.  Read Mandelbaum & Barsh, Climate Adaptation:  the concrete example of floating homes, 37 Pa. L. Weekly 846 (Sept. 9, 2014), here.

FutureGen Receives EPA Permits for Underground Injection

Posted in EPA, Illinois, Permitting

On August 29, 2014, EPA issued the first Class VI underground injection control permits to FutureGen Industrial Alliance Inc., of Jacksonville, Illinois.   Four permits were issued for injection wells for the purpose of the geological sequestration of carbon dioxide.  FutureGen proposes to capture CO2 from a coal fired power plant near Jacksonville, Illinois, purify the CO2 and put it under high pressure to turn it into a liquid, then transport it through an underground pipeline for approximately 30 miles to an underground injection well site.   Approximately 22 million metric tons of CO2 are proposed to be injected over the project’s twenty year lifespan.

According to information on the FutureGen Alliance company website, FutureGen Alliance CEO Ken Humphreys stated,  “The issuance of the permit is a major milestone that will allow FutureGen 2.0 to stay on track to develop the first ever commercial-scale, near-zero emissions coal-fueled power plant with integrated carbon capture and storage.”

For more information from EPA on these permits, please follow this link:

The intersection of the Clean Air Act and energy policy: EPA’s proposed greenhouse gas standards for existing power plants

Posted in Energy, Federal Regulation, Greenhouse Gas

In the Sept/Oct 2014 issue of the American Bar Association’s Trends, attorneys Michael Cooke and Christopher Bell co-author “The intersection of the Clean Air Act and energy policy: EPA’s proposed greenhouse gas standards for existing power plants”.
Read more here.

Cross-Border Renewable Energy Projects: Sustainable Development and Investor Protection

Posted in Energy, Environment, International

Cross-border renewable energy development is a rapidly growing share of the more than $200 billion per year renewable energy industry. Balancing the interests of investors seeking regulatory certainty with the interests of states in environmental protection is a significant source of potential conflict. In a joint publication by two committees in the ABA Section of Environment, Energy, and Resources, I review global developments, including several notable legal battles, and discuss the possibility of public cooperative mechanisms as a partial solution.

Read Cross Border Renewable Energy Projects: Sustainable Development and Investor Protection here.

Dutch Solution to Miami’s Rising Seas? Floating Islands

Posted in Climate Change, Florida, Green Building

Those following climate change adaptation may be interested in an article that appeared on Sunday, August 24, 2014, in the Miami Herald describing a project for floating villas near Miami.  The specific project is, of course, specific to the location and market.  However, the general observation is that technology to address sea level rise has been a feature of the Dutch economy for centuries.  As rising sea levels threaten coastal infrastructure in the United States and elsewhere, some of those technologies may be useful to consider.  Not everyone is going to live on in a floating luxury home.  However, the idea that substantial buildings can be built to float permanently may ultimately be a useful tool in the adaptation tool box.  Read Dutch Solution to Miami’s Rising Seas?  Floating Islands by clicking here.



Incentives and Legal Risks for Green Building in Pennsylvania

Posted in Green Building, Pennsylvania

In this month’s Pennsylvania Law Weekly column, I discuss the incentives and legal risks for green building in Pennsylvania.

Co-authored with Ana Montalban of Greenberg Traurig’s Public Finance practice, the article gives an overview of the U.S. Environmental Protection Agency’s proposed Clean Power Plan as well as some of the ways in which Pennsylvania has already positioned itself as a leader in green development and emissions reduction incentives. The article highlights certain challenges and uncertainties clients should be aware of as they prepare to take advantage of the development-friendly environment created by the Clean Power Plan.

To read Incentives and Legal Risks for Green Building in Pennsylvania, click here.

Permitting Implications of UARG Decision

Posted in Court Cases, Energy, Federal Regulation, Uncategorized

Last week, EPA issued guidance to its Regional Administrators that addresses some of the questions raised by the decision in Utility Air Regulatory Group  v. United States Environmental Protection Agency, 134 S.Ct. 2427 (U.S. June 23, 2014) (“UARG”) As discussed in our posts of June 23rd and July 14th, that decision raised several issues that must be clarified, including how to treat requirements in states that have adopted the Tailoring Rule approach and how to apply the prevention of significant deterioration (“PSD”) permitting provisions to modifications of major sources of emissions.   For example, several states have adopted EPA’s Tailoring Rule approach into their state implementation plans (“SIPS’) and EPA has approved many of those SIP provisions.  Although EPA notes that it will no longer apply or enforce federal provisions, including EPA approved SIP provisions, that require a source to obtain permits if GHGs are the only pollutant involved.  Many state level requirements, however, remain in effect until further actions are taken and may trigger permitting requirements under state law despite the UARG decision.  In light of this, EPA noted the need for Regional personnel to confer with local, state, and tribal permitting authorities and with applicants to explore plans to respond to the UARG decision.  The document notes that while some state laws might automatically be modified based on the Supreme Court decision, EPA does not read the UARG decision as precluding states that have adopted GHG permit requirements into their SIPs from retaining those requirements. This makes it critical for facilities undergoing any permitting actions now, or in the near future, to coordinate closely with state, local, and tribal agencies and with EPA. In addition, EPA has always recognized the PSD permitting program should not be triggered by de minimis increases in emissions of PSD pollutants, and it developed significance levels for purposes of determining when net emissions increases are more than de minimis. The Court in UARG expressly stated EPA may require “anyway sources” to comply with GHG BACT “only if the source emits more than a de minimis amount” of GHGs. The Court noted the 75,000 tons per year (“TPY”) threshold of the Tailoring Rule might be considered a de minimis threshold if EPA justifies that level.  In the July 24th guidance memorandum, EPA states that it intends to continue applying BACT to GHG at “anyway sources” and, pending further developments, to process PSD permit applications for “anyway sources” using a 75,000 tpy C02e (and greater than zero on a mass basis) threshold to determine whether a permit must include a BACT limitation for greenhouse gases.

Pennsylvania Commonwealth Court Invalidates PUC Review of Local Natural Gas Regulation

Posted in Court Cases, Hydrofracking, State Regulation

In February 2012, Pennsylvania adopted comprehensive revisions to its Oil and Gas Act known as “Act 13.”  Among the changes was an expanded preemption of local regulation of oil and gas activities. Prior law prohibited municipalities from regulating “how” oil and gas development would proceed, but permitted zoning control over “where” development could occur. Act 13 imposed a uniform set of rules for local ordinances governing oil and gas. It also provided that the Public Utility Commission would decide in the first instance whether a local ordinance complied. Municipalities with non-complying ordinances would not share in fees paid by natural gas developers.

In December 2013, the Supreme Court invalidates that super-preemption as a violation of the Environmental Rights Amendment to the Pennsylvania Constitution. Robinson Twp. v. Pa. Pub. Util. Comm’n, 83 A.3d 901 (Pa. 2013).  That left open the question whether the PUC would continue to have the power to review ordinances.

Today, the Commonwealth Court on remand held that the PUC review provisions were inextricably bound up with the unconstitutional preemption provisions, and so were not severable. They are invalid as well.

This leaves us back at “where-not-how” preemption and conventional judicial review of local ordinances in court. While the PUC could opine on ordinances before they were enforced or even enacted, judicial review requires final action in most cases.

The Commonwealth Court’s opinions are here.

New York Court Tosses Property Owners’ Little NEPA Challenge to New York State’s Failure To Complete Hydraulic Fracturing EIS For Lack of Standing

Posted in Court Cases, Hydrofracking, New York, Oil & Gas

A trial court in Albany, New York has landed another blow against high-volume hydraulic fracturing (“HVHF”) in New York by tossing two lawsuits (decisions available here and here) brought by property owners and a bankrupt operator challenging New York’s failure to complete its environmental review of high-volume hydraulic fracturing in a timely manner.  This comes a little more than a week after New York’s highest court upheld the right of local governments to use land use laws to restrict or ban HVHF within their jurisdiction.

The industry and property owner challenge was brought pursuant to New York’s Little NEPA, known as the New York State Environmental Quality Review Act, or SEQRA.  Citing a well-established line of case law, the court found that the petitioners lack standing to bring the action because they did not allege an injury that fell within the “zone of interest” of SEQRA.  Specifically, the court held that challenges under SEQRA had to allege an injury that was environmental, and not solely economic in nature.  Here, the industry and property owners clearly alleged economic and not environmental injury.  While the court observed that application of the rule in this instance might very well lead to the State’s inaction to remain unchallenged, the court found that it was constrained by applicable case law.

At first blush it would appear that this decision would provide government agencies wide (and judicially unreviewable) latitude to delay action on a permit application or other request for governmental action subject to an environmental review under SEQRA.  However, there are instances in the SEQRA case law where courts have found an unreasonable delay in completion of the SEQRA review process improper.  The somewhat anomalous result in these HVHF challenges may be explained by the pleading strategy of the petitioners in this specific case, which sought relief solely for alleged violations of New York’s environmental review statute.  Had petitioners consisted solely of persons or entities that applied for drilling permits and who pleaded their challenge as an alleged failure to timely process a permit under the State’s Oil, Gas and Solution Mining Law the result, at least as to standing, would likely have been different.