Further Thoughts on Valuing Contaminated Property

Posted in Articles, Court Cases

Some time ago, I offered some observations about how to value the diminution in property value caused by contamination.  I examined in particular the case of a property where someone other than the landowner had the obligation to clean up.  All of this was motivated by the Pennsylvania Commonwealth Court’ decision in Harley-Davidson’s long-running property tax appeal.

In September, the Pennsylvania Supreme Court ruled on the case.  Harley-Davidson Motor Co. v. Springettsbury Twp., No. 82 MAP 2014 (Pa. Sept. 29, 2015).  That formed the subject of my October environmental practice column in the Pennsylvania Law Weekly.  Interestingly, the Supreme Court appears to endorse a reduction in property value for property tax purposes on account of “stigma.”  The court’s notion of stigma is not tied to the expected costs to cure or the (negative) value of any restrictions on use.  This is a deduction to take account of the fact that the property just is not quite right, even though someone other than the landowner has to satisfy the regulators with any clean up.  In that case, the assessed value was reduced by 5% to account for stigma, and in a non-industrial context the court implied that it might endorse a large deduction.

Read Further Thoughts on Valuing Contaminated Property, 38 Pa. L. Weekly 972 (Oct. 20, 2015), by clicking here.


FERC Clarifies Prohibition on Buy/Sell Arrangements

Posted in FERC

At the request of Rice Energy Marketing LLC, the Federal Energy Regulatory Commission (FERC), on Oct. 15, 2015, issued a Declaratory Order that clarified the extent to which releases of capacity to asset managers are exempt from FERC’s prohibition on buy/sell transactions. As clarified, the exemption extends to volumes of gas purchased from the releasing shipper in a “supply asset management agreement” (supply AMA) as well as a “delivery AMA.” “[T]he Commission clarifies that buy/sell transactions in which the releasing shipper in a supply AMA sells its natural gas to its asset manager, the asset manager transports the gas over the released capacity, and the asset manager then resells the natural gas to the releasing shipper are not buy/sell transactions of the type prohibited by Order No. 636.” By so clarifying, FERC eliminated any question that the two types of AMAs stood on the same footing insofar as it concerns the exemption from the prohibition on buy/sell transactions.

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Fracking Litigation Update

Posted in Hydrofracking

Lawsuits asserting damages from fracking continue to be filed at a rapid pace, in addition to front-end disputes over fracking regulations.  As detailed in BNA’s Toxics Law Reporter “Fracking Boom Likely to Trigger More Litigation” much recent litigation involves the use of early Lone Pine orders to test a plaintiffs’ prima facia case.  Another brewing issue is the potential for true mass tort litigation arising from fracking, such as in MTBE and asbestos cases.  See “Hydraulic Fracking and Marcellus Shale: Drilling for Mass Torts?” Natural resource damages claims are also a real possibility.  On a related front, insurance coverage disputes may arise as secondary litigation following fracking-related claims.

Federal Regulatory and Administrative Law Issues Impacted by Recent Supreme Court Decisions

Posted in Court Cases, Federal Regulation, Legislation

As the Supreme Court’s new term begins, it will be considering several cases that could have a significant impact on cases involving the Administrative Procedure Act and other federal regulatory litigation. What follows is a summary of last term’s APA-related decisions followed by a preview of two cases currently on the Court’s docket for the new term that similarly may affect APA cases and other federal regulatory litigation. The decisions discussed below from last term address issues of statutory interpretation, deference to agency action and decision-making, timeliness of claims against the government, and the legitimacy of conduct by quasi-governmental corporations. The Court’s rulings in these cases are relevant to a broad range of disputes with federal and state agencies. The same is likely to be true of the decisions slated for this term in the cases previewed at the end of this Advisory.

Statutory Interpretation

In three decisions involving statutory interpretation, the Court made clear that the plain meaning of terms can sometimes give way to contextual factors that require a different meaning, and also that there are limits to the deference that courts must give agency interpretations. Collectively these decisions provide ammunition for advocates seeking either to stretch, or limit, the reach of statutory provisions.

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Sixth Circuit Court of Appeals Temporarily Stays Implementation of the Clean Water Rule

Posted in Clean Water Act, Water, Water quality

In the latest chapter of the ongoing Clean Water Rule saga, the Sixth Circuit Court of Appeals today stayed implementation of that rule.  Jointly promulgated by USEPA and the Army Corps of Engineers on June 29, 2015 (80 Fed. Reg. 37,054), the Clean Water Rule went into effect on August 25, 2015.  The rule substantially revised earlier rulemakings and guidance regarding the scope of the Clean Water Act’s jurisdiction, but triggered lawsuits and Congressional hearings in doing so.

In the judicial forum, a series of actions were filed in federal district and appeals courts.  The  Judicial Panel on Multi-District Litigation consolidated these actions before the Sixth Circuit Court of Appeals (In re Environmental Protection Agency and Department of Defense Final Rule, Nos. 15-3799/3822/3853/3887).  As consolidated, that matter includes 18 states challenging the rule, as well as numerous intervenors (seven states, the District of Columbia and environmental groups) supporting USEPA and the Army Corps.

The Sixth Circuit’s jurisdiction over the consolidated cases has been challenged, but pending resolution of that dispute, the Court granted a motion to stay implementation of the Clean Water Rule.  Unlike an earlier decision from the federal district court in North Dakota that stayed implementation of the Clean Water Rule in 13 states, this stay applies nationwide.

In addition to the practical implications of this ruling (discussed below), the grounds for the decision are important, as they provide an indication of how the merits of the pending challenges may be evaluated.  The Court concluded that these challenges had a “substantial possibility of success on the merits,” in particular  citing two claims:  (i) that the final rule varied so substantially from the draft published for public comment that it violated the Administrative Procedures Act, and (ii) that the distance-based jurisdictional limitations lacked any scientific basis.  While the Court agreed “the clarification that the new Rule strives to achieve is long overdue,” it concluded “a stay temporarily silences the whirlwind of confusion that springs from uncertainty about the requirements of the new Rule and whether they will survive legal testing.”  The Court split 2-1, with the dissent contending that the Court should not grant the stay without first determining if it had jurisdiction over the case.

As a practical matter, this ruling answers some questions and raises yet others.  While implementation of the Clean Water Rule had already been stayed in 13 states, the rule’s implementation is now halted in all states. The decision states that the stay preserves the pre-Clean Water Rule “status quo,” presumably meaning that the regulations and guidance in effect before the Clean Water Act became effective should again be consulted to determine Clean Water Act jurisdiction. Continue Reading

Supreme Court Won’t Consider What Level of Deference States Should Be Given Under CERCLA

Posted in CERCLA, Court Cases, Federal Regulation

As noted previously, the Ninth Circuit found, in Arizona v. City of Tucson, 761 F.3d 1005 (9th Cir. 2014), that state government agencies are not afforded the same level of deference as EPA on the question of whether a CERCLA consent decree is fair, reasonable and consistent with CERCLA.  Arizona filed a petition for writ of certiori, and 10 states filed an amicus brief in support.   Yesterday, the Supreme Court denied Arizona’s petition for cert.  For an in-depth analysis of the Ninth Circuit decision and its implications, please review my recent column for the Pennsylvania Law Weekly.

EPA Tightens Regs On Power Plant Wastewater Discharges

Posted in EPA, Waste, Water

From Kathleen Kline of GT Philadelphia:

On September 30, 2015, the United States Environmental Protection Agency (“EPA”) finalized a proposed rule to regulate wastewater discharges from power plants.  The new rule sets limits on dissolved pollutants permitted in these discharges, and focus on mercury, selenium, and arsenic—toxic metals previously unregulated in this context.

Since the 1980s, air pollution controls on power plants have improved greatly.  Scrubbers installed to comply with Clean Air Act requirements have significantly reduced air emissions, but divert the metals and other pollutants captured at the smokestacks to wastewater streams.  Regulation of this wastewater has not been updated accordingly.  Since the last revision, in 1982, wastewater has only been controlled for suspended solids, not dissolved pollutants.  A 2009 EPA study revealed these shortcomings and prompted the Agency to develop new regulations.

The finalized rule applies to all steam electric power plants, except for those smaller than 50 megawatts in production capacity, and oil-fired plants.  Coal-fired plants are expected to be the most heavily affected, and new coal and petroleum coke plants are subject to additional, more stringent controls.  Out of approximately 1,080 steam electric power plants in the U.S., 134 are expected to require new investments in order to comply with the regulations.

Along with effluent limits on toxic metals and dissolved solids, the rule establishes zero discharge limits on pollutants in ash transport water and flue gas mercury control wastewater.  Plants will have to utilize chemical or biological treatment to achieve even stricter limits on pollutants in flue gas desulfurization wastewater.  The regulations will take effect in 2018, and compliance will be phased in through 2023.

Eighth Circuit Reverses Class Certification Where Class Members Not Commonly Injured by Contamination on Their Property

Posted in Court Cases, Environment, Oil & Gas

On September 15, the Eighth Circuit reversed the district court’s order certifying a class of property owners who sought nuisance based damages and injunctive relief. In Smith v. ConocoPhillips Pipe Line Co., No. 14-2191, 2015 WL 5332450 (8th Cir. Sept. 15, 2015) the Court concluded that there was no evidence showing that class members were commonly affected by contamination on their property. This decision has important implications for defeating class certification on commonality grounds in toxic tort cases where the class fails to have any proof of widespread contamination throughout the class’s property.

A leak in an existing pipeline was discovered in a small Missouri town in 1963 and repaired, but one hundred barrels of leaded gasoline leaked and had not been recovered from the site. In 2002, a town resident contacted defendant, the successor in interest, about gasoline odors in his home. An investigation of well water used by residents showed the presence of certain chemicals at levels three times above the permissible limit. The defendant purchased the homes on and around the contamination site and began working with the Missouri Department of Natural Resources to identify and fence in the contamination. The defendant later demolished the homes on contaminated properties, removed 4000 cubic yards of soil, and set up a monitoring system to track the spread of contamination.

Property owners within a 1.1 mile radius of the contamination site filed a lawsuit seeking nuisance damages and injunctive relief for one putative class and medical monitoring expenses for a second putative class. The district court refused to certify a medical monitoring class because plaintiffs offered no evidence of actual exposure to toxic chemicals. The district court certified the first class based on evidence that a pollutant was found at a property 0.25 miles from the contamination site, despite the fact that the pollutant found had not been present at the contamination site.

The defendant argued the class could not state a nuisance claim without actual proof of contamination on the class members’ property. To determine whether the putative class suffered a common injury to sustain a nuisance claim, the Eighth Circuit relied on the Fourth Circuit’s decision in Adams v. Star Enter., 51 F. 3d 417 (4th Cir. 1995) (finding fears of contamination spread and decrease in property values insufficient to recover for nuisance claim). The discovery and testing conducted on the putative class’s property did not support the class’s fear of contamination spreading and harming property values. The court concluded that the class fear of contamination spreading, without any proof, was not a sufficient injury to support a nuisance claim. Finding the district court abused its discretion, the 8th Circuit reversed the class certification order and remanded for further proceedings.

When an Agency Changes its Mind: Lessons from Village of Kake

Posted in Court Cases, Federal Regulation

When administrations change, so does policy.  That may result in an agency changing its mind.  On the federal level, that change — particularly a change in a factual finding — will be subject to review under the Administrative Procedure Act.

The Ninth Circuit recently considered such a change in position over whether the Tongass National Forest in Alaska ought to be exempt from the “Roadless Rule,” and its “roadless values” left to protection under the Tongass’s individual forest plan.  Organized Village of Kake v. U.S. Dept. of Agriculture, No. 11-35517 (9th Cir. July 29, 2015)(en banc).  This was a dispute that has been going on since the transition from the Clinton Administration to the Bush Administration.  Perhaps that alone is a lesson.  More significantly, the majority suggests that outgoing administrations can insulate their policy choices to some extent by couching them as factual findings.  Factual findings appear to require more of a basis to undo.  That may have importance as we come to another transition.

I address these issues in my September column in the Pennsylvania Law Weekly.  Read When an Agency Changes Its Mind, 38 Pa. L. Weekly 856 (Sept. 15, 2015), by clicking here.