Doing Environmental Due Diligence for the Right Reasons

Posted in Litigation, Pennsylvania

Diligence on environmental liabilities in real estate transactions is reasonably basic stuff.  But one does the diligence in order to avoid litigation.  When a lawsuit happens, it can serve as a reminder of basic points about why environmental due diligence makes sense and what sorts of claims arise when bad things happen after a deal closes.  A recent opinion in CSX Transportation v. 2712 InvestorsCivil Action No. 14-7148 (E.D. Pa. Apr. 29, 2015), provided such a reminder that I shared in my May Environmental Practice column for the Pennsylvania Law Weekly

Read Doing Environmental Due Diligence for the Right Reasons, 38 Pa. L. Weekly 460 (May 19, 2015), by clicking here.


Florida Governor Signs Omnibus Growth Management Bill into Law

Posted in Florida, Legislation

Earlier today, State of Florida Governor Scott signed into law an omnibus Growth Management bill (SB 1216),  which continues the recent trend of reducing the role of state and regional agencies in the review of the effects of development. More specifically, the new law eliminates the State development of regional impact (DRI) review program created by the Legislature in 1972, a program that supporters of the SB 1216 characterized as duplicative and onerous.  Already existing DRIs (and comprehensive plan amendments related to these developments) will be governed under the State coordinated review process administered by the Florida Department of Economic Opportunity.

The new law similarly authorizes local review processes for comprehensive plan amendments in a connected–city corridor review and provides a concurrency exemption for certain connected-city corridors.  Among other things, SB 1216 also significantly reduces the duties of the regional planning councils (and actually dissolves one such regional planning council); clarifies and updates the sector plan law; and provides relief to owners for financing of qualified improvements to property damaged by sinkhole activity.  For

Read the the engrossed text of SB  1216.

DEC Issues Its Long-awaited Final Supplemental Generic EIS on High-Volume Hydraulic Fracturing

Posted in Hydrofracking, New York

DEC issued its Final SGEIS today which is available for review on its website. There was no mystery as to the outcome because the decision that the State would not authorize the technique in New York State was announced by the Commissioners of Health and Environmental Conservation at a December 17, 2014 cabinet meeting of the New York Governor.

While the document is voluminous, the 34-page Executive Summary explains why DEC is not permitting a natural gas extraction technique that is permitted by the federal government and every state with a significant shale play. That rationale is scientific “uncertainty.” Here is an excerpt from the FEIS:

During [the time since 2009 when DEC reviewed comments on two versions of the DEIS], a broad range of experts from academia, industry, environmental organizations, municipalities, and the medical and public health professions commented and/or provided their analyses of high-volume hydraulic fracturing. The comments referenced an increasing number of ongoing scientific studies across a wide range of professional disciplines. These studies and expert comments evidence that significant uncertainty remains regarding the level of risk to public health and the environment that would result from permitting high-volume hydraulic fracturing in New York, and regarding the degree of effectiveness of proposed mitigation measures. In fact, the uncertainty regarding the potential significant adverse environmental and public health impacts has been growing over time.”

DEC also relied upon the findings in DOH’s public health assessment, which concluded that “until the science provides sufficient information to determine the level of risk to public health from HVHF to all New Yorkers and whether the risks can be adequately managed . . . HVHF should not proceed in New York State.” DEC concurred with that assessment, concluding that the “uncertainty revolving around potential public health impacts stems from many of the significant adverse environmental risks identified in the SGEIS for which the Department proposed and considered extensive mitigation measures.”

Of course, there is always uncertainty and disagreement among professionals, and there is risk from any mineral extraction technique. It remains to be seen whether “uncertainty” and “risk” alone can form an adequate basis to prohibit a mineral extraction technique throughout an entire state.

New York Court of Appeals Upholds New York’s General Permitting Scheme for Municipal Stormwater Control

Posted in New York, Stormwater, Water

In a rare 4-3 split, the New York Court of Appeals upheld the general permit issued by the New York State Department of Environmental Conservation (“DEC”) in 2010 for discharges from municipal separate storm sewer systems that serve a population under 100,000 throughout New York State (small Ms4s).  At issue was the claim of the petitioners, Natural Resource Defense Council and seven other environmental advocacy groups, that the general permitting scheme was an “impermissible self-regulatory system” because it allows the small MS4s to gain coverage under the 2010 General Permit based upon the filing of a Notice of Intent (NOI) with the DEC that is reviewed only for completeness and not subject to an opportunity for public hearing.

The court rejected NRDC’s claims, affirming the decision of the intermediate appellate court that upheld the 2010 General Permit, which is structured in a similar manner to other DEC-issued general permits under the federal Clean Water Act (CWA).  The majority showed a clear understanding of general permits and the clear authorization for their use under the CWA and New York’s Environmental Conservation Law as a way to regulate municipal stormwater discharges on a system wide basis.  The court held that there was “no doubt” that the 2010 General Permit complies with EPA’s 1999 regulations, which allow permitting authorities to authorize small MS4s to discharge stormwater under a general NPDES permit upon receipt of an NOI – i.e., any  regulatory review, public notice and comment or opportunity for a public hearing.”  The court went on to note that DEC’s General Permit afforded “more generous regulatory review and public participation” than required under the EPA rule.  The majority clearly understood that the “permit” subject to notice and comment in this context was the general permit, and that the NOI is simply a declaration by an applicant that they seek coverage (with the accompanying benefits and requirements) under the General Permit.

The majority observed that NRDC’s position — adopted by the dissent — was that EPA’s 1999 regulation constituted, itself, “an impermissible self-regulatory system” under the federal CWA. The court refused to wade into the federal thicket, stating, after a discussion of the relevant federal case law indicating a circuit split over the issue, that “[t]he federal courts and EPA will have to sort this out.”  The New York court found it sufficient that the DEC General Permit complied with the 1999 EPA federal rule and to reject “NRDC’s attempt to litigate an underlying dispute with EPA by ordering relief against DEC for complying with EPA’s regulations.”

For the time being at least, this decision from New York’s highest court will provide welcome certainty over the ability of the agency to manage its CWA permitting docket through the use of general permits where appropriate and authorized by federal and state law.

EPA Direct Final Rule Allows Rescission of Greenhouse Gas Only PSD/Title V Permits

Posted in EPA, Greenhouse Gas

On April 30, 2015, the U.S. Environmental Protection Agency (“EPA”) issued a direct final rule that will allow the rescission of Clean Air Act Prevention of Significant Deterioration (“PSD”) permits issued by EPA or delegated state and local permitting authorities under Step 2 of the Greenhouse Gas Tailoring Rule.  The rule, published at 80 Fed. Reg. 26,183(May 7, 2015), is necessary to implement the decision last year in Utility Air Regulatory Group v. EPA, 134 S. Ct. 2427 (2014) (“UARG”) where the U.S. Supreme Court held that EPA may not rely on greenhouse gases (“GHG”) alone when determining whether a new source (or modification of an existing source) is required to obtain a PSD preconstruction permit or title V operating permit.  Sources where GHGs alone triggered PSD requirements were known as “Step 2” sources, because they were covered under Step 2 of EPA’s Tailoring Rule.

The direct final rule does not rescind any EPA-issued Step 2 permits, but provides a regulatory mechanism for EPA and delegated state and local permitting authorities eventually to rescind them.  Currently, 40 C.F.R. 52.21(w), which provides authority for a source holding a PSD permit to seek rescission of a PSD permit, is limited to permits issued on or before July 30, 1987.  Because any EPA-issued Step 2 PSD permits were issued under regulations effective after July 30, 1987, the rescission authority in 40 CFR 52.21(w) is not currently available to sources with EPA-issued Step 2 PSD permits. This rulemaking will allow for rescission of any EPA-issued Step 2 PSD permits upon request by the permitted source. Permitting agencies already have the necessary regulatory authority to revise any title V permits that incorporated PSD Step 2 permitting requirements.

The direct final rule will become effective on July 6, 2015, unless adverse comments are received by June 8th.   EPA also simultaneously published a proposed rule (at 80 Fed. Reg. 26, 210), and will pursue additional rulemaking under that proposal if adverse comments are received on the direct final rule.  Once the rule becomes effective, EPA will begin the process of rescinding EPA-issued Step 2 permits.  In a guidance memorandum issued on December 19, 2014, EPA outlined that it will exercise narrowly-tailored enforcement discretion with respect to EPA-issued Step 2 permits until they are rescinded.

Note that this action does not apply to state-issued PSD permits in states with GHG PSD programs in their EPA approved State Implementation Plans (“SIP)”.  This is because state authority under the SIPs (e.g., state authority to rescind the permit) already might be available to provide relief from the state-issued Step 2 PSD permit requirements.   In addition, as stated in EPA’s July 24, 2014, post-UARG guidance memorandum, EPA does not read the Supreme Court’s decision as precluding states from retaining permitting requirements for major sources of GHG only emissions to the extent state law provides independent authority to do so. Therefore, sources with state-issued Step 2 PSD permits should review their state permitting requirements to address questions regarding GHG only permits.

This action also does not resolve the question of what constitutes a “significant emissions rate” threshold for GHGs emitted by sources that were regulated under Step 1 of the Tailoring Rule.  The Supreme Court’s ruling in UARG held that EPA could subject GHG emissions from new or modified sources to Best Available Control Technology (“BACT”) review requirements if their emissions of conventional pollutants were regulated under the PSD program anyway.  The Court said that EPA could regulate these so-called “anyway” sources if GHG emissions were emitted from them at more than de minimis levels.  But the Court further stated that the 75,000 tons per year (“tpy”) threshold that EPA had used in Step 1 of the Tailoring Rule does not necessarily qualify as a de minimis level.  EPA has said that it will initiate a rulemaking to establish an appropriate de minimis threshold for Step 1 sources.  In the meantime, EPA is continuing to apply 75,000 tpy as the emissions rate from “anyway” sources that will trigger BACT review for GHGs at such sources.

EPA Decision Impacts Back-Up Generators

Posted in Energy, EPA

In a decision issued on May 1, the DC Circuit vacated a U.S. EPA rule that allowed backup generators to operate up to 100 hours/year without emission controls as part of so-called emergency power demand/response programs intended to address short-term capacity shortfalls in the electrical grid.  Delaware DNREC v. EPA, No. 13-1093, (D.C. Cir. May 1, 2015).  In these programs, owners/operators of backup generators enter into contracts with electricity distribution companies to sell power back into the grid under emergency power shortage conditions.  The more sophisticated efforts by “aggregators” appeared to be aimed at creating “virtual” power plants by coordinating the distribution of electricity from backup generators.

These programs were becoming popular with owners/operators of large industrial, commercial or institutional buildings with backup generators, as they provided an opportunity for revenue from an otherwise rarely used asset (particularly  when compared to the traditional demand/response option, which was often simply a mandate to reduce energy consumption).  While the DC Circuit’s decision does not prohibit demand/response agreements, it effectively makes them impractical or uneconomical, because the backup generators would now need pollution control equipment to operate at those levels.

While the DC Circuit vacated the rule, the court did note that if this decision would cause administrative or other difficulties, EPA (or any of the parties) could petition the court for a stay of the mandate to allow the current standards to remain in place while EPA figures out what, if anything, to do next.

This decision may signal where the DC Circuit might end up in a challenge to a related EPA rule that allows backup generators to run up to 50 hours/year to sell electricity into the grid even in the absence of a capacity shortfall/emergency.  The 50-hour rule for non-emergency situations rule has also allowed owners/operators of industrial/commercial/institutional buildings to extract revenue from their backup generators.


Tactical Issues When Multiple Parties Oppose Your Client

Posted in Articles, Environment

Environmental lawyers for regulated entities, governments, and NGOs often handle matters in which more than one party is on the other side.  Indeed, lawyers often have to think of organizations — businesses, agencies, or environmental groups — not as monolithic entities, but as coalitions of the individuals within them.  The Pennsylvania Environmental Law Forum planners addressed some tactical and ethical issues presented by these situations during our roundtable at the Forum on April 8.  I followed up in my April column in the Pennsylvania Law Weekly.  Read Tactical Issues When Multiple Parties Oppose Your Client, from the April 21, 2015, Pennsylvania Law Weekly by clicking here.

Massachusetts Governor Orders Comprehensive Review of State Regulations

Posted in Massachusetts, State Regulation

On March 31, 2015, the Governor of Massachusetts signed an executive order initiating a comprehensive review of all regulations promulgated by the Executive Department and leaving in place the regulatory pause announced by the Administration earlier in the year. While short in length, this executive order has the potential to significantly affect a wide range of administrative regulatory programs in Massachusetts.

Executive Order No. 562, “To Reduce Unnecessary Regulatory Burden” (the Order) directs each secretariat, agency, department, board, commission, authority or other body within the Executive Department ( Agency) “to promptly undertake a review of each and every regulation currently published in the Code of Massachusetts regulations under its jurisdiction.” The Order also invites and encourages state governmental bodies not under the Governor’s supervision to do the same.

Agencies must review their regulations to determine whether they are mandated by law or essential to the health, safety, environment, or welfare of the Commonwealth’s residents – those that are not shall not be retained or must be modified. Regulations under review must meet the following criteria:

  • there is a clearly identified need for governmental intervention that is best addressed by the Agency and not another Agency or governmental body;
  • the costs of the regulation do not exceed the benefits that would result from the regulation;
  • the regulation does not exceed federal requirements or duplicate local requirements;
  • less restrictive and intrusive alternatives have been considered and found less desirable based on a sound evaluation of the alternatives;
  • the regulation does not unduly and adversely affect Massachusetts citizens and customers of the Commonwealth, or the competitive environment in Massachusetts;
  • the Agency has established a process and a schedule for measuring the effectiveness of the regulation; and
  • the regulation is time-limited or provides for regular review. Order, Section 2.

The review must also ensure that each regulation is clear, concise and written in plain and readily understandable language.

The Order bars the promulgation of new regulations unless they have been reviewed and found in conformance with the seven criteria. In addition, each Agency must prepare a business/competitive impact statement measuring the potential impact of all new regulatory proposals on businesses and other entities, including municipalities and non-profits.

Agencies will submit regulatory proposals and impact statements to their secretariat before review by the Secretary of Administration and Finance, who will establish a process for encouraging public input, standards and schedules. The Secretary of Administration and Finance may also provide for waivers or exceptions to regulations essential to public health, safety, environment, or welfare.

Significantly, all regulations that do not comply with the Order must be rescinded, revised, or simplified by March 31, 2016.

Executive orders are odd creatures on the legal landscape, as they are apply only to actions taken by administrative agencies and are not generally enforceable. As a result, the impact of any executive order is determined as much by how it is implemented as what it actually states. In this case, the Order articulates a bold vision of how administrative regulations should work in the Commonwealth – the question now becomes how far the Baker Administration can and will go in implementing that vision.

These potential changes to administrative regulations in the Commonwealth could affect the way companies do business and manage regulatory compliance. Businesses that understand the potential consequences of impending regulatory changes will be better positioned to find competitive advantage and manage business risk, and should confer with counsel regarding how the Order may affect their business.

The Proposed Pennsylvania Budget, New Oil and Gas Regs, and the Fear of Fracking

Posted in Environment, Hydrofracking, Oil & Gas, Pennsylvania

In early March, Pennsylvania Governor Wolf submitted his proposed budget.  The Department of Environmental Protection issued a new iteration of proposed revisions to the Pennsylvania Oil and Gas Regulations that has since appeared in the April 4 Pennsylvania Bulletin, 45 Pa. Bull. 1615.  Acting DEP Secretary John Quigley reportedly stated the Administration’s support for the Delaware River Basin Commission’s moratorium on natural gas development during a budget hearing.

Can one divine regulatory or enforcement priorities from these developments?

My Pennsylvania Law Weekly column for March tried.  Read The Budget, New Regulations and the Fear of Fracking, 38 Pa. L. Weekly 292 (Mar. 31, 2015), by clicking here.

Testing the Waters

Posted in Articles, Climate Change, Florida, Green Building

In 2005, Hurricane Wilma destroyed a pair of dilapidated marinas in North Bay Village where Fane Lozman, a former Marine pilot and software developer, kept a two-story floating home.  Kerri L. Barsh successfully represented Mr. Lozman in a landmark admiralty jurisdiction case before the U.S. Supreme Court. The Fane Lozman v. City of Riviera Beach, FL ruling had national implications for the growing number of floating homes, oil rigs, casinos, restaurants, and hotels, as well as state and local governments relative to their respective regulatory authority over floating structures. It also opened business opportunity for architect Koen Olthuis and hotel developer Paul van de Camp who founded Dutch Docklands, a global leader in floating infrastructure.  Their expansion into the United States includes multi-million dollar floating homes in Miami that are responsive to rising sea levels and climate change.

Read more and see project renderings in the March 2015 Florida Trend article “Testing the Waters”.