Update On Challenging Wetlands Permitting Decisions

Posted in Court Cases, Permitting, Wetlands

Two recent federal appeals court decisions show that landowners can obtain relief for adverse wetlands permitting actions by the U.S. Corps of Engineers – both at the beginning of the permit process and after it concluded.

In Hawkes., Inc. v. U.S. Army Corps of Engineers, 782 F.3d 994, the Eight Circuit held that a landowner can obtain immediate judicial review of a “jurisdictional determination” (JD) by the Corps.  JD’s establish the boundary of wetlands that are subject to Clean Water Act (CWA) jurisdiction and thus require a permit to develop.  Once a JD is issued that declares wetlands jurisdictional, they cannot be developed until the property owner applies for and obtains a permit under § 404 of the CWA.  The Eighth Circuit in Hawkes found that restriction on the right to develop sufficient to qualify a JD as “final agency action” subject to legal challenge under the Administrative Procedure Act.  In so holding, the court expressly disagreed with a 2014 Fifth Circuit decision, in Bell Company, L.L.C. v. U.S. Army Corps of Engineers, 761 F.3d 383, which held that JD’s are not final agency action and can only be challenged if and when a subsequent § 404 permit to develop the wetlands is denied.  The government has petitioned the full Eight Circuit, “en banc,” to rehear the Hawkes decision, but the decision appears sound and appropriately provides landowners the ability to challenge wetland designations made by the Corps in JDs before having to go through the costly and time consuming process of obtaining a § 404 permit.

In another recent decision, Lost Tree Village Corp. v. United States, 707 F.3d 1286, the Federal Circuit affirmed the right of landowners to obtain relief after the conclusion of the § 404 permitting process, if the Corps denies a permit to develop property containing wetlands and the result of the denial is that no valuable use of the property remains.  That is exactly what occurred in Lost Tree, and led the court to affirm a multi-million dollar award of just compensation for a taking when a property parcel was left with no economic use after the Corps denied a § 404 permit that was necessary to develop the parcel.  The court in Lost Tree rejected the government’s argument that no taking had occurred because the property retained a nominal monetary value – $25,000, or 0.6% of its fully developed value of $4.2 million.  The Federal Circuit decision entitles the landowner to receive $4.2 million plus interest since the date of the permit denial in 2004 and attorneys’ fees incurred in the litigation.  In a prior decision in the same case, the Federal Circuit held that only one discrete parcel was relevant to the takings issue, even though that parcel lies within a residential community containing hundreds of other fully-developed parcels.

Although the Corps has significant discretionary authority over wetlands permitting, the decisions in Hawkes and Lost Tree show that legal challenges can succeed when properly targeted to actions by the Corps that unduly limit, or eliminate, development opportunities.

U.S. Supreme Court Reverses and Remands MATS to D.C. Circuit for EPA Failure to Consider Costs

Posted in Air, Climate Change, Court Cases, Energy, Environment, EPA, Greenhouse Gas

In a 5 to 4 split decision, the U.S. Supreme Court ruled on Monday, June 29th, that the U.S. Environmental Protection Agency (“EPA”) unreasonably interpreted the federal Clean Air Act (“CAA”) when EPA decided deemed that costs were irrelevant in deciding whether to regulate hazardous air emissions from electric utility sources under section 112 of the CAA.  Michigan v. EPA, No. 14-46 (U.S. June 29, 2015): SCOTUS MATS Decision The majority opinion was authored by Justice Scalia and was joined by the Chief Justice and Justices Thomas, Kennedy, and Alito.  Specifically at issue was whether the EPA was required by section 112(n)(1), 42 U.S.C. § 7412(n)(1), to consider compliance costs in determining that it was “appropriate and necessary” to regulate toxic air emissions from fossil fuel-fired utilities. (See section 112 here.) Due to issues such as grid reliability, Congress did not initially list electric utilities as a source category to be regulated under the air toxics provisions of the 1990 CAA amendments.  Instead, Congress ordered EPA to study the hazards to public health that could reasonably anticipated to occur as a result of such emissions and then to regulate electric utilities if it found that regulation was “appropriate and necessary” after performing the study.

In addressing the question of whether regulation was appropriate and necessary, EPA focused only on health impacts and did not consider compliance costs.  The agency found that regulation was appropriate because the power plants’ emissions of mercury and other hazardous air pollutants posed risks to human health and the environment, and that controls were available to reduce these emissions.  In 2012, the EPA issued its final electric utility mercury and air toxics standards (“MATS”) rule.   A history of that rulemaking may be found here. EPA noted that during the rulemaking it did consider costs in deciding what level of emissions reduction should be achieved by the affected sources. Thus, EPA asserted that it had taken costs into account consistent with the statute’s requirements. Continue Reading

NYSDEC Issues Draft Brownfield Regulations Defining “Underutilized” and “Affordable Housing Project”

Posted in Brownfields, New York

As described in our previous blog post, this spring New York enacted amendments to its Brownfield Cleanup Program (BCP) to, among other things, make eligibility for the lucrative tangible property tax credit more stringent for properties located in New York City.[1] Under the amended law, New York City-based developments will no longer be eligible for such credit unless the applicant meets at least one of the following eligibility requirements:

  • at least 50% of the project site is located in an impoverished area known as an “Environmental Zone”;
  • the site is “upside down”; i.e., it costs more to remediate than it would be worth as clean;
  • the site is an “affordable housing project”; or
  • the site is “underutilized.” The amendments made clear that the new eligibility criteria would take effect on the later of July 1, 2015 or the date on which the New York State Department of Environmental Conservation (NYSDEC) issues proposed regulations defining the terms “affordable housing project” and “underutilized.” Well, that date is now known because NYSDEC issued proposed regulations in early June, meaning that the new criteria will take effect on July 1st. As discussed below, NYSDEC has proposed to define “affordable housing project” mostly in terms of existing programs that will likely make this eligibility criterion easy to apply. By contrast, the agency has defined “underutilized” in such manner that will make it virtually impossible for any properties located in New York City eligible for the tangible property tax credit.

Affordable Housing Project

Under NYSDEC’s proposed regulations, the term “affordable housing project” is defined broadly to mean a residential use or mixed residential use project that must include “affordable residential units and/or affordable home ownership units.” To qualify as an “affordable” rental project or home ownership project the proposed development “must be subject to a federal, state or local government housing agency’s affordable housing program” or a legally binding agreement that defines a percentage of rental units to be dedicated to tenants “at a defined maximum percentage of the area median income.” “Area median income” is defined as the area median income for the primary metropolitan statistical area, as determined by U.S. Department of Housing and Urban Development (HUD). Thus, any proposed development project that includes a component of any government affordable housing program administered by HUD, the New York State Department of Housing and Community Renewal, or the New York City Department of Housing Preservation and Development would qualify as an “affordable housing project,” including market rate developments that participate in the so-called “80/20 program. Of note, although the proposed definition does not include a requirement related to the minimum number of units or square footage percentage dedicated to affordability, many of the incorporated programs, such as 80/20 mentioned above, do have such minimum requirements.

Underutilized Site

By contrast to its proposed “affordable housing project” definition, NYSDEC proposed an extremely restrictive definition of “underutilized” that would make eligibility under this criterion highly unlikely. Reflecting what can only be viewed as disagreement with the existence of any underutilized properties in New York City, the agency would limit eligibility to a proposed development that meets all of the following criteria: (1) the applicant must receive a certification from the City of New York that the development includes a building or buildings that , for at least five years prior to submission of the BCP application, used no more than fifty percent of the permissible zoning floor area for that site; (2) the proposed “sole” use of the Brownfield site must be something other than residential; (3) the applicant must receive a certification from the municipality that the site could not be developed without “substantial government assistance”; and (4) the applicant must receive a certification from the municipality that either tax payments have been in arrears for at least five years, that a building at the site is presently condemned or presents a public health or safety hazard, and/or the proposed use is in whole or in substantial part for industrial use. The proposed regulations go on to define “substantial government assistance” to mean a substantial loan, grant or land purchase cost exemption or subsidy; or for industrial properties, a low cost loan.

The proposed definition of “underutilized” is virtually unworkable for New York City-based developments. Under the plain language of the regulation, no residential or mixed-use developments would be eligible for the tangible property tax credit because the “sole” use must be non-residential. There are very few developments in New York City that are strictly commercial, and even fewer that could be developed as industrial. Indeed, the fourth criterion – requiring that the site be in tax arrears, present a public health or safety hazard, or propose a use that is substantially industrial – would appear aimed at ensuring that hotel and retail projects have trouble qualifying. To make matters worse, the proposed regulation does not offer any definition of what uses would be deemed “industrial” by reference to zoning categories or otherwise. Thus, not only is the definition of “underutilized” extremely limited, it creates uncertainly with respect to what appears to be the only available development category. Even if a developer believes it can meet the criteria for “underutilized,” the regulations assume a municipal process to “certify” the requisite conditions, and no such process exists at present in New York City for an applicant to obtain such certifications in New York City. Possible candidates for a certifying agency would be the Department of City Planning of the New York City Economic Development Corporation. Thus, not only would the criteria be virtually impossible to meet, the regulations envision an additional bureaucratic process that is likely to act as a further disincentive to developers.

At the very least, NYSDEC’s definition of “underutilized” appears to be contrary to the intent of the Legislature. Because the recent amendments do not define the term, a court would very likely examine its plain meaning by reference to its dictionary definition. For example, the term “underutilize” is defined under the Merrium-Webster Dictionary to mean “to utilize less than fully or below the potential use.” In other words, the concept of “underutilized” when used in the context of a development project is focused on a site’s “potential use,” which is typically determined by applicable zoning requirements. However, NYSDEC’s definition of “underutilized” bears no relationship to a site’s potential use in this regard. Instead, the agency has proposed to define the term with specific end uses in mind (mostly industrial) and would preclude mixed use developments, irrespective of applicable zoning requirements. In any event, if these regulations are adopted as written, and survive legal challenge, it is our view that there will be few, if any, projects that qualify as “underutilized” and thus eligible for tangible property credits in New York City.

[1] The amended law otherwise left unchanged the calculation of the tangible property tax credit, which equals the lesser of (i) 10% of development costs up to a ceiling of $35 million for residential projects ($45 million for industrial), or (ii) three times the cost of site preparation and environmental remediation.

Performance Enhancement: FERC Approves Significant Restructuring of PJM’s Capacity Market

Posted in Energy

On June 9, 2015, theFederal Energy Regulatory Commission (FERC) conditionally approved significant reforms to PJM’s capacity market, implementing the Capacity Performance Resource product, with PJM’s compliance filing due within 30 days. [1]   FERC found such reforms were necessary to address “the confluence of changes in the PJM markets, including both recent performance issues…impacted by inadequate incentives and penalties for resource performance under its current construct and ongoing changes in PJM’s resource mix that are projected to accelerate.” PJM’s resource performance fell well below expected levels during the extreme weather events of January 2014 (i.e., during the Polar Vortex) when PJM’s 22 percent forced outage rate far exceeded its 7 percent historical average.

FERC found that PJM’s Capacity Performance proposal is intended to ensure performance and the reliability of the PJM system during extreme weather events. As approved, capacity resources necessary to perform during these events can recover their costs of doing so while facing new and substantial penalties for non-performance. [2]   Specifically, FERC noted that PJM’s currently effective offer cap for existing generators does not allow sellers to include in their offers the costs attributable to natural gas firm transportation contracts.

Continue Reading.

[1]PJM Interconnection, L.L.C., 151 FERC ¶ 61,224 (2015). up
[2]FERC noted that although its approval was not based solely on the recent degradation of resource performance in PJM in times of system stress, “this poor performance has led to significant and expensive price spikes.” up

A Different Level of Deference Given to States in CERCLA Consent Decrees

Posted in CERCLA, Court Cases, Federal Regulation

In a recent decision, Arizona v. City of Tucson, 761 F.3d 1005 (9th Cir. 2014), the Ninth Circuit found that state government agencies should not be afforded the same deference as EPA on the question of whether a CERCLA consent decree is fair, reasonable and consistent with CERCLA.

In my recent column for Pennsylvania Law Weekly, I examine the implications of that decision.

Clean Water Act Jurisdiction under the Newly Issued Clean Water Rule

Posted in Clean Water Act, Environment, EPA, Water, Water quality

More than 40 years after Congress passed the landmark Clean Water Act, the jurisdictional reach of that statute remains a contentious legal and political issue. By prohibiting the discharge of pollutants to “navigable waters” without a permit, the Act expressly limits its protections to “navigable waters.” The statute defines “navigable waters” as “waters of the United States,” but fails to define that latter term. Congress’ omission led to more than three decades of federal rulemaking and Supreme Court litigation, which has yet to clarify this critical jurisdictional issue.

In their latest rulemaking effort, the United States Environmental Protection Agency (USEPA) and the U.S. Army Corps of Engineers (Corps) released the “Clean Water Rule” on May 27, 2015, offering their most recent interpretation of “waters of the United States.” The validity, scope and impact of the Clean Water Rule remain heavily disputed, and the rule is expected to trigger judicial challenges and possibly a legislative response from Congress (including S. 1140 and H.R. 1732). In the meantime, the regulated community must make sense of this complex rulemaking, estimated by some to affect as much as 60 percent of the land in the United States.

Greenberg Traurig has closely followed regulatory, legislative, and judicial developments involving the “waters of the United States” issue to assist our clients with meeting their Clean Water Act obligations. We continue to do so by offering the following analysis of the Clean Water Rule.

New Florida Statute Codifies U.S. Supreme Court Ruling in Koontz and Provides Relief Against ‘Extortionate’ Exactions

Posted in Exactions, Florida, Legislation

We wrote here previously about the U.S. Supreme Court ruling in the “takings” case of Koontz v. St. Johns River Water Management District in 2013, which was an appeal by a property owner from an adverse ruling of the Florida Supreme Court with respect to permit conditions requiring off-site mitigation work.    The U.S. Supreme Court’s opinion in Koontz expanded and clarified the unconstitutional conditions doctrine.     House Bill 383, which was signed into law by Governor Scott on June 11, 2015,   creates a statutory cause of action for injunctive relief and damages  for extortionate exactions by local and state governmental bodies, codifying the decision in Koontz and eliminating any uncertainty under Florida law on the availability of monetary damages.   The new statute defines a “prohibited exaction” to include “any condition imposed by a governmental entity on a property owner’s proposed use of real property that lacks an essential nexus to a legitimate public purpose and is not roughly proportionate to the impacts of the proposed use that the governmental entity seeks to avoid, minimize, or mitigate.”  The governmental entity must prove that the exaction is not prohibited and the property owner must prove its damages resulted from the exaction.   Pre-suit written notice to the governmental body is required, providing the government with the opportunity to cure or explain the alleged exaction before litigation commences.  The prevailing party is entitled to recovery of reasonable attorneys’ fees and costs. Continue Reading

D.C. Circuit Dismisses Challenges to Proposed Clean Air Act Section 111(d) Rule

Posted in Air, Climate Change, Court Cases, Greenhouse Gas

From Michael Cooke of GT Tampa

The U.S. Court of Appeals for the D.C. Circuit has denied petitions to review the EPA’s proposed rule to regulate carbon dioxide emissions from existing electric generating sources.  See In re Murray Energy Corporation, No. 14-1112 (D.C. Cir. June 9, 2015).    The proposed the rule was issued under section 111(d) of the Clean Air Act in June 2014, and it is expected to be promulgated in final form by late summer this year.   Murray Energy Corporation and several states filed petitions for review of the proposed rule.   Citing conflicting House and Senate versions of the 1990 Clean Air Act Amendments, the petitioners argued, among other things, that EPA has based the rule on an improper  interpretation of the Clean Air Act .   The Murray Energy Corporation and state petitions cases were consolidated for review, with oral arguments held in April 2015.    Today, the court, without  ruling on the merits of the underlying challenge, has held that it is without authority to review proposed agency rules.  Many of the arguments raised by the petitioners are expected to be used in challenges to the final rule as well.


Oklahoma Joins Texas in Preventing Local Fracking Bans

Posted in Hydrofracking, State Regulation

On May 29, 2015, Gov. May Fallin of Oklahoma signed a bill that specifically prohibits cities or towns from banning oil and gas operations such as drilling, fracking, water disposal, recovery operations or pipeline infrastructure.  A similar ban was signed into law ten days prior by Texas Gov. Greg Abbott.  Fallin and supporters of the new law contend that the bill reaffirms the three-member elected Oklahoma Corporation Commission as the regulator of the oil and gas industry and prevents a patchwork of inconsistent regulations across the state.  “They are best equipped to make decisions about drilling and its effect on seismic activity, the environment and other sensitive issues,” Fallin said in a statement. “The alternative is to pursue a patchwork of regulations that, in some cases, could arbitrarily ban energy exploration and damage the state’s largest industry, largest employers and largest taxpayers.”

The Oklahoma bill, which takes effect in 90 days, does allow municipalities or counties to enact “reasonable” regulations concerning road use, traffic, noise and odors incidental to oil and gas operations. It also authorizes the establishment of requirements for fencing around oil and gas drilling sites and how far away from homes or businesses a well site can be located.

Oklahoma’s new ban comes amid warnings from the state’s own government that a recent dramatic spike in earthquakes is linked to wastewater injection, a key part of oil and gas activity and particularly fracking. To dispose of the immense amount of water used during fracking, companies inject it underground. The Oklahoma Geological Survey has determined that the majority of recent earthquakes in central and north-central Oklahoma are very likely triggered by the injection of produced water in disposal wells.

The legislation was opposed by the Oklahoma Municipal League, which was campaigning for greater municipal authority and argued that cities are better placed to make informed decisions to protect local residents.  Norman Mayor Cindy Rosenthal said she is most concerned that cities may not have the authority to regulate the disposal of wastewater into the drainage basin that leads to Lake Thunderbird, the primary water supply for as many as 200,000 people in several metro-area communities. “There’s nothing in the bill that says cities can have the authority to protect local drinking water supplies,” Rosenthal said.

Urban Drilling in Texas: New Law and New Rules

Posted in Hydrofracking, State Regulation, Texas

On May 19, 2015, Gov. Greg Abbott signed into law a compromise bill addressing how state and local governments will share regulatory powers over urban drilling in Texas.  The new legislation is the result of a statewide controversy created by the fracking ban enacted by the City of Denton last fall that put local and state government regulatory powers in conflict with respect to oil and gas operations.  The new law states that oil and gas operations in Texas are “subject to the exclusive jurisdiction of the state” and the authority of a municipality or other political organization in the state is “expressly preempted.”  Under the new law, local governments may not enact or enforce a measure that “bans, limits, or otherwise regulates” oil and gas operations.

However, municipalities are authorized to regulate “aboveground activity” related to oil and gas operations if “commercially reasonable.”  Under the new law, local rules applying to oil and gas operations must pass a four-part test.  Local rules (1) cannot apply to subsurface activity; (2) must be “commercially reasonable”; (3) must not effectively prohibit such operations; and (4) must not be pre-empted by another state or federal regulation.  An ordinance would be considered commercially reasonable if in effect for five years with oil and gas operations continuing during that period.  Municipal regulations addressing fire and emergency response, traffic, lights, noise, notice, or reasonable setback requirements are specifically authorized.

More than two-thirds of both houses approved the new law, which took effect immediately, but others are concerned about possible regulatory voids.  The Environmental Defense Fund estimates approximately 80 areas where local rules govern oil and gas operations that no state agency addresses. County and groundwater conservation districts have voiced concern that the new law abrogates their authority, since local rule-making authority now appears limited to cities.

Read the whole story in Urban Drilling in Texas: New Law and New Rules.