Anticipating Environmental Issues in an Economic Downturn: 2019 Edition

On the morning of Dec. 25, the News Analysis on page A1 of the New York Times led off with this cheery holiday thought: “Sometime in the last couple of months, predictions of a major economic downturn or recession in 2019 went from being a crank view to the conventional wisdom.” At the front end of the Great Recession, we offered some ways in which businesses and others could protect themselves against environmental liabilities flowing from bad economic times. See “Anticipating Environmental Issues in an Economic Downturn,” Natural Resources & Environment, Vol. 24, No. 1 at 33 (Summer 2009). Many of those observations still hold.

Primarily, entities have often managed their environmental liabilities to clean up historic contamination or to maintain current compliance through agreements. Some may be direct: one party agrees to indemnify another party. Others may be indirect: the regulator agrees to seek compliance from one party first and the other party only as a backup. See “Managing Environmental Obligations: Tracking ‘Environmental Debtors,’” 35 Pa. L. Weekly 196 (Feb. 28, 2012), posted on this blog here.

Those arrangements collapse if the party with the environmental obligation cannot or will not perform due to other financial stress. The problem can be as simple as the new owner failing to pay the electric bill to power the pumps on a groundwater pumping system or allowing its housekeeping to lapse.

Now may be a time to inventory the environmental “debts” one is owed. If the debtor seems fragile, one may want to consider one’s options.

One option that is more common now is excess of indemnity insurance coverage. Rather than insist that that new owner somehow secure its obligations, you can insure against its default. It is a tool in the box if not new, then more commonly used, since 2009. Excess of indemnity approaches can insure over first-party performance obligations or more conventional third-party claims such as bodily injury and property damage causes of action. In cases where responsible parties have assumed cleanup obligations under a consent decree or administrative order on consent, the insurance can safeguard a prospective purchaser or lender from the risks associated with the responsible party’s default.

Staying in Lane Under the Environmental Rights Amendment

By Greenberg Traurig on December 26, 2018 Posted in Court Cases, DEP, Environment, Environmental Rights Amendment, Pennsylvania, Pennsylvania, State & Local

The Commonwealth Court recently provided new guidance on the extent to which the Environmental Rights Amendment to the Pennsylvania Constitution gives municipalities or agencies additional powers or imposes on them additional obligations. Frederick v. Allegheny Township Zoning Hearing Board, No. 2295 C.D. 2015 (Pa. Commw. Ct. Oct. 26, 2018), holds that the amendment does not alter the authority of the ZHB or its procedures. On the other hand, the Environmental Hearing Board seems to have held previously that the amendment requires the Department of Environmental Protection (DEP) to engage in an environmental assessment of some sort before granting a permit.

Read David G. Mandelbaum’s Dec. 20 article from The Legal Intelligencer, “Staying in Lane Under the Environmental Rights Amendment.”

New York to Propose Stringent Drinking Water Standards

By Robert M Rosenthal and Steven C. Russo on December 21, 2018 Posted in Contamination, New York, State & Local, Water

On Dec. 18, 2018, the New York State Drinking Water Quality Council, in consultation with the Departments of Health and Environmental Conservation, recommended drinking water standards for three so-called “emerging contaminants” – 1,4-Dioxane, perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS). The recommended “maximum contaminant levels” or “MCLs” are one part per billion (ppb) for 1,4-Dioxane, and 10 parts per trillion (ppt) for PFOA and PFOS. The state announced in its press release that, if adopted, the new standards for these contaminants would be the “nation’s most protective.” The next step is for the Department of Health to issue a proposed rulemaking that will begin the formal process to adopt these new standards into law, something the agency is expected to initiate over the next 60 days. The proposed rulemaking will include a public comment period of at least 60-days. The expectation is that the Department of Health will formally adopt the new MCLs by the end of 2019.

The detection of 1,4-Dioxane, PFOA and PFOS in drinking water supplies around the state came to light from recent testing performed by water districts pursuant to a regulation promulgated by the Environmental Protection Agency in 2012. Section 1445(a)(2) of the Safe Drinking Water Act, 42 U.S.C. § 300j-4(a)(2), requires EPA to issue every five years a new list of no more than 30 unregulated contaminants to be monitored by public water systems. On May 2, 2012, EPA issued its third Unregulated Contaminant Monitoring Regulation, requiring public drinking water supplies to conduct monitoring for 29 previously unregulated contaminants, including 1,4-Dioxane, PFOA and PFOS. See 77 Fed. Reg. 25859, 26074 (May 2, 2012). Subsequent testing performed by water districts indicated the existence of these contaminants at relatively low levels in several drinking water supplies around the state, including in several water supplies on Long Island, and in Hoosick Falls, Newburgh and Plattsburgh.

The detection of 1,4-Dioxane, PFOA and PFOS in water supplies, in turn, caused the Cuomo administration to include in its 2017-18 budget the creation of New York State Drinking Water Quality Council, which was tasked with making recommendations to the Department of Health related to the regulation of emerging contaminants. See Public Health Law § 1113. 1,4-Dioxane, PFOA and PFOS were highlighted as examples of the types of contaminants to be regulated. Id. § 1112(3)(c). The council has since held public meetings regarding the regulation of these contaminants, most recently on Dec. 18, 2018, when it announced the recommended MCLs.

Once finalized by the Department of Health, the MCLs for 1,4-Dioxane, PFOA and PFOS will require the modification of treatment facilities around the state, at significant cost. For example, while 1,4-Dioxane is a volatile organic compound (VOC), traditional systems used to treat VOCs, like air strippers and activated carbon, cannot alone remove 1,4-Dioxane from water supplies. Reports show that installation of an Advanced Oxidation System that uses ultraviolet radiation and either ozone or hydrogen peroxide are effective in removing 1,4-Dioxane. By contrast, PFOA and PFOS are relatively easily removed by activated carbon systems. Water Districts in New York can apply for funding through the Environmental Facilities Corporation, which will provide up to 80 percent of the cost to fund these new systems.

In addition, the new standards are expected to impact landfill operations. For example, while 1,4-Dioxane is used as a stabilizer in some solvents, it is also included in personal care products, including detergents, dishwashing soaps, shampoos, cosmetics, deodorants, and body lotions. PFOA also comes from common household products, like non-stick pans, furniture, cosmetics, household cleaners, clothing, and packaged food containers. PFOS is used as a fabric protector and is often included as an active ingredient in fire-fighting foam. Since each of these contaminants is included in household products, one can expect they will also turn up in landfill leachate, which is typically treated on-site or taken off-site to be disposed at a sewage treatment plant. The New York State Department of Environmental Conservation is in the process of conducting a study to determine the prevalence of these contaminants in landfill leachate around the state.

The new MCLs are also expected to impact the investigation as well as remediation of hazardous waste sites and Brownfield sites. The standard for 1,4 dioxane is lower than the ambient water quality standards for other common solvents observed in New York state waters (most of which are set at 5 ppb), and the standards for PFOA and PFOS are significantly lower than 1 ppb.

Thus, they are predicted to increase the scope of site remediation projects where such measures are identified as feasible and where the source is identified as existing at the hazardous waste site.

EPA’s New WOTUS Rule

By Paul M. Seby and Matthew K. Tieslau on December 13, 2018 Posted in Clean Water Act, EPA, Executive Order, Regulatory, Water, WOTUS

On Dec. 11, 2018, EPA and the U.S. Army Corps of Engineers (the Agencies) released a proposal to revise the regulatory definition of “waters of the United States” (WOTUS), as found in the federal Clean Water Act (CWA). The proposal represents another chapter in the long-running debate over the scope of federal authority.

The CWA gives the Agencies broad authority to regulate WOTUS – but does not define that term. The Agencies have adopted numerous definitions of WOTUS over the past several decades, recently adopting a rule during the Obama administration that defined WOTUS very broadly based on construing Justice Kennedy’s “significant nexus” test from his concurring opinion in Rapanos v. United States. The Obama-era WOTUS rule is currently enjoined in 22 states while litigation challenging its legality proceeds.

On Feb. 28, 2017, President Trump issued an executive order directing the Agencies to review and revise the Obama-era rule, instead adopting Justice Scalia’s narrower definition of WOTUS from the plurality opinion in Rapanos. The Agencies’ proposal this week is the latest action in response to the executive order.

The key changes to the definition of WOTUS found in the Agencies’ Dec. 11 proposal include:

Removing jurisdictional coverage of all interstate waters, instead requiring that an interstate water separately meet the definition of WOTUS under another jurisdictional category (such as being tributary to a navigable water, or being a navigable water);
Removing “ephemeral” waters features as definitional WOTUS, only including rivers and streams with yearly perennial or intermittent flow to downstream navigable waters;
Removing upland and ephemeral ditches from definitional WOTUS;
Only including lakes or ponds that are traditional navigable waters or connected to traditional navigable waters through tributaries;
Narrowing the coverage of wetlands, only including wetlands that are abutting jurisdictional waters or that have a direct hydrological surface connection to jurisdictional waters (thus removing wetlands separated by a berm, dike, or other barrier that were previously considered jurisdictional).

Otherwise, traditional navigable waters and territorial seas, impoundments, tributaries, wetlands abutting navigable waters, and ditches and lakes and ponds connected to navigable waters remain jurisdictional under the Agencies’ revised definition of WOTUS.

The Agencies claim that the new proposed WOTUS definition will bring clarity to jurisdictional determinations when compared with the Obama-era definition by creating clearly defined categories of waters considered WOTUS, eliminating the case-by-by case reliance on Justice Kennedy’s “significant nexus” test while still incorporating the important aspects of Justice Kennedy’s opinion.

The Agencies acknowledge that the new WOTUS definition narrows the scope of waters covered as jurisdictional when compared to both the Obama-era rule and the pre Obama-era WOTUS definition, but assert that the definition more closely adheres to constitutional and statutory limitations in the CWA, limiting the role of the federal government and respecting state and tribal authority over their own land and water resources.

Comments to the Agencies’ proposed rule will be due 60 days after formal publication in the Federal Register. If formally adopted, legal challenges to any final rule are expected – including seeking relief in the form of reinstatement of the 2015 Obama-era WOTUS Rule.

We are nominated for The Expert Institute’s Best Legal Blog Contest

By Greenberg Traurig on December 6, 2018 Posted in Announcements

Thank you for reading the E2Law blog.

We are pleased to announce the E2Law Blog has been selected from hundreds of potential nominees to participate in the largest competition for legal blog writing: The Expert Institute’s Best Legal Blog Competition. The competition runs until the close of voting on December 17th.

Please click the link below to vote today – and please share!

Vote for the E2Law Blog

Environmental Aspects of the United States-Mexico-Canada Commercial Agreement (USMCA)

By Erick Hernández Gallego on December 5, 2018 Posted in Environment, Federal, Federal Regulation, GT Alert, International, Mexico, Pollution, USMCA, Water

The recent United States-Mexico-Canada Agreement (USMCA), which replaces the North American Free Trade Agreement (NAFTA), claims to modernize and reinforce obligations regarding environmental matters that were previously covered in NAFTA and by the Commission for Environmental Cooperation (CEC).

This GT Alert summarizes some of the most important environmental aspects established by Chapter 24 of the USMCA and explains the scope of the new agreement’s binding obligations, which include conflict resolution through consultation and cooperation.

To read the full GT Alert, click here.

Energy Label C Obligation for All Office Buildings in the Netherlands in 2023 (With Few Exceptions)

By Jacomijn Christ and Monisha Sardjoe on November 27, 2018 Posted in Energy, Netherlands, Real estate

Introduction

Beginning January 2023, energy labels of the major part of office buildings in the Netherlands will have to be at least in category C, because of an amendment to the Dutch Buildings Decree 2012 (Bouwbesluit 2012), published 2 November 2018. This generally means that owners of office buildings with energy labels from D to G (or without any energy label) should quickly implement energy-saving measures to comply with this obligation.

Background

Since 1 January 2008, energy labels for nonresidential buildings (e.g., office buildings, schools, hospitals) have been mandatory when selling, letting, or transferring such buildings. A similar obligation exists for residential buildings in the Netherlands.

An energy label demonstrates the energy performance of a building. It also includes a standard of which energy-saving measures need to be taken to improve energy performance. The lower the energy label, the more energy-saving measures may be required to obtain a better energy label and to improve the energy performance of a building. The label categories range from A to G, with G being the lowest in terms of energy performance and having the most energy-saving measures needed to obtain a higher energy label.

At present, having an energy label in place is mandatory regardless of the category. Starting in 2023, however, stricter regulations will apply to office buildings concerning energy labels. These stricter regulations will be implemented in the Dutch Buildings Decree 2012.

New Requirements for 2023

Starting 1 January 2023, office buildings must have an energy label in category C or higher. The use of office buildings with an energy label below C will be prohibited as of that date. Exceptions will apply in the following circumstances:

the office building is part of a (larger) building and the total usable area for office functions is less than 50 percent of the total usable surface area of that building;
the total usable area for office functions and ancillary functions in the office building or the building in which the office building is a part is less than 100 square metres;
an office building that is mentioned in Article 2.2 Energy Performance Buildings Decree (Besluit energieprestatie gebouwen). Important exceptions based on this article 2.2 are:
- an office building that is a national monument;
- an office building that is only used for a maximum of two years.

Office space owners who can demonstrate that, before 1 January 2023, they have taken all measures needed to realize an energy label in category C with an earn-back-period of up to 10 years, can get by with an energy label lower than category C. The application of this provision and especially the application of the earn-back-period are not clearly explained in the amendment to the Dutch Buildings Decree 2012. It is, moreover, unclear how the effect of this provision will be enforced by the relevant authorities.

Consequences of the Energy Label C Obligation

The abovementioned amendments follow from the Energy Agreement (het Energieakkoord) for sustainable growth of 2013. This Energy Agreement aims to, among other things, limit CO2 emissions and save energy consumption in the Netherlands.

In practice we see that office buildings with energy label D, E, or F could, generally speaking, achieve a label C without major renovations (e.g., by lighting or heating measures). For office buildings with an energy label G, more drastic measures may be necessary.

Tenancy

A tenant is not responsible for compliance with the energy label C obligation with respect to the authorities. However, contractual stipulations in the lease agreement may require the tenant to be responsible for or cooperate with taking energy saving measures (e.g., in the case of a shell lease).

(Office) building tenants should inform or remind their landlords of the energy label obligation in a timely manner, as it will be prohibited to use noncompliant office buildings starting 1 January 2023. Furthermore, the execution of energy-saving measures could temporarily interfere with the use and occupation of an office building. Tenants should plan the execution of any measures with the owner/landlord. In addition, owners should communicate with their tenants about the planned energy-saving measures and how to prevent nuisance for the tenant as much as possible.

Sanctions

Starting 1 January 2023, it will be prohibited to use an office building that does not have an energy label C and is not exempted from this obligation. Violations of the energy label-obligation may result in administrative enforcement actions or criminal enforcement actions. This could lead to the imposition of an order subject to a penalty (last onder dwangsom), an administrative enforcement order (last onder bestuursdwang), or administrative fines (bestuursrechtelijke boete).

For the Future

The Energy Agreement aims for an energy label A requirement for the use of office buildings in 2030. Further legislation will likely follow to achieve this goal. Owners of office buildings should take this into account when investing in measures to upgrade their energy label.

Constant Vigilance: Why Environmental Criminal Enforcement Still Matters

By Greenberg Traurig on November 16, 2018 Posted in Compliance, Court Cases, Environment, Environmental Justice, EPA, Litigation, Uncategorized

Jillian Kirn authored an article titled “Constant Vigilance: Why Environmental Criminal Enforcement Still Matters” in The Legal Intelligencer.

According to Syracuse University’s Transactional Records Access Clearing House (TRAC), federal prosecutions for environmental crimes are down 40 percent from 2013 levels. Still, despite these recent declines, environmental criminal enforcement remains a potent regulatory tool.

To read the full article, click here.

Florida Appellate Court Reverses Class Certification in Commercial Fishing Action Arising From a 65-Million-Gallon Process Water Release Into Tampa Bay

By David B. Weinstein and Christopher Torres on November 12, 2018 Posted in class action, Court Cases, Environment, Florida, Hazardous Waste, Pollution, Water

In the summer of 2004, during Hurricane Frances, an industrial facility released approximately 65 million gallons of process water into Tampa Bay. A group of commercial fishermen promptly filed a putative class action. The class representatives alleged that the release damaged the natural habitat and adversely affected commercial fishing in and around Tampa Bay. At the certification hearing class representatives testified to what they alleged was their firsthand observation of harm to the bay and their experience of loss in commercial fishing landings and revenue. They argued that the “overwhelming common legal and factual aspects between the claims of the named [p]laintiffs and putative class members dwarf any variation in the claims and predominate over any individualized issues.” The defendant presented the testimony of experts in the fields of ichthyology, benthic ecology, marine biology, physical oceanography, estuarine science, and commercial fishing economics to demonstrate not only the absence of areawide impact, but that the class representatives failed to provide any methodology to demonstrate classwide impact and no class representative could prove the cases of the absent class members by proving their own individual cases.

The trial court certified the class by bifurcating liability and damages. It stated in its certification order:

The liability issues are common to all plaintiffs, since they are determined only by the actions of the defendant and of nature. These common questions predominate up to and including the determination of the severity of the spill’s potentially toxic effects in each geographic area. The plaintiff’s yet-to-be-revealed evidence of the effect of the spill and the defendant’s “no causation” defense both pertain to particular geographic areas, not particular people, and are thus common questions to be resolved at the liability stage.

The defendant appealed the trial court’s class certification to the Second District Court of Appeal, which rendered a decision reversing the trial court’s certification, holding that the trial court “abused its discretion because there was no competent, substantial evidence supporting its ‘proof-based inquiry’ into and ultimate determination of rule 1.220(b)(3)’s predominance requirement.” Mosaic Fertilizer, LLC v. Curd, et al., Case No. 2D17-2301 (Fla. 2d DCA Nov. 9, 2018). In its decision, the appellate court made the following important points:

The class representatives must provide a reasonable methodology for proving classwide impact. The appellate court stated that “[a] proponent of certification must demonstrate a ‘reasonable methodology for generalized proof of class-wide impact’ whereby ‘proving his or her own individual case, [the putative class representative] necessarily proves the cases of the other class members.’” And that in this case, “[t]he fisherman [] had the burden of proving—beyond mere ‘supposition’—some methodology for generalized proof by which the class representative would necessarily prove the cases of all other commercial fishing license holders who claim to have been damaged by the spill.”
The class representatives’ evidence did not satisfy that requirement. The appellate court observed that “[t]aken as a whole, it is not possible to view [the class representatives’] testimony as plausibly putting forth a reasonable methodology for proving classwide claims.” Consequently, they “failed to carry their burden of positing any reasonable methodology for proving classwide claims.”
Florida’s Engle case is unique and does not necessarily authorize bifurcation as a means of satisfying the predominance requirement. The appellate court observed that bifurcating liability and damages does not necessarily satisfy “a means of meeting” predominance, and Engle v. Liggett Group, Inc., 945 So.2d 1246 (Fla. 2006) is an idiosyncratic case that is “unique and unlikely to be repeated.”
The trial court left for later what it was required to do at the class certification hearing. Finally, the appellate court noted that “[w]ithout making some antecedent showing of the methodology by which the fisherman intended to prove classwide claims, the fisherman failed to meet the burden imposed by rule 1.220(b)(3).”

Mosaic Fertilizer, LLC v. Curd, et al. provides useful guidance in the field of environmental class actions.

Greenberg Traurig served as counsel to Appellant, Mosaic Fertilizer, LLC, in this case.

Recent Opinions Hold Differing Views on Point Source Discharges Into Waters

By Greenberg Traurig on October 22, 2018 Posted in Clean Water Act, Court Cases, Environment, Pollution, Uncategorized, Water, Water quality

Kathleen Kline authored an article in The Legal Intelligencer titled “Recent Opinions Hold Differing Views on Point Source Discharges Into Waters.”

The article explores two recent opinions from the U.S. Court of Appeals for the Sixth Circuit regarding the growing cacophony over Clean Water Act jurisdiction, both holding that the act does not regulate pollution that reaches surface water via groundwater.

To read the full article, click here.