On June 18, 2020, the Seventh Circuit handed down a decision in a case involving historical environmental contamination that eases the path to federal court for defendants who are haled into state court for acts that occurred while defendants were assisting the federal government. In Sherrie Baker et al. v. Atlantic Richfield Company, E. I. du Pont de Nemours and Company, et al., No. 19-3160, 2020 WL 3287024, — F.3d — (7th Cir. 2020), the court adopted a new standard for federal officer removal, holding that defendants act under color of federal office and are entitled to a federal forum when sued for conduct relating to acts for the federal government, even if the conduct at issue in a particular case only partially implicates the federally directed acts. This decision has consequences that reach beyond defendants facing environmental liability, as did the defendants in Baker, as it could provide an additional avenue to a federal forum for companies that have either been awarded federal contracts, or that supply customers who hold federal contracts. Continue Reading
The European Commission has opened a consultation on the adoption of amendments (currently available in draft form) to the European Union’s law on the transboundary shipment of waste. These amendments are intended to allow the EU to give effect to recent changes to the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (the Convention) which significantly extend the Convention’s scope in relation to plastic waste.
Plastic waste has emerged as a significant environmental issue in recent years, not only due to its growing accumulation in the environment generally but also due to companies in so-called developed countries shipping hard-to-recycle plastic wastes to less economically developed countries. This has led to the build-up of plastic waste with, for the moment, little prospect of being recycled or otherwise sustainably managed, in several countries including Indonesia, Thailand and Malaysia.
The changes to the Convention were agreed by the Convention’s governing body, the Conference of the Parties, in a May 2019 decision (the Decision). In broad terms, the changes provide for, via amendment to Annexes II and VIII of the Convention, the inclusion of most types of plastic waste in the Convention’s ‘prior informed consent’ (PIC) mechanism. The only types of plastic waste excluded from the PIC mechanism are those which are destined for recycling, presumed not to be hazardous, and, due to their composition, easily recyclable. The specific types of plastic wastes which fall within each Annex are set out in the Decision.
The European Parliament has adopted (as of 18 June 2020) new legislation on sustainable investments.
The new law was published in the Official Journal of the European Union last week and will come into effect on 12 July 2020. It sets out six environmental objectives and permits economic activities of investors and undertakings to be labelled as ‘environmentally sustainable’ only if they contribute to at least one of the objectives without significantly harming any of the others.
This is the first time that there will be a uniform set of pan-EU criteria for determining whether economic activity is environmentally sustainable. Such criteria will assist investors and consumers in identifying economic activity which they can participate in without sacrificing environmental standards.
On April 29, 2020, the Ministry of Ecology and Environment of China (MEE) promulgated the Measures on Environmental Management Registration of New Chemical Substances (MEE Order 12) (link in Chinese), which will come into effect Jan. 1, 2021, and replace the Measures for the Environmental Management of New Chemical Substances (promulgated by the Ministry of Environment Protection of China, MEP Order 7). MEE Order 12 focuses on mass-use of new chemicals, and highly hazardous chemicals, chemicals with persistence and bioaccumulation (PB), chemicals with persistence and toxicity (PT), and chemicals with bioaccumulation and toxicity (BT).
Background: MEE the ‘China REACH
MEE is sometimes also called the ‘China REACH’ for short. ‘China REACH’ references the EU Regulation No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals. Both the Chinese and EU legislation aim to improve human health and the environment through the identification of chemical substances. Both pieces of legislation make distinctions in their application depending on annual tonnage and may restrict the usage of highly hazardous chemicals. The main difference between MEE and the EU REACH is that EU REACH focuses on the chemical registration requirement whereas MEE focuses on new substance notification. Continue Reading
On Nov. 18, 2019, power line developer Anbaric Development Partners, LLC (Anbaric) filed a complaint before the Federal Energy Regulatory Commission (FERC) under sections 206 and 306 of the Federal Power Act against regional grid operator PJM Interconnection, L.L.C. (PJM), claiming that PJM’s transmission interconnection procedures in Sections 36.1.03 and 232 of the PJM Open Access Transmission Tariff wrongly bar transmission projects serving planned Atlantic offshore wind farms from hooking up with the grid.
On June 18, 2020, FERC denied the complaint and determined that Anbaric did not establish that PJM’s existing tariff is unjust, unreasonable, and unduly discriminatory. However, FERC announced that it would hold a technical conference on Oct. 27, 2020, to discuss whether existing FERC transmission, interconnection, and merchant transmission facility frameworks in RTOs/ISOs can accommodate anticipated growth in offshore wind generation in an efficient and effective manner that safeguards open access transmission principles and to consider possible changes or improvements to the current framework should they be needed to accommodate such growth.
The order reflects FERC’s awareness of the growing interest in developing offshore wind projects and recognizes that a key element to gaining access to offshore wind is the construction of and access to transmission to bring wind-generated electricity onshore to the grid. However, issues involving open access, financing, and jurisdiction still need to be addressed and defined to facilitate offshore wind development.
Last month, a three-judge panel of the Commonwealth Court of Pennsylvania held that certain net metering regulations of the Pennsylvania Public Utility Commission (PUC) are unenforceable. The regulations at issue are related to the implementation of Pennsylvania’s Alternative Energy Portfolio Standards Act (AEPS Act), which incentivizes the use of electricity generated by renewable sources such as wind, solar, and biomass.
The Commonwealth Court’s ruling in David N. Hommrich v. Comm., Pa., Pub. Util. Comm’n (674 M.D. 2016), leaves some questions unanswered. In Hommrich, the plaintiff, seeking to install solar photovoltaics, challenged PUC regulations pertaining to net metering that he alleged were unauthorized under the AEPS Act. “Net metering” is a system by which renewable energy generators (most often customers using solar photovoltaics) connect to a public utility power grid, and surplus power is transferred back to the grid, allowing customers to offset the cost of the power they draw from the utility. Hommrich alleged that a project that could be approved for net metering under the AEPS Act could also not be approved under the PUC’s regulations, due to the PUC’s definitions of key terms.
Under the AEPS Act, the General Assembly tasked the PUC “to develop technical and net metering interconnection rules for customer-generators.” Section 5 of the AEPS Act, 73 P.S. 1648.5. The Commonwealth Court grappled with the question of whether the PUC exceeded its statutory authority in doing so. Pursuant to the AEPS Act, the PUC’s implementing regulations provide for how “customer-generators” can “net meter,” and defined both terms. The PUC’s regulations are not known for being internally consistent or easy to parse. One of the primary questions before the Commonwealth Court was whether the PUC regulatory definitions of “customer-generator” and “utility” exceeded the PUC’s rulemaking authority.Ultimately, the PUC revised the definition of customer-generator to incorporate the term “retail electric customer” and added a definition for “utility” to make it clear that the definition applies to retail electric customers and not electric utilities, such as EDCs and so-called “merchant generators” that are in the business of providing electric services. The term “merchant generator” does not appear in the AEPS Act or regulations. The Court held that the PUC did, in fact, exceed its authority and that these definitions are invalid due to their departure from the language of the AEPS Act.”
I review this decision in my column for The Legal Intelligencer supplement, Pa. Law Weekly. Read “Who is a Customer-Generator? Uncertainty Abounds for the Pennsylvania PUC” by clicking here.
The Massachusetts Supreme Judicial Court (the court of last resort in the Commonwealth) issued a decision in a land use case today of potential concern for environmental practitioners. It raises the question whether a settlement by a regulated entity and the regulator protects the settling party from further claims by neighbor against the settling party or against the regulator on the same subject.
Stevens v. ZBA of Bourne, No. 19-P-248 (Mass. June 19, 2020), involved an estate used for weddings. Neighbors complained, the Building Inspector issued an order calling for the use to cease, and ultimately brought an enforcement action in the Land Court. The landowner settled that enforcement action, and the Building Inspector revised the cease and desist order to conform to the settlement. A neighbor then appealed that revised cease and desist order to the Zoning Appeal Board, which reinstated the original cease and desist order.
With some caveats about procedure and parties, the SJC held that the neighbor had properly appealed the post-settlement cease and desist order and that the ZBA had properly vacated it and reinstated the original, more stringent, order.
Land use enforcement is not the same as environmental enforcement, either procedurally or substantively. Public notice and rights of intervention under environmental statutes may bar this sort of after-the-fact attack on an enforcement settlement in the environmental context. But it serves as a reminder of risk.
On 10 June 2020, the German government published its long-awaited national hydrogen agenda. Earlier, the Dutch government also published its own hydrogen agenda and the policy overlap is clear: as far as the Dutch and the Germans are concerned, hydrogen will play an important role in the future energy supply of Europe.
The Dutch government published its hydrogen agenda on 30 March 2020. In the agenda, particular attention is paid to the creation of potential transportation hubs function which the Netherlands could incorporate into a greater, European hydrogen infrastructure. In addition, multiple references are made to Germany as a neighbouring country and potential hydrogen infrastructure and market partner. Meanwhile, Dutch policies are being further implemented on a local level: the Dutch province of Limburg (situated between Germany and Belgium) recently published its own hydrogen agenda (as did the province of Groningen).
After postponing the publication multiple times, the German Federal Ministry for Economic Affairs and Energy published its national hydrogen agenda on 10 June 2020. In the German agenda there is a strong focus on the production and import of “green” hydrogen, which is hydrogen produced by electrolysis based on renewable energies. In the Netherlands, the financial media has stated that Germany’s focus on hydrogen “will be lucrative for The Netherlands as well”. The German government emphasizes the need for hydrogen imports of hydrogen to meet the expected rise in demand and the Netherlands is in a strategic position both to supply and transport hydrogen. Also, offshore wind is intended to be one of the main sources of renewable energy to supply the electricity for hydrogen production at an industrial scale. To this end, the German government will be looking for cooperation and projects in the North Sea area.
The two countries appear ready to invest in hydrogen projects of all types (including infrastructure, production, and research). Since the national agendas overlap, bilateral cooperation may prove beneficial for both countries and for parties seeking to operate in the hydrogen sector throughout Europe. Yet, current EU regulations may pose an obstacle. Energy sector rules (specifically the EU Third Energy Package) require so-called “ownership unbundling”, which means that the energy generation and sale operations from transmission networks may not be performed by the same entity. This is an important issue that will need to be resolved if the hydrogen goals are to be met.
Hydrogen may be one of the main topics of interest during the German EU Presidency (from 1 July through 31 December 2020). Therefore, more news on hydrogen may soon be forthcoming.
(For more information on the EU unbundling regulation applicable to the hydrogen sector, we refer to this publication (in German) of Martin Borning of the GT Berlin office.)
On June 1 the criminal division of the U.S. DOJ revised its guidance to DOJ attorneys on how to evaluate corporate compliance programs. DOJ considers the “adequacy and effectiveness” of a company’s compliance program in deciding whether to charge a company with a crime and what penalties the government may seek, and this guidance provides them direction on how to do it. This guidance is a useful companion to the U.S. Sentencing Commission’s guidelines on what constitutes an effective ethics and compliance program aimed at preventing and detecting misconduct. The publication of these revised guidelines is a good reminder of the importance of effective compliance and environmental risk management programs not only to criminal prosecutors, but also civil enforcement authorities and a broad range of non-governmental stakeholders.
The adequacy of compliance programs is frequently relevant in civil enforcement actions brought by federal agencies such as U.S. EPA and state environmental enforcers. More broadly, environmental compliance and management programs, such as those based on ISO 14001, are generally recognized as foundations for effective environmental risk management and environmental and social governance (ESG) or corporate social responsibility (CSR) strategies. So, the application of DOJ’s revised guidance may not be limited to criminal enforcement, and it would be prudent for organizations implementing sustainability, CSR or ESG strategies to take it into account as well.
Effective environmental compliance and risk management programs bring their own reward as well. They can help organizations do the right thing, prepare for the unforeseen, prevent errors, and mitigate adverse effects when issues do occur. Applying well-established business practices to manage environmental issues can help organizations internalize and integrate sustainability and ESG into everyday conduct. This can support concrete and meaningful strategies that may decrease the risk of charges of “green washing” or “social washing” (i.e., is the organization “walking the talk”?).
DOJ’s revised guidance reflects DOJ’s growing experience with compliance programs as well as input from the business community. DOJ poses three basic questions:
- Is the corporation’s compliance program well designed?
- Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?
- Does the corporation’s compliance program work in practice?
The balance of the 20-page document unpacks each of those questions. For example, program design elements include risk assessment, policies and procedures, and training and communications (including “hotlines”). DOJ points out that the scope of an effective program should extend to third parties (e.g., entities in the value chain, contractors) and be part of merger, acquisition and divestiture activities.
The latter two questions posed by DOJ get to the fundamental question: can the organization demonstrate that they take the program seriously and that it works. These are questions of equal importance to other stakeholders, including employees, neighbors, customers and investors. In these portions of the guidance, DOJ addresses issues ranging from demonstrated management commitment to effective auditing, root cause analysis and corrective action procedures.
Throughout the guidance, DOJ suggests a dynamic and operational approach to compliance programs based on constant management participation, the regular and transparent flow and evaluation of data, continual improvement and flexibility to address new situations and facts, and relentless checking and verification of performance. A key “take away” is that an effective compliance program shouldn’t be sitting on a shelf (or the cloud) collecting dust but should be demonstrably implemented on a daily basis at all levels of the organization and, as appropriate, its value chain.
While this note has focused on the relevance of DOJ’s guidelines to environmental matters, they apply to programs aimed at compliance with laws of any sort, from anti-trust to the FCPA. The guidelines are written in a manner that allows organizations to design programs covering multiple laws but sharing common elements.
Organizations looking to implement or enhance their environmental compliance and management systems, or their sustainability, ESG or ESG strategies, would be well-served to take a close look at the revised DOJ guidance.
The negative economic effects resulting from efforts to mitigate the spread of Coronavirus Disease 2019 (COVID-19) have put financial pressure on many businesses. In the worst such cases, businesses may face the risk of insolvency. In an environmental law context, this raises the question of what the potential implications may be for those businesses’ environmental liabilities – in particular, for businesses which lease premises and who may be responsible for any potential liabilities for contamination caused during the term of their lease.
As between a tenant and a landlord, liability for contamination may arise contractually through provisions in a lease. While such provisions are often heavily negotiated, a typical approach is to allocate liability for pre-existing contamination expressly to the landlord and liability for contamination first arising or exacerbated during the term of the lease to the tenant. For tenants whose use of a property has the potential to be materially contaminative (for example, where the tenant is undertaking an industrial activity), the lease may also provide for the landlord to recover on a full indemnity basis should the landlord suffer losses from contamination caused by that tenant. Where the lease makes no express contractual provision governing contamination the landlord may have to try to obtain recourse using the standard non-environmental provisions (such as repair covenants) in the lease.
Landlords may take practical steps in efforts to mitigate the risk of liability for contamination caused by tenants who may be financially distressed. For example, landlords may consider:
- assessing their tenant’s creditworthiness and financial health before deciding whether to enter into tenancy agreement with them;
- obtaining a guarantee from another person, such as a parent company, for the tenant’s obligations under the lease;
- putting in place an insurance policy covering environmental risks including those arising from a tenant’s activities; and
- undertaking periodic inspections of the tenant’s operations so that potential issues may be identified and, where necessary, recourse can be sought.
For more information and updates on the developing COVID-19 situation, visit GT’s Health Emergency Preparedness Task Force: Coronavirus Disease 2019.