Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

New Amendments To TSCA Invigorate Chemical Regulatory Regime And Empower EPA

Posted in EPA, Health and Safety, Rulemakings

On June 22, 2016, President Obama signed into law the Frank R. Lautenberg Chemical Safety for the 21st Century Act (the Act) which amends the core provisions of the Toxic Substances Control Act (TSCA), an environmental law whose use and enforcement has dwindled somewhat over the years (Available here). TSCA regulates chemical manufacturing and usage, and has not been substantially amended since it was enacted in 1976. The Act, which enjoyed bilateral support in both the House and Senate, updates TSCA to provide EPA with the discretion to prioritize the chemicals it regulates. The 2016 version expands and supports EPA’s authority to regulate industry and enforce the regulations.  The key elements are:

  1. Risk Assessment — EPA is required to review the safety of and to prioritize all chemicals in active commerce. For chemicals the EPA classifies as high-priority, the EPA must conduct a risk-based assessment to determine whether the chemicals pose an unreasonable risk.  The risk-based assessment evaluates the impact of the chemical to human health and the environment.

Importantly, the EPA may not consider “costs or other nonrisk factors” in determining whether to regulate a chemical.  The costs and benefits of  the regulation, including  the availability of alternatives to the chemical, may be considered in determining how to regulate the chemical. However, in all cases, chemicals found to pose an unreasonable risk must be regulated “so that the chemical substance no longer presents such a risk” and to ensure the protection of sensitive populations.  The Act allows anyone to challenge the EPA’s classification of a chemical as “low priority.”

2. Power to Order Testing — The Act empowers EPA to issue an order requiring testing without first having to promulgate a rule or show evidence of a potential risk or high exposure.  Currently, EPA must go through a consent agreement which can be slow and formal.

3. Inventory — EPA must maintain an up-to-date inventory of all chemicals in commerce.

4. Preemption — Federal regulation explicitly preempts states from regulating chemicals under the purview of TSCA.  Preemption is always an issue as companies must comply with a patchwork of state regulation as well as federal.  Under the updated TSCA, the federal government has preemption over the states for regulating a chemical which it has found presents an unreasonable risk.  In the event the federal government finds the opposite, that the risk of chemical is acceptable, then a state may step in and regulate. However, all state actions taken prior to April 22, 2016 are preserved.

5. Hold, please — EPA can hit the “pause” button.  While EPA is assessing the risk of a certain chemical, states may not regulate that chemical.

Simply looking at items 1-3 above, it is clear that the Act invigorates the existing chemical regulatory regime and empowers EPA to prioritize the field and demand testing. The Act also borrows from the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) program in the European Union, which is considered a success and has been used as a template for chemicals management by countries outside of the EU. Within the United States, however, this approach is new and far reaching.

Assessing and prioritizing every chemical in active commerce – and then keeping the inventory of the chemicals current — is a large task.  Many industries will feel the impact.  If a company uses chemicals in making products, it may be worthwhile to analyze the breadth of the updated TSCA.  Manufacturing toys or cosmetics may now trigger new environmental compliance challenges.

The Act also places tighter parameters around a company’s ability to shield information about active chemicals from the public, including setting a 10-year expiration for all confidential business information claims unless the claim is substantiated again.  Companies requesting confidentiality should calendar updates to keep the protections in place.

EPA now has specific power to act and it will act quickly.  The Act imposes aggressive implementation deadlines, requiring EPA to develop rules for the inventory, prioritization and risk evaluation processes within one year; develop all policies and guidance within two years;  and conduct at least 20 risk evaluations and 20 low-priority designations within 3.5 years. Including a certain workload and schedule is a rather rare requirement for environmental regulation, but it shows that Congress wanted EPA to actually use these new procedures. TSCA has been jumpstarted by this upgrade, but the government does not want to see it lay fallow. Therefore, companies should be prepared to see changes based on these amendments happen within the next few years.

The Utility as a Distribution System Platform: NYPSC Issues Order in REV Proceeding to Establish A New Paradigm for Utilities, Customers, and Distributed Energy Resources

Posted in Electric Power, Rulemakings

In an important order (“Order”) issued on May 21, 2016 in its Reforming the Energy Vision (“REV”) proceeding, the New York Public Service Commission (“NYPSC”) announced the details of a new paradigm to govern the relationship among utilities, customers, and distributed energy resources (“DERs”).[1] In this new framework, utilities are to play an important role in stimulating the development of DERs, and empowering customers to become more involved in the management of their energy consumption, to develop a modern power system that is “clean, efficient, transactive and adoptable to integrating and optimizing resources in front of and behind the meter.”  Essentially, utilities will become the distribution system platform (“DSP”) on which this new relationship between DERs and customers will be built.

The NYPSC is creating a new regulatory model under which utilities will have established (e.g., cost-of-service ratemaking) and new sources of revenue and earnings, including: Read More

Steps to Keep OSHA from Raising the Retaliation Issue

Posted in Health and Safety

OSHA’s new anti-retaliation provisions go into effect on August 10, 2016.  The provisions require employers to:  1) inform employees of their right to report work-related injuries and illnesses without being subjected to retaliation; and 2) establish procedures for reporting work-related illnesses and injuries that are reasonable and do not discourage reporting.

Employees may already file anti-retaliation complaints under Section 11(c) of the Occupational Safety and Health Act.  The change will allow OSHA to issue a violation and issue an abatement order instead of suing under 11(c).  OSHA is targeting cases where employees’ firing is justified based on their failure to follow a safety policy when in fact they were terminated for reporting a subsequent injury or illness.  OSHA will investigate complaints to determine whether to issue a citation and order a remedy such as reinstatement of the employee with back pay and purging their personnel file.

Employers should review their policies, update them as necessary, and train managers to be extremely diligent in documenting performance issues in a timely manner. After an accident is reported, the burden may now be on the employer to justify the non-accident-reporting basis for any action.

Unanimous Support for Conservation in Senate Appropriations Committee

Posted in Environmental Quality, Rulemakings, Water Law

Who knew?  On May 19 those wild eyed environmentalists on the Senate Appropriations Committee unanimously (no misprint) passed a FY 2017 agriculture and rural development bill that includes significant funding for conservation work.  The bill now goes to the full Senate for a vote, and if it passes, back to the House for reconciliation. Read More

The Supreme Court Confirms Right to Challenge Jurisdictional Determinations

Posted in Federal, Water Law

Can a landowner challenge a US Army Corps of Engineers determination that a property contains jurisdictional wetlands? In a unanimous opinion, the Supreme Court answered this question in the affirmative May 31, 2016 in USACE v Hawkes Co.

Under Section 404 of the Clean Water Act, the Corps regulates filling in of “waters of the United States,” including wetlands. To determine the presence of wetlands on a property, i.e., if a permit is required, landowners can ask the Corps for a jurisdictional determination (JD) of whether the Clean Water Act applies. Once approved, a JD confirms the presence (or absence) of wetlands subject to regulation on a particular property. A JD is considered an administratively appealable final agency action, and it binds the Corps and the Environmental Protection Agency for five years. Read More

BPA in Plastics Requires a Prop 65 Warning — For Food Containers, California Imposes a Generic Point-of-Sale Warning

Posted in California, Health and Safety

Last year the State of California added Bisphenol A (BPA) to its list of chemicals known to cause cancer or reproductive harm under Prop 65 [the Safe Drinking Water and Toxic Enforcement Act of 1986], a law which requires warnings for such exposures in California. The warning requirement kicked in a year later – May 11, 2016.

BPA is commonly used in plastics, to soften what might be a hard and brittle plastic piece.  Other softeners were previously listed and the lawsuit notices have flooded in. With BPA’s later listing, industry thought the California Office of Environmental Health Hazard Assessment (OEHHA) would have an opportunity to sample and analyze BPA-containing products, and to consider a “safe harbor” level for that chemical, a level of exposure which makes a Prop 65 warning unnecessary.  OEHHA was unable to do so, so the Prop 65 warnings must be affixed to products whose plastic pieces contain BPA.

But a specialized use of BPA-containing products raises new issues which California is addressing through emergency regulation  — BPA in the linings of metal cans and lids of glass bottles containing food and beverage. Read More

NYPSC Set to Adopt Clean Energy Standard Aimed at 50% Renewables Goal

Posted in Renewables, Rulemakings

The New York State Energy Plan (“SEP”) calls for 50% of all electricity used in New York State by 2030 to be generated from renewable energy sources (the “50 by 30 Goal”). Additionally, the SEP sets aggressive 2030 targets for emissions (40% reduction in greenhouse gas from 1990 levels) and energy efficiency gains (23% reduction from 2012 levels of energy consumption in buildings). The State has set a long-term goal of decreasing carbon emissions by 80% by 2050. Read More

Fish and Wildlife Service Supports Renewable Developers and Proposes Revised Eagle Incidental Take Permit Reviving 30-Year Duration

Posted in Federal, Renewables, Rulemakings

On May 4, 2016, the United States Fish and Wildlife Service (FWS) released a draft rule and Programmatic Environmental Impact Statement (PEIS) analyzing the impact of the proposed rule on eagles, and extending the duration of permits from 5 years to up to 30 years. This continues the agency’s effort to support wind farms and other facilities that may have difficulty with financing given the current five year limit on permits.

The FWS specifically explains that given the existing 5-year constraint on permit duration, many facilities have not sought to obtain eagle permits despite the risk of enforcement action should eagle mortality occur.  Thus, the current 5-year permit limitation has resulted in many facilities remaining at risk of enforcement action, and deprives FWS of the opportunity to work with the facilities on methods of avoiding or reducing eagle mortalities.  Read More

New York Public Service Commission’s ESCO Order Set for Preliminary Injunction Hearing

Posted in Litigation, Rulemakings

On May 20, 2016, a state Supreme Court judge in New York is tentatively set to hear arguments regarding a request for preliminary injunctive relief with regard to the “Order Resetting Retail Energy Markets And Establishing Further Process,” issued on February 23, 2016 (the “ESCO Order”) by the New York Public Service Commission (“NYPSC”).   While the fate of the operative provisions of the Order is in the hands of the court, the ESCO Order and additional developments in related proceedings have created turmoil in the energy service companies (“ESCO”) market and have not benefitted ESCOs or customers.   Furthermore, the NYPSC has taken completely inconsistent positions – in one proceeding it seeks to eviscerate part of the ESCO market and then in another proceeding (Reforming the Energy Vision or “REV”) it contemplates that ESCOs will play a pivotal role in providing innovative services to end-use customers in a more dynamic, diverse and smart distribution system.

Several ESCOs have committed violations of the rules governing ESCO conduct (the “Uniform Business Practices” or “UBP”) in their marketing and contract practices.  However, the ESCO Order’s attempt to address those violations of the UBP is excessive. The NYPSC could have addressed these problems with several, well-publicized enforcement proceedings against the worst ESCO offenders and the enhanced investigation of others.

We will report back on the outcome of the preliminary injunction hearing and on continuing developments at the NYPSC in the ESCO proceeding (Case 15-M-0127).

The ESCO Order

In the ESCO Order, the NYPSC confirmed its authority to regulate ESCO participation in the retail market, noted that consumers had submitted numerous complaints regarding ESCO marketing and contracting practices, and concluded that it was necessary to restructure the ESCO market for residential and small commercial retail customers (i.e., mass market customers) to protect customers from high-pressure sales situations, deceptive marketing, slamming, and lack of expected savings.

Accordingly, the NYPSC directed that ESCOs “shall only enroll new mass market customers or renew existing mass market customers in gas or electric service if at least one of the following two conditions is met: (a) enrollment where the contract guarantees that the customer will pay no more than were the customer a full-service customer of the utility; and (b) enrollment based on a contract for an electricity product derived from at least 30% renewable sources.” Additionally, the NYPSC required ESCOs to receive affirmative consent from a mass market customer prior to renewing that customer from a fixed rate or guaranteed savings contract into a contract that provides renewable energy but does not guarantee savings. Finally, ESCOs that currently serve mass market customers, through month-to-month variable rate agreements, must enroll those customers in a compliant product at the end of the current billing cycle or return the customers to utility supply services.

Incredibly, the NYPSC ordered that ESCOs implement the ESCO Order within ten (10) calendar days from the issuance date of the ESCO Order.

The ESCO Industry Challenge of the ESCO Order

The ESCO industry challenged the Order on a number of bases, including that the Order was issued in an arbitrary manner and resulted in an unconstitutional taking in violation of due process. The ESCO industry successfully obtained a Temporary Restraining Order (“TRO”) on March 4, 2016 and a stay of the operative provisions of the Order  (as discussed above) pending the hearing on the request for a preliminary injunction.

However, the prospect that the operative provisions of the Order may be re-instated has caused ESCOs and utilities to scramble to be ready for compliance.  For example, ESCO and utility risk management groups are confronting a material change in risk profiling and hedging with the prospect that thousands of customers may be moved rapidly from the ESCO portfolio to the utility portfolio.

NYPSC Expectations for ESCO Implementation of the ESCO Order

With respect to the guaranteed savings requirement, the ESCO must guarantee that the customer will pay no more, on an annual basis, than the customer would have paid as a full service customer of the utility. The ESCO must ensure that this requirement is met by refunding at the end of each year any customers charged more than they would have paid as a full service customer of the utility for that year.

With regard to new offerings by ESCOs of the renewable product, the ESCO must guarantee that at least 30% of the energy provided to the customer will be generated by renewable resources, eligible under the NYPSC’s Environmental Disclosure Labeling Program (“EDP”) rules, to ensure that these products contribute to greater renewable energy achievement. Pursuant to the EDP, energy labels are based on the environmental attributes of the energy purchased by the load serving entity and are not affected by the separate purchase of Renewable Energy Certificates (“RECs”). Currently, to meet this requirement the ESCO must guarantee that at least 30% of the energy provided to the customer will be generated by deliverable renewable energy resources, including biomass, biogas, hydropower, solar energy, and wind energy, and will include renewable attributes.

Additional NYPSC Proceedings Regarding The ESCO Industry

In addition to the modifications to the ESCO market for mass market customers, the Commission established procedural rules to make it easier for the NYPSC to revoke the eligibility of the ESCO to conduct business.  The NYPSC may now issue an Order to Show Cause requiring the ESCO to explain why the ESCO’s certification should not be revoked and demanding the ESCO present a case to maintain its eligibility without prior Staff notice to the ESCO, even if the ESCO has only a single violation of the UBP governing ESCO conduct in New York.

Similarly, in a related proceeding (Case Nos. 15-M-0127, 12-M-0476 and 98-M-1343), the NYPSC has invited interested parties to submit comments on a variety of issues pertaining to the functioning of the ESCO market, including: (a) whether and under what circumstances ESCOs should be required to post performance bonds or other forms of demonstrated financial capability; and (b) what penalties may apply to ESCO’s that violate the UBP, other NYPSC orders, or provisions of the New York Public Service Law.




Climate change regulation starts to take shape in Washington State

Posted in Climate Change, Northwest

In 2015, the Washington Legislature failed to act on Governor Jay Inslee’s cap-and-trade proposal to limit the greenhouse gas emissions that cause climate change.  Since then, all branches of Washington State government, as well as the people themselves, have engaged in what looks like a massive brainstorming session on how to limit Washington’s greenhouse gas emissions.  However, the recent close of the 2016 legislative session marks a turning point, with some options dropping off the table.  This post summarizes how we got here and outlines where we may be heading for the next couple of years.

Future posts will analyze the remaining options as they develop.  The melee includes the Clean Air Rule under development by the Department of Ecology in direct response to the Governor’s frustration with last year’s legislative inaction.  It also includes Ecology implementation of the EPA’s Clean Power Plan, the potential for action by the 2017 Legislature, and the possibility that the courts will step in at some point. Read More