Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

Non-Settling CERCLA Defendants Beware: Ninth Circuit Provides Lower Courts with Discretion to Allocate Liability Using Equitable Factors

Posted in CERCLA, Litigation, Rulemakings

There is a split of authority on how credits for settlements under the Comprehensive Response, Compensation and Liability Act (“CERCLA”) are allocated to non-settlors.  Some courts have applied the proportionate share approach, under the Uniform Comparative Fault Act (“UCFA”), and others have applied the pro tanto approach, under the Uniform Contribution Among Tortfeasors Act (“UCATA”).  In Ameripride Services Inc. v. Texas Eastern Overseas Inc, the Ninth Circuit declined to dictate that either approach is required and instead found the court has discretion to determine the most equitable method of account for settlements between private parties.

In making this finding, the Court focused on the lack of any statutory provision specifying how a settlement between potentially responsible parties (“PRPs”) should affect the liability of non-settling PRPs.  In contract, the Court noted the specific provisions of Section 9613(f)(2), which provides that a settlement agreement between the state or federal government and a PRP reduced the potential liability of the non-settling PRPs by the amount of the settlement, applying the UCATA pro tanto approach.  The Court concluded that the lack of any specific requirement in the statute for settlements involving only private PRPs indicates that Congress did not intend to impose a uniform requirement.  The Court directed the district court to “allocate response costs among liable parties using such equitable factors as the court determines are appropriate,” apparently leaving it up to the lower court to determine the most equitable method of accounting for prior settlement.

The Ninth Circuit’s decision in Ameripride adds to the uncertainty that PRPs face when litigating under CERCLA.  The case leaves complete discretion in the hands of the lower courts as to whether the UCFA or UCATA will be used to determine how settlements will be allocated.  How the lower courts will apply the equitable factors to make this decision remains to be seen.

Pacific Northwest Water Wars

Posted in Northwest, Water Law

It may come as a surprise that people fight over water in soggy Oregon and Washington.  To be sure, we have not experienced the same level of conflict over competing water needs as our neighbors in the southwest, but in fact the conflicts are there and the stakes are high.

Most senior water rights in the Pacific Northwest are held by agriculture, whereas the growth in demand for water is occurring in the municipal and industrial sectors . . . and at last check, fish still need flowing streams.  Add to that dynamic a declining hydrograph due to climate change, and the table is set for confrontation.

Two recent cases out of the Oregon Court of Appeals and one out of the Washington Supreme Court addressing municipal water rights illustrate the point.  A more complete discussion of these cases can be found in the attached article appearing in the current issue of The Water Report.

The Oregon cases arise from a 2005 law providing special rules for extensions of time to complete development of municipal water supplies.  The caption for both is WaterWatch of Oregon v. Water Resources Department, but one involves the City of Cottage Grove and the other a group of Clackamas River water providers.  The 2005 law provides that for the first municipal extension granted after enactment of the statute, “fish persistence” conditions must be applied to the undeveloped portion of the city’s water system.

By the time Cottage Grove’s extension application was considered, the city had completed work on its water system.  The Oregon Water Resources Department found no “undeveloped portion” and therefore imposed no fish persistence requirements.  The court overturned the extension, finding that the fish conditions must relate back to the previous extension in 1999.

The Oregon Supreme Court initially accepted review of the case, then without explanation declared that review was “improvidently” granted and dismissed it.  Thus, the case stands; legislative corrections may be forthcoming.  For the moment, Cottage Grove and other similarly situated public water providers may have less water than they thought due to fish flow curtailments and may incur unbudgeted additional public expense.

In the Clackamas case, the court found the “fish persistence” conditions were inadequate because OWRD failed to articulate how the conditions were actually protective of fish.  The case is now back before OWRD for further proceedings.

In Cornelius v. Washington State University, the Supreme Court came to a happier conclusion for public water providers.  The issue was whether university groundwater rights identified as for “domestic” purposes were entitled to special protections afforded only to municipal purposes.  The Court unequivocally held they are.

The economies of our region depend on the courts getting it right with respect to municipal water supplies.  Washington public water providers can rest easier than their counterparts in Oregon after their state courts’ recent pronouncements.

California Supreme Court’s CEQA Ruling Reaches Beyond Residential Development

Posted in California, Environmental Quality, NEPA, Rulemakings

On Monday March 2, the California Supreme Court handed down a decision allowing a Berkeley home builder to use an exemption from detailed environmental assessment under the California Environmental Quality Act (“CEQA”) in its proposed construction of a nearly 10,000 square foot residence in the Berkeley hills.  While the limited holding of the case relates to residential development’s use of CEQA exemptions, the analysis in the case is likely to have an impact on commercial development and infrastructure projects.

In Berkeley Hillside Preservation v. City of Berkeley, the issue involved whether the City of Berkeley had to require an Environmental Impact Report (“EIR”) prior to construction of a 6,500 square foot residence and 3,400 square foot garage in the Berkeley hills.  the Court of Appeals accepted the argument of those opposing the project, that, due to its size which was out of proportion to other residences and the instability of the hill to support a home of this size, an exception to the exemption should apply.  Specifically, opponents argued that there is a “reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” CEQA Guidelines section 15300.2(c).   The California Supreme Court reversed the Court of Appeal and determined that the residential exemption applies, and there were no applicable exceptions.

CEQA, the state analog to the National Environmental Policy Act or NEPA, requires certain projects to undergo an assessment of potential environmental impacts prior to approval.  The CEQA process can result in an exemption, a Negative Declaration, a Mitigated Negative Declaration (“MND”) or an EIR.  In this case, the City of Berkeley as the Lead Agency determined that this residential construction could commence without analyzing impacts under CEQA and no exceptions to that exemption were present.

The case and oral arguments focused on the term “unusual circumstances.”  The Court of Appeal had found that the existence of significant impacts was itself an usual circumstance.  The Supreme Court disagreed, as this determination would exist in all contested matters.  The Supreme Court held that it cannot be simply that there are impacts, but that the impacts must be “due to” the “unusual circumstances.” As a matter of statutory construction, the phrase “due to unusual circumstances” must be given attention, and not disregarded.  “Unusual Circumstances” have always been difficult to identify, and the nexus of those circumstances to the impacts must be demonstrated.  In practice, this determination will be made by the lead agency and both developers and objectors will use the advice from this case.  Project opponents will attempt to show early on that there are unusual circumstances in a project and that those unusual circumstances create significant environmental impacts. Project developers may consider having the permitting agency explicitly state there are no unusual circumstances, a finding which is not required on the face of CEQA.  And, in the case where there is a possibility of unusual circumstances creating significant impacts, a project developer may wish to skip the exemption and proceed directly to the MND or EIR stage, and not risk a challenge about the applicability of an exemption.  Under the regulations, an MND should take 6 months and an EIR should take a year, though both those timeframes are rarely met.  Nonetheless a developer may consider whether the opposition’s fight about CEQA analysis may eat up valuable time which might be spent analyzing the impacts.

 

State of Alaska Continues Slow Progress in Adjudicating Instream Flow Water Rights

Posted in Northwest, Water Law

The State of Alaska’s Department of Natural Resources (DNR) continued its slow and steady progress to issue the first instream flow water right to a non-governmental organization with a February 18, 2015 notice requesting comments on an instream flow water right application by the Chuitna Citizens Coalition Inc. (Chuitna).

Parties wishing to comment on the application must do so by March 4, 2015.

As we described in a previous blog post, instream flow water rights can be controversial among consumptive water users because they decrease the legally available supply of water for other uses that may arise in the future.  Conversely, instream flow water rights are often championed by non-governmental and other entities seeking to protect environmental values supported by maintaining specific water levels in a given waterbody.

Chuitna originally filed its application in 2009 but it languished for over two years until Chuitna brought suit over DNR’s delay in 2011.  In October 2013, an Anchorage trial court ruled in Chuitna’s favor finding that DNR’s over-long delay violated Chuitna’s due process rights.  A little more than two years later on February 18, 2015, DNR published notice of the application, which is the first step in the public portion of the process for adjudicating the right.

This notice comes a little more than six months after DNR’s publication of notice for an instream flow water rights application by the United States Fish and Wildlife Service

Though DNR appears to be picking up the pace, there are several hundred more applications waiting in the wings.  Whether DNR can keep up its progress in the light of impending cuts to the state government’s operating budget remains to be seen.

ANWR News: The Fine Print of President Obama’s Executive Action to Create Over 12 Million Acres of Wilderness

Posted in Land Use

The United States Fish and Wildlife Service (FWS) is administratively implementing President Obama’s recommendation that certain lands in the Arctic National Wildlife Refuge (ANWR) in Alaska be designated as wilderness.  FWS is finalizing a management plan for ANWR that will treat more than 12 million acres of the area as wilderness for the next 15 years – the plan’s duration.

FWS must manage wildlife refuges under its jurisdiction in Alaska by using what is called a Comprehensive Conservation Plan (CCP).  A CCP is a land use planning document that guides the agency in its management decisions regarding lands within the refuge.

FWS began the planning process for ANWR’s next CCP in 2010.  FWS previously released drafts of the CCP for public comment.

The current notice regarding the CCP identifies FWS’ preferred alternative as being to manage substantial amounts of lands within ANWR as wilderness.  FWS is publishing notice of the revised CCP and its preferred alternative for public review, but is not taking further public comment at this time.

Parties interested in resource development opportunities in northern Alaska should review the draft CCP for ANWR because it will provide insight both into how ANWR may be managed for the foreseeable future and FWS’s thinking on resource issues that are likely present in other parts of northern Alaska.  Though FWS is not taking further public comment at this time, Congress will certainly be taking a closer look and interested parties may have further opportunities to present their viewpoints.

FERC Proposes Tighter “Hold-Harmless” Commitment Standards for Utility Mergers

Posted in Electric Power, FERC

The Federal Energy Regulatory Commission (FERC) is proposing to revise its standards for determining whether proposed utility mergers and other asset transfer transactions subject to its jurisdiction under Section 203 of the Federal Power Act have the potential to have an adverse effect on cost-based rates for transmission service or wholesale electric service.

FERC’s policy statement, if adopted, may affect the willingness of utilities to enter into utility mergers and other asset transfer transactions in the future.  The proposed policy statement was published January 27 in the Federal Register, and comments are due by March 30.

 A regulated entity is able to satisfy FERC’s concern that a proposed utility mergers and other asset transfer transaction will not have an adverse effect on FERC-jurisdictional rates by providing a “hold-harmless commitment.”   Currently, such a commitment has entailed agreeing that for five years after the transaction closes, the entity will not seek to recover transaction-related costs or transition costs in such rates except to the extent that there are demonstrable merger-related savings.

However, in the proposed policy statement, the FERC is proposing to make the following changes to its policy for review of hold-harmless commitments:

1. Applicants will be required to identify the costs to which the hold-harmless commitment applies.  Although the FERC will determine on a case-by-case basis the costs that must be encompassed within the hold-harmless commitment of each applicant, it has prescribed a non-exhaustive list of costs incurred to explore, agree to, consummate and implement a transaction which it believes should be covered.  Also under the proposed policy statement, the FERC would bar recovery from ratepayers of similar costs that are associated with transactions that are pursued but never completed.

2. Applicants that propose hold-harmless commitments will be required to describe in detail the controls and procedures that will be used to identify and track those costs from which their customers are to be protected.  This discussion would be required to include a describe how the applicants define, designate, accrue, and allocate transaction-related costs, explain the criteria used to determine which costs are transaction-related, and discuss the accounting and rate-making procedures that would be used track and allocate those costs.

3. The hold harmless commitment will be required to be of unlimited duration.

4. The FERC will no longer require adoption of hold harmless commitments for transactions that will not have an adverse effect on rates.  Among the transactions that fall into this category are the purchase of an existing generating plant or transmission facility that is needed to serve the acquiring company’s customers or forecasted load within a public utility’s existing footprint in compliance with a resource planning process or to meet specified NERC reliability standards.  Applicants may also demonstrate that other types of transactions meet this standard as well.

 

Washington State Producers and Retailers of Mercury-Containing Lights Face New Regulations

Posted in Health and Safety, Natural Resources, Northwest

The New Year brought with it new obligations for any company that produces or sells mercury-containing lights in (or into) Washington State.  As of January 1, 2015, the State’s recycling program and corresponding funding mechanism is fully operational, and participation is mandatory for producers of mercury-containing lights.

While the statute and regulations impose unclear requirements on retailers of mercury-containing lights – such as contributing to consumer education – the bottom line for retailers is that penalties are imposed on retailers for only one thing: selling bulbs from an unapproved producer. So retailers should talk to their producer, and check the list of approved producers.

Background

Mercury is an ingredient in high-intensity discharge bulbs (HID), neon bulbs, ultraviolet bulbs (often used to disinfect drinking water), and florescent lights, including the ubiquitous, spiral-shaped compact fluorescents used in homes.  Businesses that accumulate a significant amount of used mercury-containing bulbs should handle the bulbs as universal waste.  And individuals are now prohibited from disposing of the lights in the trash.

The legislature realized that it needed a way to pay for the handling and recycling of all the bulbs that came from historically unregulated sources like residences.  In 2010, Ecology passed the Washington Mercury-Containing Lighting Recycling Act, which established a product stewardship program funded by producers of the lights.  The producers didn’t like that idea, however, and the National Electrical Manufacturers Association (NEMA) sued to block the law’s implementation.  The State settled with NEMA by agreed to alter the program’s financing structure.

Implementation

As implemented, the law mandates that the product stewardship program is financed by the consumer.  Consumers pay a $0.25 charge on each bulb when purchased, but the producer is still responsible for remitting the fee to the State’s contractor that operates the program.  So as practical matter, the producer is still paying for the program by building the $0.25 fee into its costs and passing that cost along to the consumer.  Producers must register with an approved stewardship program, and there is currently only one approved program – LightRecycle  Washington, which is operated by PCA Product Stewardship, Inc. on the State’s behalf.

Things get trickier for retailers, however.  The primary requirement imposed on retailers is that they must sell bulbs only from approved producers.  Retailers need not register as part of the program unless they choose to remit the $0.25 fee on the producer’s behalf.  Some retailers opt to do so for simplicity.  In either case, retailers collect the $0.25 handling charge on the State’s behalf by building the cost into the sale price, or they eat the cost.

Constitutionality

When it comes to out-of-state or purely online retailers selling bulbs into Washington, the State may be walking a thin constitutional line.  The $0.25 fee looks a lot like a sales tax.  And U.S. Supreme Court precedent in Quill Corp. v. N. Dakota By & Through Heitkamp prohibits the imposition of sales taxes on retailers without a “substantial nexus” to the taxing state, which requires at least a physical presence.

The Washington statute appears to attempt to avoid this problem by requiring only “Washington retailers” to include the fee in the purchase price.  But the statute does not define “Washington retailer,” and even those who are not obligated to include the fee in the price must do so or take a loss.  The principle of Quill may be outdated in the Internet age, and other states have begun to push its boundaries, but it lives on for now.

 

Model Remedies Under Washington’s Model Toxic Control Act – A Modest First Step for Impacted Soil Sites

Posted in Land Use

In December 2014, the Washington Department of Ecology (“Ecology”) issued a white paper discussing the status of its work toward developing “model remedies.”  In 2013, the Washington Legislature directed Ecology to establish these model remedies and the 2014 white paper discusses seven draft model remedies developed for sites with petroleum contaminated soil.

Model remedies are cleanup actions that are determined in advance to meet regulatory requirements if a site meets the eligibility criteria for the remedy.  If a model remedy is used, it is not necessary to conduct either a feasibility study or a disproportionate cost analysis.  Furthermore, if a liable party seeks a “no further action” determination from Ecology, fees for the review are waived.

As might be expected, the model remedies are aggressive and do not provide for risk-based closure. They do address situations where residual soil contamination remains in place subject to recorded restrictive covenants.

However, the draft model remedies outlined in the white paper, while a good first step, are still very limited. First, the model remedies only apply if soil is the impacted media – they do not apply if groundwater, surface water, sediment or indoor air are impacted.   Second, the model remedies also do not apply to sites with contaminated soil below the water table, even if the groundwater is not impacted.

Third, the model remedies also do not apply to sites with contaminated soil when petroleum contamination has been detected in groundwater above the practical quantitation limits.  In other words, even if the groundwater concentrations are below cleanup levels, the model remedies cannot be applied if contaminants are detected in groundwater.

At this time, it is unclear when Ecology will finalize these model remedies or when model remedies for other impacted media will be proposed.

CERCLA Settlements Get a Different Look: the Ninth Circuit May Have Set a New Level of Scrutiny in State of Arizona v. Tucson

Posted in CERCLA, EPA, Rulemakings

The Ninth Circuit has further defined the level of scrutiny required by a court when evaluating settlements under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).  In State of Arizona v. City of Tucson, the Ninth Circuit refused to defer to the settling state agency and required the lower court to independently scrutinize the settlement terms.

This decision will clearly impact the level of scrutiny required by a court when a state proposes to settle both state and federal cleanup liability at a site.  What isn’t clear is whether this decision will impact the level of scrutiny required for all settlements and/or settlements by a state agency under the laws of its state.

Background

The State of Arizona sought judicial approval of proposed settlements with a number of responsible parties.  The settlements resolved the settling parties’ liability under CERCLA and Arizona environmental law.  The District Court approved the settlements and recognized its obligation to independently scrutinize the settlement terms.  However, the District Court opinion did not include any substantive analysis of the settlements’ terms.

The Ninth Circuit stated that it is not enough if evidence sufficient to evaluate the settlement terms is before the court.  The lower court must “actually engage with that information” and explain why the evidence indicates the settlement is substantively “fair, reasonable, and consistent with CERCLA’s objectives.”  The district court must evaluate the specific settlement amounts relative to each party’s liability and consider other factors, such as litigation risk, when determining if the settlement payments are appropriate under the circumstances.

Greater Deference to the EPA than State Agencies

 The Ninth Circuit acknowledged that EPA would be given a greater level of deference in any settlement under CERCLA, but it would not provide the same level of deference to the state agency.  The court expressly declined to apply the “abuse of discretion” standard, apparently because the state was settling with defendants pursuant to a statute the state was not “charged with enforcing.”  The Ninth Circuit seemed to be willing to allow state agencies “some deference” with regard to settlements under their state laws, but it did not say it would allow the agencies the same level of deference provided to EPA under CERCLA.

 

Governor Jerry Brown Calls for 50% Renewables by 2030

Posted in California, Renewables

Yesterday during Governor Brown’s inaugural address for his 4th term, the Governor announced 3 ambitious carbon-reduction goals.

  1. Increase from 33% to 50% electricity derived from renewable sources;
  2. Reduce today’s petroleum use in cars and trucks by up to 50%; and
  3. Double the efficiency of existing buildings and making heating fuels cleaner.

Stay tuned. This means lots of new regulations and initiatives in California in the near future as the various agencies figure out how to achieve these goals!