Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

Science Advisory Board Finally Weighs In on Waters of the U.S.

Posted in EPA, Rulemakings, Water Law

The Science Advisory Board has at last released its peer review  of EPA’s draft report on Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis, the technical support for the proposed rule on definition of “waters of the United States” under the Clean Water Act.  The SAB paper is generally supportive of EPA’s analysis.

As has been reported in this blog, the proposed rule has generated a great deal of controversy, causing EPA and the Corps to extend the comment period twice (November 14 is the current deadline).  Part of the controversy relates to EPA’s analysis of the technical literature supporting the proposed rule, particularly the effect of tributaries, intermittent and ephemeral streams on navigable waters.  A detailed explanation of the proposed rule, case law leading up to it, and prior agency guidance can be found here.

The SAB paper confirms EPA’s science, but recommends more nuance in some instances.  For example, the paper agrees that tributaries, intermittent and ephemeral streams can have a significant effect on the physical, biological and chemical integrity of receiving waters, but notes that the question is not simply whether there is a connection between upstream sources and navigable waters.  Rather, the paper urges EPA to acknowledge there is a “gradient of connectivity.”

The SAB also makes recommendations to improve the clarity of the EPA report and make more definitive statements.  For example, the SAB states that the literature supports a firmer statement on downstream functions of “unidirectional,” non-floodplain wetlands.  The SAB also recommended that EPA expand the discussion of approaches to quantifying connectivity, which would increase the utility of the document for regulators.

The SAB paper certainly is a necessary element of the scientific support for EPA’s and the Corps’ proposed rule for determining jurisdiction.  But it is unfortunate that the agencies reached their policy choices in the proposed rule without the benefit of the SAB’s input.

Whether that reversed sequence matters in the long term remains to be seen.  Even if EPA and the Corps had waited until the SAB completed its peer review, the rule would probably have come out roughly the same and attracted as much comment.

California Groundwater Regulation Enters the 20th Century!

Posted in California, Water Law

On September 16, 2014, California Governor Jerry Brown signed into law a trio of bills to establish a statewide regulatory scheme for the use of groundwater: Assembly Bill 1739, and Senate Bills 1168 and 1319.  California had previously been the only Western state to leave “reasonable” use of groundwater to the tender mercies of individual pumpers until such time as the aquifer is adjudicated, a process that takes decades to complete.

California historically had asserted regulatory authority only over surface streams and defined underground channels.  But the most prevalent, and unregulated, use was of percolating groundwater.  Overlying landowners were deemed to have “correlative” rights to the use of groundwater under their lands; that is, rights proportionate to the amount of owned land.

This laissez faire approach has led to widespread overdrafting of groundwater resources, subsidence, and ruined groundwater quality.  Further, as stream flows decline—whether because of drought or climate change—more users turn to groundwater pumping, lowering the water table and driving up the cost of energy to lift the water.

All the other Western states exerted authority over groundwater in the previous century.  For example, Oregon’s groundwater appropriation law was enacted in 1955.  California finally joined the 20th Century with enactment of these bills as a response to unprecedented drought conditions and the fear that climate change will make matters worse.

In a nod to intense water politics, the bills take a local planning and management approach.  Other states direct their water agencies to establish basin plans to manage their groundwater resources.  In that sense, California has shown leadership in adopting a more decentralized approach to a water-scarce 21st Century.  Under the new legislation, local entities are to develop management plans for their groundwater basin for state review.  The state would intervene only if it deems the management plans inadequate or not enforced.  This local approach has not prevented certain water users from denouncing the bills as a state power grab.

My first job as a lawyer was as staff counsel to the California State Water Resources Control Board.  In response to what was then the worst drought on record, Jerry Brown, in his first iteration as Governor, convened a blue ribbon commission to review California water rights law.  The group was staffed by U. C. Davis law professor Hap Dunning and a team of young water lawyers, including myself.  We reviewed every aspect of California water law in a series of white papers, and made several sweeping and not so sweeping recommendations for reform.

None of the recommendations passed out of legislative committees.  I suspect the current legislation would not have passed either but for the historic and severe drought conditions now facing the state.  California will need to do whatever it can to stretch its limited and declining water resources to support its powerful agricultural economy and growing cities.  Let’s hope that the new groundwater legislation will be a solution for this century.

California Desert Renewable Energy Conservation Plan Aims to Provide Certainty for Renewable Developers: Draft Released

Posted in California, Land Use, Natural Resources

On September 23, 2014, the U.S Department of Interior and the State of California released a draft Desert Renewable Energy Conservation Plan (“DRECP”), which covers over 22 million acres in Imperial, Inyo, Kern, Los Angeles, Riverside, San Bernardino, and San Diego counties.  The DRECP proposes to protect environmentally-sensitive areas of the California desert while also streamlining permitting in areas the DRECP deems appropriate for siting solar, wind, geothermal, and associated transmission development.

The DRECP is the result of an extensive, multi-year public participation process, which included historic levels of collaboration between the U.S. Bureau of Land Management, U.S. Fish and Wildlife Service, California Energy Commission, and California Department of Fish and Wildlife.  It is intended to provide renewable energy developers with permit timing and cost certainty under the federal and California Endangered Species Acts while at the same time preserving, restoring, and enhancing natural communities and related ecosystems.

The DRECP should be of interest to any companies developing, or considering future development of, renewable energy projects in the California desert areas.  The public will have until January 9, 2015 to provide comments, and public information sessions will be held throughout the fall of 2014.  The draft DRECP and further information on the public comment process is available at www.drecp.org.

ECOS Releases “Waters of the U.S.” Paper

Posted in EPA, Federal, Water Law

On September 15, the Environmental Council of the States (ECOS) released a paper produced by the American College of Environmental Lawyers (ACOEL) on the new “waters of the U.S.” rules proposed by EPA and the Army Corps of Engineers.  The new rules are intended to bring clarity as to the jurisdictional reach of the federal government in light of a somewhat muddled guidance from the Supreme Court.  The proposed rules have generated controversy; the House of Representatives recently passed a bill to block them.

The ACOEL paper includes a complete review of previous case law, a compilation of prior guidance and an analysis of the rule.  It was produced by a team of 10 ACOEL (http://www.acoel.org/) members from private practice (including DWT), academia and NGOs.

ECOS, the association of state environmental regulatory agencies, entered into a Memorandum of Understanding with ACOEL under which ACOEL members would lend their expertise to ECOS on complex federal policy initiatives.  ACOEL provides objective analysis without taking an advocacy position, informing the states in aid of their formulating their own policies.

Additional IRS Guidance on Physical Work Test and Facility Transfers for Energy Tax Credits

Posted in Federal, Renewables

The IRS has released additional guidance (Notice 2014-46) on the “beginning of construction” requirement for the renewable energy production tax credit under Code Section 45 (PTC) and energy investment tax credit under Code Section 48 (ITC).  The notice clarifies the application of the Physical Work Test and the effect that certain transfers of a facility after construction has begun will have on a taxpayer’s ability to qualify for the energy tax credits.  The energy tax credits are available to a qualifying facility if construction of the facility began before January 1, 2014. Read More

Grant Recipients Likely to Accept a 50 Percent Share of Cleanup Costs Under New Washington Grant Funding Rule

Posted in CERCLA, Northwest

The new Department of Ecology (Ecology) grant funding rules, which are expected to go into effect in September 2014, will change the way grant recipients resolve contribution claims against other liable parties under the Model Toxics Control Act or CERCLA.  The new rule provides that grant recipients (e.g., cities, counties, Ports, etc.)  may use proceeds from insurance or a contribution claim to meet the recipients’ grant funding share requirements, provided the recipient complies with certain conditions.  This means a grant recipient does not have to repay Ecology as long as the amount it receives from other liable parties (minus its costs to pursue the claim) does not exceed the recipients’ grant funding share, which for most grant recipients is 50 percent.  And since there is no monetary incentive for grant recipients to collect more than 50 percent of what they received in grants, grant recipients should be willing to accept a 50 percent share (or more) of the liability at cleanup sites, regardless of the grant recipients’ actual liability. Read More

Alaska Department of Natural Resources Seeks Comment on Precedent-Setting Instream Flow Water Right

Posted in Water Law

Instream flow 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 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.  The holding of instream flow rights by the Federal government, whether based in state or Federal law, is particularly controversial in light of the tension between state and Federal water law systems and use.  The Alaska Department of Natural Resources’ (DNR) consideration of the United States Fish and Wildlife Service’s (FWS) application for an instream flow water right could be precedent-setting in Alaska and beyond. Read More

Ninth Circuit Rejects CERCLA Settlement, Declines to Give Deference to State Agency

Posted in CERCLA, Litigation

On August 1, 2014, a divided panel of the Ninth Circuit reversed a district court’s approval of a multi-party settlement at an Arizona waste site.  State of Arizona v. Ashton Company Incorporated Contractors and Engineers, et al., No. 12-15691 (9th Cir. August 1, 2014).  The dissenting opinion noted that this is only the second time an appellate court has done so, with both decisions made by the Ninth Circuit.  The reasoning of the majority has to give pause to parties preparing to enter into CERCLA settlements at state-lead sites.

On appeal, the majority opinion held that the district court had not conducted the “comparative analysis” required in the approval of CERCLA settlements under the Circuit’s prior rulings, including US v. Montrose Chemical, 50 F.3d 741 (9th Cir 1995).  In Montrose Chemical, the district court had expressly declined to examine the merits of the settlement and, without any discussion of the merits, relied upon the approval of the settlement terms by the Special Master appointed by the district court to oversee settlement negotiations.

In State of Arizona, the district court did review, but did not discuss, information from the State on the relative liability of the settling parties, instead relying on the judgment of the State agency as to whether the settlement served the public interest.  Because the State agency was making a judgment about the adequacy of a settlement under a federal statute, the majority would not give the same deference to the agency’s determination as it would have given to EPA. The lengthy dissent strongly took issue with the failure to grant deference to the State agency’s determination, and concluded that the record was adequate to support the settlements.

Interestingly, the State agency had provided the district court with information on the basis for the settlement, which included an estimate of total cost.  The court had also received the State environmental agency’s estimate of the relative liability of the settling parties, and its judgment that the settlement terms were in the public interest.  It is likely that both the agency and the district court concluded that more precision was not worth the candle – this was an early settlement and these were small parties at a multi-party site.  Whether one accepts the view that federal courts should give lesser deference to the judgments of state agencies enforcing a federal statute, even where, as with CERCLA, that statute provides the State with a significant enforcement role, the district court here would seem to be exercising the type of judicial discretion to which a reviewing court should give deference consistent with the reasoning in decisions cited by both the majority and the dissent.

As with Montrose Chemical, this settlement will be remanded to the district court for further proceedings.  One hopes that the proposed settlement will not meet the same fate as the settlement in Montrose on remand.  The settlement ultimately approved in Montrose contained the same substantive terms as the one reviewed and remanded by the Ninth Circuit, but only after years of delay while the litigation played out.  Such a delay for these de minimis parties would hardly serve the public’s interest or the objective of CERCLA to promote early settlement.

Fifth Circuit Rejects Application of Sackett to Corps’ Jurisdictional Determination

Posted in EPA, Litigation

In Belle Company, LLC et al v. USACE, No. 13-30262 (July 30, 2014), the Fifth Circuit rejected an effort to apply the Supreme Court’s decision in Sackett v. EPA, 132 S. Ct. 1367 (2012), to a determination by the Army Corps of Engineers that part of a proposed landfill constituted wetlands.  The Fifth Circuit held that while the determination of wetland status marked the consummation of the Corps’ decision-making process, it satisfied only one prong of the required test for subject matter jurisdiction under the Supreme Court’s decision in Bennett v. Spear, 520 U.S. 154 (1997).  The court held that the jurisdictional determination, by itself, did not adversely affect the plaintiff.  The determination could only adversely affect his rights in a future administrative action, e.g., through a future decision on plaintiff’s application for a 404 permit.  If the permit were denied, the plaintiff could then seek judicial review of that decision.  In so ruling, the Fifth Circuit relied on its recent decision in Luminant Generation Co. LLC v. EPA, in which it held that a notice of a Clean Air Act violation was not final agency action because “adverse legal consequences will flow only if the district court determines that Luminant violated the Act or the SIP.”  2014 WL 3037692 at *3 (5th Cir 2014).

In Sackett, the Supreme Court held that an EPA administrative order to a landowner directing it to restore filled wetlands constituted final agency action for purposes of the Administrative Procedure Act (APA), even though EPA had not moved to enforce the order and had offered the landowner an opportunity to engage in informal negotiations.  However, once the order had been issued, Sackett risked penalties for non-compliance with the order, as well as for violation of the Clean Water Act, and was unable to take any action to challenge the order.  As the Fifth Circuit noted, Belle, unlike Sackett, could initiate an action for review of any permit denial based on the jurisdictional determination, and in the interim did not risk the incurrence of $75,000 a day in penalties while waiting for the agency to take some action based on its administrative determination.

The jurisdictional determination by the Army Corps obviously has an immediate impact on the landowner, affecting its decisions regarding future development of the property, even if it does not, like the order in Sackett, immediately subject the landowner to penalties for non-compliance.  If it stands, the Fifth Circuit’s decision here (and in Luminant) suggests that the impact of Sackett may be more narrow than some had hoped, and that parties unhappy with agency administrative determinations may in many cases remain unable to immediately seek judicial review.

National Security & Climate Change: What Do We Need to Know?

Posted in Climate Change

What do a White House senior advisor, a member of Congress, scientists, military planners, and business people all have in common? At a June 4 symposium in Seattle organized by the Jackson Foundation and the Pacific Northwest National Laboratory, they all agreed that Climate Change is having a growing impact on national security that will only increase with time.

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