A recent Ninth Circuit decision limited the ability of an insurer to seek CERCLA contribution and/or cost recovery from potentially responsible parties ("PRPs"). In Chubb Custom Insurance Company v. Space Systems/Loral et al., Chubb issued a pollution premises liability ("PPL") policy for a site in Palo Alto, California. Chubb's insured sought recovery from Chubb for site remediation costs pursuant to the PPL policy and after lengthy negotiations, Chubb reimbursed its insured the sum of $2.4M.
Chubb then proceeded to file CERCLA Section 107 cost recovery claims against other site PRPs. Chubb also asserted a separate claim under CERCLA Section 112(c), arguing that Chubb was subrogated to any rights its insured might have against the other site PRPs. The district court dismissed Chubb's complaint, finding that Chubb's claims were insufficient to satisfy the pleading standards articulated in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. Chubb appealed the district court's dismissal.
The Ninth Circuit found that the insured's failure to make any written demand for response costs from other site PRPs was fatal to Chubb's subrogation claim under CERCLA Section 112(c)(2). With respect to Chubb's CERCLA Section 107(a) cost recover claim, the court found that a "subrogee—simply by stepping into the shoes of the insured via a reimbursement—cannot be liable for response costs under CERCLA, and thus cannot itself incur response costs." The Ninth Circuit therefore affirmed the district court's dismissal.
In his dissent, Justice Gould focused on the public policy implications of the majority's decision. Justice Gould was concerned that the majority opinion requires the insurer to foot the bill while other PRPs pay nothing. The dissent argued that the court's decision ignored CERCLA's polluter pays mandate and would result in increased insurance premiums.
Chubb has already expressed its intention to petition for rehearing en banc and if this is not successful, Chubb will likely seek review of the Ninth Circuit decision before the Supreme Court.
The Center of Biological Diversity ("CBD") has filed a petition with U.S. EPA seeking to add the Northwestern Hawaiian Islands and waters of the Pacific Ocean within the United States' jurisdiction to CERCLA's National Priorities List ("NPL"). In its petition, CBD argues that the large mass of plastic debris known as the "Pacific Garbage Patch" is particularly harmful due to its impacts on marine wildlife and the coral reef ecosystems of the Hawaiian Islands. The CBD further argues that because these plastics contain toxic chemicals that are passed up through the food chain, the plastic debris is also harmful to humans that consume fish from the region.
In its press release, the CBD indicated that "this is the first time that plastic-infested waters of the United States have been nominated for Superfund designation." U.S. EPA has one year to act on the petition. In the event that U.S. EPA were to grant the CBD petition, it is unclear who might be responsible for remediating the contamination. To view the CBD petition, please click here.
The United States Environmental Protection Agency ("EPA") is seeking public comments on a revision to "Waste Analysis at Facilities That Generate, Treat, Store, and Dispose of Hazardous Wastes: A Guidance Manual." The guidance manual was last updated in 1994. The current version of the guidance manual (dated January 2013) is available here.
The manual provides guidance on how to develop and implement a Waste Analysis Plan in accordance with the Resource Conservation and Recovery Act ("RCRA"). The primary audiences for the manual are hazardous waste generators and owners/operators of treatment, storage, and disposal facilities ("TSDFs").
EPA has identified the following areas as in particular need of clarification in the revised guidance manual:
- Design of characterization studies;
- Recharacterization frequency;
- How to address issues of waste variability;
- Establishing and employing data quality objectives;
- Selection of indicator parameters to reduce testing costs;
- Measurement uncertainty; and
- Using statistical concepts to guide the characterization process.
The EPA is inviting operating TSDFs, permit writers, trade associations, and environmental groups to provide comments on the updated guidance. EPA will accept comments through April 30, 2013. More information is available on the EPA website.
Lockheed Martin announced this week that it has found a way to greatly reduce the amount of energy required to remove salt from seawater. This new discovery has the potential to make it vastly cheaper to produce clean water at a time when water scarcity is emerging as a global security issue.
The key here appears to be a pure carbon product known as graphene – created in sheets so thin (just an atom in thickness) that it takes much less energy to push seawater through a filter with sufficient force to separate salt from water. It is hoped this new process may eliminate the need for underdeveloped countries to construct costly pumping stations currently required in the reverse osmosis desalination process.
Lockheed reports a number of challenges in moving to production of filters made of graphene, a substance similar to the lead in pencils. Working with this material is difficult without tearing it as is refining the process for making the holes.
The new filtering material, known as Perforene, may be available as early as the end of this year. The objective is a drop in replacement for filters now used in reverse osmosis plants. Lockheed Martin has been awarded a patent for the Perforene material. Perforene material works by removing sodium, chlorine and other ions from seawater.
According to Lockheed Martin, graphene – the ultra strong, carbon-based material – could revolutionize the world's clean water supply. As we celebrate World Water Day today, this is great news.
The National Intelligence Council has conducted an intelligence community-wide assessment of water risks of states strategically important to the U.S. Looking out to 2040, they identified three global drivers for water scarcity: 1) population growth; 2) economic development; and, 3) climate change. In the near term, economic development and population growth are bigger drivers than climate change. Beyond 2040, climate change may be the driver.
At a May 2012 program at the Wilson Center "Global Water Security: The Intelligence Community Assessment," it was noted that water scarcity may trigger social disruption. Moreover, it was suggested that water potentially could be used as a weapon by terrorists or by states seeking to marginalize sections of their populace.
The U.S. Department of State has identified five priorities for water security: 1) building cross-state institutional capacity; 2) increasing diplomatic efforts; 3) mobilizing financial support; 4) promoting science and technology; and, 5) building sustained partnerships.
While water scarcity issues tend to be addressed in the context of social, human rights and environmental issues, these concerns are emerging as an international intelligence risk. It was stated at the Wilson Center program that "… left unaddressed, water challenges worldwide are going to present a threat to U.S. security interests."
The 2012 Wilson Center program discussed here can be viewed online at https://www.wilsoncenter.org/event/global-water-security-the-intelligence-community-assessment.
The World Resources Institute (WRI) believes that water scarcity is one of the defining issues of the 21st century. In its Global Risks 2013 report, the World Economic Forum identified water supply crises as one of the highest impact and most likely risks facing the planet. According to the report, "Two risks appear in the top five of both impact and likelihood – chronic fiscal imbalances and water supply crises." With the support of a diverse group of partners and in response to this growing need, WRI built Aqueduct to help companies, investors, governments, and communities better understand where and how water risks are emerging around the world. Aqueduct will measure, map and allow a better understanding of water risks around the globe. In January 2013, the World Resources Institute launched the centerpiece of Aqueduct after a three-year development effort: the Water Risk Atlas. The Atlas uses a robust, peer reviewed methodology and the best-available data to create high-resolution, customizable global maps of water risk.
The Aqueduct Atlas allows users to perform a variety of searches and to customize analyses including:
- view maps of projected change in water stress in coming decades;
- learn more about Aqueduct's river basin studies;
- review up-to-date water risk news stories;
- download data behind Aqueduct's water risk maps;
- examined data sources and methodology behind water risk maps; and,
- input or upload locations for study and export those results to Exel.
WRI offers "how to" tutorials, online instruction and seminars on how to use this valuable tool to review, assess and track water risk. WRI also supports a related blog and Twitter associated with Aqueduct.
There are many reasons a party may need to better understand water risk in a certain area, region or country. Aqueduct is an important tool available to the public allowing up-to-date access on water risk both now and in the future.
WRI is committed to transparency and open data. The data and methodology behind Aqueduct are documented and available for download. Thanks to WRI and its partners, all the products, methodologies and data sets that make up Aqueduct are available for free use.
To learn more about WRI and Aqueduct, visit https://aqueduct.wri.org/.
World Water Day 2013 draws attention and focus on issues around the world associated with water stress, water security and water scarcity. It is easy for many of us in areas where water is plentiful and readily available to believe that these concerns relate to others or are problems facing those living in other countries or on different continents. A closer look shows that there is growing evidence that water stress exists in the U.S. today and that these concerns may grow in significance into the future. A brief review of 2013 news stories confirms that water scarcity also is becoming a more common topic in ongoing litigation and regulatory proceedings. Below are brief summaries that highlight water rights disputes ongoing now arising from water scarcity situations:
Arizona Water Dispute: The Arizona Department of Water Resources recently approved a 7,000 new home development plan in Sierra Vista, Arizona which would allow 3,000 acre-feet of water a year to be pumped from the last big, free flowing river in the Southwest – the San Pedro. The U.S. Bureau of Land Management, along with local landowners and environmental groups, have appealed the decision arguing that the new pumping would intercept water that otherwise would flow to replenish the San Pedro River and the surrounding 57,000 acre San Pedro Riparian National Conservation Area. At issue are the water rights of local landowners as well as "reserved water rights" that entitle the federal government to "sufficient" water to serve areas including military bases, Indian reservations and national parks. Two cases are pending addressing an appeal of the State's approval of the development plan and water allocation matters.
Great Lakes' Water Levels: U.S. Army Corps of Engineers reported in January, 2013 that the water level in the Great Lakes is the lowest it has been since modern record-keeping began in 1918. Many concerned with these record setting water levels want the U.S. and Canadian governments to take action. Such action is focused, in part, on dredging activities in the St. Clair River which is the main outflow for the lakes. Dredging is responsible for some of the lowering of water levels along with warm and dry weather and overall changing weather patterns. The International Joint Commission, a binational body that oversees U.S. – Canadian boundary water issues, is reviewing thousands of public comments received after the release of a study about water levels in the Great Lakes. Recommendations from the Commission are anticipated in Q1 2013.
Texas – Oklahoma Water Dispute: The Tarrant Regional Water District is a large water supply agency serving north-central Texas. Tarrant wants to purchase water from Oklahoma to help meet its supply needs and now is engaged in a long standing water war between Texas and Oklahoma over allocation of the Red River. Tarrant filed a petition for certiorari asking the U.S. Supreme Court to weigh in on this dispute involving interesting Commerce Clause and interstate water compact implications. In January 2013, the U.S. Supreme Court agreed to hear Tarrant's lawsuit against Oklahoma over control of the water that flows from several of its river basins into the Red River.
Mississippi River Levels Threaten Barge Traffic: 2012 drought conditions are blamed for low water levels in the Mississippi River watershed that threatens to close a portion of the river between St. Louis, MO and Cairo, IL. As the river drops, barge tows are threatened with running aground on bedrock formations in the shipping channel. One complicating factor in managing levels in the Mississippi River is management of flows from the Missouri River. Whether or not increased flows can be contributed by the Missouri River will depend upon the snowpack in the mountains and the Dakotas, where the headwaters of the Missouri originate. According to the National Climate Data Center, the lack of precipitation throughout much of the country has brought about drought conditions that are the worst since the 1950s. The U.S. Army Corps of Engineers is "cautiously optimistic" that the river will remain open to barge traffic.
Each of the news items above were identified in daily national or local newspapers and not through a review of legal publications or court dockets. Water-related news is more and more common often appearing in our local newspapers.
EPA has named the membership of the first advisory board to support implementation of the Great Lakes Restoration Initiative – an aggressive action plan addressing five urgent issues through fiscal year 2014:
- cleaning up toxics and areas of concern;
- combating invasive species;
- promoting near shore health;
- restoring wetlands; and,
- tracking progress working with strategic partners.
According to a recent report from Bank of America Merrill Lynch Global Research titled "A Blue Revolution – global water," some companies in the water services industry are in the strongest position to benefit from the global dynamics of water supply and demand. The global water services industry is set to double to $1 trillion dollars in annual revenues by 2020 responding to water scarcity problems.
According to the report and as commonly outlined in other recent water stress studies, water is on course to be scarcer than oil by 2030, with demand outstripping water supply by 40 percent. Close to half of the world's population will be living in water-stressed areas. The report opines that unless more sustainable water management practices are adopted, 45 percent of projected 2050 global GDP at 2000 prices could be at risk or about $63 trillion dollars.
The report highlights three themes in addressing water scarcity: 1) water treatment; 2) water management; and 3) water infrastructure and supply, addressing each as follows:
Water treatment – emerging market growth driving demand
Rising water scarcity and growing demand from agriculture, housing and industry will increase demand for water treatment. The report details how agriculture accounts for 70 percent of water use and demand is rising as diets change. As industries across emerging markets expand, their demand for water rises. Municipal and residential water use is also growing on the back of urbanization. Wastewater reuse stands at only 2.41 percent of all water withdrawals globally.
The report outlines opportunities in areas such as producing drinking water, irrigation, or returning water to the natural environment. It focuses on sectors with heavy volumes and environmental constraints (such as utilities, oil and gas, and mining), those with strict water constraints (food and beverage, cosmetics) and variable effluents (petrochemicals, energy, and breweries). The report highlights how desalination could emerge as a $25 billion industry by 2025.
Water management – smarter irrigation is key
Against the backdrop of growing water scarcity, fragmented water management and conflicting interests of stakeholders are too expensive and unsustainable in the long term. There is growing recognition that the water crisis is as much a consequence of weak policies and poor management as natural scarcity. Effective water management enables users to cut their use of water. It also mitigates the risks associated with water shortage and reduces the need for capex-intensive solutions.
With up to 60 percent of water used in agriculture wasted, smarter irrigation is essential. Household water management has huge potential – if all U.S. households installed water-saving features, the dollar-volume savings would be more than $4 billion per year. Companies involved in areas such as drought-resistant seeds and crops and smart metering are poised to benefit from appetite for water management.
Water infrastructure and supply – growing role of private finance
The report highlights the global need for water infrastructure. Developed markets need to replace crumbling and incomplete infrastructure while emerging markets need to build infrastructure for the first time. Annual water investment needs are estimated to rise to more than $770 billion for the OECD and BRICs by 2015. With public funding increasingly under financial pressure, we believe the private sector will need to play an increasingly important role.
Water infrastructure is currently a $360 billion-plus market and is registering growth of up to 6 percent in some segments. Scope for growth is especially strong in Latin America and Asia. Companies involved in engineering, construction and consulting, pipes, pumps and valves and sewage treatment will benefit.
Citing the World Resources Institute – Aqueduct Project, the report details supply-side water pressures noting these concerns are further exacerbated by a lack of freshwater, its uneven distribution, widely varying quality and emerging climate change risks. "Every region of the world…" is impacted by water scarcity.
The report provides significant data including companies at risk because of water reliance, companies with opportunities as well as countries suffering the most significant water stress, water scarcity and absolute water scarcity.
While an economic market analysis report for investors, this report provides good insight into the business, regulatory, political, social and legal issues at play related to water scarcity now and into the future. To view the report, go to https://www.merrilledge.com/Publish/Content/application/pdf/GWMOL/ABlueRevolution-globalwater.pdf.
In celebration of World Water Day next Friday, March 22nd, the Corporate Environmental Lawyer blog will feature a series of blogs this week focused on water scarcity and water related topics including a review of the latest water scarcity studies, global water security, U. S. water rights issues and conflicts ongoing now, updates on issues with the Great Lakes, impacts of these water concerns on business and new technological developments that offer hope for improving freshwater supplies around the world.
The United Nations has declared this to be the International Year of Water Cooperation. In keeping with this directive, the theme of this year's World Water Day will be "cooperation around water." Established in 1993, World Water Day highlights the importance of freshwater and advocates for sustainable management of freshwater resources.
Water scarcity is a growing concern locally, nationally and globally. Given estimated population growth, coupled with adverse impacts from climate change, the adequacy of water resources, and particularly freshwater supplies, is uncertain. It is clear that more commitment is required by all to manage existing resources in a more sustainable manner.
Learn more about World Water Day at https://www.unwater.org/water-cooperation-2013/home/en/
In recognition of World Water Day, this week's blog will feature a variety of water-related stories and updates. Please follow our blog to learn more about water scarcity and its many impacts now and in the future.
A recent Seventh Circuit decision rejected a PRP's efforts to obtain interagency memorandum and other communications between the Environmental Enforcement and the Environmental Defense Sections within the United States Department of Justice ("DOJ"). See Menasha Corp. et al. v. United States, (7th Cir. 2013). In 2010, the United States, on behalf of U.S. EPA and the Department of the Interior, filed a lawsuit seeking to compel a number of alleged PRPs to remediate the Fox River Superfund Site (which remediation has been estimated to be as high as $1.5 billion).
Shortly after the lawsuit was filed, DOJ sought judicial approval of a proposed consent decree with several defendants in which the United States offered to contribute $4.5 million to the cleanup in recognition that other federal agencies (including U.S. EPA and the United States Army Corps of Engineers) had contributed to the PCB contamination in the Fox River. Menasha Corporation ("Menasha"), one of the defendants in the underlying litigation, challenged the consent decree in part on the grounds that the federal agencies' contribution to the contamination at the site was far greater than the $4.5 million that they were proposing to contribute to the site cleanup. Menasha was concerned that the consent decree would act as a bar to its contribution claims against the United States.
Menasha therefore sought to obtain communications between the enforcement and defense sections of DOJ, likely hoping that these communications might evidence some collusion between the defense and enforcement sections of DOJ. Menasha argued that since the two sections of DOJ represent separate governmental entities with divergent interests, they were in fact adversaries. Since communications between adverse parties results in a waiver of privilege, Menasha argued that it was entitled to those communications. The District Court agreed and ordered the requested materials be produced. The Seventh Circuit was not similarly convinced.
Although some might analogize this situation to the adversary relationship between the State's attorney and the public defender, the Seventh Circuit analogized the situation to one where a consumer sues a private company in a personal injury lawsuit. One division of the company might seek to have the case settled to avoid bad publicity while the other division would seek to litigate the case to avoid setting a bad precedent. The general counsel would then make a final decision but the Seventh Circuit opined that one wouldn't reasonably argue that communications between the two divisions should be produced because of the adversarial relationship between the two divisions.
The Seventh Circuit expressed concern that were it to order disclosure of internal communications between competing interests within the Justice Department, the result would be that the Justice Department could never shield attorney work product in a case like this without "a crippling reorganization of the Department." Instead, the Seventh Circuit concluded that since the only federal party in the underlying litigation was the United States, a single party represented by a single representative, DOJ, communications between the separate sections of DOJ were not communications between adverse parties. As such, the Seventh Circuit concluded that these communications were protected by the attorney work product privilege and need not be disclosed.
Some might argue, however, that where DOJ represents a site PRP (a defendant) and U.S. EPA (or in this case, the Department of the Interior) (in its enforcement capacity), even if there is only a single federal entity named in the litigation, DOJ should not be able to hide behind the attorney work product privilege to shield communications between the two DOJ sections. The Seventh Circuit seemed to have left this door open a little, referring in dicta to the possibility of a waiver in a situation where you have independent federal agencies "squaring off against each other as opposing parties in litigation." However, the court acknowledged that this was not the fact pattern before it and it therefore rejected Menasha's efforts to obtain disclosure of these communications.
In a letter dated February 6, 2013, then-Administrator of the U.S. Environmental Protection Agency ("EPA"), Lisa Jackson, wrote to Senator Barbara Mikulski (D-MD) to explain how the sequestration budget cuts will impact EPA's ability to protect the nation's environment and public health. Ms. Jackson identified impacts to the following EPA Programs:
- Air Programs
- Enforcement and Compliance Programs
- Tribal Programs
- Research and Development Programs
- Water Programs
Ms. Jackson also explained that the sequestration cuts will limit EPA's ability to protect communities from the risks posed by hazardous waste sites.
The sequestration budget cuts went into effect on March 1, 2013, requiring EPA to cut approximately $425 million from its $8.3 billion annual budget. In a memo to staff on March 1st, EPA's Acting Administrator Robert Perciasepe announced that, in addition to cuts in grants and contracts, EPA employees will be required to take up to 13 unpaid furlough days in the coming year. EPA employees must take four unpaid days off between April and June, at which point EPA will re-evaluate its budget and determine how many additional furlough days will be required, possibly up to a total of 13 days by the end of September.
A copy of Ms. Jackson's letter is available here.
Minnesota is believed to be one of the first state governments to stop buying products containing triclosan, an antibacterial commonly used in soap and cosmetics. Through its combined buying power, the state purchases about $1 million worth of cleaning products a year.
While there is uncertainty about whether triclosan is hazardous to humans, there also is no evidence that hand soaps and/or hand sanitizers containing triclosan are better than regular soap and water at preventing infections. Laboratory studies have found that triclosan may disrupt hormones, interfere with muscle function and promote the growth of stronger bacteria. In addition, there is growing concern suggesting a buildup in the environment may present risks to wildlife.
Triclosan also is known as 2,4,4'-trichloro-2'-hydroxydiphenyl ether, 5-chloro-(2,4-dichlorophenoxy) phenol, trichloro-2'-hydroxydiphenyl ether, CH-3565, Lexol 300, Irgasan.
In the environment, triclosan becomes a dioxin, a family of environmental contaminants linked to a variety of health risks, from cancer to hormone disruption, and which persist in the environment for years. They once came largely from industrial sources such as paper pulp mills and garbage incinerators, but increasingly stringent regulations have greatly reduced their emissions.
The recent study of triclosan in eight Minnesota lakes, conducted by scientists at the University of Minnesota and the Science Museum of Minnesota, found that triclosan and the dioxins it forms have increased in sediment while other kinds have decreased. In short, even though the water-treatment process removes most of the triclosan, antibacterial products are now the primary source of dioxins in the lakes and rivers.
There is growing concern about Triclosan and its impact on humans and the environment. This recent action by the State of Minnesota is the latest development for a substance that is undergoing continuing scrutiny in the United States and in other countries as well.
The SEC recently told PNC Financial Services Group, Inc. that the bank had to consider a shareholder request to assess climate change impacts of its investment portfolio. A March 4th article titled Banks Dragged Into Climate Change Fight With SEC Order discussed the SEC's recent order and the impact on the financial industry. The article notes that "… social responsibility proposals almost never pass. Instead, they are a tool for relevant shareholder constituencies to seek to drive more engagement around a particular topic. They often lead to dialogue around an issue and sometimes more disclosure, whether in public filings or on the issuer's website."
Grayson noted that the SEC's action sends a message that the Commission is taking climate change seriously. She is quoted as saying "… that may be a lot to ask for a financial institution but that seems to be the message the SEC is sending" referring to requests for greenhouse emission data for PNC's assets.
Gabrielle Sigel, Co-Chair of Jenner & Block's Climate and Clean Technology Law Practice, has written a comprehensive review of climate change law during President Obama's first term: Climate Change Law in Review, 2009-2012: Obama's First Term Changes the Climate on Climate Change. The article explores the changes and challenges in climate change law that occurred over the last four years. Ms. Sigel analyzes the actions taken by President Obama's EPA, and other federal agencies, ground-breaking legal decisions in the courts, and attempts by Congress to address these issues. Ms. Sigel also explores U.S. participation in climate action in the international sphere. The article begins:
"At the close of Barack Obama's first term as President, he was criticized by many for having done little to address climate change and by others for having done too much. Regardless of whether one thought it too much or too little, between 2009 and 2012, there was significant new government action attempting to address the effects of climate change. Notably, this climate action came primarily out of the Executive Branch, using statutes previously passed by the Legislative Branch, and challenged and defended – typically successfully – in the Judicial Branch."