Corporate Environmental Lawyer

WHO Announces Second Meeting On Global Collaboration In Chemical Risk Assessment

By E. Lynn Grayson

The World Health Organization (WHO) has announced its second meeting focused on strengthening global collaboration in chemical risk assessment to be held 29-30 March 2012 in Bonn, Germany. The first meeting was held in March 2010.

The two day meeting will follow up on key issues and priority actions to address the needs identified in March 2010 including: capacity building/training; chemical risk assessment/sharing knowledge; risk assessment methodology; and, research. The objective of the first day of the meeting is to provide an update on tools developed to increase capacity globally in chemical risk assessment and propose strategies to enhance update of risk assessment methodologies. The objectives of Day 2 of the meeting are to further explore interest in participating in a WHO Risk Assessment Network, to discuss the Network design in terms of vision, goals and objectives, structure and function, as well as to propose options for its implementation.

The WHO previously identified ten chemicals of major public health concern that are an important focus in the continuing risk assessment work:

1. Air pollution
2. Arsenic
3. Asbestos
4. Benzene
5. Cadmium
6. Dioxin and dioxin-like substances
7. Inadequate or excess fluoride
8. Lead
9. Mercury
10. Highly hazardous pesticides

More information about this upcoming meeting and WHO's outreach on chemicals and related risk assessment is available at http://www.who.int/ipcs/en/.

CCX Sued For Fraud

By Steven M. Siros

On December 14, 2011, a group of investors that purchased trading privileges on the Chicago Climate Exchange ("CCX") sued the CCX and its founders, alleging fraud and violations of Illinois' Consumer Fraud and Deceptive Business Practices Act. The lawsuit, which was filed in Illinois state court, contends that defendants falsely represented that only a limited number of trading privileges would be sold and once these privileges were sold, the privileges would be freely transferable. The CCX was acquired by Intercontinental Exchange ("ICE") in April 2010. In August 2011, ICE announced that due to low trading volume on the CCX (attributable to the failure to pass federal cap and trade legislation), the exchange would operate through first quarter 2012 and then shut down. In their lawsuit, plaintiffs allege that they would not have purchased trading privileges on the CCX had they been aware that the privileges would ultimately not be marketable. To see a copy of the complaint, please click here.

CDP Issues 2nd Annual Water Disclosure Report

By E. Lynn Grayson

The Carbon Disclosure Project (CDP) launched its second annual Water Disclosure Global Report on Friday, November 16th. It is based upon a questionnaire sent to 315 companies on the Global 500 Index identified as operating in the most water-stressed locations or industry sectors. The CDP report shows some improvement by reporting companies on water management issues but overall, the report concludes that more board-level attention is required to address this critical concern.

The following are some key findings from the process and the report:

1. 190 companies or 60% of identified companies responded to the questionnaire – a 10% increase over last year.
2. Over half (59%) of companies responding reported exposure to water-related risks such as flooding, scarcity and reputational damage.
3. One third (38%) of companies already have experienced water-related business impacts, such as disruption to operations from severe weather events or water shortages.
4. 63% of companies believe that water presents commercial opportunities and commonly identified opportunities relate to increased water efficiency, among others.
5. 72% of companies understood the linkages or tradeoffs between water and carbon emissions.
6. 41% of companies confirm that the biggest water risk facing their businesses is water stress or scarcity.

CDP Water Disclosure collects data annually on water use, strategies, and risks and opportunities from companies on behalf of 354 investors representing US$43 trillion in assets. The Carbon Disclosure Project is an independent not-for-profit organization providing a transformative global system for companies and cities to measure, disclose, manage, and share climate change and water information.

The 2011 CDP Water Disclosure Report is available at https://www.cdproject.net/CDPResults/CDP-Water-Disclosure-Global-Report-2011.pdf.

ISS Provides Voting Guidance on Environmental Issues for the 2012 Proxy Season

By Alexander J. May and Genevieve J. Essig

On November 17, 2011, Institutional Shareholder Services Inc. ("ISS") published the 2012 updates to its U.S. Corporate Governance Policy. The proxy voting guidelines in this document, which is reviewed and updated annually, influence how many major institutional shareholders vote on shareholder proposals and are monitored closely by all public companies. In its 2012 updates, ISS included specific policies regarding shareholder proposals related to hydraulic fracturing (also known as fracking), water issues, and workplace safety, as well as an updated recycling policy. ISS had previously used its existing General Environmental Proposals and Community Impact policy for shareholder proposals on hydraulic fracturing and water issues.

The most significant development is that ISS generally recommends a "For" vote on shareholder proposals requesting greater disclosure of a company's natural gas hydraulic fracturing operations. ISS reasoned that, given the high profile and the number of previous shareholder proposals on the subject [1], as well as the level of institutional investor support for such proposals [2], that "a specific policy on hydraulic fracturing-related proposals [was] warranted."

On the other hand, ISS makes a "case-by-case" voting recommendation regarding: (1) proposals to adopt a comprehensive recycling strategy; (2) proposals requesting that a company report on, or adopt a new policy on, water-related risks and concerns; and (3) requests for workplace safety reports, including reports on accident risk-reduction efforts. With respect to water issues, ISS notes that shareholder proponents are submitting proposals regarding water-related risks more frequently and that water risks are rising in profile. Similarly, ISS cited high-profile accidents in the oil and gas industry as driving recent shareholder proposals on workplace safety.

In sum, along with the Securities and Exchange Commission's guidance on disclosure of climate-related risks, environmental issues are likely to be a hot topic during the 2012 proxy season.

To view the full text of the 2012 Updates, click here.

Criminal Charges Filed For Sale of Fake Renewal Energy Credits; NOVs Issued to Companies that Purchased Fake Credits

By Steven M. Siros

On October 3, 2011, Rodney Hailey, the Chief Executive Officer of Clean Green Fuels, LLC was charged with wire fraud, money laundering, and Clean Air Act violations for allegedly selling $9 million in fake renewable energy credits. According to the complaint, Hailey is alleged to have sold 32 million renewable energy identification numbers representing approximately 22 million gallons of biodiesel fuel. The credits were purchased by oil companies to demonstrate compliance with a provision in the Energy Independence and Security Act that requires these companies to either produce a specific quantity of renewable fuel or purchase renewable energy credits.

On November 7, 2011, U.S. EPA issued notices of violation to 24 companies that had purchased these invalid credits, noting that the use by these companies of invalid credits to demonstrate compliance was still a violation "regardless of that person's good faith that the [credits] were valid at the time they were acquired." U.S. EPA has ordered these 24 companies to submit revised corrected compliance reports within 14 days or face potential penalties of $37,500 per day. Please click here to go to U.S. EPA's website for more information on these notice of violations.

EPA Inspector General Releases Report on Greenhouse Gas Endangerment Finding

By Genevieve Essig

Yesterday, the U.S. EPA Office of Inspector General (OIG) released a report entitled "Procedural Review of EPA's Greenhouse Gases Endangerment Finding Data Quality Processes," which was conducted at the request of Sen. James Inhofe (R-Okla.), Ranking Member of the Senate Committee on Environment and Public Works. According to the report, the purpose of the review was "to determine whether EPA followed key federal Agency regulations and policies in obtaining, developing, and reviewing the technical data used to make and support its greenhouse gas endangerment finding," referring to EPA's "Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act," issued December 15, 2009. EPA had relied on assessments conducted by outside organizations, such as the U.S. Global Change Research Program (USGCRP) (f/k/a U.S. Climate Change Science Program (CCSP)), the Intergovernmental Panel on Climate Change (IPCC), and the National Research Council (NRC), as the primary scientific basis for its endangerment finding, summarizing the results and conclusions of those assessments in its technical support document (TSD) accompanying the finding.

Environmental Citizen Groups Have No Standing to Challenge Climate Change Impacts of Federal Actions

By Gabrielle Sigel

Two U.S. district courts recently issued separate decisions rejecting environmental groups' challenges to federal actions based on alleged climate change injuries. In both cases, using the same legal test, the courts found that the environmental groups did not have standing to pursue their claims against the federal agencies. This is an important development in climate change litigation, which in the past has addressed standing only in the tort context or regarding claims brought by States, not when private parties were challenging federal agency actions.

Climate Change Update for August 2011 Now Available

By Gabrielle Sigel

Jenner & Block's latest monthly Climate Change Update, for August 2011, is available on the Firm's website.

The Climate Change Update summarizes on a monthly basis important climate change legislative, litigation, regulatory and research developments. The August 2011 Climate Change Update includes a discussion of the Obama Administration's announcement of the first-ever GHG emission standards for medium/heavy-duty trucks and for other heavy-duty vehicles. The update also includes a discussion of important developments affecting the ability of environmental citizen groups to bring federal lawsuits challenging federal regulations based on alleged climate change injuries.

Insurer Not Responsible For Global Warming Claims

By Steven M. Siros

On September 16, 2011, the Virginia Supreme Court issued its long-awaited decision in The AES Corporation v. Steadfast Insurance Company.  In that decision, the Virginia Supreme Court agreed with the insurance company's argument that it had no obligation to provide coverage for claims relating to alleged damages caused by greenhouse gas emissions. 

In 2008, The AES Corporation ("AES") was sued by the Native Village of Kivalina and the City of Kivalina for damages related to global warming allegedly caused by AES' greenhouse gas emissions.  AES in turn requested that its insurance company, Steadfast Insurance Company ("Steadfast") defend and indemnify it with respect to these claims.  Steadfast filed a declaratory judgment action, contending that it owed no defense or indemnity on three grounds:  (1) the Kivalina complaint did not allege "property damage" caused by an "occurrence"; (2) any alleged injury arose prior to the inception of coverage; and (3) the claims alleged fell within the pollution exclusion in the Steadfast policies.

In granting Steadfast's request for declaratory relief, the Virginia Supreme Court relied on the policy's definition of "occurrence".  The court noted that the term "occurrence" was defined with reference to "an accident" which in turn has been held to refer to an incident that was unexpected from the viewpoint of the insured.  Because the Kivalina complaint alleges that AES intentionally released greenhouse gases, the Virginia Supreme Court concluded that the alleged release of greenhouse gases could not constitute an "occurrence" as that term was defined in the policies.  The court further noted that the Kivalina complaint alleged that AES "knew or should have known" that its activities in generating electricity would result in the environmental harms suffered by the plaintiffs.  Per the court, "if an insured knew or should have known that certain results would follow from his acts or omissions, there is no 'occurrence' within the meaning of a comprehensive general liability policy."  The court did not address the remaining two arguments raised by Steadfast. 

The Kivalina case itself remains pending in the Ninth Circuit and briefing on the impact of the Supreme Court's decision in AEP on that case is ongoing.

New Ceres Environmental Disclosure Report Discussed

By E. Lynn Grayson

A recent publication by Ceres, Disclosing Climate Risks and Opportunities in SEC Filings: A Guide for Corporate Executives, Attorneys and Directors, was part of the materials provided in the September 7, 2011 Changing Standards for Environmental Disclosures webinar co-sponsored by the Environmental Law Institute and Jenner & Block. The report addresses:

• Climate change and the new SEC guidance.
• SEC disclosure expectations and how companies are responding.
• Other key elements of strong corporate disclosure.
• 11-point checklist for developing a climate change strategy and disclosing risks and opportunities in SEC filings.

Jim Coburn, Senior Manager, Investor Program, at Ceres spoke at the September 7th webinar and made participants aware of this recent report. Jim's powerpoint presentation and other program materials are available at http://www.eli.org/index.cfm.