Corporate Environmental Lawyer

NOW AVAILABLE: Climate Change Law in Review, 2009-2012

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."

The article can be obtained here, or by email request to Gabrielle Sigel, gsigel@jenner.com.

Illinois Working On Development Of Fracking Regulations

By Steven M. Siros

Although leases have been signed on thousands of acres of land in southern Illinois, oil and gas companies have yet to aggressively initiate hydraulic fracturing in Illinois in large part because of the absence of laws regulating that practice. That may soon change, however, in light of efforts underway in Springfield to craft comprehensive fracking rules.

The Illinois Hydraulic Fracturing Act (H.B. 25), which was introduced in the the Illinois House of Representatives on February 21, 2013, would grant the Illinois Department of Natural Resources the authority to promulgate rules and issue permits with respect to hydraulic fracturing activities.  The proposed bill would further require the disclosure of chemicals used in the fracking process, impose well construction standards to minimize source water contamination, establish setbacks with regard to residential and nearby water sources, and provide public input opportunities when fracking permits are issued.  

The bill represents the collaborative efforts of industry, environmental groups and the Illinois Attorney General. We will continue to track this bill as it makes its way through the Illinois legislature.

SEC Requires Inclusion Of Climate Change Proposal In Proxy Materials

By E. Lynn Grayson

In another sign of the SEC's increased focus on environmental and climate change-related risks, the Commission this week informed PNC Financial Services Group, in a letter, that it must include in its proxy materials a shareholder proposal seeking an assessment of greenhouse gas emissions and climate change risks resulting from its lending portfolio. The SEC disagreed with PNC's position that the climate change proposal could be excluded under the 1934 Securities Exchange Act Rule 14a-8(i)(7) which permits the exclusion of proposals dealing with ordinary business operations.

It is important to note that the SEC's Attorney-Advisor Angie Kim specifically stated in its response to PNC that "… we note that the proposal focuses on the significant policy issue of climate change." (emphasis added)

The SEC's decision about PNC's proxy materials suggests that the Commission may be trending towards a greater reliance and support of its 2010 guidance titled Commission Guidance Regarding Disclosure Related to Climate Change. This guidance provided public companies additional insight into existing disclosure requirements as they apply to climate change. The requirement for disclosing climate change risks is the same as those for other risks – whether or not the risk poses a material liability to the company.

More information about this determination is available at http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8.shtml.

State of Green Business 2013

By: E. Lynn Grayson

GreenBiz and Trucost have released a new report State of Green Business 2013 that details natural capital or environmental costs as well as identifies the top ten sustainable business trends in 2013.

Environmental cost data addressed include for example:

• Environmental costs rose 8% between 2007-2011
• Environmental costs in 2011 for U.S. companies was $352 million
• "absolute" environmental cost or financial value of companies environmental impacts was $351.6 billion in 2011 for U.S. companies

The top ten sustainable business trends of 2013, briefly summarized, are as follows:

1. companies take stock of natural capital
2. sustainability becomes a matter of risk and resilience
3. corporate reporting gets integrated
4. the sharing economy makes its mark
5. commerce gets relocalized
6. machine to machine (M2M) enables to use of greener machines
7. sustainability goes app crazy
8. materiality becomes material for investors
9. companies look past their goals
10. peak sustainability threatens corporate progress

This report is rich with data addressing, among other topics: direct and supply chain environmental impacts; absolute environmental costs; energy consumption rates; GHG emissions; water intensity; air emissions; wastes; recycling; and, sustainability.

The report, State of Green Business 2013, is available for free download with registration at http://bit.ly/YUgOqd. 

Post-Sackett Challenge to U.S. EPA RCRA Order

By Steven M. Siros

The first of perhaps many post-Sackett challenges to RCRA orders was filed in the Central District of California in December.  On December 18, 2012, a chemical company (Soco West, Inc.) challenged U.S. EPA's issuance of a RCRA Section 7003 unilateral compliance order.  In its complaint, the chemical company argues that the unilateral order is a final agency action that is subject to review under the Administrative Procedures Act ("APA").  The company seeks to challenge the order on the basis that U.S. EPA's actions in issuing the order were arbitrary and capricious. 

Prior to the Supreme Court's decision in Sackett v. EPA, pre-enforcement challenges to unilateral orders were unsuccessful because courts determined that such orders did not constitute final agency action.  In Sackett, however, the Supreme Court found that compliance orders issued under the Clean Water Act ("CWA") constituted final agency action that was reviewable under the APA.  Like the CWA, RCRA does not contain an express prohibition on pre-enforcement review. 

Please click here to view a copy of the complaint filed by Soco West, Inc.  We will continue to provide updates on this case as it progresses.

D.C. Circuit Court Denies Request For Rehearing of Decision Upholding EPA GHG Emission Regulations

By Gabrielle Sigel

On December 20, 2012, the U.S. Court of Appeals for the D.C. Circuit voted to deny rehearing of a June 26, 2012 panel decision of that court, which had upheld a series of U.S. Environmental Protection Agency ("EPA") Clean Air Act regulations for control of greenhouse gas ("GHG") emissions from mobile and stationary sources. Coalition for Responsible Regulation v. EPA, No. 09-1322, U.S. Ct. App. D.C. Cir., on petition for rehearing en banc (12/20/2012). In a 6-2 decision, with two judges writing dissents, the D.C. Circuit court denied petitioners' request for rehearing. The statements of three D.C. Circuit judges supporting the panel's original decision and of the two judges who disagreed and voted to grant the rehearing provide a preview of the parties' arguments in opposition to and in favor of an appeal being heard by the U.S. Supreme Court, particularly with respect to EPA's permitting program for stationary sources.

In June 2012, a panel of the D.C. Circuit court had approved EPA's Clean Air Act ("CAA") GHG regulations. Coalition for Responsible Regulation v. EPA, No. 09-1322, U.S. Ct. App. D.C. Cir. (6/26/12). The case was before the court after several States, led by Virginia and Texas, and industry groups, including the U.S. Chamber of Commerce, had filed petitions with the appellate court in response to EPA's series of GHG regulations. Those regulations included EPA's finding that GHG emissions constitute a danger to public health and environment, regulation of emissions from mobile sources, and requiring permits for GHG emissions from stationary sources, limited to the largest sources of GHGs. The D.C. Circuit court panel of three judges upheld all of EPA's regulations in a unanimous per curiam decision. (Id.) (A more detailed explanation of the panel's decision can be found at the Corporate Environmental Lawyer blog entry, "Federal Appellate Court Gives U.S. EPA Greenhouse Gas Regulatory Victory," June 27, 2012.)

In response to the loss before the panel, several of the petitioners filed petitions with the D.C. Circuit court for rehearing en banc, i.e., for a review of the case by all eight of the judges sitting on the D.C. Circuit court. Two judges voted to grant the en banc petitions and, in their statements supporting their dissent, they focused on EPA's regulation of stationary sources. The contested EPA regulations subjected GHG stationary source emissions to permitting under the CAA's Prevention of Significant Deterioration ("PSD") program for emission sources located in attainment areas. "Attainment" under the CAA applies to facilities that operate in areas of the U.S. whose ambient air conditions meet National Ambient Air Quality Standards ("NAAQS") for six regulated air pollutants. Even though GHGs are not a NAAQS-regulated pollutant, EPA interpreted the CAA requirements such that the PSD program applied to GHG emissions. Specifically, EPA interpreted the CAA's statutory trigger for PSD permitting - emission of "any regulated pollutant" - to apply to GHGs, not just NAAQS-regulated pollutants. Because the PSD program is triggered by emission levels that are relatively very low for GHG emissions (albeit relatively high when applied to emissions of NAAQS pollutants), EPA issued its Tailoring Rule, which modifies the CAA's statutory triggers for sources of GHG emissions. Under the Tailoring Rule, PSD requirements initially only apply to sources emitting GHGs of at least 75,000 or 100,000 tons per year ("tpy"), rather than the statutory levels of 100/250 tpy that are applied to the NAAQS pollutants. EPA justified its Tailoring Rule on three grounds: (1) implementing the CAA's tpy triggers for GHGs would lead to "absurd results" not intended by Congress; (2) the administrative burden that would otherwise be imposed; and (3) the agency's authority to implement statutory requirements over time. Rather than addressing the substance of EPA's bases for the Tailoring Rule, the Circuit Court held that neither industry nor State petitioners had standing to address the Tailoring Rule. Basically, the D.C. Circuit panel found that petitioners failed to show that the Tailoring Rule caused "injury in fact" or that vacating the rule would redress the injury.

The dissenting judges took issue primarily with the substance of EPA's decision to apply the PSD program to GHG emissions. In her statement dissenting from the denial of rehearing, Judge Brown began by lamenting the Supreme Court's 2007 decision, Massachusetts v. EPA, 549 U.S. 497 (2007), in which the Court decided that the CAA's regulation of pollutants from automobiles included GHGs, if EPA determined that such emissions endangered public health. Specifically, she "engages Massachusetts's interpretive shortcomings in the hope that either Court or Congress will restore order to the CAA." (Brown dissent, slip op. 2.) Judge Brown also explored her view that, even after Massachusetts, EPA is not entitled to apply the PSD program to GHG emissions. She notes that EPA itself recognized and promoted the "absurdity" of applying the CAA as written to GHG emissions, and finds that EPA does not have the power to "preempt legislative prerogatives", which repeatedly failed to regulate GHGs. (Id., 13.) She pronounced that "[t]he real absurdity is that this unprecedented expansion of regulatory control, this epic overreach, may very well do more damage to the well being of Americans than GHGs could ever do." (Id.) Judge Brown also relied on Supreme Court precedent under the "major questions" doctrine, Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000), to urge that administrative agencies should not receive deference "on questions of great significance more properly resolved by the legislature." (Id., 14.) Finally, Judge Brown took issue with the panel's decision on standing, finding that petitioners' standing in this case was no more speculative than the petitioners' standing that the Supreme Court recognized as sufficient in Massachusetts. Judge Brown concluded, "In denying rehearing en banc, this Court has read Massachusetts to its illogical ends and it is American industry that will have to pay. That this Court did so is unsurprising, but certainly not fated." (Id., 22-23.)

Judge Kavanaugh, in his dissent, noted that "[t]his case is plainly one of exceptional importance…[with] massive real-world consequences." (Kavanaugh dissent, slip op. 1.) He reviewed the CAA's language and found that the CAA's PSD language should more logically and appropriately be interpreted to mean that it applied only to NAAQS pollutants and not to GHGs. He noted that this more "straightforward" interpretation avoided the "absurdities" that lead to EPA's Tailoring Rule. (Id., 6, 17.) Judge Kavanaugh concluded by finding that EPA's regulation of GHGs under the PSD program put "the bedrock underpinning of our system of separation of powers…at stake." (Id., 18.) Because "EPA went well beyond what Congress authorized for the [PSD] statute", it is the court's duty to enforce the statutory boundaries and require EPA to read the CAA in a manner that avoids its application to GHGs from stationary sources. (Id., 21.)

In response to the dissents, three Circuit court judges (Sentelle, Tatel, and Rogers) issued a statement in support of the denial of the en banc petition. They rejected Judge Brown's view that Massachusetts did not envision the far-reaching consequences leading to control of GHG emissions from stationary sources. They also disagreed with Judge Kavanaugh's limit of the PSD program to NAAQS pollutants, stating that "the panel's interpretation of the statute is the only plausible one." (Order denying pet. for rehrg., slip op. 3.) They agreed, however, with Judge Kavanaugh that separation of powers is an important issue, but found that "Congress spoke clearly, EPA fulfilled its statutory responsibilities, and the panel, playing its limited role, gave effect to the statute's plain meaning." (Id., 4.)

All of the judges issuing opinions in response to the petitions for en banc rehearing were speaking to the Supreme Court, which will decide whether to grant the expected petition for permission to appeal to that Court. The petition for writ of certiorari before the Supreme Court must be filed within 90 days after entry of judgment in the Circuit court.

Alaskan Village Seeks Rehearing of Climate Change Suit in 9th Circuit

By Keri L. Holleb Hotaling

On October 4, 2012, the Alaskan Village of Kivalina filed a petition for rehearing en banc in the Ninth Circuit. Petitioners urge the Ninth Circuit to reconsider its September 21, 2012 decision to uphold dismissal of a federal common law public nuisance claim against twenty-two energy companies over their greenhouse gas emissions, which Kivalina claimed left the Village uninhabitable by eroding sea ice that protected the Village from fall and winter storms. Kivalina had sought damages of roughly $400 million. In its petition for rehearing, Kivalina argues that the recent Ninth Circuit decision directly conflicts with Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008). Kivalina maintains that in Exxon Shipping, the Supreme Court held that the Clean Water Act, like the Clean Air Act at issue in this case, displaces federal common law claims for injunctive relief, but not for damages. The petition states "[t]he direct conflict here between the majority opinion and Exxon Shipping practically jumps off the page." Kivalina contends the Ninth Circuit's panel's decision was in error because Exxon Shipping "suggests a different result" from the one reached by the majority.

Ninth Circuit Affirms Dismissal of Federal Common Law Nuisance Claim for Global Warming

By Keri Holleb Hotaling

On September 21, 2012, the Ninth Circuit Court of Appeals in Native Village of Kivalina v. ExxonMobil Corp. et al., 9th Cir., No. 09-17490, ruled that the Alaska town of Kivalina could not sue energy companies under a federal common law claim of public nuisance for global warming caused by greenhouse gas emissions. Please click here to see opinion. 

Kivalina is a coastal Alaskan town approximately seventy miles north of the Arctic Circle, whose residents are indigenous Alaskans. The town contended that due to global warming and a commensurate sea level rise, inhabitants were forced to leave and relocate further inland. Kivalina sued twenty-two oil, energy, and utility companies, alleging federal common law nuisance; state law private and public nuisance; civil conspiracy; and concert of action. The residents of the Village were seeking roughly $400 million in damages. The Northern District of California dismissed the action on alternate grounds: (i) the action was prohibited by the political question doctrine, and (ii) the plaintiffs lacked standing to pursue their claims. The town appealed to the Ninth Circuit.

The Ninth Circuit held that the Clean Air Act and, and the Environmental Protection Agency action that the Act authorizes displaced Kivalina's common law claims. The Ninth Circuit largely followed the reasoning of the Supreme Court in American Electric Power Co., Inc. v. Connecticut, ---U.S.----, 131 S. Ct. 2527, 180 L. Ed. 2d 435 (2011), in affirming the dismissal of the action by the district court finding, "[i]n sum, the Supreme Court has held that federal common law addressing domestic greenhouse gas emissions has been displaced by Congressional action. That determination displaces federal common law public nuisance actions seeking damages, as well as those actions seeking injunctive relief." The appeals court concluded by noting, "[o]ur conclusion obviously does not aid Kivalina, which itself is being displaced by the rising sea. But the solution to Kivalina's dire circumstance must rest in the hands of the legislative and executive branches of our government, not the federal common law." Kivalina was one of the last remaining major climate tort suits pending in the federal courts.

Sequestration To Cut $716 Million From U.S. EPA Budget

By Steven M. Siros

If budget sequestration takes effect on January 2, 2013, U.S. EPA will face a $716 million budget cut.  According to a September 14, 2012 report from the White House Office of Management and Budget ("OMB"), U.S. EPA's budget would be reduced from approximately $8.4 billion to $7.7 billion. The OMB report projects that the Superfund program would face cuts of approximately $122 million; state and tribal assistance grants would be cut by approximately $293 million; and U.S. EPA's program account would be cut by approximately $220 million. The OMB report goes on to acknowledge that these cuts would degrade U.S. EPA's "ability to protect the water we drink and the air we breathe" and encourages Congress to act to prevent these cuts from being triggered. According to an U.S. EPA official, U.S. EPA is developing its 2014 fiscal year budget without accounting for these significant budget cuts. To see a copy of the OMB report, please click here.  

September 11th CBA and ISBA Environmental Networking Reception

By Allison A. Torrence

The Chicago Bar Association (CBA) Environmental Law Committee, the CBA Young Lawyers Section Environmental Law Committee, and the Illinois State Bar Association (ISBA) Environmental Law Section are hosting an Environmental Networking Reception on September 11, 2012, from 4 pm to 6 pm. The networking reception will be held at the Chicago Bar Association, 321 South Plymouth Court, Chicago, Illinois.

Jenner & Block attorney and co-chair of the CBA Young Lawyers Section Environmental Law Committee, Allison A. Torrence, will make brief remarks at the reception along with other representatives from the CBA and ISBA.

If you would like to attend, please RSVP by September 7, 2012, to Dave Scriven-Young at dscriven-young@pecklaw.com.