Corporate Environmental Lawyer

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.

President Obama Withdraws Support of New Ozone Air Quality Standards

By Keri L. Holleb Hotaling

The Obama administration told EPA today that the President does not support finalizing the July 11, 2011 draft final rule, "Reconsideration of the 2008 Ozone Primary and Secondary National Ambient Air Quality Standards" and that the rule was being returned to the EPA for reconsideration. Following the recommendation of its scientific advisers, the EPA recently proposed lowering the ozone standard from 75 parts per billion ("ppb") set by the Bush administration in 2008 to a new stricter standard between 60 ppb and 70 ppb. In a statement, President Obama stressed his commitment to the environment, but stated, "I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover." Relevant provisions of the Clean Air Act forbid EPA to consider costs in deciding the stringency of both primary and secondary national ambient air quality standards. The President went on to say, "[w]ith that in mind, and after careful consideration, I have requested that Administrator Jackson withdraw the draft Ozone National Ambient Air Quality Standards at this time. Work is already underway to update a 2006 review of the science that will result in the reconsideration of the ozone standard in 2013. Ultimately, I did not support asking state and local governments to begin implementing a new standard that will soon be reconsidered." In a letter to EPA Administrator Jackson, Cass Sunstein, head of the White House Office of Information and Regulatory Affairs, said that he had been instructed by the President to carefully scrutinize all regulations "that impose significant costs on the private sector or on state, local, or tribal governments." Administrator Jackson said in a statement that "[t]his Administration has put in place some of the most important standards and safeguards for clean air in U.S. history: the most significant reduction of sulfur dioxide and nitrogen oxide air pollution across state borders; a long-overdue proposal to finally cut mercury pollution from power plants; and the first-ever carbon pollution standards for cars and trucks. We will revisit the ozone standard, in compliance with the Clean Air Act."

President Obama's Statement

Sunstein's Letter to Administrator Jackson

Administrator Jackson's Statement

Jenner & Block's Climate Change Update for July 2011 Now Available

By Gabrielle Sigel

Jenner & Block's monthly Climate Change Update, covering state, regional, national and international legislative, regulatory, and business developments affecting climate change and new technology law, is now available for July 2011.  The July Climate Change Update, as well as all prior months, can be found at Jenner & Block's Climate Change Update Resource Center.  This month's update includes a discussion of Congressional proposed amendments to EPA's pending appropriations bill targetting climate change programs and deveopments in the lawsuit brought by environmental groups seeking to compel EPA to regulate, under the Clean Air Act, GHG emissions from nonroad vehicles and engines, including marine vessels and aircraft engines. 

National Brownfield Association Sustainable Vision Breakfast

Stephen H. Armstrong will speak at an upcoming National Brownfield Association (NBA) event titled "Sustainable Vision Breakfast," to be held July 21, 2011 at Jenner & Block's Chicago office conference center.  The event will feature a panel with leaders of the City of Chicago, IEPA, and USEPA Region 5 presenting their sustainability vision and the opportunities that it will create for business, the environmental community and civic/nonprofit organizations.  Following the panel discussion, Mr. Armstrong, who is NBA Illinois Chapter President, will share his thoughts on implementing the sustainability vision.  See link below for more information.

https://ssl.brownfieldassociation.org/Events/NBASustainableVisionBreakfast20110721.aspx