By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice and Arie Feltman-Frank

Hiding in plain sight in the Fiscal Responsibility Act of 2023 (FRA)--which is intended to extend the nation’s debt limit into 2025 in order to avoid a federal default--are provisions that seek to amend the National Environmental Policy Act (NEPA) for the first time in over 40 years.  Although the FRA’s provisions greenlighting the federal permitting process for the Mountain Valley Pipeline have garnered the most attention, the FRA contains a number of other provisions meant to streamline environmental reviews of major federal actions. While many laud streamlining the NEPA process as a necessary step to bolster efficiency, several environmental groups and democratic legislators caution that these amendments significantly roll back NEPA’s regulatory reach. 

The FRA incorporates many of the provisions that were previously in Representative Garret Graves’ “Building United States Infrastructure through Limited Delays and Efficient Reviews (BUILDER) Act of 2023” that was included in its entirety in the House Republicans’ original debt ceiling bill passed in April 2023. 

Specifically, the FRA proposes the following amendments to NEPA:

• Substantial Federal Control and Responsibility. Defines “Major Federal Action” as “an action that the agency carrying out said action determines is subject to substantial Federal control and responsibility.” By adding “substantial,” the FRA emphasizes that for federal actions to trigger NEPA review, the actions don’t just need to be subject to Federal control and responsibility; the control and responsibility must be “substantial.”

• No Extraterritorial Activities or Decisions. Excludes from the definition of “Major Federal Action” extraterritorial activities or decisions, which means agency activities or decisions with effects located entirely outside of the jurisdiction of the United States. This is a more restrictive standard than has been adopted by some courts that have been called upon to evaluate the scope of NEPA. 

• Categorical Exclusions. Expands the use of categorical exclusions by allowing agencies to rely on other agencies’ categorical exclusions to avoid the preparation of a NEPA environmental assessment (EA) or environmental impact statement (EIS). 

• Reasonably Foreseeable Effects. Narrows agency considerations by only requiring review of “reasonably foreseeable” environmental effects. 

• Streamlining.  Seeks to streamline the NEPA process by requiring the designation of a “lead Federal agency” for projects that involve two or more participating Federal agencies. Imposes page limits of 75 pages for EAs and 150 pages for the majority of EISs. Imposes specific deadlines for the completion of environmental reviews, with a two-year limit on the completion of an EIS and a one-year limit on the completion of an EA, as well as a mechanism to seek judicial review for alleged failures to comply with these deadlines.

• Division of Responsibilities. Requires lead agencies to prescribe procedures to allow project sponsors to prepare EAs or EISs under the supervision of the agency. The lead agency is still required to independently evaluate the environmental document and must take responsibility for its contents.   

• Narrows Alternatives, Negative Impacts of No Action. Narrows agency considerations of the alternatives to a “reasonable range . . . that are technically and economically feasible and meet the purpose and need of the proposal,” and requires “an analysis of any negative environmental impacts of not implementing the proposed agency action in the case of a no action alternative.”

Although these amendments will likely result in fewer projects requiring an EIS and should streamline the NEPA review process, it is important to consider what the FRA does not change. For example, the BUILDER Act sought to significantly limit an agency’s consideration of cumulative impacts and those modifications did not carry through into the FRA. The FRA also does not explicitly limit or otherwise address an agency’s obligation to consider climate change impacts of federal projects. 

If these NEPA revisions survive in the final FRA, they are likely to require the White House’s Council on Environmental Quality (CEQ) to recalibrate its ongoing efforts to revise NEPA’s implementing regulations.  CEQ had sent a draft of its Phase 2 NEPA revisions to the Office of Management and Budget (OMB) for review and the draft Phase 2 revisions had been expected to be published for comment in June 2023. The statutory changes to NEPA will need to be incorporated into the Phase 2 rules, which will certainly derail CEQ’s proposed June release date. 

We will continue to provide updates on the final language in the FRA and CEQ’s ongoing NEPA rulemaking activities at the Corporate Environmental Lawyer. 

By Allison A. Torrence 

The U.S. Supreme Court has issued its opinion in the landmark Clean Water Act (“CWA”) case of Sackett v. EPA, No. 21-454 (May 25, 2023). This decision delivers a significant change in terms of the reach and jurisdiction of the CWA, and supplies some harsh critiques between the Justices that all agreed in the judgement but were fiercely divided on how to get there.

The question presented to the Court was, seemingly, straightforward: “Whether the Ninth Circuit set forth the proper test for determining whether wetlands are 'waters of the United States' under the Clean Water Act, 33 U.S.C. § 1362(7).” But, this question has wide-reaching implications. The definition of “waters of the United States” (“WOTUS”) sets the jurisdictional limits of the CWA. Under the CWA, the U.S. Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“Army Corps”) have the power to regulate, among other things, the discharge of pollutants to navigable water from a point source (33 U.S.C. § 1362(12)) and the discharge of dredged or fill material into navigable waters (33 U.S.C. § 1344). “Navigable waters” are defined in the CWA as “the waters of the United States, including the territorial seas.” 33 U.S.C. §1362(7). “Waters of the United States” is not defined further under the Act, so the agencies have been left to try to craft a definition.

The Army Corps and EPA first proposed a WOTUS definition in 1977 and it has faced revisions and legal challenges ever since. The most controversial aspect of the WOTUS definition throughout its history has been the inclusion of wetlands and other non-navigable waters. The WOTUS definition has faced Supreme Court review in three previous cases:

• U.S. v. Riverside Bayview, 474 U.S. 121 (1985)
• Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001)
• Rapanos v. U.S., 547 U.S. 715 (2006)

Which brings us to the Sackett case. Justice Alito authored the majority opinion for the Court, joined by Chief Justice Roberts, and Justices Gorsuch and Barrett. All of the other Justices also concurred in the judgment, but joined in separate concurring opinions. The case involved a residential property owned by the Sacketts located near Priest Lake in Idaho. The property was designated by EPA as a wetland, and when the Sacketts started backfilling their property to begin constructing a house, they received a compliance order from EPA. EPA determined that the Sackett’s wetlands were WOTUS because they were adjacent to a tributary to Priest Lake and they were part of a larger wetland that had a significant effect on Priest Lake.

In evaluating this case, Justice Alito discussed the history of the CWA and the WOTUS definition. Alito acknowledged that the statutory context of the CWA shows that some wetlands qualify as WOTUS. That is because in 1977, Congress amended the CWA to add §1344(g)(1), which includes language that refers to navigable waters “including wetlands adjacent thereto”. Thus, Alito saw the Court’s task as “harmoniz[ing] the reference to wetlands in §1344(g)(1) with ‘the waters of the United States’”. (Slip Op. at 19.) Ultimately, the Court held that:

the CWA extends only to those wetlands that are as a practical matter indistinguishable from waters of the United States….This requires the party asserting jurisdiction over adjacent wetlands to establish first that the adjacent body of water constitutes waters of the United States (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.

Slip Op. at 22 (internal citations omitted).

Interestingly, Justices Kagan, Sotomayor, Kavanaugh and Jackson all concurred in the judgment—they all agreed the ruling of the lower court should be reversed—but they strongly disagreed with the majority’s adoption of the “continuous surface connection” test for wetlands. Thus, the concurring opinions written by Justice Kagan and Justice Kavanaugh read like dissents and sharply criticized Justice Alito’s majority opinion. Both Justices argued that the majority’s test disregards the ordinary meaning of “adjacent” and narrows the CWA to exclude wetlands the Act has covered since 1977. That is because “adjacent” does not mean adjoining or contiguous; it can mean nearby. Thus, these concurring Justices would have adopted a test, consistent with agency practice, that “a wetland is “adjacent” to a covered water (i) if the wetland is adjoining—that is, contiguous to or bordering—a covered water—or (ii) if the wetland is separated from a covered water only by a man-made dike or barrier, natural river berm, beach dune or the like.” (Kavanaugh Concurring Op. at 4.)

Justice Thomas also concurred with the majority opinion, but wrote a separate opinion, with which Justice Gorsuch joined. Justice Thomas’s concurrence did not address the textual arguments that were the focus of the other opinions; instead he provided a detailed history of water regulation and stated that the CWA jurisdiction should be limited to truly navigable waters. He also included a section discussing his views on the court’s Commerce Clause jurisprudence and his belief that many environmental laws are not sufficiently related to interstate commerce to pass Constitutional muster.

While there was strong debate between the Justices, the definition of WOTUS appears to be settled at long last. A wetland will NOT be considered a WOTUS (and therefore not under the jurisdiction of the CWA) unless it has a continuous surface connection with a traditional navigable water. As we previously reported, EPA and the Army Corps recently updated the WOTUS rule in early 2023. That definition is not consistent with the Sackett ruling, and will likely be further revised by the agencies. EPA has not indicated yet how or when it will be revising the rule, or whether it will have enforcement guidance or leniency in the interim. We will be monitoring those developments and provide the latest updates on the Corporate Environmental Lawyer Blog.

       By    Steven M. Siros, Tatjana Vujic, Daniel L. Robertson and Arie Feltman-Frank

Earth Week 2023 brought with it two significant environmental justice developments. The week began with New Jersey Governor Phil Murphy announcing the adoption of regulations aimed at reducing pollution in historically overburdened communities and those disproportionately impacted by health and environmental stressors. President Biden then capped the week off by issuing an Executive Order on Revitalizing Our Nation’s Commitment to Environmental Justice for All which further embeds environmental justice initiatives throughout the federal government (read our analysis of that order here). These actions display the heightened emphasis on environmental justice that has led to these and other significant developments at the federal and state levels.

The United States Environmental Protection Agency (USEPA) defines environmental justice as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” With increased funding provided by the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, and the American Rescue Plan Act, federal agencies are investing at unprecedented levels to advance environmental justice.

The Biden administration also developed the Justice40 Initiative, with a goal of ensuring that 40% of the overall benefits of certain federal investments flow to “disadvantaged communities that are marginalized, underserved, and overburdened by pollution.” The Climate and Economic Justice Screening Tool geospatially identifies such disadvantaged communities, which include federally recognized Tribes and Alaska Native villages.

As companies face increased scrutiny all along the supply chain, including from regulators, customers, investors, and the public, one thing is clear: failure to consider environmental justice implications of corporate activities can significantly hinder the advancement of corporate objectives, including the achievement of climate targets, the effects of which are quite significant. By way of example, in September 2022, a company’s air permits to build a $9.4 billion plastics manufacturing complex were vacated in part because the state Department of Environmental Quality’s environmental justice analysis was found to be arbitrary and capricious, and therefore failed to uphold the “public trust doctrine” of Louisiana’s constitution.

The increased scrutiny and risks associated with failing to consider environmental justice issues is causing some companies to reevaluate corporate policies and develop business practices that embrace environmental justice and community stakeholder initiatives. In this client alert, our team explains how embracing environmental justice and community stakeholder concerns can advance corporate objectives.

A Recent History of Environmental Justice Developments

While the concept of environmental justice has long had its roots in American civil rights history, President Biden brought the topic to the forefront of federal governance as part of the administration’s “whole-of-government” approach to addressing health and environmental impacts on disproportionately affected communities. Through various executive orders, the Biden administration has put its policy of prioritizing environmental justice initiatives and directing federal agencies to make achieving environmental justice a part of their missions into practice. Federal developments thus far have taken the form of plans, new offices and positions, grant programs, mapping tools, reviews of existing legal authority, permitting guidance, and enforcement policies.

Federal, state, and local developments that are particularly relevant to the regulated community are reviewed below.

USEPA’s Legal Authorities to Advance Environmental Justice

USEPA published a May 2022 report, followed by a January 2023 addendum, that reviewed the agency’s legal authority to advance environmental justice and take steps to mitigate the cumulative impacts of federal actions taken under its various programs. The takeaway is that USEPA has existing legal authority to advance and address these topics in decision-making. This authority encompasses the full breadth of the agency’s activities, including its oversight of state programs.

USEPA also has the authority to advance environmental justice through civil rights laws. Title VI of the Civil Rights Act of 1964, for instance, prohibits recipients of federal financial assistance from intentionally discriminating on the basis of race, color, or national origin (including limited English proficiency) in their programs or activities.

USEPA’s implementing regulations also prohibit recipients of federal financial assistance from taking actions that have a discriminatory effect. The regulations offer a mechanism for a person who believes they have been discriminated against to file a complaint with any USEPA office, as well as authorize USEPA’s Office of Civil Rights to periodically conduct compliance reviews. If a recipient is found to be noncompliant, the recipient may elect to take corrective actions to mitigate the risk of losing financial assistance.

Permitting Guidance

USEPA recently issued interim guidance for addressing environmental justice and civil rights during permitting, as well as specific guidance for addressing environmental justice concerns specific to air permitting. The guidance emphasizes that compliance with federal environmental laws does not necessarily provide a shield against allegations of non-compliance with federal civil rights laws.   

For example, in Chicago, the city allegedly agreed to permit a scrap metal recycling facility’s relocation from a predominantly White neighborhood into a predominantly Black and Hispanic neighborhood. After a two year investigation, the US Department of Housing and Urban Development found the city in violation of the Civil Rights Act and the Housing and Community Development Act, stating that the city’s involvement in the relocation of the facility, approval of the new site, and methods used to achieve these objectives were shaped by the race and national origin of the residents of each neighborhood.

Therefore, even beyond what is legally required by the applicable permitting statute and regulations, companies should consider taking steps throughout the permitting process to ensure that environmental justice and civil rights concerns are being sufficiently analyzed and adequately addressed, as well as ensuring sufficient community engagement.   

Enforcement Policies

As outlined in USEPA’s Fiscal Year 2022-2026 Strategic Plan, new environmental justice-focused enforcement policies emphasize increased inspections in communities with environmental justice concerns, prioritizing enforcement in overburdened communities, and identifying remedies for noncompliance that offer tangible benefits to those communities. USEPA also emphasized acting through emergency orders to secure early relief where possible. Enforcement remedies include increased or additional fence-line monitoring, public availability of monitoring data, and encouraging supplemental environmental projects that are tied to addressing adverse environmental impacts on local communities. 

State and Local Developments

In addition to various states that have enacted or are in the process of enacting environmental justice-related legislation, New York recently joined Montana and Pennsylvania by explicitly including a “right to clean air and water, and a healthy environment” in the New York Bill of Rights. Several other states have proposed ballot initiatives to incorporate environmental rights into their constitutions.

At the local level, the focus on environmental justice has propelled some municipalities to address the topic in similar as well as different ways. As a 2019 report prepared by the Tishman Environment and Design Center indicates, municipalities have addressed environmental injustice through various land use measures, including bans on polluting facilities; policies that incorporate environmental justice goals and considerations into municipal activities; environmental review processes; and proactive planning, zoning, and public health codes.

For example, in 2020, Washington, DC amended its comprehensive plan to incorporate environmental justice objectives. Among other things, the plan states that environmental justice principles should inform public policy decisions on the siting of municipal and industrial facilities.

Embracing Environmental Justice as Part of a Company’s Corporate Culture

Considering the heightened focus on environmental justice outcomes, companies would be well served to ensure that their environmental, health, and safety programs adequately consider potential environmental justice issues and concerns and are designed in ways that strengthen community and stakeholder relationships, such as by incorporating environmental justice commitments into a company’s environmental, social, and governance (ESG) goals. Below, we outline some recommendations and best practices. 

Keep Abreast of Environmental Justice Developments that May Affect Your Operations

Track environmental justice issues. Not all environmental justice issues will apply to a specific business. However, being aware of national and local developments will allow a company to minimize regulatory, permitting, and community concerns and challenges that may otherwise catch it off-guard, including potential risks of objections to permits and litigation.

Understand your geographical area. By taking steps to better understand the communities in the areas where a company operates or may operate, a company can evaluate risks and make better informed business decisions. For example, companies can take advantage of resources such as USEPA’s EJScreen Mapping Tool, which provides demographic, socioeconomic, and environmental information for chosen geographic areas. Other mapping tools, such as the Council on Environmental Quality’s Climate and Economic Justice Screening Tool and state-specific tools are also available.

Companies with current or future operations in areas with higher percentiles of socioeconomic or environmental quality factors should prepare for the potential legal risks this may pose, including increased government and public scrutiny, and consider how to mitigate potential issues ahead of time. The tools can also be used to aid a company in analyzing health, social, and economic effects of a specific project.

Build a Proactive Environmental Plan

Create an environmental policy or revise an existing one. The rise of corporate accountability has resulted in companies revising their business plans to incorporate ESG criteria into their decision-making. A way to ensure that environmental justice is included in a company’s ESG plan is to make environmental justice part of a company’s social objectives.

In particular, as we discussed in a prior client alert, a company may wish to organize its social criteria objectives so that environmental justice commitments are treated as under the company’s direct control, much like scope 1 greenhouse gas emissions are under the direct control of the company. Companies should also consider developing a public involvement plan as part of their social criteria. Environmental justice can be measured by the amount and quality of direct community engagement and community service. In this way, companies that develop robust engagement plans that further environmental justice objectives of the local community can fold those plans into the social criteria aspects of a greater ESG policy.

Perhaps the most important takeaway is that companies should be cognizant of the interconnectedness of their environmental goals to environmental justice and social/stakeholder concerns. A good environmental justice policy means a good social policy which means a more robust and effective environmental policy and greater chance of meeting environmental objectives.

Develop a robust compliance plan. Enforcement and litigation risk will be higher for companies with operations in communities with environmental justice concerns. Therefore, it is especially important that these companies have robust compliance programs in place. As we previously discussed here, companies can benefit from consistently monitoring their operations and considering the availability of advanced monitoring technologies and methodologies (such as monitoring by aircraft and satellite) that may catch violations and prevent ongoing ones.

Companies should also strictly comply with all applicable monitoring, recordkeeping, and reporting requirements, and consider voluntary disclosure policies. USEPA’s Audit Policy provides several major incentives, including reduction of 100% of gravity-based penalties, for regulated entities to voluntarily discover and fix federal environmental violations. Moreover, the US Department of Justice, Environmental Crimes Section’s Voluntary Self-Disclosure Policy offers beneficial treatment to companies that disclose potentially criminal environmental violations.

Review suppliers and other entities with which the company contracts. In a prior client alert, and as mentioned above, we discussed how a company can define the social aspect of its ESG plan to assist in developing a baseline standard against which a company can measure itself. This includes a company taking steps to establish a standard by which it expects those with which it contracts to behave, reviewing its supply chains to identify any potential areas of inequity against such a standard, and subsequently holding suppliers and other entities with which it transacts accountable, while being particularly mindful of actions that could be tied back to the company.

Use Existing Tools and Resources to Assist in Siting and Permitting Decisions

Be aware of evolving siting and permitting requirements. As discussed above, companies making siting or permitting decisions should consider that projects in or near communities disproportionately burdened by pollution will receive scrutinized attention. Therefore, companies should ensure that environmental justice and civil rights concerns are being proactively evaluated and sufficiently addressed under environmental, civil rights, and environmental justice laws and seek out any available guidance to rectify such concerns. Failure to do so may result in unforeseen project hurdles, wasted resources, and an eventual siting or permit denial. We previously discussed how USEPA incorporates these concerns into the permitting process. Considering recent USEPA guidance on this topic, companies should develop their own best practices for permitting oversight, which should include the following: 

• Use available screening tools to assess the existence of environmental justice or civil rights concerns early in the permitting process.
• Perform an appropriately scoped environmental justice analysis or disparate impact analysis (which should consider cumulative impacts) where concerns exist.
• Know what questions to ask, such as who is being affected by the action? How, and by how much? Compared to whom? Can we mitigate the effects and, if so, how?
• Develop a public involvement plan and engage communities and tribes to ensure that their views are accounted for (discussed further below).

Failure to take these measures as part of the project scoping process may result in significant hurdles to project development. This includes the possibility of pressure being exerted on state and local regulators to change their course of action with respect to a proposed project. In the Chicago example discussed earlier, the city denied a scrap metal recycling facility’s permit to begin operating an $80 million facility after USEPA issued a letter raising health impact concerns in the surrounding community. The city’s decision, which is currently the subject of a lengthy and ongoing appeal, followed an alleged agreement between the facility operator and city that would have allowed the operator to move to the site.

This also includes active opposition to a project, which may turn into litigation. For example, developer Air Products recently sued Livingston Parish after the parish attempted to restrict the company’s proposed hydrogen/carbon capture and storage project through a moratorium. Ultimately, the parties came to a resolution, whereby the parish agreed that the moratorium was invalid and unenforceable, and the parties agreed that each would bear its own fees and costs related to the litigation.

Review existing permit conditions. Companies with existing facilities that will be applying for permit renewals should be prepared for the possibility of new and more stringent permit obligations being imposed by regulators at the time of their permit renewal. The recently enacted New Jersey environmental justice regulations, for example, set forth a step-by-step process for reviewing future permit applications, including specifically stating that existing permit holders may be subject to additional permit conditions to reduce health and environmental impacts.

More stringent requirements of which companies should be mindful may include, among other obligations: additional monitoring, recordkeeping, and reporting requirements; additional pollution controls and/or more stringent limits; and the inclusion of enforceable work practices, operating plans, and/or best practices for minimizing emissions and/or discharges.

Companies should address environmental justice-related concerns sooner than later, by taking advantage of the existing tools discussed above, to avoid unforeseen complications arising during the permit renewal process. For example, if particulate emissions are a specific concern in your area (e.g., EJScreen shows a particularly high EJ Index percentile for particulate matter 2.5), taking proactive measures to mitigate any increased particulate emissions may streamline the permit renewal process.

Engage the Local Community

Be proactive in engaging the community. Governmental environmental justice policies typically entail expectations of robust engagement with the local community and opportunities for community actors to provide input into company decisions that will affect their communities. Companies may want to similarly engage with the local community prior to taking steps to expand or modify existing operations. This is particularly true for the permitting process; however, companies are well served by engaging with communities and local tribes as a vehicle for making more informed business decisions generally.

This can include learning from a community about a company’s impact, creating strategic partnerships within the community, and collaborating with the community to advance shared goals and establish outcomes that will benefit the community overall. For example, a company can help communities finance environmental justice initiatives or help eligible applicants apply for available grants and help formulate how these community-driven initiatives will take shape.

Being proactive will better prepare a company for what issues, if any, a governmental agency may uncover during its own public engagement process. Ultimately, by strengthening its bond with the local community, companies are better situated to identify community concerns early and take appropriate action that will satisfy both company and community needs while building trust into the future.

Review existing community relationships. The community engagement discussed above should include a review of existing community relationships, specifically where potential environmental justice concerns may not have previously been addressed. To stay on track with such engagement and to ensure the maintenance of strong relationships, making periodic reviews and assessments of existing community relationships could be incorporated into a company’s ESG criteria.

Engage internal stakeholders. Community engagement goes beyond external forces at a specific facility. A company should also cultivate internal discussions with workers, unions, and other stakeholders affected by the company’s actions. Initiatives to consider include informational meetings, listening sessions, and trainings. Environmental health and safety managers should also engage upper management to ensure leadership buy-in for environmental justice initiatives. This guarantees that all levels of the company are aware of and striving towards the same goals.

Conclusion

By embracing environmental justice, companies minimize environmental oversight risks, are likely to achieve environmental goals more quickly, build community relationships, help reduce inequity and ultimately, create a solid foundation for long-term strength, all of which are accretive to an improved bottom line. As federal, state, and local governments continue embedding environmental justice and related initiatives in their regulations, policies, and programs, companies would be well served to do the same. 

Jenner & Block’s Environmental and Workplace Health and Safety and Transitions in Energy and Climate Solutions practice teams are made up of former federal regulatory commissioners, state regulators, regulatory compliance attorneys, and internal counsel and project developers, and are able to help companies achieve environmental justice objectives. Please reach out to a member of one or both of our teams with any questions.

By Tatjana Vujic  Allison A. Torrence  Daniel L. Robertson  and Arie Feltman Frank

Today, the US Environmental Protection Agency released its long-awaited proposal for New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule (Proposed GHG Rule). This article provides an overview of the Proposed GHG Rule and identifies some issues that may lie ahead.

I. Basic Architecture of the Proposed GHG Rule

The Proposed GHG Rule includes four parts. First, as a matter of housekeeping, the proposed rule officially rescinds the Affordable Clean Energy (ACE) Rule. The ACE Rule would have set emissions guidelines for states to incorporate into measures to address greenhouse gas (GHG) emissions from existing coal-fired power plants and focused on efficiency improvements. The ACE Rule was promulgated in 2019 to replace the 2015 Clean Power Plan. In 2022, the Supreme Court issued its landmark decision in West Virginia v. EPA, which ruled that the Clean Power Plan exceeded EPA’s authority to regulate GHGs pursuant to the Major Questions Doctrine, an assessment of which can be found in our article West Virginia v. EPA: The Major Questions Doctrine Arrives to Rein in Administrative Power, published in Pratt’s Law Report.^[1]

The Proposed GHG Rule then outlines standards of performance and emissions requirements based on the Agency's determination of the best system of emissions reduction (BSER), as required by Section 111 of the Clean Air Act (CAA), for three types of generating units: (A) existing coal-fired power plants, (B) new gas-fired power plants, and (C) existing gas-fired power plants. For each of these categories of generating units, EPA establishes stratified emissions standards and compliance dates dictated by the unit’s anticipated lifespan and capacity factor. Observers may recognize that the targets and dates proposed in the rules are consistent with climate goals already set by many power generators.

II. Operation of the Fuel-Type Subcategory Approach

Within the basic categories of existing coal plants, existing gas plants, and new gas plants, the Proposed GHG Rule applies a schedule for compliance and emissions reduction targets based on an individual plant’s capacity and anticipated lifespan. These standards and subcategories are guided by EPA’s determination of what constitutes the most cost effective and demonstrated technology available, thereby meeting BSER.

• Existing Coal-Fired Generating Unit GHG Emissions Standards

For existing coal plants, EPA created four subcategories based on the projected lifespan of the individual operating unit. They include coal plants that have not committed to a date certain by which to cease operations, coal plants that have voluntarily committed to cease operations by 2040, coal plants that will retire by 2035, and coal plants that will retire by 2032.

(1) Coal Plants Anticipating Ongoing Operations

If a coal steam unit has not committed to ceasing operations, EPA will require it to meet a standard consistent with carbon capture and sequestration at a 90% capture rate.

(2) Coal Plants with a Voluntary Commitment to Cease Operations by 2040

For a coal plant that has committed to voluntary retirement before 2040, the plant must meet a standard consistent with co-firing 40% natural gas.

(3) Coal Plants Retiring By 2035

With respect to a coal plant retiring in the near term, i.e., it plans to discontinue operations by 2035, EPA proposes a more relaxed standard. The more relaxed standard requires, in addition to routine operation and maintenance activities, the plant to accept a capacity limitation of 20% by 2030 and each year of operation thereafter.

(4) Coal Plants Retiring By 2032

For coal plants with an imminent retirement schedule, which means a coal plant that commits to ceasing operations by 2032, no capacity limitations must be taken. The plant need only continue to fulfill routine operation and maintenance requirements.

The underlying message for coal plants is that if retirement looms near on the horizon, then there is not an expectation for significant investments to be made in the plant.

• New Gas-Fired Electric Generating Units

In setting a BSER for GHG emissions from new gas-fired power plants, EPA also uses subcategories to stratify the BSER analysis. In doing so, EPA appears to be striving to strike a balance between a requirement that plants install demonstrated and achievable technology and the observation that infrastructure must exist to support the technology that would make it possible to meet the standards.

The subcategories thus include standards for peaker plants or plants that have a capacity factor of 20% or less, intermediate plants, which include plants with a 20 to an approximately 50% capacity factor (used over a certain amount of time per annum), and baseload plants, which constitute plants with a capacity factor over 50%. The standards are set based on the usage of the plant – the greater the annual operation of the plant, the greater controls and stricter emissions standards required.

(1) New Gas-Fired Peaker Plants / Plants with an Annual Capacity Factor of 20% or Less

Peaker plants include natural gas-fired power plants with a capacity factor of 20% or less. The Proposed GHG Rule would require peaker plants to use clean fuels, which include natural gas, with no other requirements.

(2) New Gas-Fired Intermediate Plants / Plants with an Annual Capacity Factor between 20% and 50%

The intermediate category includes plants with a capacity factor ranging from 20% to approximately 50%. This category generally includes the most efficient simple-cycle plants. By 2032, intermediate plants will be required to meet an emissions standard equal to blending 30% hydrogen by volume into the plant’s fuel stream. The hydrogen must qualify as low GHG hydrogen, which is a standard borrowed from the Inflation Reduction Act’s hydrogen tax credit and is defined in the Inflation Reduction Act as hydrogen generated via a process that results in a lifecycle GHG emissions rate of no more than 4 kilograms of carbon dioxide equivalent (CO₂e) per kilogram of hydrogen.^[2] In the Proposed GHG Rule, EPA identifies the low hydrogen standard but defers the determination of what constitutes low hydrogen to the Department of Treasury. The Treasury Department is currently developing guidance on the implementation of the production tax credit for clean hydrogen, which includes a decision on how to account for GHG emissions as part of the hydrogen production lifecycle analysis.

(3) New Baseload Gas-Fired Electric Generating Units / Plants with an Annual Capacity Over 50%

For natural gas-fired power plants with an annual capacity factor over 50%, EPA plans to require those plants to employ efficient combined cycle technology in the first phase of operation. This means that when the plant is built, it must implement the most efficient combined cycle technology and meet an emissions standard of 770 lb CO₂/MWh-gross standard. Over time, the standard becomes stricter, seemingly to match the anticipated increased availability and advancements in technology in future years, with a choice of one of two pathways. The first pathway requires the increasing use of hydrogen, or an equivalent emissions outcome, and the second pathway would require carbon capture and storage (CCS) or an equivalent emissions outcome.

(3)(a) Hydrogen Pathway for New Baseload Gas-Fired Electric Generating Units

If a baseload plant were to choose to use hydrogen as its path for reducing its GHG emissions, it can anticipate a stepwise timeline. By 2032, the plant will have to reach a level that represents a 30% hydrogen blend by volume or reduce its emissions to an equivalent extent. Then, by 2038, the same plant will need to achieve a 96% blend of hydrogen by volume or reduce its emissions to an equivalent extent. In all instances, the source of hydrogen must meet the standards set for the lowest carbon-emitting hydrogen tax credits, which will be defined by the Department of Treasury.

(3)(b) Carbon Capture and Storage Pathway for New Baseload Gas-Fired Electric Generating Units

If a plant operator were to choose to employ CCS as a means of reducing its GHG emissions, the Proposed GHG Rule would require the plant to reach a 90% capture rate by 2035 or reduce its emissions to an equivalent extent. Note that the 90% capture rate achieves emissions reductions equivalent to a 96% blend of hydrogen in the fuel stream.

• Existing Gas-Fired Generating Units

Finally, the Proposed GHG Rule not only sets standards for new gas-fired generating units, but also for the largest and most frequently used of the existing gas-fired power plants. These plants include those that generate 300 megawatts or more of electricity per year and operate at a 50% or greater capacity factor. Under the proposal, these plants will be required to meet the 2038 hydrogen pathway standard, the 2035 CCS pathway standard, or achieve the equivalent thereof. For existing gas-fired generating units that do not meet the 300MW and 50% annual capacity factor thresholds, EPA is seeking comment on how it should regulate such units.

III. Anticipated Questions and Challenges

In addition to the obvious legal challenges regarding whether the proposed rule implicates the Major Questions Doctrine and whether the technologies and timelines constitute BSER, there remain questions regarding the definition of what constitutes clean or green hydrogen. Are hydrogen and CCS as achievable as EPA contends? Are the target dates correct? Also, the proposed rule’s new gas turbine standards will apply to any plant for which construction commences after the date of publication of the Proposed GHG Rule. This CAA provision is intended to prevent a rush to commence construction on new plants to lock in the old standards. This may lead to an early challenge of this mechanism because it becomes controlling upon the publication of the proposal and prior to the rule’s finalization.

Another question is how will states, which have two years to develop state plans to incorporate the existing source standards, go about implementing the proposed rule. Will states be able to cooperate to achieve emissions reductions, such as through emissions trading regimes, particularly if such cooperative approaches allow states to achieve equivalent or better results? Why has EPA overlooked other significant emissions reduction options, such as renewable natural gas? How will plant operators pay for these upgrades? EPA has considered the Inflation Reduction Act’s many tax incentives and the Bipartisan Infrastructure Law’s incentives and payments in determining what is economically achievable, but how easy will it be to access such funds, and how can those funds be leveraged?

• Immediate Takeaways

An initial review of the Proposed GHG Rule indicates EPA has been careful not to step outside the proverbial fenceline. EPA appears to be taking into account the implied guidance provided by the Supreme Court in West Virginia v. EPA that the Agency’s authority under the CAA to regulate power plants should focus on facilities on a unit-by-unit basis rather than an approach that relies on generation-shifting, which the Court determined exceeded EPA’s statutory authority. The rules also appear to be designed in a way and timed to align with other regulatory requirements for the power sector, such as regulations governing wastewater discharges and ozone and mercury emissions, which may streamline investments made in specific plants as well as across the power generation fleet.

Details on the findings that underlie the emissions standards and timing within the proposal will be well litigated. The ultimate question, however, will be whether the overall approach, which entails setting standards for individual plants while still providing options and flexibility by which plant operators can achieve those standards, can thread the judicial scrutiny needle. As you work through these issues, Jenner’s Transitions in Energy and Climate Solutions Practice and Environmental and Workplace Health and Safety Practice are here to help.

By Daniel L. Robertson, Associate Attorney

On May 4, 2023, the Department of Justice (DOJ) announced a first-of-its-kind Title VI environmental justice interim resolution agreement with the Alabama Department of Public Health (ADPH). The resolution follows an investigation DOJ and the Department of Health and Human Services (DHHS) initiated in November 2021 into whether ADPH violated Title VI of the Civil Rights Act and Section 1557 of the Affordable Care Act. Both laws prohibit discrimination against individuals in programs receiving federal funding.

DOJ’s investigation found that ADPH’s enforcement of sanitation laws threatened residents of Lowndes County with criminal penalties and property loss for sanitation conditions they did not have the capacity to alleviate. Median household income in the county is just under $32,000, and 28.3% of county residents live below the poverty line. As of 2022, 80% of residents did not have reliable sewage systems. The process is complicated in part due to the clay soil in the area being incompatible with regular wastewater systems, causing them to often fail. Residents unable to afford specialized systems, estimated to cost between $6,000 and $30,000, have resorted to a system known as “straightpiping” whereby piping systems or ditches are constructed to draw wastewater away from the home. This often results in these wastes being exposed on the property and increasing related healthcare risks caused by exposure to raw sewage. DOJ’s investigation further found that ADPH engaged in a pattern of inaction and/or neglect concerning the health risks associated with raw sewage, and failed to take meaningful action to address the disproportionate burden and impact of these issues on Black residents of Lowndes County. Approximately 72.5% of county residents are Black.

Under the agreement, ADPH agreed to: suspend enforcing sanitation laws against residents who lack the means to purchase functioning septic systems; measure public health risks from raw sewage exposure of different populations; develop a public health awareness campaign regarding raw sewage exposure; create or supplement education materials for Lowndes County health care providers to provide more information on symptoms and illness related to raw sewage exposure; conduct a comprehensive assessment to determine the appropriate septic and wastewater management systems for Lowndes County homes; and create a plan to improve access to adequate sanitation systems. ADPH is also required to consistently engage community residents, government officials, subject matter experts and environmental justice advocates on each aspect of the agreement. DOJ and DHHS in turn have suspended their investigation as long as ADPH complies with the agreement.

One day following its announcement, DOJ released a statement marking the one year anniversary of the establishment of its Office of Environmental Justice, including a fact sheet of department accomplishments from the prior year. The Office’s actions include supporting the DOJ’s lawsuit to improve safe drinking water access in Jackson, Mississippi, training DOJ attorneys on environmental justice best practices, and developing community-outreach best practices for DOJ departments nationwide. DOJ also highlighted an ongoing investigation into potential discriminatory practices by the city of Houston in how it responds to illegal dumping.

Thursday’s move reinforces the federal government’s emphasis on advancing environmental justice initiatives, following President Biden’s recent Executive Order on Revitalizing Our Nation’s Commitment to Environmental Justice For All. As we discussed in a recent client alert, companies should evaluate and instill best practices to navigate this evolving landscape. We will continue to monitor environmental justice developments on the Corporate Environmental Lawyer.

   By Daniel L. Robertson and Allyssa Milam

On May 2, 2023, New York passed its 2024 fiscal year budget, including a prohibition on fossil fuel equipment and building systems in new construction. The policy will go into effect in 2026 for new buildings not more than seven stories tall, except for new commercial or industrial buildings greater than one hundred thousand square feet, and in 2029 for all new  buildings.

The ban will not apply to buildings in existence prior to the effective dates. Even after the effective dates, existing buildings will remain unimpacted by the ban in the course of repairs, alterations, additions, relocations, and changes to the occupancy or use of such buildings. Further, existing buildings may install and continue to use and maintain fossil fuel equipment and building systems.  

The budget includes exemptions for buildings ranging from hospitals to car washes, keeping some buildings on gas beyond the 2029 deadline. Specifically, fossil fuel equipment may be installed and natural gas may be used:

• for generation of emergency back-up power and standby power systems;
• in manufactured (e., mobile) homes; and
• in a building or part of a building that is used as a manufacturing facility, commercial food establishment, laboratory, car wash, laundromat, hospital or other medical facility, and in other critical infrastructure such as emergency management facilities, wastewater treatment facilities, water treatment and pumping facilities, agricultural buildings, fuel cell systems, and crematoriums.

To curb the use of natural gas in buildings with exemptions, the budget includes additional guardrails. Some buildings will be required to, “to the fullest extent feasible,” limit the use of fossil fuel combusting systems. Further, qualifying exempted buildings will be required to be electrification ready in the areas where the building was permitted to install fossil fuel systems. The budget also expressly states that financial restraints are an insufficient basis on which to determine the feasibility of such requirements.

The budget states that standards for building construction shall be designed to achieve the state’s clean energy and climate agenda as set forth in New York’s Climate Leadership and Community Protection Act (“Climate Act”), signed into law in July of 2019. The Climate Act is part of New York’s ambitious climate strategy to reduce greenhouse gas emissions 40% by 2030 and 85% by 2050 from 1990 levels.

New York becomes the first state to enact this type of emissions prohibition, joining cities and municipalities across the nation with similar prohibitions including San Francisco, Los Angeles, Denver, and Montgomery County, Maryland. By contrast, legal challenges to these policies and the significant number of states passing laws prohibiting cities from banning natural gas means that the nationwide trajectory of natural gas bans and emissions regulations remains undetermined. We will continue to monitor these developments on the Corporate Environmental Lawyer.

  By Daniel L. Robertson, Associate Attorney

Capping off Earth Week 2023, President Biden on Friday signed an executive order expanding the Administration’s Justice40 Initiative and creating a new White House Office of Environmental Justice.

The Executive Order, titled Revitalizing Our Nation’s Commitment to Environmental Justice for All, expands and provides additional clarity to the Biden Administration’s environmental justice commitment. According to a White House fact sheet distributed on Friday, the order is intended “to ensure that all people – regardless of race, background, income, ability, Tribal affiliation, or zip code – can benefit from the vital safeguards enshrined in our nation’s foundational environmental and civil rights laws.” The order addresses this commitment through various means:

• Embedding the Administration’s “Whole of Government” approach to Environmental Justice.

The Order makes clear that the pursuit of environmental justice should be incorporated into the missions of all executive branch agencies. It also adds agencies to the White House Environmental Justice Interagency Council, a body tasked in part with developing federal agency performance metrics and publishing an annual public performance scorecard (more on that below).

Notably, the Order directs agencies to consider measures that will address and prevent “disproportionate and adverse” impacts on health and the environment, contrasting the prior “disproportionately high and adverse” requirement established by Executive Order 12898 signed by President Clinton on February 11, 1994. The Administration describes this change as “eliminat[ing] potential misunderstanding that agencies should only be considering large disproportionate effects” which will likely lead to increased federal agency scrutiny as projects under their purview meet this lower threshold.

• Enhancing Community Engagement.

The Order requires federal agencies to notify nearby communities in the event of a release of toxic substances from a federal facility. This notification includes holding a public hearing to share information on any resulting health risks or necessary precautions. The Order also directs federal agencies to “actively facilitate meaningful public participation and just treatment of all people in agency decision-making.” This includes Tribal consultation and strengthening nation-to-nation relationships on environmental justice issues.

Federal agencies are also required to submit to the White House Council on Environmental Quality and make available to the public an Environmental Justice Strategic Plan. Agencies will use the plan to set forth goals and actions to advance environmental justice, and identify oversight opportunities to improve accountability and compliance with any statute administered by that agency that affects communities with environmental justice concerns. The Order requires that this plan be submitted no later than 18 months after the date of the Order, and every 4 years thereafter.

• Launching a new White House Office of Environmental Justice.

The new Office of Environmental Justice will be located within the White House Council on Environmental Quality and be led by the Federal Chief Environmental Justice Officer. The office will be tasked with coordinating the implementation of environmental justice policies across federal government agencies.

• Creating a new Environmental Justice Subcommittee within the National Science and Technology Council.

This new subcommittee, led by the Office of Science and Technology Policy, will be tasked with coordinating a strategy for federal agencies to identify and fill gaps in data and research relating to environmental justice in part to aid in advancing cumulative impact analyses. Filling in these data gaps will allow agencies to use science to better address adverse health and environmental impacts. The Committee will be required to update this Environmental Justice Science, Data, and Research Plan every two years.

• Publication of the Inaugural Federal Agency Environmental Justice Scorecard and Draft National Strategy on Preventing Plastic Pollution.

While not part of the Executive Order, the White House unveiled a first-of-its-kind environmental justice scorecard for federal agencies. Developed by the Office of Management and Budget, the Council on Environmental Quality, and the United States Digital Service, the scorecard assesses 24 federal agencies’ environmental justice advancement efforts, including efforts to advance the Administration’s Justice40 initiative. This initiative is designed to ensure that 40 percent of federal funding investments flow to communities that are marginalized, underserved, and overburdened by pollution. Similarly, Friday’s announcement referenced the addition of the Department of Commerce, the National Science Foundation, and the National Aeronautics and Space Administration programs to the Justice40 initiative, bringing the total number of programs covered by the initiative to 470 across 19 federal agencies.

The White House also announced a new Interagency Policy Committee on Plastic Pollution and a Circular Economy, alongside a draft National Strategy on Preventing Plastic Pollution released the same day by the U.S. EPA. The draft strategy plan is intended to address disparate impacts on communities affected by plastic from production to waste. The Committee, meanwhile, will coordinate federal efforts addressing plastic pollution to ensure an equitable distribution of the benefit from these efforts.

In a time when the Biden Administration faces increased scrutiny regarding its environmental efforts, the White House’s announcement also highlights various actions undertaken by executive agencies during the current presidential term. Friday’s action marks the latest installment in the Biden Administration’s advancement of environmental justice initiatives, following Executive Order 13990 signed on President Biden’s first day in office, and Executive Order 14008 signed soon thereafter on January 27, 2021. The White House states that Friday’s Order reflects the goals and recommendations of the White House Environmental Justice Advisory Council, demonstrating the active approach that council continues to take in this area. The Order underscores the Administration’s commitment to developing environmental justice initiatives at the federal level, entrenching those initiatives into the goals of executive agencies, and providing transparency to the public on how those goals are being achieved.

We will continue to monitor this and other federal environmental justice developments on the Corporate Environmental Lawyer.

By Allison A. Torrence 

On Earth Day and every day, companies face increasing pressure to “go green” or be more “sustainable.” When companies heed this call—whether it’s by reducing GHG emissions, investing in renewable energy, or making their products recyclable or compostable—they understandably want to let people know about the positive actions they are taking. But, when a company touts their supposed good deeds, it must carefully craft any public communications. That is because companies—particularly consumer goods companies—face increasing scrutiny and potential litigation liability for “greenwashing” and related false advertising  and consumer fraud claims.

At the heart of greenwashing claims is the assertion that a company is making false or misleading statements about its environmental performance in order to engender goodwill and increase sales or support for the company. But sometimes a company may believe that it is making truthful statements and still face greenwashing claims. Terms that might be used, like “sustainable,” are highly subjective and hard to quantify or support. A product might be technically able to be recycled, but recycling facilities may not accept that type of material for recycling. A company might think it is “leading the way” in its green initiatives, while environmental groups are less than impressed. All of these examples could lead to push back from environmental groups or regulators in a variety of forums. There could be public media campaigns, regulatory fines, and/or consumer fraud lawsuits, all around what a company thought was inspirational marketing about its sustainable practices.

So what is a company to do? Communicating a company’s sustainability goals and accomplishments may be important to leadership and investors, and can be a crucial part of finding partners willing and able to help the company achieve those sustainability goals. There is no magic formula that will avoid the pitfalls of greenwashing; but there are some best practices that should be considered.

First, follow the FTC’s Green Guides. The FTC has provided guidance on green advertising statements for decades. For example, according to the Green Guides, “a product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the waste stream through an established recycling program for reuse or use in manufacturing or assembling another item.” Companies should qualify recycling claims unless recycling facilities are available to at lease 60% of consumers or communities where the item is sold. As another example, according to the Green Guides, companies “should not make unqualified renewable energy claims, directly or by implication, if fossil fuel, or electricity derived from fossil fuel, is used to manufacture any part of the advertised item or is used to power any part of the advertised service, unless the marketer has matched such non-renewable energy use with renewable energy certificates.”

Notably, in December 2022, FTC announced that is was seeking public comments on potential updates to the Green Guides. FTC is seeking general guidance on the Green Guides, as well as on specific topics, including:

• Carbon offsets and climate change,
• The term “Recyclable”,
• The term “Recycled Content”, and
• The need for additional guidance regarding claims such as “compostable,” “degradable,” ozone-friendly,” “organic,” and “sustainable”, as well as those regarding energy use and energy efficiency.

The comment period remains open until April 24, 2023.

Additionally, while the Green Guides are a great resource, they are not the final word on greenwashing. Courts faced with greenwashing litigation may impose higher or lower standards, depending on the laws of the jurisdiction at issue. Moreover, many greenwashing claims will turn on whether a reasonable consumer was mislead by a company’s statement. As the FTC acknowledged in its recent announcement on the Green Guides, “consumers are increasingly conscious of how the products they buy affect the environment…” These sophisticated consumers are informed about environmental and sustainability issues, and not so easily confused or deceived. Thus companies that advertise to and communicate with sophisticated consumers should provide facts that are supportable and have sufficient context. Avoid broad, sweeping statements that will be hard to substantiate. And while setting goals are often a key part of a company’s sustainability plan, know that environmental groups are watching and holding companies accountable. Down the road, un-met goals may be framed as misleading statements. So, when setting environmental goals, understand how they will be achieved; and if they ultimately aren’t achieved be prepared to explain why.

Companies around the world will be embracing the spirit of Earth Day and talking about the ways they are reducing their environmental impact. If they also want to reduce their likelihood of greenwashing litigation, they need to make sure those communications are thoughtful, supported and provide the appropriate context. With the right planning, companies and go green and talk about it too.

By Geoff M. Davis and Arie Feltman-Frank

We cannot talk about investing in our planet this Earth Day 2023 without discussing the Inflation Reduction Act of 2022 (IRA). We’ve discussed the IRA previously here and here. In short, this historic piece of legislation directs nearly $400 billion in federal funding to advance a clean energy economy through a combination of tax incentives, grants, and direct loans/loan guarantees while also seeking to prioritize American workers, American businesses, and environmental justice.

Among other tax incentives, the IRA briefly extends existing clean energy production and investment tax credits for renewable resources through 2024 when they sunset in favor of a more general set of technology-neutral, emissions-based clean energy production and investment tax credits with a period of certainty that lasts at least until 2033. A decade of relative certainty for such credits, without the need for frequent or last-minute extenders, should help drive the significant climate investments that are the focus of the IRA. The IRA also creates tax credits for domestic manufacturing and critical mineral processing, provides a clean vehicle tax credit, extends and provides tax credits for low emission fuels, extends and expands the tax credit for carbon capture, utilization, and sequestration (CCUS) projects, and creates a hydrogen production tax credit. To promote employment and environmental justice goals, significant bonus credits are available for taxpayers meeting prevailing wage and apprenticeship requirements in the construction and installation of qualifying energy property; for locating projects in energy communities; for meeting domestic content requirements; and for locating projects in low-income communities.

In addition to tax incentives, the IRA provides various grant and direct loans/loan guarantee opportunities to support projects that advance clean energy, including transmission, and reduce greenhouse gas emissions, with a focus on mobile source emissions, methane emissions from the oil and gas industry, and emissions from certain other emissions-intensive sectors. The IRA also contains opportunities for funding the development of low emission fuels, projects to improve energy efficiency, projects to support sustainable agricultural practices, and projects that stimulate American manufacturing, such as of the clean vehicle supply chain. Finally, the IRA includes opportunities for funding to improve pollution monitoring and tracking. Consistent with the Justice40 Initiative, the IRA emphasizes projects that benefit low-income and disadvantaged communities.

Although dizzying in its breadth, the main takeaway from the IRA is that there are now a multitude of material financial incentives, spanning a broad range of the energy and industrial sectors that eligible entities can take advantage of to reduce greenhouse gas emissions and advance a clean energy economy. Entities that emit greenhouse gases and entities seeking to produce or invest in clean energy or related technologies, develop energy infrastructure, manufacture components along the clean energy or clean vehicle supply chain, produce lower emission fuels, or improve energy efficiency should be evaluating how they can take full advantage of the IRA, including bonus credits for prevailing wage and registered apprenticeship compliance, for projects that meet domestic content requirements, and for projects located in energy and low-income communities.

The IRA is crafted to play an important role in advancing the Biden Administration’s climate goals of a 50-52 percent reduction in greenhouse gas pollution (from 2005 levels) by 2030 and of net zero greenhouse gas emissions by 2050. Whether the IRA will be effective in reaching those goals will depend on how effective the incentives are in driving significant investment in clean energy and related technologies, how quickly and efficiently federal funds are disseminated, and how quickly projects can meet the myriad regulatory hurdles large investments require. This latter recognition is the driving force behind several efforts at regulatory streamlining that may hold the key to whether projects get off the launchpad or remain nascent projects.

As just one example, the lengthy process and associated uncertainty with having to secure siting authorization from multiple state regulatory commissions to develop interstate transmission lines and carbon dioxide (CO₂) pipelines for carbon capture and sequestration may jeopardize the effectiveness of the IRA’s provisions encouraging investment in these projects. Similarly, efficient development of transmission and pipeline infrastructure will be necessary to fully utilize solar and wind resources, as well as transport captured CO₂ to geological sequestration sites (see our article on CO₂ Capture and Storage, CCS, here).[1] Another potential impediment is public opposition, some of which may stem from the perceived impact that IRA-driven projects will have on communities and ecosystems, and some of which may stem from concerns about the efficacy of certain emission reduction strategies.

Notwithstanding potential impediments, the IRA has made Earth Day 2023 an exciting time to invest in our planet. An August 2022 Rhodium Group report suggests the IRA could drive United States greenhouse gas emissions down to 32-42% below 2005 levels by just 2030, compared to 24-35% without these measures. Of course, we must invest smartly, which will require holistic, careful, community-involved planning that allows entities to navigate financing, permitting, and environmental reviews in a way that best minimizes legal risk, maximizes emissions reductions, and addresses community concerns.

We will continue to provide insights on how entities can take full advantage of the IRA, as well as strategically navigate potential impediments to efficient project development, on the Corporate Environmental Lawyer.  

[1] The state-by-state siting of transmission lines may become easier for certain projects once the Federal Energy Regulatory Commission’s proposed rule to revise the regulations governing the Commission’s backstop siting authority is finalized.

By  Tatjana Vujic

Happy Earth Month! In today’s blog, we observe the historic investment opportunity presented by the convergence of efforts to address climate change and spur the energy transition, such as public grant programs, regulatory regimes, and, the biggest lever, tax credits. It’s fair to observe that it’s about time, because many of these initiatives have been attempted in some shape or form for decades, but only now have succeeded. It’s also correct to say it’s about time, meaning there is no time to waste, as meeting the reduction targets in time to stave off the worst effects of climate change is only a few decades away. 

Until the summer of 2022, federal efforts to address climate change to the extent and scale capable of achieving the extraordinary results needed to keep our atmosphere in check have been, for the most part, largely elusive. From an economy-wide approach via cap-and-trade, the first attempt at which was made in the early 2000’s, to administrative efforts like the Clean Power Plan, climate change either could not swing the votes or could not survive judicial review.

However, like the 2004 season stands out as the miracle year for the Boston Red Sox (for the younger generation, this was the year the Boston Red Sox won their first World Series since 1918, breaking the famous Curse of the Bambino), the time between November 2021 and August 2022 marks the miracle year for U.S. action to address climate change. This miracle year included the Bipartisan Infrastructure Bill of 2021, the CHIPS Act of 2022, and, finally, the Inflation Reduction Act of 2022 (IRA). Combined, the three statutes will mobilize massive amounts of capital – according to the International Energy Association (IEA), the U.S. is on track to disburse in the realm of $560 B by 2031 – with the intent of decarbonizing our economy. The strategy includes transitioning our energy and transportation systems to cleaner power sources, and creating the domestic manufacturing capability to do so.

If implemented swiftly and successfully, coupled with other regulatory measures such as EPA’s forthcoming powerplant rules for greenhouse gas emissions, EPA’s tailpipe emission standards, and the Securities and Exchange Commission’s requirements for climate risk disclosure, these statutes could set the U.S. on a path to meeting its climate targets. (The United States has committed to an ambitious and achievable goal to reduce net GHG emissions 50-52% below 2005 levels in 2030). In doing so, these efforts would help to keep climate change in check “within around two decades” by, according to the Intergovernmental Panel on Climate Change’s (IPCC’s) most recent Synthesis Report, achieving the “[d]eep, rapid, and sustained reductions in greenhouse gas emissions” that “would lead to a discernible slowdown in global warming … and also to discernible changes in atmospheric composition within a few years.”

The basic strategy underlying these statutes is to incentivize zero and low-carbon energy generation through mechanisms like tax credits while phasing out fossil fuels, avoiding emissions of highly potent greenhouse gases like methane, and locking away carbon dioxide, all the while helping the U.S. regain the dominance it once had with respect to domestic manufacturing in order to secure and support the transition. The suite of legislation also works to build resilience in the face of climate change, including by improving communities and infrastructure’s ability to withstand severe and more frequent weather events brought on by a changing climate, such as droughts, flooding, and wildfires.

While the IRA is mainly focused on tax credits, which tomorrow’s blog will cover, the Infrastructure Investment and Jobs Act includes more than $70B for research, development, and deployment of innovative clean energy technologies, building new and more resilient transmission infrastructure to increase delivery of renewables and cleaner energy to the grid, and more EV charging networks.

Sandwiched between the two was the passage of the CHIPS and Science Act, which is often considered to be focused on helping U.S. manufacturers produce semiconductors to meet growing demand.  The CHIPS Act, however, is also heavily focused on climate and the energy transition, authorizing up to $71B for the Departments of Commerce and Energy and the National Institute of Standards and Technology to institute a variety of programs, including the Regional Clean Energy Innovation Partnership, and award grants to public-private consortia that include industry or firms involved in technology, innovation, or manufacturing to “accelerate the pace of innovation of diverse clean energy technologies”. The Department of Energy is authorized to support research, development, and the demonstration of renewable power, electric grid modernization and security, nuclear energy, alternative fuels, and carbon removal. 

All of this is good news for the climate and investors because the market signals are appropriately aligning to reward investments in the energy transition, climate mitigation, and clean technology, and bringing that investment back to the U.S. to drive what is being touted as the next domestic industrial movement – think solar panel production, wind turbines, EVs, and EV battery materials, to name just a few. The key will be moving these dollars into action.

Stay tuned for our ideas on how to put this funding to work. And remember - it's about time because it’s about time. 

By:  Daniel L. Robertson, Associate Attorney

In the 1962 book, Silent Spring, Rachel Carson brought to the forefront of public attention contaminants of emerging concern (CECs). CECs, or emerging contaminants, are chemicals or materials that can be characterized by a perceived, potential or real threat to human health or the  environment. These threats typically “emerge” as advances in scientific technologies reveal previously unknown adverse effects of a specific chemical  that may already be ubiquitous in the environment. Examples in recent years include 1,4 dioxane, polychlorinated biphenyls (PCBs), ethylene oxide, and per- and polyfluorinated substances (PFAS). Pharmaceuticals and nanomaterials are increasingly being considered as areas of concern that may require further scrutiny in future.

Often by the time adverse impacts are identified, the contaminant is in widespread use. PCBs, for example, were prevalent in coolants and lubricants in a variety of electrical equipment because PCBs are very effective insulators. PFAS were heralded as revolutionary for their effective fire-fighting and coating characteristics and currently are in a multitude of everyday products ranging from food packaging to the clothes we wear.

As we gain a better understanding of the potential effects of these chemicals, regulators face challenges in promulgating appropriate regulations for these CECs. Meanwhile, companies seemingly acting in full compliance with permits and regulatory requirements find themselves targeted by lawsuits seeking to compel remediation of impacted sites and product reformulation. Long dormant sites previously considered remediated may be reopened and additional clean-up required as, for example, may result as a result of U.S. EPA’s pending proposals to designate certain PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

As history has shown, and due to ongoing technological advancements, new emerging contaminants will continue to be identified and the process of evaluating potential health and environmental risks will begin anew. There is an ongoing debate as to whether the approach employed by the Toxic Substances and Control Act (TSCA) is the most effective approach to regulating CECs, when contrasted for example with the approach taken by the European Union’s Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH).  While both programs are designed to protect human health and the environment through restricting the use of harmful substances, they accomplish this through different means. TSCA requires reporting oversight of a chemical where U.S. EPA demonstrates an unreasonable risk. REACH, on the other hand, obligates manufacturers and importers to register and demonstrate the safe control of a chemical prior to that chemical being placed into the market.

As applied to PFAS, in the United States, U.S. EPA seeks to regulate specific PFAS through a variety of avenues. In August 2022, U.S. EPA proposed designating two PFAS substances as CERCLA hazardous substances, and in April 2023 proposed additional PFAS substance designations. In March 2023, U.S. EPA simultaneously proposed maximum contaminant levels (MCLs) setting drinking water limits for two PFAS compounds and proposed to regulate four additional PFAS through a Hazard Index screening approach that will require site-specific determinations for drinking water concentration. Pursuant to the 2019 PFAS Act, 176 PFAS substances have been added to the Toxic Release Inventory (TRI) chemical database, creating additional reporting liabilities for impacted companies. However, in December 2022, U.S. EPA proposed reclassifying all TRI-listed PFAS to the Chemicals of Special Concern list, which would further increase reporting scrutiny on regulated companies. Each of these practices takes significant resources to implement, and with 10,000 PFAS already identified, could create a significant investment over time.

Contrast this approach with the approach of the European Chemicals Agency (ECHA) that in February proposed a blanket restriction of all 10,000 PFAS substances in the European Union. This itself creates uncertainty for companies where no commonly accepted testing methods exist whereby companies can test for all of these compounds. The approach further restricts PFAS chemicals for which studies on their adverse impacts may not yet exist. It is expected that ECHA will receive a substantial number of comments on its proposal, much like U.S. EPA has received on its proposals discussed above.

While there may not be a single “right” way to address CECs, the risks posed by emerging contaminants will continue to challenge both the regulators and the regulated community to find the appropriate regulatory balance between protection of human health and the environment and the need to continue to manufacture products that we rely upon daily. As demonstrated by the 2016 Lautenberg amendments to TSCA, stakeholders on all sides appear invested to continue striving towards this balance.  

By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice

As we prepare to celebrate the 53^rd anniversary of Earth Day, it is my pleasure to kick off our Earth Day series of daily blogs penned by my colleagues at Jenner & Block.  The theme for this 53^rd Earth Day is a continuation of last year’s theme—Invest in the Planet.  As I reflect on this year’s Earth Day theme and look back on the past 53 years, I am struck by the tremendous gains that have been realized from our past investments but at the same time, recognize that there is still tremendous work to be done if we are to truly realize the ultimate return on our investment—a vibrant thriving planet for future generations.    

Since the early 1970s, we have spent trillions of dollars in the United States alone to remediate environmentally impacted sites, resulting in the removal of millions of pounds of contaminants from soil and groundwater.  Again, focusing just on the United States, between 1970 and 2020, the combined emissions of six common pollutants (particulate matter, sulfur dioxide, volatile organic compounds, carbon monoxide, and lead) have dropped more than 77%.  Billions of dollars have been spent to prevent the direct discharge of untreated sewage into our rivers and oceans and we have progressed from it being a common occurrence for rivers to catch fire to the Chicago River now actively being used for a variety of recreational purposes, including kayaking and fishing (although I still don’t recommend jumping into the river after a particularly heavy rainstorm).  We now see that most Fortune 500 companies have robust environmental compliance programs and generate annual sustainability reports touting their environmental, health and safety accomplishments. 

Much has been accomplished since 1970 when it wasn’t unusual for industrial solid waste and raw sewage to be discharged directly into the environment.  Now, it is the rare occurrence when we read about these types of direct releases of pollutants into our environment.  Notwithstanding, the planet continues to face significant environmental threats.  New emerging contaminants threaten our drinking water supplies and greenhouse gas emissions (GHGs) contribute to changing atmospheric conditions impacting the global community. 

While we must remain diligent so as not to walk back the significant progress that we have already made, it is important that we also proactively identify and implement creative solutions to respond to new environmental challenges.  Consistent with the 53^rd Earth Day theme—Invest in Our Planet—we must ensure that we focus our investments on those environmental issues that pose the greatest risks to our planet in order to maximize our return on our investment.  

Building on this theme, in our weekly series of Earth Day blogs, on Tuesday, we turn our attention to emerging contaminants and the significant challenge these new emerging contaminants pose both in terms of identifying these emerging contaminants and crafting regulations that are appropriately protective of human health and the environment.  On Wednesday we observe the historic investment opportunity presented by the convergence of efforts to address climate change and spur the energy transition, such as public grant programs, regulatory regimes, and, the biggest lever, tax credits.  Thursday’s blog will discuss some of the financial incentives to encourage mitigation of GHGs found in the recently promulgated Inflation Reduction Act.  To close out our blog series, as more and more companies recognize the significant return on investment that can be achieved by investing in our planet, we will provide guidance and best practices to mitigate the liability risks associated with “greenwashing” claims. 

We hope that you will find these blogs insightful and thought-provoking.  We only have one planet, and it is incumbent on all of us to invest in that planet to ensure its continued viability for future generations.    

By Allison A. Torrence 

On April 12, 2023, a federal district court judge in North Dakota issued a temporary injunction blocking implementation of the EPA and Army Corps of Engineers regulations redefining Waters of the United States (“WOTUS”) under the Clean Water Act (“CWA”) (the “2023 WOTUS Rule”). The injunction was issued in a challenge brought by 24 states, and will take effect in those states: Alabama, Alaska, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

The WOTUS definition is one of the most controversial and highly-litigated aspects of the CWA, if not all environmental law, because it has wide-ranging implications. The definition of “waters of the United States” is so important because it sets the jurisdictional limits of the CWA. Under the CWA, EPA and the Army Corps have the power to regulate, among other things, the discharge of pollutants to navigable waters from a point source (33 U.S.C. § 1362(12)) and the discharge of dredged or fill material into navigable waters (33 U.S.C. § 1344). “Navigable waters” are defined in the CWA as “the waters of the United States, including the territorial seas.” 33 U.S.C. §1362(7). “Waters of the United States” is not defined further under the CWA, so the agencies have been left to try to craft a definition.

The Army Corps and EPA first proposed a WOTUS definition in 1977 and it has faced revisions and legal challenges ever since. The WOTUS definition has faced Supreme Court review in three previous cases, and is currently pending review in a fourth Supreme Court case, Sackett v. U.S. Environmental Protection Agency, 19-35469, on appeal from the U. S. Court of Appeals for the Ninth Circuit.

By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice

As we await final agency action on U.S. EPA’s pending rulemaking to designate perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as CERCLA
hazardous substances, U.S. EPA has just published an advanced notice of proposed rulemaking (ANPR) soliciting public input on whether to add additional PFAS to CERCLA’s list of hazardous substances.  When U.S. EPA initially proposed adding PFOS and PFOA to the CERCLA list of hazardous substances, there was significant outcry from environmental groups that argued that the proposed listing didn’t go far enough while industry groups argued that CERCLA was the wrong tool to address PFAS contamination.  U.S. EPA’s solicitation of comments on whether to add additional PFAS to the CERCLA hazardous substance list is certain to generate significant input from both groups.

In its ANPR, U.S. EPA seeks input on whether it should designate as CERCLA hazardous substances (1) seven additional PFAS and their salts and structural isomers; (2) precursors of these seven PFAS, plus the precursors of PFOA and PFOS; and (3) categories of PFAS.  The seven specific PFAS called out in the ANPR are perfluorobutanesulfonic acid (PFBS), perfluorohexanesulfonic acid (PFHxS), perfluurononanoic acid (PFNA), hexaluoropropylene oxide dimer acid (HFPO-DA, aka GenX), perfluorobutanoic acid (PFBA), perfluorhexanoic acid (PFHxA), and perfluorodecanoic acid (PFDA).  U.S. EPA selected these seven PFAS based on the availability of toxicity information previously reviewed by U.S. EPA and other Federal agencies. 

In addition to seeking information on these specific seven PFAS, U.S. EPA also seeks comments on whether to add to the list of CERCLA hazardous substances salts and precursors of these seven PFAS (as well as precursors of PFOA and PFOS).  Some PFAS can be formed by the degradation of other chemical substances and U.S. EPA’s ANPR solicits input on which substances do in fact degrade into these specific PFAS compounds and the manner in which this degradation might occur.  

Finally, the ANPR seeks input on whether U.S. EPA should designate groups or categories of PFAS as CERCLA hazardous substances, noting that PFAS may share similar characteristics such as chemical structure, physical and chemical properties, mode of toxicological action, precursors, degradants, or co-occurrence.  U.S. EPA references its 2020 Significant New Use Rule (SNUR) for long-chain perfluoroalkyl carboxylate (LCPFAC) as an example of its regulation of a category of PFAS.  Again, environmental groups have long sought to compel U.S. EPA to regulate PFAS as a class while industry groups have argued to the contrary, pointing out the substantial differences in toxicity and physical/chemical characteristics between different PFAS. 

Like U.S. EPA’s proposal to designate PFOS and PFOA as CERCLA hazardous substances, U.S. EPA’s latest ANPR is certain to generate input from a broad spectrum of commenters.  The comment period currently is set to expire on June 12, 2023 (60 days from the date of publication).  We will continue to provide timely updates on U.S. EPA’s ongoing efforts to designate certain PFAS as CERCLA hazardous substances at the Corporate Environmental Lawyer blog. 

  By Steven M. Siros and Arie Feltman-Frank

PFAS are being detected in drinking water systems across the United States. Moreover, evolving regulatory developments already require or soon will 
require that public water systems sample for and remediate these chemicals (see, e.g., here). When public water systems find PFAS, which is a
significant possibility, public water systems are likely to look to upstream industrial facilities to recoup their remediation costs. And, once PFOA and PFOS becomes CERCLA hazardous substances (likely Summer 2023), public water systems will have a federal cause of action to do so: CERCLA cost recovery.

Among other potential defendants, public water systems may target upstream industrial facilities that have PFOA or PFOS in their wastewater discharges. Indeed, recent U.S. EPA guidance explains that the Clean Water Act’s National Pollutant Discharge Elimination System (NPDES) program, which regulates wastewater discharges, “interfaces with many pathways by which [PFAS] travel and are released into the environment, and ultimately impact water quality and the health of people and ecosystems.”

Industry categories known or suspected to discharge PFAS include: organic chemicals, plastics & synthetic fibers (OCPSF); metal finishing; electroplating; electric and electronic components; landfills; pulp, paper & paperboard; leather tanning & finishing; plastics molding & forming; textile mills; paint formulating; and airports. Of course, this is not an exhaustive list.

While U.S. EPA’s Office of Water is working to revise Effluent Limitation Guidelines and develop water quality criteria to support technology-based and water quality-based effluent limits for PFAS in NPDES permits, there are currently no enforceable limits at the federal level. As an interim measure, recent U.S. EPA guidance describes steps that NPDES permit writers can implement under existing authorities to reduce PFAS discharges, including incorporating monitoring requirements, best management practices, and site-specific limits developed on a best professional judgment basis into permits.

An important question will be whether upstream industrial facilities that have PFAS in their wastewater discharges will be able to rely on the federally permitted release exemption as an affirmative defense to CERCLA liability. This exemption provides that parties are not liable under CERCLA for federally permitted releases. See 42 U.S.C. § 9607(j). The exemption also extends to state permitted releases under federally approved programs. Blankenship v. Consolidation Coal Co., 850 F.3d 630, 638 (4th Cir. 2017).

In the NPDES context, the exemption most notably covers “discharges in compliance with a permit.” See 42 U.S.C. § 9601(10)(A). The limited case law on this issue sheds light on two points. First, the exemption can only cover what a NPDES permit can regulate – the discharge of pollutants into navigable waters from a point source. Second, the exemption does not apply with respect to releases that (1) were not expressly permitted, (2) exceeded the limitations of the permit, or (3) occurred at a time when there was no permit. 

In 1995, U.S. EPA offered some guidance as to its interpretation of the scope of this exemption. Specifically, the Agency stated that the exemption would apply if: (1) the source, nature, and amount of the potential release had been identified and made part of the public record during the permitting process, and (2) the permit contains a condition requiring that the treatment system be capable of eliminating or abating the potential release.

Going back further in time, in a 1988 proposed rule that never took effect, U.S. EPA explained that the exemption covers discharges that are in compliance with a permit limit that specifically addresses the discharge in question. To qualify, the permit must either address the discharge directly through specific effluent limitations or through the use of indicator pollutants. In the case of the latter, the administrative record prepared during permit development must identify specifically the discharge of the pollutant as one of those pollutants the indicator is intended to represent.

Industrial facilities that have PFOA or PFOS in their wastewater discharges should evaluate whether their permits have any provisions that address these chemicals. Assuming they do not, which is the most likely scenario at this early stage, it is unlikely that the federally permitted release exemption will apply. However, if there are provisions that address these chemicals, or if the applicable permitting agency seeks to add such provisions through original permit issuance, modification, or renewal, businesses should consider the extent to which this will influence whether the federally permitted release exemption may apply.

Specifically, when negotiating permit conditions, businesses should keep in mind that U.S. EPA guidance suggests that for the exemption to apply, the source, nature, and amount of the potential PFOA or PFOS release must be identified and made part of the public record during the permitting process, and the resulting permit must contain a condition requiring that the treatment system be capable of eliminating or abating the potential release.

Considering this guidance, it is unlikely that the incorporation of mere monitoring requirements and/or best management practices that do not eliminate or abate the potential release of PFOA or PFOS will be sufficient for a discharger to rely on the federally permitted release exemption. However, the incorporation of site-specific limits developed on a best professional judgment basis likely will.

Indeed, it may be in the best interest of businesses to advocate for provisions in their permits that address PFOA and PFOS to minimize their risk or extent of future CERCLA liability. An important consideration will be the cost of eliminating or abating the potential release of PFOA or PFOS now versus the likelihood and associated cost of being sued for CERCLA cost recovery and ultimately having to pay the costs associated with remediating the unpermitted discharges of PFOA or PFOS later.

We will continue to provide timely updates on U.S. EPA’s ongoing efforts to regulate PFAS under the various environmental statutes at the Corporate Environmental Lawyer.

By Allison A. Torrence 

On March 15, 2023, EPA finalized its Good Neighbor Plan under the Clean Air Act (“CAA”), a rule designed to reduce smog-forming nitrogen oxide ("NOx") pollution from power plants and other industrial facilities in 23 upwind states that impact compliance with ambient air quality standards in downwind states. This rule will have a significant impact on power plants emissions in 22 states beginning in 2023, and will impose additional emission limits on certain industries, such as cement manufacturing, mining and solid waste combustion, in 20 states beginning in 2026.

Background

The CAA requires each state to submit State Implementation Plans (“SIPs”) that contain rules, plans and programs that will lead to compliance with the National Ambient Air Quality Standards (“NAAQS”). In these SIPs, states are required to ensure that air pollution sources in the state do not contribute to nonattainment of the NAAQS in other states. This requirement is known as the “Good Neighbor” provision of the CAA. On January 31, 2023, EPA determined that 21 states failed to meet the Good Neighbor requirements by failing to address interstate transport of ozone-creating NOx pollution in their SIPs. That action paved the way for EPA to institute Federal Implementation Plans (“FIPs”) in a total of 23 states to ensure that the Good Neighbor provisions were being addressed.

States Impacted

EPA will ensure that NOx emissions reductions are achieved by issuing FIP requirements for 23 states: Alabama, Arkansas, California, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, West Virginia, and Wisconsin.

Source: https://www.epa.gov/csapr/good-neighbor-plan-2015-ozone-naaqs

By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice

Almost two years to the date after U.S. EPA issued its regulatory determination for contaminants on the forth Contaminant Candidate List, U.S. EPA has issued its draft rule setting drinking water limits for several PFAS compounds.  Specifically.  U.S. EPA’s draft rule proposes a four part per trillion (ppt) maximum contaminant level (MCL) for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS).  According to an U.S. EPA fact sheet that accompanied the proposed rule, the four ppt level is the lowest concentration that can be reliably detected within “specified limits of precision and accuracy during routine laboratory operations conditions”. 

These proposed MCLs are higher than U.S. EPA’s previously issued health advisory levels (HALs) of 0.004 ppt for PFOA and 0.02 ppt for PFOS.  The reason for the higher proposed MCL levels is due in large part to the fact that U.S. EPA is required to consider available treatment technologies and treatment costs when setting an MCL which it is not required to do when setting a HAL.  U.S. EPA’s proposed maximum contaminant level goal (MCLG) for these specific PFAS which doesn’t need to consider technical feasibility of cost is “0”.  With respect to its previously issued HALs, U.S. EPA specifically noted that following receipt of public comments and finalization of the PFAS MCL, it will decide whether to update or remove the HALs for PFOA and PFOS. 

U.S. EPA’s draft rule also proposes to regulate several additional PFAS, including hexafluoropropylene oxide dimer acid (commonly referred to as GenX), perfluorononanoate (PFNA), perfluorohexanesulfonic acid (PFHxS), and perfluorobutane sulfonic acid (PFBS).  Rather than proposing an MCL for these PFAS,  U.S. EPA instead seeks to regulate these PFAS utilizing a hazard index which is a screening level approach that provides a risk indicator rather than a risk estimate for a mixture of components.

This hazard index approach is sometimes used by other federal agencies, including the Agency for Toxic Substances and Disease Registry.  Under this hazard index approach, U.S. EPA has identified health-based water concentrations (HBWCs) (i.e., the level at which no health effects are expected for that PFAS) for PFHxS (9 ppt); GenX (10 ppt), PFNA (10 ppt) and PFBS (200 ppt).  The detected concentration of each PFAS in drinking water is then divided by the HBWC to get a individual hazard quotient (HQ).  The hazard index is the summation of each of these HQs—if the hazard index value exceeds 1.0, then that would be an exceedance of the MCL.

The MCLs will become effective three years after they are finalized.   At that time, public drinking water systems will be obligated to test for these specific PFAS and take steps to mitigate any exceedances that are identified. 

U.S. EPA has proposed a 60-day comment period on the draft rule; however, in light of what are expected to be significant public comments, it is likely that this comment period will be extended. 

We will continue to provide timely updates on U.S. EPA’s ongoing efforts to regulate PFAS under the various environmental statutes at the Corporate Environmental Lawyer. 

By  Arie Feltman-Frank

The regulated community should be considering how Earth-observing satellites may enhance regulators’ and non-governmental organizations’ (NGOs’) ability to detect, measure, and monitor pollution. According to the Land Remote Sensing Satellites Online Compendium, a resource developed by the U.S. Geological Survey, there are 295 Earth-observing satellites that are operational, and 59 are under development.

At a basic level, Earth-observing satellites acquire information about the Earth. The data derived can differ in resolution and application depending on a satellite’s sensor and orbit. For example, satellites with a geostationary orbit maintain their position directly over the same place on Earth’s surface, permitting almost continuous coverage of that one area. These satellites may be most useful for targeting facilities with repeated or ongoing environmental violations. Once data derived from Earth-observing satellites are processed, they can be used in a variety of applications.

Notable Earth-observing satellites are set to launch this year. For example, TEMPO (Tropospheric Emissions: Monitoring Pollution) is a geostationary satellite scheduled to launch in April 2023 that will monitor daily variations in ozone, nitrogen dioxide, and other key elements of air pollution during daylight hours across North America. According to the U.S. Environmental Protection Agency (U.S. EPA), one of the anticipated benefits of TEMPO data will be an improved understanding of pollution sources and how their emissions vary throughout the day. Also, in late 2023, a subsidiary of the Environmental Defense Fund is expected to be ready to launch MethaneSAT, a satellite that will find and measure methane emissions with “unparalleled precision.” According to its website, MethaneSAT will, among other things, identify and quantify emissions from large sources and quantify aggregate emissions from smaller sources, as well as large intermittent sources.

Data derived from Earth-observing satellites may also impact businesses at the front-end through the imposition of more stringent pollution-reduction requirements. For example, a 2018 research study illustrates that satellite data can supplement ground-based air quality monitors to improve National Ambient Air Quality Standard compliance designations. This could result in businesses in newly designated areas having to comply with more stringent emission limitations and control measures.

Earth-observing satellite-derived data can be used outside of the air pollution context, too. For example, a 2022 research study illustrates that satellite data can be used to identify Concentrated Animal Feeding Operations engaging in unlawful winter land application. The land application detection system developed by this research was used in partnership with the Environmental Law and Policy Center to investigate several possible instances of unlawful application.

The takeaway is that businesses should ensure that they have robust environmental compliance programs in place that consider advancing Earth-observing satellite capabilities. They should especially consider that regulators and NGOs may be able to quickly and accurately detect, measure, and publicize discharges, leaks, spills, and other activity from even remote facilities.

For example, under U.S. EPA’s proposed methane rules, regulatory authorities and “qualified third parties” will be able to use satellites to identify and notify owners and operators in the oil and natural gas sector of “super-emitter” emissions events, which would require owners and operators to investigate and take appropriate mitigation actions.

And, if regulators and NGOs are detecting environmental violations before businesses, in addition to ensuing public relations issues, businesses will not be eligible for penalty mitigation under U.S. EPA’s Audit Policy. This may also reduce businesses’ ability to take advantage of more favorable resolutions of criminal cases under the U.S. Department of Justice, Environmental Crimes Section’s Voluntary Self-Disclosure Policy.

The impact that advancing Earth-observing satellite capabilities may have on environmental enforcement and litigation should not be overlooked. If you have any questions on how advanced monitoring technologies may impact your business operations and liabilities and how you can get ahead of this, reach out to one of the attorneys in Jenner & Block’s Environmental and Workplace Health and Safety practice.

By Matthew Price

        The Inflation Reduction Act promises to transform the energy sector in many ways, but among the most exciting is the hydrogen production tax credit, which provides a production tax credit, over a ten year period beginning with the date a facility is placed in service, of up to 60 cents per kilogram of “clean hydrogen” – that is, hydrogen “produced through a process” with a life-cycle greenhouse gas emissions rate below specified thresholds. 26 U.S.C. § 45V.   The credit is enhanced five-fold, up to $3 per kilogram, for clean hydrogen produced at facilities complying with certain prevailing wage and apprenticeship requirements.  Clean hydrogen can be used to decarbonize hard-to-electrify sectors, such as steel, cement, and chemical production, that today are responsible for a significant share of the Nation’s carbon emissions.  

        The Treasury Department is currently reviewing comments on the implementation of the hydrogen tax credit under Section 45V.  See IRS Notice 2022-58.  Several commenters have urged the agency to limit tax credits to hydrogen production powered by new renewable generation – thus eliminating the ability for hydrogen producers to receive tax credits if they source their electricity from existing renewable or nuclear plants.  Similar arguments are being raised at the Department of Energy as it seeks to finalize its Clean Hydrogen Production Standard to guide funding decisions under the Infrastructure Investment and Jobs Act. 

        The policy rationale for this limitation – which its proponents call “additionality” – is that if existing renewable or nuclear plants are used to produce hydrogen, they will no longer be available to serve the grid, and the result will be increased dispatch of fossil fuel plants to fill the gap, resulting in increased carbon emissions overall.  In their view, only “additional” clean generation – generation that would not otherwise exist, but for the electricity demand created by hydrogen production – should be allowed to be used by hydrogen producers claiming tax credits or federal funding. 

        An “additionality” requirement, however, is simply inconsistent with the statutory scheme.  If one is adopted, it is almost certain to be challenged in court – creating uncertainty that will discourage clean hydrogen production.  And, for the reasons I describe below, such a challenge is likely to succeed.

        First, the text of the Inflation Reduction Act forecloses such a requirement.  The statute makes tax credits available to “any qualified clean hydrogen,” 26 U.S.C. § 45V(b)(2)(A), (B), (C), (D) (emphasis added), and defines “qualified clean hydrogen” to focus on the process used to produce the hydrogen – not the indirect effects like the potential for other power sources to be dispatched to serve other load on the electric grid.  Thus, hydrogen counts as “clean hydrogen” if it is “produced through a process that results in a lifecycle greenhouse gas emissions rate” below a specified threshold.  Id. § 45V(c)(2)(A).  Lifecycle greenhouse gas emissions are to be calculated using a model known as “GREET,” developed by Argonne National Labs, and “shall only include emissions through the point of production” as determined by the GREET model.  Id. § 45V(b)(1) (emphasis added).  In calculating emissions through the point of production, the GREET model makes no distinction between sources of electricity based on whether they are existing or new.  Thus, there is no room for an “additionality” requirement in the definitions establishing eligibility for the tax credit.

        Second, if Congress had wanted to impose an “additionality” requirement, it knew how to do so.  For example, Section 45V contains other vintage-related requirements: a “qualified clean hydrogen production facility” is defined as one that begins construction before 2033.  § 45V(c)(3)(C).  Vintage requirements also limit which hydrogen production facilities are eligible for the increased credit amounts on account of compliance with certain prevailing wage and apprenticeship requirements.  § 45V(e)(2)(A).  But there is no vintage limitation on the resources used to provide energy to a clean hydrogen production facility. 

        Moreover, other provisions in the Inflation Reduction Act make clear that Congress anticipated the use of electricity generated by existing nuclear facilities to produce hydrogen and coordinated other clean energy credits with Section 45V on that assumption.  Section 45U, for example, establishes a nuclear production tax credit that is only available to nuclear facilities placed in service prior to enactment of the Inflation Reduction Act.  In Section 45U(c)(2), Congress incorporated special rules (set forth in Section 45(e)(13)) that would allow nuclear facilities receiving credits under Section 45U to use the electricity they generate to produce clean hydrogen receiving credits under Section 45V.  Congress would not have done so if it intended to limit Section 45V credits to hydrogen produced using energy generated by “additional” resources.  Indeed, an “additionality” requirement would make Section 45U(c)(2)’s incorporation of Section 45(e)(13) superfluous, conflicting with a basic principle of statutory interpretation and negating Congress’s intent. 

        Third, Congress sought to promote new renewable generation directly in the Inflation Reduction Act, through tax credit programs aimed directly at new clean generation, in Sections 45Y and 48E.  Especially in light of Sections 45Y and 48E, imposing an “additionality” requirement on Section 45V would be arbitrary.  After all, the purpose of Sections 45Y and 48E is to massively increase the amount of new renewable generation.  Against the backdrop of that expected influx, there is no reason to believe that new renewable generation providing electricity to hydrogen producers is “additional” just because it is new.  Such new renewable generation likely would have come online anyway.  And from the standpoint of the grid, such new renewable resources are just as available to serve load as existing renewable and nuclear resources are.  Consequently, the main effect of grafting an “additionality” requirement onto Section 45V is simply to favor one group of clean generators that otherwise would be serving load (new generators) over other clean generators that would otherwise would be serving load (existing generators).  That would be at odds with the purpose of Section 45V, which is to encourage hydrogen production—not promote new renewable generation.  From the standpoint of hydrogen producers, the main effect of an “additionality” requirement is to limit the options available to them in sourcing electricity—and thereby potentially make it more costly to produce clean hydrogen.  That is directly contrary to Congress’s objectives in Section 45V.

        Imposing an “additionality” requirement under the DOE’s Clean Hydrogen Production Standard, see 42 U.S.C. § 16166, which will guide funding decisions under the Infrastructure Investment and Jobs Act, would face similar legal hurdles.  The Clean Hydrogen Production Standard concerns “the carbon intensity of clean hydrogen production that shall apply” to the various hydrogen-related activities carried out under 42 U.S.C. subchapter 8, id. § 16166(a), including the selection of regional clean hydrogen hubs. 

        An “additionality” requirement has no place there.  Section 16166(b) directs that the clean hydrogen production standard should “support clean hydrogen production from each source” listed in Section 16154(e)(2).  That provision, in turn, makes no distinction between new energy sources and existing energy sources, but instead lists “diverse energy sources” including “fossil fuels with carbon capture, utilization, and sequestration” and “nuclear energy.”  Id. § 16154(e)(2), (2)(A), (2)(D); see also id. § 16166(c) (listing numerous sources to which “the standard” shall apply, but making no distinction among resources based on vintage).  Similarly, Section 16166(b) requires “clean hydrogen” to be defined in terms of carbon emissions “produced at the site of production per kilogram of hydrogen produced.”  Id. § 16166(b)(1)(B) (emphasis added).  In other words, hydrogen’s carbon intensity is to be assessed based on the energy source used to produce the hydrogen—not the indirect effects that using that energy source for hydrogen production may have on the carbon intensity of the grid as a whole.  An “additionality” requirement would be inconsistent with this statutory text.   What is more, the purposes of the statute are squarely focused on promoting the development and commercialization of hydrogen technology.   42 U.S.C. § 16151.  Nothing in those purposes suggest that hydrogen should be pursued only to the extent it can be created by new carbon-free resources.

        The Inflation Reduction Act amounts to a once-in-a-generation opportunity to kick-start hydrogen production.  It could have a transformational effect on our energy economy.  Unless already committed to other uses, existing clean resources should be available to American manufacturers seeking to realize that transformation.  It would be unfortunate indeed if the transition to a hydrogen-based economy were delayed or thwarted because of an “additionality” requirement limiting hydrogen producers to electricity procured from new resources that need to be constructed and interconnected.  Moreover, an additionality requirement is likely to face litigation that will create significant regulatory uncertainty for this nascent industry.  The resulting chilling effect is exactly the opposite of what Congress hoped to achieve.

    By Steven Siros, Partner and Daniel L. Robertson, Associate Attorney

On February 14, 2023, the Maine Department of Environmental Protection (MDEP) issued a proposed draft rule that provides guidance on reporting requirements and sales prohibitions for products and product components containing intentionally added Per- and Polyfluoroalkyl substances (PFAS). This proposed rule comes on the heels of two prior MDEP concept drafts and public hearings attended by hundreds of interested parties that generated a significant number of substantive comments.

In July 2021, the Maine Legislature enacted An Act to Stop Perfluoroalkyl and Polyfluoroalkyl Substances Pollution. The law sets forth three main objectives: (1) banning the sale of any product containing intentionally added PFAS by January 1, 2030; (2) banning the sale of carpets, rugs, and fabric treatments with intentionally added PFAS beginning on January 1, 2023; and (3) creating reporting requirements for manufacturers of products with intentionally added PFAS, also beginning on January 1, 2023.  In the absence of implementing regulations as of the January 1, 2023 effective date of the law, MDEP granted compliance extensions to hundreds of manufacturers, following the Maine State Chamber of Commerce actively encouraging Maine businesses to seek extensions.

MDEP’s latest draft rule clarifies a number of issues, including providing guidance on which PFAS chemicals must be reported, conditions for seeking waivers or exemptions from the reporting requirements, submitting claims for confidential business information, and certain fee requirements.

With regards to reporting, the draft rule specifies that the notification must include:

1. a) A brief description of the product;
2. b) The purpose for which PFAS are used in the product, including any product component;
3. c) The amount of each PFAS as a concentration, identified by name and its chemical abstract service (CAS) registry number, of each PFAS in the product or any product component reported as an exact quantity determined using commercially available analytical methods, or as falling within a range approved by MDEP; and
4. d) The name and address of the reporting manufacturer and information identifying a responsible officer for the manufacturer.

MDEP notes that because the statute requires notification of intentionally added PFAS by CAS number, chemicals which do not have a CAS number assigned are not subject to the reporting requirements or use prohibitions. The latest draft also removes a prior proposed requirement that manufacturers report estimated sales volume for the product. In defining a manufacturer, the proposal clarifies that, in the event a product contains more than one manufacturer, MDEP “will consider the party who controls the formulation of the product and its PFAS content to be the manufacturer.”

The proposal further provides language on waiver requirements and preemption. MDEP may waive all or part of the notification requirement if MDEP determines that “substantially equivalent information” is publicly available. “Substantially equivalent information” is defined in part as “an existing notification by a person who manufactures a product or product component when the same product or product component is offered for sale under multiple brands.”

A product for which federal law or regulation controls the presence of PFAS in the product is exempt from the proposed requirements. Federal preemption is described as “a determination that the intent of federal laws is to limit or eliminate overlapping programs at the state level.” MDEP “will treat as exempt products where an applicable federal law is written with language that explicitly preempts parts of this program . . . [or] any products where an applicable opinion from a court having jurisdiction in Maine finds that preemption of parts of this program is implied.” There are also exemptions for products subject to Maine Revised Statutes Title 32, Sections 26-A (Reduction of Toxics in Packaging) and 26-B (Toxic Chemicals in Food Packaging). This state exemption specifically applies to items being used as packaging, packing components, or food packing and intended for marketing, handling or protection of products.

MDEP also revised its rules for reporting confidential business information, with the latest draft stating that claims of confidential business information may be made at the time of notification. MDEP will handle these claims in accordance with Maine’s Freedom of Access Act, Maine Revised Statutes and related policies and procedures. The proposal notes in particular that information courts would find to be privileged is excluded from public disclosure.

Finally, the proposed rule clarifies the requirements on product components, noting that “[a] separate notification and fee are only required for product components when they are offered or distributed in Maine without being incorporated into a more complex product.”

The draft rule fails, however, to clarify what if any obligation is imposed on a manufacturer that unknowingly sells or distributes for sale a product that contains “intentionally added PFAS.”   For example, a manufacturer may use an ingredient or component that itself contains “intentionally added PFAS” but the manufacturer may lack “knowledge” of the presence of the PFAS in the ingredient or component.  Moreover, because even the best laboratories can detect only a few of the more than 9,000 different PFAS, it is often impossible for a manufacturer to know whether a product sold or distributed in Maine contains “intentionally added PFAS”.  The regulations are silent on what, if any, compliance obligations may be triggered by what is a fairly common occurrence. 

Manufacturers of products sold in Maine that may contain PFAS would be well served to carefully evaluate this proposed rule to determine how best to ensure compliance with the January 1, 2023 reporting obligations and subsequent sale prohibitions.   Affected entities may elect to submit comments on the proposed rule on an individual basis or through a trade association.  The public comment period closes on May 19, 2023.

We will continue to monitor Maine’s PFAS reporting rulemaking and other nationwide PFAS-reporting developments on Corporate Environmental Lawyer.

By Steven Siros, Daniel L. Robertson and Arie Feltman-Frank

Developing a Proactive and Strategic Game Plan

Per- and polyfluoroalkyl substances (PFAS) in consumer products continue to be in the regulatory and litigation spotlight in 2023. Manufacturers and downstream businesses should be actively preparing to comply with the continually evolving patchwork of federal and state PFAS laws, as well as taking steps to minimize litigation risks. Below, our team of attorneys offers strategic advice for manufacturers and downstream businesses with respect to how regulatory and litigation PFAS developments may apply to them and best practices for minimizing regulatory and litigation risk with respect to same.

I.     State Consumer Product PFAS Laws

Consumer products that are currently the subject of state PFAS laws include carpets, rugs, and fabric treatments, children’s products, cookware, cosmetics, food packaging, furniture, oil and gas products, ski wax, and textiles and apparel, but this is a continually evolving list. Businesses that manufacture and sell these and similar products should be carefully evaluating whether these products contain PFAS, in which states the products are or will be manufactured, distributed, or sold, and what the PFAS laws and regulations are in those states. State PFAS laws can be categorized by the PFAS they regulate, the requirements they impose, and other notable nuances.

1. Regulated PFAS

Thousands of PFAS have been identified by the U.S. Environmental Protection Agency (EPA),[1] but PFAS laws may not apply to all. Thus, when reviewing their applicability, businesses should consider how PFAS laws define PFAS and whether they apply broadly to all PFAS or only a specific subset of PFAS. Businesses should also consider whether there are specific threshold concentrations or whether the regulations are triggered by the presence of any PFAS in the product. Lastly, businesses should consider whether the laws only apply to “intentionally” added or introduced PFAS that serve an intended function. Each of these are discussed, in turn, below.

            A.    PFAS Defined and Specific Subsets

State PFAS laws generally broadly define PFAS as a class of fluorinated organic chemicals containing at least one fully fluorinated carbon atom.[2] Some laws apply to PFAS generally. For example, California’s Chemicals of Concern in Food Packaging, Juvenile Products, and Textile Articles laws prohibit “regulated” PFAS, and their definitions of “regulated” do not narrow their prohibitions’ coverage to a specific PFAS subset.

In contrast, other laws only apply to a specific subset of PFAS. These narrower laws may identify the regulated PFAS themselves or refer to chemicals designated or listed by a state regulatory agency. For example, Maryland’s Cosmetic Products law specifically lists thirteen specific PFAS that fall within its regulatory purview. Similarly, Maine’s Toxic Chemicals in Children’s Products law applies to “priority chemicals,” and perfluorooctanesulfonic acid (PFOS) is the only PFAS that the Maine Department of Environmental Protection has currently designated as such. Importantly, PFAS chemicals that are not subject to prohibitions now may fall victim in the future. Thus, businesses that choose to continue using unregulated PFAS in their products may find themselves forced to adjust their ingredient lists down the road.

            B.    Threshold Concentrations

In addition to identifying the regulated PFAS, businesses should consider whether state PFAS laws specify threshold concentrations that trigger their requirements as these may influence compliance obligations.

For example, Oregon’s Toxic-Free Kids Act imposes disclosure requirements on manufacturers of children’s products that contain a high priority chemical.

but only if the chemical is “in an amount at or above a de minimis level.” For an intentionally added chemical, the de minimis level is the “practical quantification limit” (PQL), which means the lowest concentration of a chemical that can be reliably measured within specified limits during routine laboratory operating conditions. The Oregon Health Authority has defined the PQL for intentionally added PFOS as 0.001 parts per million. For a chemical that is a “contaminant,” which is defined as trace amounts of chemicals that are incidental to manufacturing and that serve no intended function in the product component, the de minimis level is 100 parts per million (see more on unintentional PFAS below).

In a similar fashion, Maine’s An Act to Stop PFAS Pollution imposes disclosure requirements on manufacturers of products with intentionally added PFAS. However, the Maine Department of Environmental Protection has suggested in its FAQs[3] that notification is only required if intentionally added PFAS are detectable when analyzing the product using a commercially available analytical method (above the PQL). The Department understands “commercially available analytical method” to mean any test methodology used by a laboratory that performs analyses or tests for third parties to determine the concentration of PFAS present. 

Finally, California’s Chemicals of Concern in Food Packaging and Juvenile Products laws, which prohibit “regulated” PFAS, specify that PFAS may be considered “regulated” if their presence is at or above 100 parts per million, as measured in total organic fluorine. California’s Textile Articles law provides a similar threshold concentration requirement, as does Vermont’s Chemicals of High Concern to Children law.

Thus, compliance with state PFAS laws may require that businesses be able to reliably measure the concentration of PFAS (or total organic fluorine) in their final products, which will depend on the availability of commercially available testing methods. While EPA has developed approved methods for measuring PFAS concentrations in environmental matrices such as air, water, waste, and pesticides, these methods may not be specifically applicable for consumer products. Notably, the American Society for Testing and Materials (ASTM) has announced that it created a new subcommittee that will develop standards for measuring PFAS in consumer products. ASTM’s efforts are ongoing.

Importantly, limitations in measuring capabilities may pose unique compliance challenges.[4] The traditional PFAS testing methods are liquid chromatography-tandem mass spectrometry (LC/MS/MS) or gas chromatography-mass spectrometry (GC-MS), but these methods target only a specific subset of PFAS—presently approximately 42 unique PFAS.

To address these limitations, there are numerous emerging technologies and methodologies. For example, to evaluate the presence of precursor molecules that can break down or transform into PFAS, total oxidizable precursors (TOPs) assay can be utilized as it was in a recent study to measure the presence of PFAS in a range of household items.[5] Other methodologies such as combustion ion chromatography (CIC), particle-induced gamma ray emission (PIGE), neutron activation analysis (INAA), and X-ray photoelectron spectroscopy (XPS), can be used to quantify total organic fluorine that some state regulators have elected to rely upon as a proxy for PFAS.[6] There are, however, significant risks in relying on total organic fluorine as a proxy for PFAS as numerous studies have documented limitations in this methodology.[7]

Businesses should be reviewing commercially available methods to measure the concentration of PFAS in their products, as well as be cognizant as to how these methods are evolving. Businesses may also want to consider seeking clarification from regulatory agencies on which methods are appropriate for specific consumer products. 

            C.    Intentionality and Functionality

Many state PFAS laws only apply when PFAS are “intentionally” added or introduced to covered products for a specific purpose.[8] Notably, the introduction or addition of PFAS does not need to be direct. Intentionally adding or introducing product ingredients that are not regulated PFAS but break down or transform into PFAS in final products may render state PFAS laws applicable, too. Therefore, businesses should assess whether PFAS (or other chemicals that may serve as precursor molecules of regulated PFAS) are being used in their manufacturing process and for what purpose. Businesses that use PFAS or PFAS precursor product ingredients in their manufacturing process for a specific purpose should evaluate the extent to which they can phase out these ingredients and find substitutes.   

Some laws specifically exempt unintentional PFAS from regulation. For example, Connecticut’s Cosmetic Products law clarifies that a person is not in violation of the law’s PFAS prohibition if the product was manufactured through a process to comply with the law and contains a technically unavoidable trace quantity of regulated PFAS due to an impurity of a natural or synthetic ingredient, the manufacturing process, storage, or packaging.

However, other laws may not let manufacturers off the hook if the unintentional PFAS is above identified threshold concentrations. As discussed above, California’s Chemicals of Concern in Food Packaging, Juvenile Products, and Textile Articles laws and Vermont’s Chemicals of High Concern to Children law establish threshold concentration requirements.

Even if PFAS are not being used to manufacture the product itself, they may still end up in the final product. One way this may happen is through leaching from the product packaging. For example, EPA studies have revealed that PFAS from fluorinated high-density polyethylene (HDPE) container walls of pesticide products can leach into the contents of the containers. In fact, EPA has recently initiated enforcement action against a company that utilized fluorine gas in the manufacture of plastic containers from which EPA claims PFAS are leaching into the products stored in these containers. 

In sum, even if businesses do not use PFAS in their manufacturing process, they would be wise to carefully audit their supply chains to minimize the risk of PFAS winding up in their final products. Moreover, as explained further below, businesses with PFAS in their products, even if their presence is unintentional and not in violation of any specific federal or state regulation, may still be subject to private party litigation.

Finally, although not the primary focus of this client alert, businesses should consider the downstream pathways of their products and other equipment that may contain PFAS because releases into the environment may trigger Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) reporting requirements and liability once perfluorooctanoic acid (PFOA) and PFOS (and other PFAS down the road) become designated as CERCLA hazardous substances (see more on remediation demands below).[9]

2. Requirements

Requirements fall into two categories: disclosures and prohibitions. While some state PFAS laws directly impose requirements, others give regulatory agencies the authority to. Below is a collection of consumer product categories and state PFAS laws, including the types of requirements imposed and their effective dates.

While some laws are already in effect, others will take effect later this year. For example, Vermont’s prohibitions on intentionally added PFAS in carpets and rugs, food packaging, and ski wax, and California’s prohibition on regulated PFAS in children’s products, will take effect on July 1 of this year. Connecticut’s and New York’s prohibition on intentionally added PFAS in food packaging and apparel, respectively, will take effect on December 31. Other laws won’t take effect until 2024 or beyond.

State PFAS Laws/Regulations Targeting Consumer Products

3. Other Notable Nuances

Finally, state PFAS laws can be characterized by other notable nuances. For example, some laws provide defenses for sellers and distributors that rely in good faith on manufacturer certificates of compliance. Others provide exemptions for certain products or parties or provide a vehicle for regulatory agencies to extend deadlines. Businesses should carefully consider these nuances when evaluating their options.

II.     Federal Consumer Product PFAS Regulations, Bills, and Liability

In addition to preparing to comply with the patchwork of state PFAS laws, businesses should be following and preparing to comply with evolving PFAS obligations at the federal level and seeking to understand and address potential liabilities. These include:

• Reporting obligations under Section 313 of the Emergency Planning and Community Right-to-Know Act for facilities that manufacture, process, or otherwise use certain PFAS that have been added to the Toxic Release Inventory. Notably, if EPA’s December 5, 2022, proposed rule[10] takes effect, covered facilities will no longer be able to avoid PFAS reporting obligations under the “de minimis exemption,” which allows facilities to evade reporting requirements with respect to mixtures or other trade name products containing PFOS concentrations below 0.1% and other covered PFAS concentrations below 1%. Covered facilities will also no longer be able to take advantage of other burden-reduction reporting options. Businesses should consider submitting comments on the proposed rule, which must be received on or before February 3, 2023.

• Notification requirements associated with importing articles and carpets containing certain PFAS. Specifically, EPA’s Significant New Use Rule,[11] promulgated under the Section 5(a) of the Toxic Substances Control Act (TSCA), became effective on September 25, 2020, and requires persons to notify EPA at least 90 days before commencing the import of a subset of PFAS chemicals as part of a surface coating on articles and PFOS as part of carpets. The rule provides that examples of articles could include apparel, outdoor equipment, automotive parts, carpets, furniture, and electronic components.

• Potential future reporting and recordkeeping requirements for manufacturers and importers of PFAS for PFAS manufactured in any year since January 1, 2011. Under EPA’s proposed rule,[12] proposed pursuant to Section 8(a)(7) of TSCA, articles containing PFAS, including imported articles containing PFAS (such as articles containing PFAS as part of surface coatings), are included in the scope of reportable chemical substances.

• Potential future testing and reporting obligations for manufacturers or processors of certain PFAS that may be on the receiving end of TSCA Section 4(a) testing orders. Under TSCA, the term “processor” includes persons who prepare chemical substances for distribution in commerce as part of articles.[13] These orders require recipients to test identified chemical substances to determine whether they have adverse health or environmental effects.

• Keep Food Containers Safe from PFAS Act of 2021 (3169): This bill was introduced in the U.S. Senate on November 4, 2021, and would amend the Federal Food, Drug, and Cosmetic Act to, effective January 1, 2024, prohibit the introduction or delivery for introduction into interstate commerce of food packaging containing intentionally added PFAS, and for other purposes. The bill’s sponsor is U.S. Senator Margaret Wood Hassan of New Hampshire.

• No PFAS in Cosmetics Act (2047): This bill was introduced in the U.S. Senate on June 14, 2021, and would require the Secretary of Health and Human Services to issue a proposed rule to ban the use of intentionally added PFAS in cosmetics no later than 270 days after the bill’s enactment and finalize such rule not later than 90 days after issuing the proposed rule. The bill’s sponsor is U.S. Senator Susan M. Collins of Maine.

• Safe Drinking Water Act (and state) regulatory developments and remediation demands: EPA is developing a National Primary Drinking Water Regulation (NPDWR) for PFOA and PFOS, which will lead to the establishment of Maximum Contaminant Levels (MCLs) for these PFAS.[14] In the interim, EPA has developed[15] non-regulatory health advisory levels for PFOA and PFOS, as well as final health advisory levels for other PFAS. EPA is also evaluating additional PFAS and considering regulatory actions to address groups of PFAS. For example, EPA’s Fifth Contaminant Candidate List[16] includes a group of PFAS, which may lead to a NPDWR for these PFAS down the road. Also, the Fifth Unregulated Contaminant Monitoring Rule[17] requires certain public water systems to collect samples of 29 PFAS between 2023 and 2025. Notably, in addition to these federal developments, several states have established MCLs and notification requirements for certain PFAS. To comply with these regulatory developments, public water systems may detect and remediate PFAS in drinking water and target nearby consumer product manufacturers or downstream businesses with PFAS in their products to try to force them to pay remediation costs.

III.    Litigation

Finally, businesses should proactively stay ahead of new PFAS litigation trends in the consumer product context.

1. Current Litigation

As consumer interest in PFAS increases, there is a corresponding increased focus on reporting of PFAS in consumer products. Perhaps not surprisingly, this reporting has spawned litigation.

For example, after a 2022 Consumer Reports review discussed PFAS in packaging products from restaurants and grocery chains, companies named in the report, including Burger King, were sued. In a similar fashion, after Toxic-Free Future published a report on the use of PFAS in water or stain-resistant textiles, one of the companies in the report, Recreational Equipment, Inc. (REI), was sued in California in April 2022, with a second lawsuit filed in Washington in October 2022. Personal care brands and cosmetic manufacturers such as L’Oreal and Cover Girl are facing similar lawsuits, the L’Oreal lawsuit citing a June 2021 Notre Dame research study that investigated the use of PFAS in 231 cosmetic products.

The lawsuits generally allege breaches of express or implied warranties, fraudulent concealment, unjust enrichment, and consumer protection act violations and track similar themes, targeting a business for touting its product as “sustainable,” “safe,” or “green” when the product allegedly contains PFAS known to be harmful. Statements of “transparency” in product ingredients have also been targeted where the use of PFAS was not clearly stated. Unjust enrichment claims tend to allege a company saved money by using PFAS-coated products instead of more expensive, but safer, alternatives. Injury claims, such as in the REI cases, allege that a consumer was led to believe they were spending money on a premium, environmentally friendly brand versus lower-cost competitors.

At least one lawsuit has already been defeated. For example, on November 30, 2022, a district court in Pennsylvania dismissed a lawsuit against Artsana USA, Inc., commonly known as Chicco, that alleged a failure by Chicco to disclose the use of PFAS in its KeyFit 30 children’s car seat in either its packaging, labelling, or ingredients list. The plaintiff, who did not allege any health impacts, instead alleged that she overpaid for the product thinking it was PFAS-free based on Chicco’s omissions and misrepresentations. The plaintiff also pointed to a Chemical Policy on Chicco’s website that claimed the KeyFit 30 to be PFAS-free.

On a motion to dismiss, the court held that the plaintiff did allege an injury-in-fact by paying a price premium for a product the plaintiff believed to be PFAS-free. However, the court also held that the plaintiff failed to state a claim for which relief could be granted because Chicco is not required to disclose the chemicals it uses to treat its car seats and because the plaintiff did not rely on the Chemical Policy when purchasing the car seat. The court further held that the plaintiff failed to follow statutory requirements to notify the defendant of a breach of express or implied warranty.

Other consumer product company defendants have similarly pushed to dismiss litigationThe disposition of these and related lawsuits will bring needed clarity to businesses with respect to how they advertise their products.

2. Future Outlook

It is likely that plaintiff’s firms will continue to aggressively pursue lawsuits in this area. With most lawsuits focusing on product representations, businesses should pay special attention to how they address PFAS in their consumer-facing descriptions.

Retailers can also expect increased pressure from consumers to remove PFAS-containing products from their catalogs. This, in turn, will put pressure on manufacturers and upstream suppliers to ensure products reaching retail are PFAS-free, as well as increase retailer and consumer demands directed at manufacturers and suppliers for product ingredient information.

IV.    Conclusion

Manufacturers and downstream businesses should be dedicating resources to comply with regulatory developments and minimize litigation risk. Our team of attorneys can help businesses examine how PFAS developments apply to them, as well as help businesses develop a proactive and strategic game plan.

[1] See PFAS Master List of PFAS Substances, EPA (Aug. 10, 2021), https://comptox.epa.gov/dashboard/chemical-lists/pfasmaster.

[2] Sometimes state PFAS laws use the language “all” or “any” members.

[3] While the disclosure requirements took effect January 1, 2023, the Maine Department of Environmental Protection is currently in the process of developing regulations. The Department’s website notes that the answers in its FAQs are subject to change in response to feedback and changes in regulation.

[4] Cf. Kelsey L. Rodriguez et al., Recent Developments of PFAS-Detecting Sensors and Future Direction: A Review, Micromachines (Basel). 2020 Jul; 11(7): 667, at 2 (noting the limitations in the practical applications of traditional technologies used to measure PFAS in environmental matrices). For one example of regulatory-detection  mismatch in the drinking water context, EPA’s interim health advisory levels for perfluorooctanoic acid (PFOA) and PFOS, 0.004 and 0.02 parts per trillion, respectively, are below the level of both detection and quantitation for these chemicals.

[5] Kathryn M. Rodgers et al., How Well Do Product Labels Indicate the Presence of PFAS in Consumer Items Used by Children and Adolescents?, Environ Sci Technol. 2022 May 17; 56(10): 6294–6304.

[6] Lara Schultes et al., Total Fluorine Measurements in Food Packaging: How Do Current Methods Perform?, Environ. Sci. Technol. Lett. 2019, 6, 2, at 73–78.

[7] See, e.g., Anna Brinch et al., Risk Assessment of Fluorinated Substances in Cosmetic Products, Ministry of Environment and Food of Denmark. 2018 Oct, at 31.

[8] PFAS are generally added to consumer products to impart water and stain resistance.

[9] See 87 Fed. Reg. 54,415 (Sept. 6, 2022).

[10] 87 Fed. Reg. 74,379.

[11] 85 Fed. Reg. 45,109 (July 27, 2020).

[12] 86 Fed. Reg. 33,926 (June 28, 2021).

[13] See 15 U.S.C. §2602(13), (14).

[14] In March 2021, EPA published Regulatory Determinations for Contaminants on the Fourth Contaminant Candidate List, which included a final determination to regulate PFOA and PFOS in drinking water. 86 Fed Reg. 12,272 (Mar. 3, 2021) (Regulatory Determinations); 81 Fed. Reg. 81,099 (Nov. 17, 2016) (Fourth Contaminant Candidate List).

[15] 87 Fed. Reg. 36,848 (June 21, 2022).

[16] 87 Fed Reg. 68,060 (Nov. 14, 2022).

[17] 86 Fed. Reg. 73,131 (Dec. 27, 2021).

By Steven Siros, Tatjana Vujic and Arie Feltman-Frank

As businesses continue to optimize their environmental, social, and governance (ESG) strategies, an important arrow in the ESG quiver may be carbon di oxide (CO₂) capture and storage (CCS). CCS involves capturing, compressing, transporting, and then injecting CO₂ into deep underground porous rock formations for long-term storage, known as geological sequestration (GS). These formations are often a mile or more beneath the surface and overlaid by impermeable, non-porous layers of rock that trap the CO₂ and prevent it from migrating upward.

The effectiveness of carbon capture,[1] coupled with the robust storage capacity available in the United States,[2] make CCS a promising method to minimize the climate-forcing effects of CO₂ emissions. Indeed, the Security and Exchange Commission’s (SEC’s) proposed climate-disclosure rule refers to investing in CCS technologies as one way by which companies can “take advantage of climate-related opportunities.” CCS may also be a viable compliance option for “major” federal contractors which, according to a recently proposed Federal Acquisition Regulatory Council rule, will be required to set “science-based targets” to reduce their greenhouse gas (GHG) emissions in order to do business with the federal government.

Injecting CO₂ underground is not new. For decades, the oil and gas industry has been utilizing enhanced oil recovery (EOR), a process that involves injecting CO₂ into oil-bearing formations to increase the amount of oil and gas produced from oil and gas reservoirs. What is relatively new, however, is the increased focus on GS as a vital, if not indispensable,[3] part of meeting CO₂-reduction goals. This client alert will predominantly focus on the GS component of CCS and the permitting requirements associated with GS of CO₂ for the purpose of meeting GHG reduction targets.

I    The Safe Drinking Water Act and Geological Sequestration of CO₂

The primary federal program governing GS of CO₂ is the Safe Drinking Water Act’s (SDWA’s) Underground Injection Control (UIC) program. According to EPA, the “chief goal” of the UIC program is the “protection” of underground sources of drinking water (USDWs).[4] Under the SDWA, EPA must publish regulations for state UIC programs that “contain minimum requirements for effective programs to prevent underground injection which endangers drinking water sources.”[5] Interested states can then apply for primary enforcement responsibility of the UIC program, known as “primacy.”[6]

The statutory vehicle for primacy applicable to GS of CO₂ is section 1422, whereby states must demonstrate that, among other requirements, they have adopted and will implement a UIC program that meets the “minimum requirements” established by the federal regulations.[7] While the federal regulations establish a floor, they do not preclude states from adopting or enforcing “more stringent or [] extensive” requirements or “[o]perating a program with a greater scope of coverage.”[8] If EPA approves a state’s UIC program, the state achieves primacy; if EPA disapproves the program (or parts thereof), or if a state fails to apply, the federal UIC program applies.[9]

There are six classes of underground injection wells that are regulated under the SDWA.[10]  Of these classes, Class VI and Class II wells are most relevant to GS of CO₂.

Class VI wells are used for non-experimental GS of CO₂.[11] EPA promulgated regulations governing minimum federal requirements for Class VI wells by final rule on December 10, 2010.  The regulations are generally set forth at 40 C.F.R. Parts 124, 144, 145, and 146 and required EPA to establish a Federal UIC Class VI program in each state that did not submit a complete primacy application by September 6, 2011. Because no state applied by the deadline, on September 6, 2011, the federal Class VI program became effective nationwide.

Since then, only North Dakota and Wyoming have achieved Class VI primacy. In all other states, the federal program applies. Only two Class VI permits have been issued under the federal UIC program, both by EPA Region 5 to Archer Daniels Midland in Decatur, Illinois, which took EPA approximately three years to issue (measured from the date the applications were submitted to issuance). Another 28 Class VI permit applications are pending in California, Illinois, Indiana, Louisiana, Ohio, and Texas. It is anticipated that over time, the permitting process will become both faster and more efficient, especially in light of increased funding provided by the Infrastructure Investment and Jobs Act (IIJA), which appropriates $5 billion annually to EPA over the next five years for the permitting of Class VI wells as a way to facilitate more CCS.[12]

Class II wells, which include wells that inject fluids into oil and gas reservoirs for EOR,[13] are also relevant to GS of CO₂ because long-term storage of CO₂ in these wells can be incidental to the injection process. Notably, most states have achieved Class II primacy.[14] When EOR results in some “incidental storage” of CO₂ in a Class II well, the owner or operator is likely not required to seek a Class VI permit. However, if the owner or operator elects to use a Class II well originally used for EOR to inject CO₂ for the “primary purpose of long-term storage,” the regulations require that the owner or operator obtain a Class VI permit “when there is an increased risk to USDWs compared to Class II operations.”[15]

We are not aware of any instances where EPA has required an owner or operator to obtain a Class VI permit for a previously permitted Class II well. As such, one attractive option for owners or operators of Class II wells used for EOR may be to utilize these wells for long-term GS of CO₂, given that the Class II requirements are less stringent. Because Class VI wells are the primary wells used for long-term CO₂ storage, the remainder of this client alert will predominantly focus on Class VI wells.

    A.    Geological Sequestration Projects in States Where the Federal UIC Class VI Program Applies.

In states in which the federal UIC Class VI program applies, to receive a Class VI permit that would allow for GS of CO₂, businesses need to submit a Class VI permit application to the appropriate EPA regional office within “a reasonable time before construction is expected to begin.”

Because the primary requirement of the UIC program is to ensure that GS of CO₂ will not threaten any USDWs, businesses need to carefully choose where to locate their wells. In particular, wells need to be placed at sites of “suitable” geology.  Of suitable geology means that the injection zone can receive the total anticipated volume of the CO₂ stream, while the confining zone, i.e., the area in which the CO₂ will be stored, must be free of transmissive faults or fractures and sufficient to contain the injected CO₂ stream. The confining zone also must be able to withstand injection without initiating or propagating fractures that would allow the CO₂ to migrate outside its bounds.[16] GS of CO₂ must also be beneath the lowermost formation containing a USDW unless a waiver of the injection depth requirements has been granted.^[17]

In their applications, Class VI permit applicants must include information regarding the proposed injection well, its construction, the proposed operations, and geologic, hydrologic, and other information regarding the area around the project where USDWs may be endangered, which is known as the “area of review.” The area of review is “delineated using computational modeling.”[18] Applications must also include plans related to the area of review and the types of corrective action, testing and monitoring, injection well plugging, post-injection site care and site closure, and emergency and remedial response that will be provided. Lastly, applications must provide proof that the applicants meet financial responsibility requirements.[19]

Throughout the application process, applicants should consider whether the information submitted to EPA can be claimed as confidential business information. If so, they should be sure to make a confidential business information assertion in their applications or else risk the possibility that their applications could be subject to public disclosure.[20]

Once cessation of injection occurs, owners and operators must continue to monitor the site for “at least 50 years” or until EPA decides that the GS project no longer poses an endangerment to USDWs. Owners and operators also must report any evidence that the injected CO₂ stream or associated pressure front may cause endangerment to a USDW.[21]

If any indication of movement of any contaminant into an USDW exists, the permittee will be subject to “additional requirements . . . as are necessary to prevent such movement,” which are imposed by modifying the permit or terminating the permit if “cause” exists. In addition, in the absence of “appropriate” state or local action, EPA may take “emergency action” when “a contaminant which is present in or likely to enter a public water system or [USDW] may present an imminent and substantial endangerment to the health of persons.”[22]

    B.    Geological Sequestration Projects in States That Have Achieved Class VI Primacy

As noted previously, only North Dakota and Wyoming have achieved Class VI primacy.[23] Thus, businesses interested in pursuing GS in these states will have to do so in accordance with the states’ respective Class VI regulations. North Dakota’s Class VI program is administered by the North Dakota Oil & Gas Division. To date, North Dakota’s Oil & Gas Division has issued two Class VI permits and has one permit application under review. Wyoming’s Class VI program, on the other hand, is administered by the Wyoming Department of Environmental Quality. To date, Wyoming has received two Class VI permit applications, each of which are still under review.

In contrast to the three-year permitting time for the two Class VI permits issued by EPA Region 5, the time to review and approve the two permits issued by the North Dakota Oil & Gas Division was approximately eight months. It is expected, however, that the annual $50 billion in grant funding made available through the IIJA over the next five years[24] will drive more states to seek Class VI primacy. The likely result will be that more projects may be able to get permitted faster.

II    Obstacles, New Developments, and Other Considerations

Despite the significant funding and attention given to CCS as a climate mitigation tool, businesses interested in pursuing CCS should be aware of potential obstacles they may encounter and be required to navigate. These obstacles include high project costs, public opposition, and uncertainties associated with subsurface pore space ownership and long-term liability. While other project specific requirements are likely to arise, such as compliance with additional federal, state, and local laws,[25] a review of these additional requirements is beyond the scope of this client alert. 

    A.    High Project Costs.

High project costs are a key challenge to CCS development. Whether a project’s costs are high or not will depend on several factors, including the type of facility, the facility’s proximity to the injection site, the availability of CO₂ transportation infrastructure, and tax credits and grants.

Taking each of these factors in turn, certain facilities will be at an advantage when it comes to cost thanks to characteristics like the concentration of the CO₂ stream. In particular, CO₂ capture is most cost-effective for facilities that generate highly concentrated CO₂ streams.[26]

With respect to transportation, the closer the CO₂-producing facility is to the injection site, the lower the overall costs will be. Also, CCS is likely to be most cost-effective in areas with a history of oil and gas extraction and EOR, such as California, Illinois, Kansas, Oklahoma, and Texas, where the approximately 5,000 miles of CO₂ pipelines established in the United States are largely located.[27] While the expansion of CO₂ pipeline infrastructure will be necessary for large-scale CCS development, the need for additional pipeline to deliver the CO₂ to the injection site creates not only more infrastructure costs but also more requirements with which more costs, such as permit and land acquisition and related compliance with pipeline safety regulations, are likely associated.[28]

Importantly, the cost equation may be changing owing to the expanded 45Q tax credits established by the 2022 Inflation Reduction Act (IRA), which are available in addition to funding provided by the IIJA. Although a detailed overview of these statutes’ provisions is beyond the purview of this client alert, at a high level, the IRA increased the 45Q tax credits for certain facilities or equipment placed in service after December 31, 2022, to $85 per ton of CO₂ disposed of in secure geologic storage and $60 per ton of CO₂ used for EOR and disposed of in secure geologic storage or otherwise utilized in a qualified manner.[29] As mentioned above, in addition to the IRA-driven tax credits, the IIJA provided significant funding for CCS, some of which was allocated to the U.S. Department of Energy, which recently released three funding opportunity announcements and established a new finance program that may help CCS developers reduce costs further.

    B.    Public Opposition.

Despite its upsides, it is possible that CCS projects may draw opposition from the public, which can present serious developmental challenges. To address potential opposition, businesses would be wise to consider how to authentically engage with community stakeholders at the outset of project development to try to avoid contentious permitting processes to the extent possible.

However, should public opposition escalate into formal attempts to prohibit or restrict GS of CO₂, businesses should consider whether these efforts may be preempted.[30] Although the SDWA contains a savings clause that provides that “[n]othing in this subchapter shall diminish any authority of a State or political subdivision to adopt or enforce any law or regulation respecting underground injection,”[31] some courts have found local actions to be preempted, as best exemplified in EQT Prod. Co. v. Wender.[32]

In the case, the U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s determination that the West Virginia UIC program established under the West Virginia Water Pollution Control Act (WPCA) preempted a county ordinance that imposed a blanket ban on the disposal of wastewater anywhere within the county.[33]

The Fourth Circuit explained that municipal ordinances that are inconsistent or in conflict with state law are preempted and further concluded that the ordinance’s prohibition was inconsistent with West Virginia’s UIC program because the permanent disposal of wastewater in Class II wells “is licensed and regulated by the state pursuant to a comprehensive and complex permit program.” The court also rejected the county’s argument that the WPCA’s savings clause, which preserves the power of local entities to “suppress nuisances,” permitted the county to broadly designate UIC wells as nuisances and then categorically ban them. The court refused to give the savings clause this broad and less logical reading absent express language and instead interpreted the clause as allowing local regulation that “touch[ed] on the licensed activity.” This had the effect of preserving the county’s right to bring a common law public nuisance action against a state permitted UIC well on a case-by-case basis.

This case suggests that local actions, at least those that have the effect of banning or prohibiting otherwise permitted GS projects, may be preempted by state or federal law.

    C.    Subsurface Pore Space Ownership and Long-Term Liability.

Finally, businesses interested in pursuing GS should consider uncertainties associated with subsurface pore space ownership and long-term liability. Ways to circumvent pore space ownership and liability issues are described below.

First, to effectuate GS of CO₂, businesses will need to acquire ownership or control of the pore space in which the CO₂ will be stored. This step, in turn, will require determinations as to subsurface ownership rights, which are influenced by whether the pore space is located under federal or non-federal land. For projects located under non-federal land, who owns subsurface pore space will ultimately depend on the language employed in legal instruments related to the property rights at issue and state law. The “majority rule,” however, appears to be that the surface rights owner has the relevant property interest and holders of mineral rights do not, merely by virtue of these rights, have ownership or control of subsurface pore space.[34] States like Wyoming and North Dakota have enacted laws to address uncertainties associated with subsurface pore space ownership by specifying that surface rights owners own the underlying pore space.[35]

With respect to long-term liability, as explained previously, owners and operators must continue to conduct monitoring post-injection for at least 50 years or until the GS project no longer poses an endangerment to USDWs before site closure. In addition to post injection site care and site closure, owners and operators must maintain financial responsibility over emergency and remedial response.[36] Some states like Indiana, Texas, and Louisiana have established processes for transferring long-term liability to the state to alleviate the chilling effect that concerns over long-term liability might have on GS development.[37]

III.    Conclusion

As businesses explore ways to execute their GHG emissions reduction targets, CCS looms large.  Jenner & Block’s Environmental and Workplace Health & Safety, and Transitions in Energy and Climate Solutions Practices not only can help businesses assess whether CCS is a viable option for them, but also can strategically and efficiently navigate each stage of the CCS process to accelerate desired outcomes in a cost-effective manner.

[1] For example, one type of CO₂ capture, post-combustion capture, typically captures 85% to 95% of the CO₂. Angela C. Jones & Ashley J. Lawson, Cong. Rsch. Serv., R44902, Carbon Capture and Sequestration (CCS) in the United States 4 (2022), https://sgp.fas.org/crs/misc/R44902.pdf [hereinafter Oct. 2022 CRS Report].

[2] The United States Department of Energy estimates there to be a total storage capacity of between about 2.6 trillion and 22 trillion metric tons of CO₂. Id. at 9. Theoretically, the United States contains enough storage capacity to store all CO₂ emissions from large stationary sources, at the current rate of emissions, for centuries. Cong. Rsch. Serv., Injection and Geological Sequestration of Carbon Dioxide: Federal Role and Issues for Congress 3 (2022), https://crsreports.congress.gov/product/pdf/R/R46192[hereinafter Sept. 2022 CRS Report].

[3] For example, according to the Council on Environmental Quality (CEQ), GS of CO₂ will “likely [be] needed to deliver on the Paris Agreement goals to hold warming well below 2 degrees Celsius and pursuing efforts to hold warming to 1.5 degrees Celsius, which is necessary to prevent the worst impacts of climate change.” CEQ, Report to Congress on Carbon Capture, Utilization, and Sequestration 6 (2021), https://www.whitehouse.gov/wp-content/uploads/2021/06/CEQ-CCUS-Permitting-Report.pdf [hereinafter CEQ Report].

[4] 75 Fed. Reg. 77,230, 77,235 (Class VI Rule); see also 42 U.S.C. §300h(b)(1)(B); 40 C.F.R. §144.12.

[5] 42 U.S.C. §§300h(a)-(b); 40 C.F.R. Part 145, Subpart B (imposing minimum requirements for permitting, compliance evaluation programs, enforcement authority, and sharing of information).

[6] 42 U.S.C. §300h-1(b)(1); 40 C.F.R. §144.1(f)(2). Indian tribes may, too. 42 U.S.C. §§300h-1(e); 40 C.F.R. Part 145, Subpart E.

[7] See 42 U.S.C. §300h-1; Class VI Rule at 77,241 (explaining that states must demonstrate that their “regulations are at least as stringent as those promulgated by EPA”).

[8] 40 C.F.R. §145.1(g). Though where an approved state program has a greater scope of coverage, the additional coverage is not part of the federally approved program. Id. §145.1(g)(2).

[9] 42 U.S.C. §§300h-1(b)(3), (c).

[10] 40 C.F.R. §144.6.

[11] Notably, Class V wells are used for experimental injection of CO₂ (e.g., Department of Energy-supported research wells). See id. §144.81(14). “The construction, operation, or maintenance of any non-experimental Class V GS well is prohibited.” Id. §144.15. By December 10, 2011, owners or operators of experimental technology wells no longer being used for experimental purposes were required to apply for a Class VI permit. Id. §146.81(c). EPA has noted that it “anticipates that few, if any Class V experimental technology well permits will be issued under SDWA for future GS projects.” 76 Fed. Reg. 56,982, 56,983.

[12] 42 U.S.C. §300h-9.

[13] 40 C.F.R. §144.6(b)(2).

[14] Sept. 2022 CRS Report, supra note 2, at 15.

[15] See 40 C.F.R. §144.19(a).

[16] 40 C.F.R. §146.83(a). According to the United States Geological Survey, areas with the most storage potential are the Coastal Plains region, which includes coastal basins from Texas to Georgia, Alaska, and the Rocky Mountains – Northern Great Plains. Which area is the best for geologic carbon sequestration?, USGS, https://www.usgs.gov/faqs/which-area-best-geologic-carbon-sequestration (last visited Dec. 12, 2022).

[17] 40 C.F.R. §§144.6(f), 146.95

[18] See id. §§146.82(a), 146.81.

[19] Id.; id. §146.85(a)(2). Applicants will likely need to hire environmental consultants to provide support at every phase of the GS project.

[20] See id. §144.5.

[21] Id. §§146.93(b), 146.91(c)(1).

[22] Id. §144.12; 42 U.S.C. §300i.

[23] Other states are also moving towards primacy; Texas, Arizona, and West Virginia are in the “pre-application” phase, while Louisiana’s primacy application is being evaluated.

[24] Id. §300h-9.

[25] See CEQ Report, supra note 3, at 30.

[26] Adam Baylin-Stern & Niels Berghout, Is Carbon Capture Too Expensive?, IEA (Feb. 17, 2021), https://www.iea.org/commentaries/is-carbon-capture-too-expensive.

[27] Oct. 2022 CRS Report, supra note 1, at 8, 23.

[28] See CEQ Report, supra note 3, at 25-31. Using marine vessels may also be a feasible option for CO₂ transport. Oct. 2022 CRS Report, supra note 1, at 8.

[29] According to CEQ, “[c]arbon utilization is a broad term used to describe the many different ways that captured . . .  CO₂ . . . can be used [] to produce economically valuable products or services.” CEQ Report, supra note 3, at 13. The IRA-driven tax credits are an increase from the previous tax credits of $50 and $35, respectively. To qualify for the tax credits, qualified facilities must begin construction by December 31, 2032.

[30] For example, in a recent lawsuit filed against Livingston Parish in the United States District Court for the Middle District of Louisiana, developer Air Products is arguing that the parish’s attempts to restrict its proposed GS project are preempted by state and federal law.

[31] 42 U.S.C. §300h-2(d).

[32] 870 F.3d 322, 332 (2017).

[33] The court refused to decide the question of federal preemption on constitutional avoidance grounds. The court clarified that the question posed by the ordinance’s prohibition was whether the county could effectively “nullify” the Class II permit issued by DEP pursuant to the WPCA. The case did not require the court to consider “the authority of a county to regulate matters that are only related to or associated with a state-permitted activity.”

[34] Cong. Rsch. Serv., RL34307, Legal Issues Associated with the Development of Carbon Dioxide Sequestration Technology (2011), https://www.everycrsreport.com/reports/RL34307.html. Though the mineral rights owner could have priority over uses of the land, including the ability of the surface rights owner to make use of the pore space, that would interfere with the mineral rights holder’s ability to remove minerals.

[35] Wyo. Stat. §§34 -1-152, 34-1-153 (2009); N.D. Cent. Code §47-31-02 et seq. (2009).

[36]  40 C.F.R. §146.85(a).

[37] See CEQ Report, supra note 3, at 43.

By Allison A. Torrence 

On January 6, 2023, EPA announced that is was issuing a proposed rule to lower the National Ambient Air Quality Standards (“NAAQS”) for fine particulate matter (“PM_2.5”), also referred to as soot. The current primary annual NAAQS for PM_2.5 is 12 micrograms per cubic meter (µg/m³). EPA’s proposal will accept comments on reducing that annual NAAQS to a level between 9 and 10 µg/m³. EPA is proposing to keep in place the existing secondary annual standard for PM_2.5, the primary and secondary 24-hour standards for PM_2.5, and the primary and secondary standards for PM₁₀.

The current standards have been in place since 2012, and were most recently reaffirmed by EPA in 2020. Then, in June of 2021, EPA announced it was reconsidering that 2020 decision, starting the process that lead to the current proposed rule. The NAAQS are national air quality goals set by EPA for criteria air pollutants (like particulate matter), at levels that will that will protect the public health with an adequate margin of safety (primary NAAQS) and protect the public welfare (secondary NAAQS). Notably, the NAAQS are set without consideration of cost or technical feasibility of compliance. Section 109(d)(1) of the Clean Air Act requires EPA to review existing NAAQS at 5-year intervals.

Particulate matter emissions come from a variety of sources, including power plants, unpaved roads, construction sites, mobile sources, and other industrial sites. Particulate matter pollution can cause significant health effects, primarily lung and other respiratory disease. Particulate matter also has environmental impacts, including as the primary cause of haze. EPA estimates that if finalized, a lowered primary annual PM_2.5 standard at a level of 9 µg/m³, the lower end of the proposed range, would prevent:

• Up to 4,200 premature deaths per year;
• 270,000 lost workdays per year; and
• Result in as much as $43 billion in net health benefits in 2032.

Currently, most of the country is in attainment of the annual PM_2.5 NAAQS, with the exception of several counties in California and one county in Pennsylvania. However, that attainment status may change drastically if the standard is lowered by up to 25%. Once the new PM_2.5 NAAQS is set, states will have to determine what areas are in attainment or nonattainment, and then update their State Implementation Plans with rules or other plans that will allow the states to maintain attainment or reduce PM_2.5 emissions and achieve attainment for any areas that are above the new standards.

The proposed rule will be published in the Federal Register in the next few weeks, and EPA will accept public comment for 60 days after publication. EPA also plans to conduct a virtual public hearing on the proposed rulemaking over several days, but the exact timing has not been determined yet. EPA plans to review the public comments and issue a final rulemaking later this year. Additional information about the proposed rule is available on EPA’s website.

By Allison A. Torrence 

On December 30, 2022, the U.S. Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“Army Corps”) announced they had finalized the rule establishing the definition of “waters of the United States” (“WOTUS”) under the Clean Water Act (“CWA”) (the “WOTUS Rule”). This definition is one of the most controversial and highly-litigated aspects of the CWA, if not all environmental law, because it has wide-ranging implications.

The definition of “waters of the United States” is so important because it sets the jurisdictional limits of the CWA. Under the CWA, EPA and the Army Corps have the power to regulate, among other things, the discharge of pollutants to navigable waters from a point source (33 U.S.C. § 1362(12)) and the discharge of dredged or fill material into navigable waters (33 U.S.C. § 1344). “Navigable waters” are defined in the CWA as “the waters of the United States, including the territorial seas.” 33 U.S.C. §1362(7). “Waters of the United States” is not defined further under the CWA, so the agencies have been left to try to craft a definition.

The Army Corps and EPA first proposed a WOTUS definition in 1977 and it has faced revisions and legal challenges ever since. The WOTUS definition has faced Supreme Court review in three previous cases, and is currently pending review in the case of Sackett v. U.S. Environmental Protection Agency, 19-35469, on appeal from the U. S. Court of Appeals for the Ninth Circuit.

The WOTUS definition was revised in 2015 by the Obama Administration to expand the definition and then in 2020 by the Trump Administration to narrow the definition; with both definitions facing swift legal challenges, including vacatur of the Trump rule in 2021. At issue in all of these rules is how to treat non-traditional navigable waters, like ephemeral bodies of water and wetlands.

The current WOTUS Rule goes back to re-establish the pre-2015 definition of WOTUS, and also incorporates guidance from the most recent Supreme Court case, the 2006 case of Rapanos v. U.S., 547 U.S. 715. In Rapanos, the Court did not reach a majority opinion. Justice Scalia authored a plurality opinion, Justice Kennedy wrote a concurring opinion, and Justice Stevens wrote a dissenting opinion. EPA and the Army Corps are incorporating Justice Kennedy’s opinion, which provided that wetlands and other bodies of water that have a “significant nexus” to more traditional navigable waters should be included in WOTUS. Id. at 759. This was in contrast to Justice Scalia’s opinion, which limited WOTUS to “only those wetlands with a continuous surface connection to bodies that are "waters of the United States" in their own right…” Id. at 739-42.

Thus, the new WOTUS Rule includes the following categories of waterbodies: (1) traditional navigable waters (e.g., certain large rivers and lakes); (2) territorial seas; (3) interstate waters; (4) impoundments; (5) tributaries; (6) adjacent wetlands; (7) and additional waters. To determine jurisdiction for tributaries, adjacent wetlands, and additional waters, the WOTUS Rule looks at whether the body of water meets either the “relatively permanent standard” or “significant nexus standard”, as follows:

• Relatively Permanent Standard is a test that readily identifies a subset of waters that will virtually always significantly affect traditional navigable waters, the territorial seas, or interstate waters. To meet the relatively permanent standard, the waterbodies must be relatively permanent, standing, or continuously flowing waters connected to traditional navigable waters or waters with a continuous surface connection to such relatively permanent waters or to traditional navigable waters, the territorial seas, or interstate waters.
• Significant Nexus Standard is a test that clarifies if certain waterbodies, such as tributaries and wetlands, are subject to the Clean Water Act based on their connection to and effect on larger downstream waters that Congress fundamentally sought to protect. A significant nexus exists if the waterbody (alone or in combination) significantly affects the chemical, physical, or biological integrity of traditional navigable waters, the territorial seas, or interstate waters.

The WOTUS rule will be published in the Federal Register in the next few days, and will be effective 60 days after publication. Legal challenges will surely follow, and its future longevity will likely be determined by the Supreme Court in the Sackett case. EPA had tried to avoid Supreme Court review based on the fact that it was working on a revised rule, but that argument was not successful. Therefore, it is likely that the Court will go forward and make a ruling on WOTUS, potentially undermining the basis for the current WOTUS rule. As always, we will keep you updated on key developments in the Corporate Environmental Lawyer Blog.

More information about the new WOTUS Rule is available on EPA’s website.

     By Daniel L. Robertson and Arie Feltman-Frank, Associate Attorneys

On December 15, 2022, the California Occupational Safety & Health Standards Board (Board) adopted COVID-19 prevention non-emergency  workplace standards in a 6-1 vote. The standards will be in Title 8, Division 1, Chapter 4, Subchapter 7, of California’s regulations and, if approved by the Office of Administrative Law, will take effect in January 2023. The standards will sunset two years following their effective date, except for certain recordkeeping requirements that will remain in effect for three years.

Subchapter 7, titled “General Industry Safety Orders,” establishes minimum occupational safety and health standards that generally apply to all places of employment in California. In response to the COVID-19 outbreak, the Board previously approved emergency temporary standards (ETS) on COVID-19 prevention starting in November 2020, which were revised in June 2017, January 2022, and May 2022. However, the May 2022 ETS is set to expire on December 31, 2022.

Notable portions of the adopted non-emergency standards are summarized below.

• Prevention Program: Employers are no longer required to maintain a standalone COVID-19 Prevention Plan but must still address COVID-19 in their written Injury and Illness Prevention Programs or other standalone documents that include measures to address COVID-19 transmission in the workplace. Further, employers are required to review applicable state and local health department guidance when determining measures to prevent and address COVID-19 transmission.
  
  
• Screening and Exclusion: Employers will no longer have to perform daily screenings of employees, whether through questionnaires or otherwise. Employees instead are encouraged to report their own symptoms and stay home if ill. Time periods for exclusion have been shortened, and employees who are deemed close contacts do not necessarily have to be excluded if they test negative and meet certain other requirements.
  
  
• Employee Accommodations: In perhaps the most contested development, employers will no longer have to provide paid time off to infected employees or close contacts ordered to stay home. Instead, those employees must rely on other existing benefits if they are unable to work due to COVID-19 infection or isolation. Employers must continue to provide respirators to employees upon requests, and employees must still wear masks at work for at least 5 days if exposed. Companies experiencing outbreaks, defined as three or more cases in a 14-day period, must make testing available to exposed employees immediately and provide tests twice a week.
  
  
• Notice and Timing: Notice rules now only require notice to close contacts “as soon as possible” while simplifying the notice contents. However, employers should remain mindful of similar applicable rules that currently still require that the notice be given within one business day. Outbreaks no longer require “no new cases” to conclude and instead only require “one or fewer” new cases over a two-week period. A major outbreak, defined as 20 cases in a 30-day period, must be reported to the California Division of Occupational Safety and Health. While there will no longer be a requirement to report outbreaks to local public health agencies, employers should still be mindful of other local standards for reporting.
  
  
• Close Contacts and Testing: The “close contact” definition continues to follow that used by the California Department of Public Health (CDPH), which defines a close contact depending on the size of the workspace and regardless of the use of face coverings.
  
  
  • A close contact occurs in an indoor workspace with floor space of 400,000 cubic feet or less when someone shares the same indoor airspace as an infected person for a cumulative total of 15 minutes or more over a 24-hour period during the infectious period.
  • A close contact occurs for larger indoor workspaces when someone is within 6 feet of the infected person for a cumulative total of 15 minutes or more during a 24-hour period during the infectious period.

Notably, this standard affirmatively states that any future amendments to the CDPH definition will take precedent over the Board’s adopted definition. Employers must also follow applicable CDPH guidance to improve ventilation and filtration. Further, employers will now only have to make testing available at no cost to employees who are considered close contacts of an infected coworker, versus previous requirements that testing be made available to all symptomatic employees.

• Infectious Period: This definition also tracks that of CDPH and states that a person is considered infectious for two days prior to symptoms and 10 days after unless they test negative from the fifth day onward. For an asymptomatic person, these same timeframes apply based on the date of the first positive test.

The Board’s news release can be read here and the text of the adopted standards is available here. We will continue to monitor COVID-19 and other workplace health and safety developments in the Corporate Environmental Lawyer.