PFAS Poised to Join RCRA’s List of “Hazardous Constituents”

SirosBy Steven M. Siros, Chair, Environmental and Workplace Health & Safety Law Practice

 

As expected, U.S. EPA issued two proposed rules the first of which would add nine per- and polyfluoroalkyl substances (PFAS) to the Resource Conservation and Recovery Act’s (RCRA) list of hazardous constituents and the second of which clarifies that substances that are identified as RCRA hazardous constituents are subject to RCRA’s corrective action program.  The first rule, which is at least partially in response to a petition filed by Governor Michelle Grisham of New Mexico in 2021 seeking to have PFAS identified as RCRA hazardous wastes, proposed the following nine PFAS compounds as hazardous constituents under 40 CFR Part 261 Appendix VIII:  perfluorooctanoic acid; perfluorooctanesulfonic acid; perfluorobutanesulfonic acid; hexafluoropropylene oxide-dimer acid; perfluorononanoic acid; perfluorohexanesulfonic acid; perfluorodecanoic acid; perfluorohexanoic acid, and perfluorobutanoic acid.  Under the RCRA regulations, in order for a chemical to be listed as a RCRA hazardous constituent, there must be evidence that the chemical has toxic, carcinogenic, mutagenic or teratogenic effects on humans and other living entities.  In its proposed rule, US. EPA indicates that it has determined that each of these nine compounds satisfy this requirement.  Once listed as a RCRA hazardous constituent, in addition to being a first step towards a potential RCRA hazardous waste listing, the designation allows U.S. EPA and/or delegated states to pursue RCRA corrective actions to addresses these specific PFAS at hazardous waste treatment, storage and disposal facilities.   Interestingly, in its proposed rule, U.S. EPA notes there may be 1,740 facilities potentially affected by the proposed rule.

In its second rule, U.S. EPA proposes amendments to the RCRA definition of “hazardous waste” to ensure that regulators have clear regulatory authority to address emerging contaminants that are not included under the regulatory definition of hazardous waste.  More specifically, the proposed rule is intended to validate that RCRA corrective actions address releases not only of identified hazardous wastes but any substance that meets the statutory definition of a hazardous waste.  To that end, in addition to other confirming revisions, the rule proposes the following revised definition of RCRA hazardous waste:  Hazardous waste means a hazardous waste as defined in 40 CFR 261.3 except that, for purposes of § 270.14(d), “hazardous waste” means a waste that is subject to the requirements of RCRA section 3004(u) and (v) as provided in 40 CFR 261.1(b)(2).

These rules will be open for public comment for 30 days once published in the Federal Register.  We will continue to provide timely updates on these and other PFAS-related regulations at the Corporate Environmental Lawyer blog. 


Environmental Regulations to Watch in 2024

By:  Stephanie Sebor 

Several federal agencies, including the United States Environmental Protection Agency, Federal Trade Commission, Department of the Interior, and Securities and Exchange Commission, have a slew of pending environmental regulations that they anticipate finalizing in 2024. When issued, these regulations will affect a broad swath of regulated industry groups, creating a host of new compliance obligations. The Biden Administration will be under time pressure to finalize these regulations before the November 2024 elections, after which they are sure to be challenged in court and potentially under the Congressional Review Act.

Air Quality Regulations

  • In January 2023, EPA proposed to lower the primary annual National Ambient Air Quality Standards (“NAAQS”) for fine particulate matter (“PM5”) from 12 micrograms per cubic meter (“µg/m3”) to a level between 9 and 10 µg/m3. Under a lower standard, it is expected that more areas of the country will be designated as nonattainment with the annual PM2.5 NAAQS. The rule is also expected to create challenges with Prevention of Significant Deterioration (“PSD”) permitting because background ambient PM2.5 concentrations are close to 9 and 10 µg/m3 in many areas of the country. Therefore, it may be difficult for new sources or sources undergoing a major modification to demonstrate that they will not cause or contribute to noncompliance with the PM2.5 NAAQS or an exceedance of a PSD increment intended to limit degradation of air quality. The final rule is currently under White House Office of Management and Budget (“OMB”) review, and EPA is planning to issue the final rule by January 30, 2024. The new PM2.5 standard is expected to take effect within 60 days after publication of the final rule.
  • In May 2023, EPA proposed its long-awaited greenhouse gas (“GHG”) emission standards for the fossil-fueled power sector under Section 111 of the Clean Air Act. The rule will require affected sources to achieve GHG emissions limits and guidelines based on technologies such as carbon capture and sequestration (“CCS”), low-GHG hydrogen co-firing, and natural gas co-firing. EPA received over a million public comments on the proposed rule, which EPA expects to finalize in April 2024. The rule is sure to be challenged in court on several bases, including that the rule exceeds EPA’s authority under the major questions doctrine articulated in West Virginia v. EPA and that nationwide CCS and hydrogen technologies are not adequately demonstrated and therefore cannot serve as the best system of emissions reduction (“BSER”).
  • In April 2023, EPA proposed two rules that would regulate vehicle emissions: one concerning GHG emissions from heavy-duty vehicles and one concerning criteria pollutant, GHG, and air toxics emissions from light- and medium-duty vehicles. The proposed standards for light- and medium-duty vehicles would be phased in over model years 2027 through 2032, and the heavy-duty vehicle GHG emissions standards would commence with model year 2027. EPA intends to finalize both rules in March 2024.

Water Regulations

  • In March 2023, EPA proposed to set maximum contaminant levels (“MCLs”) for perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”) in drinking water under the Safe Drinking Water Act. EPA’s proposal also included health advisory levels (“HALs”) for PFOA and PFOS that are more stringent than the MCLs. The proposal would also regulate several other per- and polyfluoroalkyl substances (“PFAS”), including hexafluoropropylene oxide dimer acid (“GenX”), perfluorononanoate (“PFNA”), perfluorohexanesulfonic acid (“PFHxS”), and perfluorobutane sulfonic acid (“PFBS”), using a hazard index, which is a screening level approach that provides a risk indicator rather than a risk estimate for a mixture of components. EPA intends to finalize the rule by September 3, 2024.
  • EPA proposed in August 2023 an update to the regulations that allow states and tribes to administer their own Clean Water Act Section 404 permitting programs. While the Clean Water Act allows states and tribes to assume the Section 404 permitting program, only three states – Michigan, New Jersey, and Florida – have received approval to do so. EPA’s proposal is intended to make the procedures and substantive requirements for assumption more transparent and straightforward to facilitate further assumption of the Section 404 permitting program by state and tribal governments. Currently, the U.S. Army Corps of Engineers administers Clean Water Act Section 404 permitting in most states. EPA intends to finalize this rulemaking in June 2024.
  • As previously covered on our blog, EPA intends to revise the National Primary Drinking Water Regulation for lead and copper under the Safe Drinking Water Act by October 2024. The proposed rule would require public water systems to replace all lead service lines and certain galvanized service lines within 10 years, lower the lead action level to 10 parts per billion (or µg/L), and update tap water sampling protocols for affected systems. EPA estimates the proposed rule would cost between $2.1 billion and $3.6 billion per year, primarily associated with identifying and replacing lead service lines.

PFAS Regulations

  • In September 2022, EPA proposed to add PFOA and PFOS to the list of hazardous substances subject to regulation under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”). EPA plans to finalize this regulation in March 2024, which will create new release reporting requirements for PFOA and PFOS and allow for CERCLA cost recovery and contribution claims related to PFOA and PFOS cleanup costs.
  • Meanwhile, EPA also issued an advanced notice of proposed rulemaking (“ANPR”), seeking 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 public comment period on the ANPR ended on August 11, 2023. It is unclear when EPA intends to proceed with a proposed rule (and if so, what the timing for finalization will be), although EPA may make reference to its future plans when it finalizes its designation of PFOA and PFOS as CERCLA hazardous substances in March 2024.
  • In response to several petitions, including one from the Governor of New Mexico, EPA has indicated its intention to propose to list four PFAS constituents – PFOA, PFOS, PFBS, and GenX – as hazardous constituents under the Resource Conservation and Recovery Act (“RCRA”). In addition, EPA intends to issue regulations clarifying that emerging contaminants such as PFAS can be cleaned up through the RCRA corrective action process. EPA had planned to issue both of these proposed rules before the end of 2023, but interagency of the proposals is not yet complete. EPA has indicated that it expects to propose these rules as soon as the interagency reviews are complete, likely in early 2024.
  • EPA proposed a rule in May 2023 under the Toxic Substances Control (“TSCA”) that, if finalized, would make changes to the approval processes for new PFAS chemicals to ensure that they go through a full safety review process before entering commerce. Specifically, the proposal would update EPA’s TSCA regulations to include the five statutory determinations EPA must make for each new chemical submission, eliminate eligibility exemptions from the full safety review process for PFAS and other persistent, bioaccumulative, and toxic chemicals, and make other changes to the new chemicals review process. EPA intends to finalize the rule by April 2024.

Other Chemical Regulations

  • In October 2023, EPA proposed to ban the manufacture (including import), processing, and distribution in commerce of trichloroethylene (“TCE”) for all uses. The proposal would largely phase out TCE within one year after publication of the final rule, subject to certain extended compliance timeframes and workplace controls (including an exposure limit) for some processing and industrial/commercial uses, such as battery separator manufacturing. The proposed rule would also prohibit the disposal of TCE to industrial pre-treatment, industrial treatment, or publicly owned treatment works, with a time-limited exemption for cleanup projects. EPA expects to issue the final rule in April 2024.
  • In May 2023, EPA proposed to prohibit the manufacture (including import), processing, and distribution in commerce of methylene chloride for all consumer uses and most industrial and commercial uses. For industrial/commercial uses where EPA determined that unreasonable risks can be addressed, EPA proposed to require a workplace chemical protection program (“WCPP”), including inhalation exposure concentration limits and exposure monitoring. EPA expects that the proposal would be fully implemented in 15 months after the rule is finalized and would amount to a prohibition of approximately 52% of annual production volume and end uses. EPA expects to issue the proposed rule in March 2024.
  • In June 2023, EPA proposed to prohibit the manufacture (including import), processing, and distribution in commerce of perchloroethylene (“PCE”) for all consumer uses and most industrial and commercial uses. For industrial/commercial uses where EPA determined that unreasonable risks can be addressed, EPA proposed to require a WCPP, including inhalation exposure concentration limits and dermal contact prevention requirements. EPA also proposed a 10-year phase out for the use of PCE in dry cleaning; otherwise, EPA estimated that these changes would be fully implemented within two years of issuance of the final rule. EPA expects to publish the final rule in July 2024.
  • In August 2022, EPA proposed to prohibit the manufacture (including import), processing, distribution in commerce and commercial use of chrysotile asbestos in a six categories of products: asbestos diaphragms, sheet gaskets, oilfield brake blocks, aftermarket automotive brakes and linings, other vehicle friction products, and other gaskets. EPA proposed that its prohibitions take effect between 180 days and two years after issuance of the final rule. EPA anticipates publishing the final rule in January 2024.

Securities Regulations

  • In April 2022, the SEC proposed a rule that would enhance and standardize the climate-related disclosures provided by public companies in their registration statements and annual reports (i.e., Form 10-K filings). Under the proposed rule, a registrant would be required to provide information about its climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The proposed rules would also require disclosure of a registrant’s GHG emissions and certain climate-related financial metrics in a registrant’s audited financial statements. Specifically, the proposed rule would require a registrant to disclose information about its direct GHG emissions (Scope 1) and indirect GHG emissions from purchased electricity or other forms of energy (Scope 2). In addition, a registrant would be required to disclose GHG emissions from upstream and downstream activities in its value chain (Scope 3), if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions. The SEC plans to finalize the rule in April 2024.
  • In June 2022, the SEC proposed its highly-anticipated environmental, social and governance (“ESG”) rule for certain registered investment advisers, advisers exempt from registration, registered investment companies, and business development companies. The rule would create a common disclosure framework for ESG factors that affected funds use in their investment strategies in order to provide comparable, reliable, and transparent information for investors. The SEC also plans to finalize this rule in April 2024.

Species Regulations

  • In June 2023, USFWS issued three proposed rules aimed at revising Endangered Species Act regulations issued during the Trump Administration. First, USFWS proposed to reinstate its "blanket” Section 4(d) regulations, which were withdrawn in 2019. The blanket 4(d) rules provide an option to extend most protections provided to endangered species to those listed as threatened, unless the FWS adopts a species-specific 4(d) rule. Without this blanket rule, the USFWS must issue a species-specific 4(d) each time it lists a species as threatened. Second, USFWS proposed to revise its regulations concerning interagency consultation under Section 7 of the Endangered Species Act. Third, USFWS proposed to revise its regulations regarding listing and reclassification of species and designation of critical habitat. Perhaps most significantly, the proposal would restore the phrase “without reference to possible economic or other impacts of such determination” to the end of 50 CFR § 424.11(b) to clarify that the economic impacts and any other impacts that might flow from a listing decision must not be taken into account when making listing determinations; rather, per Section 4(b)(1)(A) of the Endangered Species Act, listing decisions are to be made solely on the basis of the best scientific and commercial data available. These regulatory changes will have a significant impact on USFWS’s and NMFS’s administration of the Endangered Species Act, which will have broad ramifications across other regulatory programs, such as projects undergoing National Environmental Policy Act Review, and industries, including the renewable energy industry.
  • In February 2023, USFWS proposed revisions to its regulations governing incidental take permits under Section 10 of the Endangered Species Act. The proposal would revise the regulations to allow incidental take permits to be issued for species that are not listed as threatened or endangered. In such case, the permittee would begin implementing the conservation commitments for the non-listed covered species; however, the take authorization would not go into effect until such time as the non-listed covered species becomes listed, either as endangered or threatened, provided the permittee is complying with the permit and properly implementing the agreement or plan. This mechanism would allow permittees to obtain incidental take permits for candidate species that appear likely to be listed during the conduct of otherwise lawful activities that may result in the incidental take of a species, such as the operation of wind turbines. The proposal would also codify requirements related to Habitat Conservation Plans (“HCPs”) that are currently found in the so-called Five Point Policy in the HCP Handbook. USFWS intends to finalize this rulemaking in February 2024.
  • In October 2021, USFWS issued an ANPR seeking public input on the creation of an incidental take permit program under the Migratory Bird Treaty Act. USFWS intended to issue a proposed rule on this topic in November 2023 and to finalize the rule by April 2024; however, USFWS has not yet issued a proposal. When issued, the proposal is certain to attract attention from a variety of industry groups, in light of significant penalties that USFWS has assessed in recent years for violations of the Act.
  • In September 2022, USFWS issued a proposed rule that would revise its incidental take permit regulations under the Bald and Golden Eagle Protection Act. Specifically, USFWS proposed to create general permits for four categories of activities: (1) wind-energy generation projects, (2) power line infrastructure, (3) activities that may disturb breeding bald eagles, and (4) bald eagle nest take. Permittees would be required to meet eligibility criteria and mitigation requirements to avoid, minimize, compensate for, and monitor impacts to eagles. USFWS would continue to allow the issuance of site-specific permits for activities that do not fit within the four general permit categories. USFWS plans to issue to final rule in January 2024.

Consumer Protection Regulations

  • In December 2022, the FTC announced that it was seeking public comment on its 2012 “Guides for the Use of Environmental Marketing Claims” — also known as the Green Guides. Specifically, the FTC sought guidance on carbon offset and renewable energy claims, the terms “recyclable” and “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. Following the close of the public comment period in April 2023, the FTC has continued to seek public input as part of its review of the Green Guides. For example, the FTC held a public workshop in May 2023 regarding “recyclable” advertising claims as part of its ongoing review of the Green Guides. Although it is uncertain when the FTC will issue an update to the Green Guides, it is likely that it will do so sometime in 2024.

Remote Sensing as a Supplement to Emissions Monitoring and Quantification

Feltman-Frank  By:  Arie Feltman-Frank

GHGSat CO2 sensor

According to a recent Bloomberg article, a company did not report an August 2023 air emissions event to state environmental regulators until December, just days after the company was asked by Bloomberg Green about a methane plume detected in August over one of its compressor stations.

The methane plume was observed via a remote sensing instrument onboard the International Space Station (“ISS”) and publicized in November 2023 by Carbon Mapper, a California non-profit that is planning to launch satellites that it states will persistently (i.e., on a daily to weekly basis) pinpoint, track, and make available to the public methane and carbon dioxide emissions at individual facilities located within “high-priority areas.”

The launch of the first Carbon Mapper Coalition satellites is expected in 2024. These satellites will join other recently launched or soon-to-be launched satellites with sensors that can detect methane and carbon dioxide emissions (e.g., GHGSat, MethaneSat). Notably, GHGSat describes its sensor, Vanguard, launched into orbit on November 10, 2023, as the first orbital sensor able to pinpoint carbon dioxide emissions from individual industrial facilities.  

With Carbon Mapper’s satellites not yet launched, the organization’s online data portal includes data from airborne surveys, as well as global observations by NASA’s Earth Surface Mineral Dust Source Investigation (“EMIT”) instrument onboard the ISS (which is the instrument that observed the methane plume over the compressor station).

What’s New?

Pollution monitoring by satellite is not new. What is new is the fact that remote sensing technologies are advancing in their ability to continuously monitor, detect, and quantify emissions and attribute the emissions to individual sources. Moreover, satellite data is becoming increasingly accessible to enforcement agencies and the public. As a result, we are seeing an increased effort by governments, non-profit organizations, and industry to harness remote sensing technologies to better understand and reduce pollution.

The incident highlighted above is but one example of what happens when satellite-derived data goes public, allowing a third party to discover an emissions event—in some cases, before the source. This type of incident is not necessarily rare.

For example, the possibility of third-party detection is incorporated into EPA’s final rule setting new source performance standards and emissions guidelines for oil and natural gas facilities under the Clean Air Act (the “Methane Rule”). Under this rule, EPA-certified third parties will be able to use EPA-approved remote sensing technologies to notify the Agency of “super-emitter events” (100 kg/hr of methane or greater), ultimately requiring owners and operators to investigate the events and, if necessary, take corrective actions.

Legal Risks

The availability of advanced satellite-derived emissions data can lead to legal risks that can materialize in enforcement actions (which are likely to become more common, particularly with respect to methane emissions at oil and natural gas operations and landfills), as well as citizen suits and tort actions. Third-party detection can also make it harder to favorably resolve violations pursuant to enforcement policies that favor voluntary self-disclosure. Finally, third-party detection is not good for a company’s reputation and can lead to increased public scrutiny.   

Importantly, these legal risks are not limited to oil and natural gas production operations and landfills (though methane emissions from these sources are certainty a primary focus so far). Nor are these legal risks limited to methane and carbon dioxide emissions. For example, Tropospheric Emissions: Monitoring of Pollution (“TEMPO”), an instrument that was launched into space in August 2023, measures pollutants including nitrogen dioxide, ozone, aerosols, and sulfur dioxide on an hourly basis during the daytime over North America at neighborhood scales.

Preparing for What’s to Come

Companies and investors associated with emissions-intensive operations should do the following to prepare for what’s to come.

  • Familiarize yourself with what remote sensing technologies are out there (or may be soon) that can detect emissions, as well as the extent to which the detected emissions can be attributed to the relevant operations and reliably quantified. Also, consider whether the emissions data will be available to the public.
  • If necessary, conduct a tailored analysis of the legal risks that remote sensing technologies pose to your current and future operations and consider the admissibility of satellite data in administrative and civil proceedings.
  • Consider whether it is worth utilizing remote sensing technologies to supplement current pollution monitoring and quantification efforts (e.g., to comply with monitoring requirements, as well as future climate reporting requirements). Indeed, under EPA’s Methane Rule, referenced above, owners and operators of oil and natural gas facilities will be able to use advanced methane detection technologies as an alternative to ground-based methods to comply with monitoring requirements. With respect to climate reporting, remote sensing technologies may be especially helpful for companies seeking to better understand emissions that are outside of their direct control.

Also, note that remote sensing technologies may make their way into settlements. For example, on December 12, 2023, the owner of a municipal sanitary landfill agreed to spend approximately $30,000 to use drone technology to monitor methane emissions to resolve alleged violations of the Clean Air Act. This was the first settlement involving the use of drones for surface emissions monitoring.

We will continue to track remote sensing technologies on the Corporate Environmental Lawyer. Please do not hesitate to reach out if you have questions.

EPA Proposes Revisions to Lead and Copper Rule


SeborBy Stephanie B. Sebor Tap

On December 6, 2023, EPA published a proposal to revise the National Primary Drinking Water Regulation for lead and copper under the Safe Drinking Water Act. The proposal would apply to public water systems, including community water systems and non-transient, non-community water systems, and would require affected systems to replace all lead service lines and certain galvanized service lines within ten years. As part of this effort, EPA would require affected systems to track lead connectors in their inventories and replace them whenever encountered. EPA is also proposing to lower the lead action level to 10 parts per billion (or 10 µg/L) and would require systems that exceed the lead action level three or more times in a five-year period to take certain actions to provide public education and make water filters available to consumers. In addition, EPA is proposing to update its tap water sampling protocol to require affected systems to collect first-liter and fifth-liter samples at sites with lead service lines or lead premise plumbing.

EPA estimates the proposed rule would cost between $2.1 billion and $3.6 billion per year, primarily associated with identifying and replacing lead service lines. As part of the Biden-Harris Administration’s whole-of-government approach to address lead in drinking water, paint, and other media, the federal government has made significant funding available to meet the proposal’s compliance obligations, including under the Bipartisan Infrastructure Law, the Drinking Water State Revolving Loan Fund, and the Water Infrastructure Improvements for the Nation Act. The proposal is also part of the Biden-Harris Administration’s Justice40 commitment that forty percent of the benefits of federal investments flow to disadvantaged communities.

EPA will accept public comments on the proposed rule until February 5, 2024. EPA anticipates issuing the final rule by October 2024. We will continue to provide updates on this pending rule at the Corporate Environmental Lawyer blog. 

An Analysis of California's Landmark Climate Disclosure Laws

Robertson_Daniel_BLUE

Feltman-Frank   By: Daniel L. Robertson and Arie Feltman-Frank

California recently enacted two landmark climate disclosure laws that will require companies doing business in the State above specified revenue thresholds to report their Scope 1-3 greenhouse gas (“GHG”) emissions and climate-related financial risk information. Notably, the laws do not define what constitutes doing business in California. While the California Air Resources Board (“CARB”), the agency charged with implementing the laws, may provide further details on their reach in future rulemakings, companies engaged in business transactions in the State (even if they are not located in California) should familiarize themselves with these requirements and be prepared to comply. In this blog, we unpack both laws and contextualize them with pending federal rulemakings.

SB 253 – The Climate Corporate Data Accountability Act

The Climate Corporate Data Accountability Act will require companies with annual revenues above $1 billion that do business in California to annually measure and report their Scope 1-3 GHG emissions in conformance with Greenhouse Gas Protocol standards and guidance. There are over 5,000 companies that may be impacted by this law, with penalties rising to $500,000 per year for noncompliance.

Starting in 2026, companies will be required to annually report their Scope 1 and 2 emissions, and starting in 2027, those companies will be required to annually report their Scope 3 emissions. Scope 1 and 2 emissions are emissions that are either directly under the company’s control (e.g., fuel combustion activities) or indirectly attributed to the company’s operations (e.g., consumed electricity, heating and cooling). Scope 3 emissions, on the other hand, are those emissions attributed to upstream and downstream actors that the company does not own or directly control (e.g., consumer emissions, employee travel). Companies will also be required to obtain a third-party “assurance engagement” to assure the accuracy of their emissions reporting, with varying requirements based on type of emissions and date.

One of the biggest difficulties for companies will be accounting for upstream and downstream emissions from entities that may not have any reporting requirements of their own. While collecting upstream information from suppliers may be more straightforward as a term of doing business, the process becomes more complicated for downstream users that otherwise have no incentive to collect this data. Recognizing these difficulties, the law provides that companies will not be penalized for any misstatements with regard to Scope 3 disclosures “made with a reasonable basis and disclosed in good faith.” Moreover, between 2027 and 2030, companies will only be penalized on their scope 3 reporting for non-filing.

Finally, recognizing that companies may be subject to similar non-California reporting requirements, the law specifies that companies will be able use reports prepared to meet national and international reporting requirements as long as the reports satisfy the law’s requirements.

CARB is expected to unveil regulations by January 1, 2025, detailing how companies will have to disclose their emissions, but the law currently requires that this disclosure be publicly available in a manner that is accessible and easily understandable.

 SB 261 – The Climate-Related Financial Risk Act

The Climate-Related Financial Risk Act will require companies with annual revenues above $500 million that do business in California to, starting in 2026 and biannually thereafter, prepare a report that discloses their “climate-related financial risk” and measures adopted to reduce and adapt to that risk. Companies will be required to make the report available on their websites. There are currently around 10,000 companies that may be impacted by this law, with penalties rising to $50,000 per year for noncompliance.

“Climate-related financial risk” is defined as “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks.” The law provides as examples “risks to corporate operations, provisions of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.”

Companies will have to evaluate their “climate-related financial risk” in accordance with recommendations by the Task Force on Climate-related Financial Disclosures or specified equivalents.

Pending Federal Rulemakings

 Although limited to companies that do business in California, the California laws discussed above are expansive in comparison to the requirements in the proposed climate disclosure rules issued by the U.S. Securities and Exchange Commission (“SEC”) and Federal Acquisition Regulatory Council (“FAR Council”).

For example, the SEC’s proposed climate disclosure rule only applies to public companies and only requires the disclosure of Scope 3 emissions if material or if a company has set an emissions reduction target or goal that includes its Scope 3 emissions. Moreover, the FAR Council’s proposed climate-disclosure rule only applies to federal contractors, and only “major” federal contractors must inventory and disclose their Scope 3 emissions. In contrast and as explained above, the California laws apply to all companies (both public and private) doing business in the State above specified revenue thresholds, and SB 253 requires that all companies subject to the law disclose their Scope 3 emissions.

What’s Next?

Extensions of the reporting deadlines are anticipated as reporting requirements are developed and scrutinized. For example, in Governor Newsom’s signing of SB 253, he indicated that “the implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting.”

Regardless, companies will be well served to use these California developments as an opportunity to assess their GHG emissions, particularly areas with data gaps (such as with respect to their Scope 3 emissions) that will need to be addressed prior to the laws’ requirements taking effect. Particular attention should be given to ensuring consistency in reporting and planning for the most cost-effective way to comply with not only California’s climate disclosure laws, but also future federal requirements and bills pending in other states. Finally, history has shown that increased publicly available information leads to increased scrutiny, opening companies to additional liability and potential litigation.

We will continue to monitor climate disclosure requirements on the Corporate Environmental Lawyer.

Justice Department Issues First-Ever Comprehensive Environmental Justice Enforcement Strategy Report

Robertson  Daniel   

By: Daniel L. Robertson

 

On October 13, 2023, the U.S. Department of Justice’s Office of Environmental Justice (OEJ) released its Comprehensive Environmental Justice Enforcement Strategy Report (Report). The Report outlines what OEJ considers to be its environmental justice successes over the past year since OEJ’s creation, as well as its enforcement strategy moving forward. Regarding successes, the Report highlights the Civil Rights Division’s first ever Title VI environmental justice resolution agreement in Lowndes County, Alabama (read our summary of that agreement here). The Environmental and Natural Resources Division also negotiated interim orders to stabilize drinking water and wastewater systems in Jackson, Mississippi.

Moving forward, OEJ outlines four main principles in its Report:

(1) Prioritizing cases that will reduce public health and environmental harms to overburdened communities. This includes OEJ working with Department of Justice (DOJ) components to help federal investigative agencies evaluate adverse effects on environmental justice communities during their investigations. OEJ also developed a guidance document for DOJ attorneys to develop outreach plans for cases affecting overburdened communities.

(2) Making strategic use of all available legal tools to address environmental justice concerns. Tools highlighted by OEJ include enforcement actions under environmental protection, civil rights, worker safety, and consumer protection laws; the False Claims Act; and appropriate settlement tools such as Supplemental Environmental Projects in the pursuit of timely and effective remedies.

(3) Ensuring meaningful engagement with impacted communities. This includes increased outreach and listening sessions, of which OEJ highlights undertaking over 27 public engagements. OEJ also highlights its development of case-specific community outreach plans in prior matters, and efforts to coordinate engagement across DOJ’s offices as well as other federal agencies.

(4) Promoting transparency regarding environmental justice enforcement efforts and their results. This includes the development of performance standards including pulling performance metrics from DOJ’s Strategic Plan. Performance metrics include the percentage of environmental enforcement matters in or substantially affecting overburdened and underserved communities that are favorably resolved; the percentage of participants in OEJ-facilitated environmental justice events who indicate an increased awareness of DOJ’s efforts to advance environmental justice; and the percentage of trainees who indicate an increased awareness and capacity to identify and address environmental justice concerns.

The Report highlights other actions taken by OEJ over the past year, including appointing an Environmental Justice Coordinator in each of its 94 United States Attorney’s offices and increasing environmental justice training. OEJ further highlights provisions in the report for partnering with other federal enforcement agencies and strengthening coordination with Tribes on environmental justice issues.

Federal agencies continue to provide transparent guidance on their environmental justice strategies. Companies that fall under the purview of a particular agency should consider keeping apprised of these strategies as part of their environmental compliance initiatives. We will continue tracking environmental justice developments on the Corporate Environmental Lawyer.


U.S. EPA Finalized PFAS Reporting Rule Requires Submittal of 12 Years of PFAS Data

Siros

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

Per- and Polyfluoroalkyl Substances (PFAS) | FDA

On September 28, 2023, U.S. EPA released its final reporting rule that will require manufacturers (and importers) of PFAS and PFAS-containing articles to submit detailed PFAS-information going back as far as 2011.  Putting aside the difficulties posed by a reporting rule with a 12-year look-back, the final rule also adopts a structure-based PFAS definition.  Specifically, rather than listing out specific PFAS, the final rule defines PFAS as “including at least one of these three structures:  R-(CF2)-CF(R’)R”, where both the CF2 and CF moieties are saturated carbon; R-CF2OCF2-R’ where R and R’ can either be F, O or saturated carbons; and CF3C(CF3)R’R’, where R’ and R” can either be F or saturated carbons”.  U.S. EPA explains that it adopted this structure-based definition to “expand the universe of PFAS to include additional substances of potential concern” that U.S. EPA believes are likely to be persistent and to “capture certain fluorinated ethers”.

The final rule applies to the “manufacture for commercial purposes” of PFAS.  “Manufacture for commercial purposes” is defined to include the import, production, or manufacturing of a chemical substance or mixture containing a chemical substance for the purpose of obtaining an immediate or eventual commercial advantage for the manufacturer and includes the coincidental manufacture of PFAS as byproducts or impurities.   

Importantly, the final rule does not apply to entities that process, distribute in commerce, use, and/or dispose of PFAS and specifically exempts non-commercial R&D activities.  The comments accompanying the final rule further clarify that “waste management activities involving imported municipal solid waste streams for the purpose of disposal or destruction are not within the scope of the rule’s reporting requirements.”  The final rule does however, apply to waste management sites that import PFAS-containing waste (include municipal solid waste) for the purposes of recycling or reuse. 

The final rule requires that the following information be reported within 18 months of the effective date of the rule:

Continue reading "U.S. EPA Finalized PFAS Reporting Rule Requires Submittal of 12 Years of PFAS Data" »

EPA narrows “Waters of the United States” definition following Sackett ruling

 image from environblog.jenner.comDaniel BLOGByAllison A. Torrence and Daniel L. Robertson 

Free-photo-of-wetlands-by-the-seaThe Environmental Protection Agency and the Army Corps of Engineers recently announced a revised and final rule amending the definition of Waters of the United States (WOTUS) following the Supreme Court decision in Sackett v. EPA that invalidated the agencies’ previous definition. The revised rule took effect immediately upon its publication in the Federal Register on September 8.

The definition of “waters of the United States” is significant because it sets the jurisdictional limits of the Clean Water Act (CWA). Under the CWA, EPA and the 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 CWA, so the agencies have been left to try to craft a definition.

Since the Supreme Court’s 2006 decision in Rapanos v. United States, the agencies have relied on a “significant nexus” standard to include nearby wetlands and ephemeral waterways in the WOTUS definition. A “significant nexus” was established if the body of water “either alone or in combination with similarly situated wetlands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as navigable.”

In January of this year, the agencies published a “Revised Definition of ‘Waters of the United States’”, which incorporated both a “relatively permanent” standard and a “significant nexus” standard. However, in May 2023, the Supreme Court decision in Sackett v. EPA rejected the “significant nexus” test, instead holding that bodies of water must have a “continuous surface connection” to a traditional navigable water to be a covered wetland (read our analysis of the Sackett decision here).

In consideration of the Sackett ruling, the agencies have again revised their final rule to conform with the Supreme Court’s decision. Under the new rule, “interstate wetlands” are no longer covered, and the “significant nexus” standard is no longer applicable in defining WOTUS. Instead, to be jurisdictional water, a wetland must be “relatively permanent, standing or continuously flowing…” and must have “a continuous surface connection” to a traditional navigable water.

Continue reading "EPA narrows “Waters of the United States” definition following Sackett ruling" »


Proposed NEPA Revisions Seek to Ingrain Environmental Justice into Permitting Decisions

Daniel BLOG By: Daniel L. Robertson

The Council on Environmental Quality recently published the “Bipartisan Permitting Reform Implementation Rule,” the second in a two-phase approach to revising National Environmental Policy Act (NEPA) implementation regulations. An accompanying White House Fact Sheet highlights the proposal’s objectives to accelerate environmental reviews, encourage community engagement, accelerate clean energy advancements, strengthen energy security, and advance environmental justice.

From an environmental justice perspective, the proposed revisions will require agencies, where appropriate, to incorporate mitigation measures that will avoid or reduce a proposed action’s significant adverse health and environmental effects that disproportionately and adversely affect communities with environmental justice concerns. The proposal generally embeds the term “environmental justice” throughout the NEPA regulations, making a facility’s location a determining factor in the degree of review an agency gives a specific proposal, or whether the agency approves the project at all. Agencies must also, “to the fullest extent possible,” encourage and facilitate public engagement in decisions affecting the quality of the human environment, including meaningfully engaging communities with environmental justice concerns.

The revisions require agencies to consider the needs of affected communities when developing outreach and notification strategies. Notably, the proposal replaces the term “public involvement” with “public engagement,” emphasizing that interaction and collaboration is required between agencies and impacted communities, versus simply posting a public notice. That engagement must begin early in the process to seek input on proposals from impacted communities. Agencies are also required to provide sufficient notification to the community, which means making relevant documents accessible for community review. The proposal emphasizes that agencies must respond to public comments, removing a revision under the Trump Administration that an agency “may” respond to public comments. Further, agencies will be required to identify a “Chief Public Engagement Officer” that will be responsible for facilitating the agency’s community engagement. Overall, these processes are intended to make federal agency decisions more accessible and transparent to interested community members.

Besides encouraging early community engagement, the proposed rule also seeks to enhance engagement by removing what it described as “detailed and onerous” requirements that the prior administration imposed on public comments for them to be considered by an agency. These included requirements such as producing supporting information on a position or obtaining an expert to provide certain levels of detail. The proposal also removes a qualifier that the public comment should indicate what specific economic or employment impacts it is addressing. Generally, the expectation is that public comments will increase and more comments will be considered in agency decision-making.

The CEQ is currently holding public meetings on the proposal, with public comments due by September 29, 2023. Interested parties can submit their comments, identified by docket number CEQ–2023–0003, here. Additional information on the public hearings is located here. The first phase received almost 95,000 written comments, and it’s anticipated that this second phase will equally receive significant public attention.

Through this proposal, the Biden Administration is continuing its “whole of government” approach to embracing environmental justice initiatives. While not stated in the revisions, the regulated community should be mindful of these enhanced community engagement and cumulative impact provisions potentially entering future permit application requirements. We will continue to monitor CEQ’s proposed revisions and other environmental justice developments on the Corporate Environmental Lawyer blog.


EPA Drops First Set of UCMR 5 Data

Siros

 

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

 

U.S. EPA released the first set of data collected by public water systems (PWS) pursuant to the Fifth Unregulated Contaminant Monitoring Rule (UCMR 5).  UCMR 5 required PWS serving more than 10,000 customers to sample for 29 specific per- and polyfluoroalkyl substances (PFAS), including perfluorooctanoic acid (PFOA), perfluorooctane sulfonic acid (PFOS), and hexafluoropropylene oxide dimer acid (GenX).  The key take-aways from this newly released data (which represents about seven percent of the data that U.S. EPA expects to receive from the UCMR 5 sampling) are as follows:

  • PFOA and PFOS were identified above their minimum reporting levels (above 4 ppt)  in 8.5% and 7.8% of the PWS, respectively;
  • GenX was found in only one PWS (representing 0.5% of the PWS) above its health advisory level;
  • Detectible concentrations of nine other PFAS were identified above their minimum reporting levels (U.S. EPA has not set health advisory levels for these nine PFAS); and
  • Sixteen PFAS were not detected above their respective minimum reporting levels. 

With respect to PFOA and PFOS, because U.S. EPA’s  controversial health advisory levels for these compounds are set below the minimum reporting levels, any detectible concentration of PFOA and PFOS is by definition in excess of its health advisory level. 

In the press release that accompanied the data drop, U.S. EPA’s Assistant Administrator for Water, Radhika Fox stated “PFAS are an urgent public health issue facing people and communities across the nation. The latest science is clear: exposure to certain PFAS, also known as forever chemicals, over long periods of time is linked to significant health risks.  That’s why the Biden-Harris Administration is leading a whole-of-government approach to address these harmful chemicals. As part of this commitment, EPA is conducting the most comprehensive monitoring effort for PFAS ever, at every large and midsize public water system in America, and at hundreds small water systems.”

We will continue to monitor subsequent UCMR 5 data releases at the Corporate Environmental Lawyer blog.  


Montana State Court Sides with Youth Plaintiffs in Unique Climate Change Lawsuit

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

On August 14, 2023, a Montana state court found that a Montana environmental review statute (the Montana Environmental Policy Act or MEPA) that limited (and as amended in May 2023, precluded) consideration of greenhouse gas (GHG) emissions and corresponding impacts of those emissions on the climate in connection with environmental reviews was violative of Article IX, Section 1 of the Montana constitution that requires that “[t]he state and each person maintain and improve a clean and health environment in Montana for present and future generations.” 

The court’s ruling was almost entirely focused on the evidence presented by the plaintiffs in significant part because the defendants began and rested their defense on the same day, arguing primarily that the case presented an issue that should rightly be decided by the legislature and not the judiciary.  

In its 103-page order, the court found that plaintiffs had standing, noting that although plaintiffs’ mental health injuries directly resulting from state inaction or counterproductive action on climate change did not establish a cognizable injury, plaintiffs’ mental health injuries stemming from the effects of climate change on Montana’s environment, were cognizable injuries.  The court also found redressability, presuming that if the court declared MEPA unconstitutional, that would somehow compel Montana to deny future permits for fossil fuel activities thereby reducing the levels of GHG emissions in the state.   

In finding portions of the MEPA statute to be violative of the Montana constitution, the court stated that [b]y prohibiting consideration of climate, GHG emissions, and how additional GHG emissions will contribute to climate change … the MEPA Limitation violates Plaintiffs’ right to a clean and healthful environment and is facially unconstitutional”. 

Montana’s attorney general has already indicated the state intends to appeal the court’s ruling, noting that this “same legal theory has been thrown out of federal court and the courts in more than a dozen states.”  What impact this ruling might have, if any, on Juliana et al. v. United Stateswhich is pending in federal court in Oregon and involves claims that the actions of the federal government are violative of the federal constitution remains to be seen, especially since the U.S. constitution doesn’t contain similar language regarding the right to a clean environment as is contained in the Montana state constitution. 

In any event, we will continue to provide timely updates on breaking environmental, health and safety issues at the Corporate Environmental Lawyer blog.  

New EPA Rule Removes Emergency Defense Waiver in Title V Air Permits

 Daniel BLOG image from environblog.jenner.comBy: Daniel L. Robertson and Allison A. Torrence

On July 21, 2023, the Environmental Protection Agency published a final rule eliminating an affirmative defense for Clean Air Act permit emissions violations caused by
Smokestack“emergency” circumstances.

“Major sources” (i.e. sources with actual or potential emissions above certain emission thresholds) are required under Title V of the Clean Air Act to obtain operating permits. When the EPA originally promulgated rules implementing Title V, the proposed rules did not include an emergency affirmative defense provision. However, the EPA included the provisions in its final rule following requests from commenters. Specifically, 40 C.F.R. Parts 70.6(g) (state operating permit program) and 71.6(g) (federal operating permit program) contained identical affirmative defense provisions whereby a source could avoid liability for an emission violation if the violation was caused by an emergency “arising from sudden and reasonably unforeseeable events beyond the control of the source.” This included “acts of God, which situation requires immediate corrective action to restore normal operation, and that causes the source to exceed a technology-based emission limitation under the permit, due to unavoidable increases in emissions attributable to the emergency.” In such circumstances, a source could demonstrate an emergency affirmative defense by providing evidence that:

  1. An emergency occurred and the cause was identified;
  2. The facility was at the time being properly operated;
  3. The facility took all reasonable steps to minimize emission level exceedances and permit requirements during the emergency; and
  4. The permittee submitted notice of the emergency to the permitting authority within two working days.

The EPA’s attempt to remove the Title V emergency affirmative defense has been around since an initial rule proposal in 2016. However, later administrations did not pursue the proposal until a revised version was introduced in 2022. According to the EPA, the affirmative defense is “inconsistent with the EPA’s interpretation of the enforcement structure of the Clean Air Act in light of prior court decisions.” In one of those court decisions, Natural Resources Defense Council v. EPA, 749 F.3d 1055 (D.C. Cir. 2014), the D.C. Circuit Court of Appeals vacated a Title V permit provision that specified an affirmative defense for unavoidable malfunctions. The court held that the EPA exceeded its authority, as only the courts have the authority to decide whether to assess penalties for civil suit violations. The 2014 ruling was upheld in 2016, when the D.C. Circuit in U.S. Sugar Corp. v. EPA, 830 F.3d 579 (D.C. Cir. 2016), reaffirmed that the EPA’s affirmative defense provision at issue intruded on the judiciary’s role in determining Title V permit violation penalties. Similarly, the D.C. Circuit in a 2008 case, Sierra Club v. EPA, 551 F.3d 1019 (D.C. Cir. 2008), vacated an EPA rule exempting emission standards requirements during startup, shutdown or malfunction, finding such exemption in violation of Clean Air Act requirements. These decisions led EPA to revisit similar affirmative defense provisions, resulting in the latest rule.

The EPA states that the provisions’ removal is consistent with other EPA actions, specifically referencing removal or omission of similar affirmative defenses for New Source Performance Standards, emission guidelines for existing sources, and regulations for National Emission Standards for Hazardous Air Pollutants (NESHAP). According to the EPA, the latest action “would harmonize the EPA’s treatment of affirmative defenses across different [Clean Air Act] programs.”

As described in the rule summary, “any impermissible affirmative defense provisions within individual operating permits that are based on a Title V authority and that apply to federally-enforceable requirements will need to be removed.” The EPA has therefore instructed “any states that have adopted similar affirmative defense provisions” in operating permit programs to remove those provisions from their programs within twelve months of the rule’s August 21, 2023 effective date. The EPA expects the same revisions by local and tribal permit programs. Existing Title V operating permits “will eventually need to be revised” to remove language regarding affirmative defense provisions. These changes will likely occur during permit renewals or revisions.

The EPA does not believe the revisions will have a significant impact on sources, noting in the final rule that the Title V emergency defense provisions “have rarely, if ever, been asserted in enforcement proceedings.” Instead, sources more often assert affirmative defenses based on malfunctions, which were not addressed in this rule. In response to the potential chilling effect the rule may have on sources operating to provide vital services during an emergency, the EPA emphasized the enforcement discretion of oversight authorities, as well as accounting for emergency situations in determining remedies. The EPA further stated that the revisions will not restrict a source’s “ability to defend itself in an enforcement action” and that sources will still be able to seek the reduction or elimination of monetary penalties “based on the specific facts and circumstances of the emergency event.”

The proposed rule received significant comments, and legal challenges are likely to be forthcoming. We will continue to track this and other Clean Air Act developments on the Corporate Environmental Lawyer.


Biden Administration Seeks Public Comment on Expanding Environmental Justice Initiatives to Ocean-Related Activities

Robertson  Daniel

 

By:  Daniel L. Robertson, Associate Attorney

 

On June 8, 2023, the Council on Environmental Quality, on behalf of the Ocean Policy Committee (OPC), published a Federal Register request for information seeking public input on the development of a new “Ocean Justice Strategy.”

The OPC is a Congressionally mandated interagency body tasked with coordinating ocean science, technology and management policy across Federal agencies in order to maximize Ocean2 the effectiveness of Federal investments in ocean research and ocean resource management. Codified by the 2021 National Defense Authorization Act, the Committee falls within the National Oceanic and Atmospheric Administration and is led by the Director of the White House Office of Science and Technology Policy and the Chair of the Council on Environmental Quality. The OPC currently consists of at least 25 members, including the Secretary of State, Secretary of Defense, Attorney General, and the Administrator of the Environmental Protection Agency.

In Thursday’s announcement, the Council states that the new ocean justice strategy will “aim to identify barriers and opportunities to fully integrate environmental justice principles into ocean-related activities of the Federal Government.” The strategy will further “propose equitable and just practices to advance safety, health, and prosperity” for communities near oceans and the Great Lakes. Through its request, the OPC is seeking public input “on what the vision and goals of the Ocean Justice Strategy should be and how the Federal Government can advance just and equitable access to, and management and use of, the ocean, the coasts, and the Great Lakes.” The notice provides examples of environmental justice concerns including inequitable placement of polluting infrastructure such as ports and landfills, and inadequate responses to natural hazards like storms and typhoons.

In addition to a general request for any considerations in developing the strategy, the OPC is specifically seeking public input on the following areas:

  • How ocean justice is defined;
  • Barriers and key challenges to realizing ocean justice;
  • What elements, activities and components the strategy should include, including injustices that the federal government should better address;
  • Research and knowledge gaps the federal government should address;
  • How the federal government can harness existing tools (such as the Climate and Economic Justice Screening Tool and EJScreen) to address ocean justice, and what new tools or practices are necessary; and
  • Where and how can the federal government partner with external stakeholders, and what solutions should be led by non-federal entities.

The strategy will further expand the federal government’s advancement of environmental justice initiatives, and follows President Biden’s recent executive order clarifying the administration’s “whole of government” approach to addressing environmental justice, which we previously discussed here. The notice also gives indication as to areas that the OPC may be looking to address, stating that communities have not shared an equitable benefit and burden in ocean-related activities including “climate change, sea level rise and coastal flooding, increased storm intensity, pollution, overfishing, loss of habitat biodiversity, and other threats.”

Public comments are due on or before July 24, 2023, and can be submitted through the federal rulemaking portal located here by referencing docket number CEQ-2023-004. We will continue to monitor environmental justice developments on the Corporate Environmental Lawyer.

Avoiding Default and Streamlining NEPA—Can the Fiscal Responsibility Act of 2023 Accomplish Both Objectives?

Siros

Feltman-Frank

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

Congress

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

Supreme Court Narrows Scope of Clean Water Act in Landmark Sackett Case


Torrence

By Allison A. Torrence 

 

6a01310fa9d1ee970c02942f955469200c-800wiThe 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.


Embracing Environmental Justice Initiatives to Advance Corporate Objectives

Siros  Tatjana   Daniel BLOG Feltman-Frank  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 White House 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.

 

 

In a Choose Your Own Adventure - Approach, EPA Proposes Greenhouse Gas Emissions Standards for New and Existing Power Plants

Tatjana 

  image from environblog.jenner.com

Daniel BLOG

Feltman-Frank

     

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 Power plant 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.

 

 

 

 

 

 

 

 

 

Department of Justice Secures First Title VI Environmental Justice Resolution Agreement

Daniel BLOG 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. Seal_of_the_United_States_Department_of_Justice.svg

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.


New York Becomes First State to Pass Natural Gas Ban for New Construction

Daniel BLOG  AllyssaMilam  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 Download  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.


Biden Administration Underscores Environmental Justice Commitment with Earth Week Executive Order

 

 Daniel BLOG By Daniel L. Robertson, Associate Attorney

White House - BLOGCapping 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.


Can You Go Green Without Being Accused Of Greenwashing?

Torrence_Allison_BLUE
By
Allison A. Torrence 

 

Earth Week

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.

Utilizing the Inflation Reduction Act to Invest in Our Planet

Davis

Feltman-Frank

 

By Geoff M. Davis and Arie Feltman-Frank

 

Earth Week Blog Image2023

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.


The Time for Climate Investment is Here

Tatjana

 

By  Tatjana Vujic

 

Earth Week Blog Image2023

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. 


Earth Day 2023--Investing in a Balanced Approach to Emerging Contaminants

Daniel BLOG

By:  Daniel L. Robertson, Associate Attorney

 

 

Earth Week Blog Image2023

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.  

Earth Day 2023—A Reflection on the Past and Forward-Looking Opportunities For Investing in Our Future

 

Siros

 

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

 

Earth Week Blog Image

As we prepare to celebrate the 53rd 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 53rd 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 53rd 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.