On Friday, April 30, 2021, the Biden Administration’s Environmental Protection Agency (EPA) announced significant steps the agency intends to take under the Toxics Release Inventory (TRI) Program to implement expanded reporting requirements for companies that store and utilize hazardous chemicals, including new obligations to report the storage, use and any releases of ethylene oxide, a commonly used industrial chemical and sterilant for medical equipment and supplies. The TRI Program, which was established under Section 313 of the Emergency Planning and Community Right-to-Know Act (EPCRA), serves as a resource for the public to learn about annual chemical releases, waste management, and pollution prevention activities reported by nearly 22,000 industrial and federal facilities. Under the TRI Program, U.S. facilities operating in various industry sectors must report annually the quantity of certain chemicals they release to the environment and/or manage through recycling, energy recovery and treatment. A “release” of a chemical in the context of the TRI Program means that the chemical is emitted to the air or water, or placed in some type of land disposal.
A major component of EPA’s announcement is the agency’s intent to regulate ethylene oxide. The use and release of ethylene oxide by medical device sterilization companies have prompted a number of recent high-profile lawsuits alleging that releases of the chemical into the environment have caused increased cancer rates in communities adjacent to the facilities. EPA’s announcement notes that many existing sterilization facilities “are located near areas with Environmental Justice concerns,” and that individuals living adjacent to these facilities may be at a heightened risk from exposure to ethylene oxide. “Every person in the United States has a right to know about what chemicals are released into their communities,” EPA Administrator Michael S. Regan stated. “By requiring new and more data on chemical releases from facilities, EPA and its partners will be better equipped to protect the health of every individual, including people of color and low-income communities that are often located near these facilities but have been left out of the conversation for too long.” In the coming months, EPA will provide further details regarding the specific actions the agency intends to take to require sterilization facilities that use ethylene oxide to report under the TRI Program.
In addition to implementing new reporting requirements for companies utilizing ethylene oxide, EPA announced several other steps the agency plans to take that will increase reporting and public access to information under the TRI Program, including:
- Finalizing a longstanding proposed rule that will add natural gas processing facilities to the industry sectors covered under the TRI Program thereby increasing the publicly available information on chemical releases and other waste management activities of TRI-listed chemicals from this sector;
- Continuing to add new per- and polyfluoroalkyl substances (“PFAS”) to the list of chemicals that require reporting under the TRI Program, including the addition of perfluorobutane sulfonic acid (PFBS) following EPA’s toxicity assessment of the substance;
- Proposing a new rule to add high-priority substances under the Toxic Substances Control Act (TSCA) and chemicals included in the TSCA workplan to the list of chemicals that require reporting under the TRI Program; and
- Increasing public access to TRI data through improved search functionality and improved website interface.
EPA’s announcement marks the most recent step by the agency to implement the Biden Administration’s focus on environmental justice as a top priority of its environmental agenda. On the same day that EPA announced the agency’s updated TRI policy, EPA circulated a memorandum to all EPA-staff, indicating the additional actions the agency intends to take to fulfill its environmental justice commitment. These actions include: (1) increasing inspections of facilities that pose the most serious threats to overburdened communities; (2) focusing on implementing remedies that benefit communities, including through the incorporation of supplemental environmental projects; (3) increasing communications with overburdened communities to develop improved cleanup and non-compliance solutions; and (4) identifying locations where state regulators are not adequately protecting local communities and taking increased enforcement actions to “pick up the slack” if state regulators have not taken appropriate or timely actions.
The Corporate Environmental Blog will continue to follow developments on this issue in the coming months as EPA provides additional details on the specific actions it intends to take to expand the TRI Program.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
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 States—which 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.
Biden Administration Seeks Public Comment on Expanding Environmental Justice Initiatives to Ocean-Related Activities
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 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.
Earth Week 2023 brought with it two significant environmental justice developments. The week began with New Jersey Governor Phil Murphy announcing the adoption of regulations aimed at reducing pollution in historically overburdened communities and those disproportionately impacted by health and environmental stressors. President Biden then capped the week off by issuing an Executive Order on Revitalizing Our Nation’s Commitment to Environmental Justice for All which further embeds environmental justice initiatives throughout the federal government (read our analysis of that order here). These actions display the heightened emphasis on environmental justice that has led to these and other significant developments at the federal and state levels.
The United States Environmental Protection Agency (USEPA) defines environmental justice as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” With increased funding provided by the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, and the American Rescue Plan Act, federal agencies are investing at unprecedented levels to advance environmental justice.
The Biden administration also developed the Justice40 Initiative, with a goal of ensuring that 40% of the overall benefits of certain federal investments flow to “disadvantaged communities that are marginalized, underserved, and overburdened by pollution.” The Climate and Economic Justice Screening Tool geospatially identifies such disadvantaged communities, which include federally recognized Tribes and Alaska Native villages.
As companies face increased scrutiny all along the supply chain, including from regulators, customers, investors, and the public, one thing is clear: failure to consider environmental justice implications of corporate activities can significantly hinder the advancement of corporate objectives, including the achievement of climate targets, the effects of which are quite significant. By way of example, in September 2022, a company’s air permits to build a $9.4 billion plastics manufacturing complex were vacated in part because the state Department of Environmental Quality’s environmental justice analysis was found to be arbitrary and capricious, and therefore failed to uphold the “public trust doctrine” of Louisiana’s constitution.
The increased scrutiny and risks associated with failing to consider environmental justice issues is causing some companies to reevaluate corporate policies and develop business practices that embrace environmental justice and community stakeholder initiatives. In this client alert, our team explains how embracing environmental justice and community stakeholder concerns can advance corporate objectives.
A Recent History of Environmental Justice Developments
While the concept of environmental justice has long had its roots in American civil rights history, President Biden brought the topic to the forefront of federal governance as part of the administration’s “whole-of-government” approach to addressing health and environmental impacts on disproportionately affected communities. Through various executive orders, the Biden administration has put its policy of prioritizing environmental justice initiatives and directing federal agencies to make achieving environmental justice a part of their missions into practice. Federal developments thus far have taken the form of plans, new offices and positions, grant programs, mapping tools, reviews of existing legal authority, permitting guidance, and enforcement policies.
Federal, state, and local developments that are particularly relevant to the regulated community are reviewed below.
USEPA’s Legal Authorities to Advance Environmental Justice
USEPA published a May 2022 report, followed by a January 2023 addendum, that reviewed the agency’s legal authority to advance environmental justice and take steps to mitigate the cumulative impacts of federal actions taken under its various programs. The takeaway is that USEPA has existing legal authority to advance and address these topics in decision-making. This authority encompasses the full breadth of the agency’s activities, including its oversight of state programs.
USEPA also has the authority to advance environmental justice through civil rights laws. Title VI of the Civil Rights Act of 1964, for instance, prohibits recipients of federal financial assistance from intentionally discriminating on the basis of race, color, or national origin (including limited English proficiency) in their programs or activities.
USEPA’s implementing regulations also prohibit recipients of federal financial assistance from taking actions that have a discriminatory effect. The regulations offer a mechanism for a person who believes they have been discriminated against to file a complaint with any USEPA office, as well as authorize USEPA’s Office of Civil Rights to periodically conduct compliance reviews. If a recipient is found to be noncompliant, the recipient may elect to take corrective actions to mitigate the risk of losing financial assistance.
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.
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.
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.
Existing Clean Power and Eligibility for Hydrogen Production Tax Credits: “Additionality” Doesn’t Add Up
The Inflation Reduction Act promises to transform the energy sector in many ways, but among the most exciting is the hydrogen production tax credit, which provides a production tax credit, over a ten year period beginning with the date a facility is placed in service, of up to 60 cents per kilogram of “clean hydrogen” – that is, hydrogen “produced through a process” with a life-cycle greenhouse gas emissions rate below specified thresholds. 26 U.S.C. § 45V. The credit is enhanced five-fold, up to $3 per kilogram, for clean hydrogen produced at facilities complying with certain prevailing wage and apprenticeship requirements. Clean hydrogen can be used to decarbonize hard-to-electrify sectors, such as steel, cement, and chemical production, that today are responsible for a significant share of the Nation’s carbon emissions.
The Treasury Department is currently reviewing comments on the implementation of the hydrogen tax credit under Section 45V. See IRS Notice 2022-58. Several commenters have urged the agency to limit tax credits to hydrogen production powered by new renewable generation – thus eliminating the ability for hydrogen producers to receive tax credits if they source their electricity from existing renewable or nuclear plants. Similar arguments are being raised at the Department of Energy as it seeks to finalize its Clean Hydrogen Production Standard to guide funding decisions under the Infrastructure Investment and Jobs Act.
The policy rationale for this limitation – which its proponents call “additionality” – is that if existing renewable or nuclear plants are used to produce hydrogen, they will no longer be available to serve the grid, and the result will be increased dispatch of fossil fuel plants to fill the gap, resulting in increased carbon emissions overall. In their view, only “additional” clean generation – generation that would not otherwise exist, but for the electricity demand created by hydrogen production – should be allowed to be used by hydrogen producers claiming tax credits or federal funding.
An “additionality” requirement, however, is simply inconsistent with the statutory scheme. If one is adopted, it is almost certain to be challenged in court – creating uncertainty that will discourage clean hydrogen production. And, for the reasons I describe below, such a challenge is likely to succeed.
First, the text of the Inflation Reduction Act forecloses such a requirement. The statute makes tax credits available to “any qualified clean hydrogen,” 26 U.S.C. § 45V(b)(2)(A), (B), (C), (D) (emphasis added), and defines “qualified clean hydrogen” to focus on the process used to produce the hydrogen – not the indirect effects like the potential for other power sources to be dispatched to serve other load on the electric grid. Thus, hydrogen counts as “clean hydrogen” if it is “produced through a process that results in a lifecycle greenhouse gas emissions rate” below a specified threshold. Id. § 45V(c)(2)(A). Lifecycle greenhouse gas emissions are to be calculated using a model known as “GREET,” developed by Argonne National Labs, and “shall only include emissions through the point of production” as determined by the GREET model. Id. § 45V(b)(1) (emphasis added). In calculating emissions through the point of production, the GREET model makes no distinction between sources of electricity based on whether they are existing or new. Thus, there is no room for an “additionality” requirement in the definitions establishing eligibility for the tax credit.
Second, if Congress had wanted to impose an “additionality” requirement, it knew how to do so. For example, Section 45V contains other vintage-related requirements: a “qualified clean hydrogen production facility” is defined as one that begins construction before 2033. § 45V(c)(3)(C). Vintage requirements also limit which hydrogen production facilities are eligible for the increased credit amounts on account of compliance with certain prevailing wage and apprenticeship requirements. § 45V(e)(2)(A). But there is no vintage limitation on the resources used to provide energy to a clean hydrogen production facility.
Moreover, other provisions in the Inflation Reduction Act make clear that Congress anticipated the use of electricity generated by existing nuclear facilities to produce hydrogen and coordinated other clean energy credits with Section 45V on that assumption. Section 45U, for example, establishes a nuclear production tax credit that is only available to nuclear facilities placed in service prior to enactment of the Inflation Reduction Act. In Section 45U(c)(2), Congress incorporated special rules (set forth in Section 45(e)(13)) that would allow nuclear facilities receiving credits under Section 45U to use the electricity they generate to produce clean hydrogen receiving credits under Section 45V. Congress would not have done so if it intended to limit Section 45V credits to hydrogen produced using energy generated by “additional” resources. Indeed, an “additionality” requirement would make Section 45U(c)(2)’s incorporation of Section 45(e)(13) superfluous, conflicting with a basic principle of statutory interpretation and negating Congress’s intent.
Third, Congress sought to promote new renewable generation directly in the Inflation Reduction Act, through tax credit programs aimed directly at new clean generation, in Sections 45Y and 48E. Especially in light of Sections 45Y and 48E, imposing an “additionality” requirement on Section 45V would be arbitrary. After all, the purpose of Sections 45Y and 48E is to massively increase the amount of new renewable generation. Against the backdrop of that expected influx, there is no reason to believe that new renewable generation providing electricity to hydrogen producers is “additional” just because it is new. Such new renewable generation likely would have come online anyway. And from the standpoint of the grid, such new renewable resources are just as available to serve load as existing renewable and nuclear resources are. Consequently, the main effect of grafting an “additionality” requirement onto Section 45V is simply to favor one group of clean generators that otherwise would be serving load (new generators) over other clean generators that would otherwise would be serving load (existing generators). That would be at odds with the purpose of Section 45V, which is to encourage hydrogen production—not promote new renewable generation. From the standpoint of hydrogen producers, the main effect of an “additionality” requirement is to limit the options available to them in sourcing electricity—and thereby potentially make it more costly to produce clean hydrogen. That is directly contrary to Congress’s objectives in Section 45V.
Imposing an “additionality” requirement under the DOE’s Clean Hydrogen Production Standard, see 42 U.S.C. § 16166, which will guide funding decisions under the Infrastructure Investment and Jobs Act, would face similar legal hurdles. The Clean Hydrogen Production Standard concerns “the carbon intensity of clean hydrogen production that shall apply” to the various hydrogen-related activities carried out under 42 U.S.C. subchapter 8, id. § 16166(a), including the selection of regional clean hydrogen hubs.
An “additionality” requirement has no place there. Section 16166(b) directs that the clean hydrogen production standard should “support clean hydrogen production from each source” listed in Section 16154(e)(2). That provision, in turn, makes no distinction between new energy sources and existing energy sources, but instead lists “diverse energy sources” including “fossil fuels with carbon capture, utilization, and sequestration” and “nuclear energy.” Id. § 16154(e)(2), (2)(A), (2)(D); see also id. § 16166(c) (listing numerous sources to which “the standard” shall apply, but making no distinction among resources based on vintage). Similarly, Section 16166(b) requires “clean hydrogen” to be defined in terms of carbon emissions “produced at the site of production per kilogram of hydrogen produced.” Id. § 16166(b)(1)(B) (emphasis added). In other words, hydrogen’s carbon intensity is to be assessed based on the energy source used to produce the hydrogen—not the indirect effects that using that energy source for hydrogen production may have on the carbon intensity of the grid as a whole. An “additionality” requirement would be inconsistent with this statutory text. What is more, the purposes of the statute are squarely focused on promoting the development and commercialization of hydrogen technology. 42 U.S.C. § 16151. Nothing in those purposes suggest that hydrogen should be pursued only to the extent it can be created by new carbon-free resources.
The Inflation Reduction Act amounts to a once-in-a-generation opportunity to kick-start hydrogen production. It could have a transformational effect on our energy economy. Unless already committed to other uses, existing clean resources should be available to American manufacturers seeking to realize that transformation. It would be unfortunate indeed if the transition to a hydrogen-based economy were delayed or thwarted because of an “additionality” requirement limiting hydrogen producers to electricity procured from new resources that need to be constructed and interconnected. Moreover, an additionality requirement is likely to face litigation that will create significant regulatory uncertainty for this nascent industry. The resulting chilling effect is exactly the opposite of what Congress hoped to achieve.
New OEHHA Proposition 65 Acrylamide Warning Label Does Little to Resolve Pending First Amendment Challenges
By Daniel L. Robertson, Associate Attorney, and Steven M. Siros, Chair, Environmental and Workplace Health & Safety Law Practice
On September 16, 2022, California’s Office of Environmental Health Hazard Assessment (OEHHA) submitted to the California Office of Administrative Law (OAL) a revised Proposition 65 warning label requirement for the use of acrylamide in food and beverages that OEHHA claims will resolve the First Amendment claims being asserted by the California Chamber of Commerce (CalChamber) in federal district court in California. OAL is expected to approve OEHHA’s “safe harbor warning” for acrylamide by the end of October 2022.
Under California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly referred to as Proposition 65 (Prop. 65), businesses are required to provide warnings to consumers about significant exposures to chemicals that cause cancer, birth defects or other reproductive harm. As of February 25, 2022, almost 1,000 chemicals are subject to this requirement and one of these chemicals is acrylamide.
Acrylamide can form through a natural chemical reaction in high-temperature cooking processes such as frying, roasting, and baking, and is commonly found in food products such as coffee, grain and potato products. Studies indicate that it has likely always been present in foods cooked at high temperatures.
In 2019, CalChamber sued the California Attorney General for violating its members’ First Amendment rights against compelled speech by requiring food products containing acrylamide to include a Prop. 65 cancer warning. In its complaint, CalChamber alleges that acrylamide was identified as a carcinogen solely on the basis of laboratory animal studies, and that its members will be required to convey “to consumers the false and misleading message that consuming the products will increase consumers’ risk of cancer, even though there is no reliable evidence that exposure to dietary acrylamide increases the risk of cancer in humans.” The Council for Education and Research on Toxics (CERT) intervened in the matter to defend the Prop. 65 acrylamide warning.
In March 2021, the court issued a preliminary injunction that barred new Prop. 65 acrylamide lawsuits from being filed during the pendency of the litigation, noting that the Attorney General had not shown that the warning requirements were “purely factual and uncontroversial.” CERT appealed the court’s ruling and in March 2022, the Ninth Circuit Court of Appeals upheld the lower court’s ruling, thereby reinstating the district court’s preliminary injunction. The Ninth Circuit specifically acknowledged statements by scientific bodies such as the Food and Drug Administration, American Cancer Society, the National Cancer Institute, and even the State of California to emphasize the “robust disagreement by reputable scientific sources” of whether acrylamide can be linked to cancer in humans.
In direct response to CalChamber’s First Amendment challenge, on September 17, 2021, OEHHA issued a Notice of Proposed Rulemaking that proposed the following “safe harbor warning” for acrylamide in food and beverages:
Consuming this product can expose you to acrylamide, a probable human carcinogen formed in some foods during cooking or processing at high temperatures. Many factors affect your cancer risk, including the frequency and amount of the chemical consumed. For more information including ways to reduce your exposure, see www.P65Warnings.ca.gov/acrylamide.
Notwithstanding OEHHA’s efforts to respond to CalChamber’s First Amendment challenge, the new “safe harbor warning” will not stop the ongoing litigation in that CalChamber claims that this new warning language continues to violate its members’ First Amendment rights. As such, the CalChamber lawsuit will continue to move forward and any subsequent ruling by the court will provide additional clarification on potential First Amendment limitations on Prop. 65 warnings.
We will continue tracking Proposition 65 developments through the Corporate Environmental Lawyer blog. Regardless of OAL’s decision on the latest regulatory proposal, the current action and similar litigation relating to glyphosate establish a litigation roadmap for businesses that may otherwise be subject to Prop. 65 requirements based on disputed science.
Jenner & Block Wishes Bon Voyage to Gay Sigel as She Starts Her Next Adventure with the City of Chicago
As Gay Sigel walked through the doors at One IBM Plaza in Chicago, fresh out of law school and ready to launch her career as an attorney at Jenner & Block, she could not have envisioned the tremendous impact she would have on her clients, her colleagues, and her community over the next 39 years. Gay started her legal career as a general litigator, but Gay and Bob Graham were quick to realize how the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was creating a new and exciting area of the law that was increasingly important for the firm’s clients: Environmental Law. Gay and Bob saw an opportunity to specialize in that area and founded Jenner & Block’s Environmental Health and Safety Practice. Gay has been an ever-present force in the EHS community ever since.
Over her 39-year career at Jenner & Block, Gay has worked on some of the most significant environmental cases in the country for clients ranging from global Fortune 50 corporations to environmental organizations to individuals. For more than a decade, she taught environmental law at Northwestern University, helping shape the next generation of environmental lawyers. She has worked on issues of global impact, like those affecting climate change, issues of local impact like those related to combined sewer overflows to the Chicago River, and issues of individual impact like those involving employee safety and health. No matter the subject, Gay has always been a tireless advocate for her clients. We often describe her as the Energizer Bunny of environmental lawyers: she is the hardest working attorney we have ever met.
Gay’s true passion is to make this world a better, more just place for others. So, throughout her career as an environmental, health, and safety lawyer, Gay has devoted her time, energy, and emotional resources to innumerable pro bono cases and charitable and advocacy organizations. Her pro bono work includes successfully protecting asylum applicants, defending criminal cases, asserting parental rights, and defending arts organizations in OSHA matters. Among her many civic endeavors, Gay was a founding member of the AIDS Legal Council of Chicago (n/k/a as the Legal Council for Health Justice); she was the Secretary and active member of the Board of Directors for the Chicago Foundation for Women; and she was on the Board of the New Israel Fund. Gay continues to promote justice wherever she sees injustice, including as an advocate for women’s rights, particularly for women’s reproductive rights.
In both her environmental, health, and safety practice as well as her pro bono and charitable work, Gay is a tremendous mentor to younger (and even older) attorneys. She is curious, committed, exacting, fearless, and demanding (though more of herself than of others). We all give Gay much credit for making us the lawyers we are today.
Gay is leaving Jenner & Block to embark on her next adventure. She is returning to public service as Assistant Corporation Counsel Supervisor with the City of Chicago's Department of Law where she will be focusing on environmental issues. The City and its residents will be well served as Gay will bring her vast experience and unparalleled energy to work tirelessly to protect the City and its environment. We will miss working with and learning from Gay on a daily basis, but we look forward to seeing the great things she will accomplish for the City of Chicago. We know we speak for the entire firm as we wish Gay bon voyage—we will miss you!
In a compromise move many months in the making, on August 7, 2022, the Senate passed a spending bill dubbed the Inflation Reduction Act of 2022, which contains provisions aimed at lowering drug prices and health care premiums, reducing inflation, and most notably for our readers, investing approximately $369 billion in energy security and climate change programs over the next ten years. The Inflation Reduction Act, which is the Fiscal Year 2022 Budget Reconciliation bill, passed on entirely partisan lines in the Senate, with all 50 Democratic senators voting in favor, all 50 Republicans voting against, and Vice President Harris breaking the tie in favor of the Democrats. The bill is currently pending before the House of Representatives, where it is expected to be hotly contested but ultimately pass.
According to Senate Democrats, the Inflation Reduction Act “would put the U.S. on a path to roughly 40% emissions reduction [below 2005 levels] by 2030, and would represent the single biggest climate investment in U.S. history, by far.” There are a wide variety of programs in this bill aimed at achieving these lofty goals, including:
- Clean Building and Vehicle Incentives
- Consumer home energy rebate programs and tax credits, to electrify home appliances, for energy efficient retrofits, and make homes more energy efficient.
- Tax credits for purchasing new and used “clean” vehicles.
- Grants to make affordable housing more energy efficient.
- Clean Energy Investment
- Tax credits to accelerate manufacturing and build new manufacturing plants for clean energy like electric vehicles, wind turbines, and solar panels.
- Grants and loans to retool or build new vehicle manufacturing plants to manufacture clean vehicles.
- Funding for EPA, DOE and NOAA to facilitate faster siting and permitting of new energy generation and transmission projects.
- Investment in the National Labs to accelerate breakthrough energy research.
- Reducing Carbon Emissions Throughout the Economy
- Tax credits for states and electric utilities to accelerate the transition to clean electricity.
- Grants and tax credits to reduce emissions from industrial manufacturing processes like chemical, steel and cement plants.
- Funding for Federal procurement of American-made clean technologies to create a stable market for clean products—including purchasing zero-emission postal vehicles.
- Environmental Justice
- Investment in community led projects in disadvantaged communities, including projects aimed at affordable transportation access.
- Grants to support the purchase of zero-emission equipment and technology at ports.
- Grants for clean heavy-duty trucks, like busses and garbage trucks.
- Farm and Rural Investment
- Funding to support climate-smart agriculture practices and forest conservation.
- Tax credits and grants to support the domestic production of biofuels.
- Grants to conserve and restore coastal habitats.
- Requires sale of 60 million acres to oil and gas industry for offshore wind lease issuance.
Drilling down on some of these many provisions, the clean vehicle consumer tax credit has already sparked controversy due to the requirement that certain manufacturing or components be sourced in North America. The Inflation Reduction Act would maintain the existing $7,500 consumer tax credit for the purchase of a qualified new clean vehicle. The Act would get rid of the previous limit that a single manufacturer could only offer up to 200,000 clean vehicle tax credits—a limit that many manufacturers were hitting. However, under the new bill, that tax credit is reduced or eliminated for electric vehicles if the vehicle is not assembled in North America or if the majority of battery components are sourced outside of North America and if a certain percentage of the critical minerals utilized in battery components are not extracted or processed in a Free Trade Agreement country or recycled in North America. Manufacturers have indicated these battery sourcing requirements are currently difficult to meet, and may result in many electric vehicles being ineligible for this tax credit in the near term.
Another controversial point in the Act is the handling of oil and gas rights vis-à-vis wind farm projects. The Act would allow the sale of tens of millions of acres of public waters to the oil and gas industry as part of an overall plan to require offshore oil and gas projects to allow installation of wind turbines. A group of 350 climate groups, including Senator Bernie Sanders, criticized this and other provisions they saw as favorable to the oil and gas industry in the Act. Despite his criticism of certain aspects of the Inflation Reduction Act, Senator Sanders ultimately voted for the bill.
The House is expect to vote on the Inflation Reduction Act very soon and if it is passed by the House, President Biden will sign it into law. We will continue to track the Act’s progress and its impact on the regulated community. You can follow the Corporate Environmental Lawyer Blog for all of the latest developments.
On the final day of its 2022 term, the Supreme Court issued its highly-anticipated opinion in the case of West Virginia v. EPA, 579 U.S. __ (2022), addressing EPA’s authority to regulate greenhouse gases (“GHGs”) under the Clean Air Act (“CAA”), but having much broader implications for the authority of all administrative agencies. The opinion signals a significant shift in the standards used to review administrative actions. Chief Justice Roberts wrote the opinion for the Court, joined by Justices Thomas, Alito, Gorsuch, Kavanaugh and Barrett. Justice Gorsuch filed a concurring opinion, in which Justice Alito joined, and Justice Kagan filed a dissenting opinion, in which Justices Breyer and Sotomayor joined.
Major Questions Doctrine Has its Day in the Sun
In a significant yet long-predicted move, the six-to-three opinion rejected EPA’s approach to regulating GHG emissions under the Obama Administration’s Clean Power Plan (“CPP”), under which EPA intended to regulate existing coal-and natural-gas-fired power plants pursuant to Section 111(d) of the CAA. Of greater significance, however, the Court took the opportunity to fully embrace the “major questions doctrine,” a standard several Justices had endorsed but which had not yet been fully unveiled by the Court. The doctrine now requires agencies, in instances in which a regulation will have major economic and political consequences, to point to clear statutory language showing congressional authorization for the power claimed by the agency. In particular, in “extraordinary cases” in which “the history and the breadth of the authority that the agency has asserted and the economic and political significance of that assertion” is significant or major, courts have “a reason to hesitate before concluding that Congress meant to confer such authority.” Slip op. at 17. In such extraordinary cases, the Court will not read into ambiguous statutory text authority that is not clearly spelled out. Instead, “something more than a merely plausible textual basis for the agency action is necessary”; specifically, “[t]he agency instead must point to clear congressional authorization for the power it claims.” Slip op. at 19.
As support for the adoption and application of the major questions doctrine, the Court cited numerous cases in which agency authority was curtailed because of extraordinary circumstances that it determined required a clear congressional directive. The cases included the FDA’s attempt to regulate tobacco (FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000), the CDC’s effort to issue an eviction moratorium during the COVID-19 pandemic (Alabama Assn. of Realtors v. Dept. of Health & Human Servs., 594 U.S. __ (2021)), EPA’s assertion of permitting authority over millions of small sources like hotels and office buildings (Utility Air Regulatory Group v. EPA, 573 U.S. 302 (2014)), and OSHA’s endeavor to require 84 million Americans either obtain a COVID-19 vaccine or undergo weekly testing (National Federation of Independent Business v. OSHA, 595 U.S. __ (2021)), all of which, according to the Court, involved an agency overstepping its authority to act in situations not dissimilar from the extraordinary circumstances presented in West Virginia v. EPA. The dissent, on the other hand, regarded the majority’s use of the major questions doctrine to be without precedent, observing that “[t]he Court has never even used the term ‘major questions doctrine’ before.” Dissent at 15.
As discussed below, when the Court determines that the major questions doctrine applies, even if the administrative action arguably fits within what may seem like a broad grant of statutory authority, it is not necessarily enough to authorize the agency to act. Rather, if the court finds that the administrative rule is an “extraordinary case”, i.e., will have a significant economic or political impact, the agency must base its action on very clear congressional authorization to justify the power it is attempting to assert.
Clean Power Plan is Out But Regulating GHGs Still OK
Turning back to the regulation at issue in West Virginia, the Court reviewed the Clean Power Plan, which dates back to the Obama Administration’s EPA. At that time, EPA promulgated the CPP pursuant to its authority under the New Source Performance Standards (“NSPS”) in Section 111(d) of the CAA. The Court’s review thus centered on Section 111(d), which gives EPA authority to select the “best system of emission reduction” for existing sources of pollution, like power plants. 42 U.S.C. § 7411(d). Under the CPP, the Obama Administration’s EPA used the NSPS to set GHG emission standards for existing power plants which would require many operators to shut down older coal-fired units and/or shift generation to lower-emitting natural gas units or renewable sources of electricity. The Court viewed EPA’s CPP, which would have required power producers to significantly change the generation mix, as an “extraordinary case” because it would have a major impact on the economy and was a “transformative expansion in [EPA’s] regulatory authority” based on “vague language” in the CAA. Slip op. at 20. In addition, the Court noted that EPA was using an “ancillary provision” in the CAA to regulate GHGs and stated that “the Agency’s discovery [of Section 111(d)]”—which the Court described as a “gap filler”—"allowed it to adopt a regulatory program that Congress had conspicuously and repeatedly declined to enact itself.” Slip op. at 20.
Best System of Emission Reduction
Notably, the Court acknowledged that “as a matter of definitional possibilities, generation shifting can be described as a system” (and thus a “best system of emission reduction”), but nevertheless determined that the CAA’s grant of authority was too vague. Slip op. at 28. According to the Court, almost anything could be described as a “system”, and therefore the CPP was based on a vague grant of authority and did not pass the major questions doctrine test. Slip op. at 28. The majority found such a broad grant of authority questionable, particularly because climate change legislation has been debated in Congress for years with no action, signaling that EPA could not exercise such broad authority when Congress had clearly declined to take such action itself.
By contrast and contrary to the majority’s narrow reading of “best system of emission reduction,” the dissent argued that the generation shifting prescribed by the CPP was precisely the type of “system” of emission reduction permitted under the CAA. In particular, the dissent contended that the term “system” is not vague (which Justice Kagan defined as unclear, ambiguous or hazy) but intentionally expansive to allow for such system-wide programs. Thus, the crux of the disagreement between the majority and dissent is that the dissent saw the CAA as having bestowed broad authority on EPA to regulate complex and important issues of air pollution—including and especially climate change, particularly considering the severity of the problem—in the manner that EPA determines is most appropriate, while the majority required further scrutiny for large-scale administrative endeavors like the CPP, which it held require very clear and specific authorization.
In terms of the implications of West Virginia, what is clear is that the major questions doctrine is here to stay and EPA’s ability to regulate GHG’s under Section 111(d) of the CAA may be curtailed but has not been rejected. In fact, the Court specifically endorsed EPA’s authority to regulate GHGs. So, what does this mean, not only for GHG regulation but also for agency rulemaking in general?
First, while the ruling marks a significant setback for EPA, it does not shut the door on the agency’s ability to regulate GHGs. The CPP rules at issue raised the specter of the major questions doctrine because the regulation would have required generation shifting across the entire energy industry—an action viewed by the Court as having a significant impact on the national economy. The Court, however, declined to opine on “how far our opinion constrains EPA,” indicating that EPA’s authority had not been disallowed. Slip op. at 31, fn5. In fact, the opinion unequivocally states that it is within EPA’s purview to set a specific limit on GHG emissions. Slip op. at 6 (“Although the States set the actual rules governing existing power plants, EPA itself still retains the primary regulatory role in Section 111(d). The Agency, not the States, decides the amount of pollution reduction that must ultimately be achieved.”) Nothing in the opinion suggests that EPA cannot choose to regulate GHGs at power plants with more traditional technology-based requirements. Indeed, an inside-the-fence-line regulation that requires technology like carbon-capture would likely be within EPA’s traditional expertise and less likely to implicate large swaths of the economy like generation switching, and hence not be struck down.
Looking beyond EPA and GHG regulation, additional fallout from the Court’s embrace of the major questions doctrine is sure to occur. In addition to the Court’s explicit adoption of the major questions doctrine, Justice Gorsuch—a longstanding proponent of the doctrine—used his concurring opinion to lay out what he saw as the appropriate elements to consider when evaluating administrative rules under the doctrine. While Justice Gorsuch’s concurrence is not binding, future courts and administrative agencies likely will look to both the Court’s majority opinion and the Gorsuch concurrence for guidance. Administrative regulations will face increased challenges and heightened judicial scrutiny thanks to the major questions doctrine, and we can expect to see not only the number of challenges increase but also the number of successful challenges rise. Additionally, administrative agencies may proactively rein in regulatory actions they were planning to promulgate—keeping the rules more modest or tailored in an attempt to avoid challenges based on the major questions doctrine.
Undoubtedly, this will not be the last word on EPA regulation of GHGs or the use of the major questions doctrine. EPA will issue new GHG regulations, which certainly will invite future litigation. The decision will also certainly trigger many more challenges of agency authority under the newly minted major questions doctrine.
 Notably, the CPP was revoked by the Trump EPA, and the Biden EPA has stated that it intends to promulgate new GHG regulations different from the previous rules under past administrations. Nevertheless, the Court held that the parties had standing to proceed and the case was not moot. Slip op. at 14, 16.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
U.S. EPA issued its long anticipated interim updated drinking water health advisories for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS) that replace previous U.S. EPA health advisories for these per- and polyfluoroalkyl substances (PFAS) that had been set at 70 parts per trillion (ppt). The updated advisory levels, which U.S. EPA claims are based on new science and consider lifetime exposure, evidence that U.S. EPA believes that adverse health effects may occur with concentrations of PFOA or PFOS in water that are about as close to zero as you can get. U.S. EPA notes that these interim health advisories will remain in place until EPA establishes a National Primary Drinking Water Regulation.
U.S. EPA has set a new health advisory level of 0.02 ppt for PFOS and 0.004 ppt for PFOA. These new levels are dramatically lower than U.S. EPA's previous 70 ppt level that applied to both PFOA and PFOS. U.S. EPA also set final advisories for hexafluoropropylene oxide dimer acid and its ammonium salts (also referred to as GenX) at 10 ppt and perfluorobutane sulfonic acid (PFBS) at 2,000 ppt.
Interestingly, U.S. EPA's health advisory levels for both PFOA and PFOS are set well below the current analytical detection limit of 4 ppt. Responding to questions as to how the regulated community is supposed to demonstrate compliance with these health advisory levels, U.S. EPA acknowledged it was a "complicated matter" and U.S. EPA's advice was for water providers to test for PFAS using the currently analytical methodology that can test to 4 ppt.
Environmental groups and the plaintiffs’ bar were quick to applaud the new health advisory levels, noting that any detectible levels of PFOA or PFOS represent unacceptable levels of these compounds in drinking water. The regulated community, on the other hand, blasted the new health advisory levels, claiming that the advisory levels ignored U.S. EPA’s commitment to embrace scientific integrity.
Regardless of which side of the fence that you find yourself, it is clear that U.S. EPA’s new PFAS health advisories will be relied upon by plaintiffs to file lawsuits in any instance where a detectible concentration of PFOA and/or PFOS is found in drinking water which in turn is likely to keep drinking water providers throughout the United States awake at night.
We will continue to provide updates on U.S. EPA’s efforts to regulate PFAS at the Corporate Environmental Lawyer blog.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On May 18, 2022, U.S. EPA updated its Regional Screening Level tables to include five new per- and polyfluoroalkyl substances (PFAS). The five new PFAS compounds added to the RSL tables are hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA – sometimes referred to as GenX chemicals), perfluorooctanesulfonic acid (PFOS), perfluorooctanoic acid (PFOA), perfluorononanoic acid (PFNA), and perfluorohexanesulfonic acid (PFHxS). U.S. EPA added its first PFAS substance, PFBS or perfluorobutanesulfonic acid, to the RSL tables in 2014 and updated that listing in 2021 when U.S. EPA released its updated toxicity assessment for PFBS.
The RSLs are risk-based screening values for residential and industrial soils and tap water that U.S. EPA relies upon to help determine if remediation is necessary. Although U.S. EPA is quick to point out that the RSLs are not cleanup standards, regulators at both the state and federal levels rely on these RSLs to drive decision-making at contaminated sites. The regulators also rely on these RSLs notwithstanding that U.S. EPA has yet to officially designate any PFAS as a CERCLA hazardous substance or RCRA hazardous waste (although efforts are ongoing on both fronts--CERCLA hazardous substances / RCRA hazardous wastes).
U.S. EPA set the screening levels for PFOA, PFOS, PFNA, and PFHxS based on the Minimal Risk Levels from the Agency for Toxic Substances and Disease Registry’s toxicological profiles. The screening level for HFPO-DA was set based on a final, peer-reviewed toxicity value. For example, the screening level for PFOS is set at 38 parts per trillion for tap water and 1.6 parts per million for industrial soils and the screening level for PFOA is set at 60 parts per trillion for tap water and 2.5 parts per million for industrial soils
As we await further U.S. EPA action with respect to regulating PFAS under RCRA and CERCLA, it is interesting to note that U.S. EPA is currently engaged in a significant information gathering exercise related to historical PFAS use. Relying on its authority under CERCLA Section 104(e), U.S. EPA has recently issued scores of information requests seeking information regarding facilities’ past PFAS uses and practices. The use of these information requests is consistent with the statements in U.S. EPA’s 2021 PFAS Roadmap where U.S. EPA indicated that it intended to rely on its various enforcement tools to identify and address PFAS releases.
We will continue to provide timely updates on PFAS-related issues at the Corporate Environmental Lawyer blog.
Since early 2021, the SEC has emphasized that ESG-related issues are important to investors and a key SEC disclosure and enforcement priority. Although the agency’s heightened focus on these issues led to the recent proposal for new climate disclosures, the SEC also has made clear that it would seek to bring cases under existing law and not wait for new rules to be passed.
The reality that the SEC Enforcement Division is on the ESG beat was reinforced late last month, when the Climate and ESG Task Force filed charges against a Brazilian mining company – Vale, SA. Vale describes itself as the world’s largest producer of iron ore, pellets, and nickel. The case stems from an investigation opened after one of the company’s dams collapsed, causing over 200 deaths and dramatic environmental damage. In its complaint, the SEC alleged that Vale made misstatements about its dam's safety and engaged in deceptive conduct that concealed it had committed misconduct in obtaining required certifications related to dam safety. After the SEC filed action, Vale indicated that it denied the allegations in complaint and intended to defend the action.
The SEC’s approach to the Vale litigation provides a roadmap for public companies to consider how ESG-related disclosures and statements will be scrutinized when the company is impacted by adverse events that are ESG-related. It illustrates that companies should be prepared for the SEC to closely scrutinize statements about risk in ESG disclosures such as sustainability reports or climate impact analyses. This alert discusses the SEC’s case against Vale and real-world “lessons learned” for all public companies when publishing materials about ESG, climate, and operational risks.
Summary of the SEC’s Allegations in Complaint against Vale
The SEC’s complaint alleges that Vale failed to make appropriate disclosures in the lead-up to an environmental disaster that had a direct impact on its investors’ bottom line. The January 25, 2019 collapse of Vale’s Brumadinho dam was described by the SEC as “one of the worst mining disasters in history,” releasing “nearly 12 million cubic tons of mining waste... – a toxic sludge of iron, manganese, aluminum, copper, and other rare earth minerals – in a deluge rushing downhill toward the Paraopeba River.” Compl. ¶2. The disaster killed 270 people “while also poisoning the Paraopeba River and its tributaries and causing immeasurable environmental, social, and economic devastation.” Id. As a result of the dam’s collapse, both the company’s financial performance and stock performance were impacted. In the earnings released the quarter after the dam’s collapse, Vale “reported quarterly loss and negative earnings (EBITDA) for the first time in its history.” Compl. ¶212. Vale’s corporate credit rating was also downgraded to junk status. In the aftermath of the dam’s collapse, the SEC also alleged that Vale’s American Depository Shares “fell by nearly 25%, wiping out approximately $4.4 billion in market capitalization.” Id.
The SEC alleged that “Vale and its executives knowingly or recklessly engaged in deceptive conduct and made materially false and misleading statements to investors about the safety and stability of its dams.” Compl. ¶¶277, 280, 283. As is typical, the SEC complaint details the key section of the defendant’s periodic statements that it alleged were false and misleading. Compl. at ¶284. In addition, the SEC included allegations that reflected its investigation had focused closely on the company’s ESG-related disclosures. The complaint includes false and misleading statements in Vale’s sustainability reports and “ESG Webinars” posted on the company’s public website. E.g., Compl. ¶¶ 23, 29, 245.
In alleging fraud, the SEC emphasized that Vale had committed misconduct in connection with obtaining dam stability declarations required by local law. Because of past disasters in Brazil, the company was required to obtain stability declarations from auditors to certify that auditor had approved the mine’s safety. Compl. ¶ 1. To obtain the required certifications, the SEC alleged that Vale “concealed material information from its dam safety auditors,” and “concealed material and “removed auditors and firms who threatened Vale’s ability to obtain [the required] dam stability declarations.” Id. The SEC also alleged that it “removed auditors and firms who threatened Vale’s ability to obtain dam stability declarations.” Id.
Although statements to auditors and local regulators are not typically themselves actionable under the federal securities laws, the SEC used this misconduct to support its argument that Vale defrauded investors. First, it alleged that Vale described the stability declarations that it had obtained without also disclosing the circumstances in why it procured these certifications. Second, in pursuing its case, the SEC also used this misconduct to prove the company’s executives acted in bad faith. Consistent with this, the SEC emphasized Vale’s “deceptive conduct” in connection with the audit through the complaint.
In framing this case as about ESG misstatements, the SEC was able to note that Vale itself had highlighted dam safety as an important ESG issue. Undoubtedly, Vale’s own ESG characterization of its publications addressing dam safety made them a target for an enforcement analysis with an ESG lens. For example, in 2017, in the last Sustainability Report issued before the Brumadinho dam collapse, Vale identified “priority topics” in its “materiality matrix,” which included commitments concerning “health and safety of the workforce and of the community” and “management of social, environmental and economic impacts,” as well as “management of mineral waste” and “management of business and operational risks.” Vale publicly considered “sustainability” to include many aspects of its operations, including dam safety. 2017 Sustainability Report, pp. 11-12. Indeed, in the 2019 Sustainability Report, issued in the year after the dam collapse, Vale described the consequences of the dam collapse using ESG-type language, “the rupture...cannot be understood only in light of the survey of its impacts on the population and the environment. For the company, these situations impacted the human rights of the people affected, residents and local workers.” 2019 Sustainability Report, p. 14. Thus, Vale’s emphasis on ESG issues in its framing of its operations and goals apparently gave the SEC an opportunity to focus on “ESG disclosures” as part of its Climate and ESG Task Force enforcement initiative.
Potential Implications and Lesson Learned
The SEC emphasized that the case against Vale was part of its focus on ESG-related issues. In the press release announcing the filing of the action against Vale, Gurbir Grewal, the Director of the Enforcement Division, emphasized the SEC’s consistent theme that ESG statements are material to investors. Grewal said, “Many investors rely on ESG disclosures like those contained in Vale’s annual Sustainability Reports and other public filings to make informed investment decisions,” and he stated that the company’s misstatements “undermined investors’ ability to evaluate the risks posed by Vale’s securities.”
The SEC’s focus on ESG and climate issues has increased the importance of ensuring the accuracy of disclosures (and omissions) on those issues. Although the Vale case represents a unique set of facts, it provides an important reminder on importance of carefully vetting ESG-related disclosures. Such ESG disclosures should be considered not just a marketing initiative but should be scrutinized carefully for accuracy and proper caveats. In practice, this means that companies should ensure that it has backup for each statement made. In addition, companies should be mindful of how “worst case” scenarios or “black swan” events could impact their disclosures.
The case also highlights that the SEC will investigate a potential defendant’s interactions with regulators in evaluating fraud charges. If it finds evidence of misconduct, the SEC could cite it to prove intent to deceive or to allege that the lies to investors were designed to conceal misconduct.
This reinforces the importance of making sure communications with such regulators are carefully vetted. In the US, for example, companies often disclose information about their workplace safety and environmental operations. A serious workplace or environmental accident resulting in a material impact could lead to an SEC enforcement action led by its Climate and ESG Task Force, in addition to any fines, penalties, or damages resulting from the accident itself.
The Enforcement Division’s focus on ESG-related issues is likely to continue. As detailed above, the SEC’s action against Vale provides a roadmap for how they will approach these issues and this framework can help companies better prepare for this scrutiny.
Law Clerk Claudia M. Diaz-Carpio is a contributing author to this client alert.
Vermont Joins Growing Number of States Allowing Medical Monitoring for Alleged Exposure to Chemicals
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On April 21st, Vermont Governor Phil Scott signed into law Senate Bill 113 that provides a cause of action for medical monitoring for individuals exposed to toxic chemicals. The new law specifically provides persons without a present injury or disease with a cause of action for medical monitoring if the following conditions are demonstrated by a preponderance of the evidence:
- Exposure to a toxic substance at a rate greater than the general population;
- The exposure is a result of tortious conduct of the defendant;
- As a result of the exposure, plaintiff has suffered an increased risk of contracting a serious disease;
- The increased risk makes it medically necessary for plaintiff to undergo periodic medical examinations different from that prescribed for the general population; and
- Monitoring procedures exist that are reasonable in cost and safe for use.
The bill also provides for an award of attorneys’ fees and other litigation costs.
The new law comes on the heels of a Vermont federal court's approval of a $34 million dollar class action settlement relating to alleged PFAS exposures that included a $6 million dollar medical monitoring fund.
With its new law, Vermont joins Arizona, California, the District of Columbia, Florida, Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Utah and West Virginia as states that specifically allow lawsuits seeking reimbursement for medical monitoring costs in the absence of present injury or disease. However, unlike these other states where the right to medical monitoring is a right recognized by the courts, Vermont is one of first states in the nation to provide that right via statute. Other states may well follow Vermont’s lead and there have been ongoing albeit unsuccessful efforts to create a federal cause of action for medical monitoring for exposure to certain toxic chemicals at the federal level.
We will continue to provide updates on federal and state efforts to codify the ability to bring claims seeking medical monitoring relief at the Corporate Environmental Lawyer blog.
By Connor S.W. Rubin
The Russian invasion of Ukraine has led to over 11 million people fleeing their homes, and 5 million who have reportedly left Ukraine – a staggering number for a conflict that began in late February. However, while the war in Ukraine is one of the latest events causing a surge of refugees, those fleeing Russian aggression are by no means alone. As of the most recent data from the United Nations High Commissioner on Refugees (“UNHCR”), which counts until mid-2021, there were 20,835,367 people qualified as refugees under the UNHCR’s mandate – an uptick from the 20,661,855 recorded in 2020. Additionally, the UNHCR tracked 50,872,901 “internally displaced persons of concern” during the same period in 2021.
These numbers reflect the staggering impact of human conflict and economic instability; however, they do not show the full impact of human activity. The term “refugee” has a specific definition, laid out in the 1951 Convention Relating to the Status of Refugees and its 1967 Protocol (together “the Convention”). The definition includes any person who crosses a border “owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion.” That definition, written 24 years before Wallace Broecker first put the term “global warming” into the public domain, does not include those fleeing climate disasters in its definition. While recent legal guidance from the UNHCR notes that communities impacted by climate change “may be exposed to a risk of human rights violations that amount to persecution within the meaning of the 1951 Convention” due to limitations on “access to and control over land, natural resources, livelihoods, individual rights, freedoms and lives”, impacts of climate change alone do not qualify someone fleeing their homeland as a refugee. This is because fleeing formerly arable land that no longer sustains crops due to gradual desertification or fleeing cities that have become unlivable due to flooding, fires, or other extreme events do not inherently create “a well-founded fear of being persecuted.”
Is it time for an update to the definition? Some commenters believe so. According to the World Bank, by 2050 over 143,000,000 people could be intra- or internationally displaced from Sub-Saharan Africa, South Asia, and Latin America by climate change. This is roughly equivalent to the populations of California, Texas, Florida, New York, Pennsylvania, Illinois, and Tennessee combined. Without changes to how we view refugees, many of these people may be forced from the areas they’ve lived for generations without any legal status or protections. Advocates who support such changes argue that the current definition of “refugee” under international law fails to include many people forced to flee their home for reasons that fit the spirit of refugee law, but not the strict limitations imposed by the 1951 Convention. The (aptly named) advocacy group “Climate Refugees” gives examples of hypothetical cases, including “the Bangladeshi family displaced across borders by a disaster, the subsistence farmer in Chad with no option but to leave his country because he lacks water for farming, or a mother forced to flee her country because of a climate change-induced resource war.” Such displaced people fall into the goals as stated in the preamble of the 1951 Convention that all people should be able to “enjoy fundamental rights and freedoms without discrimination.” As further articulated by Andrew Schoenholtz in the Chicago Journal of International Law, while “some individuals displaced by natural disasters and climate change may be ‘persecuted’ in connection with a characteristic protected by the Refugee Convention, the vast majority of these newest forced migrants will need new norms developed to address their unique situation.”
Other (though less ubiquitous) compacts or treaties such as the 1969 Convention Governing the Specific Aspects of Refugee Problems in Africa, by the Organisation for African Unity – subsequently adopted by the African Union (“the OAU Convention”) and the 1984 Cartagena Declaration have expanded the definitions of “refugee”, but these may also be inadequate for what advocates seek. The 1969 OAU Convention was organized as many African states were either newly freed from colonialism, or else still fighting for freedom. As such, the definition of refugee was expanded to include “every person who, owing to external aggression, occupation, foreign domination or events seriously disturbing public order in either part or whole of his country of origin or nationality.” The “events seriously disturbing public order” could likely be found to include natural disasters but may still not be fully inclusive of climate change’s pernicious, but slower-acting changes. Further, the requirement of “serious” disturbance of the public order may require large-scale disorder, which may not be present in each circumstance. The Cartagena Convention is a non-binding regional instrument signed by 10 Latin American nations. The definition of refugee is like that found in the OAU Convention’s and includes “persons who have fled their country because their lives, security or freedom have been threatened by generalized violence, foreign aggression, internal conflicts, massive violation of human rights or other circumstances which have seriously disturbed public order.” These two instruments are uniquely broad in their definition, and even they may not include the full sum of those advocates seek to include in a new definition of “climate refugee.”
However, that may not be the case for long. On February 4, 2021, President Biden signed Executive Order 14013 entitled Rebuilding and Enhancing Programs to Resettle Refugees and Planning for the Impact of Climate Change on Migration. This order required the National Security Advisor and Secretaries of State, Defense, Homeland Security, the Director of USAID, and the Director of National Intelligence to “prepare and submit … a report on climate change and its impact on migration, including forced migration, internal displacement, and planned relocation.” That report, released in October of 2021, advocates for an interagency working group to address growing climate migration and its effects, and an expansion of the use of Temporary Protected Status to help resettle those impacted most severely by climate disasters. While stopping short of what some advocates hoped for in terms of seeking to declare climate refugees protected, the report at least shows a willingness to substantively engage in the effects of climate change and its role in global movement.
As the world grapples with how to prevent climate change, and increasingly turns to how to adapt to the effects of climate change, climate refugees will continue to be a growing problem around the world. Addressing their legal status is just one step in a complex and quickly evolving landscape.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On the 60th anniversary of the publication of Rachel Carlson’s groundbreaking book “Silent Spring”, the world continues to struggle to manage the human health and environmental risks associated with newly discovered emerging contaminants. Silent Spring focused on the challenges associated with managing the risks associated with pesticides (and more specifically DDT), and even today, many of the largest personal injury verdicts are associated with alleged exposure to pesticides.
Over the many years since Silent Spring, numerous contaminants have moved through the emerging contaminant life cycle, including asbestos, dioxins, PCBs, MTBE, BPA, 1,4-dioxane, and most recently, per- and polyfluoroalkyl substances (PFAS) (although PFAS seems stuck in the middle of the life cycle).
The life cycle journey of emerging contaminants has been influenced significantly by our improved ability to understand the potential impacts of these emerging contaminants on human health and the environment. As new contaminants are identified, resources are devoted to better understanding the potential environmental and health risks associated with these contaminants and regulations generally evolve to mitigate identified risks. In response to increased regulatory pressure, industry’s use of chemicals evolves and the risks are mitigated. Of course, industry’s use of these chemicals also evolves and is influenced by lawsuits when the regulations and/or the enforcement of the regulations lags.
In addition to improved understanding of the risks posed by some of these emerging contaminants, the fact that we are able to measure smaller and smaller quantities of these contaminants also impacts the life-cycle journey of these emerging contaminants. When I started practicing environmental law in the dark ages, contaminants in soil and groundwater were measured in parts per thousand. As science evolved to detect lower and lower levels, regulatory levels moved from parts per million to parts per billion, and then parts per trillion, and PCBs are now regulated in parts per quadrillion. As detection levels drop, the number of new emerging contaminants will increase and the life-cycle journey for each of these contaminants begins.
A lot can be said for the progress that has been made since the summer of 1962. Although some will argue it should still be faster, the time from discovery of the contaminant to identification of risks and regulation of these identified risks has greatly improved since the 1960s. This is due in part to the fact society has a much lower tolerance for risks posed by emerging contaminants and is much quicker to demand a response from the regulators now than was the case in the 1960s when environmental laws in the United States were in their infancy. A reformed TSCA is better situated to address both environmental and health and safety impacts of chemicals (both newly manufactured chemicals and new chemical uses). U.S. EPA, working in collaboration with manufacturers, implemented a global stewardship program to eliminate the manufacture and import of long-chain PFAS compounds. In October 2021, U.S. EPA announced its PFAS Strategic Roadmap intended to implement a whole-of-agency approach to addressing PFAS.
As our understanding of risks evolves and our detection levels drop, it is inevitable that we will continue to identify new emerging contaminants that need to be regulated. However, I think Rachel Carlson would be proud of the progress we have made and continue to make to ensure that the world is a safer place for everyone.
As we near Earth Day 2022, the United States may be headed toward a profound change in the way EPA and similar administrative agencies regulate the complex areas of environmental law. EPA began operating more than 50 years ago in 1970, and has been tasked with promulgating and enforcing some of the most complex regulations on the books. From the Clean Air Act to the Clean Water Act; to CERCLA and RCRA and TSCA; and everything in between.
EPA has penned voluminous regulations over the past 50 years to implement vital environmental policies handed down from Congress—to remarkable effect. While there is certainly progress left to be done, improvements in air and water quality in the United States, along with hazardous waste management, has been impressive. For example, according to EPA data, from 1970 to 2020, a period in which gross domestic product rose 272% and US population rose 61%, aggregate emissions of the six criteria pollutants decreased by 78%.
For the past 50 years the environmental administrative law process has worked mostly the same way: First, Congress passes a law covering a certain environmental subject matter (e.g., water quality), which provides policy objectives and a framework of restrictions, prohibitions and affirmative obligations. Second, EPA, the administrative agency tasked with implementing the environmental law, promulgates detailed regulations defining terms used in the law and explaining in a more comprehensive fashion how to comply with the obligations outlined in the statute. Depending on the subject matter being addressed, Congress may leave more details up to EPA, as the subject matter expert, to fill in via regulation. In some instances, there is a third step, where additional authority is delegated to the states and tribes to implement environmental regulations at the state-level based on the framework established by Congress and EPA. Occasionally someone thinks EPA overstepped its authority under a given statute, or failed to act when it was supposed to, and litigation follows to correct the over or under action.
Currently, this system of administrative law is facing challenges from parties that believe administrative agencies like EPA have moved from implementing Congress’s policy to setting their own. The most significant such challenge has come in the consolidated Clean Air Act (“CAA”) cases pending before the U.S. Supreme Court, West Virginia v. EPA, Nos. 20-1530, 20-1531, 20-1778, 20-1780. In West Virginia v. EPA, challengers object to the Obama-EPA’s Clean Power Plan (“CPP”), which used a provision in the New Source Performance Standards (“NSPS”) section of the CAA to set greenhouse gas emission standards for existing power plants. The biggest issue with the CPP, according to challengers, is that the new standards would require many operators to shut down older coal-fired units and shift generation to lower-emitting natural gas or renewable units. Challengers, which include several states, power companies and coal companies, argue the CPP implicates the “major questions doctrine” or “non-delegation doctrine”. These doctrines provide that large-scale initiatives that have broad impacts can't be based on vague, minor, or obscure provisions of law. Challengers argue that the NSPS provision used as the basis for the CPP is a minor provision of law that is being used by EPA to create a large-scale shift in energy policy. EPA argues that, although it is currently revising its greenhouse gas regulations, the actions taken in the CPP were authorized by Congress in the CAA, are consistent with with the text of the CAA as written, and do not raise the specter of the major questions or non-delegations doctrines.
While this case will certainly dictate how EPA is permitted to regulate greenhouse gases under the CAA, it will likely have broader impacts on administrative law. On the one hand, the Court may issue a narrow opinion that evaluates the CPP based on the regulations being inconsistent with the text or intent of the CAA. On the other hand, the Supreme Court may issue a broader opinion that invokes the major questions or non-delegation doctrines to hold that based on the significant-impacts of the regulation, it is an area that should be governed by Congress, not an administrative agency. If the Supreme Court takes the latter route, it could set more limits on Congress’s ability to delegate regulatory authority to administrative agencies like EPA.
Indeed, in the Supreme Court’s recent decision on the OSHA emergency temporary standard on employer vaccine or test mandate (“the OSHA ETS”), Ohio v. Dept. of Labor, et al., 595 U.S. ____ (2022), the Court struck down an administrative regulation in a preview of what might be coming in the EPA CAA case. As everyone knows by now, the Supreme Court struck down the OSHA ETS, holding it was an overstep of the agency’s authority to regulate safety issues in the workplace. The Court’s opinion focused on the impact of the OSHA ETS—that it will impact 84 million employees and it went beyond the workplace—instead of the statutory language. The Court stated, “[i]t is telling that OSHA, in its half century of existence, has never before adopted a broad public health regulation of this kind—addressing a threat that is untethered, in any causal sense, from the workplace.” Slip op. at 8.
Justices Thomas, Alito and Gorsuch invoked the major questions doctrine in their concurring opinion, stating that Congress must speak clearly if it wishes to delegate to an administrative agency decisions of vast economic and political import. In the case of OSHA and COVID-19, the Justices maintained that Congress did not clearly assign to OSHA the power to deal with COVID-19 because it had not done so over the past two years of the pandemic. Notably, the fact that when Congress passed the Occupational Safety and Health Act, it authorized OSHA to issue emergency regulations upon determining that “employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful” and “that such emergency standard[s] [are] necessary to protect employees from such danger[s]”, was not a sufficient basis for the Court or the three consenting Justices. In their view, in order to authorize OSHA to issue this vaccine or test mandate, Congress had to do more than delegate to OSHA general emergency powers 50 years ago, but instead would have had to delegate authority specific to the current pandemic.
Applying this logic to EPA and the currently-pending CAA case, Justices Thomas, Alito and Gorsuch may conclude that provisions of the CAA written 50 or 30 years ago, before climate change was fully on Congress’s radar, should not be used to as the basis for regulations that impact important climate and energy policy. Of course, many questions remain: Will a majority of the court adopt this view, and how far they will take it? If Congress can’t delegate climate change and energy policy, what else is off the table—water rights? Hazardous waste? Chemical management? If Congress can’t delegate to EPA and other administrative agencies at the same frequency as in the past, how will Congress manage passing laws dealing with complex and technical areas of law?
All of these questions and more may arise, depending on how the Supreme Court rules in West Virginia v. EPA. For now, we are waiting to see what will happen, in anticipation of some potentially significant changes on the horizon.
 Jenner & Block filed an Amicus Curiae brief in this case on behalf of Former Power Industry Executives in support of EPA.
By Gabrielle Sigel, Co-Chair, Environmental and Workplace Health and Safety Law Practice
On this 52nd anniversary of Earth Day, I am not writing yet another, typically not very funny, riff on one of Shakespeare’s most famous lines. Instead, I am inspired by one of the most popular of our blogs, written in 2017 by our talented former partner, E. Lynn Grayson, “Imagine a Day Without Water.” To start our Earth Week series of daily blogs by our firm’s EHS department, I offer words of hope and gratitude for the vast amount of work that has been done to improve and protect the environment – work done by lawyers, scientists, policy makers, and members of the public, to name a few.
Imagine what lawyers and scientists faced in 1970, the year of the first Earth Day. There was oppressive soot and polluted air throughout urban and industrial areas in the United States. The Cuyahoga River was so blighted it had caught fire. Although there was a new federal Environmental Protection Agency and two new environmental statutes – the National Environmental Policy Act and the Clean Air Act, one of the most highly complex and technical statutes ever written – both needed an entire regulatory structure to be created in order to be operationalized and enforced. This foundational work had to be done when there was not even an accepted method for determining, much less regulating, environmental and public health risk. Then two years later, in 1972, a comprehensively overhauled Clean Water Act was enacted, followed within the next decade by TSCA, RCRA, and CERCLA, to address the consequences of past waste and chemical use, and to control their future more prudently. Other laws were also passed in that time period, including the Safe Drinking Water Act and the Endangered Species Act.
Although Earth Day was created in the U.S. – the idea of Senator Gaylord Nelson (WI-D) and supported by Representative Pete McCloskey (CA-R) (both lawyers) and grass roots organizers – environmental consciousness also was growing worldwide. The 1972 Stockholm Declaration, from the first UN Conference of the Human Environment, recognized the importance of environmental protection amid the challenge of economic disparities. That work, including of the United Nations Environment Programme, led to the 1992 “Earth Summit” issuing the Rio Declaration on Environment and Development, which adopted a focus on sustainable development and the precautionary approach to protecting the environment in the face of scientific uncertainty, and creating the United Nations Framework Convention on Climate Change, which itself led to the 1997 Kyoto Protocol and the 2015 Paris Agreement, as well as other global efforts focusing on climate change and resource conservation.
Thus, within a split-second on our earth’s timeline, humans were able to tangibly improve and focus attention on the environment, through laws, agreements, governmental and private commitments, and public support. I note these developments, which were stimulated by lawyers on all sides, not to naively suggest that the global climate change, water accessibility, toxic exposure, and other environmental challenges that we face today can easily be solved, nor do I suggest that only lawyers can provide the solution. Instead, let’s take hope from the fact that in fewer years than the average for human life expectancy, there have been significant environmental improvements in our air, land, and water, and our collective focus on preserving the planet has been ignited.
These past efforts have improved the environment – not perfectly, but demonstrably. The legal structure that helped make these improvements happen has worked – not perfectly, but demonstrably. Hopefully, we will continue to work on these issues, despite their seeming intractability, under a system of national laws and global agreements. The alternative is too painful to contemplate.
Closing on a personal note, our firm’s Environmental Law Practice lost one of the best environmental lawyers in the profession, when Stephen H. Armstrong passed away last week. Steve was one of the first in-house environmental counsel I had the opportunity to work with when I began my focus on environmental law in the 1980s. He demonstrated how to respect the science, embrace the legal challenges, fight hard for your client, and always act with integrity. Although I was a young woman in a relatively new field, he consistently valued my opinions, supported my professional development, and with his deep, melodious laugh and sparkle in his eye, made working together feel like we shared a mission. And a ”mission” it was for him; I have never met any lawyer who cared more or wrestled harder about their clients’ position, while always undergirded by a deep reverence for doing the right thing. Once he joined our firm more than a decade ago, he continued being a role model for all of us. Our firm’s Environmental Law Practice, and all those who worked with him, will miss having him as a devoted colleague, friend, and mentor. Our earth has been made better for his life on it.
“The first thing we do, let’s kill all the lawyers.” William Shakespeare, Henry VI, Part 2, Act Iv, Scene 2 (circa 1591).
U.S. EPA’s Addition of 1-BP to CERCLA Hazardous Substance List Likely Precursor to Similar Actions on PFAS
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On April 8, 2022, U.S. EPA added the industrial solvent 1-bromopropane (1-BP) to its list of CERCLA hazardous substances; this listing was triggered by U.S. EPA’s decision to add 1-BP to the Clean Air Act’s list of hazardous air pollutants in January 2022. The addition of 1-BP to the Clean Air Act’s list of hazardous air pollutants may have come as a bit of a surprise since U.S. EPA hasn’t added a new pollutant to the hazardous air pollutant list since the list was originally promulgated in 1990. However, once on the Clean Air Act list of hazardous air pollutants, the pollutant automatically falls with the CERCLA definition of “hazardous substances”. In addition to adding 1-BP to the list of hazardous substances in Table 302.4 in the Code of Federal Regulations, U.S. EPA set a CERCLA reportable quantity for 1-BP at one pound (the CERCLA statutory default).
The manner in which U.S. EPA treats 1-BP at CERCLA sites may be illustrative as to how U.S. EPA will treat PFOS and PFOA, two PFAS compounds that are currently under consideration for listing as CERCLA hazardous substances. Will U.S. EPA add 1-BP to the CERCLA required analyte list at all Superfund sites or will U.S. EPA adopt a more selective approach by relying on Toxics Release Inventory (TRI) data to identify nearby sites or manufacturing facilities that may have used the industrial solvent? The more likely scenario is that U.S. EPA will utilize some screening criteria to determine whether to sample for 1-BP but how wide of a 1-BP net that U.S. EPA decides to cast remains to be seen.
1-BP is also a volatile substance so U.S. EPA could also rely on the new listing to reopen and investigate sites for potential vapor intrusion concerns. However, it is unlikely that a site would be reopened solely on the basis of 1-BP vapor intrusion risks.
We will continue to track how U.S. EPA elects to address 1-BP at Superfund sites in an effort to gain insight as to how U.S. EPA may approach future hazardous substance designations at the Corporate Environmental Lawyer.
The SEC’s Proposed Climate-Related Disclosure Rules: Are They the “Core Bargain,” a “Watershed Moment,” or “Undermin[ing] the Existing Regulatory Framework”?
Earlier this week, the Securities and Exchange Commission (“SEC”) approved the issuance of proposed new disclosure rules [cited as “PR, p. __”], titled The Enhancement and Standardization of Climate-Related Disclosures for Investors, that would require both domestic and foreign public companies to provide certain climate-related information in their registration statements and annual reports and certain ongoing updates in their quarterly reports. The long-awaited proposed rules are the SEC’s most direct move yet to transform disclosure requirements related to Climate and ESG issues and passed only after what appears to have been significant internal debate. The SEC’s lone Republican Commissioner, Hester M. Peirce, dissented from the proposed rule, and the Chair and the other two Democratic commissioners released statements in support of the proposed rules. Their accompanying statements previewed the wide range of debate—in the courts, political sphere, and public discussion—destined to accompany these rules through the likely lengthy administrative process before (or if) they become final.
This Client Alert previews the disclosure obligations for public companies if the proposed rules are ultimately adopted, summarizes the ongoing debate about the wisdom of the proposed changes and previews the potential legal challenges to the proposed rule. For additional details regarding the proposed amendments, the SEC has posted a press release summarizing the proposal and public comment period, a fact sheet, and the text of the proposed amendments.
I. Summary of Proposed Disclosure Requirements
The SEC emphasized that its goal in proposing the rules was to enhance and standardize climate-related disclosures for investors. To do so, the SEC would impose a number of new and enhanced disclosure requirements for public companies. These new proposed disclosure requirements include information about a company’s climate-related risks (and opportunities) that are reasonably likely to have a material impact on its business or consolidated financial statements, as well as disclosure of the company’s Scopes 1 and 2 (direct and indirect) greenhouse gas (“GHG”) emissions, regardless of their materiality, and Scope 3 GHG emissions if material or relied upon by the company. The SEC also proposed new rules that would require companies to disclose certain climate-related financial metrics in their audited financial statements and information about the company’s internal governance with respect to climate-related issues.
A. Climate-Related Disclosures
The proposed new Item 1500 of Regulation S-K would require registrants to disclose certain climate-related information ranging from governance, business strategy impact and risk management of climate-related risks, to GHG emissions and climate-related goals and targets. “Climate-related risks” are defined as “the actual or potential negative impacts of climate-related conditions and events on a registrant’s consolidated financial statements, business operations, or value chains, as a whole.” PR, p. 61. Those risks include both acute and chronic “physical risks,” such as extreme weather events and longer-term decreased availability of water supply, as well as “transition risks,” defined as “risks related to a potential transition to a lower carbon economy.” PR, pp. 61-62. The disclosure required by Item 1500 of Regulation S-K must be included in the domestic company’s registration statements and annual report on Form 10-K, and material updates are required to be provided in Form 10-Q. Broadly, the categories of required information include:
• Governance and oversight: Board of directors’ oversight of climate-related risks and, if applicable, opportunities; management’s role in assessing and managing climate-related risks and if applicable, opportunities.
• Strategy, business model, and outlook:
- Climate-related risks (and opportunities) reasonably likely to have a material impact, including on the company’s business or consolidated financial statements and business activities, which may manifest over the short, medium, and long term, with each registrant defining how many years are encompassed within each of those terms.
- Actual and potential impacts of any climate-related risks on the company’s strategy, business model, and outlook, including the time horizon of such impact.
- Whether and how any such impacts are considered as part of the company’s business strategy, financial planning, and capital allocation.
- Whether and how any identified climate-related risks have affected, or are reasonably likely to affect, the company’s consolidated financial statements.
- Information on the company’s internal carbon price, if available, but the use of a carbon price is not required.
- Resilience of the company’s business strategy considering potential future changes in climate-related risks. If the registrant utilizes a scenario analysis to assess the impact of climate-related risks on its business and financial statements, and to support the resilience of its strategy and business model, companies must disclose the scenarios considered, providing both qualitative and quantitative information.
• Risk management:
- The company’s processes for identifying, assessing, and managing climate-related risks (and opportunities).
- Whether and how any such processes are integrated into the company’s overall risk management system or processes.
- The company’s transition plan as part of its climate-related risk management strategy, if applicable.
• Targets and goals: If the company has set any targets or goals related to GHG emissions reduction, or any other climate-related target or goal, it must provide information on the scope of activities and emissions included in the target, unit of measurement, time horizon, baseline targets, interim targets, and strategy for meeting the target or goal.
- If carbon offsets or renewable energy credits (“RECs”) have been used as part of the company’s plan to achieve climate-related targets or goals, the company must disclose certain information including carbon reduction from such offsets or RECs and related costs.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On March 22, 2022, U.S. EPA released a new web tool designed to ensure that information regarding environmental violations and enforcement actions is more readily available to the public. The new tool, called ECHO Notify, allows users to sign up for weekly emails when new information is available with respect to violations of environmental statutes or enforcement actions in a specific geographic area or with respect to a particular facility.
ECHO Notify provides information on both state and federal enforcement and compliance activities under the following programs: Clean Air Act (stationary sources), Clean Water Act (point sources), Resource Conservation and Recovery Act (hazardous waste handlers), and Safe Drinking Water Act (public water system). The tool provides U.S. EPA-specific enforcement-related information with respect to other environmental statutes.
In a press release that accompanied the release of the new tool, U.S. EPA Administrator Michael Regan stated that “EPA is committed to empowering communities with the information they need to understand and make informed decisions about their health and environment.” Administrator Regan went on to state “EPA has developed ECHO Notify so that finding updates on environmental enforcement and compliance activities is as easy as checking your email.”
This new tool is another example of U.S. EPA’s continued focus on environmental justice communities and its desire to ensure that information regarding environmental compliance and enforcement activities is readily available to those communities. We will continue to provide updates regarding U.S. EPA initiatives at the Corporate Environmental Lawyer.
SEC’s Upcoming Proposed Rule for Climate Disclosures: Will It Be as “Decision-Useful” as the Ingredients Label for “Fat-Free Milk”?
The Securities and Exchange Commission (“SEC”) is meeting this Monday, March 21, to determine whether to propose amendments to existing law to “enhance and standardize registrants’ climate-related disclosures.” The SEC’s expected proposed rule is more than a decade in the making and would be the SEC’s most visible step yet to pursue disclosure improvements related to Climate and ESG issues. While speculation on what the SEC will announce runs rampant, the SEC itself has given a few clues as to what to expect. This article traces the history of the SEC’s focus on climate related disclosures and highlights the most important recent developments that could highlight a possible approach. As detailed below, the SEC’s goal is to making disclosures “consistent,” “comparable” and “decision-useful.”
The 2010 Guidance
In early 2010, the SEC issued “Guidance Regarding Disclosure Related to Climate Change.” This interpretive release advised companies of the “existing disclosure requirements” with respect to climate change. The guidance noted that while there were increasing legislative and executive actions with respect to climate, a registrant would be required to file would be governed existing rules and law. With respect to climate-related impacts, companies would be required to disclose “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.” The SEC recommended that companies consider the positive and negative impacts of US and international legislation, regulation, and accords and other legal, technological, political and scientific developments, as well as the physical impacts of climate change, such as severe weather events. The guidance concluded by referring further evaluation of this issue to the SEC’s Investor Advisory Committee.
Democratic Commissioners Call for Climate-Related Disclosure in 2019
The issue of mandated climate-related disclosures remained primarily on the sidelines until the two democratic commissioners, Robert J. Jackson Jr. and Allison Herren Lee, raised the issue in 2019. When the Commission as a whole proposed revisions to Regulation S-K (which requires disclosure of specific material, qualitative material) without addressing climate change, Jackson and Lee issued a statement making their views clear. The statement decried the revised amendment’s “absence of [guidance] on the topic of climate risk.” They concluded that “what is clear is that investors of all kinds view [climate] risk as an important factor in their decision-making process, and that “research shows that we are long past the point of being unable to meaningfully measure a company’s sustainability profile.”
The SEC’s Early 2021 Emphasis on Climate and ESG Issues
After becoming Acting Chair in January 2021, Lee continued to proactively seek additional climate-related disclosures. In February 2021, she directed the SEC staff to review climate-related disclosures, and then in March 2021, she announced a Climate and ESG Task Force as part of the Division of Enforcement to focus on material misstatements or omissions relating to climate risk disclosures, and “beyond climate,” on the “the broader array of ESG disclosure issues.” On March 15, 2021, Acting SEC Chair Lee issued a formal request for public comment on a potential rule, with fifteen “Questions for Consideration,” and soliciting comments on how the SEC can “best regulate climate change disclosure.”
Recent Developments Highlighting Possible Approach
The SEC’s request for comments generated over 6,000 comments (including many form letters that were re-submitted). In initial response to the public input, SEC Chair Gary Gensler stressed, in July 2021 and again in September 2021 and December 2021, that climate risk disclosures must be “consistent,” “comparable,” and “decision-useful,” including providing sufficient detail that the investor understands the bases for a company’s disclosure and for investment funds describing themselves as “sustainable” or “green.”
In September 2021, SEC staff in its Division of Corporation Finance published a sample letter that companies may receive based on existing rules and the 2010 Climate Change guidance. This letter would ask the receiving company to explain the lack of climate-related disclosure issues, such as:
- An explanation as to why the company provided a “more expansive disclosure in its corporate responsibility report” than in its SEC filings.
- The material effects of transition risks related to climate change.
- The effects of significant developments in international accords and federal and state legislation and regulation on the business.
- To the extent material, the indirect consequences of climate-related regulation or business trends.
- The material effect of physical effects of climate change, including severe weather and fires and water availability.
- The material effect of purchase or sale of carbon credits or offsets.
Most recently and perhaps most tellingly, Chairman Gensler’s March 3, 2022 appearance on his “Office Hours” YouTube video, explained that he wants investors to understand and be able to compare ESG disclosures as easily as a consumer in a grocery store can understand and compare the ingredients in different brands of fat-free milk. While over-simplifying the issues, the Office Hours video demonstrates that the Chairman is committed to his basic goal of “consistent,” “comparable,” and “decision-useful” disclosures regarding climate impacts. The March 21, 2022 meeting will demonstrate how close he came to these high aspirations.
EPA Proposes Hazardous Substance Facility Response Plan Regulations; Includes Climate Change and Environmental Justice Considerations
On March 11, 2022, the U.S. Environmental Protection Agency (“EPA”) announced it was proposing new regulations that would require certain facilities located close to navigable waters create and submit Facility Response Plans for worst case discharges of hazardous substances. These regulations would add to EPA’s existing regulations of worst case discharges of oil, which have been in place since 1994. Adding a new twist in these proposed regulations, EPA would grant Regional Administrators wide discretion to make the Facility Response Plan requirements mandatory at facilities that, in the Regional Administrator’s judgment, were vulnerable to climate change or potentially impacting an environmental justice community, even if the facilities are not near a navigable water.
The Clean Water Act (“CWA”) contains general spill response plan requirements, which require EPA to establish rules “to prevent discharges of oil and hazardous substances from vessels and from onshore facilities and offshore facilities, and to contain such discharges…” 42 U.S.C. § 1321(j)(1)(C). In response to this requirement of the CWA, EPA promulgated its Spill Prevention, Control, and Countermeasure (“SPCC”) Regulations, found at 40 C.F.R. part 112.
The proposed hazardous substance Facility Response Plan rules are being promulgated pursuant to Section 311(j)(5) of the Clean Water Act (CWA), a slightly more specific provision that was added to the CWA in 1990. Section 311(j)(5)(A) directs EPA to issue regulations that require certain facilities to prepare and submit to EPA “a plan for responding, to the maximum extent practicable, a worst case discharge, and to a substantial threat of such a discharge, of oil or a hazardous substance.” 42 U.S.C. § 1321(j)(5)(A)(i). Specifically, the CWA states that facilities covered by this requirement include, a facility “that, because of its location, could reasonably be expected to cause substantial harm to the environment by discharging into or on the navigable waters, adjoining shorelines, or the exclusive economic zone.” 42 U.S.C. § 1321(j)(5)(C)(iv).
In 1994, EPA promulgated regulations that require certain facilities that store and use oil to prepare and submit a Facility Response Plan. See 40 C.F.R. §§ 112.20-112.21. However, EPA never issued regulations requiring similar response plans for facilities storing hazardous substances. On March 21, 2019, several environmental groups (the Natural Resources Defense Council, Clean Water Action, and the Environmental Justice Health Alliance for Chemical Policy Reform) sued EPA alleging violations of the CWA and the Administrative Procedures Act for its failure to issue those regulations. The environmental groups and EPA entered into a consent decree on March 12, 2020, that resolved the lawsuit and required EPA promulgate hazardous substance response plan regulations by March 12, 2022.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
In connection with the release of its 2020 Toxics Release Inventory (TRI) National Analysis that evidenced a 10% decline in environmental releases of TRI chemicals between 2019 and 2020, U.S. EPA announced that it intends to initiate a rulemaking that will, among other things, remove the de minimis exemption for reporting the 172 per- and polyfluoroalkyl substances (PFAS) that were added to TRI by the 2020 National Defense Authorization Act.
The TRI analysis report noted that 38 facilities reported managing 800,000 pounds of PFAS in 2020 but only 9,000 pounds of PFAS were reported as having been released. In response to what U.S. EPA claims to be a “seemingly limited scope of PFAS reporting”, U.S. EPA stated that it intends to “use existing data to generate lists of potential productions and recipients of PFAS waste, and has contacted facilities with potential reporting errors, as well as those that were expected to report but did not.” In addition, U.S. EPA claims that “the elimination of the de minimis exemption will result in a more complete picture of [PFAS] releases and other waste management quantities for these chemicals."
The de minimis exemption, which allows covered facilities to disregard certain minimal levels of listed toxic chemicals in mixtures or trade name products, has been strongly criticized by a number of environmental groups. The de minimis level for perfluorooctanoic acid is 0.1% and for all other TRI-listed PFAS is 1.0%. Litigation is currently pending in the U.S. District Court for the District of Columbia challenging U.S. EPA’s inclusion of the de minimis PFAS reporting threshold and this rulemaking may be an effort by U.S. EPA to respond to that litigation.
We will continue to provide updates on U.S. EPA’s efforts to strip the de minimis TRI reporting exemption for PFAS as well as other PFAS-related issues on the Corporate Environmental Lawyer blog.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
In what could portend significant risk to the regulated community, a recent “overfiling” by U.S. EPA in connection with a Clean Air Act (CAA) settlement between the Louisiana Department of Environmental Quality (LDEQ) and a steel plant should at a minimum cause the regulated community to be cautious when entering into settlement agreements with state regulators. On January 24, 2022, U.S. EPA Region 6 filed a Notice of Violation (NOV) alleging that a steel plant in Louisiana was emitting excess hydrogen sulfide, sulfuric acid mist and sulfur dioxide in violation of the plant’s CAA Title V permit.
Back in October 2021, the Tulane Environmental Clinic had filed a formal request that U.S. EPA exercise its overfiling and supervisory authority pursuant to 42 U.S.C. § 7413(a)(a), (b), and (d) on the basis that the LDEQ settlement agreement imposed insufficient penalties and mitigation measures to ensure future compliance. It is interesting to note that the U.S. EPA NOV does not specifically reference the LDEQ settlement nor directly challenge its provisions. Moreover, the three pollutants identified in the NOV were not specifically called out in the LDEQ settlement, and, in fact, hydrogen sulfide and sulfuric acid mist are not currently part of the plant’s Title V permit.
However, it would be naïve to believe that U.S. EPA’s NOV is unrelated to the request filed by the Tulane Environmental Law Clinic. In fact, U.S. EPA held a number of meetings with the Tulane Environmental Law Clinic and other environmental groups following the overfiling request. U.S. EPA’s decision to overfile may be an indication of more aggressive enforcement oversight over state regulatory agencies, especially in situations involving vulnerable communities. As such, when evaluating whether to enter into settlements with state regulatory entities to address compliance issues with federal environmental statutes, companies should carefully consider the possibility of U.S. EPA overfiling, especially in situations where objections to the settlement have been raised by environmental groups, or in circumstances involving vulnerable communities.
We will continue to provide updates on U.S. EPA enforcement trends on the Corporate Environmental Lawyer.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
Over the past week, several new per- and polyfluoroalkyl substances (PFAS) have been added to California’s Proposition 65 list. In March 2021, California’s Office of Environmental Health Hazard Assessment (OEHHA) selected perfluorooctane sulfonate (PFOS) and its salt and transformation and degradation precursors for evaluation by California’s Carcinogenic Identification Committee (CIC). OEHHA also selected perfluoronanoic acid (PFNA) and perfluoroundecanoic acid (PFDA) for evaluation by California’s Reproductive Toxicant Identification Committee (DARTIC).
Several industry groups submitted comments in opposition to adding these PFAS chemicals to the Proposition 65 lists. For example, even though PFOS has been voluntarily phased out of production in the United States, the American Chemistry Council opposed listing PFOS as a carcinogen under Proposition 65, claiming that the available data doesn’t support a conclusion that PFOS presents a carcinogenic risk to humans.
Notwithstanding this industry opposition, on December 6, 2021, the CIC voted 8-2 with one abstention to add perfluorooctane sulfonate (PFOS) and its salt and transformation and degradation precursors to the Proposition 65 list of chemicals known to the State of California as causing cancer. It is important to note that PFOS had previously been on the Proposition 65 list due to its alleged reproductive toxicity.
On December 14, 2021, DARTIC voted to add PNFA to the Proposition 65 list of reproductive toxicants. However, DARTIC did not add PFDA to the list of reproductive toxicants. DARTIC relied in part on a recent assessment prepared by OEHHA that evaluated the reproductive effects of both PFNA and PFDA.
Unlike PFAS, these particular PFAS chemicals have not been phased out and are used as processing aids in fluoropolymer manufacturing as well as in certain cosmetic products. As such, the inclusion of these chemicals on the Proposition 65 list will trigger new warning obligations.
Once a chemical is added to the Proposition 65 list, companies have one year to provide the requisite Proposition 65 warnings and companies that fail to provide these warning are often the target of “claims” by private party Proposition 65 enforcers. It should also be noted that OEHHA has yet to develop “safe harbor” levels for any of these PFAS chemical and so any exposure to these PFAS chemicals will require a Proposition 65 warning.
These particular PFAS chemicals are commonly found in firefighting foam, stain-resistant fabrics, and food packaging. Companies that distribute and sell these types of products in California would be well served to evaluate whether their products contain any of these chemicals and take steps to either eliminate these chemicals from their products or ensure that the products have the requisite Proposition 65 warnings in the next year.
We will continue to provide updates regarding Proposition 65 at the Corporate Environmental Lawyer blog.
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On Monday, October 18, 2021, U.S. EPA released its PFAS Strategic Roadmap (Roadmap) outlining the agency’s three-year strategy for addressing per- and polyfluoroalkyl substances (PFAS). The Roadmap acknowledges that U.S. EPA cannot solve the problem of “forever chemicals” by tackling only one route of exposure or one use at a time. Instead, the Roadmap outlines a multi-pronged approach with specific emphasis on the following:
- Accounting for the full lifecycle of PFAS, their unique properties, the ubiquity of their uses, and the multiple pathways for exposure;
- Focusing on preventing PFAS from entering the environment in the first instance which is a foundational step in reducing the exposure and risks of PFAS contamination;
- Holding polluters accountable for releases of PFAS into the environment;
- Investing in scientific research to fill gaps in understanding PFAS to drive science-based decision making; and
- Ensuring that disadvantaged communities have equitable access to solutions.
In order to achieve these objections, U.S. EPA’s Roadmap identifies the following specific agency actions:
- U.S. EPA’s Office of Chemical Safety and Pollution Prevention commits to:
- Publish a national PFAS testing strategy to generate toxicity data on PFAS compounds (Fall 2021);
- Ensure robust TSCA review for new PFAS chemical submissions (ongoing);
- Review previous TSCA regulatory decisions to ensure that the those decisions were sufficient protective of human health and the environment (ongoing);
- Enhance PFAS reporting under the Toxics Release Inventory (Spring 2022); and
- Finalize new PFAS reporting under TSCA Section 8 (Winter 2022).
- U.S. EPA’s Office of Water commits to:
- Finalize the Fifth Unregulated Contaminants Monitoring Rule to require testing for 29 PFAS substances (Fall 2021);
- Establish an MCL for PFOA and PFOS (Fall 2023);
- Finalize the toxicity assessments for GenX and five additional addition PFAS compounds (Fall 2021);
- Publish health advisories for GenX and PFBS (Spring 2022);
- Set Effluent Limitations Guidelines to restrict PFAS discharges nine different industrial categories (2022); and
- Leverage the National Pollutant Discharge Elimination System (NPDES) program to reduce the discharges of PFAS and obtain more comprehensive information on PFAS discharges (Winter 2022).
- S. EPA’s Office of Land and Emergency Management commits to:
- Designate PFOA and PFOS as CERCLA hazardous substances (Summer 2023);
- Evaluate designation of other PFAS compounds as CERCLA hazardous substances (Spring 2022); and
- Issue updated guidance on the destruction of PFAS and PFAS-containing materials (Fall 2023).
In addition to U.S. EPA’s Roadmap, the White House announced ongoing efforts by the following seven agencies to address PFAS pollution: the White House Council on Environmental Quality (CEQ), the Departments of Defense, Agriculture, Homeland Security, and Health and Human Services, Food and Drug Administration, and the Federal Aviation Administration. We will continue to track these ongoing efforts to regulate PFAS at the Corporate Environmental Lawyer blog.