Climate Change Lawsuits Brought by Coastal Municipalities and States Against the Fossil Fuel Industry: Trends in Climate Change Litigation, Part 3
In the third installment of Jenner & Block’s Corporate Environmental Lawyer's discussion of emerging trends in Climate Change Litigation, we are discussing a quickly proliferating form of litigation—lawsuits filed by U.S. states and municipalities against companies that operate in industry sectors which have historically had high levels of greenhouse gas emissions.
At present, the most common target for this litigation in the United States has been the oil and gas industry. In these cases, plaintiff cities or states will often bring suit against a large number of oil and gas companies as members of the collective industry. These claims are usually brought in state court, where the plaintiffs can take advantage of potentially favorable state common law. Using this strategy, plaintiffs have asserted claims against the fossil-fuel industry under state law theories such as nuisance, failure to warn of the known impacts of climate change, and unjust enrichment. Of course, as a counter to this strategy and in hopes of demonstrating preemption under the Clean Air Act, defendants will often look to remove climate change cases to federal court.
In order to satisfy Article III Standing requirements, Plaintiffs in these cases have generally been coastal communities which allege that they have suffered harm or are uniquely at risk of suffering harm from rising sea levels as a result of climate change.
Several examples of this ongoing litigation includes:
- County of San Mateo v. Chevron Corp. et al. (2018): claims brought by six California municipalities and counties against 37 fossil-fuel companies in California state court. The plaintiffs, alleging they will be damaged by the effects of climate change, brought a variety of claims under state common law including nuisance, negligence, failure to warn, and trespass. Following defendants’ removal of the case to federal court, plaintiffs successfully remanded back to state court on the grounds that their claims did not implicate a federal question or raise preemption issues. Defendants have filed an interlocutory appeal in the Ninth Circuit which is currently being briefed by the parties.
- City of Oakland v. BP p.l.c. et al. (2018): claims brought by the City of Oakland and San Francisco against fossil-fuel companies under California common and statutory law. Plaintiffs asserted that the industry’s GHG emissions amounted to a “public nuisance” under California law. However, unlike San Mateo, the defendants in City of Oakland were able to successfully remove and ultimately retain the matter in federal court. The Northern District of California court denied plaintiff’s motion to remand the case back to state court based on its finding that federal common law necessarily governed the nuisance claims. The district court subsequently dismissed the suits on the grounds that the plaintiffs’ claims raised a “Political Question” best addressed by the legislature as opposed to judicial branch. This dismissal has also been appealed to the Ninth Circuit.
- Rhode Island v. Chevron Corp. et al. (2018): The first such case to be brought by a U.S. State, Rhode Island asserted claims for nuisance, strict liability, failure to warn, design defect, trespass, impairment of public trust resources, and violations of the Environmental Rights Act against 21 fossil-fuel companies. Rhode Island’s lawsuit asserts that the state’s extensive coastline will be damaged through rising sea levels, increased frequency and severity of flooding, extreme precipitation events, and ocean warming and acidification. Defendants have removed the case to federal court, and the parties are currently briefing Rhode Island’s attempt to remand the case back to state court.
In the second installation of Jenner & Block’s Corporate Environmental Lawyer's discussion of emerging trends in Climate Change Litigation, we are highlighting recent investigations brought by US state attorneys general against private companies for allegedly misleading the public and/or company shareholders regarding the potential climate impacts of their operations.
In recent years, several major state investigations were launched following investigative journalism reports of private companies’ failures to disclose the causes and effects of climate change. One such example is the Los Angeles Times 2015 exposé into Exxon Mobil Corp.’s historic in-house research on climate change.
Approximately one month after the publication of the Los Angeles Times’ article, the New York Attorney General subpoenaed Exxon, seeking documents related to the company’s research on the causes and effects of climate change; the integration of its research findings into business decisions; and the company's disclosures of this information to shareholders and the Securities and Exchange Commission. The attorney general’s investigation was grounded in New York's shareholder-protection statute, the Martin Act, as well as New York’s consumer protection and general business laws.
In 2016, New York’s investigation was publically supported by a coalition of top state enforcement officials from Vermont, Virginia, Massachusetts, Maryland, Connecticut, and the Virgin Islands, all of which agreed to share information and strategies in similar climate change investigations and future litigation. Exxon responded by filing its own lawsuit seeking to block New York and Massachusetts’ investigations.
After a three-year contentious investigation, the New York Attorney General's office sued Exxon on October 24, 2018, alleging that Exxon engaged in “a longstanding fraudulent scheme” to deceive investors by providing false and misleading information about the financial risks the company faced from its contributions to climate change.
Jenner & Block’s Corporate Environmental Lawyer will continue to update on this matter, as well as other important climate change litigation cases, as they unfold.
The term “climate change litigation” has become a shorthand for a wide range of different legal proceedings associated with addressing the environmental impacts of climate change. Plaintiffs in climate change lawsuits may include individuals, non-governmental organizations, private companies, state or local level governments, and even company shareholders who, through various legal theories, allege that they have been harmed or will suffer future harm as a direct result of the world’s changing climate. The targets of climate change litigation have included individual public and private companies, government bodies, and even entire industry groups. While there appears to be no shortage of plaintiffs, defendants, or legal theories emerging in climate change litigation, one clear trend is that the number of these lawsuits has grown dramatically in recent years. By one count, more than fifty climate change suits have been filed in the United States every year since 2009, with over one hundred suits being filed in both 2016 and 2017.
In light of the growing trend of climate change litigation, Jenner & Block’s Corporate Environmental Lawyer blog is starting a periodic blog update which will discuss the emerging trends and key cases in this litigation arena. In each update, our blog will focus on a sub-set of climate change cases and discuss recent decisions on the topic. In Part 1 of this series, we will be discussing Citizen-Initiated Litigation Against National Governments.
On Tuesday, November 6th, Colorado voters rejected a highly contested ballot initiative which would have set unprecedented limits on oil and gas drilling in the state. The measure, Proposition 112, would have prohibited drilling new oil or natural gas wells within 2,500 feet of certain occupied buildings—including homes, schools and hospitals; various water sources—including lakes, rivers and creeks; and other areas specifically designated as “vulnerable” by the state. In total, a report from the Colorado Oil & Gas Conservation Commission estimated that the measure would have prohibited new hydraulic fracturing operations on as much as 95% of the land in Colorado’s top oil and gas producing counties.
The proposition received a high degree of pre-election attention, with individuals from politician Bernie Sanders to actor Leonardo DiCaprio encouraging Colorado voters to support the initiative. While early polling indicated Proposition 112 was supported by the majority of Colorado voters, the initiative was ultimately defeated with 57% of the state’s voters opposing it in Tuesday’s elections. In what may have served as a fatal blow, Colorado’s governor-elect, Jared Polis, distanced himself from the ballot initiative in the days leading up to the election. The newly elected Democrat had campaigned as a pro-environment alternative to his Republican opponent, but categorized the ballot initiative as “economically damaging” to the state of Colorado.
At present, New York, Vermont, and Maryland are the only states to have established outright bans on fracking. None of those states, however, has oil and gas reserves approaching the production capacity of Colorado. The state’s oil and gas industry has grown dramatically in the last decade, with the state’s production of crude oil rising from 73,000 barrels per day in 2008 to 477,000 barrels per day in August 2018. As the state’s production of oil and gas continues to grow, it appears likely that legislative battles over fracking regulations will continue to unfold.
The United States’ Largest Wholesale Energy Provider Launches Blockchain-Based Pilot for Renewable Energy Markets
On April 18, 2018, the Corporate Environmental Lawyer published a blog entry discussing the growing use of Blockchain technology by startup companies seeking to connect populations without access to traditional electricity markets to electricity produced by distributed renewable energy systems. As discussed in that blog entry, proponents of Blockchain technology have asserted the platform’s built-in efficiencies would allow it to compete with traditional, utility-owned electrical grids, with one company going as far as setting up a “micro-grid” in Brooklyn, New York. It appears that the marriage between Blockchain and the electricity grid may be moving forward at an accelerated pace as the technology is now being examined and piloted by major utility operators.
PJM Interconnection (“PJM”), the United States’ largest power grid operator and market administrator serving over 65 million people from Chicago to Washington D.C., has announced its intention to test a Blockchain system that will allow clean-energy buyers and sellers to trade the renewable energy credits that wind and solar farms produce as they generate electricity. Working through its subsidiary—PJM Environmental Information Services—PJM has announced a partnership with Energy Web Foundation, a nonprofit entity with experience developing Blockchain platforms for smaller energy markets in Europe and Asia. The partnership hopes to rollout a pilot for the program by the end of the first quarter of 2018. “This collaboration between EWF and PJM-EIS is a major milestone for the adoption of advanced digital technologies in the energy sector,” said Hervé Touati, CEO of Energy Web Foundation. “We are excited to partner with a leader such as PJM-EIS.”
Blockchain, the technology that functions as a public ledger underpinning digital currency transactions, continues to be promoted as a key driver of growing renewable energy markets. At its core, the belief that Blockchain can spur renewable energy growth and disrupt current energy markets stems from the potential built-in efficiencies of the technology, which allow buyers and sellers of clean power to interact directly, without the need for a central coordinator. While the potential impact of Blockchain on future energy markets is still unknown, the successful use of the technology by PJM could represent a major milestone in the growth and development of the technology in the marketplace.
On November 5, 2018, the United States Supreme Court will hear oral arguments on a landmark case regarding the preemptive effect of the Atomic Energy Act of 1954 (the “Atomic Energy Act”) on a state’s regulation of uranium mining. The case, Virginia Uranium Inc. v. Warren, questions whether the Atomic Energy Act’s regulation of radiation safety standards extends to preempt a Virginia state law banning uranium mining within the borders of the state. The Virginia law dates back to the early 1980s, after the largest uranium deposit in the United States was discovered in Pittsylvania County, Virginia. In response to the discovery, the Virginia General Assembly asked the state’s Coal and Energy Commission to evaluate the potential safety effects of uranium mining, and enacted an indefinite ban on mining the deposit. The unharvested deposit is valued at up to $6 billion USD.
In 2007, the owners of the land, Virginia Uranium Inc., Cole Hill LLC and Bowen Minerals LLC, announced their intention to begin mining the deposit. After failing to convince the Virginia legislature to overturn its mining ban, the plaintiffs sought to challenge Virginia’s law as preempted under the Atomic Energy Act.
The Atomic Energy Act gives the federal Nuclear Regulatory Commission the sole power to regulate several steps in the production of nuclear fuel, including setting radiation safety standards for milling uranium ore and disposing of uranium waste byproducts. The Atomic Energy Act does not, however, directly regulate the mining of uranium on non-federal land.
According to the Plaintiffs/Petitioners, the Virginia ban is preempted by the Atomic Energy Act because the purpose and direct effect of Virginia’s law is to regulate radiation safety standards, which the Atomic Energy Act exclusively entrusted to the purview of the Nuclear Regulatory Commission. Predictably, the Virginia legislature has taken a much less expansive view of the law, arguing that the Atomic Energy Act only regulates uranium “after [uranium’s] removal from its place of deposit in nature.” Thus, according to the legislature, a state is free to regulate—or ban—the harvesting of uranium prior to its removal from the deposit.
The eventual resolution of the dispute will not only have a significant impact on the availability of American mined uranium, but may also potentially set the stage for the broader battle over states' rights brewing between the Trump administration and liberal states like California, which have looked to enact environmental laws in areas currently regulated by the federal government.
In a recently filed lawsuit in Cook County Circuit Court, the State of Illinois accused Trump International Hotel & Tower of violating multiple clean water laws and endangering fish and aquatic life in the Chicago River. The lawsuit, filed on August 13, 2018 by Illinois Attorney General Lisa Madigan, alleges that the Trump Tower’s water intake cooling system failed to comply with state and federal permit requirements, which are designed to limit the number of fish killed by the intake screens or sudden changes in pressure and temperature caused by the cooling system. The state’s lawsuit further alleges that the Trump Tower's National Pollutant Discharge Elimination System permit (“NPDES Permit”) expired on August 31, 2017, and that the building had been operating without a permit for nearly a year.
The 1,400 ft. skyscraper is one of the city’s largest users of river water. In order to cool the tower, the building, like most other buildings along the river, uses a water intake cooling system that siphons approximately 20 million gallons of water per day (“MGD”) from the Chicago River. After being utilized to cool the building, this water is subsequently pumped back into the river up to 35 degrees hotter than its original temperature. Because the building's intake system withdraws more than 2 MGD, the building must comply with regulations promulgated under Section 316(b) of the Clean Water Act (“CWA”). According to the attorney general’s lawsuit, these regulations required Trump Tower to document the efforts it has taken to minimize the impact of its intake system on the river’s fish and other aquatic life—actions which the lawsuit claims the building failed to complete. According to a Chicago Tribune article published in June 2018, Trump Tower is the only building relying on water from the Chicago River that has failed to document these efforts.
In May 2017, Trump Tower submitted a delayed application to renew its then expiring NPDES permit. Despite the building’s alleged failure to timely submit a permit renewal request, it appears the Illinois Environmental Protection Agency (“IEPA”) had been preparing to reissue the Trump Tower’s NPDES Permit as recently as last January. However, the agency changed course after several environmental groups threatened to sue prompting the agency to delay reissuance of the NPDES Permit.
Representatives of the Trump organization have responded to the lawsuit with criticism. “We are disappointed that the Illinois Attorney General would choose to file this suit considering such items are generally handled at the administrative level,” stated a representative for the Trump Organization. “One can only conclude that this decision was motivated by politics.”
Environmental groups responded positively to the lawsuit. The Illinois Chapter of the Sierra Club and Friends of the Chicago River, which had jointly announced their own plans to bring suit against Trump Tower last June, stated that they looked forward to assisting in the state’s lawsuit “to assure an outcome that addresses the permit violations, protects additional aquatic life from harm, and makes the river healthier for fish."
This is not the first time Attorney General Madigan has gone after Trump Tower for discharge violations. In 2012, the State sued Trump Tower for failing to obtain a permit for the same intake system. The 2012 lawsuit resulted in Trump Tower agreeing to pay $46,000 in fines and obtaining the proper permitting. In its most recent lawsuit, the State is seeking a preliminary and (after trial) permanent injunction to stop Trump Tower from using its cooling water intake system. In addition, the complaint seeks $10,000 in daily penalties. In an interesting twist, it appears that industry groups previously urged the Trump Administration’s Environmental Protection Agency to overhaul or eliminate the CWA’s cooling water intake rules, which industry groups described as “cumbersome.”
White House Cites National Security Concerns as Administration Moves to Save Coal and Nuclear Power Plants
A combination of stagnant power consumption growth and the rise of natural gas and renewable power sources has resulted in the displacement and potential closure of many older coal and nuclear power plants in the United States. According to the U.S. Energy Information Administration, since 2008, coal and nuclear energy have seen a continuous decline in their percentage of the nation’s total energy generation market. And in 2015, the closure of coal fueled power plants accounted for more than 80% of the nation’s retired energy generating capacity.
In an attempt to reverse these trends, President Donald Trump has ordered Energy Secretary Rick Perry to take “immediate action” to stem the closure of nuclear and coal power plants. In an official White House statement issued on June 1, 2018, the Trump Administration stated that “keeping America's energy grid and infrastructure strong and secure protects our national security… Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation's energy mix, and impacting the resilience of our power grid.”
The statement is not the first time the Administration has asserted that coal and nuclear plants are critical to national security. In January of this year, Mr. Perry presented a sweeping proposal to the Federal Energy Regulatory Commission (“FERC”), which requested subsidies for struggling coal and nuclear plants that were no longer able to operate profitably in the current energy markets. In presenting the proposal, Mr. Perry argued that coal and nuclear plants’ unique ability to store at least 90 days of fuel on-site made the energy sources critical to the reliability and stability of the United States’ energy markets. In a 5-0 decision, FERC rejected the Energy Secretary’s proposal, and casted doubt on Mr. Perry’s claims that energy markets would become vulnerable and unreliable without contributions from coal and nuclear power.
It appears the Trump Administration may now be seeking a more direct route to provide assistance to coal and nuclear power plants. According to Bloomberg, a draft memo from the Department of Energy (“DOE”) reveals that the agency is considering using its authority under Section 202(c) of the Federal Power Act and the Defense Production Act of 1950 to force regional grid operators to buy electricity from a list of coal and nuclear plants the department deems crucial to national security. The plan would require suppliers to purchase power from the plants for 24 months in order to starve off closures as the Administration works to provide a long-term solution. If the DOE plan is implemented, it is likely to face legal challenges from both utilities and environmental groups. Regardless of whether the DOE elects to pursue this strategy, it appears that the Trump Administration is focused on working to protect aging coal and nuclear plants.
On April 2, 2018, the Pennsylvania Superior Court issued a potentially groundbreaking decision by holding that trespass and conversion claims arising from hydraulic fracturing are not precluded by the rule of capture. In reaching this conclusion, the court found that the Southwestern Energy Production Company (“Southwestern”) may have committed trespass when it extracted natural gas located under neighboring properties by draining the gas through fissures created from hydrofracturing fluid. Such a holding was almost universally thought to be precluded by the rule of capture. The rule of capture, which can be traced back to 18th century fox hunting, has historically been applied to find that oil and gas companies cannot be held liable for “capturing” oil and gas that drain naturally from neighboring land as a result of legal extraction activities. In differentiating hydraulic fracking from traditional oil and gas extraction, the court focused on the fact that hydraulic fracking actually pumps fluid across property lines to open up non-natural fissures that allow the natural gas to seep back across the property to be extracted.
The potential impact of the Pennsylvania court’s decision has spurred high levels of concern from the greater fracking industry. On the same day that Southwestern filed an appeal requesting an en banc rehearing of the decision, seven separate industry trade groups filed leave with the court seeking permission to file amicus briefs urging the court to grant Southwestern the rehearing. One of these groups, the Marcellus Shale Coalition (“MSC”), is a collection of approximately 200 producers, midstream, and local supply-chain companies that produce more than 95% of the natural gas in Pennsylvania. The group has asserted that the April 2nd ruling interrupts well-established law and creates an “unprecedented form of tort liability” that threatens the entire industry. In a similar filing, the Pennsylvania Chamber of Business and Industry stressed that the decisions could have devastating effects on the industry and the economy of Pennsylvania. According to the American Petroleum Institute, the hydraulic fracking industry currently provides an estimated 322,600 jobs to Pennsylvania and contributes nearly $44.5 million in revenue to the state’s economy.
In Southwestern’s own appeal, the company echoed many of the concerns proclaimed by the industry. The company stressed that the decision would “unleash a torrent of speculative lawsuits” that could threaten the economic livelihood of the industry throughout the state. The company also characterized the April 2nd ruling as an impractical precedent for future decisions. Southwestern noted that the opinion would require courts and juries to speculate whether hydrofracturing fluid located miles below the surface ever moved onto neighboring property, which is a task the company portrayed as “a fool’s errand.”
The ultimate resolution of the matter has potentially far-reaching impacts on the U.S. energy markets. Behind Texas, Pennsylvania is the United States’ second largest producer of natural gas. The state generated 19 percent of the United States’ total output in 2017 and has seen steady gains in production output since 2010. Further, the decision raises questions about whether other state courts may adopt the logic of the Pennsylvania Superior Court and similarly hold that trespass and conversion claims against hydraulic fracking are not precluded by the historic rule of capture.
We will continue to track this case as it moves through the Pennsylvania courts.