By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On September 28, 2023, U.S. EPA released its final reporting rule that will require manufacturers (and importers) of PFAS and PFAS-containing articles to submit detailed PFAS-information going back as far as 2011. Putting aside the difficulties posed by a reporting rule with a 12-year look-back, the final rule also adopts a structure-based PFAS definition. Specifically, rather than listing out specific PFAS, the final rule defines PFAS as “including at least one of these three structures: R-(CF2)-CF(R’)R”, where both the CF2 and CF moieties are saturated carbon; R-CF2OCF2-R’ where R and R’ can either be F, O or saturated carbons; and CF3C(CF3)R’R’, where R’ and R” can either be F or saturated carbons”. U.S. EPA explains that it adopted this structure-based definition to “expand the universe of PFAS to include additional substances of potential concern” that U.S. EPA believes are likely to be persistent and to “capture certain fluorinated ethers”.
The final rule applies to the “manufacture for commercial purposes” of PFAS. “Manufacture for commercial purposes” is defined to include the import, production, or manufacturing of a chemical substance or mixture containing a chemical substance for the purpose of obtaining an immediate or eventual commercial advantage for the manufacturer and includes the coincidental manufacture of PFAS as byproducts or impurities.
Importantly, the final rule does not apply to entities that process, distribute in commerce, use, and/or dispose of PFAS and specifically exempts non-commercial R&D activities. The comments accompanying the final rule further clarify that “waste management activities involving imported municipal solid waste streams for the purpose of disposal or destruction are not within the scope of the rule’s reporting requirements.” The final rule does however, apply to waste management sites that import PFAS-containing waste (include municipal solid waste) for the purposes of recycling or reuse.
The final rule requires that the following information be reported within 18 months of the effective date of the rule:
By Daniel L. Robertson, Associate Attorney
The Executive Order, titled Revitalizing Our Nation’s Commitment to Environmental Justice for All, expands and provides additional clarity to the Biden Administration’s environmental justice commitment. According to a White House fact sheet distributed on Friday, the order is intended “to ensure that all people – regardless of race, background, income, ability, Tribal affiliation, or zip code – can benefit from the vital safeguards enshrined in our nation’s foundational environmental and civil rights laws.” The order addresses this commitment through various means:
- Embedding the Administration’s “Whole of Government” approach to Environmental Justice.
The Order makes clear that the pursuit of environmental justice should be incorporated into the missions of all executive branch agencies. It also adds agencies to the White House Environmental Justice Interagency Council, a body tasked in part with developing federal agency performance metrics and publishing an annual public performance scorecard (more on that below).
Notably, the Order directs agencies to consider measures that will address and prevent “disproportionate and adverse” impacts on health and the environment, contrasting the prior “disproportionately high and adverse” requirement established by Executive Order 12898 signed by President Clinton on February 11, 1994. The Administration describes this change as “eliminat[ing] potential misunderstanding that agencies should only be considering large disproportionate effects” which will likely lead to increased federal agency scrutiny as projects under their purview meet this lower threshold.
- Enhancing Community Engagement.
The Order requires federal agencies to notify nearby communities in the event of a release of toxic substances from a federal facility. This notification includes holding a public hearing to share information on any resulting health risks or necessary precautions. The Order also directs federal agencies to “actively facilitate meaningful public participation and just treatment of all people in agency decision-making.” This includes Tribal consultation and strengthening nation-to-nation relationships on environmental justice issues.
Federal agencies are also required to submit to the White House Council on Environmental Quality and make available to the public an Environmental Justice Strategic Plan. Agencies will use the plan to set forth goals and actions to advance environmental justice, and identify oversight opportunities to improve accountability and compliance with any statute administered by that agency that affects communities with environmental justice concerns. The Order requires that this plan be submitted no later than 18 months after the date of the Order, and every 4 years thereafter.
- Launching a new White House Office of Environmental Justice.
The new Office of Environmental Justice will be located within the White House Council on Environmental Quality and be led by the Federal Chief Environmental Justice Officer. The office will be tasked with coordinating the implementation of environmental justice policies across federal government agencies.
- Creating a new Environmental Justice Subcommittee within the National Science and Technology Council.
This new subcommittee, led by the Office of Science and Technology Policy, will be tasked with coordinating a strategy for federal agencies to identify and fill gaps in data and research relating to environmental justice in part to aid in advancing cumulative impact analyses. Filling in these data gaps will allow agencies to use science to better address adverse health and environmental impacts. The Committee will be required to update this Environmental Justice Science, Data, and Research Plan every two years.
- Publication of the Inaugural Federal Agency Environmental Justice Scorecard and Draft National Strategy on Preventing Plastic Pollution.
While not part of the Executive Order, the White House unveiled a first-of-its-kind environmental justice scorecard for federal agencies. Developed by the Office of Management and Budget, the Council on Environmental Quality, and the United States Digital Service, the scorecard assesses 24 federal agencies’ environmental justice advancement efforts, including efforts to advance the Administration’s Justice40 initiative. This initiative is designed to ensure that 40 percent of federal funding investments flow to communities that are marginalized, underserved, and overburdened by pollution. Similarly, Friday’s announcement referenced the addition of the Department of Commerce, the National Science Foundation, and the National Aeronautics and Space Administration programs to the Justice40 initiative, bringing the total number of programs covered by the initiative to 470 across 19 federal agencies.
The White House also announced a new Interagency Policy Committee on Plastic Pollution and a Circular Economy, alongside a draft National Strategy on Preventing Plastic Pollution released the same day by the U.S. EPA. The draft strategy plan is intended to address disparate impacts on communities affected by plastic from production to waste. The Committee, meanwhile, will coordinate federal efforts addressing plastic pollution to ensure an equitable distribution of the benefit from these efforts.
In a time when the Biden Administration faces increased scrutiny regarding its environmental efforts, the White House’s announcement also highlights various actions undertaken by executive agencies during the current presidential term. Friday’s action marks the latest installment in the Biden Administration’s advancement of environmental justice initiatives, following Executive Order 13990 signed on President Biden’s first day in office, and Executive Order 14008 signed soon thereafter on January 27, 2021. The White House states that Friday’s Order reflects the goals and recommendations of the White House Environmental Justice Advisory Council, demonstrating the active approach that council continues to take in this area. The Order underscores the Administration’s commitment to developing environmental justice initiatives at the federal level, entrenching those initiatives into the goals of executive agencies, and providing transparency to the public on how those goals are being achieved.
We will continue to monitor this and other federal environmental justice developments on the Corporate Environmental Lawyer.
On Earth Day and every day, companies face increasing pressure to “go green” or be more “sustainable.” When companies heed this call—whether it’s by reducing GHG emissions, investing in renewable energy, or making their products recyclable or compostable—they understandably want to let people know about the positive actions they are taking. But, when a company touts their supposed good deeds, it must carefully craft any public communications. That is because companies—particularly consumer goods companies—face increasing scrutiny and potential litigation liability for “greenwashing” and related false advertising and consumer fraud claims.
At the heart of greenwashing claims is the assertion that a company is making false or misleading statements about its environmental performance in order to engender goodwill and increase sales or support for the company. But sometimes a company may believe that it is making truthful statements and still face greenwashing claims. Terms that might be used, like “sustainable,” are highly subjective and hard to quantify or support. A product might be technically able to be recycled, but recycling facilities may not accept that type of material for recycling. A company might think it is “leading the way” in its green initiatives, while environmental groups are less than impressed. All of these examples could lead to push back from environmental groups or regulators in a variety of forums. There could be public media campaigns, regulatory fines, and/or consumer fraud lawsuits, all around what a company thought was inspirational marketing about its sustainable practices.
So what is a company to do? Communicating a company’s sustainability goals and accomplishments may be important to leadership and investors, and can be a crucial part of finding partners willing and able to help the company achieve those sustainability goals. There is no magic formula that will avoid the pitfalls of greenwashing; but there are some best practices that should be considered.
First, follow the FTC’s Green Guides. The FTC has provided guidance on green advertising statements for decades. For example, according to the Green Guides, “a product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the waste stream through an established recycling program for reuse or use in manufacturing or assembling another item.” Companies should qualify recycling claims unless recycling facilities are available to at lease 60% of consumers or communities where the item is sold. As another example, according to the Green Guides, companies “should not make unqualified renewable energy claims, directly or by implication, if fossil fuel, or electricity derived from fossil fuel, is used to manufacture any part of the advertised item or is used to power any part of the advertised service, unless the marketer has matched such non-renewable energy use with renewable energy certificates.”
Notably, in December 2022, FTC announced that is was seeking public comments on potential updates to the Green Guides. FTC is seeking general guidance on the Green Guides, as well as on specific topics, including:
- Carbon offsets and climate change,
- The term “Recyclable”,
- The term “Recycled Content”, and
- The need for additional guidance regarding claims such as “compostable,” “degradable,” ozone-friendly,” “organic,” and “sustainable”, as well as those regarding energy use and energy efficiency.
The comment period remains open until April 24, 2023.
Additionally, while the Green Guides are a great resource, they are not the final word on greenwashing. Courts faced with greenwashing litigation may impose higher or lower standards, depending on the laws of the jurisdiction at issue. Moreover, many greenwashing claims will turn on whether a reasonable consumer was mislead by a company’s statement. As the FTC acknowledged in its recent announcement on the Green Guides, “consumers are increasingly conscious of how the products they buy affect the environment…” These sophisticated consumers are informed about environmental and sustainability issues, and not so easily confused or deceived. Thus companies that advertise to and communicate with sophisticated consumers should provide facts that are supportable and have sufficient context. Avoid broad, sweeping statements that will be hard to substantiate. And while setting goals are often a key part of a company’s sustainability plan, know that environmental groups are watching and holding companies accountable. Down the road, un-met goals may be framed as misleading statements. So, when setting environmental goals, understand how they will be achieved; and if they ultimately aren’t achieved be prepared to explain why.
Companies around the world will be embracing the spirit of Earth Day and talking about the ways they are reducing their environmental impact. If they also want to reduce their likelihood of greenwashing litigation, they need to make sure those communications are thoughtful, supported and provide the appropriate context. With the right planning, companies and go green and talk about it too.
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.
Contaminants of Emerging Concern (CECs), chemicals that may be harmful to human health or the environment but that are not yet regulated, are capturing the public’s attention. For example, EPA just proposed to list perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS), two chemicals in the per- and polyfluoroalkyl substances (PFAS) group that are pervasive in the environment and may be harmful to human health, as Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) hazardous substances. EPA will be accepting comments on the proposed rule until November 7, 2022, and, according to the PFAS Strategic Roadmap, a final rule is expected in Summer 2023.
To fill the federal void, some states have been addressing PFAS in their own cleanup programs. For example, in 2016, the New York Department of Environmental Conservation added PFOA and PFOS to New York’s list of hazardous substances. More recently, Washington’s Department of Ecology concluded that PFAS are hazardous substances under Washington’s Model Toxics Control Act.
PFOA and PFOS may just be the beginning. According to the PFAS Strategic Roadmap, EPA is developing an Advance Notice of Proposed Rulemaking to seek input on whether to designate other PFAS as CERCLA hazardous substances. Ultimately, as our understanding of CECs advances, new chemicals may become designated as “hazardous” under CERCLA or state cleanup programs.
But before CECs become CERCLA hazardous substances, if they ever do, where do they fit into the CERCLA liability framework?
CERCLA uses the term “hazardous substance” and the term “pollutant or contaminant.” A chemical is a CERCLA “hazardous substance” if it falls within the purview of CERCLA §101(14), 42 U.S.C. §9601(14). That section provides that “hazardous substance” means, inter alia, any substance designated as hazardous under or pursuant to various identified federal environmental law provisions. See 42 U.S.C. §9601(14). The CERCLA list of hazardous substances can be found at 40 C.F.R. §302.4. The term “pollutant or contaminant” is broader. It includes, but is not limited to:
any substance . . . which, after release . . . and upon exposure, ingestion, inhalation, or assimilation into any organism, either directly . . . or indirectly . . . will or may reasonably be anticipated to cause death, disease, behavioral abnormalities, cancer, genetic mutation, physiological malfunctions (including malfunctions in reproduction) or physical deformations, in such organisms or their offspring.
See 42 U.S.C. §9601(33). CECs, if and until they become CERCLA hazardous substances, may become pollutants or contaminants. Indeed, in EPA’s PFAS Action Plan, the Agency noted that PFOA and PFOS are considered pollutants or contaminants, giving the Agency the authority to investigate releases or threats of releases of PFOA and/or PFOS at sites pursuant to CERCLA §104(e), 42 U.S.C. §9604(e).
The distinction between CERCLA hazardous substances and all else, including pollutants or contaminants, is important because CERCLA liability is triggered by the existence of a “hazardous substance” at a site, nothing else. See 42 U.S.C. §9607(a)(1)-(4); Colorado v. United States, 867 F. Supp. 948, 951 (D. Colo. 1994); Jastram v. Phillips Petroleum Co., 844 F. Supp. 1139, 1141 (E.D. La. 1994); United States v. United Nuclear Corp., 814 F. Supp. 1552, 1557 (D.N.M. 1992); Eagle-Picher Indus. v. United States, 759 F.2d 922, 932 (D.C. Cir. 1985).
Though once a hazardous substance is present, potentially responsible parties (PRPs) are liable for “all costs of removal or remedial action” incurred by the U.S. government, states, and Indian tribes not inconsistent with the national contingency plan (NCP) and “any other necessary costs of response” incurred by any other person consistent with the NCP. 42 U.S.C. §9607(a)(4)(A)-(B). Removal and remedial actions are meant to be directed at hazardous substances. See id. §§9601(23), (24); Colorado, 867 F. Supp. at 951-52 (explaining that “[t]he definitions clearly focus on actions taken in relation to hazardous substances”). However, their statutory definitions suggest that they may, in limited circumstances, include actions targeted at “associated” materials, including pollutants or contaminants, too. See id. at 952.
For example, “removal” is defined to include “such actions as may be necessary taken in the event of the threat of release of hazardous substances into the environment.” 42 U.S.C. §9601(23) (emphasis added). It is also defined to include “other actions as may be necessary to prevent, minimize, or mitigate damage to the public health or welfare or to the environment” from a release or threat of release of a hazardous substance. Id. (emphasis added). Moreover, “remedial action” is defined to include the “cleanup of released hazardous substances and associated contaminated materials” and the “offsite transport and offsite storage, treatment, destruction, or secure disposition of hazardous substances and associated contaminated materials.” Id. §9601(24) (emphasis added).
So, the question then becomes: When can “all costs of removal or remedial action” or “any other necessary costs of response” include within it the costs associated with addressing CECs at a site, thus making PRPs liable under CERCLA for their cleanup?
Let us consider three different scenarios.
First, there may be a site where only CECs (no CERCLA hazardous substances) are present. In this scenario, there is no CERCLA liability. In fact, a major implication of designating a chemical as a CERCLA hazardous substance is that the presence of the chemical, on its own, will trigger CERCLA liability. However, it is important to note that liability may be imposed by a state cleanup program if the CECs are hazardous substances under state law.
Second, there may be a site where there are CECs and hazardous substances in geographically distinct areas. Here, there will be no CERCLA liability for the geographic area containing the CECs, but there will be CERCLA liability for the geographic area containing the hazardous substances. For example, in Colorado v. United States, Colorado sought to recover response costs incurred in connection with the Rocky Mountain Arsenal cleanup and litigation, including costs incurred in responding to the release of diisopropyl methylphosphonate (DIMP). 867 F. Supp. at 951. Colorado and the United States stipulated that DIMP is a pollutant or contaminant, not a hazardous substance. Id. Nonetheless, Colorado argued that it could recover its DIMP response costs because, as a PRP, the United States was liable for “all costs.” Id. The United States argued back that a PRP is not liable for response costs associated with “a discrete action that does not purposefully address hazardous substances . . . simply because it is part of a larger cleanup program” at a site. Id. The court agreed, concluding that the language in §9607(a)(4)(A), when interpreted in accordance with the definitions in §§9601(23) and (24), dictates that response costs are available only when the associated response actions are directed at hazardous substances. Id. at 952. But as mentioned above, for the geographic area containing the CECs, liability may be imposed by a state cleanup program if the CECs are hazardous substances under state law.
Third, there may be a site where CECs and hazardous substances are comingled. Here, due to the comingling, response actions directed at the hazardous substances will necessarily require addressing the “associated” CECs and therefore be considered part of “all costs of removal or remedial action” or “any other necessary costs of response.” Thus, in this third scenario, PRPs will likely be liable for the cleanup of the CECs, too. Cf. United Nuclear Corp., 814 F. Supp. at 1558 (treating mine tailings that contained some hazardous substances in trace amounts as hazardous substances rather than pollutants or contaminants). If the CECs remain onsite, and if they are considered pollutants or contaminants, absent waiver, the CECs will have to be cleaned up pursuant to federal standards and more stringent promulgated state standards that are “legally applicable” to them or “relevant and appropriate under the circumstances” of their release or threatened release, known as ARARs. 42 U.S.C. §9621(d)(2)(A). If there are no ARARs, advisories, criteria, or guidance may be “considered” when selecting the remedy. 40 C.F.R. §300.400(g)(3).
In summary, PRPs should pay close attention to the presence of CECs at sites and their spatial relationship with hazardous substances, if any, as this will affect their CERCLA liability and potential courses of action. We will continue tracking CEC and federal and state cleanup developments in the Corporate Environmental Lawyer.
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!
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On August 16, 2022, U.S. EPA released its Interim Environmental Justice and Civil Rights in Permitting Frequently Asked Questions (FAQ) that provides guidance to federal, state, and local environmental permitting entities on integrating environmental justice (EJ) and civil rights into relevant environmental permitting decisions. Lilian Dorka, director of U.S. EPA’s External Civil Rights Compliance Office (ECRCO), emphasized that the information in the FAQ isn’t new and that environmental permitting decisions are always supposed to consider the EJ and civil rights impacts of the permit. Rather, according to Director Dorka, the FAQ is an effort by U.S. EPA to compile existing information on integrating EJ and civil rights into the permitting process into a single document. She also noted that this is an interim document and EPCRO is working on separate guidance document to provide further direction on how permitting entities should consider civil rights in permitting decisions, including Title VI’s disparate impact analysis.
One of the more interesting parts of the FAQ is the following paragraph:
If there are no mitigation measures the permitting authority can take, whether within or outside the permitting program, that can address the disparate impacts, and there is no legally sufficient justification for the disparate impacts, denial of the permit may be the only way to avoid a Title VI violation. Whether denial of a permit is required to avoid a Title VI violation is a fact-specific determination that would take into account an array of circumstances, including whether the facility will have an unjustified racially disproportionate impact, as well as the less discriminatory alternatives available.
This is one of the first times that U.S. EPA has clearly articulated its position that a permit can be denied solely because it may violate Title VI although the occasions when a permit has been denied on this basis have historically been far and few between. However, a recent example of how EJ and civil right issues can impact the permitting process is currently playing out in Chicago where the City of Chicago denied a permit for a metal recycling facility following receipt of a letter from U.S. EPA noting significant civil rights concerns associated with the facility’s operations. Notwithstanding that the Illinois Environmental Protection Agency had already issued the facility an air permit allowing the facility to commence operations, the City of Chicago denied the facility an operating permit based primarily on the purported disparate impact of the facility on disadvantaged communities. The City’s permit denial is currently being challenged in an administrative proceeding.
The FAQs are clearly consistent with U.S. EPA’s ongoing efforts to integrate President Biden’s Justice40 Initiative that sets a goal of ensuring that 40% of the overall benefits of certain federal investments flow to disadvantaged communities. We will continue to track U.S. EPA’s efforts to ensure that its permitting decisions are appropriately protective of disadvantaged communities at the Corporate Environmental Lawyer blog.
OMB Throws Potential Speed Bump in Front of U.S. EPA’s Efforts to Designate PFAS as CERCLA Hazardous Substances
By Steven M. Siros, Co-Chair, Environmental and Workplace Health & Safety Law Practice
On August 12, 2022, the Office of Management and Budget (OMB) completed its review of U.S. EPA’s proposed rule to designate perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as CERCLA hazardous substances. Designation as a CERLA hazardous substances would have significant ramifications, including requiring the reporting of releases of reportable quantities of these substances and potentially resulting in the reopening of previously closed CERCLA sites. These ramifications are discussed in a previous Corporate Environmental Lawyer blog.
OMB had previously designated the proposed rule as “other significant” which would not have required U.S. EPA to issue a regulatory impact analysis (RIA). “Other significant” designations are reserved for rules expected to have costs or benefits less than $100 million annually. In response to a number of comments, including comments from the U.S. Chamber of Commerce that estimated annual costs in excess of $700 million, the OMB has changed its designation to “economically significant” which will require U.S. EPA to conduct an RIA.
Although it is very unlikely that the requirement to conduct an RIA will deter U.S. EPA in proceeding with its plans to designate PFOA and PFOS as CERCLA hazardous substances, it will require U.S. EPA to analyze whether its proposed rule is necessary and justified to achieve U.S. EPA’s goals and to clarify how its rule is the least burdensome and most cost-effective and efficient mechanism to achieve that goal. OMB will review and comment on U.S. EPA’s RIA and may require that changes be made to U.S. EPA’s analysis.
Again, the requirement to conduct the RIA is unlikely to derail U.S. EPA’s efforts to designate these chemicals as CERLA hazardous substances but it could jeopardize U.S. EPA’s summer 2023 deadline for finalizing its rule. We will continue to track and report on PFAS related issues at the Corporate Environmental Lawyer.
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.
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 Matthew G. Lawson
“When the wind of change blows, some people build walls, others build windmills.” While this ancient Chinese proverb most likely did not envision the construction of large-scale, offshore wind farms, its wisdom remains strikingly applicable to the United States’ energy and infrastructure policies in the 21st Century. At a time of growing concern over fossil fuel availability, climate change and energy grid security, the Corporate Environmental Lawyer is taking a moment during Earth Day 2022 to look towards our nation’s investment into improved infrastructure and clean, self-sustaining energy sources.
Undoubtably one of the largest recent, public investments in the United States’ infrastructure and energy future occurred on November 15, 2021, when President Biden signed into law the bipartisan and highly anticipated $1.2 trillion Infrastructure Investment and Jobs Act. According to the bill’s Summary, over the next five years, the legislation will provide significant infrastructure investments, including an additional $110 Billion in funding towards bridge and roadway repairs, along with approximately $30 Billion in public transportation. In addition, the bill allocates approximately $65 Billion to the Country’s power infrastructure, with nearly $29 billion dedicated solely to bolstering and protecting the electric grid. Finally, the bill includes $7.5 billion to deploy a national network of electric vehicle chargers across highway corridors throughout the United States.
Perhaps even more critical than the legislation’s investment is infrastructure spending, is its investment in future clean energy sources. Funds allocated through 2025 for clean energy projects include $84,000,000 for enhanced geothermal systems, $100,000,000 for wind energy, and $80,000,000 for solar energy. Moreover, the Biden Administration is betting big on “Clean hydrogen”—an emerging form of clean energy that utilizes surplus from other renewable sources to create additional power by splitting water molecules—by earmarking approximately $8 million in funding for investment in the technology.
Looking beyond the United States’ public infrastructure investments, private investment into clean-energy assets also skyrocketed in 2021, reaching a record $105 billion. This investment represents an 11% jump from 2020 and a 70% surge during the past five years, according to the Business Council for Sustainable Energy. Private backing into U.S. assets such as wind farms and solar plants represents about 14% of the $755 billion in global private investment made last year, including investment in the United States’ first commercial-scale offshore windfarm, the 30 MW Block Island Wind Farm, which is set to supply power to the energy grid by 2023. The project is the first of what the Department of Energy (DOE) anticipates being a major rollout of privately-funded offshore wind, including an estimated addition of more than 30 gigawatts of offshore wind power by the year 2030.
At a time when Americans are increasingly feeling pessimistic about the future of our Country, it is important to embrace the opportunity for bilateral agreement presented through future investments in the nation’s infrastructure and clean energy. Safe roads, reliable energy grids, clean air and new jobs are an area of common agreement between Americans at a time when such agreements appear to be increasingly rare. As a nation, we would do well to embrace our changing world and new challenges by investing in ourselves and our future.
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.
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.
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
On December 20, 2021, U.S. EPA finalized its Fifth Unregulated Contaminant Monitoring Rule (UCMR) that will require public water systems (PWS) to collect monitoring data for 29 per- and polyfluoroalkyl substances (PFAS) and lithium in drinking water. Every five years, the Safe Drinking Water Act (SDWA) requires U.S. EPA to publish a new list of unregulated contaminants that will be monitored by PWS. UCMR 5 focuses almost exclusively on PFAS and targets 29 of the more than 4,700 PFAS that have been identified to date.
Starting in 2023, all PWSs serving more than 10,000 customers are obligated to monitor for these UCMR 5 contaminants while smaller PWSs (those serving less than 10,000 customers) must monitor subject to availability of appropriations (U.S. EPA is responsible for all analytical costs associated with PWSs serving less than 10,000 customers) and laboratory capacity. In response to comments on the draft UCMR 5 expressing concern about the lack of laboratory capacity to support the PFAS monitoring, the final rule notes that U.S. EPA expects laboratory capacity to quickly grow to meet UCMR demand. The final rule identifies applicable U.S. EPA test methods for each of the 29 targeted PFAS compounds. However, some commenters were critical that the final rule did not identify a testing technique to determine “total PFAS” in drinking water. The final rule acknowledges this issue but notes that U.S. EPA “has not identified a complete, validated peer-reviewed aggregate PFAS method” at this time.
The data collected is expected to inform U.S. EPA as it evaluates whether to set a specific drinking water limit or treatment standard under the SDWA for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS). U.S. EPA has committed to establishing a national drinking water regulation for PFOA and PFOS by the fall of 2023 and it is likely that additional PFAS will be in the SDWA regulatory pipeline in the near future.
We will continue to track U.S. EPA regulatory agenda at the Corporate Environmental Lawyer blog.
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.