Friday, November 30, 2012

Heightened Federal Pleading Standards and Environmental Long-tail and Toxic Tort Claims

I wrote an article with my colleague, Greg Gotwald, that was recently published in the American Bar Association's Section of Environment, Energy, and Resources' newsletter Trends.  The article provides an outline of how federal district courts have been handling environmental claims in light of Iqbal and Twombly's requirement that a plaintiff show plausible--not possible--entitlement to relief.  This can be hard to do when details of when and where the contamination originated may not be known at the time a complaint is filed.  The take-away of the article is that the more information a plaintiff can provide in a complaint, the better chance it has of defeating a 12(b)(6) motion. If defending an action, then Twombly and Iqbal provide justification for dismissing speculative claims.

Read more here.






Friday, November 9, 2012

President Obama & The Environment



I know that everyone was sick and tired of the media coverage leading up to the presidential election, so I thought I’d add a bit more discussion to the mix.  Seriously though, I thought I’d take a look at what President Obama’s second term has in store for environmental policy.  Interestingly, climate change was not mentioned once in the three presidential debates—the first time that has happened since 1984.  President Obama, however, did mention climate change in his acceptance speech, in which he stated: "We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality, that isn't threatened by the destructive power of a warming planet.”

On November 7, 2012, a day after President Obama was reelected, Audubon Magazine published the president’s answers to ten questions on the environment.  In the Audubon interview, President Obama called climate change "one of the biggest issues of this generation.”  Although most of the article dealt with what the president has done in his first term to address climate change, he did address some of his future plans.  The president proposes increasing limits on new fossil-fuel-fired power plants, limiting greenhouse gas emissions from automobiles, investing in renewable energy, and reaching emission limit agreements with other countries.  
                
One area where President Obama conflicts with environmentalists is on drilling in the Arctic.  The president believes that drilling in the Arctic must be a part of America’s “all-of-the-above energy strategy.”  He would, however, prevent drilling in the Arctic National Wildlife Refuge.  Another potential source of conflict with environmentalists is the Keystone oil pipeline.  The president’s administration is conducting a thorough assessment of the pluses and minuses of the proposed pipeline, while the Audubon interviewer stated that the pipeline “would transport what some consider to be the dirtiest oil in the world and cause destruction of boreal forest.”
                
The president does not believe that we have to choose between a clean environment and a thriving economy.  He believes that clean energy investment will lead to a $2.3 trillion global market.  Industry groups, however, disagree.   Industry groups fear that increased regulation of coal and other fossil fuels will hurt the economy and raise prices for consumers.  For more energy industry perspective, please click here
                
If you have questions about how new proposals, regulations, or laws will impact you or your business, please contact an environmental attorney.



Monday, October 22, 2012

Soybeans and Patents: Bowman v. Monsanto

On October 5, 2012, the Supreme Court of the United States ("SCOTUS") granted an Indiana farmer's petition for transfer to hear a case regarding whether the lower court erred by (1) refusing to find patent exhaustion in patented soybean seeds even after an authorized sale and (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies.  The case, Vernon Hugh Bowman v. Monsanto Company et al., 11-796 (more information on this case at the SCOTUS is available at this link), originated in the U.S. District Court of the Southern District of Indiana.  The district court granted Monsanto's motion for summary judgment (Judge Young's opinion is available here) and the Federal Circuit Court affirmed that judgment.

The Indiana farmer planted two soybean crops in 2007: the first was of Pioneer Hi-Bred beans (a Monsanto brand), and a later crop of commodity beans from his local elevator.  The farmer discovered that neither brand of seed was damaged by a particular herbicide.  He was able to save some of the second crop to plant in later years.  Monsanto sued the farmer, claiming that it had developed and patented the biotechnology that made the Pioneer Hi-Bred beans resistant to herbicide (these were called "Roundup Ready" (R) seeds).  Monsanto argued the farmer signed a licensing agreement that included a provision that meant the company's patent rights were not exhausted.  The farmer disagreed, claiming that when beans from a licensed Roundup Ready (R) are harvested and sold to a grain elevator, they are sold without restriction, mixed with all other soybean crops from the area, and therefore, when farmers purchase those beans later to use as seed, the beans are not protected by patent.



After the district court granted Monsanto's motion for summary judgment, the Federal Circuit Court affirmed and relied in part on the "conditional sale exemption" that allows patent holders to continue to assert patent rights after an authorized sale is correct.  Now in front of the SCOTUS, the farmer argues that patent exhaustion results after an authorized sale.  As explained by the farmer: "[t]his case presents an issue both of core practical important to agriculture and of vital legal interest in patent law..."  Brief in Support of Certiorari, available here.  The importance of this case, and of seed patent rights, is especially apparent in a drought year, like the one we are currently having here in the Hoosier state.  (Soybean harvest is well underway in Indiana.)

The United States has filed an amicus brief in favor of Monsanto, available here.  As of October 22, 2012, oral argument in the case was to be determined.

Wednesday, July 4, 2012

Indiana's Environmental Progress


In May, the Indiana Department of Environmental Management released its Criteria Pollutants Air Quality Trend Analysis Report.  This report tracked Indiana's air quality from 1980 to 2010 in twelve geographic regions.  Our firm has offices in both Indianapolis and South Bend, so I reviewed the air quality trends for the Central Indiana and North Central Indiana regions, which include Marion County and St. Joseph county, respectively.  The news for the Central Indiana region (Boone, Hamilton, Hancock, Hendricks, Johnson, Marion, Morgan, Putnam, and Shelby counties) is good. Although population and vehicles miles traveled have increased over the past thirty years, the region's emissions have also decreased.  The air quality in the North Central region (Elkhart, Fulton, Kosciusko, Marshall, and St. Joseph counties) has also improved over the past thirty years despite an increase in population and vehicle miles traveled. Hopefully Indiana's air quality will continue to improve as businesses and individuals work with environmental attorneys to help them comply with complex state and national environmental regulations.  For an in-depth look at the air quality levels across Indiana, please click here.



Tuesday, June 26, 2012

New EPA Guidelines: To Frack or Not to Frack?

The somewhat controversial practice of hydraulic fracking has gotten its fair share of news headlines lately, for better or for worse.  While the intricacies and scientific technicalities of fracking perhaps are better left to another day, this blog post provides a quick and dirty guide to the debate over fracking and its environmental repercussions.

Hydraulic fracking is a process which has been around since the 1940s, but has gained international attention recently due in part to the energy crisis, and in part to the enhanced science we have available today to make it an economically feasible method to release natural gas from deep within the earth.  On one hand, fracking gives us access to an energy source which otherwise was inaccessible to us.  On the other hand, opponents argue that fracking will lead to increased groundwater contamination and potential unknown other pollutants being released into the air, groundwater, and soil.

Fracking involves pumping a liquid into an existing wellbore, generally located in shale rocks or coal beds.  The fracking liquid being pumped into the rock increases the pressure and forces the rock to crack.  The liquid extends deeper into the crack, which further extends the crack until it reaches the natural gas deep beneath the earth's surface, releasing the gas upward into the well area where it can be captured and piped out as an energy source.  Different liquids can be used as fracking liquids, but the most common is a mix of water and chemical additives.  Fracking liquids are also used to inject sand and other solids to stabilize the cracks without losing the permeability that allows the gas to rise up.  These solids are called "proppants."  These wells are then "tapped" to catch the natural gas that is released.  During the tapping and fracking processes, trace amounts of natural gas, methane, volatile organic compounds ("VOCs"), and other fracking fumes may be released.

In April, 2012, the Environmental Protection Agency ("EPA") passed new rules regarding fracking under the Clean Air Act ("CAA").  See the EPA's news release here. However, the rules do not take effect until 2015. Once the new rules go into effect, they will require the industry to perform a process called "green completion" to trap the fumes that are currently being released into the air. Certain states, such as Wyoming and Colorado already require green completion.  The EPA's CAA fracking rules are a step in the right direction to control VOC and methane gas air contamination while allowing companies to develop needed cutting-edge oil and gas drilling technologies to release new stores of energy.  As an added benefit, it is believed the industry will be able to sell the gases captured during green completion to recoup some of the costs incurred in becoming compliant with the rules by 2015.

On May 4, 2012, the EPA released a draft of a new guidance to follow if diesel fuel is used as the fracking fluid.  You can read this draft here.  This draft was published in large part in response to concerns about groundwater when diesel is injected into the ground.  EPA is holding a public meeting on the proposed draft on June 29, 2012 in Washington, D.C.  The draft is open to public comment until July 9, 2012.

Friday, May 4, 2012

Common Sense Approach to Underage Drinking

This has nothing to do with environmental law, but I'd like to applaud the Indiana legislature's common sense approach to underage drinking.

On March 16, Governor Mitch Daniels signed Senate Enrolled Act 274 into law.  Today, he took part in a ceremonial signing of the act, which will go into effect July 1.  The so-called Lifeline Law prevents police officers from arresting a minor solely for public intoxication, minor possession, consumption, and/or transportation of alcohol if the minor sought medical attention for an intoxicated person and remained at the scene until emergency personnel arrived.  The law was proposed by college students at various Indiana schools.  Indiana is the twelfth state to adopt a Lifeline Law.  Hopefully, some lives will be saved if underaged drinkers are not forced to chose between saving someone's life and turning themselves in to the authorities.   

For the full text of the act, click here.  For the Indiana Lawyer's disussion, click here.

Wednesday, April 25, 2012

Temporary Restraining Orders in Environmental Litigation

Temporary restraining orders, known in the legal world as “TROs”, are a powerful tool in environmental litigation.  For a party that is considering a TRO, it has the power to immediately halt excavation, stop construction, or prevent the imposition of a new regulation.  For a party facing a TRO, violation of such an order can lead to steep fines, being held in contempt of court, and a multitude of other punishments.

TROs are often litigated in the environmental arena.  Recently, the Indiana Supreme Court considered a TRO in the context of an underground storage tank (“UST”) site.  In Witt v. Jay Petroleum, Inc., Cause No. 38S02-1110-CV-608 (Ind. March 21, 2012), the Supreme Court decided that the property owner, his attorney, and his environmental consultant were properly held in contempt of court for violating a TRO.  In that case, the property owner sued a prior owner, claiming the petroleum contamination he was cleaning up was from the prior owner’s use of the USTs.  The parties could not agree on a method for removing the USTs and testing the surrounding soil.  The trial court issued a TRO prohibiting any UST removal, soil excavation, or other environmental investigation and remediation activities until the court could conduct a preliminary injunction hearing.  Id., slip op. at 3.  The environmental consultant and other parties to the litigation continued excavating the UST area, and the trial court found them in contempt.  Id. at 3–4.  The Indiana Supreme Court eventually affirmed the trial court’s order.  See also Commissioner  v. RLG, Inc., 755 N.E.2d 556, 558 (Ind. 2001).  In RLG, the Indiana Department of Environmental Management (“IDEM”) sought preliminary injunctive relief against a landfill.  The defendant landfill agreed to remedy its environmental violations and to close the landfill, and IDEM agreed to drop its action for other civil penalties.  When defendant failed to comply, default judgment was entered for $3.1 million against landfill for violating the temporary restraining order.  The Indiana Supreme Court affirmed the judgment.          

This short recap of the Witt and RLG cases illustrates the applicability of the TRO in environmental litigation, and the extreme importance in abiding by a TRO.  A TRO expires within ten days after it was issued (unless the court extends it for good reason).  Ind. R. Trial P. 65(B). As soon as possible after the entry of a TRO, the trial court will conduct a preliminary injunction hearing where all parties can present their arguments regarding whether the activity that is the subject of the TRO should be enjoined pursuant to a more permanent preliminary injunction.  This powerful tool should not be overlooked—by the party filing it, or the party opposing it.

Indiana Rule of Trial Procedure 65 controls injunctions and temporary restraining orders (“TROs”).

To obtain a preliminary injunction, [the movant has] the burden of showing by a preponderance of the evidence that: (1) their remedies at law were inadequate, thus causing irreparable harm pending resolution of the substantive action; (2) they had at least a reasonable likelihood of success at trial by establishing a prima facie case; (3) the threatened injury to them outweighed the potential harm to the Appellees resulting from the granting of an injunction; and (4) the public interest would not be disserved by the granting of a preliminary injunction. If the party moving for an injunction fails to prove any of those four requirements, a. grant of an injunction to that party is an abuse of discretion. Stated another way, if, on appeal, the moving party cannot demonstrate that it proved each of those four requirements then the trial court’s denial of the movant's request for an injunction must be affirmed.

Curley v. Lake County Bd. of Elections & Registration, 896 N.E.2d 24, 32–33 (Ind. Ct. App. 2008).  While Curley was a case about elections, not the environment, the same TRO rules apply in the environmental context.

The lesson?  TROs are a powerful tool for any party—the government, property owners, defendants, plaintiffs, and anyone in between.  Parties should be aware of the usefulness of such a weapon, and if a TRO is entered against you, beware the consequences of violating that court order. 

Wednesday, April 18, 2012

IDEM's New Remediation Closure Guide

Yesterday, fellow Monitoring Well bloggers Brianna Schroeder, Sean Hirschten, and I attended a presentation by Keramida's Steven Sittler on using IDEM's new Remediation Closure Guide.  The Remediation Closure Guide replaces the Risk Integrated System of Closure (RISC) guide that had been used since 2001.  Some of the important characteristics of the Remediation Closure Guide are that: remediation objectives have replaced hard and fast default closure levels; the Conceptual Site Model may lead to increased up-front costs but may reduce the amount of remediation needed; and the guide is intended to be flexible to allow for alternative remediation approaches.  It is important that environmental attorneys and other environmental professionals stay on top of these and other changes at IDEM.

Thursday, April 5, 2012

Law and Economics and the Pollution Exclusion; or Why Flexdar is Right

In stark contrast to the Indiana Supreme Court's recent decision in Flexdar (more about which is here), the Seventh Circuit Court of Appeals recently came down with a case that bends over backwards to interpret the absolute pollution exclusion to achieve the optimal outcome for insurance companies.  At issue in Scottsdale Indemnity Company v. Village of Crestwood, 2012 U.S. App. LEXIS 5069 (7th Cir.) was an absolute pollution exclusion that purported to exclude losses for bodily injury, property damage, or personal injury "arising out of . . . alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants' at any time," and also excluded coverage for expenses arising from orders for "cleaning up . . . or in any way responding to, or assessing the effects of pollutants."  "Pollutants" were defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkilis, chemicals and waste."


The Village of Crestwood, Illinois got its drinking water in part from wells that were contaminated with PCE, a solvent commonly used in drycleaning.  Residents sued for damages, claiming they contracted cancer due to ingesting the PCE in their drinking water.  Crestwood turned to its insurers, who denied coverage based on the above exclusion.  The Court, in an opinion by Judge Posner, held that PCE was a "contaminant," and therefore a "pollutant."  Thus, there was no coverage.  However, the court didn't just stop there, as it acknowledged it could have.  Instead, it went into a long discussion of the business model of insurance companies and reached the result it did because that result is, according to the court, the most compatible with the business model of insurance companies.  The court went into this digression in the first place because it acknowledged that the pollution exclusion, if interpreted literally, would exclude coverage for accidents caused by "pollutants" even if they aren't acting like "pollutants."  The example the court gave was a tanker truck full of PCE crashing into a bridge and spilling that PCE all over the highway.  If another driver skidded in the PCE (which is a liquid) and crashed, a literal interpretation of the pollution would exclude coverage.  But of course, that result is absurd.  


The Indiana Supreme Court, in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996), acknowledged the same thing with a similar hypothetical.  Kiger involved a gas station, and the court noted that if a customer were to slip and fall on grease, any resulting liability would be excluded by a literal reading of the pollution exclusion.  But the Indiana Supreme Court, in Kiger and again in Flexdar, used the rules of construction applicable to insurance policies, and really to contracts generally, to conclude that the exclusion is ambiguous and overly-broad and, thus, unenforceable.  The Seventh Circuit, following Illinois law, bent over backwards to enforce the exclusion in this case.  To be fair, Illinois law follows the "situational" approach, enforcing the exclusion when the harm involved is "traditional environmental pollution."  (That phrase, incidentally, always brings two images to my mind.  The first is a metal drum, oozing green gunge, and sporting a tri-corner hat.  The other is the "Tradition" song and dance routine from Fiddler on the Roof.  Because where would we be without traditional environmental pollution?)


In order to determine whether the seepage of PCE into Crestwood's wells was "traditional environmental pollution," the court went into a long discussion of why insurers developed the pollution exclusion and the business of insurance.  It's "Law and Economics of Insurance."  What it is not is an analysis of the language of the pollution exclusion based on the rules of contract interpretation.  I understand the critique of legal reasoning that claims it's just a screen to hide policy preferences, and that a wily argument can use any rule to justify any action.  And I have read many opinions that pay lip service to contra proferentem and other rules of construction, but then ignore those rules in actually deciding the case.  But with the Illinois Supreme Court having already decided that the rules don't apply to the pollution exclusion, we are left with judges falling back on what they think the outcome should be, with essentially no policy prescriptions or legal reasoning to guide them.  So the Seventh Circuit thinks that if insurers covered pollution losses, they'd all go out of business (and you should read the opinion to see just how dire the court sees things; according to this analysis, there should be no insurance available in Indiana at a reasonable rate, since insurers, who have covered pollution liability here for 15 years, should all have left a decade ago due to the dreaded "adverse selection.")  


But the question that I was left with was "why should the court bend over backward to enforce this exclusion?"  The insurance companies, after all, drafted it themselves.  If a literal application of this exclusion is unenforceable (which the court acknowledged it is), why not tell the insurers to draft a better exclusion?  The Village argued in part that, because it didn't cause the pollution (the PCE was introduced by a drycleaner), the exclusion shouldn't apply to it.  The court rejected that argument, stating that "[t]he pollution exclusion would be largely nugatory" if only the "original author [of the pollution's]" coverage were excluded.  But why is it so important that the exclusion not be "largely nugatory?"  Why are we so concerned that this exclusion has to mean something?  Why not tell the insurers that if they want their exclusions enforced, they need to draft them with an eye toward the plain, simple, and almost universal rules of construction that courts at least say they use to interpret insurance policies?  Such an approach would lead to better-written policies, and would prevent the courts from being in the awkward position of determining what an exclusion means based on how that meaning accords with the needs and inner-workings of the insurance industry.  The whole reason for writing a policy is to explain what is and isn't covered.  If the insurance company can't look out for its own interests by drafting a clear exclusion, the courts should not step in and do their job for them.

Wednesday, March 28, 2012

EPA Releases Proposed GHG Emissions Standard for Power Plants

On March 27, 2012, the EPA released its proposed new source performance standard (NSPS) for carbon dioxide (which EPA is calling “carbon pollution” in its press releases) from electric utility generating units. The proposed emissions limitation is an output-based standard of 1,000 pounds of CO2 per megawatt-hour (lb. CO2/MWh).  Conventional coal-fired plants currently average about 1,800 lb. CO2/MWh.  The proposed new standard is based on the performance of natural gas combined cycle (NGCC) technology.
   
In other words, any new stationary source will need to be a natural-gas fired plant, a renewable energy facility, or a coal plant built with some type of carbon-capture (CCS) technology.

EPA does not attempt to mask its intent with this new proposed standard: the elimination of new coal-fired power plants in the U.S. (although EPA does indicate in the proposal that coal-fired power plants may have a limited useful purpose in terms of "promoting energy diversity").   


EPA recognizes that coal-fired power plants will only be able to achieve the 1,000 lb. CO2/MWh standard by incorporating expensive carbon capture and sequestration (CCS) technology, but speculates that this technology may become more affordable in the future and that sources may be able to secure funding from the federal government for CCS projects. The proposed regulation would allow coal (and pet coke) fired sources to be subject to an 1800 lb. CO2/MWh standard for the next 10 years, but these sources would then be subject to a 600 lb. CO2/MWh for the subsequent 20 years (resulting in a 1000 lb. CO2/MWh average over the 30 year period).

The proposed NSPS would not apply to “transitional sources” – those that have acquired a complete PSD permit prior to March 27, 2012 and that commence construction within 12 months. It also would not apply to existing EGUs whose CO2 emissions increase as a result of installation of pollution controls for conventional pollutants (such as SCR dampers).

At this point, EPA has only proposed the NSPS for new and modified sources under §111(b). Emissions guidelines for existing sources under §111(d)—which will be converted into performance standards by the states (in a process much like the SIP process)—are referenced in the proposal, but EPA said yesterday in a conference call that it currently has no plans to regulate existing power plants.

The comment period will run 60 days from the date the proposed rule is published in the Federal Register—which has not happened yet. EPA will also hold public hearings on the proposal, the dates, times and locations of which have not yet been announced.

You can read the full text of the proposed rule here
.  More on this to come....

Thursday, March 22, 2012

The Absolute Pollution Exclusion is STILL Ambiguous in Indiana

Thanks, Colin, for the shout-out on Flexdar.  The vast bulk of the credit for this goes to George Plews and Jeff Featherstun, both for the outcome of this case and the cases that preceded it.  George was the lead attorney for the policyholders in Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1997) and Seymour Mfg. Co. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996), and Jeff appeared in Seymour (though in talking to him, I'm pretty sure he also had a hand in Kiger). 

Flexdar is yet another case asking whether the absolute pollution exclusion is ambiguous.  The Indiana Supreme Court, for the fourth time, answered yes.  As I mentioned in a previous post, the absolute pollution exclusion is one of the most heavily-litigated clauses in modern insurance policies.  It normally states that the policy excludes losses caused by "pollutants," and defines pollutants as:

Any solid, liquid, gaseous or thermal irritant or contaminant, including vapor, soot, fumes, acids, alkilis, chemicals and waste.

In Kiger, which is the ur-pollution exclusion case in Indiana, the Indiana Supreme Court said that this exclusion could not be used to preclude coverage for a gas station whose tanks leaked, necessitating an extensive environmental remediation.  The insurance company pointed to the policy's pollution exclusion and reasoned that gasoline contamination was pollution, as therein defined, and therefore no coverage existed.  The Supreme Court, in an opinion by Justice De Bruler, said not so fast.  "We begin by noting one oddity of American States' [the insurer] position.  That an insurance company would sell a "garage policy" to a gas station when that policy specifically excluded the major source of potential liability is, to say the least, strange."  The Court when on to hold that, since gasoline is not always a pollutant, and indeed is the main product that a gas station sells, the pollution exclusion was ambiguous.  It was therefore read against the insurer, who drafted it, and was unenforceable.  The cleanup was covered under the policy.

In Flexdar, State Auto tried to distinguish this case from Kiger seized on the fact that Kiger involved gasoline contamination caused by a gas station, whereas the contamination in Flexdar was caused by something that was only a minor part of the policyholder's business.  Flexdar was a company that manufactured rubber stamps and printing plants was believed by the Indiana Department of Environmental Management to have been responsible for contaminating the groundwater around its plant with TCE.  TCE is a chlorinated solvent, and Flexdar used that solvent to clean some of its equipment (though it is still not clear that Flexdar was, in fact, the source of the contamination).  But TCE was not a major part of Flexdar's business. 

The Supreme Court, in an opinion by Justice Rucker, wasn't buying it.  The Court held that the absolute pollution exclusion is ambiguous because "practically every substance would qualify as a 'pollutant' under this definition, rendering the exclusion meaningless."  Slip Op. at 7.  The Court went on to reject State Auto's suggestion that Indiana follow other states, such as California, that recognize the pollution exclusion as ambiguous, but nonetheless enforce it when "traditional" environmental pollution is involved.  Justice Rucker wrote that that approach is "problematic because the concept of what is a 'traditional' environmental contaminant may vary over time and has no inherent defining characteristics."  Slip Op. at 8.

As it stands, essentially three approaches to the pollution exclusion now exist.  There's the California "traditional environmental pollution" approach, the "literalist" approach followed in, among other states, Alabama, and the Indiana approach, which says that the absolute pollution exclusion is a dead letter.  If you want to exclude pollutants, name them.  Otherwise, the courts will not go back and try to fix the problems that the insurers' own poor drafting created.

I could go on and on about the absolute pollution exclusion, but I'll leave it at this for now, except to say that the infamous (in my opinion, anyway) "curry powder" case I blogged about a month ago also got a mention in Justice Rucker's opinion as an example of the "literalist" approach to the pollution exclusion. 

Indiana Supreme Court Finds Pollution Exclusion is Still Ambiguous!

Congratulations to Sean Hirschten for a win before the Indiana Supreme Court in State Automobile Mutual Insurance Company v. Flexdar, Inc.  Sean worked with George Plews and Jeff Featherstun on this case, which has a significant impact on the practice of environemntal law in Indiana.  The Indiana Supreme Court held that the absolute pollution exclusion in insurance policies is still ambiguous and does not bar insurance coverage for environmental cleanups.  

Stay tuned for a lengthier discussion of the impact of this decision, but I wanted to get an initial shout out to Sean!

Supreme Court Rules for Landowner in Wetlands Dispute

The U.S. Supreme Court yesterday issued its most anticipated decision in the environmental arena this term in Sackett v. U.S. Environmental Protection Agency - a case that has been dubbed a sort of David vs. Goliath battle by property rights advocates - finding in favor of the landowner and against EPA.   

T
he basic facts of Sackett are relatively straight-forward: the Sacketts owned a residential lot near Priest Lake, Idaho and were preparing to build a home there.  After they performed grading and fill work at the site, EPA officials served the couple with an administrative compliance order advising them that their parcel constituted wetlands subject to federal permit jurisdiction under section 404 of the Clean Water Act.  The order directed the Sacketts to restore the lot to its original condition without delay; and threatened the Sacketts with substantial daily fines (quantified by the Solicitor General at oral argument as up to $75,000/day) for non-compliance with the CWA and administrative order.

The landowners then sought a hearing to make their case that the property was not actually a wetland.  This request was denied and the Sacketts filed suit in federal district court to challenge EPA’s wetlands classification of their lot.  The district court dismissed their lawsuit, holding that EPA administrative compliance orders issued under the CWA do not constitute final agency actions subject to judicial review.  The Ninth Circuit affirmed, joining numerous other federal circuits that had previously come to the same conclusion.

The Supreme Court disagreed, holding that a compliance order issued under the CWA is final agency action under the APA and subject to judicial review.  The Supreme Court did not reach the issue of whether EPA violated the Sacketts' due process rights by depriving them of the opportunity for judicial review.  Had the Court reached this issue, it would likely have had impacts on administrative law far beyond the wetlands context.  Instead, the Court restricted its opinion to the question of whether the administrative compliance order was a final agency action, and found that it was.

This decision will likely make life more difficult for EPA regulators, requiring the agency often to engage in costly litigation before actual compliance with its administrative orders is required.  But a system in which EPA can use the threat of significant daily fines in order to force compliance without the landowners having any opportunity for judicial review is inequitable and was in need of fixing.  Judicial review should also reduce waste in many cases because it will allow courts to decide disputed issues before the landowner is required to pay significant compliance costs.  This is particularly important when the issue, as in Sackett, is whether EPA has jurisdiction over the site at all.  Presumably the availability of judicial review will also make EPA think twice before denying a request for a hearing from a landowner.  

The full opinion of Sackett v. EPA can be found at http://pub.bna.com/lw/101062.pdf.  

Monday, March 19, 2012

March Madness!

We haven't posted on the Monitoring Well in a few weeks.  This has to be because of the dreaded time suck of the NCAA tournament.  Every year new studies come out showing that office productivity and server speed drops during the first week of the tournament as everyone is checking their brackets and their favorite teams' scores.  In an interesting article, Michael Crom of the Dale Carnegie Institute suggests that companies embrace the inevitable and use March Madness to boost employee engagement in the office, through events like viewing parties and encouraging bracket pools.  As a die hard sports fan I'm all for this approach.


OK, enough blogging for me for a bit.  I need to get back to daydreaming about IU knocking off Kentucky again.  Go Hoosiers!

Wednesday, February 29, 2012

EPA Proposes to Halt Plans to Expand Greenhouse Gas Permitting Requirements to Smaller Sources

The U.S. Environmental Protection Agency (EPA) is proposing not to change the greenhouse gas (GHG) permitting thresholds for the Prevention of Significant Deterioration (PSD) and Title V Operating Permit programs to include smaller sources of GHGs, as it had originally planned.  

EPA's "tailoring rule" administratively altered the GHG applicability thresholds for the PSD and Title V programs of the Clean Air Act.  The rule was designed to initially subject only the largest facilities that emit GHGs to the regulations, then subsequently expand to phase in smaller sources by lowering the applicability levels.  The next phase was to begin in July 2013, with EPA conducting a rulemaking in 2011 to determine the new, lower threshold levels.  But EPA is now proposing to leave the program as is rather than expanding it.   

While EPA claims that the decision not to expand the program is because "the current approach is working well . . . [and] state permitting authorities are currently managing PSD permitting requests," it is unclear why the plans for the program are being altered if it is working so well.  According to EPA, as of December 1, 2011, EPA and state permitting authorities have issued 18 PSD permits addressing GHG emissions.

It is possible that EPA is waiting to see what happens in the legal challenges to the four key pieces of the EPA's suite of GHG regulations--the oral arguments for which are taking place in the Circuit Court for the D.C. Circuit this week--before pushing ahead to expand the program.   

EPA will accept comments on this proposal for 45 days after it is published in the Federal Register. A public hearing will be held on March 20, 2012, in Arlington, Virginia.

Tuesday, February 28, 2012

Court Vacates EPA’s Self-Imposed Stay on Boiler MACT Rules

The U.S. District Court of D.C. recently vacated EPA’s “Delay Notice” on the Boiler MACT rule it promulgated in February 2011 (and the related solid waste incinerator rule), leaving uncertainty as to the rule’s current effect and whether regulated entities will be required to meet its upcoming compliance date of March 21, 2014.  This is the latest in a long line of legal challenges involving the Boiler MACT rules that has, in the words of Foghorn Leghorn, caused more confusion than a mouse in a burlesque show. 

On February 11, 2011, EPA promulgated standards regulating hazardous air pollutants from Industrial, Commercial, and Institutional Boilers and Process Heaters (referred to as “Boiler MACT”) and Commercial and Industrial Solid Waste Incinerators (“CISWI”).  Numerous environmental and industry groups appealed the rules to the Court of Appeals for the D.C. Circuit.  Due to serious concerns raised about the rules by the public and regulated community after their promulgation, EPA elected to place a stay on their implementation in order to reconsider their content and seek additional comments.


Specifically, EPA found in its Delay Notice:
 
justice requires postponing the effectiveness of these rules. . . . EPA has identified several issues in the final rules which it intends to reconsider because we believe the public did not have a sufficient opportunity to comment on certain revisions EPA made to the proposed rules. . . . In addition, EPA received data before finalizing both rules but was unable to incorporate that data into the final rules given the court deadline for issuing the rules, which the Agency was unable to extend. 
Federal Register, Vol. 76, No. 96 (May 18, 2011), pp. 28662–28664, at  http://www.gpo.gov/fdsys/pkg/FR-2011-05-18/pdf/2011-12308.pdf (May 25, 2011).

The Sierra Club immediately challenged the Delay Notice in the U.S District Court of D.C.  Then, in January 2012, the court held that the EPA’s action in issuing the Delay Notice was arbitrary and capricious and vacated the stay.  EPA argued that the stay was allowed because of the pending judicial review in the Court of Appeals, which is a legitimate basis for a stay.  However, the court vacated the Delay Notice because EPA failed to apply the proper four-part test for determining whether a stay was warranted and EPA also explicitly stated that the stay was actually for its own reconsideration of the rules rather than for purposes of judicial review.

EPA has released a proposal for amendments to certain elements of the rules and indicated that it expects to complete its reconsideration of the rules by April 30, 2012, with the final revised rules expected in the fall of 2012. Technically, now that the stay has been vacated, the rules that were published in February 2011 are in effect and require compliance with emissions limits by March 21, 2014 and with certain interim notification deadlines that have already passed.  In order to reduce confusion caused by the vacatur, EPA has now issued a "No Action Assurance" letter to make clear that it will not pursue enforcement of any violations associated with failure to meet initial notification deadlines. This No Action Assurance will be in effect until new compliance deadlines are set by EPA.

The final revised Boiler MACT rule, when published, will extend the compliance date to 3 years from the date of its publication.  Even then, however, the rules are still subject to change as a result of the judicial review by the D.C. Court of Appeals, which is expected to rule on the challenges to the rules in late fall 2012.  In addition, the deadlines may be altered by Congress to allow EPA more time to complete its reconsideration.

Monday, February 27, 2012

EPA Continues Delay on Greenhouse Gas Performance Standards for Power Plants

The Environmental Protection Agency has missed another deadline for proposing the New Source Performance Standard (NSPS) for greenhouse gas (GHG) emissions from electric utility steam generating units subject to 40 C.F.R. part 60, subpart Da ("EGUs").  This is now the third time the EPA has missed a deadline for promulgating the proposed standard.

As described in more detail here, EPA is required to establish the performance standard under a settlement with the Sierra Club, Natural Resources Defense Council, Environmental Defense Fund and several states.  After missing previous court-imposed deadlines, the EPA set a late January 2012 deadline for itself, which has now passed.  While EPA continues to claim that release of the proposed rule is imminent, there is no clear indication when it will actually be released.  The settlement agreement requires the EPA to publish the final rule by May 26, 2012, a deadline which now will almost certainly be missed given the delays in releasing the proposed rule.

These delays present a double-edged sword for the entities that may be affected by the regulation.  While  businesses are generally not in favor of the imposition of onerous regulations, they also value the ability to plan for the future.  Given the recent barrage of administrative, judicial and legislative actions aimed at developing, changing or halting efforts to regulate air emissions, there is a lot of uncertainty and seeming instability in the regulatory scheme, which presents problems for regulated entities seeking to remain in compliance.

Presumably the EPA is taking so long to propose the EGU NSPS to avoid a train wreck similar to that surrounding the passage of the Boiler MACT rules.  In addition, EPA has indicated that the development of “emissions guidelines” that the states will turn into enforceable standards for existing EGUs pursuant to Section 111(d) of the Clean Air Act (as opposed to federal performance standards that will apply to new and modified units under Section 111(b)) is contributing to the delay because it is a complicated and relatively novel process.  However, there have been some indications from EPA that these emissions guidelines regarding existing EGUs may not even be included in the proposed rule that is expected to come any day now and may be proposed separately at a later date.

 For more information on this or other related environmental law questions, please contact Dan Cory.

Wednesday, February 22, 2012

Take Warning! Your Spice Cabinet May Contain Pollutants!


Curry powder - delicious spice, or pollutant?
 America beware!  If your spice cabinet is anything like mine, it harbors more than just tasty flavorings to add to your food.  It contains pollutants!  What pollutants, you might ask, does your spice cabinet contain?  Well, according to many insurance policies (possibly even your own homeowners policy), just about any substance under the sun can be classified as a pollutant.

The so-called "absolute pollution exclusion" is one of the most litigated clauses in insurance policies.  In its most common form, it states that the policy excludes coverage for losses caused by "discharge, dispersal, seepage, migration, release or escape of 'pollutants.'"  "Pollutants" are normally defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including vapor, soot, fumes, acids, alkilis, chemicals and waste."  This exclusion first entered policies after congress and the states started passing laws, like the CERCLA or "Superfund" statute, making companies liable for environmental clean up operations.  Insurers claimed they didn't want to have to pay for such expensive operations, but as we'll see, they've recently become quite creative in the application of this exclusion.

The insurance industry generally contends that this scheme is perfectly straightforward.  In, for instance, a first-party property policy, one that claims to cover "all risk of loss," but then excludes certain risks, you look at what caused the loss, and ask "did it result from the discharge, dispersal, seepage, etc. of a pollutant?"  If you're unsure whether a "pollutant" was involved, you just look to the definition.  And here's where things get interesting.  If you read that definition literally, it can encompass anything and everything in the known universe (perhaps excluding dark matter, but I don't know enough about dark matter to analyze whether it's a pollutant, and at any rate, I've never heard of it causing an insured loss.)  For instance, an inkpen is a (1) solid; if someone were to poke me in the eye with it, my eye would be both (2) irritated, and (3) contaminated with a foreign object.  Thus, the injury to my eye would be excluded under a literal reading of the pollution exclusion.  You might say "that's ridiculous!  Even if the definition could be read to include ink pens, no court would ever hold that.  And what the heck does this have to do with spice cabinets?" 

Consider what the Eleventh Circuit Court of Appeals did in Maxine Furs, Inc. v. Auto-Owners Insurance Company, 2011 U.S. App. LEXIS 6706 (11th Cir. Unpublished).  There, a fur shop was located next to an Indian restaurant.  The two businesses shared a ventilation system, and eventually the furs became permeated with the smell of curry powder.  The fur shop had their wares cleaned, and made a claim for the bill to their insurance company, Auto-Owners.  Auto-Owners looked at the pollution exclusion and said, "nope, not covered.  Curry smell is a 'contaminant,' so it's excluded under the pollution exclusion."  My first thought on reading this case was "that's ridiculous!  Even if the definition could be read to include curry powder, no court would ever hold that."  But after the fur shop sued the insurer, both the district court and the court of appeals agreed with the insurer, saying curry smell is a pollutant.  So now we have an exclusion that was originally written to allow insurers to escape paying for the extraction of mercury from the Raritan River being used to exclude coverage for cleaning furs that smell like garam masala. 

Fortunately, most states don't go as far as Alabama in the extent to which they will read the pollution exclusion literally.  Unfortunately, most don't take their own rules of insurance policy construction seriously enough to do with this exclusion what ought to be done: ignore it.  I'll talk about that in another post.  But for now, you may want to consider calling a toxic waste disposal expert the next time you decide to rearrange your spice cabinet.

Sunday, February 19, 2012

NRC Downgrades Palisades Nuclear Power Plant

I have been going to my grandma's lake house in Palisades Park in Covert, Michigan my whole life.  Palisades Park is within walking distance of the Palisades nuclear power plant.  Until recently the power plant has operated without major incident.  In each of the last two years, however, the Nuclear Regulatory Commission ("NRC") has downgraded the plant's ranking.

The NRC rates reactors green, white, yellow, and red, in descending order.  Most of the country's reactors are in the highest green category.  At the end of 2011 the plant was downgraded to white and on February 13 the plant was downgraded to yellow because of two violations.  The most serious violation involved an equipment malfunction that a manager said could have killed someone.  The yellow rating requires that the plant undergo increased NRC inspections.  The Palisades plant has 30 days to appeal the decision.  

I'll still go to my grandmother's lake house this summer, but I'll definitely keep an eye on the Palisades plant's status.  For more information, please read the Detroit Free Press' article.  Also, thanks to my aunt Kitzie Connor for forwarding the article.

Wednesday, January 18, 2012

Declaratory Judgments an Important Tool for Establishing Liability Early in CERCLA Litigation

Attorneys representing Potentially Responsible Parties (“PRPs”) in CERCLA litigation need to consider the use of a declaratory judgment action to establish liability early in the process in order to save their clients money and, in many cases, avoid the burden of unnecessary litigation altogether.
As one commentator has described, declaratory judgment claims provide "a speedy means of resolving a dispute with a rifle shot, rather than employing the full artillery of a protracted lawsuit, and if the lawyer acts quickly, it can be deployed before a full-blown war has erupted." [1]
Declaratory judgments are particularly useful in CERCLA cases because the broad scope of activity that makes entities potentially responsible parties (PRPs) often leads to the presence of a number of parties in a case that are not actually liable under CERCLA. A declaratory judgment action can provide these parties with a way to get out of the case relatively quickly, before discovery begins regarding the extent and sources of contamination, costs of remediation or removal and other complex technical matters, which can drag on for years and be very expensive.
In addition, a declaratory judgment action can be useful in pursuing insurance coverage in connection with a claim by establishing early in the litigation that a policyholder is liable.
Under CERCLA, §113(g)(2), declaratory judgments are mandatory as to future response costs or damages, but only for §107 actions. Accordingly, some courts have outright rejected claims by PRPs for a declaratory judgment in §113 contribution actions. E.g., Ceramicas Industriales, S.A. v. Metropoloitan Life Ins. Co., 2009 WL 331262 (S.D.N.Y. 2009) (CERCLA does not authorize a declaratory judgment to be brought under § 113(f)(3) action).
However, the U.S. Court of Appeals for the First and Sixth Circuits have held that declaratory judgments are also available in §113 actions seeking contribution. See GenCorp, Inc. v. Olin Corp., 390 F.3d 433, 450 (6th Cir. 2004); United States v. Davis, 261 F.3d 1, 46-47 (1st Cir. 2001). And, in a recent opinion, the Second Circuit agreed, though it didn’t find it necessary to determine whether the authority for the declaratory judgment action derived directly from CERCLA. See New York v. Solvent Chem. Co., Nos. 10-2026 et al., 2011 U.S. App. LEXIS 25141 (2d Cir. N.Y. Dec. 19, 2011) (finding that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), provides sufficient, independent authority for entry of a declaratory judgment in contribution action).
In other words, declaratory judgments are available in CERCLA actions, regardless of whether the authority for them derives from CERCLA itself or from the Declaratory Judgment Act.  PRPs and their attorneys should consider a declaratory judgment claim early in a CERCLA case as a means of minimizing costs or—potentially—avoiding unnecessary litigation altogether.


[1] John W. Amberg, Overview of Declaratory Judgments, NITA Commentary, 28 US NITA prec § 2201 (2011).

Wednesday, January 11, 2012

2010 Toxics Release Inventory

On January 6, 2012, IDEM released its analysis of Indiana's 2010 Toxics Release Inventory ("TRI"). The TRI tracks releases and transfers of regulated chemicals. TRI data is collected annually from industries that manufacture or process more than 25,000 pounds of a listed chemical or use more than 10,000 pounds of a listed chemical during the year.

IDEM's analysis shows an increase in the number of releases from the 2009 reporting year. On-site releases to land, water, and air increased 18% in reporting year 2010. IDEM Commissioner Thomas Easterly says that the 2010 TRI results differ from the "TRI data in recent years [that] indicate[d] that overall releases continue to trend downward, despite economic fluctuations.” Whether this is a sign that local manufacturing is increasing, that industries are not doing enough to limit their environmental releases, or that IDEM and industries are doing a better job tracking releases remains to be seen. One important takeaway is that industries' need for legal representation in complying with IDEM and EPA regulations is not going away.

For more information, please review EPA's TRI dataIDEM's summary information, and IDEM's press release.

Coal Mining, Economics, and Regulation

While I've been on vacation (stay classy, San Diego!) environmental law in Indiana has been making major news and raising interesting issues.  This story and this editorial from recent editions of the Indianapolis Star discuss the Bear Run Coal Mine in Sullivan County.  As production there ramps up, the mine is expected to become the largest coal mine in the eastern U.S.  The Indiana Department of Environmental Management (IDEM) is nonetheless regulating Bear Run under a general permit.  The federal EPA has urged IDEM to regulate Bear Run under a more restrictive individual permit, but IDEM has declined to do so. 

This cases raises several fascinating issues, including the environmental price of economic development, the dangers and benefits posed specifically by coal mining, and a host of others.  I want to focus on the one I found most interesting.

While IDEM claims it is following a less-stringent course at Bear Run for regulatory reasons (it doesn't consider Bear Run unique enough to require an individual permit), Bruce Jaffee, a professor of business economics at IU's Kelley School, points to other factors.  Specifically, he notes that the price of natural gas has plummetted lately.  This is due in large part to hydraulic fracturing, or "fracking," that makes getting at certain forms of natural gas much easier and cheaper than it used to be.  Unfortunately for Indiana, we have bet our energy future in significant part on the new coal gasification plant in Edwardsport.  So instead of making power from cheap natural gas, we're going to buy more expensive coal and create gas out of it for our power.  Jaffee thinks the less-expensive regulation at Bear Run is a way to try to keep utility costs in line by keeping down the price of coal that goes to Edwardsport.  (In a related note, from perhaps an opposite angle, see this NPR story on how the falling price of natural gas has made investments in solar power less attractive.)

Power plants take a long time to build.  What might look like a smart move at one point (betting on coal) may look less attractive when a new technocology, here fracking, comes along to upend the status quo.  But maybe things will change again as fracking comes under greater scrutiny (h/t Jeff Lorenzo at the Indiana Environmental Law Blog). 

I should add that I have no reason to disbelieve IDEM's claims that it is choosing a general permit at Bear Run over an individual permit for regulatory, not economic, reasons.  I just find the economic analysis interesting, and it gives me a reason to discuss energy prices and the different aspects of the market.  Betting on coal may prove to be more costly than it looked when the decision was made, and that cost could not necessarily have been predicted due to the emergence of new technologies.  I think that's fascinating.