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.

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.

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.

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.

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.

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

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 data, IDEM'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.