Gardere Environmental Action Report

03 November 2010 Publication

Case Updates

Obama Administration Asks Supreme Court to Deny Climate Change Nuisance Suits

Siding with the defendants, the Obama administration has urged the U.S. Supreme Court to vacate the 2nd U.S. Circuit Court of Appeals' decision in American Electric Power v. Connecticut, which allowed Connecticut and several other states to seek greenhouse gas reductions under federal common law nuisance claims. (American Electric Power Co. v. Connecticut, No. 10-174, brief filed 8/24/10). Representing the Tennessee Valley Authority, a quasi-government agency, acting Solicitor General Neal Katyal asked the court to remand the case back to the 2nd Circuit to consider whether allowing the case to proceed would undermine recent greenhouse gas regulatory actions by the EPA. Even though TVA is a party in the case, the solicitor general's voice is pretty powerful with the Supreme Court.

The 2nd Circuit decision is considered by many to be the most significant decision currently before the Supreme Court. As discussed below, Gardere filed an amicus brief in the U.S. Supreme Court in support of a petition for certiorari.

No Quorum: The 5th Circuit Dismisses Appeal on Hurricane Katrina Global Warming Case

"A court without a quorum cannot conduct judicial business." With that, in Comer v. Murphy Oil USA, the 5th U.S. Circuit Court of Appeals dismissed an appeal from a landmark panel decision issued in October 2009 in a public nuisance case. The history leading up to this decision is as follows. By reversing a district court decision that found that the climate change case created a non-judicable political question, a three-judge panel reinstated plaintiffs' claims that greenhouse gas emissions from utility, chemical and oil companies had increased the intensity of Hurricane Katrina. The defendants appealed the decision to the entire 5th Circuit which agreed to rehear the case en banc; a decision which automatically vacated the panel opinion. Most assumed the 5th Circuit would reverse itself, setting up the case up for review by the U.S. Supreme Court. This never happened, however, because the court lost its quorum during the briefing stage after an eighth judge on the 16-judge court recused himself. The court sought briefings by the parties to determine its options. Ultimately, the court ruled that the three-judge panel decision to vacate the reversal stood, but that the loss of quorum left the court with no choice but to dismiss the appeal. Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009). In response, the plaintiffs have filed a writ of mandamus with the U.S. Supreme Court asking it to order the 5th Circuit to either reinstate the vacated panel opinion or hear the appeal. Interestingly enough, however, the plaintiffs did not petition for certiorari of the district court opinion.

Fifth Circuit Limits Use of CERCLA's "Arranger" Liability

Can a contractor that unknowingly damages an underground pipeline and sets in motion years of methanol leaks be held liable for arranging disposal of hazardous wastes? Not under CERCLA and its state counterpart, the Texas Solid Waste Disposal Act. That was the ruling the 5th Circuit recently affirmed in Celanese Corp. v. Martin K. Eby Construction Co. While installing an underground water pipeline in 1979, Celanese's existing methanol pipeline was unknowingly damaged by Eby. Celanese discovered its pipeline was leaking in 2002, and by 2008 it had incurred millions in costs removing and disposing of hundreds of thousands of gallons methanol that has leaked from the damaged pipeline. Celanese traced the leak back to Eby's project and sought to recover its remedial costs from Eby by claiming that Eby had "arranged for disposal" of hazardous substances. Based on undisputed evidence that the damage was unintentional and unknown to Eby, the district court concluded that Eby could not be liable as a CERCLA arranger. Relying on Burlington N. & Santa Fe Ry. v. U.S., 129 S. Ct. 1870 (2009), the 5th Circuit affirmed the decision, holding that to establish arranger liability required proof that Eby took "intentional steps" or planned "for the disposal of hazardous substances." This decision updates the 5th Circuit's decision in Geraghty & Miller v. Conoco, 234 F.3d 917, 929 (5th Cir. 2001), which had required "a ‘nexus' between a defendant's conduct and the disposal of the hazardous substance." Although Eby's backhoe operator knew he had struck "something" during the work, standing alone, that knowledge was insufficient to establish arranger liability under the BNSF standard.  The court also applied the BNSF standard in affirming dismissal of Celanese's claim under the Texas Solid Waste Disposal Act, holding that the Act should be construed consistent with CERCLA.

Beach Restoration Projects Are Not Impermissible Takings

A unanimous U.S. Supreme Court affirmed a Florida Supreme Court decision in Stop the Beach Renourishment v. Florida Dep't of Envtl. Prot., holding that the placement of fill onto submerged beach land owned by the state did not constitute a taking of privately owned beachfront property. According to the court, "The takings clause only protects property rights as they are established under state law, not as they might have been established or ought to have been established." Among the rights of Florida beachfront property owners are the rights to have access to the water, to use the water, to have an unobstructed view of the water and to receive automatic title to gradual accretions to their properties. The Florida beachfront property owners objected to a beach restoration program because it caused the submerged property to become public property. According to the court, no prior Florida decision had established the property owners had rights to contact with the water that were superior to the state's rights to replenish its beaches. The justices, however, went further and declared that future state court decisions could prohibit takings if "a court declares that what was once an established right of private property no longer exists."

Texas AG Moves to Block Federal Action on GHG Limits

On Sept. 16, 2010, Texas Attorney General Greg Abbott petitioned the U.S. Court of Appeals for the D.C. Circuit to keep various greenhouse gas emission limits from taking effect in January 2011. GHG limits are set to take effect in January 2011 for passenger vehicles and other greenhouse gas sources. Abbott argued that the regulations are based on faulty climate data and would hurt the Texas economy and jeopardize Texas jobs. Abbott stressed that the government has not proven that curbing GHG emissions is in the public's interest.

DOJ Asks Court to Create a Deepwater Horizon "Government Track"

Although not yet a party to the pending litigation, the U.S. Department of Justice has stated that it expects to file a civil suit related to the Deepwater Horizon explosion under the Clean Water Act, the Oil Pollution Act and possibly several other statutes. To expedite their claims, the DOJ has asked the Deepwater Horizon MDL court to give special consideration to government and state plaintiffs by setting up a "government track" because only government entities can make claims for certain damages, such as the loss of natural resources, tax revenues or royalties.

Louisiana Seeks to Hold Transocean Liable for Gulf Oil Spill

The State of Louisiana is asking a New Orleans federal judge presiding over the Deepwater Horizon Multi-District Litigation to rule that Transocean Ltd. is a responsible party under the Oil Pollution Act for the Gulf Oil spill. Transocean has only admitted to being liable for oil that leaked from the Deepwater Horizon Rig when it exploded and not for the 210 million gallons of oil that gushed from the BP well. In the suit the state is seeking a declaratory judgment that Transocean be deemed liable; Louisiana is not seeking to recover any costs or damages. The Deepwater Horizon Rig was carrying about 700,000 gallons of fuel when it exploded and sank in the Gulf of Mexico. This finding will have meaning in determining the contractual liability of the parties and the state.

Legislative/ Rulemaking

EPA Abandons Majority of Construction Stormwater Guidelines

About a year after finalizing its construction stormwater rule, EPA has abandoned the numeric turbidity limits after admitting they are flawed because EPA agreed it improperly interpreted data and could no longer support the 280-NTU numeric effluent limit. Among other requirements, EPA's December 2009 Effluent Limitations Guidelines established a numeric limit on the turbidity of stormwater discharges from large construction sites and required monitoring to ensure compliance with that limit. In August, EPA filed an unopposed motion in the 7th U.S. Circuit Court of Appeals, asking the court to vacate its numeric ELG. Wisconsin Builders Ass'n v. EPA. While the court granted EPA's request to remand the numeric ELG, it refused to vacate the ELGs, which remain enforceable. The court's ruling leaves states that are in the process of renewing general permits for construction stormwater in the awkward position of having to address EPA's admittedly flawed, but enforceable, ELGs while EPA goes through the administrative process of revising its rule.

EPA Widens Hydraulic Fracking Investigation

Earlier this year, EPA announced that it would conduct a comprehensive research study to investigate the potential adverse impacts that hydraulic fracturing associated with natural gas wells may have on ground and surface water. Amid growing public concerns that groundwater supplies may already be impacted, EPA announced that it will widen its investigation into the adverse effects of hydraulic fracturing. Toward that goal, EPA sent letters to nine companies currently using fracturing and asked that they disclose detailed information about the chemicals contained in fluids being used to open the underground rock formations. Although EPA framed the request as voluntarily, it advised the companies that the agency would use legal means to compel submissions, if necessary.

EPA Delays Air Toxics Rules for Boilers and Incinerators

To consider recently collected emissions data, EPA has decided to delay promulgation of three final rules that would require owners and operators of boilers, process heaters and incinerators to control emissions of toxic air pollutants. EPA now intends to issue final rules by Jan. 16, 2011, one month later than originally planned. The delay was in response to comments to EPA from 41 senators – 18 Democrats and 23 Republicans – and 106 members of the House of Representatives. The legislators complained that EPA's proposed rules could lead to significant job losses, more than EPA predicted, particularly for industries that rely on biofuels for their boilers, process heaters and incinerators. They asked EPA to create additional subcategories of emissions limits to provide operators with more flexibility. They also asked EPA to consider health-based standards that would not require boiler operators to install additional pollution controls if they can demonstrate emissions of toxic pollutants are below the level of concern for public health. EPA's regulatory analysis estimated fewer than 8,000 job losses in the short term and 6,000 job losses to 12,000 job gains in the long term. However, recent industry studies suggest that the rule would eliminate more than 300,000 jobs.

EPA Challenges SIPs that Don't Address GHGs

On Sept. 2, 2010, EPA released two draft rules for implementing the agency's new permitting requirements under the Clean Air Act's Prevention of Significant Deterioration program. In the first, EPA issued a proposed State Implementation Plan call, to find that the SIPs of 13 states, including Texas, are "substantially inadequate" because their PSD programs do not apply to new or modified greenhouse gas-emitting sources. EPA seeks to require the non-compliant states to issue revised SIPs within 12 months that address permitting requirements for greenhouse gas emissions under the PSD program consistent with the Tailoring Rule. EPA proposes publishing the final SIP call in early December 2010, which means that revised SIPs would be due in December 2011, unless a state has asked for an earlier deadline. In its second rule, EPA proposes assuming responsibility for PSD permitting via a Federal Implementation Plan for greenhouse gas emissions in states that do not timely submit compliant SIPs. Before assuming responsibility for PSD permitting via a FIP, EPA must determine that the relevant SIP is "substantially inadequate." It must also provide the state with a "reasonable" amount of time to cure its defective SIP; here EPA is proposing 12 months to submit corrective SIPs. Under EPA's proposal, new or modified large greenhouse gas sources may not be able to obtain PSD permits (and thus be denied to construct or modify some units if they have annual emissions exceeding 75,000 tons of carbon dioxide) because neither an approved SIP nor FIP will be in place until late in 2011.

TCEQ Proposes New Permitting Rules for Oil and Gas Facilities

Largely in response to Barnett shale concerns in North Texas, the Texas Commission on Environmental Quality has developed a new more stringent permit and permit by rule for oil and gas facilities. For example, the proposed PBR will include operating specifications and emissions limitations for typical equipment during normal operations, including production and planned maintenance and start up and shut down. It also specifically addresses the appropriateness of multiple authorizations at one contiguous property and includes revised criteria for registration and changes at existing authorized sites. Existing oil and gas facilities currently authorized under a PBR and that remain unmodified are not affected by this proposal except if they notify TCEQ by 2013 that they are operating under a historical PBR or standard permit. They must also meet planned maintenance start up and shutdown requirements by Jan. 5, 2012.

EPA Announced Voluntary De-Flexing Program

EPA announced a voluntary audit program that will allow Texas companies operating under flexible permits to de-flex and obtain new air quality permits that meet EPA requirements. This audit program allegedly offers protection from civil enforcement by the federal government, provided that companies with flexible permits agree to and complete the audit program. It requires, however, that companies allow a third-party auditor to review past operations, modifications and permitting activities, which will then serve as the basis for a new agreement with the EPA. Companies that enter the audit will no longer be subject to Clean Air Act enforcement actions. However, significant penalties may be sought by EPA in the course of de-flexing to settle alleged past violations. Companies that do not want to go through the audit process can negotiate directly with the EPA on a new permit system.

Harris County Attorney Proposes New Pollution Police

Pointing out that last year the Harris County Public Health & Environmental Services did not turn over a single pollution case to the county's district attorney, Harris County First Assistant Attorney Terry O'Rourke has begun promoting the creation of a new pollution police. Harris County Commissioner Steve Radack claims that polluters are operating with impunity because of the way the HCPHES department is run. In defense of her department's enforcement activities, current HCPHES Executive Director Herminia Palacio – who describes herself as a physician with police powers – noted that last year the department issued more than 1,000 violation notices and gave guidance to companies on how to comply with environmental regulations. Nonetheless, O'Rourke claims that an independent department could focus its efforts on checking smokestacks and pipelines and pursuing court-ordered cleanups. Moreover, he claims that the HCPHES "shouldn't be the same one whose job it is to kick the rear end of major companies and sinister polluters."

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