Energy & Environmental Law Adviser

Court Limits the GHG Permit Rule to Align with UARG v. EPA

Posted in Air

In its recent decision in Coalition for Responsible Regulation, Inc. v. EPA, No. 09-1322 (D.C. Cir. Apr. 10, 2015), the D. C. Circuit Court of Appeals narrowed the United States Environmental Protection Agency’s greenhouse gas (GHG) permit rule (sometimes called the Tailoring Rule, 40 C.F.R. §§ 51.166(b)(48)(v) and 52.21 (b)(49)(v)) in accordance with the Supreme Court’s decision in Utility Air Regulatory Group (UARG) v. EPA, 134 S. Ct. 2427 (2014).

 In UARG v. EPA, the Court held that EPA could require best available control technology (BACT) reviews for GHGs only at facilities that would be subject to prevention of significant deterioration (PSD) for conventional pollutants, regardless of a source’s GHG emissions (so-called “anyway sources”). Relying on this holding, the court vacated the Tailoring Rule to the extent it requires sources to obtain PSD or Title V permits solely due to a potential to emit GHGs. The court also formally ended the cases challenging the Agency’s landmark motor vehicle GHG rules, endangerment finding, and remaining permit requirements – again, consistent with the Supreme Court’s ruling.

The court also ordered EPA to “consider any further revisions” to the rules that may be necessary. Presumably, this directs EPA to establish a de minimis threshold for GHGs that would apply in PSD or Title V permit actions. In the Tailoring Rule, USEPA used 75,000 tons of CO2e as a trigger, but now it must, consistent with the Supreme Court’s direction, consider setting an appropriate de minimis threshold.

Before the April 10 order, several facilities obtained PSD and/or Title V permits as a result of their GHG emissions. EPA plans to finalize a new rule by the end of 2015 for rescinding these permits. For more information and background on UARG v. EPA or the Tailoring Rule, see our June 25, 2014 and March 1, 2012 posts.

Ninth Circuit Holds District Courts Have Discretion in Accounting For CERCLA Private Party Settlement When Allocating to Non-Settling Parties

Posted in CERCLA

On April 2, 2015, the Ninth Circuit held that a district court has the discretion to determine the most equitable method of accounting for settlement between private parties when it allocates liability to a non-settling defendant in a CERCLA contribution action.  AmeriPride Serv. v. Texas Eastern Overseas, Case no. 12-17245 (9th Cir. Apr. 2, 2015).  The Ninth Circuit’s decision is consistent with previous case law from the First Circuit (Am. Cyanamid Co. v. Capuano, 381 F.3d 6, 20-21 (1st Cir. 2004)) but splits with case law from the Seventh Circuit (Akzo Nobel Coatings, Inc. v. Aigner Corp., 197 F.3d 302, 308 (7th Cir. 1999)), which has held that a court must use the pro tanto approach of the Uniform Contribution Among Tortfeasors Act when allocating liability to a non-settling defendant.

AmeriPride brought CERCLA § 107(a) and § 113(f) claims against Texas Eastern Overseas (TEO) related to a contaminated industrial site in Sacramento, California.  The district court granted a summary judgment motion filed by AmeriPride, holding that TEO was liable for AmeriPride’s response costs under CERCLA § 107(a) and that AmeriPride could recover amounts AmeriPride had paid in settlement to other parties from TEO under CERCLA § 113(f).  In an earlier order in the case, the court also said it would adopt the proportionate share approach of the Uniform Comparative Fault Act in allocating response costs.  Under this approach, the court must determine the responsibility of all parties that have settled, as well as those still involved in the litigation.  The non-settling parties are responsible only for their proportionate share of the costs, even if a settling party settles for less than its fair share of the injury. After trial on the equitable allocation of response costs between AmeriPride and TEO, however, instead of using the proportionate share approach the court utilized the pro tanto approach in allocating costs.  Under this approach, the settling parties are allocated the amounts set forth in the settlement agreements, regardless of whether those amounts were less than their fair share.  To the extent the settling parties paid less than their fair share, TEO was left bearing part of those costs.

On appeal, TEO argued that the district court should have used the proportionate share approach in allocating liability.  The Ninth Circuit explained that while federal common law has favored use of the proportionate share approach of allocating liability, there was strong evidence that Congress did not intend to apply the proportionate share approach to cases involving litigation among private parties.  Additionally, the court noted that CERCLA itself does not specify how private party settlements affect liability of non-settling parties.  Thus, the court held that a district court has discretion under CERCLA to determine the most equitable method of accounting for settlements between private parties in a contribution action.

TEO also argued that the district court improperly represented that it would use the proportionate share approach prior to trial and then changed to the pro tanto approach after trial.  The Ninth Circuit held that while a district court has discretion in deciding which approach it uses to account for settling parties, it must explain its decision and how that decision complies with CERCLA § 113(f).  The district court must also provide parties with reasonable opportunity to present evidence and argument on the fairness of the district court’s allocation approach.  Because the district court did not provide such an explanation or opportunity before switching from the proportionate share to pro tanto approach for allocation, the Ninth Circuit remanded the case to the district court for further proceedings.

Aggregation Update: Oil & Gas Industry Permitting Under Heightened Scrutiny in 2015

Posted in Air

Recent and anticipated litigation from the United States Environmental Protection Agency (EPA or the Agency) and environmentalists signals that permitting decisions involving whether to aggregate emissions from separate facilities will be at the forefront of environmental enforcement in 2015 and beyond. Schiff Hardin continues to closely follow these on-going developments, the results of which will likely have significant impact on the oil and gas industry. Continue Reading

Schiff Hardin Partner Josh More to Participate in New Coal Ash Regulation Webinar

Posted in Events

Schiff Hardin partner Joshua More will participate in a webinar discussion entitled “The New Coal Ash Regulations” on the EPA’s final rule regulating CCRs, focusing on charting a cost-effective course forward that will mitigate the potential for enforcement actions and citizen suits. Other topics of discussion include:

  • How to handle/control the cost of CCR regulations
  • Groundwater monitoring for current or soon to be closed ash facilities
  • Preparation of coal ash disposal facilities to comply with CCR regulations
  • Effluent limitation guidelines

Mr. More is a member of Schiff Hardin’s Environmental and Litigation Groups. His practice includes civil litigation, compliance counseling, regulatory advocacy and transactional support. He has extensive experience handling coal ash management issues, including beneficial use programs and remediation and closure of coal ash ponds.

The 90-minute interactive webinar will be held on April 22 at 1:00 p.m. For registration and more information, please click here.

FERC Issues Order to Show Cause and Notice of Proposed Penalty to City Power Marketing, LLC and K. Stephen Tsingas

Posted in Compliance

On March 6, 2015, the Federal Energy Regulatory Commission (FERC) issued an Order to Show Cause and Notice of Proposed Penalty (Order) to City Power Marketing, LLC and K. Stephen Tsingas (jointly, Respondents). The Order requires the Respondents to show cause why they should not be found to have violated the Federal Power Act and the Commission’s regulations prohibiting market manipulation by engaging in fraudulent Up To Congestion (UTC) transactions in PJM Interconnection L.L.C.’s (PJM) energy markets. The Order also requires City Power to show cause why it should not be found to have violated the Commission’s rules by making false statements and material omissions related to the existence of instant messages between partners in City Power discussing the alleged fraudulent conduct. Continue Reading

Monitoring and Testing (and Taxing): New York Appellate Court Imposes Sales Tax on Environmental Remediation Work

Posted in CERCLA, Compliance, Regulatory

Keeping with a growing trend, a New York appellate court in Exxon Mobil Corp. v. State of New York Tax Appeals recently upheld a ruling applying a sales and use tax assessment to environmental remediation work.

New York law has a provision imposing a sales tax on services related to “[m]aintaining, servicing or repairing real property, property or land…as distinguished from adding to or improving such real property, property or land, by a capital improvement.” 20 NYCRR 527.7(a)(1). The court held that this language was broad enough to extend to environmental remediation work. Exxon Mobil Corp. v. State of New York Tax Appeals Tribunal, No. 517504, 2015 WL 919788, at *2 (N.Y. App. Div. Mar. 5, 2015).

After an audit of Exxon, the New York Department of Taxation and Finance found that Exxon owed $500,000 in unpaid sales taxes on testing and monitoring of properties affected by petroleum spills. Exxon asserted that its monitoring and testing programs were not taxable because they were “intended to ascertain the condition of the affected property and not to remediate the petroleum spills.” Exxon Mobil Corp., 2015 WL 919788, at *2.

The court, however, found that the testing and monitoring were part of remediation efforts insomuch as they may lead directly to active remediation or the cessation of remediation. Testing and monitoring were therefore found to be an “integral part” of such remediation efforts and subject to a sales and use tax. Id.

FERC Issues Rulemaking Regarding Electronic Filing of Hearing Exhibits

Posted in Uncategorized

The Federal Energy Regulatory Commission (Commission) is continuing its practice of transitioning from hard-copy paper submissions to electronic filing procedures. In 2000, the Commission started accepting certain electronic filings through its eFiling system.  Later, in 2008, the Commission began the process of accepting tariff filings electronically through its eTariff system. In a Notice of Proposed Rulemaking (NOPR) issued earlier today, the Commission announced proposed changes to its hearing procedures to allow for the electronic filing of hearing exhibits.

The Commission’s current rules require that a hearing participant seeking to have an exhibit admitted must provide one copy of the exhibit to the presiding officer and two copies to the reporter. This requirement has become obsolete given that the Commission’s administrative law judges (ALJ) recently adopted revised practices for handling exhibits that eliminate the need to submit paper copies of exhibits during the hearing. The new ALJ policy instead requires that within 7 days after the hearing, participants must electronically file a Joint Exhibit List and Official Copies of each document offered into evidence during the hearing. Since the ALJs no longer require paper copies of exhibits, there is no reason for the Commission to continue such submissions.

This shift to electronically filed hearing exhibits is intended to further improve the efficiency and administrative convenience of the Commission’s hearing process. Electronic filings will reduce the burden and expense associated with preparing and submitting often voluminous paper exhibits during hearings and will better facilitate the compilation and transmittal of the hearing record. Comments on this NOPR are due 60 days after publication in the Federal Register.

The NOPR is available at: http://www.ferc.gov/whats-new/comm-meet/2015/031915/E-15.pdf

The ALJ’s new procedures for handling exhibits is available at: http://www.ferc.gov/legal/admin-lit/exhibits-hearing-record.doc

EPA Avoids Spoliation Sanctions, But D.C. District Court Not Pleased

Posted in Regulatory

On March 2, 2015, a D.C. district court denied a plaintiff’s motion for spoliation sanctions against the Environmental Protection Agency (EPA) for its conduct in connection with a Freedom of Information Act (FOIA) request. Despite the result, the court expressed its displeasure with the agency.

From the very start of its opinion, the court expressed its dissatisfaction with EPA’s behavior in connection with Landmark Legal Foundation’s FOIA request. The court speculated that EPA’s conduct in response to the request was for one of two reasons. “Either EPA intentionally sought to evade Landmark’s lawful FOIA request so the agency could destroy responsive documents, or EPA demonstrated apathy and carelessness toward Landmark’s request.” The court believed that “[e]ither scenario reflects poorly upon EPA and surely serves to diminish the public’s trust in the agency.”

Landmark Legal Foundation, a conservative public interest law firm, filed the FOIA request with EPA and later brought suit in order to obtain information as to whether the agency intentionally delayed proposing or finalizing any agency rules until after the 2012 presidential election. The court observed that EPA allegedly engaged in a variety of delay and spoliation tactics to destroy relevant information, including failing to produce emails from former Administrator Lisa Jackson’s personal email account that Landmark proved that she had used for official business.

Despite EPA’s conduct, the court denied Landmark’s motion, explaining that punitive spoliation sanctions require that the moving party demonstrate by “clear and convincing evidence that the opposing party destroyed relevant evidence in bad faith.” The court held that Landmark did not satisfy that standard.

In closing, however, the court noted that it was “left wondering whether EPA ha[d] learned from its mistakes, or if it will merely continue to address FOIA requests in the clumsy manner that has seemingly become its custom.” Finally, the court “implore[d] the Executive Branch to take greater responsibility in ensuring that all EPA FOIA requests – regardless of the political affiliation of the requester – are treated with equal respect and conscientiousness.”

 

FERC Upholds New ROE Method in Opinion No. 531-B

Posted in Regulatory

INTRODUCTION

FERC’s Opinion No. 531-B, issued March 3, 2015 (150 FERC ¶ 61,165) upheld FERC’s earlier rulings, Opinion Nos. 531 and 531-A, regarding the return on equity (ROE) the New England Transmission Owners (NETOs) should be allowed to charge through their transmission formula rates. Among other things, FERC affirmed its reliance on discounted cash flow (DCF) analysis to determine the ROE, its decision to calculate the dividend growth component of the DCF formula in part based on projections of growth in the gross national product, the use of the midpoint rather than the median of the zone of reasonableness when determining the ROE for a large group of utilities, and various other aspects of its DCF application. The most significant Opinion No. 531-B rulings related to its confirmation that an existing ROE is not necessarily just and reasonable even though it falls within the DCF-determined zone of reasonableness and that prevailing anomalous financial conditions coupled with the results of non-DCF ROE determination methods justified its placement of the ROE in the upper end of the zone of reasonableness. Continue Reading

CFTC Fines ICE Futures U.S. $3 Million as Part of Settlement for Recurring Data Reporting Violations Regarding Certain Energy Products

Posted in Natural Gas

On March 16, 2015, the Commodity Futures Trading Commission (CFTC) announced that it had entered into an administrative settlement with ICE Futures U.S., Inc. (ICE), a subsidiary of Intercontinental Exchange, Inc., to resolve charges that ICE violated a number of data reporting requirements regarding certain energy futures products over a 20-month period. As part of the settlement, ICE agreed to pay a civil monetary penalty of $3 million and to implement various compliance-related directives. Although the CFTC routinely files and settles charges against persons and firms registered in the commodities industry, charges are rarely brought against designated contract markets. Continue Reading