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This column provides highlights of federal
statutory, regulatory, case law, and guidance developments of relevance
to Florida practitioners. Coverage is of cases published from
November 1997 to January 1998. If you are aware of a federal legal
development which you think should be shared with your colleagues, please
either E-mail it to asht0364@mlb.com
or fax it to David Ashton at 305-579-0321.
The Kyoto Agreement. On December 11, 1997, the nearly 160 nation United Nations Framework Convention on Climate Change adopted an agreement which requires that the United States cut certain greenhouse gas emissions 7 percent from 1990 levels by the years 2008-2112. However, the agreement is unlikely to have any immediate effect on industry. For the agreement to be binding on the United States, it still must be ratified by the Senate by a 2/3 majority vote. The failure of the final agreement to include cutbacks at developing countries such as China and India makes it unlikely that the Senate would approve the agreement in its current form. Therefore, President Clinton will probably not present the treaty to the Senate before the issue of developing countries is addressed in the next conference, which is scheduled to take place in Buenos Aires, in November 1998. Thus, as with a number of other international environmental agreements, industry can expect significant delays in implementation in the United States. For instance, the Basel Convention, which concerned hazardous waste trade and disposal, was adopted in 1989, but has yet to be ratified in the United States. Nevertheless in the long term, Kyoto
may have a substantial effect. It is likely that there will be an
increase in regulatory programs to reduce fossil fuel use. There
is also likely to be an increased use of emissions trading programs both
in the United States and between nations. Moreover, even in the short-term,
Kyoto may provide an impetus for EPA to address greenhouse gas emissions
at the regulatory level, even if Senate ratification does not occur for
a number of years. Thus, although Kyoto itself is unlikely to have
an immediate impact on industry, it has served to focus attention squarely
on the issue of global warming, and in the long term, significant new laws
and regulations are likely as a result.
The Fourth Circuit sustained EPA's interpretation of benzene NESHAP but required fair notice of the interpretation prior to enforcement. EPA issued the National Emission Standard for Hazardous Air Pollutant (NESHAP) for benzene in 1984. Several years later it brought an enforcement action against Hoechst Celanese Corporation (Hoechst) for failing to comply with the NESHAP requirements. Hoechst claimed that it was exempt because it did not "use" (i.e. consume) more than the exemption level of one thousand megagrams (Mg) (approximately 2,200,000 pounds) per year of benzene at its CeIriver, South Carolina plant. Rather, it recycled benzene so that "new" benzene introduced to the facility was less than a total of 1000 Mg of benzene per year. EPA interpreted the term "use" more broadly, such that it measured the amount of benzene used by counting each time the recycled chemical passed a fixed point in the system. The federal District Court upheld EPA's construction of the NESHAP, but barred enforcement because Hoechst did not have fair notice of the interpretation. In an appeal by both the United States and Hoechst, the Fourth Circuit Court of Appeals affirmed the EPA construction of the regulation but determined that once EPA provided Hoechst actual notice of its interpretation of the NESHAP, Hoechst was subject to an enforcement action for its failure to comply. United States v. Hoechst Celanese Corporation, 1997 WL 663138 (4th Cir., Oct. 27, 1997). EPA issued clarifications and technical corrections
to its RCRA Subpart AA, BB, and CC air emission standards. EPA provided
additional amendments to and interpretations of the organic air emission
standards promulgated at 40 C.F.R. Part 264 and 265, Subpart AA, BB, and
CC. Although the rule generally provides additional compliance flexibility,
in a few cases the rule imposes more stringent requirements. Some
of the more significant changes are described below. The rule is
immediately effective. 62 Fed. Reg. 64,636 (Dec. 8, 1997).
Subpart CC tank, surface impoundment, and container
standards. EPA limited the ability to grant case-by-case implementation
schedule extensions for installation of air emission control equipment.
EPA exempted certain surface impoundments conducting biological treatment.
EPA substantially clarified the exemption for wastes treated to meet applicable
organic land disposal restriction (LDR) standards, allowing newly-listed
and not-yet-prohibited characteristic wastes to qualify. EPA amended
aspects of the treatment demonstration provisions, and clarified the analytical
provisions for waste determinations and for treatment exemptions.
EPA limited the approved use of EPA Methods 8260 and 8270 to the current
versions adopted in SW-846. EPA allowed the use of a single closure
device on tank manifold systems and the opening of closure devices on Level
I tanks for routine maintenance and operation activities. EPA required
enclosed combustion devices on Level 2 tank enclosures. EPA exempted
wastes treated to applicable organic LDR standards from the closed-system
transfer requirements for tanks and surface impoundments. EPA clarified
that visual inspections of containers are required on or before the date
of acceptance at a facility, but allowed facilities to rely upon inspections
conducted by generators or transporters before or during loading.
EPA allowed vacuum trucks to vent directly to the atmosphere during filling
operations. EPA clarified that adding sorbent materials after each
scoop during filling of containers triggers Level 3 tank standards.
The Second Circuit ruled that the Federal Energy Regulatory Commission (FERC) may not reject conditions contained in a state's water quality certification issued under the Clean Water Act and refuse to include them as conditions on a federal license issued by FERC. FERC argued that it had authority to review and reject state imposed conditions it deemed to exceed a state's power under § 401 of the Clean Water Act. The court rejected this position, ruling that while FERC may determine whether the proper state has issued the certification or whether a state has issued a certification within the prescribed period, FERC does not possess the authority to determine if state imposed conditions are inconsistent with the terms of § 401 and thus reject them. According to the court, disputes regarding certification should be brought by the license applicant in courts of appropriate jurisdiction. American Rivers, Inc. v. Federal Energy Regulatory Commission, Nos. 1169-72, 1997 WL 691043 (2d Cir. 1997). The Fifth Circuit reversed and remanded the
ruling of a district court which had dismissed a Clean Water Act citizen
suit on the grounds that Friends of the Earth, Inc. (FOE), a non-profit
District of Columbia corporation, lacked associational standing because
it had no members under corporate law. Although FOE's by-laws required
that membership requirements shall be set by its board, FOE's board had
never taken any affirmative action to comply with its responsibility and
authority to determine membership requirements. According to the
court, while this failure may be relevant to the issue of whom the corporation
represents, such a defect should not overshadow FOE's significant activities
with and for those persons its officers and staff have consistently considered
to be members. Applying the "indicia of membership" test, the court
found associational standing based upon a clearly articulated and understandable
membership structure, testimony of individuals stating they were members,
and membership involvement in the finance of activities and election of
officers. Friends of the Earth, Inc. v. Chevron Chem. Co., 129 F.3d
826 (5th Cir. 1997).
The Sixth Circuit limited stockholder liability under CERCLA, holding that shareholders may only be liable as operators under CERCLA if circumstances exist which justify “piercing the corporate veil.” This ruling follows the logic of the Sixth Circuit's controversial decision in United States v. Cordova Chemical Co., 113 F.3d 572 (6th Cir. 1997), regarding the liability of parent corporations. The Supreme Court has accepted certiorari in the Cordova case. Donahey v. Bogle, Nos. 92-1128, 92-1151 (6th Cir. Nov. 17, 1997). The Ninth Circuit refused to create a "continuing business enterprise" exception to the general rule that those who purchase the assets of a corporation are not liable as its successors, holding that it is inappropriate to create federal common law rules on this subject and consequently state law dictates the parameters of successor liability under CERCLA. This overruled part of the Ninth Circuit's decision in Louisiana-Pacific Corp. v. Asarco, Inc., 909 F.2d 1260 (9th Cir. 1990) in favor of the Supreme Court's view that special federal rules are needed only in "few and restricted instances." Atchison, Topeka, and Santa Fe Ry. v. Brown & Bryant, Inc., 1997 WL 792675 (9th Cir. Dec. 30, 1997). The Western District of Arkansas dismissed a complaint filed by a group of aluminum producers alleging that Reynolds Metals' waste treatment facility in Arkansas is violating federal hazardous waste treatment regulations. The aluminum producers sought to shut down Reynolds' facility to avoid having to comply with EPA's treatment standards governing aluminum production wastes. Because that facility is currently the only treatment facility in the country capable of meeting those standards, the plaintiffs believed that their suit, if successful, would have forced EPA to withdraw the standards. The Court ruled that the plaintiffs lacked standing under Article III of the Constitution to bring such an action. The District of Minnesota held that CERCLA’s “public comment” requirement for clean up cost recovery is not met where public meetings serve only to inform the public of a clean up remedy already selected and partially completed. Additionally, the court found that an owner's failure to prepare a remedial investigation and feasibility study for alternative treatment remedies prevented it from recovering clean up costs, regardless of the fact that the corporate owner examined such remedies in internal notes and memoranda. Union Pacific Railroad Co. v. Reilly Industries, Inc., No. CIV. 4-96-660 (D. Minn. Nov. 3,1997). The Northern District of New York held that when a manufacturer arranges for transport of hazardous materials to a site, it “disposes” of those materials, even if the operator of the site later resells such materials. The court found that a party cannot claim it merely “stored” materials when the party's purpose is to rid itself of materials. Additionally, the court held that although the Solid Waste Disposal Act recycling exemption exempts certain materials from the definition of solid waste, it does not expressly exempt those same materials from the definition of “disposed of” under CERCLA. Cooper Indus. Inc. v. Agway Inc., No. 92-CV-0748 (N.D.N.Y. Nov. 14, 1997). The Western District of New York held that,
when an owner asserts state common law claims in a CERCLA action, the statute
of limitations begins to run when the owner knows of the fact of contamination,
not when the owner ascertains the identity of each defendants' specific
contaminants that damaged the property. Additionally, the court held
that when an owner purchases land with knowledge of its preexisting contamination,
such knowledge does not as a matter of law serve as a bar to recovery for
state law claims. Seneca Meadows Inc. v. ECI Liquidating, Inc., 1997
WL 722338 (W.D.N.Y. Nov. 14, 1997).
OSHA issued a proposed health standard
for tuberculosis (TB) that will cover an estimated 5.3 million health care
workers. The proposed standard's coverage would include hospitals,
long-term care, facilities for the elderly, hospice facilities, certain
laboratories, and other work settings with a high risk of TB infection.
Under the proposed standard, covered employers would be required, among
other things, to prepare a written TB exposure control plan and provide
baseline skin testing for employees. The public comment period expired
December 16, 1997. 62 Fed. Reg. 54,159 (October 17, 1997).
OSHA's home page on the Internet is www.osha.gov.
EPA issued a direct final rule revising its lead ambient air monitoring regulations at 40 CFR Part 58. The rule would allow many lead monitoring stations near major highways to be discontinued, while maintaining a core lead monitoring network in urban areas to track continued compliance with the National Ambient Air Quality Standard (NAAQS) for lead. EPA is also focusing on major stationary lead sources which are causing or have a potential to cause lead NAAQS exceedances. The Agency considers sources emitting at least five tons per year of lead to be candidates for additional lead monitoring, although smaller sources may also be targeted. EPA's shift away from ambient monitoring near highways comes at the request of state and local governments, whose on-road mobile source-oriented lead monitors have recently been reporting peak lead air pollution values that are many times less than the quarterly lead NAAQS. The rule became effective on December 22, 1997. 62 Fed. Reg. 59,813 (Nov. 5, 1997). EPA issued guidance on incorporating voluntary mobile source emission reduction programs (VMEPs) into State Implementation Plans (SIPs). EPA's guidance outlines the conditions for establishing VMEPs and the requirements for obtaining EPA approval of VMEP SIP submittals by states. Its primary purpose is to provide an incentive for states, localities and the public to voluntarily reduce air pollution through such measures as employer-based transportation management programs, area-wide rideshare, small engine and recreational vehicle programs, and buyback of older, more polluting equipment. EPA provides the example of an electric utility offering to purchase gasoline-powered lawnmowers from its customers in exchange for vouchers toward the purchase of electric lawnmowers, thereby increasing the demand for electricity while reducing emissions. Once approved, emissions generated by such VMEPs can then be used by states to demonstrate progress toward attainment and maintenance of the NAAQS (but only up to 3% of the total reductions needed for attainment). Guidance on Incorporating Voluntary Mobile Source Emission Reduction Programs in State Implementation Plans, authored by Richard D. Wilson, October 24, 1997. The Research and Special Programs Administration
issued a rule requiring operators of onshore gas, hazardous liquid and
carbon dioxide pipelines to participate in qualified "one-call systems"
as part of the required excavation damage prevention programs. A
"one-call system" is a communication system established individually or
jointly by utilities, government agencies or other operators of underground
facilities to provide a single telephone number for excavators to notify
participating members of their intent to excavate, allowing , members sufficient
opportunity to identify and mark affected facilities. The final rule
mandates that operators of interstate and intrastate pipelines participate
in a qualified one-call system (i.e. one meeting the applicable requirements
at 49 C.F.R. § 198.39) by identifying the location of their pipelines.
It also requires certain previously exempt small gas systems, including
gas distribution systems for small apartment complexes and trailer parks,
as well as small municipal gas systems, to participate in the one-call
systems. The rule becomes effective on May 18, 1998. 62 Fed.
Reg. 61,695 (Nov. 19, 1997). RSPA's home page on the Internet is
at www.citation.com.hpages/respa.html.
The District Of Columbia Circuit determined that EPA rules are "promulgated" for purposes of judicial review under RCRA section 7006 when they are published, in the Federal Register, and thus dismissed as premature a petition for review filed before publication. On May 30, 1995, the EPA Administrator signed a final rule delisting electric arc furnace dust treated by Conversion Systems, Inc.'s Super DetoXTM process. Horsehead Resource Development Co. rushed to the courthouse and filed a petition for review of the delisting rule two days later, on June 1, 1995. EPA subsequently filed the rule with the Office of Federal Register on June 12, 1995. The rule was published and became immediately effective the next day. 60 Fed. Reg. 31,107 (June 13, 1995). The Court dismissed the petition as fatally premature because it was filed before publication. Relying on precedent established for orders of the Federal Communications Commission, the Court held that RCRA § 7006(b) creates a jurisdictional "window," by requiring petitions for review to be filed "within" ninety days of "promulgation." See Western Union Tel. Co. v. FCC, 773 F.2d 375, 377 (D.C. Cir. 1985). Because RCRA does not define "promulgation,"
the Court also relied on precedent to hold that "promulgation" in §
7006(b) means "publication." See National Grain & Feed Assn, Inc. v.
OSHA, 845 F.2d 345, 346 (D.C. Cir. 1988). The Court rejected Horsehead's
arguments that EPA had consistently interpreted RCRA to allow signature
to constitute promulgation for purposes of complying with statutory deadlines.
The Court noted that the "window" for review should not "open" with signature,
because in many cases affected parties will not have actual notice of the
Agency's decision --thereby shortening the filing period--and because "closing"
the window 90 days after publication would extend the statutory period.
Horsehead Resource Dev. Co. v. EPA, 1997 U.S. App. LEXIS 35012 (D.C. Cir.
Dec. 12, 1997).
SIGNIFICANT GUIDANCE DOCUMENTS EPA issued draft technical guidance under the recent Compliance Assurance Monitoring rule (CAM). CAM imposes monitoring requirements on certain large pollutant-specific emission units at facilities that are required to have Title V permits. EPA's guidance is intended to help explain the CAM rule and provide examples of CAM monitoring approaches of the draft provides an overview of the rule, summarizes the process for implementing CAM, sets forth guidance on preparing required monitoring information (CAM plans), and discusses necessary elements of quality improvement plans (QIPs). QIPs may be required after a determination that a source has failed to use acceptable procedures to respond to an excursion or exceedance. The guidance also includes examples of CAM plans and illustrations of the types of monitoring approaches that would generally satisfy the requirements of CAM, and identifies presumptively acceptable monitoring for a limited number of source categories subject to certain New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants (NESHAPs). 62 Fed. Reg. 63,662 (Dec. 2, 1997). EPA issued guidance on whether emission reductions needed to meet EPA's Maximum Achievable Control Technology (MACT) standards for hazardous air pollutants (HAPs) may be credited for netting under the New Source Review (NSR) program. Under NSR, modifications to major stationary sources are subject to strict requirements if they result in significant net emissions increases of NSR regulated pollutants. NSR netting refers to the process of considering certain previous and prospective emissions changes to determine if a significant net emissions increase will result from a proposed modification. Emission reductions used for netting must be "surplus." EPA's memorandum states that HAP reductions may be considered surplus and used for purposes of NSR netting, as long as the reductions are otherwise creditable (i.e., they have not been considered in a SIP for criteria pollutant attainment purposes). However, HAP reductions may not be used to satisfy nonattainment offset requirements under NSR rules, unless the reductions are in excess of what is required to comply with, or incidental to the reductions necessary to achieve, the MACT requirements. Crediting of MACT Emission Reductions for NSR Netting and Offsets, authored by John S. Seitz, Nov. 12, 1997. EPA issued a policy on interim implementation of new source review requirements for PM2.5. On September 16, 1997, the new National Ambient Air Quality Standard (NAAQS) for fine particulate (PM2.5) and the revised NAAQS for PM10 became effective. Under the Clean Air Act (CAA), new or modified major sources must undergo new source review (NSR) in order to ensure that emissions meet prevention of significant deterioration (PSD) program requirements. PSD prevents new or modified sources from causing or contributing to a violation of a NAAQS. One element of the NSR program requires best available control technology for each conventional air pollutant subject to PSD. Even though EPA issued the PM2.5 NAAQS, changing NSR and PSD requirements prospectively, EPA acknowledged that there are significant technical difficulties in implementing NSR for PM2.5. These difficulties include the lack of necessary tools for calculating PM2.5 emissions, including PM2.5 precursors. In a recent memorandum discussing NSR implementation for PM2.5, EPA announced that, pending development of the appropriate analytical tools (3 to 5 years), including a model to estimate PM2.5 and its precursors emissions, it believes that PM10 may properly be used as a surrogate for PM2.5. EPA notes that the policy statement does not bind state and local governments as a matter of law. Interim Implementation of New Source Review Requirements for PM2.5 authored by John S. Seitz, Oct. 21, 1997. EPA issued an addendum to its “Interim CERCLA
Settlement Policy” of December 5, 1984. On November 14, 1997, EPA
announced the availability of an addendum to its December 5, 1984 “Interim
CERCLA Settlement Policy.” The addendum provides that, subject to
certain limitations, EPA may reduce CERCLA cost recovery settlements by
the amount attributable to insolvent or defunct potentially responsible
parties, so called “orphan shares.” EPA has also issued new policies
and guidance with respect to bankruptcy cases, ability to pay determinations,
and settlement of civil penalty and punitive damage claims. 62 Fed.
Reg. 61, 112-13 (Nov. 14, 1997).
In the wake of a renewed effort by EPA to promote Project XL (eXcellence and Leadership) and newly proposed legislation to codify the program, corporations may once again want to consider whether this program presents a viable option. XL is the focus of EPA and President Clinton's "Regulatory Reinvention Effort." The prograin, which was first announced in March 1995, pledged to provide companies with regulatory flexibility in return for "superior environmental performance." The program allows companies the opportunity to develop their own ideas for reform and submit them to EPA. The announced goal was to implement 50 programs by 1997, and the hope was that EPA could use the program to identify and test potential regulatory reforms. Where the projects proved to be successful, EPA would be able to explore implementation of the reforms on a wider scale. The original expectations, however, have not been met. Only a handful of projects have actually been implemented by EPA. A number of companies that originally made proposals to EPA withdrew them after the negotiation process with EPA became overly burdensome. There are a number of problems with participating in XL. EPA's legal authority for the program is questionable. Although the agency has significant discretion in the area of enforcement, no law specifically grants EPA the type of broad authority necessary to carry out a comprehensive regulatory flexibility program like XL. Moreover, the process can take years and involves a significant commitment of time, energy, and money by the company, as well as the involvement of community stakeholders. Companies are required by EPA to provide 66superior environmental benefit." EPA has interpreted this to mean "superior to" that which the company is already doing without XL. In other words, if a company is already operating at levels that are superior to what the regulations require, the company would have to improve environmental performance even more to be considered for an XL project. XL projects that involve exemptions from certain regulatory requirements by EPA may still expose the company to possible citizen suits for not satisfying the regulations. Nevertheless, with the right proposal in the right situation, the benefits of the program can be quite substantial. For instance, in return for decreased air contaminant emissions, companies have been allowed to negotiate for single multi-media permits that cover air, water, and other requirements, and have been given significant flexibility to make permit changes without having to use the permit modification process. In the fall of 1997, EPA pledged to revitalize the program with a new marketing campaign, and legislation has been proposed in the Senate that would codify the program and ease some of the legal concerns which have hampered the program up till now. Thus, Project XL may benefit a particular company facing unreasonable regulatory requirements in a particular context. It is clear, however, that any company considering participating in an XL project should carefully consider the costs and risks involved before doing so.
David Ashton practices with the Miami Environmental Practice Group of
Morgan, Lewis & Bockius LLP in the areas of air and water pollution
law. He can be reached at 305-579-0364 or asht0364@mlb.com.
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Federal Highlights