US EPA, State Agencies, and Private Attorneys Meet in Chicago, Discuss Environment

There can be little doubt that the philosophy at the US EPA has undergone a dramatic change under President Obama. To more fully understand the new priorities at the US EPA as well as the current priorities of the state environmental agencies of the Great Lakes states (aka EPA Region 5), the American Bar Association Section of Environment, Energy and Resources held a day and a half conference in Chicago: State and EPA Perspectives on Environmental Issues In Region 5.

In what could be one of the preeminent environmental conferences in the Great Lakes region (having played a significant role in the conference I might be a bit biased), the program involved exclusively government speakers, including Commissioner Paul Eger of the Minnesota Pollution Control Agency. Although the conference featured numerous panels discussing aspects of environmental law from Resource Conservations and Recovery Act (RCRA) to the Great Lakes Interstate Compact and everything in between, the two most important presentations were the keynote speech by Bharat Mather, Acting Regional Administrator US EPA Region 5, and the State Environmental Directors Roundtable.

Mather spoke briefly regarding the American Reinvestment and Recovery Act (ARRA), the state-federal environmental partnership and the goals of his new boss Lisa Jackson. Discussing ARRA, Mather noted that the EPA has obligated 72% of its ARRA funds and that the primary issues with implementing ARRA are reporting, the Buy American provision, compliance with the Davis-Bacon Act requirement, and funding of green issues. On the state-federal partnership, he stressed that EPA’s role is oversight of the state agencies and that the focus should be how the two can work together to get things done. Turning to the goals of Administrator Jackson, Mather stressed four areas: 1) science must be the backbone for EPA; 2) EPA decisions must follow the rule of law; 3) EPA actions must be transparent; and 4) environmental justice should be considered in every EPA decision.

Mather then turned to EPA priorities in Region 5. The number one concern, he said, is climate change. This certainly should come as no surprise given the public announcements from Administrator Jackson. But it does reinforce the reality that the question is not whether greenhouse gases will be regulated in the near future, but what the vehicle for regulation will be. Among the other named priorities he discussed were new source permits, reducing diesel emissions, managing overall chemical risks, hazardous waste cleanup, and water quality. He noted particular interest in Minnesota when discussing the asbestos risk in mining and managing risks from perfluorocarbons. He also noted that one of the water quality priorities is addressing water nutrient levels in the Mississippi River as it relates to Gulf of Mexico hypoxia.

Following the keynote speech, Bert Frey, Deputy Regional Counsel US EPA Region 5, hosted a roundtable discussion with the directors of all six state environmental agencies (Indiana DEM, Illinois EPA, Michigan DEQ, Minnesota PCA, Ohio EPA, and Wisconsin DNR). Almost universally, the director concerns involved addressing climate change, improving water quality/wastewater management, and finding a way to accomplish these goals in the face of an ever-shrinking budget. The truly amazing theme in the roundtable was the staggering cost that we face to update our water infrastructure and to deal with storm water management. Time and again, the state directors would note that the tens or hundreds of millions of ARRA dollars dedicated to state revolving water funds did not meet the needs for infrastructure updates (all told, the EPA received $6 billion for water infrastructure, which has been allowed to the states and US territories.

It was not lost on many of us that this was the first time there had been a Region 5 environmental conference since 1999. After listening to the government attorneys and agency personnel speak for a day and half, it is clear that the days of market self-regulation have come to an end. In Minnesota and across the nation, we can expect to see new environmental regulation and a renewed focus on enforcement of existing regulations.

Submitted by Michael J. Mergens

Michael J. Mergens is an attorney at Larkin Hoffman Daly & Lindgren in Minneapolis. His practice includes a broad range of real estate matters, such as environmental permitting and litigation, land use approvals and disputes, and general real estate disputes. He has devoted much of his practice to the regulation of greenhouse gas emissions, which has begun to arise in the environmental permitting processes of various state and federal regulatory bodies. He also tracks the potential for regulations under the Clean Air Act.

With near unanimity, United States Supreme Court strikes down government’s attempt to broaden CERCLA liability

Generally speaking, an entity who “arrange[s] for disposal” of a hazardous substance at a contaminated facility can be held liable for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). It has long been understood that this provision clearly (a) covers an entity who enters into a transaction to solely discard a used and no longer useful hazardous substance, and (b) does not cover an entity who enters into a transaction solely to sell a new and useful hazardous substance that may later be disposed of by a third party. But in a recent case, EPA argued that Shell Oil should be subject to “arranger” liability for its sale of a hazardous chemical to a distributor because Shell had knowledge of leaking and spilling during the transaction, which EPA argued fell within the statutory definition of “disposal.”

In what seems like a rare showing of consensus these days at the Supreme Court, an 8-justice majority in Burlington Northern & Santa Fe Ry. Co. v. United States rejected this broad reading as beyond the bounds of the statutory language (the decision also addresses the named railroads were properly held to be joint and several liability; the Court ruled they were not). Specifically, the Court, applying an ordinary meaning of “arrange for,” ruled that there can be no liability as an “arrange[r] for disposal” unless it was the entity’s intent that the transaction involve, at least in part, the disposal (spilling and leaking in this case) of the substance. Thus, while Shell was aware that leaks and spills occurred when its chemicals were being transferred from the common carrier to the buyer, more was needed to impose “arranger” liability under CERCLA.

In contrast to a finding of intent, Shell encouraged the distributor to reduce spills by providing safety manuals, offering a discount for improvements in safety procedures, and requiring inspections by engineers. Although minor spills continued to incur, the Court held that such evidence showed that Shell intended to reduce spills and not intended for them to occur. Without that conscious desire that the useful substance be spilled or leaked during transport, it was beyond the common understanding of “arrange for disposal” to impose liability on Shell.

In reality, the Supreme Court’s decision is remarkable only for its common sense. The decision is based on a straightforward, ordinary understanding of what it means to arrange to dispose of a product. Of course, intent is still a subjective determination that is fact intensive. But at least we now know that if you, like Shell, take active steps to avoid spilling and leaking of a substance you are trying to sell, you are not arranging for disposal of the very chemical you are selling.


Submitted by Michael J. Mergens and Julie Nagorski

Michael J. Mergens is an attorney at Larkin Hoffman Daly & Lindgren in Minneapolis. His practice includes a broad range of real estate matters, such as environmental permitting and litigation, land use approvals and disputes, and general real estate disputes. He has devoted much of his practice to the regulation of greenhouse gas emissions, which has begun to arise in the environmental permitting processes of various state and federal regulatory bodies. He also tracks the potential for regulations under the Clean Air Act.

Julie Nagorski is an associate attorney at Larkin Hoffman and practices in the areas of real estate and land use law. In her practice, Julie combines knowledge of the related disciplines of land use and real estate with expertise in litigation, dispute resolution, and appellate advocacy.

The costs of patchwork climate change regulation

These days it is hard to turn on your computer or watch the television without coming across a discussion of some variety on greenhouse gas (“GHG”) emissions and climate change. Some continue to question climate change or whether anthropogenic GHG emissions are a primary cause. Others point to government-backed scientific organizations and argue that the only question is how to prevent the predicted dire planetary consequences.

While these debates continue to provide coffee shop fodder, the legal reality of GHG emissions for the average American energy producer, mining company, or other large scale carbon emitting business is one of costly uncertainty. This legal reality traces back to the April 2007 United State Supreme Court decision of Massachusetts v. EPA, which concluded that that carbon dioxide and other GHGs are air pollutants under the federal Clean Air Act. In reaching that conclusion, the Supreme Court stated that the “harms associated with climate change are serious and well recognized” and that there is a causal connection between anthropogenic GHG emissions and climate change.

Decision makers across the nation from state district courts (Georgia decision), to the Environmental Appeals Board (EAB decision) have looked to Massachusetts to decide legal questions relating to GHG emissions. Since this represents the opinion of the highest court of the land, the current trend towards judicially-mandated GHG action is going to continue, at least until the Supreme Court revisits the questions or Congress and President Obama take legislative action. Of course, the early signs are that the EPA under President Obama is going to be more active on GHG regulation, not less.

The problem for American businesses is that the combination of the Massachusetts decisions and the relative inaction at the federal level has created a legal quagmire that has spurned costly court battles and administrative challenges to state and federal agency decisions. Given the current state of affairs, the closest thing to a guarantee for a company with significant energy production or needs that is entering the environmental review or permitting process is there will be a challenge to any agency decision based on GHG emissions. We now are beginning to see the effect of the regulatory uncertainty as a major planned utility plant was cancelled.

Given the trying financial times we now face, the certainty of costly litigation is just one more reason to look elsewhere for any potential project or to simply forego the project all together. There are some that may say “great, inaction is good for the environment.” But the reality is that as worldwide consumption of fossil fuels and other raw materials remains the same (or more realistically continues to increase), the notion that preventing a project here is good for the environment simply does not past muster. So long as there is demand, companies will find a way to meet that demand as cheaply as possible. In the current state of patchwork local and regional GHG “regulation” companies will face economic pressure to move potential projects to states with a more conservative approach to GHG emissions or to nations that have little to no environmental controls. When you are dealing with a “global pollutant” like GHG emissions, we do nothing to reduce emissions globally or in our backyard by simply pushing off business to another jurisdiction. In these trying times, if there is going to be GHG regulation shouldn’t it be done in a way that actually helps the environment and that does not disadvantage Minnesota businesses compared to state locations or chase American businesses outside our borders?

Submitted by Michael J. Mergens

Michael J. Mergens is an attorney at Larkin Hoffman Daly & Lindgren in Minneapolis. His practice includes a broad range of real estate matters, such as environmental permitting and litigation, land use approvals and disputes, and general real estate disputes. He has devoted much of his practice to the regulation of greenhouse gas emissions, which has begun to arise in the environmental permitting processes of various state and federal regulatory bodies. He also tracks the potential for regulations under the Clean Air Act.

Mergens serves on the Minnesota Chamber of Commerce Environmental and Natural Resources Committee. He is also involved with the Minnesota Environmental Initiative, the United States Green Building Council – Mississippi Headwaters Chapter, and the Environmental Section of the American Bar Association. He received his juris doctorate cum laude in 2002 from the University of Minnesota Law School. He is admitted to practice law in Minnesota, California and Arizona, as well as in the United States District Courts for Minnesota and the Central District of California.