Source: http://acoel.org/2009/01/default.aspx
Timestamp: 2019-04-20 02:17:56+00:00

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A Quick Economic Stimulus Meets a Slow Environmental Process - Are NEPA Waivers Needed to Reach Energy Independence?
President Obama has pressed Congress this week to enact an economic stimulus package that would “double our capacity to generate alternative sources of energy like wind, solar, and biofuels . . . and build a new electricity grid that lay down more than 3,000 miles of transmission lines to convey this new energy from coast to coast.”[i] On Wednesday, January 28, 2009, the House passed the American Recovery and Reinvestment Act of 2009 (H.R. 1), which contains nearly $15 billion in capital investments and loan guarantees for renewable energy projects and new electric transmission lines, and $18.5 billion for energy efficiency programs. The Administration’s stated goal is to spend this money in the next 18 months. This may be possible for the energy efficiency projects such as weatherizing homes and government buildings. But for dozens of new wind farms and thousands of miles of transmission lines, it is not, and a good part of the reason is that those projects have yet to undergo environmental review or receive necessary permits.
[i] These remarks came in the President’s first weekly address, which was delivered on Saturday, January 24, 2009. The address can be viewed at this link.
Typically, siting a transmission line, wind farm, or other major energy facility involves obtaining a long list of environmental permits, each of which has a review process that can be used by opponents of the project to delay and sometimes defeat it. Moving infrastructure projects forward quickly will only be possible if Congress and the Administration speed up the environmental review and permitting process.
In a January 26, 2009, report, the Congressional Budget Office estimates that it will take up to seven years to spend the money that H.R. 1 dedicated to expanding alternative energy. Experience teaches that this estimate may be overly conservative. For example, the Arrowhead-Weston Transmission Project, a 220 mile transmission line from Wisconsin to Minnesota, took nine years to permit and construct, even though all but 50 miles of it were in existing transmission line corridors. Southern California Edison’s Tehachapi Transmission Project, a 250 mile transmission project to deliver electricity generated from wind farms in Southern California, took over 10 years to design, permit, and begin construction. Indeed, portions of the project are still undergoing environmental review by the U.S. Forest Service and others.
The new Administration must navigate this tension – quickly addressing the economic crisis while maintaining the integrity of the environmental review process. Doing so will require identifying ways that environmental review and permitting can be streamlined and modernized, alongside the infrastructure system. We ought to be able to get wind farms and bridges and light rail built in a time frame that provides the short-term stimulus our economy needs, and also allow for sufficient environmental review to make sure our resources are protected. This article lays out some of the options the new Administration may wish to consider as it seeks to balance job creation with environmental stewardship.
Many environmental regulatory statutes contain waivers of applicable requirements in response to natural disasters or other emergency conditions. For example, the Stafford Disaster Relief and Emergency Assistance Act authorizes NEPA waivers to facilitate prompt responses to natural disasters. Similarly, the White House Council of Environmental Quality (CEQ) is authorized to approve “alternative arrangements” allowing federal agencies to modify or limit NEPA review in response to natural disasters. Other federal environmental laws with emergency response provisions include the Clean Water Act and CERCLA.
In response to Hurricane Katrina, CEQ approved expedited NEPA review procedures for certain U.S. Army Corps of Engineers flood control projects. EPA temporarily waived certain Clean Water Act, Clean Air Act, and other environmental regulations in Katrina’s wake. Both Louisiana and Mississippi issued similar emergency administrative orders, temporarily suspending certain environmental regulations to facilitate clearing hurricane debris and other emergency response actions.
The United States Supreme Court upheld the President’s action, finding that the public interest in adequately training the Navy’s antisubmarine forces “plainly outweighs” conservationists’ interests in studying marine mammals that may be injured by sonar exercises.
Shortening the time frame for appealing permitting decisions under the Coastal Zone Management Act (§ 381).
· Certain Department of Housing and Urban Development funding decisions are exempt from NEPA review, based on certification of compliance with state and local laws (42 U.S.C. § 3547(2)).
While legislative, regulatory, and executive precedent exists for either waiving or limiting environmental review, those precedents have rarely been used to justify waiving environmental review on the grounds of an economic crisis. But precedent exists for using “alternative arrangements” for environmental review in response to economic concerns. In 1980, after General Motors threatened to build a new manufacturing facility outside the city limits unless the city cleared and delivered an appropriate site for the facility, the City of Detroit declared a state of emergency based on an economic crisis. In September 1980, CEQ approved an “alternative arrangement” under NEPA allowing the Department of Housing and Urban Development to release loan guarantee funds prior to the completion of NEPA review.
The challenge for the new Administration and Congress is to strike a balance between expediting environmental review while maintaining sufficient oversight to prevent bad decision making. Options to achieve that goal include: (1) expediting funding for “shovel ready” projects which already have undergone federal and state environmental review and obtained necessary permits; (2) using programmatic environmental review of project categories that would obviate the need for project-specific (and often redundant) environmental reviews; (3) providing limited exemptions or streamlined environmental review for specific categories of projects; and (4) limiting judicial review of final agency approvals for projects funded by the stimulus bill, while providing for oversight, review, and approval by CEQ.
 See 42 U.S.C. § 5159.
 Under 40 CFR § 122.3, the President or an agency acting with delegated Presidential authority may grant a waiver of the NPDES requirement if necessary to address substantial threats to public health or welfare. EPA invoked this exception in response to Hurricane Katrina. Another exception is 40 CFR § 122.41(n), which allows a wavier in the event of an “upset,” which is the temporary failure to comply with NPDES permit conditions based on factors that are beyond the reasonable control of an operator, for example, a power failure or a large spill of contaminants into a collection and treatment system.
 CERCLA provides the President and EPA with broad authority and flexibility to undertake response actions whenever there is a release or threatened release of a hazardous substance which presents an imminent and substantial danger. See 40 CFR § 300.400(e)(1).
 See NRDC v. Evans, 232 F. Supp.2d 1003 (N.D. Cal. 2002) (for more information on this decision, see Colleen C. Karpinsky, A Whale of a Tale: The Sea of Controversy Surrounding the Marine Mammal Protection Act and the U.S. Navy’s Proposed Use of the SURTASS-LFA Sonar System, 12 Penn St. Envtl. L. Rev. 389 (2004)).
 Winters v. Natural Resources Defense Council, Inc., 555 U.S. ___, 129 S. Ct. 365 (2008).
 While NEPA allows agencies to allow “alternative arrangements” suspending or modifying environmental review, CEQ regulations limit their applicability to “actions necessary to control the immediate impact of the emergency.” 40 CFR § 1506.11 (emphasis supplied).
 Although the full NEPA review was eventually completed, the “alternative arrangement” allowed HUD and the city to expedite project activities in response to an economic crisis. The facts of the Detroit “alternative arrangement” are summarized at Crosby v. Little, 512 F. Supp. 1363 (E.D. Mich. 1981).
More Clean Water Act Citizen Suits on the Way?
At least in the Southeast, the popularity of Clean Water Act citizen suits has waxed and waned over the course of the Act’s 37 year history. However, our firm’s environmental practice group began to see a renewed interest in citizen suits a couple of years ago, and a recent decision by the Eleventh Circuit Court of Appeals may lead to an even greater resurgence.
In Black Warrior Riverkeeper, Inc. v. Cherokee Mining, LLC, the Eleventh Circuit held that a citizen suit may proceed against a defendant for alleged violations of the Clean Water Act despite the state environmental agency’s commencing an administrative enforcement action before the citizen suit was filed. 548 F.3d 986 (11th Cir. 2008). Riverkeeper, an environmental organization supporting the preservation of the Black Warrior River watershed in Alabama, filed suit in 2007 against Cherokee Mining, an owner and operator of two coal mines in northern Alabama, for alleged illegal discharges to navigable waters in violation of the company’s permit. Pursuant to the Act, Riverkeeper first sent Cherokee Mining a “60-day notice letter,” notifying the company of its intent to file suit in federal court. The state environmental agency then commenced enforcement by issuing an administrative consent order, and Riverkeeper filed its suit in the Northern District of Alabama shortly thereafter.
Cherokee Mining filed a Motion to Dismiss Riverkeeper’s suit for lack of subject matter jurisdiction under Section 309 of the Act which precludes citizen suites when a state agency has commenced and is diligently prosecuting an administrative enforcement action against a defendant. Riverkeeper responded by pointing to what until now has been a largely overlooked provision in Section 309 stating that the citizen suit bar does not apply to actions filed after a citizen gives its notice of intent to sue prior to commencement of an administrative enforcement action and the citizen actually files suit “before the 120th day after the date on which such notice is given.” 33 U.S.C. § 1319(6)(B)(ii). Based on language found elsewhere in Section 309, Cherokee Mining argued that this 120-day exception only applies to federal, not state, administrative enforcement actions. The district court rejected this argument and held that Riverkeeper’s suit could go forward because it met the Act’s notice of intent to sue requirements. Holding that Cherokee Mining’s interpretation of the statute “was an extremely cramped and narrow reading of the ordinary and plain meaning of the relevant language” in the Act, the Eleventh Circuit affirmed the district court’s decision. Cherokee Mining petitioned the Court for panel or en banc rehearing, and the petition was denied on January 8, 2009. There has been no word yet as to whether Cherokee Mining plans to appeal the case to the U.S. Supreme Court.
Until now, no Circuit Court has ever addressed the 120-day rule on which Riverkeeper successfully relied as an exception to the bar on citizen suits filed after the commencement of state administrative enforcement actions. Prior to the Eleventh Circuit’s decision, state agencies routinely initiated successful administrative enforcement actions once notified of a citizen suit, and the citizen either did not file suit or had their case dismissed pursuant to Section 309 of the Act. Certainly for companies operating in Alabama, Georgia, and Florida, the rules have now changed. Entities faced with both a citizen suit and state administrative enforcement action have a much lower incentive for resolving the matter by coming into compliance and paying state penalties when they may be required to later pay citizens’ attorneys fees and Clean Water Act statutory penalties (up to $32,500 per day per violation) or even be required to comply with court-ordered injunctive relief that may be at odds with whatever the state would have required. Because state environmental agencies recognize the dilemma regulated entities face as a result of this decision, states are also going to have to alter their strategies in dealing with potential noncompliance of clean water regulations by industry. Because administrative consent decrees will be less palatable to regulated entities, the state will have to weigh whether or not to go to the added expense (in terms of dollars and resources) of filing a lawsuit in state court.
This state of affairs is not likely to go unnoticed by citizen groups throughout the country. As counsel for Riverkeeper stated after the Court issued its opinion—“this changes everything.” With the increase in “60-day notice” letters we’ve seen being sent to entities just in Alabama in the last few months, it’s hard to disagree.
The Advisory Groups working on the Midwest Greenhouse Gas Reduction Accord and the Midwest Governor’s Association Platform met in Indianapolis on January 14 and 15, 2009 for the purpose of advancing the development of recommendations for a regional program to reduce greenhouse gases. While the program being developed contemplates a regional cap and trade program, much work is being focused on the development of complimentary policies that would be implemented outside the cap and trade program.
The December 2008 draft recommendations of the Advisory Group, calls for a cap and trade program that would be applied to all six greenhouse gases. Initially, the cap and trade program would apply to electricity generation and imports, industrial combustion sources, and industrial process sources for which there are credible measurement in monitoring protocols. In addition, transportation fuels are being considered for inclusion in the cap and trade program based on the results of economic modeling that is currently being performed. Heating fuels will be included in the second three year compliance period.
Significantly, the cap and trade program would be applied both to electricity generated within the region and to electricity imported into the region. In the latter case, the point of regulation for the program would be entity that first delivers electricity into a participating jurisdiction for consumption in that jurisdiction. The Commerce Clause implications on such an approach have yet to be tested.
addressing harmful impacts due to climate change.
Individual states would be called upon to make a determination as to whether allowances would be auctioned or allocated for free.
Offsets would be encouraged under the draft recommendations for entities not covered by the cap and trade program. The Advisory Committee has yet to determine how much of the cap could be met by offsets, although a range of 10-50% are being considered. The final value would be set once economic modeling data becomes available. Initially, offsets would be limited to those which occur within the states and provinces that elect to participate in the program.
· the combination of the cap and trade program and complimentary measures.
It is anticipated that the results of this modeling will be available by the time the Advisory Group meets in March at a date and location that have not yet been determined.
Final recommendations are expected to be issued during the third quarter of 2009.
For more information regarding these activities, visit www.midwesternaccord.org.
The primary function of the articles produced to date for this blog has been to alert colleagues of current developments of which they should be aware. This article’s purpose, however, is broader. There appear on occasion in law reviews and other publications valuable perspectives on law and policy issues in areas like climate change that are worthy of attention but might escape notice. The above-referenced symposium is such a document. In the spirit of full disclosure, it should be noted that the authors of the majority of the articles are law professors and consequently it is necessary to wade through a great deal of legal theory to glean the valuable nuggets of insight that are prevalent throughout the document.
The articles also provide a comprehensive treatment of the potential legal barriers and drawbacks to state actions. One of those drawbacks that is discussed by several of the authors is the cost externalization produced by individual state initiatives. The most cited example of a cost externalization is the push by California and other states allied with California for automotive emission standards for GHGs. While California’s actions seem laudable on their face and it is likely that EPA will grant the waiver that California needs to enforce the standards, the cost of complying with the standards will ultimately be borne by the rest of the country even though they had no say in their adoption.
The primary legal barriers to state action are preemption and its allied concept, the so-called dormant Commerce Clause. The range of legislation currently before Congress addresses preemption by either expressing a clear intent to broadly preempt state initiatives as far as GHG regulation or no preemption language thereby leaving it up to the federal courts to apply general principles of preemption to specific state actions. The authors tend to favor limiting the applicability of preemption, particularly when the state action does not directly impair the sale of allowances or does not directly impair the functioning of the other mechanisms necessary for a successful national cap-and-trade program. Thus, such state measures as renewable energy portfolio requirements, measures that encourage technological innovation or diffusion of existing technology and even product efficiency standards that are more restrictive than national standards, should not be subject to being invalidated because of preemption. Conversely, state restrictions on the sale or purchase of emissions allowances even as part of the direct regulation of GHG emissions would probably be preempted by federal legislation.
A similar analysis is followed concerning the applicability of the dormant Commerce Clause to state climate change initiatives. A state’s regulations that directly discriminate between, for example, in-state and out-of-state electric utility companies, particularly if the effect of such discrimination was to interfere with the functioning of the national cap-and-trade program, would clearly run afoul of the dormant Commerce Clause. However, the range of state measures discussed in the articles would not seem to raise either dormant or general Commerce Clause issues, particularly if the national legislation, as seems likely, contains a savings clause like that in Section 116 of the Clean Air Act that explicitly allows states to adopt “standards or limitations” that are more stringent than federal standards or limitations.
Obviously, the foregoing vastly oversimplifies what are a number of complex topics and their analyses, but it should provide enough of an overview of the content of the symposium to motivate interested parties to pursue the full benefit of its articles. As all of the authors note, it was the states, in the absence of federal action, that have been the leaders in GHG regulation and it is their initiative, experience and expertise that ensure that they will have a role and continued interest in addressing climate change even in the face of federal legislation.
Significant management changes announced this week by AIG Environmental, and further news in the wake of that announcement, may further impact the changing environmental insurance market.
Over the past ten years, environmental insurance products have been utilized as a key component in many brownfield redevelopment projects and real estate transactions, and have become a common risk-reduction tool in the real estate and manufacturing sectors.
Most recently, the leading players in the environmental insurance market have been AIG Environmental, XL Environmental and Ace, with AIG most active in writing cost-cap and pollution legal liability ("PLL") policies for real estate transactions and brownfields projects. Zurich has also played an important role in the market, although historically the company has been particularly risk-adverse. Chubb has been writing PLL policies, but not cost-cap policies.
In recent months, however, Zurich has been indicating an enhanced interest in considering the underwriting of projects and transactions that they might previously have declined. Chubb has also expressed an interest in growing its PLL portfolio.
The impact of AIG’s recent and highly publicized financial woes, and the ensuing reductions in the ratings of AIG's insurance companies, have generated a good deal of speculation about the future of AIG Environmental and whether the Company would maintain its aggressive underwriting of brownfields projects and real estate deals.
It is yet to be seen whether the financial problems of the parent company and management-level changes at AIG Environmental are leading to an overall change in approach, but with XL and Ace still in the market, Zurich and Chubb expressing a greater interest in underwriting, and Ironshore opening a new environmental division with experienced management, there may be more options available to those seeking such policies, and greater competition on policy terms and pricing.

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 § 122
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