U.S. EPA’s Proposed Rule Would Modernize NPDES Regulations

Water Quality

Earlier this month, the United States EPA proposed a rule (“Proposed Rule”) that would update and revise National Pollutant Discharge Elimination System (“NPDES”) regulations. Rather than epa-logoreopening the existing NPDES regulations for comprehensive revision, the Proposed Rule would make “specific targeted changes to the existing regulations” that align the regulations with statutory requirements and incorporate case law decisions.  Essentially the update would “modernize” the NPDES regulations.

The Proposed Rule covers 15 topics. These pertain to permit applications; the water quality-based permitting process; permit objections, documentation and process efficiencies; the “vessels exclusion” (which authorizes certain discharges incidental to the normal operation of commercial vehicles); and the Clean Water Act (CWA) section 401 certification process.

For a complete summary of the Proposed Rule, please click here.  Comments on the Proposed Rule will be accepted through July 18, 2016 and may be submitted here.

California Supreme Court Finds that a Public Agency Cannot Inadvertently Waive Attorney-Client and Work Product Privileges

Environmental Litigation

Today, the California Supreme Court resolved this issue in Ardon v. City of Los Angeles.

Last year, I wrote about the Second Appellate District case of Ardon v. City of Los Angeles.  In Ardon, the appellate court found that a public agency can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a California Public Records Act (PRA) request, even if inadvertently.  However, half a year later, the First Appellate District in Newark Unified School District v. Superior Court came to the opposite conclusion in holding that a public agency cannot inadvertently waive attorney-client and work product privileges.  These contradictory holdings created what is known as a “split of authority.”  Today, the California Supreme Court resolved this issue in Ardon v. City of Los Angeles.  The Court found that a public agency cannot waive the privileges if it inadvertently releases privileged documents in response to a PRA request.

In Ardon, the plaintiff in litigation against the City of Los Angeles sought records under the PRA from the city concerning the subject matter of its complaint. After receipt of the records, Ardon’s counsel notified the city that it had obtained copies of some records that appeared to be privileged. The city responded by asserting that the documents had been inadvertently produced. The city demanded that Ardon return the documents to the city and agree not to rely upon the documents in any way. Ardon declined this request, asserting that the city had waived any privilege claim.  Citing California Government Code section 6254.5, the court found that in producing the documents, even inadvertently, the city waived any privilege claim.

The California Supreme Court characterized this issue as “one of statewide importance.”  In reaching its decision, the Court reviewed the statutory language of California Government Code section 6254.5 and the other relevant statutes pertaining to the PRA.  The Court concluded that the statutory language as a whole was ambiguous on this issue, and resolved the ambiguity by concluding that inadvertent disclosure does not waive the privileges. The Court stressed the importance of the statutory privileges and a party’s reasonable reliance that an inadvertent disclosure would not waive the privileges.  The Court further found that there was no reason to interpret California Government Code section 6254.5 differently from Evidence Code section 912 (which applies to discovery requests in litigated disputes) in this regard.  Under Evidence Code section 912, an inadvertent disclosure of privileged documents does not waive the privilege.

In this author’s opinion, the California Supreme Court made the right decision.  As the Court pointed out, it would be difficult for public agencies to respond to the numerous PRA requests that they receive without any human error.  The lower court’s decision would put an unnecessary burden on public agencies to ensure that they never inadvertently disclosed privileged documents.  This would ultimately make it more difficult for public agencies to respond to PRA requests in a timely manner.

In the Heart of the Rainy Season: The New (Stayed) Clean Water Rule Covers Vernal Pools in California

Water Quality

After years of drought, the El Niño storms have been bringing much-needed rain and snow to California–albeit in quantities significantly less than we hoped for thus far.  In addition to the anticipated snow packs, flowing rivers, and replenished reservoirs, the California landscape has been marked by the return of ephemeral vernal pools, which may appear as seemingly insignificant ponds or puddles.

However, under the Clean Water Rule (“CW Rule”) which was promulgated mid-last year, and which defines which waters are “jurisdictional”—meaning, protected as “waters of the United States” under the Clean Water Act (“CWA”)—the reach of federal jurisdiction may include those seemingly insignificant ponds or puddles.

If such a pond or puddle is deemed a “vernal pool” that is covered by the CWA, then the pond or puddle is subject to a myriad of CWA regulatory requirements, including the federal prohibition on discharges of pollutants except in compliance with the CWA (§ 301), the requirement to obtain a permit prior to discharge (§§ 402, 404), water quality standards (§ 303), oil spill liability and oil spill prevention and control measures (§ 311), certification of compliance with State water quality standards (§ 401), and enforcement (§ 309).

This may seem like a whole lot of fuss about what may appear to be nothing more than large mud puddles.

This may seem like a whole lot of fuss about what may appear to be nothing more than large mud puddles.

The CW Rule specifically includes western vernal pools as potentially jurisdictional under the CWA and specifies how jurisdiction is to be determined.  In sum, western vernal pools may be deemed jurisdictional waters of the United States on a case-by-case basis depending on whether combined networks of vernal pools “significantly affect” the integrity of other jurisdictional waters.  This is in contrast to the five classes of waters which are deemed per se jurisdictional, or “jurisdictional by rule” under the CW Rule:  traditional navigable waters, interstate waters, the territorial seas, tributaries, and “adjacent” waters (as defined).

The CW Rule describes “western vernal pools” as

shallow, seasonal wetlands that accumulate water during colder, wetter months and gradually dry up during warmer, drier months;

and

seasonal wetlands from the Pacific Northwest to northern Baja California, Mexico associated with topographic depressions, soils with poor drainage, mild, wet winters and hot, dry summers.

Although the CW Rule does not categorically include western vernal pools as “waters of the United States,” the CW Rule categorizes them as waters that may be deemed waters of the United States when a case-specific determination has found a significant nexus between the pools in question and jurisdictional waters of the United States.

The significant nexus standard stems from a series of United States Supreme Court opinions, including Rapanos v. United States, 547 U.S. 715 (2006), which set forth several tests for determining when waters may be deemed “waters of the United States.”  In a fractured 4-1-4 decision, Justice Kennedy concluded in a concurring opinion that waters could be jurisdictional if they either alone or in combination with similarly situated waters in the region, “significantly affect the chemical, physical, or biological integrity” of traditional navigable waters, interstate waters, or the territorial seas.

Under the CW Rule, western vernal pools are deemed “similarly situated” for purposes of the significant nexus standard, and must therefore be considered as a whole rather than individually in making jurisdiction assessments.  Specifically, they are to be analyzed as a group in the watershed that drains to the nearest traditional navigable water, interstate water, or the territorial seas when making a case-specific analysis of whether these waters have a significant nexus to traditional navigable waters, interstate waters, or the territorial seas.  This is theoretically true irrespective of distance from jurisdictional waters, although to the extent that vernal pools are “adjacent” (as defined in the CW Rule) to jurisdictional waters, then they would automatically be deemed jurisdictional by rule which would obviate the need for a case-specific determination.

Under the prior regulatory scheme, western vernal pools were not specifically enumerated as a subclass of potentially jurisdictional waters, and it was unclear how they were to be evaluated (including whether they were to be evaluated separately or as a network).  This left stakeholders—predominantly those in the Central Valley where western vernal pools are most commonly found—scratching their heads over jurisdictional determinations.  See, e.g., Borden Ranch Partnership v. United States Army Corps of Engineers, 261 F.3d 810 (9th Cir. 2001) (reversing district court’s findings of liability with respect to isolated vernal pool in the Central Valley).

Despite the CW Rule’s potential for significant new designation of jurisdictional waters, the CW Rule states that it does not purport to add any additional CWA permitting requirements.  For example, with respect to agriculture, the CW Rule does not affect any of the exemptions stated in CWA section 404(f), including exemptions for “normal farming,” ranching, and forestry activities.  That said, the Economic Analysis document accompanying the CW Rule indicates that the CW Rule will result in an approximately 3% to 5% increase in claimed CWA jurisdiction compared to the current field practice.

The CW Rule has been challenged on multiple grounds, and is presently stayed nationwide.  Shortly after the CW Rule was issued, enforcement of the CW Rule was stayed in the Sixth Circuit (In re: Environmental Protection Agency and Department of Defense, Final Rule: Clean Water Rule: Definition of “Waters of the United States) pending a determination by the court on jurisdiction to review the rule.  As a result, federal regulators have not been implementing the CW Rule, and are instead using the 1986 regulations and associated guidance (those in effect prior to August 28, 2015) in making jurisdictional determinations.  Just last month, however, in a fractured 2-1 decision, a three-judge panel found that the Sixth Circuit has jurisdiction to hear challenges to the CW Rule.

The stay will fuel uncertainty as vernal pools begin to form throughout California this spring as to whether specific vernal pools will be considered “waters of the United States.”  This may be a source of significant frustration for those with development, grading, or other plans for land that could impact vernal pools.

When compounded with the possibility that threatened or endangered species may be lurking within vernal pools (such as the threatened fairy shrimp that have historically emerged when vernal pools begin to fill), vernal pools can present a complicated and expensive set of environmental challenges.

This may seem like a whole lot of fuss about what may appear to be nothing more than large mud puddles.  Nevertheless, property owners must exercise caution before they disturb those pools, as the penalties under the CWA can be significant.

Proposed Rule Adding Vapor Intrusion Component to Hazard Ranking System Published in the Federal Register Today

Air Quality

Today the U.S. Environmental Protection Agency published a proposed rule in the Federal Register which would add a vapor intrusion component to the Hazard Ranking System, the system EPA uses to evaluate sites for placement on the National Priorities List (“NPL”).  We forecasted and discussed the publication of this proposed rule in a blog post earlier this month.  Under the proposed rule, the Hazard Ranking System evaluation could directly consider “human exposure to hazardous substances, pollutants, or contaminants that enter regularly occupied structures through subsurface intrusion in assessing a site’s relative risk, and thus, enable subsurface intrusion contamination to be evaluated for placement of sites on the NPL.”  Click here to see the proposed rule.

Comments may be submitted on the proposed rule through April 29, 2016.

Proposed Rule Adding Vapor Intrusion Component to Hazard Ranking System Will Likely Appear in Federal Register This Month

Air Quality

A  proposed rule that would add a vapor intrusion component to the Hazard Ranking System (“HRS”), the primary screening tool for the CERCLA National Priorities List (“NPL”), is scheduled for publication in the Federal Register this month.  NPL listing is a prerequisite for designation as a federal Superfund site.  Previously, the HRS did not take into direct consideration the vapor intrusion pathway, and NPL listing was based upon only the ground water migration, soil exposure, surface water migration, and air migration pathways.  The proposed rule represents a renewed effort by the U.S. Environmental Protection Agency to expressly account for vapor intrusion in the NPL evaluation process, following a prior version of this rule proposed in 2010.

Proponents of the rule contend that vapor intrusion presents unique risks to human health that the HRS does not adequately account for, while industry opponents assert the new criteria would result in the identification of few, if any, new NPL sites and that the lengthy Superfund process is not the appropriate vehicle to address any sites that may involve more imminent threats to human health.

Upon publication in the Federal Register, there will be a sixty-day public comment period.   For more information, please click here.  Check back to the blog for future updates.

 

 

Required Action on the Horizon for California Consumer Products Companies

Yesterday, the Department of Toxic Substances Control (“DTSC”) released its draft Stage 1 Alternatives Analysis Guide (“Guide”) under the California Safer Consumer Products program.  Public comments are being accepted on the Guide through October 24, 2015, and DTSC is specifically asking commenters to “provide the names of tools, methods, approaches, and data sources not already mentioned, as well as examples for steps and approaches, to complete an [alternatives analysis].”

By way of background, California’s Safer Consumer Products program took effect on October 13, 2013, and seeks to reduce certain chemicals from consumer products.  The program establishes a list of “candidate chemicals” of concern and “priority products” that contain candidate chemicals.  Candidate chemicals are identified here.  Initial priority products include paint stripper with Methylene Chloride; spray polyurethane foam with unreacted MDI; and children’s foam-padded sleeping products with TDCPP (or TCEP).

Manufacturers and other supply-chain participants of priority products will be required to submit priority product notifications to DTSC sixty (60) days after the effective date of the regulation establishing a product-chemical combination as a final priority product.  Subsequently, alternatives analyses will be required, in which manufacturers and other supply-chain participants will need to submit information regarding whether there is a “safer” way to make priority products.  Thereafter, DTSC is required to implement a regulatory response, which could include mandated product labeling requirements, safety measures, and bans.

Consumer products manufacturers and supply-chain participants are advised to keep abreast of California’s Safer Consumer Products program.  Although it has been slow-moving up until this point, required action is on the horizon.  Looking ahead in the next few years, DTSC also plans to examine “Beauty, Personal Care, and Hygiene Products,” “Building Products and Household, Office Furniture and Furnishings,” “Cleaning Products,” “Clothing,” “Fishing and Angling Equipment” and “Office Machinery.”

Can a Public Agency Inadvertently Waive Attorney-Client & Work Product Privileges? First and Second Appellate District Split on the Issue

Environmental Litigation

In January, I wrote about the Second Appellate District case of Ardon v. City of Los Angeles.  In Ardon, the court found that a public entity can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a California Public Records Act (PRA) request, even if inadvertently.  Recently, the First Appellate District in Newark Unified School District v. Superior Court came to the opposite conclusion in holding that a public agency cannot inadvertently waive attorney-client and work product privileges.  These contradictory holdings have created what is known as a “split of authority.” 

 

In Newark Unified School District, some parties requested documents from the Newark Unified School District (District) under the PRA.  The PRA requires public entities to make their public records open for inspection and copying upon request.  Within hours of delivering the documents in response to the request, the District’s interim superintendent discovered that the District had inadvertently included over one-hundred documents that it contended were subject to the attorney-client or attorney work product privileges.  The District immediately sent e-mails to the recipients of the documents requesting that they return the documents.

 

Citing California Government Code Section 6254.5, the document recipients argued that the District waived the privileges by its inadvertent release of the documents.  The court in Ardon had previously cited this provision in finding that a public entity waives any privilege if it discloses a privileged document pursuant to a PRA request, even if such disclosures are made inadvertently, by mistake or through excusable neglect.  However, the court in Newark Unified School District concluded that the District did not inadvertently waive the privileges.

The Newark Unified School District court reviewed the Legislative history of Government Code Section 6254.5 and determined that the Legislature intended the section to prevent public agencies from intentionally disclosing documents to some members of the public while asserting confidentiality as to other persons.  In contrast, the Legislature did not intend that a public agency could waive its privilege by inadvertent disclosure.  Finally, the court concluded that to harmonize Government Code Section 6254.5 and California Evidence Code Section 912 (in which courts have found that a privilege cannot be waived by an inadvertent disclosure), it must construe Section 6254.5 as not applying to an inadvertent disclosure of a privileged document.

The decisions in Ardon and Newark Unified School District create a clear split of authority on whether a public agency can inadvertently waive privilege.  In this author’s opinion, Newark Unified School District has the better argument.  From a public policy standpoint, it would be very burdensome on local agencies’ resources if they had to respond to PRA requests without any safeguard from inadvertent disclosure of privileged documents.  Public agencies would be held to a higher standard than private litigants, because in private litigation inadvertent disclosure does not result in a waiver of privilege.  Fortunately, this split of authority should be resolved soon, because the Ardon case is now before the California Supreme Court.  Stay tuned …

State Water Board Approves Composting General Order

Water Quality

     Earlier this month, the California State Water Quality Control Board (“State Water Board”) approved a General Order for Waste Discharge Requirements (“WDRs”) for composting operations, which will streamline and standardize permitting processes and regulate water quality at new and existing composting facilities.  While the General Order was approved with very little fanfare or media coverage, its implications are significant.

General Order Coverage

    The General Order, which applies to State composting facilities that process at least 500 cubic yards of material per year, will impose a regulatory scheme on a large number of the organics facilities already operating in the State.  Moreover, the General Order’s facility coverage is likely to expand in the coming years, given the recent passage of California Assembly Bill 341 (“A.B. 341”) (2011), which encourages the addition and expansion of State composting facilities by establishing a State policy goal that at least 75 percent of the solid waste generated in the State be source-reduced, recycled, or composted by 2020.

Waste Disposal and Composting in California

     The State of California currently disposes of an annual estimated 35 million tons of waste in landfills, of which an estimated 32 percent is compostable organic material, 29 percent is construction debris, and 17 percent is paper.  Much of the organic material could be, but is not being, composted, which is leading to the excessive and unnecessary filling of State landfills.  Composting yields environmental benefits by preserving nutrients, diverting waste from landfills, improving soil, reducing runoff, and sequestering carbon.

Prior Regulatory Scheme 

     In the past, potential water quality issues arising from composting facilities were regulated by the State’s nine Regional Water Quality Control Boards through individual facility WDRs, or waivers of WDRs.  California Water Code section 13263 requires that the water boards prescribe WDRs that, among other things, implement water quality control plans and consider the beneficial uses to be protected.

     Historically, the principal water quality issue at composting facilities has been the control of “leachate,” a liquid byproduct of composting.  Leachate consists of a variety of pollutants, including salts, nitrates, pesticides, and metals, which have the potential to impact ground waters and surface waters of the State.

Permit Basics

     The General Order puts most composting facilities in either a Tier I or a Tier II category, with Tier II facilities being subject to heightened regulatory requirements.  Classification is predominantly based on feedstock type, total volume of materials, and hydrogeological siting.

     With respect to each tier, the General Order sets forth standards for depth to groundwater, distance to surface water, allowable and prohibited feedstocks, additives, surface pads, wastewater handling, berms, and facility monitoring.  Some composting facilities will fall into neither tier, necessitating the continued use of individual WDRs.

 Over-Regulation of Composting?

     A number of composting industry participants have suggested that the cost of compliance with the General Order is high compared to the relatively innocuous threats posed to water quality by composting activities.  Consequently, they argue, composting facilities may consider shutting down or raising fees—both of which would be detrimental to the State’s A.B. 341 goals.

     In response to industry comments, the State Water Board revised a number of the General Order’s more onerous regulatory requirements.   For example, in an earlier draft of the General Order, detention ponds at composting facilities were required to contain all runoff from working surfaces in addition to precipitation from a 25-year, 24-hour storm event.  Industry participants argued that the requirement lacked flexibility.  In response, the General Order was revised to indicate than an “equivalent alternative” to the detention pond requirement could be approved by a regional water board.

     Whether the General Order strikes the appropriate regulatory balance between encouraging composting and adequately protecting water quality is still in question.  Only time will tell whether the General Order accomplishes those dual objectives.

 Next Steps for Composting Facilities

     Existing composting facilities, except those with individual WDRs or conditional waivers of WDRs, are required to seek coverage under the General Order by submitting a Notice of Intent (“NOI”), filing fee, and technical report within one year of adoption of the General Order (as indicated above, the General Order was adopted on August 4, 2015).  New composting operations that propose to begin operating after adoption of the General Order, are required to seek coverage under the General Order by submitting a complete NOI, filing fee, and technical report at least 90 days prior to commencement of operations.

     After the appropriate regional water board determines that an NOI and technical report are complete and the operation can be appropriately regulated under the General Order, the regional water board will issue a Notice of Applicability (“NOA”) which will confirm the facility’s tier and a timeline for compliance with the General Order.  Existing facilities will have six years to come into full compliance with the General Order.

Insurance Protection for Losses May Be Freely Assigned in Connection with a Corporate Sale or Reorganization

Environmental Litigation

On August 20, 2015, the California Supreme Court handed down its much anticipated decision in Fluor Corporation v. Superior Court (Hartford Accident & Indemnity Company). The court held that Insurance Code §520, a seldom cited provision of the Insurance Code dating back to 1935, bars an insurer from refusing to honor a policyholder’s assignment of policy coverage regarding injuries or damages that pre-date the assignment. In the process, the high court overruled its 2003 decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934, which had held that when a liability policy contains a “consent-to-assignment” clause (a standard provision in pre-1985 policy forms), the policyholder may not assign its rights to policy benefits without the insurer’s consent until the claim against the insured is reduced to a judgment or settlement with the claimant.

 The decision, which deals with post-loss assignment of insurance benefits under general liability policies in the context of a corporate reorganization, has particular relevance to companies who acquire companies with existing environmental or other long-tail liabilities. Before the Fluor decision, it was often necessary to structure a transaction as a stock purchase and maintain the target company as a subsidiary of the acquiring company to obtain the benefit of the target company’s legacy coverage typically dating back many years to the time period when the environmental or other liabilities for the target company’s operation arose. In Fluor, the California Supreme Court expressly recognized that its decision will protect the ability of a policyholder “in the course of transferring assets and liabilities to another business entity in connection with a corporate sale or reorganization, to assign rights to claim defense and indemnification coverage provided by prior and existing insurance policies concerning the business’s previous conduct.”

 Greenberg Glusker represents policyholders in insurance recovery litigation against insurers.  For more information regarding our insurance coverage practice, please contact Jonathan B. Sokol at 310.201.7423 or JSokol@greenbergglusker.com.

 

EPA Must Consider Costs in Deciding Whether to Regulate HAPs From Power Plants

Air Quality

Last week, in Michigan v. EPA, the U.S. Supreme Court held that it was unreasonable for the U.S. Environmental Protection Agency (“EPA”) to refuse to consider costs in connection with its finding that it was “appropriate and necessary” to regulate hazardous air pollutant (“HAP”) emissions from power plants under the federal Clean Air Act (“CAA”).

By way of background, the CAA instructs EPA to regulate HAP emissions from power plants if it concludes that regulation is “appropriate and necessary.”  The “appropriate and necessary” language stems from the 1990 CAA amendments, wherein Congress established a procedure for determining the applicability of the HAP program to power plants.  Those amendments require EPA to regulate power plants as ordinary major sources if, after conducting several studies, EPA finds that it is “appropriate and necessary.”

After EPA completed the required studies in 1998, it concluded that regulation of power plants was in fact “appropriate and necessary.”  EPA’s “appropriate” finding was based on a conclusion that power plants emitted mercury and other HAPs which posed a risk to human health and the environment and that emission reduction controls were available.  EPA’s “necessary” finding was based on its conclusion that then-existing requirements did not eliminate risks.  In conjunction with its conclusions, EPA determined that “costs should not be considered” in determining whether power plant HAPs should be regulated.  A Regulatory Impact Analysis issued by EPA estimated that EPA’s decision would cost power plants $9.6 billion per year, whereas quantifiable regulatory benefits would be worth $4 to 6 million per year.

Reviewing EPA’s statutory interpretation under the test enunciated in Chevron USA, Inc. v. NRDC, Inc., 720px-Seal_of_the_United_States_Supreme_Court_svgthe U.S. Supreme Court concluded that the phrase “appropriate and necessary” requires “at least some attention to cost.”  Moreover, the Supreme Court found that statutory context reinforced the relevance of cost, as EPA was asked to study cost prior to determining whether it was “appropriate and necessary” to  regulate HAP emissions from power plants.  Although EPA argued, among other things, that the statute at issue did not mention cost and therefore did not require EPA to consider cost, the Supreme Court maintained that the statute’s broad reference to “appropriateness” encompassed multiple relevant factors—including cost.

Several commentators have concluded that the effect of the Supreme Court’s decision in Michigan v. EPA is somewhat inconsequential, since EPA can nevertheless regulate HAP emissions from power plants (including mercury) provided that it merely considers costs in the future.  It is unclear whether this conclusion is true, as the Supreme Court’s opinion is chock-full of intimations that in determining “appropriateness,” EPA must also weigh—to at least some extent—costs against benefits.   For example, the Supreme Court stated that “[o]ne would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”  Moreover, although the Supreme Court acknowledged that “[i]t will be up to [EPA] to decide . . . how to account for cost,” the Court also acknowledged that EPA must nevertheless consider costs “within the limits of reasonable interpretation.”  Thus, in any event, Michigan v. EPA stands for the principle that EPA must engage in reasoned decision making in its decision to regulate HAP emissions from power plants.