Where the law and the environment connect

     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.

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 aciStock_000017700348_XXXLarge-150x150quire 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.

 

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.

As an update to a previous write-up on the deadline for compliance with the new California Industrial General Permit for Stormwater (General Permit), the State Water Resources Control Board (State Water Board) has continued the deadline for registration and compliance from July 1, 2015 to August 14, 2015.

In a notice circulated on the original deadline for compliance, July 1, 2015, the State Water Board acknowledged that its web-based database for stormwater compliance (SMARTS) was experiencing technical issues which were limiting registration access.

As a result, the State Water Board extended the deadline for registration from July 1, 2015 to August 14, 2015.  This extended deadline should enable those industrial facilitiesdirty-pipe-water-300x199 that were either unaware of the July 1, 2015 deadline or those struggling to meet that deadline to timely register.

On July 1, 2015, the new California Industrial General Permit for Stormwater (General Permit) will take effect and along with it come a host of new compliance obligations. Chief among those obligations is the completion and submission of a notice of intent (NOI) to be bound by the new General Permit. The last time industrial facilities were obliged to submit an NOI was when the soon-to-be-expired General Permit was updated back in 1997.  Much has changed in the world of industrial stormwater compliance since then.

For those less familiar with the General Permit, it applies in California to the tens of thousands of industrial facilities throughout the state and serves to regulate stormwater emanating from those facilities. The application of the General Permit to any given facility is based on that facility’s Standard Industry Classification (SIC) code. The SIC code for a given facility is determined based on the primary industrial activity at the facility.

The first step in complying with the new General Permit is to determine if an industrial facility is subject to it.  For those industrial facilities that already have their own individualized permit for stormwater, the General Permit’s compliance obligations are inapplicable. And for those industrial facilities that are already operating under the soon-to-be-expired General Permit, the new General Permit’s compliance obligations may be inapplicable.  Oftentimes, industrial facilities will just re-notice their intent to be bound by a new permit without evaluating whether their facility should be subject to a permit. This common practice should be avoided, if possible, to ensure that a facility is not expending time and money to comply with a permit that is inapplicable. Finally, for those industrial facilities that are not already operating under the General Permit, it’s time to evaluate whether the General Permit applies.

200146012-001California’s Public Records Act (PRA) law requires public entities to make their public records open for inspection and copying. Environmental practitioners often use PRA requests as a tool to obtain information regarding a contaminated or a potentially contaminated site. In a recent case, Ardon v. City of Los Angeles, the California Court of Appeals found that a public entity can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a PRA, even if inadvertently.

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 inadvertency 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.

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contaminationOn September 25, 2014, Governor Brown signed SB 445 (Hill) Underground storage tanks; hazardous substances: petroleum: groundwater and surface water contamination into law (UST Law).  The UST Law was an urgency measure that took effect immediately.

The UST Law makes changes to the Underground Storage Cleanup Fund (UST Fund).  The UST Fund provides a mechanism to reimburse owners and operators of USTs the cost to remediate contaminated sites as the result of leaking USTs.  Most importantly, the UST Law extended the program’s sunset date by ten years to January 1, 2026.  Under the prior law, the UST Fund was set to expire in 2016, leaving many UST sites without access to state funds.

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cityscapeRecently, the court in Rominger v. County of Colusa found that a lead agency which approved a mitigated negative declaration for a project, can take the seemingly inconsistent position that the proposed project was not a California Environmental Quality Act (CEQA) project or was exempt from CEQA when its action is subsequently challenged.

In Rominger, real party in interest Adams Group, Inc. filed an application with the County of Colusa for the approval of a tentative subdivision map to divide 4 existing parcels into 16 parcels.  The application indicated that no specific plan for future expansion was available and that they intended to continue the existing use of the property.  The County prepared an initial study and issued a mitigated negative declaration under CEQA.

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LandfillForm over substance continues to obscure the substantive issue presented in the case of the City of Los Angeles (City) vs. Kern County (County). At its core, the dispute involves the land application of biosolids. Biosolids are organic material produced during the processing and treatment of wastewater. Historically, waste by-products like biosolids were disposed of in a landfill or were incinerated. With environmental concerns on the rise, more sustainable practices have been identified to dispose of biosolids, one of which includes land application.

The dispute between the City and County over the land application of biosolids began in the early 1990s when the City began working with County farmers to utilize biosolids in land application as fertilizer for crops. After several years of successful land application, residents of the County passed a measure banning the practice. The practice was successfully portrayed as the City disposing of its waste in the County rather than keeping the waste in the City. Residents of the County overwhelmingly passed the measure and the City sued to block implementation of the measure. Years of protracted litigation between the City and County culminated in the most recent decision by the California Supreme Court (Court).

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OLYMPUS DIGITAL CAMERAOn November 6, 2013, ASTM revised its standard for conducting Phase I environmental site assessments, known as Standard E1527-13 (entitled “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”).  ASTM E1527-13 is the first revision to the ASTM Phase I standard since its 2005 revision of the standard (known as ASTM E1527-05).

The ASTM standards are a helpful tool for parties seeking to avoid, or at least minimize, potential liability pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA,” also known as “Superfund”).  CERCLA imposes liability without regard to fault or negligence on present facility owners and certain past owners, as well as certain other parties, for any environmental contamination found on the property.  This means that a purchaser and current owner of land contaminated by the actions of others could be held liable under CERCLA for the cleanup of the property.  Fortunately, CERCLA has a few defenses for these situations for so-called “innocent landowners,” “bona fide prospective purchasers,” and “contiguous property owners.”  However, to qualify for these defenses, CERCLA requires a property owner to conduct “all appropriate inquiries” on or before the date of acquiring the contaminated property, among other requirements.

Prior to November 2005, there was no federally approved statute or regulation defining the procedure that a prospective purchaser must follow in conducting all appropriate inquiries.  However, on November 1, 2005, the United States Environmental Protection Agency (“EPA”), issued a final rule entitled the “Standards and Practices for All Appropriate Inquiries.”  Effective on November 1, 2006, the All Appropriate Inquiries Rule for the first time established federal standards and practices for conducting all appropriate inquiries, as a first step to qualifying for one of the elusive CERCLA defenses.