The Wildcatter
(By Nikolas Tysiak)
For this month’s edition of the Wildcatter, we have two cases from Ohio that are of interest.
In Tera, LLC v. Rice Drilling D, LLC (2023-Ohio-273; 7th Dist.), the Court of Appeals for Ohio’s 7th district was asked to overturn the significant award of monetary damages in favor of a landowner based on a trespass claim. The lease at issue expressly reserved all the oil and gas rights “in all formations below the base of the Utica Shale,” while production indicated that the wellbores had penetrated the Point Pleasant formation. The trial court found that such penetration violated the reservation language of the lease, resulting in the trespass. The Operators involved appealed on various grounds, conceding that the Point Pleasant formation is now considered a distinct rock formation, but was not considered separate from the Utica Shale at the time the leases at issue were executed in 2013 and 2014, and that the term “Utica Shale” held special meaning at that time in Ohio, allowing for the use of extrinsic evidence (evidence outside the lease document) to interpret the lease. The court of appeals agreed with the trial court that the term “Utica Shale” was entirely unambiguous and that no extrinsic evidence was warranted to interpret the same and upheld the trial court’s decision. The appeals court went on to indicate that some of the factors regarding the calculation of damages required further analysis at trial and remanded to the trial court with some instructions on damages calculations. The key takeaway being, at least at this time, in Belmont County, Ohio, leases covering the “Utica Shale” will not cover the Point Pleasant formation.
In Chartier v. Rice Drilling D, LLC (2023-Ohio-272, 7th Dist.), the Court was once again confronted with a Marketable Title Act issue involving oil and gas. The Court decided that the reservation language within the root-of-title period called for by the Marketable Title Act did not serve to preserve reserved oil and gas for two distinct reasons: first, the underlying reservation at issue arose from a corrective deed that reserved oil and gas from the land, when the same had not been reserved in the original deed subject to correction; and second, a determination that the reservation language was not “specific” under Blackstone v. Moore, and therefore was a “general” reservation not preserved under the Marketable Title Act. Because of these factors, the court of appeals found in favor of the surface owners against the holders of the severed mineral interest. Despite this finding, the decision appears to be of questionable authority. First, the case makes no mention of Erickson v. Morrison, which found that a reference to a reservation only needs to provide notice to a title examiner that a preexisting interest exists and is locatable by a standard title search. Second, the Court appears to ignore the fact that subsequent parties repeated the reservation language from the corrective deed, calling in to question what expectation subsequent grantees realistically had to receive oil and gas rights under the land. Additionally, as of March 9, the case has been accepted for judicial review by the Ohio Supreme Court (case # 2023-0343), so we will continue to track and watch this one.
As always, bring us your feedback and suggestions for any additional topics you want to see covered.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC April 2023 issue of The Wildcatter. All rights reserved.
Legal Intelligencer
(by Matt Wood and Mackenzie Moyer)
On March 14, 2023, the U.S. Environmental Protection Agency (EPA) provided a pre-publication version of a proposed National Primary Drinking Water Regulation Rulemaking that would regulate six polyfluoroalkyl substances (PFAS) under the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq (PFAS Rule). The proposed PFAS Rule would establish Maximum Contaminant Level Goals (MCLGs) and Maximum Contaminant Levels (MCLs) for perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS), two of the most common PFAS – a group of thousands of manmade chemicals used in various consumer, commercial, and industrial manufacturing processes since the 1940s – as individual contaminants. It would also establish a Hazard Index MCL for mixtures containing one or more of perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid and its ammonium salt (HFPO-DA, commonly known as GenX chemicals), perfluorohexane sulfonic acid (PFHxS), and perfluorobutane sulfonic acid (PFBS). Years in the making, the final PFAS Rule will be the first federally enforceable drinking water rule governing PFAS. EPA intends to finalize the PFAS Rule by the end of 2023.
PFAS have been used to make products water-, stain-, and heat-resistant and have been a key ingredient in some aqueous film forming foams (AFFF) used to extinguish flammable liquid fires (e.g., those that might occur on airports or military bases). PFAS are known as “forever chemicals” because they do not break down naturally in the environment. Due to these properties and their ubiquitous nature, PFAS have been found in various environmental media, such as groundwater (including drinking water), plants, animals, and in humans. Toxicity studies suggest that PFAS exposure can lead to adverse health effects.
For PFOA and PFOS, the proposed PFAS Rule sets MCLGs – non-enforceable health-based goals that represent the maximum concentration of a contaminant in drinking water at which there is no known or anticipated negative effect on a person’s health – at 0 parts per trillion (ppt). It sets the enforceable MCLs for PFOA and PFOS, which represent the maximum concentrations allowed in drinking water that can be delivered to users of a public water system and are informed by other factors (e.g., available treatment technologies and cost), at 4 ppt each.
The proposed PFAS Rule takes a different approach for PFNA, HFPO-DA (GenX), PFHxS, and PFBS by proposing regulation of these compounds as a mixture, because of their likely co-occurrence in drinking water, using a hazard index formula. The Hazard Index is calculated by dividing the concentration of each of the four PFAS compounds by its Health-Based Water Concentration (HBWC; 10 ppt for PFNA, 10 ppt for HFPO-DA (GenX), 9 ppt for PFHxS, and 2000 ppt for PFBS) and then adding the results together. A total value greater than 1.0 is an exceedance of the proposed Hazard Index MCL. For a more detailed explanation of the Hazard Index calculation, see EPA’s FAQ for Drinking Water Primacy Agencies, available here.
Prior to EPA’s announcement of the proposed PFAS Rule, the only federal drinking water guidance for PFAS were EPA’s 2022 interim Health Advisories for PFOA (0.004 ppt) and PFOS (0.02 ppt) and final Health Advisories for GenX (10 ppt) and PFBS (2,000 ppt), which are unenforceable standards that identify the concentration of PFOA and PFOS in drinking water at or below which adverse health effects are not expected to occur over a lifetime of exposure.
If finalized, and after a specified implementation period, the proposed PFAS Rule will require public water systems, including those in Pennsylvania, to monitor for each of the six PFAS discussed herein, notify the public of exceedances of the MCLs and/or Hazard Index MCL, and take action to reduce any exceedances in drinking water. Because the Safe Drinking Water Act does not regulate private wells, the proposed PFAS Rule does not apply to private well owners. EPA’s proposed PFAS Rule follows Pennsylvania’s recent adoption of state MCLs for PFOA (14 ppt) and PFOS (18 ppt) in January 2023. If the proposed PFAS Rule is finalized as written, Pennsylvania will have to lower its current MCLs for PFOA and PFOS and adopt standards for PFNA, HFPO-DA (GenX), PFHxS, and PFBS to ensure these standards are as at least as strict as the federal MCLs.
The proposed PFAS Rule is the latest action under President Joe Biden’s plan to combat PFAS pollution (fact sheet available here) and EPA’s 2021 PFAS Strategic Roadmap (available here), under which EPA is taking a “whole-of-agency approach” to address PFAS throughout its lifecycle. Consistent with this approach, EPA engaged in consultations with the public and sought input from other stakeholders, including public webinars, correspondence with the Science Advisory Board, and meetings with state, local, and tribal officials, to develop the proposed PFAS Rule.
To assist financially with addressing PFAS, the Bipartisan Infrastructure Law provides $9 billion to invest in drinking water systems impacted by PFAS and other emerging contaminants. $4 billion is earmarked for investment in Drinking Water State Revolving Funds and $5 billion will be made available to communities as grants through EPA’s Emerging Contaminants in Small or Disadvantaged Communities (EC-SDC) Grant Program, which is intended to promote access to safe and clean water in small, rural, and disadvantaged communities. In February 2023, EPA announced the availability of the first $2 billion of the EC-SDC funding.
The proposed NPDWR rulemaking will be subject to a 60-day public comment period upon publication in the Federal Register. EPA is also holding a public hearing on May 4, 2023, which members of the public can attend and provide verbal comments. More information on the public hearing can be found here.
In addition to the proposed PFAS Rule, EPA is moving to regulate PFAS under other federal programs, including a September 2022 proposal to designate PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The proposed PFAS CERCLA Rule would implement certain reporting requirements for releases of PFOA or PFOS exceeding the applicable reportable quantity and would enhance EPA’s authority to address PFAS in the environment, including potentially reopening long-closed cleanup sites. The comment period for the PFAS CERCLA rule is closed and the rule could be finalized this summer.
In the months since the proposed PFAS CERCLA Rule, stakeholders have raised questions and concerns about how EPA intends to address enforcement for PFAS contamination under CERLCA. In March 2023, EPA held two listening sessions focused on these questions. The agency stated that it intends to focus its CERCLA enforcement on manufacturers, federal facilities, and other industrial parties that are significant sources of PFAS and does not intend to pursue water utilities and publicly owned treatment works, publicly owned and/or operated municipal solid waste landfills, farms that apply biosolids, and certain airports and fire departments. EPA said that it is considering summarizing its PFAS CERCLA enforcement discretion policy in a formal guidance document in the future. More information on the CERCLA enforcement listening sessions can be found here.
Babst Calland’s PFAS Work Group, including both environmental and litigation attorneys, continue to track PFAS technical and legal developments and are available to assist you with PFAS-related matters. For more information on this and other remediation matters, please contact Matthew C. Wood at (412) 394-6583 or mwood@babstcalland.com, Mackenzie M. Moyer at (412) 394-6578 or mmoyer@babstcalland.com, or any of our other attorneys in this practice.
Matthew C. Wood is Senior Counsel in Babst Calland’s Environmental Group. His practice encompasses a variety of legal matters arising under major federal and state environmental and regulatory programs, with a focus on issues involving government inquiries, environmental investigations, remediation, and related activities.
Mackenzie M. Moyer is an associate in Babst Calland’s Environmental Group. Her practice encompasses a broad range of environmental issues including state and federal permitting and regulatory compliance.
To view the full article, click here.
Reprinted with permission from the April 6, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
Smart Business
(By Adam Burroughs featuring Kevin Douglass)
Many business owners are blindsided when a co-owner files a lawsuit against them detailing a list of grievances. When owners form a new business or an owner is added to an existing ownership group, the stakeholders are typically optimistic about the future. Owners often do not discuss or consider the possibility of future differences and may not address them in their written agreements. Consequently, when a disagreement inevitably arises, business owners frequently choose to minimize or completely ignore the dispute until considerable damage is done to the owners’ relationship, which allows these matters to fester and eventually disrupt the business. But with the right preventive approach, these challenges can be identified and resolved quickly and cost effectively.
“Even companies with just one owner eventually must deal with succession questions, so no business owner is completely immune from dealing with co-owners or the prospect of future owners,” says Kevin Douglass, shareholder at Babst Calland.
Smart Business spoke with Douglass about conflict resolution among business owners.
What can trigger disagreements among owners?
One common trigger is finances. If the company is doing very well, owners may feel entitled to more compensation or at least more input into how additional profits will be invested. In contrast, if the business begins to struggle, owners’ compensation, distributions and benefits may need to be decreased, and tough decisions made about the company’s direction.
Other reasons for conflict can include a change in an owner’s level of commitment or job performance, an owner’s desire for more authority and input into company management, or conflicting business strategies. Changes in an owner’s personal life may also spark controversy, such as the involvement of a new family member or owner in the business, changes in an owner’s personal finances or simply the advancing age of the company’s primary manager(s).
What are the risks of ignoring owner disagreements?
Owner disagreements can spill over into a business’s operations and finances. Employees, lenders, customers, vendors and others can easily become aware of, and even embroiled in, the drama. They may be confused about which owner is in charge. If left unchecked, the reputation and health of the business may be threatened. Just as significantly, relationships on a professional, personal and family level may be permanently impacted, if not addressed thoughtfully and with sensitivity.
Some owners resort to litigation to obtain the satisfaction they believe they are entitled to, but the expense, stress and distraction of litigation is rarely the best route to resolve differences.
How can owners resolve their underlying issues quickly?
Do not ignore the issue. Instead, take the necessary steps to resolve potential conflicts as efficiently as possible.
Take the time to understand your legal and strategic options. Consult with an independent attorney who can objectively assess the strength of your position, as well as your goals, risks and opportunities. The company attorney’s primary obligation is to act in the best interest of the business, and therefore, may not be in the best position to give an owner personal legal advice.
After fully vetting an owner’s situation, finding a solution may include answering difficult questions. Do the owners share the same vision for the company’s future? Does the ownership, compensation or governance structure need to be redefined? Are new leaders and investors needed? Do the owners want to continue in business together, or separate via a buyout? Should the business be sold? Should a strategic or succession plan be developed, and if so, what should it look like?
Any resolution of issues involving owner conflict should strive to satisfy, or at least account for, the concerns of all owners and interested parties — even if they involve the buyout of an owner. Although litigation can be an effective way to resolve a dispute as a last resort, owners should seriously explore more cost-effective options to address conflict and strive to develop workable solutions that ensure the protection and preservation of the business.
To view the PDF, click here.
To view the full article, click here.
The Legal Intelligencer
(by Alex Farone, Janet Meub and Steve Silverman)
The National Labor Relations Board (NLRB) recently announced the return of a wide-sweeping ban on severance agreements that contain provisions that effectively silence certain employees. On February 21, 2023, the NLRB issued its decision in McLaren Macomb, 372 NLRB No. 58, reinstituting its pre-2020 precedent that severance agreements cannot contain: (1) confidentiality agreements precluding the employee from discussing the terms of the severance; and (2) non-disparagement clauses.
In McLaren, a Michigan hospital laid off eleven employees early in the COVID-19 pandemic after federal regulations prohibited the hospital from performing outpatient procedures or allowing nonessential employees to work in the building. The hospital offered these eleven employees a severance agreement that included a non-disparagement clause and a provision not to disclose the terms of the severance agreement. However, the NLRB determined that the severance agreement violated the National Labor Relations Act (NLRA) due to the inclusion of these provisions.
The Board reasoned that offering severance agreements containing broad confidentiality or non-disparagement clauses has a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights under the NLRA to engage in protected concerted activity, which constitutes an unfair labor practice in violation of Section 8(a)(1). Under the NLRA, employers are prohibited from interfering with, restraining, or coercing employees who exercise their rights to engage in protected concerted activities, such as discussing the terms and conditions of their employment for the purpose of mutual aid and protection. According to the Board, the confidentiality and non-disparagement clauses in McLaren had a potential chilling effect on the employees’ exercise of their rights, because employees must waive certain Section 7 rights in order to receive the benefits of the severance agreement.
This decision marks a return to long-standing Board precedent that was overturned in 2020. In Baylor University Medical Center, 369 NLRB No. 43 (2020), the Board shifted its focus from analyzing the text of a severance agreement to the circumstances under which an employer offered the agreement. The Baylor Board reversed years of precedent to hold that severance agreements containing broad confidentiality requirements did not violate the NLRA, as long as they were not mandatory or coercive, applied only to post-employment activities, and were free of allegations that the employer committed a separate unfair labor practice discriminating against the employee. Several months later, in IGT d/b/a International Gaming Technology, 370 NLRB No. 50 (2020), the Board applied the same reasoning to severance agreements containing non-disparagement clauses. The McLaren Board criticized the rulings in both Baylor and IGT for failing to articulate any policy considerations that would justify their “severely constricted view” of employees’ Section 7 rights, and squarely overruled them in favor of reinstating broader protections for employees.
The McLaren ruling applies to all private employers—with or without unionized workforces—covered by the NLRA, as it is based on both Sections 7 and 8 of the Act. It does not, however, apply to all employees. The NLRA only applies to “employees” as defined by the Act, which specifically excludes independent contractors and supervisors. Whether an employee is a “supervisor” involves a fact-specific analysis beyond review of the job title in question. The NLRA states that a “supervisor” is:
Any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.
NLRA, Section 2(11). Some of these terms have been subject to additional definitional analysis through Board decisions. The Supreme Court has further determined that employees who are even higher in the management structure but who may not meet the NLRA definition of “supervisor” are also excluded from coverage of the Act. These workers are considered “managerial employees”—executives who formulate and effectuate management policies by expressing and making operative decisions of the employer. See NLRB v. Bell Aerospace Co. Div. of Textron Inc., 416 U.S. 267 (1974). So, McLaren‘s limitations likely will not apply to severance agreements offered to any supervisory or managerial employee.
The McLaren ruling is effective immediately, but there was no discussion as to whether the decision retroactively invalidates existing severance agreements containing these confidentiality and non-disparagement clauses. This is unlikely, as such retroactive application could be challenged as a violation of the U.S. Constitution’s Article I provision protecting the freedom to contract. Further, the six-month statute of limitations for unfair labor practice charges should render any severance agreement executed more than six months before McLaren (i.e., severance agreements effective prior to August 21, 2022) presumptively valid.
So, what are the implications of the McLaren decision on employers?
- As many employers are more likely to offer severance agreements to employees whom they would consider supervisory or managerial, employers are encouraged to consult legal counsel prior to including non-disparagement or broad confidentiality provisions in severance agreements for these employees to analyze whether they would fit the definitional NLRA exemption.
- Risk-averse employers should cease offering severance agreements containing non-disclosure and non-disparagement clauses to nonsupervisory employees, at least for the time being. Per McLaren, the very act of offering severance agreements with these broadly worded prohibitions, even if the employer has no intention of legally enforcing them, is itself now a violation of the NLRA. The safest practice is to take this approach until further clarification and advisory memoranda from the Board’s General Counsel is made available.
- A more robust approach would be for an employer to augment the offending provisions of its standard severance agreement with a broad disclaimer stating that nothing in the agreement should be interpreted as waiving the employee’s Section 7 rights under the NLRA or prohibiting the employee from participating in protected concerted activity, participating in the Board’s investigative process, or filing an unfair labor practice. There is no guarantee that the Board would uphold a confidentiality or non-disparagement clause containing such a proviso, but this is a viable middle ground approach that arguably demonstrates recognition of and attempted compliance with the NLRA’s prohibition on interference with employees’ Section 7 rights.
- Along with providing a disclaimer, an employer could tailor their standard confidentiality and non-disparagement provisions to address the specific issues the Board identified in the agreement in McLaren. The Board took issue with the fact that the non-disparagement clause (1) was not limited to matters regarding past employment, (2) extended to statements made concerning the employer’s parents, affiliated entities, officers, directors, employees, agents, and representatives, and (3) had no temporal limitation. The Board criticized the confidentiality clause because it applied to disclosure of the terms of the agreement to any third person other than a spouse, legal counsel, tax advisor, or court/administrative agency when compelled, which prohibits discussion with former coworkers who could be faced with deciding whether to accept a similar severance agreement and with union representatives. Creating caveats in severance agreements that address the Board’s concerns of overbreadth could result in provisions that may pass scrutiny under McLaren.
- When determining risk tolerance and how to proceed, consider these factors: (1) the deterrent value of your existing confidentiality and non-disclosure provisions; (2) whether your industry or company is at particular risk of scrutiny from the NLRB; (3) the likelihood of whether McLaren will be upheld; and (4) the likelihood that your former employees would challenge their severance agreements by filing an unfair labor practice.
- Finally, employers should review their employee handbooks (preferably annually) to ensure that their policies do not violate the NLRA.
The McLaren decision is a return to the employee-friendly pre-Baylor days. While the effects are immediate, it remains for the courts to enforce. This decision may be appealed, but in the meantime, employers should consider changing their severance agreement practices if they wish to avoid an unfair labor practice charge. Contact a Babst Calland employment and labor attorney to assist in evaluating the legal risk inherent in your existing severance agreements and in carefully crafting disclaimers that address the McClaren reasoning.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@babstcalland.com.
Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. Ms. Meub has significant experience in the areas of employment and labor law, professional liability defense, insurance coverage and bad faith litigation, toxic tort litigation, nursing home negligence, and medical malpractice defense. She has a diversified practice that includes defending employers, healthcare providers, law enforcement and other professionals, and non-profits, at all levels of civil litigation through trial. Contact her at 412-394-6506 or jmeub@babstcalland.com.
Steve Silverman is a shareholder in the Litigation and Employment and Labor groups of Babst Calland. Mr. Silverman devotes a significant amount of his practice to the defense and prosecution of theft of trade secret and non-compete suits. Contact him at 412-253-8818 or ssilverman@babstcalland.com.
For the full article, click here.
Reprinted with permission from the March 30, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
The American College of Environmental Lawyers (ACOEL)
(By Donald C. Bluedorn II)
Unless you have been hibernating this winter, you know about ChatGPT, the artificial intelligence chatbot that rolled out late in 2022. Its developer, OpenAI, describes ChatGPT as follows:
We’ve trained a model called ChatGPT which interacts in a conversational way. The dialogue format makes it possible for ChatGPT to answer followup questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests.
Or, for those of us who remember watching Star Trek, ChatGPT functions a lot like the computer on the Starship Enterprise – you ask it to do something, and it does it. People have experimented with ChatGPT to write computer code, draft poems, write term papers, and create visual art, among many others.
Recently I experimented with ChatGPT, in an effort to not be that “senior” lawyer who in the early 1990’s said, “I don’t need to learn this new email thing . . . .” More specifically, I asked ChatGPT to do two things:
- Draft a short purchase and sale agreement for a 65-acre coal-fired power plant; and
- Prepare a five-page memorandum on the definition of “Waters of the US.”
The results were surprising but instructive.
First, ChatGPT’s purchase and sale agreement was so basic, and so vanilla, that it would be useless to a lawyer hoping to prepare the document in a real transaction. This surprised me because I had heard and read so many glowing reviews about ChatGPT that I anticipated a fulsome work product. It is quite possible, if not likely, that much of this is attributable to “user error.” If I spent more time describing the project and setting forth my anticipated parameters, I expect I would have received a better product. Nonetheless, I deemed my initial effort with ChatGPT a failure.
ChatGPT’s 5-page memorandum on the “Waters of the US” was surprisingly good. Now make no mistake about it – the draft would not pass muster as a writing assignment in even the most basic of environmental law courses, much less as an actual piece of legal work product.
Nevertheless, it provided a basic level of understanding of the issues and it provided a surprisingly sound foundation for such a memorandum. I could easily imagine checking the referenced statements and citations in the draft (unfortunately ChatGPT already has developed a fearsome reputation for confidently stating a “fact” when it is wrong), and then performing supplemental research and analysis to fill out the picture. If I were a new lawyer tasked with preparing such a memorandum and I did not already have a good starting place, the draft would have saved me a surprising amount of time at the outset. So, at least in that sense, I deemed my second effort with ChatGPT a conditional success.
OpenAI is quite open and transparent about many of the limitations in ChatGPT. Among other express limitations, it states on its website that “ChatGPT sometimes writes plausible-sounding but incorrect or nonsensical answers. Fixing this issue is challenging . . . .” And of course the entire field of artificial intelligence is growing at a tremendous rate, so we can expect to see significant improvements in ChatGPT and similar products in the foreseeable future. Nevertheless, even in its current iteration it would be a mistake to dismiss ChatGPT as a viable tool for the environmental lawyer, particularly in the correct circumstances and with appropriate controls.
And with that final note, “Beam me up, Scotty . . . .”
To view the full article, click here.
Reprinted with permission from the March 23, 2023 ACOEL Blog.
Pretrial Practice & Discovery
American Bar Association Litigation Section
(By Jessica Barnes)
A proposed antitrust class action was recently dismissed because of the plaintiffs’ serious failures to comply with the court’s orders regarding discovery.
Interpretations of the extent of a responding party’s obligations to certain discovery requests likely vary by lawyer. One thing that most if not all lawyers would agree with, however, is that a party producing more than 99 percent of its documents after the close of fact discovery is improper, which is what occurred this week in a case out of the U.S. District Court for the Western District of Tennessee.
In American Spirit and Cheer Essentials Inc, et al. v. Varsity Brands, LLC, et al., No. 2:20-cv- 02782-SHL-tmp (W.D. Tenn. Mar. 21, 2023), there were numerous discovery disputes among the parties. Between seeking documents excluded from discovery via protective order, producing documents in a form that was in violation of the mutually agreed upon electronically stored information (ESI) protocol, outright lack of production and responses, failing to maintain and provide lists of search terms used in collecting documents, attempts to serve hundreds of subpoenas, and producing documents either immediately before or after the deposition of a relevant witness, the court described the history of discovery in this matter as “long, complex, and tortured[.]”
The court faced a first round of motions to dismiss in this case, which were granted in part and denied in part. The most critical aspect in the court’s actions here is that it specifically warned the plaintiffs that “willful failure to cooperate in discovery could lead to dismissal of plaintiffs’ case under Rules 37(b) and 41(b).”
Then later came another round of motions to dismiss. The plaintiffs responded, not contesting the defendants’ factual allegations of discovery violations, but arguing that the alleged discovery failures did not meet the legal standard to justify dismissing the case. In evaluating the arguments, the court highlighted that under Federal Rule of Civil Procedure 37, the court may impose sanctions on a party who fails to obey a court order to provide discovery, and such sanctions may include dismissal of the action. In addition, Federal Rule of Civil Procedure 41 permits involuntary dismissal of a case if the plaintiff fails to comply with the federal rules or a court order.
Accordingly, the court went through the four factors to consider when a party moves to dismiss a case under these two rules. First, the court found that while the defendants did not show an intent to thwart judicial proceedings from the plaintiffs, they did show that the plaintiffs’ conduct did amount to reckless disregard. Second, the court found that the plaintiffs’ actions prejudiced the defendants, who expended significant time, money, and effort to obtain plaintiffs’ documents. Furthermore, the defendants conducted depositions that were largely unusable because they were unable to inquire into important topic sources from the documents. Third, the court found that its previous explicit warning, that their behavior in discovery could lead to dismissal of the plaintiffs’ case, weighed in favor of dismissal. Lastly, the court found that lesser sanctions were insufficient to protect the integrity of the judicial process. Thus, the court dismissed the plaintiffs’ claims with prejudice.
Overall, this case is an example of how discovery misconduct, if severe enough, can cost the client its entire case. While disputes over the burden and proportionality of specific discovery requests will continue across the board, let this case be a lesson that neglecting discovery obligations can result in a plaintiff’s worst-case scenario: dismissal.
Jessica Barnes is an associate at Babst, Calland, Clements & Zomnir P.C. in Pittsburgh, Pennsylvania.
To view the full article, click here.
To view the PDF, click here.
© 2023. No Reason to Cheer—Case Dismissed Due to Severe Discovery Violations, Pretrial Practice & Discovery, American Bar Association Litigation Section, March 22, 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
PIOGA Press
(By Amanda Brosy and Sean McGovern)
This article provides an update on the recent developments in environmental justice (EJ) policy and funding at the federal level, as well as forthcoming updates to Pennsylvania’s own EJ Policy, which could have tangible impacts on Pennsylvania’s regulated community.
Federal Background
Executive Action
Since Day One of taking office, the Biden administration has made EJ a priority. For example, on January 20, 2021, President Biden signed Executive Order 13985 (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), which directs federal agencies, including EPA, to “assess whether underserved communities and their members face systemic barriers in accessing benefits and opportunities available pursuant to those policies and programs.” E.O. 13985 then directs agencies to develop plans to overcome these barriers. Two more executive orders on EJ followed in January 2021, including 14008 (Tackling the Climate Crisis at Home and Abroad), which required the integration of EJ considerations into federal agency processes. Notably, E.O. 14008 established the Justice40 initiative, which sets the goal that 40 percent of the overall benefits of certain federal investments flow to disadvantaged communities, and it established an EJ screening tool to highlight disadvantaged communities that are “marginalized, underserved, and overburdened by pollution.”
Last month, President Biden signed Executive Order 14091 (Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), which builds upon the Administration’s prior “equity-related Executive Orders by extending and strengthening equity-advancing requirements for agencies, and [positioning] agencies to deliver better outcomes for the American people.” Among other things, E.O. 14091 addresses equity-focused leadership, embedding equity in government-wide processes, and the creation of economic opportunities in rural communities.
US EPA Continues to Refine its EJ Agenda
In response to the directives in EO 13985, US EPA released its Equity Action Plan in April 2022, to “take decisive action to advance environmental justice and civil rights.” US EPA has released formal EJ planning documents since 2010, including its most recent EJ 2020 Action Agenda, and the Equity Action Plan builds on this past work. One of the Equity Action Plan’s priorities is the development of “a comprehensive framework for considering cumulative impacts in relevant US EPA decisions,” which would be applied across US EPA’s programs and activities. The Equity Action Plan describes the issue of cumulative impacts in the context of federal, state, and local permitting decisions:
For decades, EPA, state environmental regulators, and local zoning officials have made decisions that contributed to the disproportionate pollution burden on people of color and underserved communities across the country, such as decisions to site and permit new industrial facilities in ways that concentrate them within these communities. Communities overburdened by pollution often raise concerns about the cumulative impacts of these individual environmental management decisions on public health and quality of life.1
According to US EPA, addressing cumulative impacts is a priority because multiple sources have identified it as “critical to achieving equitable and just outcomes across US EPA programs.”2 In the short-term, US EPA plans to develop a framework for considering cumulative impacts in relevant US EPA decisions, and produce guidance that will operationalize this framework. US EPA intends to identify and promote uses of the cumulative impacts framework in multiple contexts, including permitting, compliance monitoring and enforcement, cleanups, and rulemaking. The cumulative impacts framework will likely factor into permit conditions, mitigation, and potential denial of permits.
The concept of “cumulative impacts” is not new. Various federal environmental statutes including the National Environmental Policy Act (NEPA), the Clean Water Act (CWA), and the Resource Conservation and Recovery Act (RCRA) and associated regulations already incorporate consideration of cumulative impacts in some form or another. What is new, however, is US EPA’s commitment to weaving a comprehensive analysis of cumulative impacts throughout its decision-making. Speaking of decision-making, in Fall 2020 New Jersey adopted its new EJ Law, which provides that various types of permits shall be denied when the Department of Environmental Protection determines that approval would “cause or contribute to adverse cumulative environmental or public health stressors.”3
Pennsylvania Developments
Over the past several years, Pennsylvania has reevaluated its own EJ policies and programs. In October 2021, Former Governor Wolf adopted Executive Order 2021-07 which formally established the Office of Environmental Justice (OEJ) within the Department of Environmental Protection (DEP). E.O. 2021-07 directed OEJ to revise the state’s EJ Policy (which was drafted in 2004 but had gone unchanged since then) to, among other things, develop statewide definitions of “Environmental Justice Area” and “cumulative environmental impacts.” DEP is in the home stretch of the revision process now, having released a draft of the revised Policy in Spring of 2022 for public comment. DEP received over 1,200 public comments on the draft and is currently compiling a comment response document, as well as an updated draft. It is anticipated that the updated draft will be released early this year, in conjunction with key announcements from the Shapiro administration. Notably, the current draft did propose to apply cumulative impacts analysis broadly to agency decisions going forward.
As the public awaits the finalized EJ Policy update, DEP continues to update and otherwise populate the Environmental Justice Areas Viewer 4 with data used to identify potential EJ areas. The Viewer includes data on health, educational levels, and waste generators, and a third party has been retained to provide additional data such as transportation, income, and employment rates. Certain data is updated “nightly from Monday – Friday.” Accordingly, it is possible that the Viewer will show you outside of an EJ Area one day and inside of one the next.
Federal Funding
Following clear and consistent directives from President Biden, EJ funding is more robust as a result of the 2022 Inflation Reduction Act (IRA). Through the IRA, Congress made about $3 billion in funding available for EJ grants. The Administration has developed the following EJ grant programs:
- On January 10, 2023, the Administration announced the availability of $100 million via EPA’s Environmental Justice Collaborative Problem-Solving (EJCPS) Cooperative Agreement Program and the Environmental Justice Government-to-Government (EJG2G) Program. The EJCPS program will provide an estimated $30 million in funding directly to com-munity-based nonprofit organizations (and partnerships of these organizations). The EJG2G program will provide $70 million in funding, $20 million of which will be for state governments to be used in conjunction with community-based organization partners.
- On February 23, 2023, the Administration announced the availability of $550 million via the EPA’s new Environmental Justice Thriving Communities Grantmaking Program (EJ TCGM). The program will fund 11 entities to serve as “grantmakers” to community-based projects that reduce pollution. The selected grantmakers will develop a process to allow organizations that historically have faced barriers to receiving funding more seamlessly apply for grants that address environmental harms and risks.
Most recently, the Biden administration’s proposed Budget would provide US EPA almost $1.8 billion across numerous programs in support of environmental justice efforts, in addition to $91 million for technical assistance for communities working to advance equity and justice. While passage of the Budget as proposed is far from guaranteed, it does further demonstrate the current Administration’s persistence in funding EJ efforts.
Takeaways
As both US EPA and states like Pennsylvania work to develop updates to their respective EJ policies and programs, it is difficult to say exactly how these changes will impact the regulated community with plans for activities in potential EJ areas. What is clear is that funding will continue to be dispersed by the federal government to both states and local community-based organizations to support EJ initiatives. This, coupled with further refinements to the scope and definition of EJ Areas and cumulative impacts by federal and state agencies, means that members of the regulated community who may be planning to conduct activities in possible EJ Areas should keep cognizant of this evolving landscape.
__________________
1 E.O. 13985 Equity Action Plan: U.S. Environmental Protection Agency (April 2022), at p. 4 (available at https://www.epa.gov/system/files/documents/2022-04/epa_equityactionplan_april2022_508.pdf).
2 Id. at 6
3 N.J.S.A. 13:1D-160.4(a)(3)(c).
4 Available at: PA Environmental Justice Areas.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the March 2023 issue of The PIOGA Press. All rights reserved.
(By Paul Gough)
Three advocates for Appalachian hydrogen and carbon capture buildouts said Pennsylvania and the tri-state region will need to focus on permitting and other legal hurdles ahead of the potential projects that are likely coming over the next several decades of the energy transition.
Jim Curry and Kevin Garber, attorneys at Babst Calland, and Michael Docherty, executive director of Appalachian Energy Future, spoke during a webinar on policy and regulatory issues surrounding hydrogen and carbon capture and storage, which the Biden administration is promoting as a solution to reducing the reliance on fossil fuels in energy, electricity production and heavy industry like metal and chemical manufacturing.
For the full article, click here.
Smart Business
(By Adam Burroughs featuring Dane Fennell)
Artificial Intelligence (AI) has made its way into the legal profession — though not in the way that some news headlines might suggest. Recently, a program called ChatGPT passed several law and business school exams. However, for anyone who has any thoughts that we are entering an age of AI legal representation, flesh and blood lawyers who engage in utilizing AI on a daily basis can confirm that those days are a long way off.
“While AI is being used as a tool in a number of different areas of the law, it’s not yet capable of taking over all human roles,” says Dane Fennell, Senior Counsel at Babst Calland. “It’s just an arrow in the quiver that professionals can use to help them be more efficient, saving them and their clients time and money.”
Smart Business spoke with Fennell about the state of AI technology in the legal profession — how it’s being used, and what it can and can’t do.
How would you characterize AI’s place in the legal world?
There are a number of ways that AI has found its way into the legal profession. For example, in M&A due diligence, AI can be used to review large volumes of documents to assist the legal team to home in on the key aspects of a deal with much more speed and efficiency than a manual review. This saves clients time and money, and actually enables the review team to expand the scope of a review to find the ‘needle in the haystack’ issues.
Consumer-based programs are helping those who find themselves with relatively minor legal issues, such as parking tickets and credit card fees. Rather than pay a lawyer, some people are plugging their information into apps such as DoNotPay A.I. (which is the company that created ChatGPT) and allowing technology to fight to get those fees back or beat a ticket.
The problem is that modern AI technology typically doesn’t work well with respect to issue-spotting or finding a resolution to open-ended problems. They still require significant human oversight to be effective.
Lawyers need to have a basic understanding of AI, know what tools their firm is using and what those tools can and can’t do, in order to provide the best services to clients.
What should business leaders know about AI’s use in legal work?
Some business leaders believe that they can just buy an AI program and use it themselves to sort out whatever legal issue they encounter. Unfortunately, AI isn’t something that can be bought off the shelf, unboxed and used in a meaningful way. These technologies are supported by dedicated companies that work with law firms to tailor the AI to simultaneously improve it in an organic way, while also allowing the firm to utilize the AI as best fits the firm’s needs. Based on the current technology available on the market, there are no programs or technologies that can handle all aspects of a legal issue without human oversight.
Before a firm even considers implementing some form of AI, the client needs to have the final right to approve, particularly when any of the client’s data is sent to third-party companies or if saved on a non-firm server. It is a lawyer’s duty to explain exactly what the programs do — such as organizing, categorizing and inventorying documents and information — and what they don’t do — such as making decisions without human interaction or oversight. AI amplifies a firm’s capabilities, and if used correctly, AI can be an invaluable resource that saves clients time and money.
For the foreseeable future, the human component within the legal profession is not going anywhere. AI technology has made leaps in the last decade, but at the end of the day it is a tool alone. It’s a powerful, though oftentimes expensive, tool that can make a good business or firm great if it’s correctly applied.
To view the PDF, click here.
To view the full article, click here.
FNREL Water Law Newsletter
(By Lisa Bruderly & Mackenzie Moyer)
In early 2022, the Pennsylvania Department of Environmental Protection (PADEP) published a technical guidance document entitled “Pennsylvania Function-Based Aquatic Resource Compensation Protocol,” PADEP Doc. No. 310-2137-001 (effective Mar. 1, 2022) (Mitigation Guidance). See Vol. 55, No. 1 (2022) of this Newsletter. On January 7, 2023, PADEP published a notice in the Pennsylvania Bulletin rescinding the Mitigation Guidance for re-evaluation. 53 Pa. Bull. 107 (Jan. 7, 2023).
The Pennsylvania Dam Safety and Encroachments Act, 32 Pa. Stat. §§ 693.1–.27, and its implementing regulations, 25 Pa. Code ch. 105, require a person to obtain a permit from PADEP to construct, operate, maintain, modify, enlarge, or abandon a dam, water obstruction, or encroachment that alters the course, current, or cross section of a body of water. Mitigation Guidance at 1. A mitigation plan is typically required with the permit application, including, as applicable, a plan to compensate for the impact to regulated waters as a result of the project. Id. at 2.
The Mitigation Guidance was meant to provide a standardized system for evaluating functional compensation offsets associated with proposed aquatic resource impacts, determining compensatory mitigation requirements, assisting in identifying measures to minimize proposed project impacts, reducing subsequent compensation requirements, and evaluating compensation proposals. Id. Prior to the Mitigation Guidance, Pennsylvania’s method for determining compensation for losses to aquatic resources was based on acreage and linear feet.
Due to pushback from affected entities, including mitigation banks and permittees, PADEP formed a stakeholder working group to review the Mitigation Guidance. PADEP officially rescinded the Mitigation Guidance “to reevaluate its effectiveness and review potential revisions through stakeholder outreach.” 53 Pa. Bull. at 107. Until new guidance is developed, the previous acre-and-feet method will be used to identify and calculate mitigation needs and requirements.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa Bruderly & Mackenzie Moyer)
On January 27, 2023, the Pennsylvania Department of Environmental Protection (PADEP) released the final 2022 Pennsylvania State Water Plan (Plan). The Plan is intended to inform decision making and educate the commonwealth on sustainable use of the commonwealth’s aquatic resources. It identifies regional and statewide water resource priorities and recommends over 100 statewide and legislative actions to address those priorities.
Background
The Water Resources Planning Act of 2002, 2002 Pa. Legis. Serv. Act 2002-220, requires PADEP to collaborate with statewide and regional committees to update the Plan every five years. However, the last State Water Plan was published in 2009.
PADEP identified five main goals for the Plan update:
- A reviewed and updated State Water Plan having the input, guidance, and advice from a repopulated and reinstated statewide committee, six regional committees, and the public.
- Approved and updated critical area resource plans (CARPs) within the Potomac and the Ohio planning areas left unfinished from the 2009 Plan Update.
- Enhanced web-based applications and tools to deliver improved access to water resource information, data, and statistics for educational and water planning purposes.
- Plan provisions to implement applicable water resource-related strategies outlined in the 2018 Pennsylvania Climate Action Plan.
- An updated 2009 State Water Plan Atlas using a web-based GIS application.
The Plan is meant to be a source of water resource data, the latest information, and policy recommendations. It will assist PADEP and other state agencies with developing and implementing policies, programs, and projects that correspond with Pennsylvania’s current and future water needs.
Plan Recommendations
The updated Plan recommends over 100 actions in areas such as flood control, stormwater management, water withdrawal, legacy coal mining impacts, legacy oil and gas wells, drinking water and wastewater treatment, contaminants of emerging concern, and agricultural nonpoint source pollution.
Regarding stormwater, the Plan’s recommendations include: providing a streamlined and more efficient stormwater management program for the regulated community, establishing legislation that allows local authorities, utilities, and management districts to collect “reasonable fees” and “generate sustainable revenues” dedicated to planning, maintaining, improving, and repairing stormwater management infrastructure, and continuing to create opportunities for delegated county conservation districts to implement chapter 102 (Erosion and Sediment Control) and chapter 105 (Dam Safety and Water Way Management) permitting.
Other recommendations in the Plan include establishing an emerging contaminants program, considering regionalization and consolidation of treatment systems to address acid mine drainage from abandoned coal mines, and providing additional funding to identify and address inactive, abandoned, and orphaned wells.
Jumping off the work completed for the 2009 State Water Plan, the 2022 Plan identifies four watersheds as critical water planning areas (CWPAs). CWPAs are areas where existing or future water demands threaten to exceed water availability. These four watersheds are the Marsh and Rock Creek watersheds in Adams County; the Back Creek watershed in Fayette County; and the Laurel Hill Creek watershed in Somerset and Fayette Counties. After a watershed is identified as a CWPA, a CARP is developed. The CARP will identify CWPA-specific recommendations to better manage water-use in the CWPA and ensure future use.
Environmental justice (EJ) and climate change have been top priorities for PADEP, and the Plan complements these priorities. On climate change, the Plan includes and incorporates recommendations found in the 2018 and 2021 Pennsylvania Climate Action Plans. For example, the 2018 Climate Action Plan highlighted opportunities to use stormwater best management practices and water conservation to meet climate change goals. These goals tie nicely with the goals of the State Water Plan and have been incorporated into the Plan. For EJ, the Plan aims at providing educational opportunities and soliciting participation from EJ areas in state water planning processes. PADEP hopes to bring public awareness to the State Water Plan and include vulnerable communities in water-use planning to ensure availability of water resources for all communities into the future.
According to PADEP, the next step is for PADEP and committee members “to reach out to legislative, government, advocacy, and business leaders statewide with information on how they may implement the strategies and actions to benefit all members of their communities.” PADEP, “Pennsylvania State Water Plan,” https://www.dep.pa.gov/Business/Water/PlanningConservation/StateWaterPlan/Pages/default.aspx.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
The Wildcatter
(By Nikolas Tysiak)
Welcome back, I hope everyone had an excellent holiday season. As always, the period covering December and January is usually the slowest time of year regarding judicial and legislative activity, and this year is no exception. Just one case of interest from Ohio, and some minor administrative code revisions in Pennsylvania.
Ohio Public Works Commission v. Barnesville, 2022-Ohio-4603. The village of Barnesville, OH, purchased about 104 acres of land as an “open space” project in connection with the Clean Ohio Conservation Fund, which is administered by the Ohio Public Works Commission (“OPWC”) in 2002. As part of the deal, OPWC required that Barnesville take deeds for the lands with certain covenants and restrictions, including a limitation on the use of the purchased lands, restricting the use of the property for the stated purposes, and empowering the OPWC to enforce the covenants and restrictions with various penalties attached. Barnesville subsequently leased the oil and gas under the lands at issue to Antero Resources in 2012, without the consent of OPWC. The Ohio Supreme Court found that the actions of Barnesville in regard to the oil and gas rights violated the transferability restriction imposed by the OPWC, overruling the 7th District Court of Appeals. However, the Supreme Court also determined that the lease to Antero violated the use restriction imposed by OPWC as part of the overall transaction and affirmed the appropriateness of injunctive relief in enforcing such restrictions, including an injunction deeming the oil and gas lease unenforceable. Consequently, the Supreme Court affirmed the decision of the 7th District Court of Appeals’, remanding the case for further consideration, accordingly.
Pennsylvania has amended several administrative code sections regarding VOC emissions control requirements arising custody transfer from the wellhead to transmission or storage. See 25 Pa. ADC § 129.121 – 129.140. Additionally, there were revisions to the permits required in the disturbance of waterways and watersheds. See 58 Pa. ADC § 51.61.
There is nothing else to report this time. Until next time, we are always interested in hearing from the membership, so please do not hesitate to reach out to us.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the MLBC February 2023 issue of The Wildcatter. All rights reserved.
Legal Intelligencer
(by Ben Clapp and Gina Falaschi Buchman)
On January 12, 2023, U.S. Environmental Protection Agency (EPA) published a notice of public comment period in the Federal Register requesting “Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027.”[1] Though EPA is charged with the enforcement of many environmental statutes, like any agency with limited resources, it must prioritize enforcement efforts. Every four years, EPA reviews its priorities and sets new enforcement and compliance initiatives for which it establishes specific goals and a comprehensive strategy.[2]
Over the years, EPA has used various names for these initiatives. The program started as the National Priorities. In 2010, the program was changed to the National Enforcement Initiatives in response to stakeholder feedback that the term “National Priorities” implied that EPA’s many other enforcement activities were of lesser significance programmatically or environmentally. From 2010 to 2018, the program was known as the “National Enforcement Initiatives,” but EPA decided to “evolve the National Enforcement Initiatives program into a National Compliance Initiatives (NCIs) program by providing states and tribes with additional opportunities for meaningful engagement, by developing and applying a broader set of compliance assurance tools, and by aligning the NCIs with the Agency Strategic Plan measures and priorities.”[3]
On December 20, 2022, EPA released a memorandum entitled “Updated Policy for EPA’s Enforcement and Compliance Initiatives” which explains that “[w]hile criminal enforcement and civil enforcement (judicial and administrative) remain the key tools to address serious noncompliance, hold polluters accountable and create general deterrence, EPA also uses informal enforcement and compliance tools to advance the national initiatives. To reflect this comprehensive approach, the national initiatives will now be known as National Enforcement and Compliance Initiatives (NECIs).”[4]
The December 2022 memorandum also sets forth three criteria to be used to evaluate initiatives to be included in the Fiscal Years 2024-2027 NECIs: (1) EPA will consider whether there is a serious need to address the issue and whether it is a widespread environmental violation. EPA will aim to address noncompliance that has a significant adverse impact on the environment and public health, particularly in environmental justice communities. (2) EPA will consider whether federal enforcement can make a difference, that is, will it be effective in holding polluters accountable and leveling the playing field. (3) EPA will consider whether the NECI aligns with the EPA’s FY2022-2026 Strategic Plan to concentrate enforcement resources to contribute towards the broader goals of the agency.[5] Two of the agency’s goals – Goal 1: Tackle the Climate Crisis and Goal 2: Take Decisive Action to Advance Environmental Justice – apply to all program areas. Strategic Plan Goal 3: Enforce Environmental Laws and Ensure Compliance reemphasizes the role of the NECIs. The memorandum also states that NECIs should be evaluated as to whether they can support media-specific goals in the Agency’s Strategic Plan such as Goal 4.1 – Improve Air Quality and Reduce Localized Pollution and Health Impacts.
While the EPA is preparing for the next four-year cycle, it is still enforcing under the current set of National Compliance Initiatives for Fiscal Years 2020-2023. The agency is currently focused on six NCIs where the enforcement program has the lead for the agency and a seventh priority area, where the enforcement program is contributing to the EPA’s goal of reducing childhood lead exposure. The six current NCIs are:
- Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants from Stationary Sources;
- Reducing Hazardous Air Emissions from Hazardous Waste Facilities;
- Stopping Aftermarket Defeat Devices for Vehicles and Engines;
- Reducing Significant Noncompliance with National Pollutant Discharge Elimination System Permits;
- Reducing Noncompliance with Drinking Water Standards at Community Water Systems; and
- Reducing Risks of Accidental Releases at Industrial and Chemical Facilities.
EPA’s list of proposed NECIs for Fiscal Years 2024-2027 were selected using the three criteria explained above. EPA is soliciting comment on whether to continue, modify, or conclude the six initiatives from the FY 2020-2023 cycle. EPA notes that it is planning to continue the following four existing initiatives into the FY 2024-2027 cycle: (1) Creating Cleaner Air for Communities by Reducing Excess Emissions of Harmful Pollutants. EPA plans to continue this initiative with a focus on processes for which widespread noncompliance continues to be identified: flares, storage tanks, wastewater treatment, and incineration/combustion. (2) Reducing Risks of Accidental Releases at Industrial and Chemical Facilities. EPA plans to continue this initiative because EPA has found that many regulated facilities are not adequately managing risks they pose to surrounding communities. (3) Reducing Significant Non-Compliance in the National Pollutant Discharge Elimination System (NPDES) Program. EPA will continue and expand this initiative to include municipal permittees that are covered under a general permit, as unlawful discharges from such facilities can cause significant adverse impacts to overburdened communities. (4) Reducing Non-Compliance with Drinking Water Standards at Community Water Systems. EPA proposes to continue this initiative because, while progress has been made working with States in improving Safe Drinking Water Act compliance, further improvement is needed. EPA has also proposed to return the following two initiatives to the standard “core” enforcement program: (1) Reducing Toxic Air Emissions from Hazardous Waste Facilities and (2) Stopping Aftermarket Defeat Devices for Vehicles and Engines as significant improvement has been made and there is increased awareness of the issues.
EPA also specifically solicited comment on two potential new NECIs: (1) Mitigating Climate Change. This initiative would seek to combat climate change through a focus on reducing non-compliance with the illegal import, production, use, and sale of hydrofluorocarbons pursuant to the American Innovation and Manufacturing Act of 2020, excess emissions from sources within certain industrial sectors, and non-compliance with other requirements such as mobile source, fuels, and methane regulations. (2) Addressing PFAS Contamination. This initiative would focus on implementing the commitments under the EPA’s 2021–2024 Per-and Poly-fluoroalkyl substances (PFAS) Strategic Roadmap.[6] EPA also sought comment on two additional areas being considered for possible development as NECIs: (1) Reducing Exposure to Lead and (2) Addressing Coal Combustion Residuals (CCR). EPA noted that while both topics are significant enforcement priorities, resource constraints limit the number of NECIs that can be pursued.
Maintaining an awareness of the NECIs as they are developed and implemented can help the regulated community understand where EPA has identified significant nationwide noncompliance. With this knowledge, companies can identify aspects of their operations that fall within the ambit of the NECIs and evaluate internal compliance programs as appropriate. Additionally, companies should be aware that EPA will sometimes prepare updated guidance documents related to components of the NECIs in an effort to assist the regulated community in complying with the underlying environmental laws and regulations. EPA will accept comments on the proposed NECIs until March 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
________________
[1] Public Comment on EPA’s National Enforcement and Compliance Initiatives for Fiscal Years 2024-2027, 88 Fed. Reg. 2093 (Jan. 12, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-01-12/pdf/2023-00500.pdf.
[2] Memorandum from Susan Parker Bodine to Regional Administrators, FY 2020-FY2023 National Compliance Initiatives, (June 7, 2019), available at https://www.epa.gov/sites/default/files/2019-06/documents/2020-2023ncimemo.pdf.
[3] Memorandum from Susan Parker Bodine to Regional Administrators, Transition from National Enforcement Initiatives to National Compliance Initiatives (Aug. 21, 2018), available at https://www.epa.gov/sites/default/files/2018-08/documents/transitionfromneitonci082118.pdf.
[4] Memorandum from Lawrence E. Starfield to Regional Administrators, “Updated Policy for EPA’s Enforcement and Compliance Initiatives” (Dec. 20, 2022), available at https://www.epa.gov/system/files/documents/2022-12/necimemo.pdf.
[5] EPA, FY2022-2026 Strategic Plan, (March 2022) available at FY 2022-2026 EPA Strategic Plan.
[6] EPA, PFAS Strategic Roadmap: EPA’s Commitments to Action 2021-2024, available at https://www.epa.gov/system/files/documents/2021-10/pfas-roadmap_final-508.pdf.
Ben Clapp is a shareholder of Babst Calland. Mr. Clapp’s transactional work, which straddles the Firm’s Environmental and Corporate practice areas, consists of advising clients on the environmental components of complex deals, including identifying and analyzing significant environmental liability and compliance issues arising in connection with mergers and acquisitions, asset sales, project financings, and corporate restructurings, and working to resolve, manage, allocate or mitigate these environmental risks in the client’s best interest. Contact him at 202-853-3488 or bclapp@babstcalland.com.
Gina Falaschi Buchman is an associate in the Environmental Group of Babst Calland. Ms. Falaschi provides advice to clients in the energy, transportation, and technology sectors regarding compliance with state and federal environmental regulations. She has assisted companies with disclosure of regulatory violations to state and federal agencies and has counseled clients in negotiations with the U.S. Department of Justice, U.S. EPA, and California Air Resources Board. Contact her at 202-853-3483 or gbuchman@babstcalland.com.
To view the full article, click here.
Reprinted with permission from the February 16, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.
The American Oil & Gas Reporter
(By Lisa Bruderly)
The U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers have issued a new definition of “waters of the United States” (WOTUS), which becomes effective on March 20. The regulated community is watching this new definition of WOTUS because it will determine federal jurisdiction under the Clean Water Act.
For example, projects involving oil or natural gas development or pipeline construction require federal permitting for impacts from crossing, or otherwise disturbing, WOTUS. Generally speaking, the more impacts to such federally regulated streams and wetlands, the more complicated, expensive and lengthy the Corps Section 404 permitting.
In addition to determining the scope of federal permitting for the dredging/filling of streams and wetlands, the WOTUS definition also determines the scope of several other federal regulations, including regulations associated with National Pollutant Discharge Elimination System permitting, Spill Prevention, Control and Countermeasure plans and federal spill reporting. Although WOTUS is not defined in the CWA, the WOTUS definition appears in 11 different federal regulations.
Overview And Background
The agencies have promoted this final rule as establishing a “durable definition” that will “reduce uncertainty” in identifying WOTUS. However, this definition does not appear to provide much-needed clarity. Rather, generally speaking, the new definition codifies the approach that the agencies already have been informally utilizing to determine WOTUS, for example, relying on the definition of WOTUS from the late 1980s, as interpreted by subsequent U. S. Supreme Court decisions (such as the 2006 case, Rapanos v. United States). Challenges to the new definition are already underway.
The definition of WOTUS has been debated for nearly two decades, starting with several U. S. Supreme Court cases, which addressed the meaning of the 1980s WOTUS definition. This 1980s definition is very brief and is open to much interpretation because it does not include any defined terms. As discussed further below, rather than providing clarity, the U.S. Supreme Court decisions introduced additional uncertainty by offering more than one test for determining WOTUS.
Subsequently, Presidents Obama and Trump each introduced their own WOTUS definitions. President Barack Obama introduced the Clean Water Rule (CWR) in 2015, and President Donald Trump introduced the Navigable Waters Protection Rule (NWPR) in 2020.
Not surprisingly, the CWR entailed a broader interpretation of WOTUS, based heavily of Justice Anthony Kennedy’s significant nexus test in Rapanos, while the NWPR was based heavily on Justice Antonin Scalia’s “relatively permanent waters” test in Rapanos. Both the CWR and the NWPR were immediately and significantly challenged. Neither rule remains in effect.
Current Status
The Biden administration published its draft definition of WOTUS on Dec. 7. The final rule was published in the Federal Register on Jan. 18. The agencies’ approach to interpreting WOTUS relies heavily on both of the frequently discussed tests identified in the Rapanos decision. In Rapanos, Justice Scalia issued the plurality opinion, which held that WOTUS would include only “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, and to “wetlands with a continuous surface connection to such relatively permanent waters” (such as adjacent wetlands).
Justice Kennedy, however, advanced a broader WOTUS interpretation in his concurring opinion, which was based on the concept of a “significant nexus” (for instance, wetlands should be considered as WOTUS “if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical and biological integrity of other covered water”). President Biden’s new definition directly quotes and codifies these tests as regulations that may be relied upon to support a WOTUS determination.
While this new WOTUS definition may not be, conceptually, a significant change to how the agencies regulate streams and wetlands, the new definition may expand the agencies’ interpretation of a wetland that is “adjacent” to a WOTUS, through its lengthy discussion of adjacent wetlands in the final rule’s preamble.
The new definition also may expand how the agencies determine whether a water body will “significantly affect” a WOTUS, by providing a definition of “significantly affect,” which enumerates five factors to assess and five functions to consider in evaluating whether a potentially unregulated water will have a “material influence” on a traditionally navigable water.
Factors include distance from the traditionally navigable water, hydrologic factors and climatological variables. Functions include contribution of flow and retention and attenuation of runoff. Both the factors and the functions are broad and open to interpretation, which may lead to the agencies asserting jurisdiction over more water bodies. The new definition also codifies that the effect of the potentially regulated water must be evaluated alone “or in combination with similarly situated waters in the region,” which likely will broaden how the agencies evaluate the potential regulation of ephemeral and isolated water bodies.
Supreme Court And Congress
Publication of this definition, at this time, is likely a preemptive move by the agencies in advance of the Supreme Court’s impending decision in Sackett v. EPA, a case in which the court will, again, weigh in on the definition of WOTUS.
In Sackett, landowners in Idaho have had a long-standing challenge to an administrative order issued against them for allegedly filling wetlands without a permit. The Sacketts assert that Justice Kennedy’s significant nexus test in Rapanos is not the appropriate test to delineate wetlands as WOTUS, and that, under the test identified by Justice Scalia, the wetlands on their property are not WOTUS.
In 2021, the U.S. Court of Appeals for the Ninth Circuit ruled against the Sacketts’ position and held that the “significant nexus” test in the Kennedy concurrence was the controlling opinion from Rapanos. The Sacketts petitioned the U.S. Supreme Court to consider whether Rapanos should be revisited to adopt the plurality’s test for wetland jurisdiction under the CWA. However, the Supreme Court instead will consider the narrow issue of whether the Ninth Circuit “set forth the proper test for determining whether wetlands are WOTUS.”
Some have speculated that the U.S. Supreme Court’s opinion may support a narrower interpretation of WOTUS than the agencies have been implementing. For example, if the court narrows or eliminates the “significant nexus” test, the decision will create even more uncertainty in identifying WOTUS and may invalidate the Biden administration’s definition. The Sackett opinion is expected by this summer.
In a letter dated Jan. 30, 25 Republican governors asked President Biden to delay implementation of the new WOTUS definition until the U.S. Supreme Court issued the Sackett decision. The governors oppose the new definition and claim that it is, among other things, ill-timed, burdensome and overbroad. The governors assert that delaying implementation of the new definition until after the issuance of the Sackett decision will minimize the number of changes to the definition in a short time. The governors stated that multiple revisions would “impose an unnecessary strain on farmers, builders and every other impacted sector of the American economy.”
Consistent with the sentiments of the Republican governors, in early February, Republican members of Congress, led by Senator Shelley Moore Capito, R-W.V., and representatives Sam Graves, R-Mo., and David Rouzer, R-N.C., announced that they intended to use the Congressional Review Act to formally challenge the new WOTUS definition through a joint resolution of disapproval. The hearing was held on Feb 8.
The CRA provides Congress a mechanism to vote to disapprove agency rules that go beyond the authority Congress granted to federal agencies and to send the resolution to the president, who can approve or veto the resolution. If passed, the joint resolution of disapproval could invalidate the rule and prohibit an agency from issuing a rule that is in substantially the same form without further congressional authorization. President Biden is expected to veto any such joint resolution of disapproval.
Consistent with Obama’s CWR and Trump’s NWPR, the new WOTUS definition already has been challenged in the U.S. District Court of the Southern District of Texas by Texas and 18 industry groups, including the American Petroleum Institute, claiming that the new definition is “unworkable” and in conflict with the CWA (see accompanying story, page 30). These challenges may result in the stay or vacatur of the new definition. If this occurs, the agencies may, again, revert back to the current WOTUS definition.
To view the full article, click here.
Republished with permission from the February issue of The American Oil & Gas Reporter.
PIOGA Press
(By Gina Falaschi Buchman, Justine Kasznica, and Susanna Bagdasarova)
On November 14, 2022, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a proposed Federal Acquisition Regulation (FAR) rule that would require certain federal suppliers to annually disclose their greenhouse gas (GHG) emissions and climate-related financial risks, as well as set GHG emissions reduction targets, on an annual basis. 87 Fed. Reg. 68,312 (Nov. 14, 2022) (Proposed Rule). The Proposed Rule entitled the “Federal Supplier Climate Risks and Resilience Rule” implements President Biden’s Executive Order 14030, directing a number of federal agencies to take action to address climate-related risks and the Administration’s push toward net-zero emissions procurement by 2050.
The Proposed Rule would introduce a new FAR subpart 23.XX containing mandatory GHG emissions1 disclosure and reporting requirements for major federal suppliers, which are divided into “significant” and “major” contractors for purposes of the applicable requirements. “Significant contractors,” defined as federal contractors receiving at least $7.5 million but less than $50 million in federal contract obligations in the prior fiscal year, must conduct a GHG inventory of their annual Scope 12 and Scope 23 emissions and report the total annual emissions in the System for Award Management (SAM). “Major contractors,” defined as federal contractors receiving more than $50 million in federal contract obligations in the prior fiscal year, are subject to the same requirement with respect to Scope 1 and Scope 2 emissions and must also conduct and report the results of a GHG inventory of their annual Scope 34 emissions.
Major contractors are also required to use the Carbon Disclosure Project (CDP)5 Climate Change Questionnaire annually to complete a publicly available disclosure of their Scope 1, Scope 2, and Scope 3 emissions as well as their climate risk assessment process and any risks identified. In addition, major contractors must identify and publicly disclose science-based targets to reduce their GHG emissions.
Under the proposed regulatory framework, a federal supplier is presumed to be nonresponsible (and therefore ineligible for contract awards) until the relevant contracting officer confirms that the contractor has (itself or through its immediate owner or highest-level owner, as defined in the FAR), complied with the applicable requirements of the Proposed Rule.
Certain entities are exempted from the Proposed Rule’s reporting and disclosure requirements, including higher education institutions, nonprofit research entities, state or local governments and federal management and operating (M&O) contractors which derive at least 80 percent of their annual revenue from such M&O contracts. Additionally, if a major contractor qualifies as a “small business” or is a nonprofit organization, it is subject only to the reporting requirements of a significant contractor. The requirements may also be waived by the Senior Procurement Executive for emergencies, national security, or other mission essential purposes.
Significant and major contractors will be required to report Scope 1 and Scope 2 emissions one year following the publication of the final rule. Major contractor requirements to disclose Scope 3 emissions, climate-related risks, and science-based targets begin two years following the publication of the final rule.
If this Proposed Rule is finalized, many companies with government contracts, particularly small businesses, will be required to calculate and report GHG emissions and climate-related financial information for the first time. Preparations of such disclosures is costly and may require the hiring of new personnel or outside contractors to complete calculations and compile and organize information. In addition, companies without government contracts may be asked by customers or suppliers with government contracts to estimate or account for their GHG emissions as part of the supply chain. Finally, public disclosure of climate-related financial information could subject companies to litigation risk by shareholders, investors, or non-governmental organizations.
From a practical standpoint, many oil and gas companies may already calculate and report GHG emissions under other federal, state, or permit requirements, including companies required to report under the EPA’s Greenhouse Gas Reporting Program (GHGRP). EPA’s GHGRP regulations generally apply to (1) direct GHG emissions sources that emit at least 25,000 metric tons of CO2-equivalent (CO2e, the amount of CO2 emissions with the same global warming potential as the number of metric tons of another GHG) per year; (2) fuel and industrial gas suppliers; and (3) facilities with underground CO2 injection wells. Other companies voluntarily set GHG emission reduction targets as part of their sustainability initiatives. The annual calculating and reporting of GHG emissions to satisfy other obligations may lessen the burden of the Proposed Rule on certain companies affected both directly and indirectly by the proposal.
The DoD, GSA, and NASA will accept comments on the Proposed Rule until February 13, 2023 on the Federal e-rulemaking portal (www.regulations.gov).
If you have any questions about the Proposed Rule or submission of comments, please contact Gina Falaschi Buchman at (202) 853-3483 or gfalaschi@babstcalland.com, Justine M. Kasznica at (412) 394-6466, or jkasznica@babstcalland.com, or Susanna Bagdasarova at (412) 394-5434 or sbagdasarova@babstcalland.com.
__________________
1 GHG is defined to include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride, and sulfur hexafluoride.
2 “Scope 1” emissions are GHG emissions from sources that are owned or controlled by the reporting company.
3 “Scope 2” emissions are GHG emissions associated with the genera-tion of electricity, heating and cooling, or steam, when these are pur-chased or acquired for the reporting company’s operations but occur at sources other than those owned or controlled by the entity.
4 “Scope 3” emissions are GHG emissions that are a consequence of the operations of the reporting entity but occur at sources other than those owned or controlled by the entity.
5 The CDP is a nonprofit organization that runs a disclosure system for companies, cities, states, and regions to manage environmental impact and scores these entities based on questionnaires submitted.
To view the full article, click here.
To view the PDF, click here.
Reprinted with permission from the February 2023 issue of The PIOGA Press. All rights reserved.