Ever since the EPA’s 1985 rulemaking on the Definition of Solid Waste, 50 Fed. Reg. 614 (1985), the question of how one distinguishes legitimate recycling from sham recycling has puzzled both regulators and recyclers. The question is vital because sham recycling is equivalent to illegal disposal and exposes the perpetrator to enforcement and significant penalties. In contrast, legitimate recycling is highly encouraged and satisfies the central purposes of the Resource Conservation and Recovery Act. So telling the two apart is important.

In 1989, Sylvia Lowrance, the then-Director of Solid Waste for EPA, signed a memorandum, entitled, “FOO6 Recycling,” that drew from earlier rulemakings and set forth a summary of the criteria for distinguishing between sham and legitimate recycling. Among these criteria was a comparison between the chemical composition of the purported recyclable material (or “secondary material”) and the analogous raw material or product. Included in her discussion was the question, “Are the toxic constituents actually necessary (or of sufficient use) to the product or are they just “along for the ride?” This “along for the ride” concept has since greatly influenced the question of sham vs. legitimate recycling because it raises the specter that the recycler is actually surreptitiously disposing of hazardous waste under the cover of beneficial recycling. But a lingering question for the last several decades has been how much toxics can actually be “along for the ride” and still be legitimate?

Fast forwarding to 2015, EPA addressed head-on the sham recycling question and set forth four criteria to tell a sham from the real thing. Importantly, the fourth criterion effectively replaced the old “along for the ride” criterion. See 40 C.F.R. 260.43(a)(4); 80 Fed. Reg. at 1725-28. This new criterion requires that the “product of the recycling process must be comparable to a legitimate product or intermediate,” and gives a recycler three options for satisfying it.

Where there is an “analogous” product, the recycled product is comparable if (a) it does not exhibit a hazardous characteristic not exhibited by the “legitimate” product; and (b) the two products have comparable levels of hazardous constituents. Where there is no “analogous” product, the two products are comparable if the product of the recycling process meets “widely recognized commodity standards and specifications[.]” Last, even if the product has high levels of hazardous constituents as compared to the raw material, the recycling can still be legitimate if recycler carries out certain health and environmental studies to show the toxic constituents are not harmful. 40 C.F.R. 260.43(a)(4)(iii).

But Factor 4 is no longer part of EPA’s regulations. In the just-published case of American Petroleum Institute v. EPA, (No. 09-1038), the D.C. Court of Appeals vacated Factor 4, finding that EPA failed to articulate a concrete standard for determining at what contaminant level a recyclable material was “significant in terms of health and environmental risks.” EPA’s “comparable to or lower than” standard, the court said, does not adequately determine when a recycling is a sham: levels can be high and still be part of a legitimate recycling process. Further, the court noted, this standard does not “reasonably focus on items that are part of the waste disposal problem.” It therefore vacated Factor 4 as it applies to all hazardous material recycling.

The court pinpointed the inherent flaw in the “toxics along for the ride” metaphor: at what concentration level does the presence of these toxics signal a sham? The court also criticized EPA for an over-reliance upon recycling horror stories, rather than actual instances of environmental harm. Unfortunately for EPA, it is back to the drawing board on this 30-year old conundrum of defining legitimate recycling. Meanwhile, those seeking to demonstrate the legitimacy of a recycling process (at least as a matter of federal law), will only need to satisfy the remaining three legitimacy criteria: (a)the secondary material must provide a useful contribution to product; (b) the recycling process must produce a valuable product; and (c) the generator and recycler must manage the secondary material as valuable product. In the end, this all might be a good thing, as it may open up opportunities to fulfill the underlying purposes of the Resource Conservation and Recovery Act, rather than become entangled in “labyrinthine maze” that is the definition of solid waste.

For more on this topic, read my article, “Understanding a Sham: When is Recycling, Treatment?,” published in the Boston College Environmental Affairs Law Review here.

Several environmental organizations have petitioned the D.C. Circuit Court of Appeals and moved to block EPA from implementing a 90-day administrative stay of the New Source Performance Standards covering methane emissions from oil and gas infrastructure.  A group of states, plus the District of Columbia and the City of Chicago, have since moved to intervene in favor of petitioners.  Industry groups and conservative leaning states have lined up to support the agency’s action.  The rule, which focuses on detecting and repairing methane leaks, would have required oil and gas well owners and operators to complete initial monitoring by June 3, 2017.

Petitioners ague that EPA lacks the authority to issue a stay of finalized regulations under the Clean Air Act other than pursuant to 42 U.S.C. § 7607(d)(7)(B), which requires identification of an objection of central relevance to the rule that could not have been raised during the initial public comment period.  The groups claim that these conditions are not satisfied, as all the issues relied on by EPA were extensively deliberated during the public comment period, or at least could have been, and in any event are not centrally relevant.  For example, petitioners attack EPA’s claim that its rationale for including low producing well sites in the leak detection and repair program was not presented to the public, noting that EPA explicitly sought comment on this issue in its 2015 proposal.

Petitioners also contend that the stay is overboard and that the EPA’s failure to narrowly tailor it to the specific issues under reconsideration, or balance the equities involved, is arbitrary and capricious.

In response, EPA submits that 42 U.S.C. § 7607(d)(7)(B) establishes only when the agency must reconsider a rule, but that it has inherent authority to reconsider its decisions.  Its argument runs into a bit of trouble because the authority for the three month stay EPA initiated appears to be tied to a reconsideration pursuant to 42 U.S.C. § 7607(d)(7)(B).  Only secondarily does it defend its decision on the grounds that the conditions required by that section are satisfied.

This legal fight is part of a larger battle between the EPA and the environmental community over the rule.  On June 13, 2017, the EPA proposed an additional 2-year stay of portions of the regulations.  In particular, the agency has proposed to stay the fugitive emissions requirements, the well site pneumatic pump standards, and the requirements for certification of closed vent system by professional engineers.  Even if petitioners are successful before the D.C. Circuit, they will still have an uphill battle to maintain the rules indefinitely.  They do not dispute that the agency can initiate a separate rulemaking and likely permanently eliminate as much of the rule as it would like.

Yesterday, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers proposed a rule to rescind the 2015 Clean Water Rule and recodify the definition of “waters of the United States,” known as WOTUS, that existed before 2015.  EPA and the Corps intend to re-evaluate and revise the WOTUS definition consistent with the Executive Order issued on February 28, 2017.  In the meantime, EPA states that the proposed rule will be implemented consistent with “Supreme Court decisions, agency guidance, and longstanding practice.”

On May 18th, the D.C. Circuit Court of Appeals granted the EPA’s request to stay challenges to the New Source Performance Standards regulating methane emissions from oil and gas infrastructure, pending review of the rule in accordance with President Trump’s Energy Independence Executive Order.  EPA announced in April that it intended to reconsider the rule and was staying a future compliance date.

Since it was issued last year, the rule has been challenged by various oil and gas industry groups on the grounds that the EPA does not have the authority to regulate methane from oil and gas infrastructure. The challengers have signed on to the EPA’s motion to put the cases on hold pending a review of the current rules.

The President’s executive order specifically directed the EPA to review and reconsider the methane rules for new oil and gas infrastructure, and if appropriate, suspend, revise or rescind them. In its motion to put the cases on hold, the EPA argued that its review of the rules could impact the disputes awaiting resolution in the Court.

Various environmental groups, as well as several states, intervened in the dispute opposing the EPA’s motion, asserting that the EPA had not offered any concrete timeline for the review, rendering the hold indefinite.  The court rejected this argument, but did order the EPA to file status reports regarding its review every 60 days.

The precise fate of the rule is still uncertain, but it is likely it will be greatly rolled back, if not eliminated entirely.  EPA administrator Scott Pruitt has a long history fighting against precisely this kind of regulation of the oil and gas industry.  After President Trump’s decision to pull American out of the Paris Agreement, it is difficult to imagine the EPA leaving anything more than the bare minimum of the rule in effect.

By statute, North Carolina has capped the monetary awards available for nuisance claims related to agricultural or forestry operations. The law, H.B. 467, was designed to protect hog farms and other concentrated animal feeding operations (CAFOs) from substantial judgments in odor nuisance lawsuits.   It limits compensatory damages to the reduction in the fair market value of the plaintiff’s property, if the nuisance is found to be permanent, and the diminution of the fair rental value of the property if temporary. The bill passed over the veto of Governor Roy Cooper.

The limits on awards set by H.B. 467 are cumulative. A subsequent action by the same plaintiff or a successor to plaintiff is restricted to the fair market value of the property, less what was recovered in the earlier lawsuit. The limit applies even to lawsuits against separate defendants arising from distinct operations. H.B. 467 does not, however, place limits on available punitive damage awards or bar any otherwise available injunctive relief.

North Carolina joins a handful of other states that have passed similar legislation in recent years aimed at limiting the amount of damages available for agriculture related nuisance claims.

The legislation is a reaction to an increase in odor nuisance lawsuits in North Carolina and elsewhere in the country. In 2013, more than 400 plaintiffs filed nuisance lawsuits against Murphy-Brown, LLC, a subsidiary of Smithfield Foods, Inc., the largest pork producer in the world. Some of those cases are still pending. An early version of the bill would have had retroactive application and limited recovery in the suits that have not been resolved. That provision, however, was changed before the bill passed.

H.B. 467 is a continuation of legislative efforts to insulate the North Carolina livestock industry. A 2013 bill, S.L. 2013–314, amended the state’s right-to-farm law, which prevents operations from becoming a nuisance as a result of changes in the surrounding community. Agricultural facilities cannot benefit from right-to-farm protections if they undergo a fundamental change from previous operations. But the law broadly exempts several categories of changes – including changes in size and technology – greatly curtailing plaintiffs’ recourse against expanded and updated CAFOs.

Collectively, these changes will make it much more difficult for plaintiffs to recover in nuisance actions against North Carolina CAFOs in the future, and will likely turn off many plaintiffs’ lawyers from investing the time and resources into even winnable cases.

By rule published in the Federal Register today, EPA is staying the New Source Performance Standards (NSPS) and Emissions Guidelines (EG) final rules for municipal solid waste landfills, in their entirety, for 90 days pending reconsideration.  The rules are found at 40 CFR Part 60, Subparts Cf and XXX and had been published on August 19, 2016.  The 90-day period is effective from today, May 31, through August 29, 2017.

In a letter dated May 5, 2017, EPA announced that it would be reconsidering the following topics: (1) tier 4 surface emission monitoring; (2) annual liquids reporting; (3) corrective action timeline procedures; (4) overlapping applicability with other rules; (5) the definition of cover penetration; and (6) design plan approval.

This stay has no effect on the existing rules at 40 CFR Part 60, Subparts WWW and Cc, which municipal solid waste landfills must continue to comply with.

A federal district court in Indiana recently ruled on whether email communications with environmental contractors hired by an attorney are protected from discovery. In Valley Forge Ins. Co. v. Hartford Iron & Metal, Inc., No. 1:14-cv-00006-RLM-SLC, 2017 WL 1361308 (N.D. Ind. April 14, 2017), the Court held that the communications were not protected by the attorney-client privilege, but were, in part, protected by the work-product doctrine.  This decision provides much-needed guidance to lawyers when retaining environmental consultants on behalf of their clients.

The Valley Forge litigation involved a dispute between the owner of a scrap metal recycling facility and its insurer over a settlement agreement relating to an environmental clean-up at the insured’s property.  The settlement agreement allocated responsibilities for the clean-up pursuant to an agreed order with the Indiana Department of Environmental Management (IDEM).  USEPA also later asserted enforcement claims against the defendant.

Following these claims, the defendant’s attorney hired two environmental consultants – one to design a stormwater management system to treat PCB-contaminated stormwater and another to perform site remediation.  The attorney initially retained both consultants directly, with the defendant’s approval; however, the defendant was found to have later entered into a standard construction contract directly with one of the contractors.

The Court performed an in camera review of 185 emails or email threads with the environmental contractors that the defendant had withheld as privileged in response to discovery requests by the plaintiff.  Applying Indiana law, the Court held that none of the emails were protected by the attorney-client privilege.  The Court stated that, while the “attorney-client privilege can extend to consultants hired by the attorney on behalf of a client,” only communications made for the “primary purpose” of obtaining legal advice from the lawyer come within the attorney-client privilege.  These protected communications can include reports made by third parties from gathering information from the client, where the primary purpose of the report is to assist a lawyer in giving legal advice.

In this case, the Court held that that the primary purpose in retaining the environmental contractors was not to provide legal advice, but to provide environmental remediation services.  The Court further held that the attorney’s retention of the contractors, by itself, was not sufficient to bring the contractors within the scope of the attorney-client privilege, nor was labeling the communications as “privileged and confidential” or “attorney-work product.”

The Court then addressed whether the communications were protected by the attorney work-product doctrine, applying federal law.  The Court noted that the doctrine is “distinct from and broader than the attorney-client privilege,” and applies to documents prepared in anticipation of litigation by any representative of the client, “regardless of whether the representative is acting for the lawyer.”  The primary motivating purpose must be to “aid in possible future litigation.”

The record in this case supported the defendant’s claim that the motivating factor to complete the clean-up of its facility was the threat of litigation with IDEM and USEPA.  All of the emails at issue were created after the lawsuit was filed and after the parties became aware of the claims by IDEM and USEPA.  The fact that the emails also served an ordinary business purpose of completing the environmental remediation did not deprive them of their protection under the doctrine because the defendant was able to show that the anticipated litigation was the driving force behind the preparation of the requested documents.

In performing the in camera review, the Court declined to extend the protections of the work product doctrine to transmittal communications that did not contain any attorney comment, impressions or strategy, billing records or emails that merely pertained to administrative, logistical or scheduling matters.  The rest of the emails were held to be protected by the work-product doctrine.

 

Filling in a gap in its regulations, Kentucky proposes new regulations for technologically enhanced naturally occurring radioactive materials or TENORM. The regulations were in response to concerns about the management of radioactive materials from oil and gas production.  A public hearing is to be held on the proposed regulations on June 21, 2017.

The Regulations can be found here.

We will be following these regulations and providing updates here on Environmental Law Next as they progress.

A North Carolina appeals court has ruled that a company may be an “operator” of a hazardous waste disposal facility under RCRA Subtitle C based solely on post-closure involvement at the site.

The case, WASCO LLC v. N.C. Dep’t of Env’t & Nat. Res., Div. of Waste Mgmt., No. COA16-414, 2017 BL 125671 (N.C. Ct. App. Apr. 18, 2017), involved a former textile manufacturing facility. The site became contaminated after perchloroethylene (PCE), a dry-cleaning solvent leaked, from underground storage tanks. At the time the leaks occurred the site was owned by a division of Winston Mills, Inc. Five years after the leaks, Winston Mills entered into an agreement with the North Carolina Department of Environment and Natural Resource that detailed a plan to close the site, and the site was closed three years later. Defendant-petitioner WASCO LLC first became involved at the site years later, when it acquired a company that co-guaranteed indemnification for environmental liabilities at the site.   It subsequently took some action to affirmatively remediate the site and applied for a RCRA Part A permit.

By 2007, however, North Carolina discovered that hazardous waste was migrating offsite and contaminating groundwater. At that time WASCO disclaimed responsibility for further remediation and asserted that all previous involvement had been on a voluntary basis. It could not be an operator, it argued, because it did not become involved with the site until after it was closed and it is impossible to operate a closed site. WASCO asserted that it was not an “operator” under the language of the North Carolina Solid Waste Management Act, which defines the term as “any person, including the owner, who is principally engaged in, and is in charge of, the actual operation, supervision, and maintenance of a solid waste management facility and includes the person in charge of a shift or periods of operation during any part of the day.” N.C. Gen. Stat. § 130A-290(a)(21).

The court rejected WASCO’s arguments. It held that WASCO must be an operator despite its late involvement because the site was not designated as a disposal facility until after the site was closed. Accepting WASCO’s interpretation that operators are only entities responsible for pre-closure activities would, at least in this case, mean that the facility would have no operators at all. It also found that the trial court properly looked not only to the definition of operator in the North Carolina statute, but also at the broader definition in CERCLA, in addition to cases and guidance related to CERCLA and RCRA. These sources, it reasoned, are hazardous waste specific, while North Carolina’s more detailed definition applies to all solid waste management facilities.

Although the belated designation of the site as a hazardous waste disposal facility on account of the unintentional release of PCE distinguishes it from typical RCRA Subtitle C landfills, it is far from clear that this distinction was dispositive for the court. More likely it was guided by the principle of broad liability under RCRA, particularly when hazardous waste is involved.

The Office of Management and Budget (OMB) recently released a guidance document on the subject of President Trump’s January 30, 2017 executive order, EO 13771, titled “Reducing Regulation and Controlling Regulatory Cost.”  That executive order garnered a great deal of attention with its bold but simplistic decree that “[u]nless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”  OMB’s guidance provides some insight into how that ambitious deregulatory agenda might operate in practice.  Not surprisingly, a closer look at EO 13711 and OMB’s guidance reveals that a significant rollback of the regulatory state is not likely imminent.  Instead, the regulation may push agencies to search out and eliminate minor, archaic regulations that remain on the books but have little or no effect on the regulated community.

EO 13771 requires that any incremental costs associated with a new regulatory action shall be offset by the elimination of existing costs associated with at least two prior regulations.  Although this language appears to require a net reduction in regulatory impacts, OMB has interpreted it in a way that will almost certainly not.

OMB’s guidance provides that “[i]n general, executive departments or agencies may comply with those requirements by issuing two EO 13771 deregulatory actions…for each EO 13771 regulatory action.”  Regulatory actions and deregulatory actions, however, are not two equal sides of the same coin.  Regulatory actions are only “significant regulatory actions as defined in Section 3(f) of EO 12866…” and significant guidance documents.  EO 12866 significant regulatory actions are those that have an annual effect on the economy of over $100 million or have other substantial impacts.  While only significant regulatory actions need to be offset, the “deregulatory actions” that they may be offset by need not be “significant.”

The impact of the requirement that any “new incremental costs associated with new regulation” be offset by the elimination of existing costs is also weakened by OMB’s guidance.  “Incremental costs” are not simply the costs of compliance for the regulated community.  Rather, “total incremental costs” are the sum of all costs minus all “cost savings.” As the guidance recognizes,  “[t}here are several types of impacts that…could be reasonably categorized as either benefits or costs, with the only difference being the sign (positive or negative) on the estimates.”  In other words, in many situations agencies may simply categorize the benefits of the regulatory action as “negative costs” and thereby internally reduce a regulation’s “new incremental costs.” Although the guidance says “agencies should conform to the accounting conventions they have followed in past analyses” when accounting for costs and benefits, an increased labeling of regulatory benefits as “negative costs” may be an appealing way for agencies to work around EO 13771.

Taken together, these two components of the guidance suggest we should expect to see few if any major regulations undone, even as new significant regulatory actions are promulgated.

The requirement that significant regulatory action be tied to some sort of deregulatory action may send agencies looking into the archives to see what outdated, insignificant regulations can come off the books.  There is value to that.  But do not expect EO 13771 to spur the deconstruction of the administrative state the administration has promised.