Archive for September, 2010

The state of reporting

Photo by Schzmo

An interesting articlepublished today by Paul Leavoy on GreenBiz.com ponders the true benefits of voluntary sustainability reporting. While the author clearly appreciates the motivation behind organization that have developed reporting frameworks (such as the Global Reporting Initiative or the Carbon Disclosure Project), he questions whether such schemas do little more than creating a climate where reporting is king (and what you do, less so).

CSRs, or Corporate Sustainability Reports, purport to make transparent to the public a company’s practices as they pertain to social and environmental issues such as energy, waste, occupational health, diversity, human rights, corruption, and product responsibility. As consumer demand for corporate disclosure and accountability increases, reporting frameworks have sprung up to fill the niche – super databases of company reports where you can do your one-stop shopping for researching and comparing corporate sustainability practices.

However, despite their best intentions, Mr. Leavoy points out a few downsides to CSR reporting frameworks. First of all, CSR reporting in and of itself may have little correlation to good corporate practices – companies can have their reports polished to perfection, filed in the most timely of manners, and still be dumping thousands of tons of CO2 into the air. (But surely companies realize they give off a certain do-gooder vibe just by participating!) Secondly, the reporting schemas are complicated, take a lot of time and company resources (best spent elsewhere?), and have yet to be standardized or centralized. Lastly, while few believe a company would outright lie in a report, the bright green colors and flowery language of a company’s narrative can all obscure the exact facts.

Needless to say, most CSR reporting frameworks have a strong emphasis on environmental disclosure. While certain environmental disclosures are already mandated by federal law, GHG emissions legislation is still in the works. Still, public companies may be subject to certain climate change related disclosures in SEC filings. Earlier this year, the SEC published interpretive guidance on this topic. In particular, disclosure related to climate change may be mandated by Item 503(c) of Regulation S-K, which requires a registrant to provide where appropriate, under the heading “Risk Factors,” a discussion of the most significant factors that make an investment in the registrant speculative or risky.

Risk Factors, utterly fascinating, give a glimpse into a company’s darkest fears: Will compliance with future GHG emissions regulation increase costs for SeaCube Container Leasing Ltd.? Will an increase in frequency of severe weather events adversely affect MS&AD Insurance Group Holdings, Inc.’s cash flow? Will consumers’ demand for alternative energies decrease their demand for China Lithium Technologies Inc.’s batteries? Until more concrete climate change regulation is in place, you can see these kind of climate change disclosures on knowledgemosaic’s Risk Factors search page. Just enter climate change into the text search box.

FERC’s modified civil penalty guidelines

Photo by Thomas Roche. Some rights reserved

Almost two weeks ago, FERC issued modified penalty guidelines for enforcement cases. These guidelines, which set forth procedures for determining civil penalties, have had a somewhat turbulent recent history.

The Energy Policy Act of 2005 originally expanded FERC’s civil penalty authority under the Federal Power Act (FPA), and provided civil penalty authority to cover violations of the Natural Gas Act (NGA). On March 18th, 2010, after nearly four years of experience with their new authority, FERC first issued a policy statement on the penalty guidelines that, according to the FERC press release, would “add fairness, consistency and transparency to all FERC civil penalty determinations.” The policy statement guidelines were modeled after portions of the US Sentencing Guidelines.

However, less than one month after the issuance of the guidelines, FERC issued an order mysteriously suspending the new policy and requesting public comments on it. According to the order, FERC had “determined that the public interest would be served by affording interested entities a broader opportunity to comment on the Penalty Guidelines before issuing a final order and putting them into effect.”

Three conferences and numerous written comments later, FERC announced that the penalty guidelines had been revised in response to industry feedback, and that these guidelines, like their March 2010 predecessors, would “ensure fairness, consistency and transparency in all FERC civil penalty decisions.” Law firm Van Ness Feldman identifies the following as key changes to the penalty guidelines:

  • Applicability of the Penalty Guidelines to Violations of the Reliability Standards
  • Base Violation Level for Violations of Reliability Standards
  • Load Loss
  • Partial Compliance Credit
  • Senior-Level Involvement
  • Mitigation Credits
  • Misrepresentations and False Statements

You can read the specifics of the changes in this VNF Alert.

According to FERC, “the modified Penalty Guidelines will apply to all future violations and any pending investigation where FERC’s Enforcement staff has not entered into settlement negotiations.” Within a year, FERC intends to hold a technical conference to receive more input on the guidelines and how they are being implemented.

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Further analysis of the implications of the guidelines and their recent amendments is still trickling in from law firms. You can read more on the KM law firm memo search page by entering FERC and penalty guidelines into the text search box.

Open wide for mercury waste rules

Photo by DeaPeaJay. Some rights reserved.

Dental amalgam is a filling material used in restoring teeth that is usually made of up to 50% mercury. Use of amalgam is in decline as better substitutes become available, but each time a dentist replaces and disposes of an old mercury filing, that mercury then has a chance to make it into the environment.

Because disposal of amalgams accounts for 3.7 tons of mercury discharged each year – that’s approximately 50 percent of all mercury discharges – the EPA is planning to move forward with rulemaking to reduce mercury waste from dental offices. Yesterday, the EPA announced that it hopes to propose a rule next year that will require dental offices to use amalgam separators to capture mercury from old filings, which can then be recycled and reused.

Currently many dental offices will simply flush old dental amalgams into chair-side drains, where the mercury can enter wastewater systems, with some eventually – and inevitably – ending up in rivers and lakes. Once mercury has been deposited into the environment, certain microorganisms can change elemental mercury into methylmercury, a highly toxic organic compound. Fish and shellfish easily accumulate and concentrate mercury in their bodies, making consumption of these fish dangerous to humans. Methylmercury can damage children’s developing brains and nervous systems even before they are born.

Some dental offices already take measures to separate out mercury from the effluent discharged to waste treatment plants. In 2008, the EPA’s Office of Water and the American Dental Association (ADA) signed a Memoranda of Understanding (MOU), intended to have dental offices voluntarily install amalgam separators and recycle the collected amalgam waste. However, the EPA’s decision to pursue rulemaking at this time may have come from dissatisfaction with this voluntary approach. According to the Environment News Service, the Dennis Kucinich-chaired House Domestic Policy Subcommittee found that none of the Memorandum’s commitments, milestones and goals had been satisfactorily fulfilled at the time of a May 2010 hearing entitled “Assessing EPA’s Efforts to Measure and Reduce Mercury Pollution from Dentist Offices.”

Of course, ADA representative William Walsh argued at the hearing that dentists need no further regulation. Walsh claimed that “even without separators, dentists capture in their offices approximately 78 percent of the waste amalgam,” and lauded the ADA’s continually updated “best management practices” for handling waste amalgam. Sorry, Walsh, but the EPA’s in motion, and the agency intends to continue outreach efforts under the MOU during the rulemaking process.

Life, wastewater, and taxes

Earlier this year, the IRS published a technical advice memorandum concluding that a certain facility that collects and neutralizes wastewater before it enters the municipality’s publicly owned treatment works (POTW) is a “sewage facility” under Section 142(a)(5) of the Internal Revenue Code.

Photo credit: NOAA Restoration Center. Some rights reserved.

The facility in question first collects the wastewater from a pharmaceutical company’s research and manufacturing plant in equalization tanks, which equalizes the pressure of the wastewater, thereby controlling peak discharge flow rates (and reducing the impact of the plant’s wastewater on the POTW). Then, the equalized water is adjusted to a pH level determined by the POTW. According to the technical memorandum, wastewater outside acceptable pH levels can be harmful to the bacteria that digest organic material. These bacteria are what help remove solids, breakdown organic matter, and destroy pathogens in wasterwater. The water is then discharged to the POTW under a permit issued to the company.

The facility was financed by the pharmaceutical company using proceeds from Bonds issued by “a public instrumentality and body corporate and politic of State.” The Issuer issued Bonds to finance the Facility as a sewage facility within the meaning of §142(a)(5). In the memorandum, the IRS concluded that the facility is a sewage facility under Section 142(a)(5) because “it consists of (a) property used for the collection, storage, and processing of wastewater, which property is necessary for secondary treatment…, and (b) property that is functionally related and subordinate to such property…” This Client Alert from Chapman and Cutler digs a bit deeper into the details.

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Tip for KM users: Interested in learning more about wastewater? There are currently 59 articles, newsletter, and alerts on the topic on our Law Firm Memo search page. Type “wastewater” into the Text Search box to see them all.

IMO takes on ships’ emissions

Photo by mikebaird. Some rights reserved.

The International Maritime Organization (IMO) today released a briefing indicating that reduction of GHG emissions from the international shipping industry is a top priority. Discussion of possible measures is on the agenda at a meeting of IMO’s Marine Environment Protection Committee (MEPC) at the IMO Headquarters in London next week.

A 2009 study by the IMO showed that the global shipping sector was responsible for 847 million tons  of carbon dioxide emissions in 2007 (or about 2.7% of total global emissions). According to the study, “mid-range emissions scenarios show that, by 2050, in the absence of policies, ship emissions may grow by 150% to 250% (compared to the emissions in 2007) as a result of the growth in shipping.” Despite the grim prediction, the study was optimistic that the implementation of a combination of technical and operational measures could increase efficiency and reduce the emissions rate by 25% to 75% below the current levels.

Emissions from shipping are not covered by the UN’s Kyoto Protocol, and movement towards a global climate treaty continues to be sluggish. However, the EU has been proactively suggesting strategies that define “objectives, actions and recommendations” to help reduce ships’ atmospheric emissions, and commissioning feasibility studies on the subject.

At next week’s meeting, the MEPC plans to consider the adoption of mandatory technical and operational measures (specifically, the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP)) to reduce CO2 emissions from international shipping. Application and verification of EEDI are currently only applied on a voluntary basis. (Interim guidelines can be found here and here.) The MEPC will also discuss further work on market-based measures, including the possible development of a mandatory IMO instrument. Earlier this year,the IMO published a study on the assessment of economic impacts of market-based measures.

Time for Congress to bite into Child Nutrition Programs

Many thoughtful environmentalists have long argued that the key to preserving the health of our environment lies in what – and how – we eat (Michael Pollan comes to mind). Whether it’s the chemicals we put (or don’t) into the ground to enhance growth or kill pests, or the oil we use (or don’t) to transport food long distances, it’s hard to argue that how we structure our food system doesn’t have an effect on the quality of our water and our air.

Photo by chidorian. Some rights reserved.

But where to even begin? Let’s say we start small. Around age 5. Most children will eat at school one or two meals a day, five days a week, for their next 13 years. If we can enable schools to provide healthful meals and environmental education opportunities, we’ll be taking great strides in helping future generations understand the connection between food and planet.

Every five years, Congress has the opportunity to add improvements to the federal Child Nutrition Programs as they come up for reauthorization. Because most of these programs are set to expire next Thursday, September 30th, both the Senate and the House have already passed versions of the reauthorization bills. Each version includes funding for the Farm to School program, which aspires to help children “understand where their food comes from and how their food choices impact their bodies, the environment and their communities at large” by bringing healthy food from local farms to school children nationwide. The Farm to School grant program was authorized in the 2004 Child Nutrition and WIC Reauthorization Act, but USDA has yet to request funding for it.

Unfortunately, the improvements to the programs come at a steep price. Jim Weill at The Hill reports that “the Senate-created bill that attempts to improve and regulate what our schools are serving for breakfast and lunch would be paid for, in significant part, with a $2 billion reduction to the federal food stamp program, or SNAP, cutting $59 from a typical family of four’s monthly food budget.” According to CQ Politics, despite a letter sent to House Speaker Nancy Pelosi on behalf of more than 100 House Democrats opposing the food stamp offset, the swiftly arriving expiration date of the current law seems to have compelled the House to pass the Senate version.

You can read the Senate version of the bill here, and the House version here.

Retailers should tread carefully under FIFRA

Photo by andypowe11. Some rights reserved.

Ignorance is no excuse – if you are selling or distributing pesticides, noncompliance with FIFRA will cost you. In June of this year, an EPA Judge levied fines in excess of $400,000 on retailer “99-cent Only Stores” for its 166 violations of FIFRA Section 12(a)(1). The violations were the result of the sale and/or distribution of three different products that were either unregistered with the EPA or misbranded according to FIFRA rules. A recent EPA press release claims that this fine “is the largest contested penalty ever ordered by an EPA administrative law judge against a product retailer under [FIFRA].”

FIFRA (or “the Federal Insecticide, Fungicide, and Rodenticide Act,” codified at 7 U.S.C . § 136 et seq.) is a US federal law that aims to protect applicators, consumers and the environment by providing the basis for regulation, sale, distribution and use of pesticides.  In 1947, when FIFRA was first passed, the USDA was given regulatory responsibility. However, when FIFRA underwent substantial changes in 1972, the task was transferred to the EPA. The EPA is charged with review and registration of pesticides, and has the authority to suspend or cancel a given pesticide’s registration if continued use of a pesticide is shown to pose “unreasonable risk.”

A recent Manatt, Phelps & Phillips article on this case underscores the importance of compliance with FIFRA, highlighting the risks to retailers in particular. As the article points out, “Every FIFRA-regulated pesticide must be registered with the EPA and properly labeled before being sold in the United States. Although the producer and/or importer of pesticides is responsible for compliance with FIFRA requirements, each seller and distributor must also ensure that the pesticide is properly labeled prior to sale.”

You can view earlier EPA Orders related to this case here.

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