Archive for January, 2011

Last Week In Environmental Contingencies and Proceedings Disclosure

As we posted a while ago, public companies must generally disclose material legal proceedings in their annual and quarterly reports to the SEC. Today we check back in with some recent filings to see who is disclosing what in the land of environmental enforcement.


In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon Waste Systems, Inc. On September 29, 2003, the United States Environmental Agency (EPA) placed a 4.2 acre portion of that property on the National Priorities List pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In a letter from the EPA dated June 27, 2005 the Company, along with approximately 13 other parties, including the current owner and operator of the site, was notified that it might be liable to perform or pay for the remediation of environmental contamination found on and around the site. Since the receipt of the letter, the Company has been in periodic communications with the other parties who received a similar letter with respect to what action, collectively or individually, should be taken in response to the EPA assertion of liability. The Company believes that the remediation of contamination of the site is properly the responsibility of other parties that have occupied and used it for waste recycling purposes since 1961, although under CERCLA the EPA is able to assert joint and several liability against all parties who ever owned or operated the site or generated or transported wastes to it. This investigation is in its preliminary stages and the Company intends to vigorously defend any liability for remediation. At October 31, 2010, the liability for remediation, if any, is not estimatable and therefore no accrual has been recorded in the financial statements.

As part of its routine business operations, the Company disposes of and recycles or reclaims certain industrial waste materials, chemicals and solvents at third-party disposal and recycling facilities, which are licensed by appropriate governmental agencies. In some instances, these facilities have been and may be designated by the United States Environmental Protection Agency (“EPA”) or a state environmental agency for remediation. Under the Comprehensive Environmental Response, Compensation, and Liability Act and similar state laws, each potentially responsible party (“PRP”) that contributed hazardous substances may be jointly and severally liable for the costs associated with cleaning up these sites. Typically, PRPs negotiate a resolution with the EPA and/or the state environmental agencies. PRPs also negotiate with each other regarding allocation of the cleanup costs.

The Company had reserves of $2.0 million and $1.9 million for losses related to environmental matters that were probable and estimable at December 31, 2010 and September 30, 2010, respectively. The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating future contingent liability costs, the Company does not expect that any sum it may have to pay in connection with these matters in excess of the amounts recorded will have a materially adverse effect on the Company’s financial position, results of operations or cash flows.

GE Alfalfa Gets the Go-Ahead

Photo by tina_kolesnik. Some rights reserved.

The USDA announced yesterday that so-called Roundup Ready alfalfa will be fully deregulated. After a “thorough and transparent examination,” USDA’s Animal and Plant Health Inspection Service found RR alfalfa to be “as safe as traditionally bred alfalfa.”

If you aren’t too disheartened, you can read the USDA Q&A on their decision or peruse their promises of support to the diverse set of stakeholders. Of course, I couldn’t help but notice that Monsanto’s stock rose over the course of the afternoon.

You can read the back story on RR alfalfa and see the original Environmental Impact Statement on which the decision was supposedly based here.

The Price (of your life) Is Right

Much like environmental valuation, “value of a statistical life” (VSL) is a fascinating, if potentially morbid, aspect of benefit-cost analysis in the environmental policy world.

Photo © BrokenSphere. Some rights reserved.

The same way that a dollar value can be placed on the ecosystem services of a wetland in order to, say, estimate the true costs of destroying it to create a theme park, the EPA routinely assigns a dollar value to human life in order to weigh the financial “benefits” (in human lives saved) of a policy that would, say, reduce pollution in a certain area against the costs of implementing that policy.

And what exactly is the current going rate for human lives? According to this recent AP article, the value of life “quietly” dipped from $7.9 million to $7 million under the Bush administration (making policies that protect human lives less financially “beneficial”), but bounced back up to $7.9 million shortly after Obama took office.

Sensitive to society’s general aversion to having a figurative price tag tied to their wrist, the EPA has been working to revamp the image of VSL. In addition to a change in terminology (the EPA will now refer to this kind of analysis as “mortality risk valuation” or “VMR”), the units used to aggregate and report the data will also change – all to “more accurately describe the health risk changes that are being analyzed.”

You can read more about how the EPA estimates and uses VSL in the 2010 Guidelines for Preparing Economic Analyses. Specifics of the proposed changes can be found in the draft white paper published last month or in the set of Frequently Asked Questions the EPA has made available on their website. (Also, check out this cool infographic from Compliance and Safety!)

OSHA Finalizes Rules on Whistleblower Provisions Under Six Environmental Statutes and the Energy Reorganization Act

OSHA published a final rule in the federal register last week that intends to make the procedures for handling retaliation complaints under six environmental whistleblower statutes and Section 211 of the Energy Reorganization Act (ERA) “as consistent as possible” with similar procedures under other OSHA-administered whistleblower provisions.

Photo from Zephyris. Some rights reserved.

Whisteblower provisions protect employees from being discharged or otherwise retaliated against for actions such as notifying their employers of a potential company violation, complaining to OSHA about company practices, or testifying in an OSHA proceeding. While OSHA is most commonly associated with the retaliation protections under the Occupational Safety and Health Act, OSHA also administers and enforces whistleblower provisions under a variety of statutes protecting employees in industries ranging from nuclear energy to health care reform.

Today’s action affects the whistleblower provisions under the following federal statutes: the Safe Drinking Water Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Solid Waste Disposal Act, the Clean Air Act, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as well as the aforementioned Energy Reorganization Act of 1974, all of which are covered by the regulations under 29 CFR Part 24, “Procedures for the Handling of Retaliation Complaints under Federal Employee Protection Statutes.”

Whatever level of consistency across statutes OSHA was aiming for, law firm Fulbright & Jaworski points out that “distinctions still exist regarding applicable burdens of proof, filing deadlines, and available damages.” You can read the firm’s Briefing for a thorough discussion of these distinctions.

The EPA’s Rules for Intentionally Dosing Human Test Subjects with Pesticides

On January 19th, 2011, the EPA published a proposed rule intended to strengthen protections for human test subjects in third-party studies. The proposed rule updates and “tightens” the existing regulations that govern the protection of human subjects, which are codified at 40 CFR Part 26.

Photo from Some rights reserved.

This particular set of proposed changes was required under the terms of a 2006 settlement with the NRDC and other health advocates. The initial lawsuit was filed in response to the EPA final rule – published earlier that year – that makes up the current set of protections.

While the EPA had previously accepted such studies, in 2001 the EPA issued a press release stating that they would not consider or rely on “third-party intentional dosing human toxicity studies for pesticides” until the National Academy of Sciences provided them with ethical guidance on the topic.

However, shortly thereafter, the pesticide industry sued the EPA over the press release, arguing that its seemingly casual “interim policy” constituted a “binding regulation, […] which should not have been issued without notice of proposed rulemaking and opportunity for public comment.” The court agreed, and reinstated the EPA’s practice of considering, on a case-by-case basis, some third-party human studies.

Between 2002 and 2006 the EPA drafted, solicited comments on, and eventually finalized a rule that attempted to “formalize and further strengthen existing protections for subjects in human research conducted or supported by EPA, and to extend new protections to adult subjects in intentional dosing human studies for pesticides conducted by others who intend to submit the research to EPA.”

But this rule still left something to be desired, and NRDC et al. stepped in with their aforementioned lawsuit. According to the NRDC, the human testing rule, which generally prohibits pesticide testing on pregnant women and children, still “allows parents or other authority figures to allow pesticide testing on their children in some circumstances.” These “circumstantial” exceptions, NRDC argued, violated the 2006 Appropriations Act because they “did not bar all pesticide research with pregnant women and children.” Luckily the EPA’s recent proposed rule eliminates this “loophole.”

You may submit comments on the proposed rule within 60 days of its publication in the Federal Register, which is expected soon.


Pop Culture Trivia: The EPA, noticeably sensitive about the human subject testing regulations after so many lawsuits, found it necessary to post a response on their website after an episode of Law and Order: Special Victims Unit aired that depicted research involving pesticide testing and was “filled with factual inaccuracies.”

FERC Issues Study of Frequency Response Metrics and Variable Renewable Generation

Late last week FERC announced the release of a FERC-initiated, FERC-funded, and Lawrence Berkeley National Laboratory-conducted study that develops “an objective methodology to evaluate the reliability impacts of varying resource mixes including increased amounts of renewable resources.”

Photo by Zuzu. Some rights reserved.

The study, “Use of Frequency Response Metrics to Assess the Planning and Operating Requirements for Reliable Integration of Variable Renewable Generation” (supporting documents for which can be found here) examines the potential impact on frequency response of adding variable resources like wind power to the grid. “Frequency response” measures the ability of a bulk power system to respond to a change in system frequency, such as a sudden loss of generation that could cause blackouts.

However, the purpose of the study was less to specifically determine the impact, and rather, as a part of its analysis, identify and test metrics for measuring the adequacy of frequency response, which will be useful for “operating and planning a reliable system with increased amounts of variable renewable generation.”

A Van Ness Feldman Alert on the topic posits that FERC will use the study, and subsequent comments from stakeholders, to “refine its policies governing reliability and the integration of variable generation resources.” The Alert also suggests that stakeholders may use the study “to support positions filed in response to the Commission’s Notice of Proposed Rulemaking addressing the Integration of Variable Energy Resources.”

Comments on the study may be submitted here under Docket AD11-08-000 by March 7, 2011.

Out With The “Federal Defendant” Rule, and In With Private Party Intervention!

On January 14, 2011, the Ninth Circuit issued a decision in Wilderness Society v. U.S. Forest Service that overturned the so-called “federal defendant” rule, which “categorically prohibits private parties and state and local governments from intervening of right on the merits of claims brought under the National Environmental Policy Act (NEPA).”

Photo by PunkJr. Some rights reserved.

The rule – instituted more than two decades ago by Churchill County v. Babbitt – was “reversed and remanded” by the decision, on the grounds that it was “at odds with the text of Federal Rule of Civil Procedure 24(a)(2) and the standards we apply in all other intervention of right cases.”

While Procedure 24 permits anyone who “claims an interest relating to the property or transaction that is the subject of the action” to intervene in a case, the judges in the Churchill County v. Babbitt found that “because NEPA requires action only by the government [..] a private party cannot ‘comply’ with NEPA, and, therefore, a private party cannot be a defendant in a NEPA compliance action.”

Luckily, the Ninth Circuit realized last week that the NEPA-specific rule was, as Sidley Austin put it in a recent Environmental Update, an “anomaly.” Going forward, “this ruling will allow parties with a cognizable interest in an agency decision under NEPA, such as an Environmental Impact Statement and Record of Decision, to seek to intervene in both the merits and remedy stages of a lawsuit challenging that decision,” wraps up a related E-Alert from Nossaman.

If you can judge the importance of a court decision by the number of law firm memos that analyze it and how quickly they are published, then surely this decision is worth noting. Only four days after the decision was announced, three law firms concurrently published alerts detailing its “broad ramifications” and “substantial implications.” In addition to Sidley Austin and Nossaman, Morrison Foerster also reported thoroughly on the decision.

CFTC Releases Report on Oversight of Carbon Markets

By now, many of you have heard that the CFTC has released, on behalf of the Interagency Working Group for the Study on Oversight of Carbon Markets, the report mandated by Section 750 of the Dodd-Frank Act (you can skip to page 374). But have you read it?

According to E2 Wire, the report stresses that carbon markets will “function best if they’re open to a wide range of actors — as long as tough oversight is in place.” The working group’s summed-up recommendations for such oversight? “Rely on the existing regulatory oversight program, as enhanced by the Dodd- Frank Act,” and “ensure that appropriate oversight mechanisms are in place for primary and secondary allowance and offset markets.”

In addition to the CFTC, the working group that put together the report is made up of representatives from FERC, EPA, CFTC, SEC, and even FTC. Collaboration like this showcases the curious terrain to be traversed when energy and environmental law intersect with the world of financial law and market regulation. Consider this multi-faceted report representative of some of the more interesting things to be found on knowledgemosaic – from climate change risk disclosure in SEC filings to regulations detailing FERC authorization of public utility issuances of securities. As knowledgemosaic continues to broaden its content, access to these fascinating expressions of industry and agency interconnectedness will only grow.

American Farm Bureau Federation Hates New Year’s Pollution Diet

Frustrated after more than 20 years of largely unsuccessful efforts to clean up Chesapeake Bay – the largest estuary in the US – the EPA was understandably excited to announce the establishment of a landmark “pollution diet” designed to restore clean water in the Bay and its tidal rivers.

Photo by D.L. Some rights reserved.

The catchily-named “diet” is actually a Total Maximum Daily Load (TMDL) – a set of specific limits on the amount of various pollutants allowed to enter the 64,000-square-mile watershed. The massively comprehensive Bay TMDL also identifies the reductions of nitrogen, phosphorus and sediment coming from various states in the area that are necessary to help meet these limits.

Agriculture, through its use of fertilizers, cropland tilling, and application of animal manure, is the largest single source of nitrogen, phosphorus, and sediment loading to the Bay. It is a natural target of the TDML. The American Farm Bureau Federation (AFBF), however, will not stand to have its agricultural belt tightened by the EPA.

On January 10, 2011, the AFBF, together with the Pennsylvania Farm Bureau, filed a complaint in federal court requesting that the assigned pollutant loads be declared “not legally enforceable,” and that the TMDL be vacated.

AFBF finds the TMDL “fatally flawed” in the following four respects:

(a) the “allocation” of pollutant loads among sources in a TMDL exceeds EPA’s authority under the Clean Water Act; (b) the assigned pollutant loads are based on erroneous information; (c) the erroneous information used to derive the assigned pollutant loads was fed into computer models that are unsuitable for deriving such loads – even with accurate information; and (d) during the comment period the public did not have access to the information it needed to comment effectively on the modeling results and the assumptions in the Final TMDL.

Does this lawsuit mean that the Bay will continue to be fattened up with pollutants, or could this diet really stick?

Nanomaterials: More Than a Nano-Threat?

The National Institute for Occupational Safety and Health (NIOSH, a part of the Centers for Disease Control) will be accepting comments until February 18, 2011, on its draft “Current Intelligence Bulletin” regarding occupational exposure to carbon nanotubes and nanofibers.*

Photo by TED-43. Some rights reserved.

Though, as the bulletin reports, there are currently no reported “adverse health effects in workers producing or using carbon nanotubes (CNT) or carbon nanofibers (CNF),” some studies on rodents have shown effects such as “the early onset and persistence of pulmonary fibrosis […] in CNT-exposed animals,” “reduced lung clearance in rats exposed to low mass concentrations of CNT,” and “acute pulmonary inflammation and interstitial fibrosis […] in mice exposed to CNF.”

It is because of such findings that NIOSH is proposing a recommended exposure limit (REL) of 7 μg/m3 elemental carbon (EC) as an 8-hour time-weighted average. The bulletin goes on to make additional recommendations for dealing with CNT and CNF in the workplace, such as how to store and handle the materials, as well how to clean areas where such materials are used. You can read a succinct summary of the draft in this Fulbright & Jaworski briefing.

But NIOSH isn’t the only agency worried about nanomaterials. According to the EPA, many nanoscale materials are regarded as “chemical substances” under the Toxic Substances Control Act (TSCA). The EPA has been working towards comprehensive regulation of nanomaterials under TSCA, using a “four-pronged approach” that is detailed here.

In fact, only a few months ago, the EPA published a final rule in the federal register requiring anyone intending to manufacture, import, or process either multi- or single-walled carbon nanotubes to notify the EPA at least 90 days before commencing such activities. This pre-manufacture notification (one of the aforementioned four prongs) gives the EPA an opportunity to determine whether the proposed use should be prohibited or limited, as “these chemical substances may be hazardous to human health and the environment.”


* Nanomaterials are generally defined as structures sized between 1 to 100 nanometers**

** A nanometer is equal to only one billionth of a meter

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