Wednesday, May 27, 2009

The New Electorate

I just read an interesting article over at the Guardian regarding the Chevron annual meeting and an expected vote “on a resolution urging management to assess the company’s compliance with the environmental laws of every country in which it operates.” The article is primarily concerned with a growing green ethic in the “extractive industry” (oil, gas, and mining companies). But I am struck by the Chevron vote itself.

We are all familiar with the idea of political lobbying. Environmental groups and industry groups play tug of war with each other - the rope consisting of state and federal politicians. Yet there is another kind of elected official in this country – the director of a publicly traded corporation. The elections that put them into and out of office are often held behind closed doors. Many are dominated by large, often institutional, shareholders. But at the end of the day, and however removed, ownership of many large companies is held by individuals.

Most people don’t consider that when they own shares in a company, they own a say in how that company should be operated – and consequently moral responsibility for its actions. As hard as environmental groups lobby our publicly elected officials, I am surprised they don’t lobby the privately elected ones more diligently. I sometimes get the feeling that many environmental groups simply see corporations as the “enemy”, and look no deeper. How much could these groups achieve by directing at least some of their efforts at swaying corporate shareholders and educating them about the influence they wield?

Today, corporate directors are concerned first and foremost with corporate profitability – that is their job after all – because they believe it will please their constituents. Chevron’s constituents may have just signaled that profitability alone is not enough.

** A quick follow-up. Check out this article discussing the meeting. A great discussion about the ability of Chevron's shareholders to promote change in the way the company operates.

**Yet another update. Chevron's shareholders rejected the resolution calling for management to assess its compliance with environmental laws.

Thursday, May 21, 2009

Legislative Sabotage?

Controversy has erupted in Florida with the recent approval of Senate Bill 2080 by the Florida legislature. The purported purpose of the bill was to encourage water conservation by making it easier for homeowners to replace vegetation – like St. Augustine grass – with vegetation that requires less water.

According to some, the bill has been sabotaged.

At the last minute the bill was amended to provide sweeping power to the executive directors of Florida’s five water-management districts. If Governor Crist signs the bill into law, those five individuals will have the power to unilaterally approve water-use and wetland destruction permits for large projects without formal input from either the relevant water district governing boards or the public.

So why sabotage? Well, it turns out that no one seems to know how the amendment made it into the bill. According to Senate records, the amendment was added by one of the bill’s sponsors – Senator J.D. Alexander. Senator Alexander is apparently not commenting, but his co-sponsor, Senator Carey Baker, says the records are wrong and that neither he nor Senator Alexander knew of the amendment until after they voted for the bill. What?

Some have called for Governor Crist to veto the bill. Senator Carey says that if the Governor does not, then he will work during the next session to fix it. The concern is that concentrating this sort of authority in five people makes the permitting process highly susceptible to pressure from both politicians (who approve the hiring of the directors) and business interests seeking permits.

The arguments against the amendment are obvious and clich├ęs about power corrupting spring easily to mind. But I am still struck by the fact that no one can seem to identify where the amendment came from. Senator Baker seems to suggest that it may have slipped into the bill accidentally. How does that happen without anyone noticing?

Wednesday, May 13, 2009

Rapanos Redux

Two weeks ago I posted an entry about the Clean Water Restoration Act (“CWRA”). Shortly thereafter, at the request of U.S. Representative James Oberstar, the EPA issued a report containing the anecdotal comments of various regional EPA and U.S. Army Corps of Engineer officials regarding the Supreme Court’s decision in Rapanos. That decision serves as one of the rallying points for supporters of the CWRA, who claim that it has limited the scope of federal jurisdiction under the Clean Water Act and caused confusion among government agencies as to what jurisdiction actually does exist.

The upshot of the report is that there is unverified anecdotal evidence that uncertainty associated with the Rapanos decision has increased costs to the EPA (and to some extent the Army Corps of Engineers) associated with evaluating and bringing enforcement actions. The report specifically states that nationwide the Rapanos decision has affected approximately 489 enforcement actions, “such that formal enforcement was not pursued as a result of jurisdictional uncertainty, case priority was lowered as a result of jurisdictional uncertainty, or lack of jurisdiction was asserted as an affirmative defense to an enforcement action.” (See Report, p. 1) This report supports the notion that some resolution of the confusion caused by Rapanos, such as the CWRA, is needed.

Whether Rapanos improperly limited jurisdiction under the Clean Water Act or reigned in out of control jurisdiction is a question of perspective. That the Rapanos decision has caused confusion is not. This is evident in the split of the various U.S. Courts of Appeal over which of the three tests propounded by the Supreme Court should be controlling. (See e.g. United States v. Cundiff, 555 F.3d 200, 207 (6th Cir. 2009)(“Parsing any one of Rapanos's lengthy and technical statutory exegeses is taxing, but the real difficulty comes in determining which--if any--of the three main opinions lower courts should look to for guidance.”)

Indeed, the Sixth Circuit in Cundiff discusses the dilemma and current divisions among Circuit Courts quite succinctly:
In its short life, Rapanos has indeed satisfied any "bafflement" requirement. The first court to decide what opinion was controlling decided to ignore all of them and instead opted for earlier circuit precedent which it felt was clearer and more readily applied. United States v. Chevron Pipe Line Co., 437 F. Supp. 2d 605, 613 (N.D. Tex. 2006). The Courts of Appeals have not fared much better. The Ninth Circuit has stated that Justice Kennedy's test applies in most instances, Northern California River Watch v. City of Healdsburg, 496 F.3d 993, 1000 (9th Cir. 2007), while the Eleventh Circuit has held that the Act's coverage may be established only under his test. United States v. Robison, 505 F.3d 1208, 1219-22 (11th Cir. 2007). By contrast, the First and the Seventh Circuits, though differing somewhat in their analyses, have followed Justice Stevens' advice and held that the Act confers jurisdiction whenever either Justice Kennedy's or the plurality's test is met. United States v. Johnson, 467 F.3d 56, 60-66 (1st Cir. 2006); United States v. Gerke Excavating, Inc., 464 F.3d 723, 725 (7th Cir. 2006).

Cundiff, at 208. The Sixth Circuit was able to dodge the dilemma in Cundiff by ruling that Clean Water Act jurisdiction existed under all three tests in that particular case. Other Circuits have similarly dodged the bullet thus far, while presumably hoping that either the Supreme Court or Congress will act to resolve the confusion.

Rapanos is not the first splintered decision issued by the Supreme Court, and the Court has provided some guidance to lower courts for exactly this eventuality, “When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, ‘the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds….’" Marks v. United States, 430 U.S. 188, 193 (U.S. 1977). This test essentially invites the lower courts to guess how the Supreme Court justices would vote if the case were before them. Unfortunately, the plurality and Kennedy tests enunciated in Rapanos each flatly reject the other. This is complicated by the dissenting Justices who command four votes and held that jurisdiction exists under either test. Thus:

Although "in most cases in which [Justice Kennedy] concludes that there is no federal authority he will command five votes (himself plus the four Justices in the Rapanos plurality)," in other cases Justice Kennedy "would vote against federal authority only to be outvoted 8-to-1 (the four dissenting Justices plus the members of the Rapanos plurality) because there was a slight surface hydrological connection."

Cundiff, at 210 (citations omitted). Given the confusion among the courts, it is not difficult to see why the Army Corps of Engineers and EPA are having trouble with Rapanos.

Friday, May 8, 2009

Tokyo Strikes Back!

There are many articles, blogs, tweets etc. on the evils of bottled water. Bottled water is far more energy intensive that tap water. It’s far more expensive. And, often enough, its just bottled tap water anyway (and for a really absurd example of that, see here).

Well, for all those who decry bottled water you should take a tip from the city of Tokyo which has actually decided to do something about it. Tokyo has begun an “ambitious campaign” to advertise the benefits of its own tap water. The campaign includes posters and videos for Tokyo’s train and subway stations as well as child oriented web content.

Good for them.

That it is even necessary for a local municipality to advertise the (legally mandated) quality of its water highlights the fact that people apparently don't trust their local tap water anymore. This constitutes a public relations failure on the part of local government which has had an enormous impact on our drinking habits. It is all the more inexplicable given that from a legal perspective tap water is far more heavily regulated than bottled water. The National Resources Defense Council issued a report addressing this very issue. Hopefully other municipalities around the world will take note of Tokyo's efforts.

Tuesday, May 5, 2009

Arranger Liability Under CERCLA

Happy Cinco de Mayo from The Water Law. Yesterday, the U.S. Supreme Court issued its opinion in the case Burlington Northern & Santa Fe Railway Co. v. United States, 566 U.S. ___ (2009). In that opinion, among other things, the Court clarifies the scope of “arranger” liability under the Comprehensive Environmental Response, Compensation, and Liability Act (more commonly known as “CERCLA”).

For those who are not familiar with how CERCLA works, CERCLA is the statute under which the federal government may compel four broad categories of so-called Potentially Responsible Parties (”PRP’s”) to clean up a contaminated area or compensate the government for costs it has or will incur to clean up the contamination. Those categories cast a wide net and CERCLA imposes strict liability (i.e. it doesn’t require negligence or intentional conduct to impose liability) on those who fall within it. The issue in Burlington was whether Shell, who sold chemicals to the property owner for the owner’s use, was a person who “arranged for disposal or treatment…of hazardous substances [owned by Shell]…by [the property owner].” 42 U.S.C. §9607(a)(3).

The District Court and Ninth Circuit Court of Appeals took a broad view and held that Shell was a PRP under §9607(a)(3). While Shell was not “arranging” the “disposal” of hazardous chemicals in the traditional sense, CERCLA’s definition of “disposal” includes “discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water.” 42 U.S.C. §6903(3); see also §9601(29). Because Shell was apparently aware that its product was being “spilled” and/or “leaked” into the environment, the lower courts held Shell was an “arranger” and thus a PRP. The Supreme Court disagreed.

The Supreme Court held, “In common parlance, the word “arrange” implies action directed to a specific purpose. Consequently, under the plain language of the statute, an entity may qualify as an arranger under §9607(a)(3) when it takes intentional steps to dispose of a hazardous substance.” Burlington at *10-11(citations omitted). The Court further stated:

While it is true that in some instances an entity’s knowledge that its product will be leaked, spilled, dumped, or otherwise discarded may provide evidence of the entity’s intent to dispose of its hazardous wastes, knowledge alone is insufficient to prove that an entity “planned for” the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product. In order to qualify as an arranger, Shell must have entered into the sale of D–D with the intention that at least a portion of the product be disposed of during the transfer process by one or more of the methods described in §6903(3). Here, the facts found by the District Court do not support such a conclusion.

Id. at *12. This greatly raises the bar of proof needed to assess liability to non-traditional “arrangers” and further insulates those who sell hazardous materials from liability associated with the unintentional “disposal” of those materials. The irony of the decision is that while CERCLA is well known for its almost draconian imposition of strict liability, the Supreme Court has now read an intentionality requirement into it, “[T]he evidence does not support an inference that Shell intended such spills to occur.” Id. (emphasis added). The practical effect of the decision will be to limit the sources of funding for environmental remediation. In the words of Justice Ginsberg’s dissent:

Relieving Shell of any obligation to pay for the cleanup undertaken by the United States and California is hardly commanded by CERCLA’s text, and is surely at odds with CERCLA’s objective—to place the cost of remediation on persons whose activities contributed to the contamination rather than on the taxpaying public.
Burlington dissent at *3 (Ginsberg, J. dissenting).