The Coal Industry: A New Reality -- Risks and Opportunities Related to Proposed Regulation of Carbon Emissions

Reed Smith is pleased to announce the next teleseminar in the series "The Coal Industry:  A New Reality."

Risks and Opportunities Related to Proposed Regulation of Carbon Emissions

In the last few weeks, there have been many developments related to the U.S. Environmental Protection Agency's efforts to regulate carbon emissions. In this 30 minute presentation we will address the developments, indentify environmental risks and opportunities, and discuss possible next steps. Our topics include:

  • EPA’s plan to reduce carbon emissions from existing coal-fired power plan
  • A new focus on an individual state’s implementation plan
  • The creation of regional carbon-trading programs
  • The possible impact of a recent U.S. Supreme Court decision related to the regulation of carbon emissions

Date:  Wednesday, July 16, 2014

Time:  12:00 PM - 12:30 PM ET / 9:00 AM - 9:30 AM PT / 4:00 PM - 4:30 PM GMT

Speaker:  David W. Wagner

Register here

About the series: Companies must adjust to maintain a global role in the world of energy. What are the challenges facing coal producers and users? Where is the coal industry thriving? How can coal companies better position themselves? What are some economic and regulatory issues to watch? We are addressing these and other issues in our series.

On Wednesday, September 17, Robert P. Simons will discuss "Headlines in the Coal Industry."

Does the Supreme Court's Opinion in Utility Air Regulatory Group v. Environmental Protection Agency, et al. (June 23, 2014) Foretell the Future of Greenhouse Gas Regulation Under the Clean Air Act

This post was written by Lawrence A. Demase, Christopher L. Rissetto, Jennifer A. Smokelin, and David W. Wagner.

Background – The Tailoring Rule On May 13, 2010, the United States Environmental Protection Agency (“EPA”) issued a final rule requiring new or modified stationary sources of Greenhouse Gas (“GHG”) emissions located in areas of the country that are in attainment or are unclassifiable for any National Ambient Air Quality Standard to obtain pre-construction permits under section 165(a) (Prevention of Significant Deterioration) of the Clean Air Act (“Act”). This new GHG rule also defined when new and existing industrial sources of GHG emissions were required to obtain a Title V permit under section 502 of the Act.

For more detail on this topic, please see our Client Alert.

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Tort Risks Related to California Fracking

This post was written by Todd Maiden, Marilyn Moberg, and Michael Mandell.

A few months ago, we discussed the Fiorentino case where Pennsylvania plaintiffs alleged an oil and gas company improperly conducted hydraulic fracturing, which allowed the release of toxic chemicals on their land and into their groundwater. At the time, the Fiorentino court was unwilling to dismiss the plaintiffs’ claims until the record was more fully developed. Among those claims was a claim for strict liability whereby the plaintiffs claimed that hydraulic fracturing is an abnormally dangerous activity under Pennsylvania law. Fiorentino v. Cabot Oil & Gas Corp., 750 F. Supp. 2d 506 (M.D. Pa. 2010). Recently, the Fiorentino court rendered a decision declining to “take a step which no court in the United States has chosen to take, and declare hydraulic fracturing to be an ultra-hazardous activity that gives rise to strict tort liability.” Fiorentino, No. 3:09-cv-02284, Doc. 489 at 1.
 

The court, adopting the magistrate judge’s report and recommendation, went through the six factors set forth in the Restatement (Second) of Torts § 520 to determine whether hydraulic fracturing legally qualifies as an ultra-hazardous activity giving rise to strict liability. Id. at 23. These are the same six factors that California courts use when evaluating whether strict liability should apply to individual cases without precedent. Edwards v. Post Transp. Co., 228 Cal. App. 3d 980, 985 (1991).
 

In short, Fiorentino found that the plaintiffs failed to meet any of the six factors because they had presented no evidence that a properly constructed and completed gas well would still lead to water contamination or fluid migration. Fiorentino, Doc. 489 at 29. Instead, the plaintiffs’ limited evidence consisted only of an expert report describing the possible negligence of the defendants (i.e., that fluid migration from the wells was “likely” due to a lack of due care relating to “faulty well design and/or construction”). Id. The court was also persuaded by the “surplus of evidence not only attesting to the relative safety of natural gas drilling operations, but also to the fact that such operations are a common, growing, and important part of a modern, highly industrial society . . . .” Id. at 10. Accordingly, the court granted the defendants’ motion for summary judgment on the plaintiffs’ claims for strict liability. Id. at 37.
 

That said, although strict liability may be an uphill battle for plaintiffs, other causes of action still remain viable. In April, a Texas family was awarded 2.9 million in the first toxic tort jury verdict over fracking. They succeeded on an intentional nuisance claim. Parr v Aruba Petroleum Inc., Tex. County Ct., No. CC-11-01650-E. Whether causes of action alleging intentional nuisance or strict liability can be successful in California courts has yet to be tested for fracking. However, when coupling the increased use of hydro-fracturing and other well stimulation techniques in California along with the rising tide of community opposition to such operations, upstream developers and landowners need to closely monitor the litigation risks associated with these activities.

Is RGGI in Pennsylvania's Future?

This post was written by  Jennifer A. Smokelin, Lawrence A. Demase, and David W. Wagner.

Cap and trade may play a major role in the U.S. Environmental Protection Agency’s (EPA) recent proposal to cut carbon dioxide emissions from existing fossil-fueled electric generating facilities. On June 2, 2014, EPA issued a proposed rule under section 111(d) of the Clean Air Act that would establish state-by-state carbon dioxide emission-reduction targets for existing electric generating units (EGUs). Under the proposal, EPA establishes both an interim compliance period from 2020 through 2029, as well as a final performance level that must be met by 2030 and maintained thereafter. EPA projects that once all states meet their emission goals, the cumulative reductions will equal a 26 percent to 30 percent reduction from 2005 emission levels for the power sector by 2030.

To achieve each state’s reduction targets, EPA’s rule is encouraging states to develop or join existing regional carbon trading systems. This Reed Smith Client Alert provides background information on section 111(d), the state-by-state emission targets, and implications of the rule on cap-and-trade programs.

For more detail on this topic, please see our Client Alert.

U.S. Army Corps of Engineers and EPA Rule Proposal Attempts to Broaden Federal Water Jurisdiction

On March 25, 2014, the U.S. Environmental Protection Agency and the Army Corps of Engineers jointly released a proposed rule to define the waters that fall under the jurisdiction of the Clean Water Act. While the agencies claim that the proposed rule is intended to clarify the CWA’s reach, the proposed rule would significantly expand the definition of “waters of the United States.” In doing so, the proposed rule would have a major impact on businesses that develop or change land, including oil and gas companies, pipeline operators, developers, and many others. Moreover, projects that already require a permit would likely have to purchase additional mitigation credits, and projects that do not currently require a permit would require one.

Under the proposed rule, all tributaries, ephemeral and intermittent streams, adjacent waters, and adjacent wetlands would be categorically subject to federal oversight, with no additional analysis required. To establish this broad jurisdictional delineation, the proposed rule relies upon general scientific evidence of the connectivity between streams and wetlands with downstream waters and certain parts of Supreme Court jurisprudence.

For more information, please read the full client alert on reedsmith.com

California Identifies the First Products for Regulation under the Green Chemistry Program

This post was written by Jamon Bollock

California’s Department of Toxic Substances Control (DTSC) took an important step in implementing its Green Chemistry program by releasing its list of the first three “Priority Products” that will be targeted for scrutiny under the new Safer Consumer Products regulations. The list of Priority Products subjects certain types of children’s sleeping mats, spray foam used in building insulation, and paint or varnish strippers for assessment, reformulation, and possible prohibition. Manufacturers of these products will have to react quickly to respond to the agency’s notice.

At the same time, all manufacturers and retailers of consumer products sold in California, even those that do not make or sell any of the three proposed Priority Products, should monitor the rulemaking process and assist the agency in developing a regulatory program that works.

Ensuring a workable program is especially important because California’s Green Chemistry program will likely become a model for consumer protection and chemical safety regulations nationwide. Even if other jurisdictions do not adopt similar requirements, the size and importance of the California market dictate that manufacturers and retailers of consumer products sold throughout the country will be forced to comply with the requirements, resulting in de facto nationwide product safety standards.

For more information, please read the full client alert on reedsmith.com by clicking here.
 

Audio & Slides from last week's teleseminar - The Coal Industry: A New Reality

On Tuesday, March 4, 2014 Reed Smith hosted its first half-hour program in a series entitled "The Coal Industry: A New Reality".

The topics included:

  • How the recent chemical spill by Freedom Industries in West Virginia has created renewed national interest in the treatment of environmental claims in bankruptcy cases and what this means to the coal industry
  • How to get your corporate house in order and avoid officer and director, contingent, and successor liability
  • Updates and implications of recent cases and transactions

The audio and slides are available for download here.

~~~

ABOUT THE SERIES: Companies must adjust to maintain a global role in the world of energy. Where is the coal industry thriving? How can coal companies better position themselves? What are some economic and regulatory issues to watch? These are some examples of the issues to be discussed in the coming series.

The next teleseminar in the series will be April 15, 2014. David W. Wagner of our Energy and Natural Resources Practice in Pittsburgh will focus on upcoming environmental regulations, especially the U.S. Environmental Protection Agency’s proposed emission standards and guidelines for existing coal-fired power plants.

If you require additional information, contact Lina Carollo at lcarollo@reedsmith.com.

Proposed Regulation of Hazardous Waste in Retail Sector

This post was written by Ed Walsh and Todd Maiden

The Environmental Protection Agency has released a Notice of Data Availability (NODA) in order “to collect information towards improving hazardous waste requirements for the retail sector”. To read it, click here. Retailer hazardous waste violations are already a hot enforcement issue in some jurisdictions like California where settlements against big box retailers and chain stores are regularly in the millions of dollars e.g., K Mart’s $8 million settlement and Home Depot’s settlement of $9.9 million. Now, EPA appears to be extending this focus nationally: the NODA states that it has committed to analyze information and identify issues about the regulations applicable to hazardous waste generated in the retail industry, including: a) what materials may be affected; b) what the scope of the issues are; and c) what options may exist for addressing the issues. Hazardous wastes from the retail industry sector are regulated under the federal Resource Conservation and Recovery Act, the enforcement of which is typically delegated to the various states.

In the notice, the EPA states that it has conducted meetings with the Council on Safe Transportation of Hazardous Articles Inc., the National Retail Federation, the Retail Industry Leaders Association, and select large retailers and consumer goods manufacturers. Many of the comments received were related to specific issues faced by the retail sector when managing hazardous waste pharmaceuticals. However, other retail-related comments were also raised, with some of the more important comments focusing on episodic generation, hazardous waste determination, reverse distribution, and aerosol can management. The EPA recognizes that retailers face widely varying duties under the hazardous waste generation regulations due to product recalls, customer returns, expiration dates, accidental product spills or breakage, seasonality and midnight dumping in parking lots. Different rates of hazardous waste generation also may subject retailers to different training, recordkeeping, manifesting and other hazardous waste regulations, as stated in the NODA.

While the states have taken the majority of enforcement actions against several major retail companies in connection with hazardous waste issues, in 2013, EPA and the U.S. Department of Justice reached agreement with one of the largest retailers to resolve RCRA violations that allegedly occurred across the country. As part of that agreement, the retailer committed to the continued development and implementation of a comprehensive, corporate-wide waste management program to identify and properly manage all hazardous wastes generated throughout its retail operations. Specifically, the retailer now has suppliers submit product information to a third party to evaluate product formulations to determine a product’s regulatory waste status and transportation classification, an electronic system that provides every employee with waste handling information for each product through the scanning of the UPC bar code, a waste management system that utilizes colored buckets to clearly designate where certain types of waste are accumulated prior to off-site shipment, and a reverse logistics system to track the disposition of all items going through their reverse distribution system.

All comments on the NODA should be submitted within 60 days following the notice's publication in the Federal Register. The notice was issued on February 4, 2014 and should be published shortly in Docket ID No. EPA-HQ-RCRA-2012-0426. Instructions on how to submit comments can be found in the NODA.

Reed Smith has represented and currently is representing companies facing these “reverse logistics” issues of how to properly manage hazardous substances in products that are returned to stores or other facilities, including decision-making on how and when it is possible to resell such products or return products to vendors or third parties who assist in reusing, reselling or recycling products. For questions, please reach out to one of the authors of this post, or with the Reed Smith attorney with whom you work.
 

Decrypting the Science Behind the U.S. EPA: The Secret Science Reform Act

This post was written by Christopher Rissetto

After years of alleging that the U.S. Environmental Protection Agency (“EPA”) relied on undisclosed and unverifiable data upon which to base its regulations, at least some Members of the U.S. House of Representative have decided to intervene. On February 6, 2014, David Schweikert (R-AZ-6), Chair of the Subcommittee on Environment, in the House Committee on Science, Space, and Technology, joined by Committee Chairman Lamar Smith (R-TX-21) and a total of 18 co-sponsors, introduced the Secret Science Reform Act (H.R. 4012).

No text of the bill is yet available. The bill’s title, however, gives a clear picture of the sponsors’ intention regarding the proposed legislation: To prohibit the Environmental Protection Agency from proposing, finalizing, or disseminating regulations or assessments based upon science that is not transparent or reproducible.

In a statement issued by the Committee, Chairman Smith gave an indication of the sponsors’ frustrations with the perceived absence of a scientific record to support EPA’s rulemakings: “Costly environmental regulations should be based on publicly available data so that independent scientists can verify the EPA’s claims. The Secret Science Reform Act of 2014, which I sponsored, prohibits EPA from using secret science to justify new regulations.”

The bill was referred to the House Science, Space and Technology Committee.

A hearing is presently scheduled on Tuesday, February 11, 2014, at 10 am, before the Committee’s Environment Subcommittee. The hearing is titled, “Ensuring Open Science at EPA,” and will receive testimony on the proposed legislation. Witnesses scheduled to give testimony are: Hon. John Graham, Dean, School of Public Environmental Affairs, Indiana University; Dr. Louis Anthony Cox, Chief Sciences Officer, Next Health Technologies, Clinical Professor, Biostatistics and Informatics, Colorado Health Science Center, and President, Cox Associates; Raymond Keating, Chief Economist, Small Business & Entrepreneurship Council; and Dr. Ellen Silbergeld, Professor, Bloomberg School of Public Health, Johns Hopkins University.
 

The Coal Industry: A New Reality

Reed Smith is pleased to announce its upcoming teleseminar series entitled "The Coal Industry: A New Reality".

The first half-hour program to kick-off the series will be offered on Tuesday, March 4 at 8:00 AM pacific/ 12:00 PM eastern. See below for full details.

Coal Industry Survival Guide

Date: March 4, 2014
Time: 12:00 PM - 12:30 PM ET/ 9:00 AM - 9:30 AM PT/ 4:00 PM - 4:30 PM GMT

With expanded regulatory schemes and global economic shifts related to coal production, use and sales, the coal industry is facing significant changes and challenges. To help navigate this new reality, Reed Smith invites you to the first in a series of teleseminars that will address key industry issues.

Our kickoff program, called the Coal Industry Survival Guide, will include:

  • How the recent chemical spill by Freedom Industries in West Virginia has created renewed national interest in the treatment of environmental claims in bankruptcy cases and what this means to the coal industry
  • How to get your corporate house in order and avoid officer and director, contingent, and successor liability
  • Updates and implications of recent cases and transactions

SPEAKER: Robert P. Simons

TO REGISTER: CLICK HERE

ABOUT THE SERIES: Companies must adjust to maintain a global role in the world of energy. Where is the coal industry thriving? How can coal companies better position themselves? What are some economic and regulatory issues to watch? These are some examples of the issues to be discussed in the coming series.

The next teleseminar in the series will be April 15, 2014. David W. Wagner of our Energy and Natural Resources Practice in Pittsburgh will focus on upcoming environmental regulations, especially the U.S. Environmental Protection Agency’s proposed emission standards and guidelines for existing coal-fired power plants.

 

If you require additional information, contact Lina Carollo at lcarollo@reedsmith.com.

Public Comment Period Extended for Proposed Pennsylvania Oil and Gas Surface Activities Regulations

On January 22, 2014, the Department of Environmental Protection (“DEP”) issued a press release announcing that DEP and the Environmental Quality Board extended the public comment period and number of public hearings on the proposed regulations of oil and gas surface activities. The public comment period is extended from February 12, 2014 until March 14, 2014. There will be two additional public hearings on February 10, 2014 and February 12, 2014. Read the complete press release here.

Brownfield land in the UK: directors' and officers' liability

Members of the Brownfield Solutions team at Reed Smith have just published the first in a new series of articles looking at issues relevant to those with an interest in UK brownfield land. In the first article, the team looks at Directors’ & Officers’ liability in the context of brownfield sites. To view the article, click here.

Sanctions Update on Iran

This post was written by Alexandra Gordon, Lisa Mason, Leigh Hansson and Matthew Thomas

As reported in our client alert in December 2013, the “Joint Plan of Action” reached between the E3+3 and Iran in November 2013 envisaged a two-step process in relation to relief from international trade sanctions.

On 12 January 2014, it was announced that the interim deal (of six months of initial measures) between the E3+3 and Iran, constituting the first step of the “Joint Plan of Action”, would begin to run on 20 January 2014.

In summary, the proposed initial measures include suspending sanctions on prohibitions relating to the following:

    (a) the import, purchase and transport of Iranian petrochemical products;

    (b) Iranian imports of gold and precious metals; and

    (c) oil-related insurance and transportation services. In addition, EU authorisation thresholds for non-sanctioned trade would be increased.

In addition to the voluntary measures that the E3+3 proposed to undertake (as above), the US would unblock some sanctions against Iran so as to (i) allow US$2.4 billion in restricted oil sale assets to be transferred to Iran in instalments; (ii) suspend certain sanctions on Iran’s automobile industry; and (iii) allow safety-related repairs and inspections for certain Iranian airlines inside Iran. All other US sanctions against Iran would remain in place.

We understand that the Obama administration is in the process of finalising draft orders and policy statements to amend US sanctions to implement the first step of the “Joint Plan of Action”. Those should be made public shortly. We are continuing to monitor the situation, and will publish further alerts following any major developments. In the meantime, we understand that negotiations on a permanent agreement (i.e. the second step of the “Joint Plan of Action”) will begin within a few weeks.  

Lawyer's Guide to Emergency Response in the Energy & Natural Resources Industry

This post was written by Rebecca Archer, Caroline Brader-Smith, Carol M. Burke, Richard M. Gunn, Nicholas Rock

Emergencies, whether they be high profile public events or small and relatively self-contained issues, are unfortunately a fact of business life. Preparing for emergencies demonstrates a company’s ability to accept and deal with challenges and its commitment to maintaining the continuity of normal business operations instead of becoming caught up in the surrounding chaos. Drawing on our experience of dealing with a wide range of energy and natural resources sector emergency situations, this Reed Smith Client Alert suggests certain "best practice" approaches from the perspective of an external or in-house lawyer when facing an emergency situation by looking at the ways in which a company should prepare for an emergency before it happens, the steps that should be taken while the situation is ongoing, and how the aftermath of an emergency should be used as an opportunity for development.

Potential Impact of New California Fracking Disclosure Requirements

This post was written by Todd Maiden, Marilyn Moberg, and Michael Mandell

On November 15, 2013, the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR) released draft regulations affecting hydraulic fracturing activities within the state that some state officials are touting as the "toughest in the nation." These proposed regulations include a public disclosure requirement of the chemicals used in "well stimulation activities" (including hydraulic fracturing and acid stimulation treatment).

Specifically, DOGGR’s proposed regulations, based on California Senate Bill 4 (S.B. 4), require operators to post publically on the Chemical Disclosure Registry the trade name, supplier, and descriptions of the additives used in their fracking fluids within 60 days after an operation ends. In Wyoming, which enacted similar legislation in 2010, there has already been litigation regarding issues of trade secrets protection. Wyoming’s regulation requires that the owner or operator of a well provide the Wyoming Oil and Gas Conservation Commission with, inter alia, the identity of all compounds contained in fracturing fluid additives for each fracturing operation. Wyo. Admin. Code OIL GEN Ch. 3 § 45(d)(ii). However, the regulation exempted information from disclosure to the public if an operator requested, and the Commission supervisor found that the information was a trade secret. See Id. at § 45(f) ("confidentiality protection shall be provided consistent with WYO. STAT. ANN. § 16-4-203(d)(v) of the the Wyoming Public Records Act, for the following records: ‘trade secrets, privileged information and confidential commercial, financial, geological or geophysical data furnished by or obtained from any person.’"). On November 20, the Wyoming Supreme Court heard arguments over whether a trade secret exemption could be invoked to prevent disclosure of the chemicals used in hydraulic fracturing. See Powder River Basin Resource Council v. Wyoming Oil & Gas Conservation Commission, No. S-13-0120. In contrast, S.B. 4 specifically provides that the following information is not a trade secret:

  • Identification of the chemical constituents of additives
  • The concentrations of the additives;  
  • Pollution monitoring data;
  • Health and safety data ; and  
  • Chemical composition of the flowback fluid following well stimulation.

In addition to trade secret issues, there has also been litigation involving fracking where plaintiffs allege negligence, strict liability, medical monitoring trust funds and nuisance against oil and gas companies. See, e.g., Fiorentino v. Cabot Oil & Gas Corp., 750 F. Supp. 2d 506 (M.D. Pa. 2010) (asserting, inter alia, causes of action for negligence, private nuisance, medical monitoring trust funds, and gross negligence). Thus far, courts have been unwilling to dismiss these claims until fact investigation ends. See, e.g., Fiorentino, 750 F. Supp. 2d at 509–510 (M.D. Pa. 2010) (deferring judgment on plaintiff’s claims until the end of discovery); Kamuck v. Shell Energy Holdings GP, LLC. No. 4:11–1425, 2012 WL 1463594 (M.D. Pa. Mar. 19, 2012) (same); Berish v. Southwestern Energy Production Co. 763 F. Supp. 2d 702, 704 (M.D. Pa. 2011) (same). For instance, in Pennsylvania, plaintiffs—63 individuals who executed leases giving an oil and gas company the right to extract natural gas from their properties—alleged the defendants improperly conducted hydraulic fracturing that allowed the release of methane, natural gas, and other toxins onto their land and into their groundwater. Fiorentino, 750 F. Supp. 2d at 509–10. These plaintiffs claimed that they experienced property damage and physical illness, that they live in constant fear of future illness, and that they suffer severe emotional distress. Thus, they requested an injunction prohibiting future natural gas operations, damages (under strict liability theory), and the cost of future health monitoring. Id. On ruling on the defendants’ motion to dismiss, the Fiorentino court refused to dismiss the plaintiffs’ claims until the record was more fully developed and instead instructed the defendants to reassert their arguments at the summary judgment stage. Id. at 512-13. Firoentino is just now entering the summary judgment stage—two years after the court denied the defendants’ motion to dismiss.

Reed Smith has extensive experience in hydraulic fracturing issues and commercial and toxic tort litigation and is following these issues closely. If you have any further questions, please contact one of the authors of this post.