July 07, 2020

In Brief

John R. Jacus

Administrative Procedure Act, standing

California v. Trump, No. CV 19-960 (RDM), 2020 WL 1643858, 2020 U.S. Dist. LEXIS 58154 (D.D.C. Apr. 2, 2020).
The U.S. District Court for the District of Columbia dismissed a lawsuit challenging an Executive Order by President Trump that requires federal agencies to repeal two existing rules for each new rule promulgated. Petitioners, the states of California, Minnesota, and Oregon, argued that the order delayed or resulted in several new rulemakings that would likely cause the petitioners various alleged environmental and fiscal harms. The court found that the petitioners failed to establish a causal connection between the failure to engage in formal rulemaking and the substantive decisions at issue, and therefore failed to show that the Executive Order caused the relevant agency actions or failures to act. The court dismissed the suit for lack of standing.

Administrative Procedure Act, Clean Air Act

Nat. Res. Def. Council v. Wheeler, 955 F.3d 68 (D.C. Cir. 2020).
The U.S. Court of Appeals for the District of Columbia Circuit vacated a 2018 U.S. Environmental Protection Agency (EPA) rule that vacated a 2015 rule phasing out the use of hydrofluorocarbons (HFCs) as replacements for ozone-depleting substances used in refrigeration, expanded foams, and aerosol products under the Clean Air Act. The petitioner environmental group argued that EPA’s 2018 rule was invalid because it was a legislative rule adopted without required notice and comment under the Administrative Procedure Act (APA). The court held that EPA had improperly promulgated the 2018 rule because that rule had the effect of amending the 2015 rule, which was indisputably a legislative rule, and, therefore, the 2018 rule was also a legislative rule subject to APA procedural requirements. The court majority vacated the 2018 rule and remanded the matter to EPA for further administrative proceedings.

CERCLA, state common law

Atl. Richfield Co. v. Christian, 140 S. Ct. 1335 (2020).
The U.S. Supreme Court affirmed in part and vacated in part a decision of the Montana Supreme Court regarding state common law challenges regarding remedial actions at the Anaconda Smelter Superfund Site in Butte, Montana (Site), under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Respondent owners of properties located within the Site brought trespass, nuisance, and strict liability claims under Montana common law seeking restoration damages that the Montana Supreme Court allowed. Petitioner Atlantic Richfield Co. (ARCO) argued that section 113 of CERCLA stripped Montana courts of jurisdiction over the respondent landowners’ claims, and that as owners of portions of the Site, the respondents were potentially responsible parties (PRPs) prohibited from taking remedial action without EPA approval under section 122(e)(6) of CERCLA. The Montana Supreme Court rejected both arguments, holding that while CERCLA section 113 stripped the court of jurisdiction to review challenges to EPA cleanup plans, the respondents’ claims did not present such a challenge, and they had not been treated as PRPs since the designation of the Superfund site many years prior. The U.S. Supreme Court concluded that because the landowners' claims arose under state law, not under CERCLA, the Montana Supreme Court correctly found that CERCLA did not strip Montana courts of jurisdiction. However, the Court concluded the respondents were not allowed to take remedial action without EPA approval because they were CERCLA PRPs, as hazardous substances had “come to be located” on their properties. The Court affirmed in part and vacated in part the Montana Supreme Court’s opinion and remanded the case for further proceedings.

Clean Air Act, conflict preemption

Wheelabrator Baltimore, L.P. v. Mayor & City Council of Baltimore, No. CV GLR-19-1264, 2020 WL 1491409, 2020 U.S. Dist. LEXIS 53020 (D. Md. Mar. 27, 2020).
The U.S. District Court for the District of Maryland granted partial summary judgment in favor of two Baltimore solid waste incineration facilities in their challenge to the Baltimore Clean Air Act (the Act), a local ordinance adopted by the Baltimore City Council. The facilities argued the Act was “conflict preempted” by Maryland law because it prohibited solid waste incinerators from operating as expressly authorized by the federal Clean Air Act Title V permitting program, which is administered by the state. The court found that the Act conflicted with state law and effectively invalidated the plaintiffs’ state-issued permits. The Act’s imposition of significantly more stringent emission standards and monitoring requirements, and higher criminal penalties than those imposed by state law and regulation, undermined the state’s authority to decide how best to achieve compliance with federal air quality standards under the federal Clean Air Act. The court granted the facilities’ partial motion for summary judgment.

Clean Water Act

Cty. of Maui, Hawaii v. Hawaii Wildlife Fund, 140 S. Ct. 1462 (2020).
The U.S. Supreme Court held that the “functional equivalent of a direct discharge” of pollutants into groundwater and thereafter into navigable waters requires a Clean Water Act (CWA) section 402 permit, vacating the opinion of the U.S. Court of Appeals for the Ninth Circuit that such discharges require a direct discharge permit if the pollutants entering navigable waters are “fairly traceable” to the upgradient point source discharge into groundwater. Petitioner environmental groups argued a county wastewater reclamation facility discharging pollutants into groundwater via a permitted injection well was actually discharging pollutants into navigable waters without a permit because the pollutants were finding their way from the point source injection well to a navigable water, the Pacific Ocean. On certiorari, the petitioner county argued the CWA created a bright-line test under which a pollutant is deemed to come from a point source only if that source, i.e., the injection well, is the last conveyance that discharges the pollutant into navigable waters. The Supreme Court agreed in part with petitioner, holding that the statutory phrase from any point source” was limited to a narrower set of circumstances than the Ninth Circuit had held, but was broader than the complete exclusion of all discharges through groundwater asserted by the petitioner. Thus, the Court majority held that the CWA requires a permit when there is a direct discharge from a point source into navigable waters or when there is the “functional equivalent of a direct discharge” into navigable waters. The Court vacated the judgment of the Ninth Circuit and remanded the case for consideration of whether the county’s discharge of pollutants into groundwater that later discharge into the Pacific Ocean meets this standard.

Commerce Clause, breach of water supply contracts

City of Fresno v. United States, No. 16-1276L, 2020 WL 1451987, 2020 U.S. Claims LEXIS 44 (Fed. Cl. Mar. 25, 2020).
The U.S. Court of Federal Claims granted in part and denied in part the U.S. Bureau of Reclamation’s (Bureau) motion to dismiss a lawsuit concerning its curtailment of water deliveries to the plaintiffs during a drought in California. Plaintiffs City of Fresno and several irrigation districts argued the Bureau had breached its water supply contracts with them by failing to make water deliveries in the quantities required during the drought. The Bureau moved to dismiss the case, arguing the contracts contained an immunity provision that shields it from liability when it reasonably determines that some of the water must be allocated to other water users. The court found that plaintiffs’ allegation that the Bureau’s allocation decision was arbitrary and capricious was sufficient to overcome the Bureau’s reliance on the immunity provision, and denied the motion to dismiss in part on that basis. Plaintiffs also argued that the Bureau’s failure to deliver all water required by contract constituted a Fifth Amendment taking of their property because it had caused them and their water users to suffer crop losses and reduced groundwater reserves, and to incur water shortages and rationing. The court found that plaintiffs lacked standing to pursue a takings claim because they did not have property interests under California law in the water supplied to them by the Bureau. Accordingly, the court granted the Bureau’s motion to dismiss the takings claim.

Commerce Clause, local zoning ban on mining

Minnesota Sands, LLC v. Cty. of Winona, 940 N.W.2d 183 (Minn. 2020).
The Minnesota Supreme Court affirmed an appellate court ruling that a county’s zoning ordinance banning all industrial-mineral mining did not violate the dormant Commerce Clause or effect a compensable taking. The petitioner silica-sand mining company argued that the ordinance violated the dormant Commerce Clause by discriminating against its business. The court found that the ordinance did not, on its face, confer any benefit to in-state consumers of silica sand, and, therefore, was not facially discriminatory. The court also found the ordinance did not benefit in-state interests at the expense of out-of-state interests. The court concluded that the ordinance did not discriminate against interstate commerce in either purpose or practical effect. The petitioner also argued it was entitled to compensation because the ordinance constituted a regulatory taking of its property. The court held that the petitioner lacked a compensable property interest because it did not have a vested leasehold interest under Minnesota law.

Commerce Clause, public utilities regulation

NextEra Energy Capital Holdings, Inc. v. Walker, No. 1:19-cv-626-LY (W.D. Tex. Feb. 26, 2020).
The U.S. District Court for the Western District of Texas held that statutory amendments to the Texas Utilities Code giving existing electricity transmission providers in the state a right of first refusal to build and operate new transmission lines is constitutional, and granted the defendant Public Utility Commission’s (PUC) motion to dismiss the claim. The plaintiff energy company argued the changes to Texas law effectively barred it from obtaining PUC authorization for construction of a transmission line in East Texas. Plaintiff alleged that the Texas statute impermissibly discriminated against it, in violation of the Commerce Clause of the U.S. Constitution, because the law restricted the development of transmission facilities to owners of interconnecting local facilities or in-state entities that local owners designate. The court found that the law only regulated the construction and operation of transmission lines and facilities within Texas. The court held the statutory amendments did not impermissibly discriminate in favor of in-state interests because the law did not purport to regulate the transmission of electricity in interstate commerce. Plaintiff also argued the law effected a substantial impairment of its contractual relationship with an electric grid independent system operator in violation of the Contract Clause. The court ruled the plaintiff had failed to state a claim because the law was founded upon significant and legitimate state interests.

Endangered Species Act

City of Austin v. Kinder Morgan Texas Pipeline, LLC, No. 1:20-CV-138-RP, 2020 WL 1324071, 2020 U.S. Dist. LEXIS 48194 (W.D. Tex. Mar. 19, 2020).
The U.S. District Court for the Western District of Texas denied the city of Austin’s and various landowners’ request for a preliminary injunction to halt construction of a 430-mile natural gas pipeline by the defendant. The plaintiffs argued that construction would result in an unlawful take of endangered species, such as the golden-cheeked warbler, that the defendant lacked an incidental take permit under section 10 of the Endangered Species Act (ESA), and that the defendant and the U.S. Fish and Wildlife Service had not fully complied with the National Environmental Policy Act. The court found that plaintiffs failed to demonstrate a reasonably certain threat of imminent harm to a protected species, even though it did proffer evidence of gaps in the project’s ESA compliance.

Natural Gas Act, Federal Energy Regulatory Commission

Gulf S. Pipeline Co., LP v. Fed. Energy Regulatory Comm’n, 955 F.3d 1001 (D.C. Cir. 2020).
The U.S. Court of Appeals for the District of Columbia Circuit vacated an order of the Federal Energy Regulatory Commission (FERC) that refused to allow the petitioner natural gas pipeline company to impose incremental-plus or additive rates to cover the costs of an expansion project under the Natural Gas Act. The company argued that FERC should have approved the requested rates, which were intended to recoup the more expensive costs of the expansion project, and that its failure to do so was arbitrary and capricious. The court found that FERC’s sole rationale for denying the requested rates, which was that the expansion facilities and existing facilities would be operated as a single integrated system, did not adequately explain how that finding justified rejecting the requested rates. The court held that FERC’s denial of the requested rates was arbitrary and capricious, vacated the commission’s order as to the incremental-plus rates, and remanded to FERC for further proceedings. The petitioner’s challenge of FERC’s order with respect to its initial rate of return and depreciation rate was rejected by the court.

Oil Pollution Act, breach of contract

CITGO Asphalt Ref. Co. v. Frescati Shipping Co., Ltd., 140 S. Ct. 1081 (2020).
The U.S. Supreme Court affirmed an appellate court ruling that an oil refining company was responsible for $140 million in damages from a 2004 oil spill in the Delaware River previously imposed in part upon the vessel owner under the Oil Pollution Act. The owner of the vessel involved in the spill argued that the company it chartered to deliver crude oil from Venezuela to the company’s refinery near Philadelphia had breached the safe-berth clause in its charter agreement, and was at fault for the spill. The lower court held that because the clause embodied an express warranty of safety, the refining company was liable to the vessel owner for breaching that warranty. The refining company argued on certiorari that the safe-berth clause did not impose strict liability or liability without regard to fault, and only imposed a duty of due diligence in the designation of the berth. The Supreme Court majority found that the plain language of the clause did not include any liability-limiting language, and because it clearly required the company to designate a safe berth, a warranty of safety was provided.

State energy regulation

Matter of Westar Energy, Inc., 460 P.3d 821 (Kan. 2020).
The Kansas Supreme Court held unlawful a rate design approved by the Kansas Corporation Commission (Commission) under which utilities charged residential customers generating their own electricity from a renewable source (distributed generation or DG customers) a higher price than they charged non-DG customers. The petitioner utilities argued that a more recent Kansas statute authorizing them to charge more to DG customers preempted an older statute that prohibited them from doing so. A lower appellate court agreed with the utilities, finding the two statutes in question were in conflict and holding that the newer statute controlled. On certiorari, the supreme court reversed the appellate court, finding no conflict between the two statutes because the older statute focused on the price of goods and services sold by regulated utilities, while the more recent statute addressed utility rate structure. The court concluded the challenged rate design violated the older statute because it used a customer’s DG status as a basis for charging more for the same goods and services, reversing the appellate court and remanding to the Commission for further proceedings.

John R. Jacus

John R. Jacus is a senior partner in the Environmental Practice Group of Davis Graham & Stubbs LLP in Denver. He is a past Section Council member and Environmental Committees chair and vice chair, and a contributing editor of Trends.