Throughout the first year of the Biden-Harris Administration, Environmental Justice (EJ) has been a focus of the U.S. Environmental Protection Agency. As I wrote about in November 2021, since January 2021 EPA has released numerous policies and guidance documents on EJ-related issues and has taken unprecedented actions in connection with permitting reviews and enforcement actions. EPA Administrator Michael Regan has repeatedly emphasized that EJ will be a top EPA priority.

Recently, EPA released additional broad policy actions to follow through on its EJ priority. These actions include:

  • “Aggressively” using EPA’s authority to conduct unannounced inspections of suspected non-compliant facilities and using all available tools to hold accountable those found to be in non-compliance.
  • Establishing a new program to expand air monitoring capacity, including additional air pollution inspectors, airplanes, and other air monitoring vehicles.
  • Leveraging EPA resources to invest in community air monitoring in vulnerable areas.
  • Pressing state and local elected officials to take urgent action to better protect the most overburdened communities.
  • Increased monitoring and oversight of polluting facilities in overburdened communities.
  • Applying the best available science to agency policymaking to safeguard public health and protect the environment.

EPA’s announcement included a number of specific actions focused on southern states (e.g., Texas, Louisiana,  and Mississippi) to address long-standing EJ challenges. This included the formation of a Multi-Scale Monitoring Project called the Pollution Accountability Team (PAT), which will utilize high-tech air pollution monitoring, and an increase in inspectors on the ground to enhance inspection and enforcement actions.

While EPA’s recent announcement is primarily focused on EJ challenges in a handful of southern states, it provides useful insight into EPA’s EJ-related investments, investigations, and enforcement nationwide.

 

Effective January 26, 2022, OSHA withdrew its enforcement of its COVID-19 Emergency Temporary Standard (ETS), which would have required many employers to mandate vaccination or regular testing for employees. As we have previously discussed, the ETS had undergone a number of legal challenges. Most recently the United States Supreme Court stayed the ETS and sent it back to the Sixth Circuit for full review on the merits. OSHA’s announcement that it will cease enforcement of the ETS will likely end this litigation.

Although OSHA is withdrawing the ETS as an enforceable emergency temporary standard, OSHA has not withdrawn the ETS as a proposed rule. This is significant because it will allow OSHA to expedite the rulemaking for a permanent COVID-19 rule under the Administrative Procedures Act. In the meantime, OSHA is prioritizing its resources to focus on finalizing a permanent COVID-19 Healthcare Standard and continues to “strongly encourage[s] vaccination of workers against the continuing dangers posed by COVID-19 in the workplace.”

While the ETS will not be enforced at this time, employers should investigate whether another federal, state, or local mandate may apply to them. If not, then they may choose to implement policies and practices they deem appropriate for the unique needs of their work environment. Of course, OSHA is continuing to enforce existing personal protective equipment, respiratory protection, and sanitization standards, as well as issue citations for recognized hazards (including COVID-19) under the General Duty Clause.

As we have previously reported, the implementation status of OSHA’s Emergency Temporary Standard (ETS) regarding COVID-19 vaccination or testing seems to change weekly. Yesterday, the United States Supreme Court reinstated the stay of OSHA’s ETS, ultimately sending the rule back to the Sixth Circuit to await a full review on the merits.

In the 6-3 opinion, the Supreme Court held that, while OSHA has the authority to regulate “occupational dangers,” it does not have the authority to regulate “public health more broadly.” The Supreme Court held that, while COVID-19 might be present in workplaces, it is not necessarily an occupational hazard in most. “Permitting OSHA to regulate the hazards of daily life—simply because most Americans have jobs and face those same risks while on the clock—would significantly expand OSHA’s regulatory authority without clear congressional authorization.”

While the ultimate fate of OSHA’s ETS will continue to play out in the courtroom, U.S. Secretary of Labor Marty Walsh released a statement urging employers to require workers to get vaccinated or tested weekly. Secretary Walsh also referenced OSHA’s existing COVID-19 guidance as a resource for employers to keep workers safe from COVID-19. Secretary Walsh concluded by saying:

“Regardless of the ultimate outcome of these proceedings, OSHA will do everything in its existing authority to hold businesses accountable for protecting workers, including under the Covid-19 National Emphasis Program and General Duty Clause.”

Employers should continue to monitor the fate of the OSHA ETS as it heads back to the Sixth Circuit. In addition, the Executive Order related to COVID-19 vaccination/testing for federal contractors, while currently stayed, may be reinitiated as well. Employers should continue to monitor legal developments related to the Executive Order.

Perhaps not as glamorous as the Times Square crystal ball, but something else drops at the start of the New Year: The threshold for mandated food waste separation and recycling by certain industrial and commercial facilities in Connecticut.

Legislation passed this year cut in half the annual tonnage of organic waste generation – from 52 tons/year to 26 tons/year – that will trigger the state’s organics recycling mandate under certain conditions. In particular, as of January 1, 2022, certain facilities – industrial food manufacturers and processors, commercial food wholesalers and distributors, supermarkets, resorts, and conference centers – must source-separate organic materials from other solid waste and ensure that such source-separated organic materials are recycled at an authorized composting facility. This requirement is triggered if the following conditions are met:

  1. The facility must generate an average projected volume of at least 26 tons/year of source-separate organic materials;
  2. The facility does not compost its source-separated organics material on-site, or treat it via on-site organic treatment equipment permitted under state or federal law; and
  3. The facility is located 20 miles or less from an authorized composting facility that has available capacity and will accept the source-separated material.

While Connecticut’s statute does not provide details about how to calculate a facility’s average projected volume against the 26 tons/year threshold, the internet provides some tools that may be useful for this purpose (caveat emptor). For example, there is a calculator developed by the Massachusetts Department of Environmental Protection-funded Recycling Works in connection with that state’s similar organics recycling mandate.

To determine if an authorized composting facility is within the 20-mile limit of your facility, a good place to start is the Connecticut Department of Energy and Environmental Protection’s food waste composting webpage. This page includes a relatively recent, but not necessarily definitive, list of such composting facilities.

Unlike some of the other jurisdictions in the country with similar organics recycling mandates, Connecticut’s program does not cover institutional cafeterias, such as those at large corporate offices, hospitals, schools or universities.

On December 21, 2021, the U.S. Supreme Court took its first step into the fray over federal vaccine mandates. As we have previously posted, legal challenges to the Biden administration’s various vaccine mandates have been working their way through the courts since November. Most recently, the U.S. Court of Appeals for the Sixth Circuit ruled last Friday that OSHA’s Emergency Temporary Standard (ETS) for COVID-19, which includes a vaccine-or-testing mandate, could continue after it was halted by another court the day after it went into effect. In an unusual move, the Supreme Court announced it will hold a special hearing on January 7 to hear arguments on both the ETS and a regulation from the Centers for Medicare and Medicaid Services (CMS) requiring vaccines for health care workers. The Supreme Court has not yet issued any rulings to stay either requirement. Both requirements are set to go into effect in January.

The January 7 hearing will occur just before the Supreme Court is set to begin its regularly scheduled term. The hearing also moves these legal challenges from the so-called “shadow docket,” which has been subject to criticism lately. The Supreme Court has repeatedly upheld state-implemented vaccine mandates in a variety of circumstances. However, the future of OSHA’s ETS and the federal contractor vaccine mandate will likely turn on whether Congress authorized the executive branch to institute these types of requirements. While the Justices’ questions during the January 7 hearing will likely give some insight into how they may rule, the date of a ruling on the future of these requirements is not known.

At his confirmation hearing earlier this year, Attorney General Merrick Garland identified the policing of corporate crime and enforcement as a key priority of the Biden administration. In an address at the ABA’s recent National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced three significant actions to strengthen the Department of Justice’s (DOJ) corporate criminal enforcement policies and practices. The DOJ memo provides prosecutors with a new, or at least sharpened, set of tools to effectuate DOJ policy. For companies and corporate officers, especially those in heavily-regulated industries, the DOJ’s renewed focus warrants a review of internal compliance programs and procedures.

Evaluating History of Misconduct

When evaluating a company’s compliance history, the policy clarifies that prosecutors are to consider the entirety of the entity’s regulatory and criminal enforcement record, not simply the misconduct at issue.  Prosecutors are encouraged to “start from the position that all prior misconduct is potentially relevant,” and therefore broaden their information sweep. This includes any prior criminal, civil, or regulatory enforcement actions, regardless of how it might relate, or not, to the subject of the present investigation. Organizationally, it also includes the target company’s parent, divisions, affiliates, subsidiaries, and other entities within the corporate family. Especially for large companies and multi-national corporations, this broad scope of review could result in a greater focus on the target’s past misconduct, even if unrelated to the conduct at issue.

Identifying All Individuals

Obtaining credit for cooperating with the authorities can influence, or even determine, the outcome of a prosecution determination. The DOJ has clarified that, in order to qualify for any cooperation credit, “corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct.” This means producing “all nonprivileged information relevant to all individuals involved in the misconduct,” both inside and outside of the company. The new policy takes a broad view of “involved” and effectively removes the company’s discretion in determining which individuals to disclose to the government. Even in the case of a rogue employee falsifying records, the company will be expected to disclose the identity of co-workers, supervisors, and managers, regardless of position or potential culpability.

Using Corporate Monitors

The DOJ has pivoted away from prior policies critical of corporate monitors and has recommitted to imposing monitors where appropriate in corporate criminal matters. While still evaluated on a case-by-case basis, the DOJ will favor the imposition of a third-party monitor where a company’s compliance program has proven ineffective, untested, or inadequately funded. According to the DOJ, monitors can be “an effective means of reducing the risk of repeat misconduct and compliance lapses.” Independent monitors can also be a costly addition to a resolution of a government investigation.

On Friday, the U.S. Court of Appeals for the Sixth Circuit lifted a stay of OSHA’s Emergency Temporary Standard (ETS) on COVID-19 vaccination and testing for employers with 100 or more employees. As we previously posted, the Fifth Circuit almost immediately issued a stay of the ETS after its release. The Sixth Circuit’s ruling puts the ETS back on track as its January 4, 2022, compliance deadline approaches. Multiple parties have already filed emergency motions with the U.S. Supreme Court to eliminate the ETS entirely. The legal ping-pong match will surely continue into 2022.

Meanwhile, OSHA issued a statement on Saturday that no citations will be issued for noncompliance with the ETS before January 10, 2022. OSHA will also exercise discretion and not issue citations for noncompliance with testing requirements under the ETS before February 9, 2022, if “an employer is exercising reasonable, good faith efforts to come into compliance with the standard.” While OSHA’s statement provides covered employers some breathing room, time is running out to put in place the necessary measures to comply with the ETS. That is, if the Supreme Court does not volley in before January 4, 2022.

An important lesson on contracting with environmental consultants recently came out of a federal district court in California in Golden Gate Way, LLC v. Enercon Services, Inc., 20-cv-03077-EMC (N.D. Cal. Nov. 18, 2021).

Golden Gate Way (GGW) hired environmental consultant Enercon to perform a Phase II Environmental Site Assessment in connection with a refinancing of a loan on GGW’s property which had previously been used for a dry-cleaning business. The contract contained a common provision limiting Enercon’s liability to the fee paid to Enercon for work under the contract (which turned out to be about $15,000). At GGW’s request, Enercon agreed to add a provision to the contract making GGW an additional insured under certain Enercon insurance policies.

After Enercon completed the Phase II work, GGW alleged that Enercon exacerbated contamination on the subject property and sought to recover under Enercon’s insurance policies as well as filing suit against Enercon for damages. Unfortunately for GGW, the Enercon insurance policies contained pollution exclusion provisions (excluding coverage for losses in connection with the potential spread of contamination at Enercon job sites). Thus, the GGW insurance claims were denied.

Enercon moved for partial summary judgment in GGW’s lawsuit based on the contract’s limitation of liability provision. The district court granted the motion, holding that the terms of the agreement (including the limitation of liability provision and agreement to add GGW as an additional insured) (1) were the result of an arms-length transaction between sophisticated parties, (2) did not violate public policy, and (3) were not the result of fraud or other malfeasance.

GGW’s experience serves as a reminder when contracting for environmental investigation and remediation services, it is important to pay close attention to contractual provisions such as limitation of liability clauses and, when relying on insurance, to pay close attention to policy terms and exclusions.

This post is part of an ongoing series covering the Biden administration’s efforts pursuant to Executive Order 13990 to repeal and replace regulations adopted during the Trump administration. Prior posts include Catching Up on the 2021 Clean Water Act Releases.

The Council on Environmental Quality (CEQ) recently issued a Notice of Proposed Rulemaking to amend National Environmental Policy Act (NEPA) regulations adopted by the Trump administration in 2020. CEQ oversees federal agencies’ compliance with NEPA, including its requirements to consider environmental impacts and prepare Environmental Impact Statements (EIS) before authorizing or directly taking “major federal actions.” The 2020 amendments were the first significant revisions to NEPA regulations since their implementation in 1978.

The Notice of Proposed Rulemaking initiates Phase I of CEQ’s approach of reconsidering and revising the 2020 amendments in two phases. The Phase I rulemaking focuses on revisions to a discrete set of 2020 amendment provisions “by generally reverting to the language from the 1978 NEPA regulations that w[ere] in effect for more than 40 years.”

In Phase I, CEQ proposes three revisions to the NEPA regulations:

  • Removal of language added by the 2020 amendments that modified the purpose and need section, and related definition of “reasonable alternatives,” of an EIS.
    • When an agency is reviewing an application for authorization, the 2020 amendments require agencies to base the purpose and need of the subject action on the goals of an applicant and the agency’s statutory authority. CEQ proposes to revert to the original 1978 regulatory language for purpose.
  • Clarification that agencies have the discretion and flexibility to develop procedures beyond the CEQ regulatory requirements.
    • CEQ proposes to remove the “ceiling provisions” added by the 2020 amendments, which made CEQ’s regulations a ceiling for agency NEPA procedures. CEQ’s proposed rulemaking would permit agencies to develop environmental review procedures to address their specific programs that go beyond CEQ’s regulatory requirements.
  • Revise the definitions of “effects” or “impacts” to restore the substance of the definitions contained in the original 1978 regulations with changes consistent with the current Code of Federal Regulations.
    • CEQ proposes to restore the definitions of “direct” and “indirect” effects and “cumulative impacts” to the original 1978 language by incorporating them into the definition of “effects” or “impacts” so that each reference to these terms would include direct, indirect, and cumulative effects.

Where Phase I of the rulemaking process generally restores provisions that were in effect before being modified in 2020, it is anticipated that Phase II of the rulemaking process will propose further revisions to ensure the NEPA process “provides for efficient and effective environmental reviews,” and meets environmental, environmental justice, and climate change objectives. The proposed changes could result in increased NEPA review timelines for projects involving agency action regarding federal lands, federal money, or federal permits or approvals.

The comment period for the Phase I proposed rule closes on November 22, 2021. Comments can be submitted through the Federal Register. More than 34,000 comments have been submitted to date. Phase II of the rulemaking is expected to be issued in the next several months.

On November 1, ASTM International (ASTM) released a revised standard for conducting Phase I Environmental Site Assessments (Phase I ESAs). The new standard – ASTM E1527-21 – establishes new requirements for complying with the “All Appropriate Inquiry” (AAI) rule in 40 CFR Part 312. The AAI is an essential element of environmental due diligence used to protect prospective buyers, lenders, and owners from liability related to environmental contamination. E1527-21 will not be a required part of the AAI rule until the U.S EPA adopts it through a formal rulemaking. Nevertheless, those involved in environmental due diligence and transactions should start to become familiar with E1527-21 and begin to incorporate its requirements into Phase I ESAs.

While E1527-21 contains several changes from the prior ASTM standard for Phase I ESAs, these new additions are not as significant as those made the last time the standard was revised in 2013. The following provides a brief summary of several of the more noteworthy updates:

  • The terms Recognized Environmental Condition (REC); Controlled Recognized Environmental Condition (CREC); and Historical Recognized Environmental Condition (HREC) have all been updated with important clarifications, including:
    • Offsite issues without the potential to impact the subject property are now clearly excluded from the definition of REC;
    • The Findings and Opinions section of a Phase I ESA must now include the rationale for finding a condition is a CREC or a HREC; and
    • For each HREC, the environmental professional must also state whether the HREC still qualifies as an HREC.
  • Definitions for “Property Use Limitation” and “Significant data gap” are now available.
  • Emerging contaminants, such as PFAS, are now included on the list of non-scope items, at least until they are classified as a CERCLA hazardous substance. However, the non-scope issues appendix now includes a discussion of emerging contaminants and states that where the Phase I ESA is performed to satisfy both federal and state requirements the environmental professional should consider and discuss these substances if they are considered hazardous under applicable state law.
  • The historical records review section now reflects common industry practice, including subject and adjoining property identification, use, and research objectives.
  • Numerous updates and additions to the appendices, including a flowchart and guidance to help properly classify conditions as RECs, CRECs, or HRECs, a revised report outline, and a discussion of business environmental risks.

If a revised Phase I ESA ASTM standard was not enough reason to remind you of the importance of properly and timely conducted Phase I ESAs, then a recent decision from the U.S. Court of Appeals for the Seventh Circuit should help. In September, the Seventh Circuit affirmed the District Court’s finding that a party was not entitled to assert the bona fide prospective purchaser (BFPP) defense under CERCLA because the party’s Phase I ESAs did not comply with the AAI (Von Duprin LLC v. Major Holdings, LLC, No. 20-1711 (7th Cir. Sep. 3, 2021)).

The District Court had found that the environmental professional failed to make the required inquiries with the property owner and failed to include the necessary certifications in a Phase I ESA for one property. In connection with a second property, the court found that the Phase I ESA was completed within the appropriate timeframe (180 days) prior to the party’s purchase of the property, however the party started a 99-year lease of the same property six years prior to it purchasing the property. Thus, the party became an operator under CERCLA at the start of its lease and had not satisfied the AAI rule at that time because the Phase I ESA the party conducted prior to signing the lease was not completed or updated within the 180 days before the start of the lease, as required by the AAI rule.

All parties involved in commercial real estate transactions, including leases, should continue to familiarize themselves with the AAI rule and the newly revised ASTM standard (E1527-21). Complete and timely Phase I ESAs remain a staple of commercial real estate transactions. Failure to fully comply with the AAI can have long-lasting and significant consequences.