You Are Invited: June 12 Environmental Ethics CLE Luncheon
By E. Lynn Grayson
On Monday, June 12, 2017, Jenner & Block's Environmental and Workplace Health & Safety Practice Group is hosting a special program targeted at environmental lawyers titled Drilling Down on the Risks: Ethics and Liabilities for Environmental Practitioners. The program will be held from 11:45-1:30 at Jenner & Block’s offices, 353 North Clark Street, in Chicago. You may participate in the program in person or via a webinar.
Three exceptional speakers—Deborah Green Shortridge (ALAS), April Otterberg and Gay Sigel (Jenner & Block)—will discuss a variety of ethical concerns often confronted by environmental lawyers. They will address prior work conflicts, joint representation, common interest agreements, retaining environmental consultants in transactional and litigation matters, positional conflicts, contacting government officials, community outreach, and public statements.
The CLE program will be eligible for 1.5 professional responsibility credits in Illinois.
If you would like to join us for this CLE program, please RSVP here.
U.S. Water Risks: It's Not Only About Flint
By E. Lynn Grayson
By and large, Americans are blessed with clean, safe, plentiful and mostly free drinking water sources. The Flint, Michigan contaminated drinking water scandal was a wakeup call for many that drinking water sources we depend upon may not be as reliable, stable, or even as affordable as we think.
On December 19, 2016, Reuters released a startling report about the quality of America’s drinking water. Reuters' investigation found that at least 3,000 water supplies in the U.S. were contaminated with lead at levels at least double the rates detected in Flint’s drinking water. In addition, 1,100 of these communities had rates of elevated lead in blood tests at least four times higher. Reuters concluded that Flint’s water crisis doesn’t even rank among the most dangerous lead hotspots in the U.S. Like Flint, however, many of the other localities are plagued by legacy lead: crumbling paint, plumbing, or industrial wastes left behind. Unlike Flint, many have received little attention or funding to combat poisoning.
Another critical issue looming on the horizon for many will be the affordability of water. A new Michigan State University (MSU) report recently concluded that a variety of compounding factors in the U.S. could easily push large portions of the population out of the financial range to even afford water in the future. The MSU report concludes:
A variety of pressures ranging from climate change, to sanitation and water quality, to infrastructure upgrades, are placing increasing strain on water prices. Estimates of the costs to replace aging infrastructure in the U.S. alone project over $1 trillion dollars are needed in the next 25 years to replace systems built circa World War II, which could triple the cost of household water bills…. Over the next few decades, water prices are anticipated to increase four times current levels. Prices could go higher if cities look to private providers for water services, who have a tendency to charge higher rates than public providers.
The MSU report concludes that 36% of households will be unable to afford water within five years. The highest risk areas in the U.S. are in the South, with the most at-risk communities in Mississippi. The MSU report noted that Ohio is 9th on the list, followed by Michigan at 12th.
Water risks come in many forms and include not only sufficient quantities and acceptable quality, but also affordability. The latter issue has not been addressed in a meaningful manner in the U.S. and will become a growing concern as water risks of all kinds increase in number and scope.
Gay Sigel, Steve Siros, and Allison Torrence Speak at March 7 CLE Program
By E. Lynn Grayson
Jenner & Block Partners Gay Sigel, Steve Siros, and Allison Torrence will speak at the upcoming program Environmental, Health, and Safety Issues in 2017: What to Expect From the Trump Administration, hosted by Jenner & Block’s Environmental, Workplace Health & Safety Practice Group on Tuesday, March 7 from 12:00 pm to 1:00 p.m. With the Trump Administration beginning to take shape, federal environmental, health, and safety (EHS) policy is certain to shift to the right. This CLE program will provide an overview of the Trump Administration’s actions impacting EHS matters to date and prognosticate on changes that may be forthcoming. You are invited to join us for this special program in person or via webinar. If you plan to participate, please RSVP as indicated below.
Tuesday, March 7, 12:00—1:00 p.m. with lunch starting at 11:45 a.m.
Jenner & Block, 353 North Clark, Chicago, IL—45th Floor Conference Center
For more information about the program and to RSVP, please connect here.
VW Agrees to $4.3 Billion Settlement of Diesel Emission Claims
By Allison Torrence
On January 11, 2017, the U.S. Department of Justice announced that Volkswagen AG (VW) has agreed to plead guilty to three criminal felony counts and pay a $2.8 billion criminal penalty for selling approximately 590,000 diesel vehicles in the U.S. that had installed defeat devices to cheat on emissions tests mandated by the Environmental Protection Agency (EPA). VW will be on probation for three years and under an independent corporate compliance monitor who will oversee the company for at least three years. VW has also agreed to pay $1.5 billion to settle separate civil violations under the Clean Air Act (CAA) as well as other customs and financial claims.
We previously reported on EPA’s CAA lawsuit on this blog, which was filed on January 4, 2016, and alleged multiple CAA violations stemming from allegations that VW installed defeat devices in the subject diesel vehicles designed to cheat EPA emissions tests. EPA sought civil penalties and injunctive relief. In October, VW settled EPA’s injunctive relief claims along with consumer class action claims in a settlement valued at approximately $15.3 billion.
In addition, a federal grand jury in the Eastern District of Michigan returned an indictment on January 11, 2017, charging six VW executives and employees with criminal conspiracy to defraud the United States, defraud VW’s U.S. customers and violate the CAA. One of these VW employees, Oliver Schmidt, was arrested on January 7, 2017, in Miami during a visit to the United States and appeared in federal court there on Monday. The other defendants are believed to presently reside in Germany.
The settlement announcement was made by Attorney General Loretta E. Lynch, who was joined by EPA Administrator Gina McCarthy. Attorney General Lynch stated that:
Today’s actions reflect the Justice Department’s steadfast commitment to defending consumers, protecting our environment and our financial system and holding individuals and companies accountable for corporate wrongdoing. In the days ahead, we will continue to examine Volkswagen’s attempts to mislead consumers and deceive the government. And we will continue to pursue the individuals responsible for orchestrating this damaging conspiracy.
The Department of Justice statement on the VW settlement is available here.
New Climate Change Financial Disclosure Recommendations
By E. Lynn Grayson
The Task Force on Climate-Related Financial Disclosures has issued a report detailing is recommendations for helping businesses disclose climate-related financial risks and opportunities within the context of their existing disclosure requirements. The Task Force developed four widely adoptable recommendations on climate-related financial disclosures that are applicable to organizations across sectors and jurisdictions: 1) adoptable by all organizations; 2) included in financial filings; 3) designed to solicit decision-useful, forward-looking information on financial impacts; and 4) strong focus on risks and opportunities related to transition to lower-carbon economy.
The recommendations are incorporated into a comprehensive report that provides good insight into climate-related risks and financial impacts, sector focused guidance, scenario analysis for climate issues and identification of key issues requiring further consideration. Appendices include a summary of select disclosure frameworks and other guidance including fundamental principles for effective disclosure.
In a letter to the Financial Stability Board transmitting the recommendations, Chairman Michael Bloomberg notes “….Warming of the planet caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact across many economic sectors……without effective disclosure of these risks, the financial impacts of climate change may not be correctly priced and as the costs eventually become clearer, the potential for rapid adjustments could have destabilizing effects on markets.” He concludes in his letter that the Task Force’s recommendations “…aim to begin fixing this problem.”
The recommendations are designed to help companies identify and disclose information needed by investors, lenders and insurance underwriters to appropriately assess and price climate related risks and opportunities. Even with the upcoming changes in D.C., it is clear there will be continuing focus on climate change-related disclosures in 2017.
DTSC Seeks Comments on New Safer Consumer Products Guidance
By E. Lynn Grayson
The California Department of Toxic Substances Control (DTSC) has issued draft guidance titled Alternatives Analysis Guide and is seeking comments through January 20, 2017. California’s Safer Consumer Products (SCP) Program challenges product designers and manufacturers to reduce toxic chemicals in their products. According to DTSC, the SCP regulations establish innovative approaches for responsible entities to identify, evaluate, and adopt better alternatives. The SCP approach requires an Alternatives Analysis (AA) that considers important impacts throughout the product’s life cycle and follows up with specific actions to make the product safer. DTSC prepared the Draft Alternatives Analysis Guide to help responsible entities conduct an AA to meet the regulatory requirements. Public comments are specifically requested to provide DTSC with insight on the clarity and usefulness of the Draft Alternatives Analysis Guide.
DTSC’s SCP Program regulations took effect October 1, 2013 and are being implemented based on the various regulatory requirements. The goals of the program are to: 1) reduce toxic chemicals in consumer products; 2) create new business opportunities in the emerging safer consumer products industry; and 3) help consumer and businesses identify what is in the products they buy for their families and customers.
The SCP program implements a four-step process to reduce toxic chemicals in the products that consumers buy and use. It identifies specific products that contain potentially harmful chemicals and asks manufacturers to answer two questions: 1) Is this chemical necessary? 2) Is there a safer alternative? The first step involved publication of a list of candidate chemicals that exhibit a hazard trait and/or an environmental toxicological endpoint. Regulators must then identify potential “priority products” containing chemicals that pose a significant risk to public health or the environment. Once a priority product is declared through a separate rulemaking, regulated entities must conduct an alternative analysis to determine if safer options are available. The final step in the lengthy process is for the department to determine if a regulatory response, such as banning the chemical-product combination, is required.
To learn more about the status of the SCP program and to obtain a copy of the new guidance, visit the DTSC SCP website at http://www.dtsc.ca.gov/SCP/index.cfm.
EPA Publishes Proposed Rule to Ban Certain Uses of TCE
By Allison Torrence
On December 7, 2016, EPA published a proposed rule to ban certain uses of trichloroethylene (TCE) under section 6(a) of the Toxic Substances Control Act (TSCA) due to risks to human health from those uses. The proposed rule would prohibit the manufacture (including import), processing, distribution in commerce and commercial use of TCE for aerosol degreasing and for spot cleaning in dry cleaning facilities.
As we previously reported on this blog, EPA recently included TCE on its list of the first 10 chemicals it will evaluate broadly for potential risks to human health and the environment pursuant to requirements of the 2016 TSCA Reform Act. In a 2014 risk assessment, EPA identified serious risks to workers and consumers associated with TCE uses, concluding that the chemical can cause a range of adverse health effects, including cancer, development and neurotoxicological effects, and toxicity to the liver.
Based on the 2014 risk assessment, EPA has preliminarily determined that the use of TCE in aerosol degreasing and for spot cleaning in dry cleaning facilities presents an unreasonable risk of injury to health and is proposing to prohibit such uses. EPA’s risk assessment also preliminarily indicated that the use of TCE in vapor degreasing presents an unreasonable risk of injury to health. EPA has stated that it intends to issue a separate proposed rule for TCE use in vapor degreasing by the end of the year. EPA then plans to issue one final rule covering both the current proposed ban on aerosol degreasing and spot cleaning and the forthcoming vapor degreasing proposal.
EPA issued a press release and statement from Jim Jones, assistant administrator for the Office of Chemical Safety and Pollution Prevention, praising the new authority granted to EPA under the TSCA Reform Act and the recent actions of EPA under that Act:
For the first time in a generation, we are able to restrict chemicals already in commerce that pose risks to public health and the environment. Once finalized, today’s action will help protect consumers and workers from cancer and other serious health risks when they are exposed to aerosol degreasing, and when dry cleaners use spotting agents. I am confident that the new authority Congress has given us is exactly what we need to finally address these important issues.
The proposed rule will be published in the Federal Register in the coming days. Comments on the proposed rule can be submitted by the public for 60 days following publication in the Federal Register. Notably, the comment period on the proposed rule will run past the end of the Obama administration and any final rule issued after the comment period would be promulgated under the Trump administration, which could change or withdraw the proposal.
More information on the proposed rule is available at the EPA website.
Uncertainty Continues As to ESG Reporting
By E. Lynn Grayson
The importance of and how best to report on environmental, social and governance (ESG) issues remains uncertain, and what really matters appears to depend upon whether you are a corporate or an investor. The continuing difference of opinion on ESG matters is highlighted in a new survey from PricewaterhouseCoopers LLP titled Investors, Corporates and ESG: Bridging the Gap.
The survey finds that corporates view disclosing ESG data differently—corporates are focused on growth but investors are focused on risk. It is clear that sustainability reporting has become mainstream with 81% of S&P 500 companies publishing sustainability reports in 2015 compared to 20% in 2011.
Some key findings from the survey include:
65% of corporates say ESG issues are very important to the core business strategy
80% of corporates follow Global Reporting Initiative (GRI) standards for ESG disclosure reporting
31% of investors confirm that ESG data is very important to equity investment decisions
43% of investors would like to see ESG information reported using the Sustainability Accounting Standards Board (SASB) standards
A critical issue identified in the survey relates to trust and transparency of ESG disclosures. Corporates express 100% confidence in the quality of ESG information shared but only 29% of investors are confident in the quality of the ESG information received from companies.
The results of this new survey from PWC confirms that investors are increasingly interested in both financial and nonfinancial disclosures including information related to ESG matters. 36% of investors noted that having such information incorporated into SEC filings would ensure higher quality data. The SEC currently is considering corporate disclosures of ESG issues.
Federal Court Approves $14.7 Billion Volkswagen Settlement
By Allison Torrence
On October 25, 2016, Judge Charles Breyer of the U.S. District Court for the Northern District of California approved a $14.7 billion partial settlement in the Volkswagen “defeat device” MDL litigation. The settlement resolves injunctive relief claims brought by the United States and the State of California, as well as consumer class action claims related to Volkswagen’s 2.0 liter vehicles.
The United States had sued Volkswagen (and its subsidiaries, including Audi and Porsche) in January 2016, alleging that over 500,000 vehicles sold by Volkswagen in the United States from 2009 through 2016 contained software, known as a “defeat device”, that senses when the vehicle is being tested for compliance with emission standards. The defeat devices produced compliant emission results during testing but then reduced the effectiveness of emission control systems during normal driving. The United States alleged that the defeat devices cause increased NOx emissions up to 40 times allowable levels in 2.0 liter vehicles and 9 times allowable levels in 3.0 liter vehicles.
A consolidated consumer class action complaint was filed in federal court in the Norther District of California in February 2016. The consumer class action alleged that Volkswagen used defeat devices in the subject vehicles and also alleged that damage to consumers was compounded by Volkswagen’s false and misleading “clean” diesel advertising.
The United States complaint, along with dozens of other complaints filed by individual states and other parties, were transferred to a Multi-District Litigation (MDL) docket in the U.S. District Court for the Norther District of California.
The partial settlement just approved by the court totals approximately $14.7 billion, and contains the following, key elements:
Volkswagen will invest $2 billion to support zero emission vehicle technology.
Volkswagen will create a $2.7 billion environmental remediation fund to mitigate the excess emissions.
Volkswagen will set aside over $10 billion to buy back cars and provide cash compensation to owners.
Notably, this settlement does not resolve the following claims:
Claims related to 3.0 liter vehicles – Volkswagen sold approximately 80,000 3.0 liter vehicles containing defeat devices in the United States, compared to 500,000 such 2.0 liter vehicles.
Claims for civil penalties under the Clean Air Act – which have the potential to reach $65 billion.
Potential criminal claims.
The district court has a hearing scheduled on November 3, 2016, to address claims related to 3.0 liter vehicles.
Due to the level of interest in this case, the United States District Court for the Northern District of California has created a website to provide important news and information about the Volkswagen MDL to the public.
170 Nations Agree to Legally Binding Accord to Limit Global Warming HFCs
By Allison Torrence
On October 15, 2016, representatives from 170 countries concluded negotiations in Kigali, Rwanda that resulted in a legally binding accord to limit hydrofluorocarbons (HFCs) in an effort to combat climate change. HFCs are chemical coolants used in air conditioners and refrigerants. Chemical companies developed HFCs in the late 1980s after the Montreal Protocol banned ozone-depleting coolants called chlorofluorocarbons (CFCs). HFCs do not harm the ozone layer, but they have 1,000 times the heat trapping potential of carbon dioxide.
The Kigali accord is an amendment to the 1987 Montreal Protocol (which was ratified by the U.S. Senate during the Regan Administration). Thus, the Kigali accord has the legal force of a treaty without further ratification by the current U.S. Senate. Although HFCs make up a small percentage of greenhouse gasses in the atmosphere, because of their extremely high warming potential, the reductions called for in the Kigali accord will lead to the reduction of the equivalent of 70 billion tons of carbon dioxide, which is approximately two times the amount of carbon dioxide emitted globally each year.
The Kigali agreement contains three tracks for HFC reductions, determined by a county’s wealth and need for air conditioning. The richest countries, including the United States and those in the European Union, are in the first track. Those countries will freeze the production and consumption of HFCs by 2018, reducing them to 15 percent of 2012 levels by 2036. The second track contains most of the rest of the world, including China, Brazil and all of Africa. Second track countries will freeze HFC use by 2024, reducing it to 20 percent of 2021 levels by 2045. Finally, the third track contains a small group of the world’s hottest countries — India, Pakistan, Iran, Saudi Arabia and Kuwait. Those countries will not have to freeze HFC use until 2028, and will have to reduce it to 15 percent of 2025 levels by 2047.
Secretary of State John Kerry participated in the negotiations in Kigali, along with EPA Administrator Gina McCarthy. Secretary Kerry praised the final outcome, stating that “It is likely the single most important step we could take at this moment to limit the warming of our planet and limit the warming for generations to come.”
2016 Democratic Party Platform: Combat Climate Change, Build a Clean Energy Economy, and Secure Environmental Justice
By Allison Torrence
Last week, we examined the key environmental issues raised in the 2016 Republican platform. Now that the political focus has shifted from Cleveland to Philadelphia, where Democrats are holding their convention, we will examine what the Democratic Party has to say about its environmental priorities in the 2016 Democratic Party Platform. One of the Democratic Party platform’s 13 main sections is entitled “Combat Climate Change, Build a Clean Energy Economy, and Secure Environmental Justice.” Environmental issues are also raised in the section titled “Confront Global Threats”, which discusses “Global Climate Leadership.”
In the platform’s preamble, the Democrats state that:
Democrats believe that climate change poses a real and urgent threat to our economy, our national security, and our children’s health and futures, and that Americans deserve the jobs and security that come from becoming the clean energy superpower of the 21st century.
Other key positions from the Democratic environmental platform include:
Bipartisan TSCA Reform Act Signed by President Obama
By Allison Torrence
On June 22, 2016, President Obama signed the Frank R. Lautenberg Chemical Safety for the 21st Century Act (a/k/a the TSCA Reform Act) into law. The TSCA Reform Act received bipartisan support in both the House and Senate, passing both bodies by wide margins. The TSCA Reform Act is a major overhaul of the 40-year-old chemical law, which had fallen short of its goal to protect people and the environment from dangerous chemicals.
In an article posted on EPA’s blog, Administrator Gina McCarthy praised the TSCA Reform Act, stating:
The updated law gives EPA the authorities we need to protect American families from the health effects of dangerous chemicals. I welcome this bipartisan bill as a major step forward to protect Americans’ health. And at EPA, we’re excited to get to work putting it into action.
Key provisions of the TSCA Reform Act include:
ExxonMobil, 13 State Attorneys General Fight Back Against the Exxon Climate Probes
By Alexander J. Bandza
As previously reported by my colleague Lynn Grayson, ExxonMobil has faced a recent onslaught of scrutiny over allegations that fossil fuel companies had committed fraud by downplaying the effect of climate change on their businesses. These matters include a subpoena issued by the U.S. Virgin Islands’ Attorney General’s office related to allegations of violating two state laws by obtaining money under false pretenses and conspiring to do so; and New York Attorney General Schneiderman’s investigation where documents have been subpoenaed to determine whether the company misled investors about the dangers climate change posed to its operations.
Two events last week suggest that this fight will not end anytime soon.
ExxonMobil filed suit in the Northern District of Texas, seeking an injunction barring the enforcement of a civil investigative demand issued by the Massachusetts Attorney General to ExxonMobil, and a declaration that this demand violates ExxonMobil’s rights under state and federal law, including the First and Fourteenth Amendments to the Constitution, as well as the Dormant Commerce Clause.
The Attorneys General of 13 states wrote a sharply-worded letter to their colleagues, noting that “this effort by our colleagues to police the global warming debate through the power of the subpoena is a grave mistake” and “not a question for the courts.” The letter outlines how this investigation is in fact “far from routine” because of its following three characteristics: “1) the investigation targets a particular type of market participant; 2) the Attorneys General identify themselves with the competitors of their investigative targets; and 3) the investigation implicates an ongoing public policy debate.”
We will continue to monitor developments on this heated situation.
TSCA Reform Act Passed, Sent to the President for Signature
By Allison Torrence
Late on June 7, 2016, the Senate voted in favor of the Frank R. Lautenberg Chemical Safety for the 21st Century Act (HR 2576) (a/k/a the TSCA Reform Act). The TSCA Reform Act regulates the manufacture, transportation, sale and use of thousands of chemicals, and provides a much needed update to the 40 year old Toxic Substances Control Act (TSCA). The TSCA Reform Act had been passed by the House in May, with overwhelming support. It was held up recently in the Senate by an objection from Senator Rand Paul (R-Ky.), who argued that he needed more time to review the complex new law. But, Senator Paul dropped his objection on June 7th, and a vote was quickly held.
The TSCA Reform Act is widely seen as an improvement over the outdated TSCA. The American Chemical Counsel praised the TSCA Reform Act as “truly historic”. Others, however, were disappointed that the TSCA Reform Act preempted state laws on chemical safety, instead of setting a floor and letting state’s set more stringent standards.
President Obama is expected to sign the TSCA Reform Act into law very soon, as the White House had endorsed the Act after it passed the House of Representatives in May.
Is A TSCA Reform Bill Finally Going To Happen?
By Allison Torrence
Attempts to reform the outdated Toxic Substances Control Act (“TSCA”) have been working their way through Congress for years with no success. But as of this week, legislators in Washington have announced that they are closer than ever before to finalizing and approving a TSCA reform bill.
Last year, the House and Senate each passed their own versions of a TSCA reform bill. The two versions contained significant differences, including on how they managed preemption of State chemical laws. Then, on May 17, 2016, House and Senate leaders issued the following statement on the current status of TSCA reform:
House and Senate negotiators are finalizing a TSCA reform bill that represents an improvement over both the House and Senate bills in key respects. Current federal law only provides very limited protection. We are hopeful that Congress will be taking action soon on reforming this important environmental law.
While some House Democrats, including Rep. Frank Pallone Jr. (D-NJ), Ranking Member of the House Committee on Energy and Commerce, believe the TSCA reform bill does not do enough, many high-profile Democrats and Republicans have signed on to the compromise bill, including U.S. Senate Environment and Public Works Committee Ranking Member Barbara Boxer (D-CA), Senator Cory Booker (D-NJ), House Energy and Commerce Committee Chairman Fred Upton (R-MI), and U.S. Senate Environment and Public Works Committee Chairman Jim Inhofe (R-OK).
The Congressional leaders are confident that the compromise bill will be up for a vote next week and could potentially be sent to the President for signing before Memorial Day. Be sure to follow the Corporate Environmental Lawyer Blog for analysis of any developments with the TSCA reform bill.