October 9, 2008
By Troy N. Nichols and Justin W. Ross
Wyatt, Tarrant & Combs, LLP, Lexington, Kentucky

District of Columbia Circuit

Sierra Club v. Environmental Protection Agency, 536 F.3d 673 (D.C. Cir. 2008)

The D.C. Circuit Court of Appeals struck down an EPA rule that prevented state and local authorities from supplementing federal monitoring requirements under the Clean Air Act (CAA).  Under Title V of the CAA, the EPA and state and local environmental authorities run a permit program for most stationary sources of air pollution.  According to the statute, “[e]ach permit … shall set forth … monitoring … requirements to assure compliance with the permit terms and conditions.”  However, some permits, especially those that pre-date the 1990 Amendments to the CAA, are not adequate to assure compliance and must be fixed by either the EPA or state and local authorities.  Under the promulgated EPA rule, state and local authorities could not supplement those permits which do not assure compliance and all changes had to be made by the EPA.  Stating that the EPA had “offered nothing more than vague promises to act in the future,” the court held that the EPA rule contravened statutory directive and struck it down.

Sixth Circuit (Kentucky)

Kentucky Waterways Alliance v. Johnson, 540 F.3d 466 (6th Cir. 2008)

The Sixth Circuit Court of Appeals rejected EPA approval of a coal mining discharge exemption to Kentucky’s water quality antidegradation rules.  These rules were established pursuant to the Federal Water Pollution Control Act (FWPCA).  The court held that the EPA’s approval of Kentucky’s Tier II exemption for coal mining discharges under the FWPCA was not in accordance with administrative law.  Specifically, the court took issue with the EPA’s acceptance of an informal commitment made by Kentucky that it would subject coal mining discharges to socioeconomic review.  This review requires dischargers to demonstrate economic or social necessity for their actions.  Though Kentucky agreed to require such a review, the court held that the EPA may not rely on such promises without support for them in state regulations.

The EPA had also approved five other Kentucky administered Tier II exemptions, including storm water and animal feeding discharges.  These exemptions were based on the conclusion that they each form only a de minimus amount of pollution and, therefore, escape antidegradation review.  The Sixth Circuit did not state that these sources of pollution were not, in fact, de minimus sources, but held that there was insufficient data to support the EPA’s claim that they were.  The court ordered the EPA to more fully examine each of the five exemptions.

Tenth Circuit (Colorado)

United States, ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180 (10th Cir. 2008)

Bobby Maxwell, a senior auditor for the Minerals Management Service (MMS), brought a qui tam action against Kerr-McGee for underpaying royalties to the federal government for offshore oil leases.  After a jury verdict for $7.5 million was returned against Kerr-McGee, the district court ruled that it did not have jurisdiction over the suit.  Citing to e-mails between a different MMS agent and a state government auditor, the court held that the information underlying the suit had previously been disclosed to the public and that the court no longer had jurisdiction under the False Claims Act.

The Tenth Circuit Court of Appeals reversed the district court’s ruling and remanded the action for further proceedings.  The Tenth Circuit held that because the audit was ongoing all information relating to it that was exchanged between government officials was considered confidential.  The case is expected to be appealed to the Supreme Court.

Eleventh Circuit (Georgia)

Sierra Club v. Johnson, 2008 WL 4021602 (11th Cir. 2008)

The Sierra Club and the Coosa River Basin Initiative challenged the issuance of Title V operating permits to two Georgia Power coal-fired power plants.  Pointing to an EPA-issued Clean Air Act violation notice and a related civil complaint, the plaintiffs claimed the EPA had a statutory duty to object to the issuance of the permits by the Georgia Environmental Protection Division.  The EPA argued that the violation notice and civil suit was merely an initial step in the agency’s enforcement action against the plants and that, without more, its duty to object to the permits was not triggered.  Citing the “arbitrary, capricious, or abuse of discretion” standard of review, the court agreed that the EPA’s decision not to object to the permits was within its broad discretion and that the plaintiffs had not met their burden of proving non-compliance with the Clean Air Act.

Texas Supreme Court

Coastal Oil & Gas Corp. v. Garza Energy Trust, 2008 WL 3991029 (Tex. 2008)

The Texas Supreme Court delivered an important decision regarding well operators’ liability for subsurface trespass based on the drainage of natural gas from hydraulic fracturing of gas wells.  The plaintiffs sued Coastal Oil & Gas, claiming that hydraulic fracturing had extended beyond lease lines and caused natural gas to drain from beneath plaintiffs’ land.  The court reversed a Corpus Christi court decision that awarded plaintiffs $14 million.  Basing its decision on the rule of capture, the court essentially eliminated the possibility of drainage-based damages claims for hydraulic fracturing.  However, the court expressly declined to determine whether subsurface hydraulic fracturing, outside the context of drainage, could ever give rise to an action for trespass.

Mine Safety and Health Administration (MSHA) Issues Two Final Rules

The first rule amends 30 C.F.R. Part 49 by revising the standards which require certain equipment at mine rescue stations.  This rule requires that each station be equipped with 12 four-hour capacity self contained breaching apparatus (SCBAs) and two extra, fully charged oxygen bottles.  The rule was amended to not require oxygen resuscitators.  This final rule will be effective on November 14, 2008.

The second rule amends 30 C.F.R. Part 75 which addresses the quantity and location of firefighting equipment in underground coal mines.  This rule requires two portable fire extinguishers at each temporary and permanent electrical installation.  The requirement of rock dust at temporary electrical installations was removed.  This final rule will be effective on October 15, 2008.

MSHA Seeks Comment on Advanced Notice of Proposed Rulemaking

The Federal Mine Safety and Health Review Commission is requesting comments for an Advanced Notice of Proposed Rulemaking (ANPRM) that will address their procedures for “processing requests for relief from default and reducing the number of cases in which parties seek relief before the commission after default.”  These comments must be submitted by November 3, 2008.  The proposed rule is necessary due to the great number of operators requesting relief from a penalty due to their failure to timely contest the proposed assessment.  The commission must consider all such requests and now seeks to reduce the number of them.

The ANPRM seeks comments in five areas:

[1] Whether the requirements for relief should be set forth in a rule or informal guidance document?

[2] When should a request for relief be filed?

[3] What standard should apply in considering the request?

[4] What documentation should be required in support of the request?; and

[5] Should requests for relief be considered by the commission or chief administrative law judge?

EPA’s Proposed Rule Would Regulate Geological Sequestration of CO^₂

The EPA has proposed a rule which would create a regulatory structure for geological sequestration of carbon dioxide using its authority under the Safe Drinking Water Act (“SDWA”).  The SDWA requires that the EPA regulate “underground injection which endangers drinking water sources.  By using this authority, the EPA can regulate the geologic sequestration of CO₂ through its existing Underground Injection Control (“UIC”) program.  Through this program, the EPA would be able to help ensure that CO₂ injected hundreds of meters below the ground does not escape to groundwater sources or the atmosphere.

Under the proposed rule, injection of CO₂ for oil and gas recovery would continue under Class II regulations.  Injection for new sequestration wells would fall under new Class VI regulations, which would govern nearly all stages of geological sequestration well development, including site determination, construction, operation, monitoring, testing, and closure.  Those sequestration wells that currently exist could be grandfathered under the old regulations which govern CO₂ injection for existing well classes.  Currently experimental sequestration wells are subject to Class V regulations.  The proposed rule also addresses certain requirements relating to financial responsibility, mechanical integrity, corrosion-resistance, and injection pressure in addition to a host of other issues concerning well design, development and maintenance.  The proposed regulations generally strive to help minimize the risks associated with the geological sequestration of CO₂ .  Comments must be received on or before November 24, 2008.

Opportunities in Wind Energy on the Outer Continental Shelf

The Minerals Management Service (MMS) has published a proposed rule that will establish a leasing and grants program for environmentally responsible wind energy projects on the Outer Continental Shelf (OCS).  Wind over the OCS blows stronger than wind slowed by forests, hills, and buildings on land and is an increasingly viable source of alternative energy.  Commercial leases, rights-of-use easements (RUE), and rights-of-way (ROW) will be available for the production, transportation, and transmission of energy from sources other than oil and gas.  Activities related to this rule will be regulated by MMS.

Agreement Between Xcel Energy and New York Attorney General to Disclose Climate Change-Related Risks

Xcel Energy and Andrew Cuomo, the Attorney General of New York, reached a binding and enforceable settlement agreement last month that requires Xcel to furnish detailed disclosure of climate change related risks in its 10-K filings to the Securities and Exchange Commission (SEC) which provides financial performance information to investors.  The agreement resulted from an investigation by the Attorney General’s Office in connection with the alleged failure by several publicly traded utility companies to properly disclose climate risk in the companies’ public filings.  Xcel was one of five companies subpoenaed by New York in September 2007 to address their compliance with SEC risk disclosure obligations. 

Cuomo stated, “this landmark agreement sets a new industry-wide precedent that will force companies to disclose the true financial risks that climate change poses to their investors.”  Xcel agreed that the climate risk disclosures would include an analysis of the financial risks related to the present and probable future of climate change regulation and legislation, climate change-related litigation, and physical impacts of climate change.  Xcel has also agreed to disclose current carbon/greenhouse gas emissions; projected increases in carbon emissions from planned coal-fired power plants; company strategies for reducing, offsetting, limiting or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions; and corporate governance actions related to climate change, including whether environmental performance is incorporated into officer compensation.

The settlement appears to be one of the first where a private company has agreed to undertake a binding, enforceable obligation to disclose detailed climate change-related risk information as part of its 10-K filing process.