Back to the Future!!

The scope of regulatory jurisdiction over navigable waters and wetlands has again come into question under the Biden Administration. Over the course of four administrations, this jurisdiction has been explained, expanded, enjoined, restricted, and remanded to the point where the public has little confidence in continuity over time. Now, to determine jurisdiction over waters and wetlands, we go back to prior guidance while the future of regulatory jurisdiction is determined through yet another rulemaking.

Continue reading “Back to the Future!!”

Energy Consumption Data During the Pandemic Year Reveals China’s Growth

2020 is a year that most people would likely soon forget, both in terms of personal impacts and the overall economic downturn caused by the pandemic. While it hopefully will prove to be an anomaly, economic and energy usage data and statistics from 2020 still provide some useful insights and glimpses of future issues. BP recently released its annual Statistical Review of World Energy, covering through the end of 2020.

Although declines in use were noted for coal and natural gas, oil had the sharpest decline in global consumption: 9.1 million barrels per day, or 9.3 per cent. The decline is the largest ever seen and accounts for about three-quarters of the total decline in energy consumption. Oil demand fell the most in the US (2.3 million barrels per day), followed by the decline in the European Union of 1.5 million barrels per day. China saw an increase in oil consumption of 220,000 barrels per day.

Continue reading “Energy Consumption Data During the Pandemic Year Reveals China’s Growth”

How to Ruin a Perfectly Good Oil and Gas Boom

Over the last several years, oil and gas production has risen steadily, setting production records year after year. These increases were driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing.

According to the U.S. Energy Information Agency, the United States exported more petroleum than it imported in 2020, making the United States a net annual petroleum exporter for the first time since at least 1949. It also produced more petroleum than it consumed. Crude oil imports, though, were higher than exports. However, some of the imported crude oil is refined into petroleum products, such as gasoline, heating oil, diesel fuel, and jet fuel, and then exported. As to natural gas, total annual exports generally increased each year from 2000 through 2019 as increases in natural gas production contributed to lower natural gas prices and the competitiveness of natural gas in international markets. In 2019, the United States exported natural gas to about 38 countries and total annual natural gas exports were 4.66 trillion cubic feet, the highest on record, and the United States was a net exporter of natural gas for the third year in a row.

Against this backdrop of robust oil and gas production, the Biden Administration was installed on January 20, 2021. President Biden wasted no time reigniting the war on fossil fuels. Among other things, he rejoined the Paris Agreement on the day he was inaugurated, mandated the use of the “social cost of carbon” when monetizing greenhouse gas impacts, and paused new oil and gas leases on federal lands and in offshore waters.

Under the 2015 Paris Agreement, President Obama pledged that the United States’ nationally determined contribution to greenhouse gas emission (GHG) reduction was 26% to 28% below 2005 levels by 2025. President Biden has now announced that the United States will achieve a 50 – 52% reduction from 2005 levels by 2030 and achieve net zero emissions by 2050. In the Fact Sheet released with the announcement, he also announced a goal to reach “100 percent carbon pollution-free electricity by 2035.”

According to the EPA’s GHG Inventory, Table E-2, total GHG were 7,423 million metric tons of carbon dioxide equivalent (MMT) in 2005. Over the 14 years from 2005 through 2019, total GHG emissions dropped to 6,558.3 MMT, a drop of 864.7 MMT and 11.6%. GHG emissions dropped in 2020 due COVID-related economic restrictions but are expected to rise with renewed economic activity.

However, President Biden’s goals place even greater transformative pressure on the economy and creates a great deal of uncertainty as to how his goals will be achieved in the designated time frames. To achieve the goal of reducing total GHG by 50% from 2005 levels (half of 7,423 MMT is 3,711.5 MMT), an additional 2,846.8 MMT will have to be reduced over the next nine years based on the 2019 level of 6,558.3 MMT. Assuming that the entire electrical generation infrastructure can be changed by 2030 or 2035, a realization of the goal of “100 percent carbon pollution-free electricity by 2035” will not achieve the overall 50% goal, as 2019 emissions from fossil fuel combustion for electric power were only 1,606 MMT. Clearly, reductions from many other sectors of the economy will have to be realized.

The social cost of carbon (SSC) is an estimate of the monetized “damages” associated with incremental increases in greenhouse gas emissions. Its use and value were scaled back under President Trump. However, President Biden issued an executive order requiring its use “when monetizing the value of changes in [GHG] emissions resulting from regulations and other relevant agency action.” An interim SSC was released in February 2021 setting the SSC at $51 per metric ton (at a three percent discount rate) with increases to $85 per metric ton by 2050. Thus, there is a “cost” of $51 for every metric ton of CO2 emitted in 2020. Stated another way, preventing the emission of a ton of CO2 yields $51 in societal value or benefit.

The use of an inflated SSC tends to skew a cost-benefit analysis. The addition of costs associated with the emission of carbon will likely always generate a conclusion that the societal benefits of a proposed rule outweigh its costs. Further, the use of the SSC for “other relevant agency action” means that the SSC will be applied beyond rule-making to a variety of new agency actions. Based on this broad language, Interior may factor in the SSC in its decision to resume oil and gas activities on federal lands.

President Biden also issued an executive order requiring that the Secretary of the Department of Interior “pause new oil and gas leases on public lands or in offshore waters.” The “pause” will be in place pending a “comprehensive review” of “potential climate and other impacts of oil and gas activities on public lands and in offshore waters.”

This is not the first time Interior has been engaged in hindering oil and gas activity. In fiscal year 2007, 7,124 drilling permits were approved on federal lands, but by FY 2016 that number had dwindled to 2,184. There was a bit of a rebound by FY 2020 as 4,226 permits were issued. Further, the new Secretary of the Interior, Deb Haaland, has revoked twelve Trump era orders that were focused on promoting oil and gas development on federal lands and in offshore waters because the orders were “found to be inconsistent with, or present obstacles to,” the policies announced by President Biden.

The Department’s web-site states that the “worsening impacts of climate change pose an imminent threat to our daily lives, critical wildlife habitats and future generations” and the “time for bold action is now.” It is likely that the Interior, as part of its “comprehensive review,” will factor in the SSC in its decision to resume oil and gas activities on federal lands.

Interestingly, in order to achieve a “100 percent carbon pollution-free electricity by 2035” and net zero emissions by 2050, a vast number of solar and wind farms will have to be built in a short period of time. Some estimate that an area the size of South Dakota will be required to achieve the 2035 goal and an area the size of five South Dakotas is necessary to achieve the 2050 goal. It is likely that the same federal lands that now support oil and gas development will be utilized to house the large number of wind turbines and solar panels necessary to produce the necessary electricity.

The production and combustion of fossil fuels, including clean burning natural gas, will face obstacles that will curtail growth and likely diminish the levels of current production in order to reach the new GHG emission reduction goals. In announcing the new reduction targets, President Biden did not address the disruption to the oil and gas industry or the economy as a whole which will be associated with such a dramatic decrease in reliance on fossil fuels over such a short time period.

Louisiana Board of Tax Appeals Rules That Chemicals Qualify for Pollution Control Sales Tax Exclusion

The Louisiana Board of Tax Appeals issued an important ruling relating to pollution control devices or systems. For at least two decades, the relevant agencies did not consider chemicals to meet the definition of a pollution control device or system and thus chemicals did not qualify for the applicable exclusion from sales tax. However, the decision, issued on April 14, 2021, found that chemicals used for pollution control, which otherwise meet the terms of the exclusion, could qualify and provide a refund for sales taxes paid.

For sales tax purposes, the term “sale at retail” does not include the sale of a “pollution control device or system.” The statutory definition is “any tangible personal property approved by the Department of Revenue and the Department of Environmental Quality and sold or leased and used or intended for the purpose of eliminating, preventing, treating, or reducing the volume or toxicity or potential hazards of industrial pollution of air, water, groundwater, noise, solid waste, or hazardous waste in the state of Louisiana.” La. R.S. 47:301(10)(l). The regulatory definition is similar but with a relevant difference: “any one or more pieces of tangible personal property which is intended and installed.” LAC 61:I.4302, emphasis supplied.

Monsanto Company operates a facility in Luling, Louisiana (the Luling Facility). Like many industrial facilities in Louisiana, Monsanto utilizes sodium hydroxide, or caustic, to neutralize and control the pH of acidic waste streams. Monsanto uses caustic in its air scrubbers, which are pollution control devices designed to neutralize acid gases. In fact, Monsanto’s air permit mandates that caustic be used in this manner. Monsanto also uses caustic to control the pH of its wastewater prior to discharge and deepwell injection. Again, Monsanto’s discharge and injection permits mandate that the pH be maintained above or within specific levels prior to discharge or injection.

The caustic is received at the Luling Facility in liquid form and placed it into storage tanks. From this central location, the caustic is hard piped to the various scrubbers, tanks, and other equipment. Sensors in each unit determine the pH of the materials and caustic is automatically pumped to the unit to adjust the pH when and as needed.

During an internal tax review, it was determined that Monsanto had paid over $3.9 million in sales taxes on its caustic purchases between 2012 and 2014. Monsanto applied for a sales tax refund. However, when the Louisiana Department of Environmental Quality (LDEQ) received Monsanto’s application for review, it stated that it “does not consider chemicals as parts of pollution control systems … because they do not constitute ‘tangible personal property … installed.’” Based on this, the Department of Revenue (Revenue) denied the sale tax refund and Monsanto appealed to the Board of Tax Appeal (BTA).

In its Order with Written Reasons, the BTA found that Monsanto “is entitled to the claimed refund.” The BTA, noting that it must construe exclusions in favor of the taxpayer and that it does not give deference to LDEQ’s interpretation of the law, disagreed with LDEQ’s “interpretation of the law related to the meaning of ‘installed.’” The term ‘installed’ is not defined in the statute, regulation, or any guidance from LDEQ or Revenue. Finding that the ordinary meaning of the word ‘installed’ is “to set up for use or service,” the BTA found that Monsanto installs the caustic as it sets it up in the storage tanks, uses caustic to neutralize acidic waste, and does so for use in its pollution control scheme. Therefore, Monsanto’s use of the caustic is “within a common and approved definition of ‘install.’”

Taxpayers still have a narrow window in which to seek refunds even though the exclusion was partially suspended from July 1, 2016 through June 2018 and fully suspended between July 2018 until 2025. Taxpayers that have paid sales taxes on chemicals, such as caustic, and which otherwise meet the terms of the exclusion have two opportunities to claim a refund: taxpayers may be entitled to a refund for periods from December 2017 through June 30, 2018 if claimed before December 31, 2021 and taxpayers currently under state audit may be able to claim additional periods prior to December 1, 2017 if the audit is still open.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part V: Considerations in Site Selection

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part V: Considerations in Site Selection

An applicant for an environmental permit faces any number of hurdles in gaining approval to construct and operate a facility or even expand an existing facility. Environmental justice concerns add a layer of complexity and uncertainty to capital investment decisions. It is almost certain that environmental justice claims will be made during the permitting process for major facilities. While each situation is different and the level of effort should be based on the facts and needs in each case, consideration can be given to taking certain steps before and during that process to reduce the likelihood of success of any such claims.

It is important to note that there is little to no fact-checking during the public comment process, meaning that opponents to a facility can make any number of unsupported claims. Many environmental justice advocates seem to believe that any facility located near or in the vicinity of a disadvantaged community is, on its own and regardless of the facts, a basis to make a claim regarding environmental justice. In other words, the mere location of the facility creates an environmental injustice. Additionally, claims of environmental injustice can be made tactically to galvanize opposition to the facility, again without regard to facts or based on the flimsiest of evidentiary bases. Notwithstanding the rhetoric, there are legal standards and factual thresholds, based on Title VI and the case law interpreting it and EPA’s own regulations and policies, that must be met to prove an environmental justice claim.

It is also important to remember that administrative or judicial review of environmental permits is usually confined to an administrative record. It is critically important that information developed to counter environmental justice claims be placed into the administrative record during the application and public comment process. Without supporting information in the record, the agency and permittee will not be able to rely on and reference the information in a decision document, the permit decision will lack valuable supporting evidence, and a reviewing tribunal or court will lack a basis to uphold the permit decision.

The obvious, but perhaps unrealistic, step to limit or eliminate environmental justice claims is to locate a facility in an area where no one lives in proximity to the proposed facility. These may be located in rural areas or within much larger tracts used or set aside for industrial purposes (sometimes called ‘mega-sites’). If such tracts are available, they should be given serious consideration. However, rural tracts may not meet the needs of the proposed facility, such as access to transportation infrastructure for raw materials or products, and even the larger tracts set aside for industrial purposes may have residents in some degree of proximity.

As a result, it is more likely than not that available industrial sites will be located in areas where some population resides in some degree of proximity. Determining if those sites are suitable for selection, from an environmental, economic, and environmental justice perspective, requires a searching inquiry that should begin prior to making any purchase commitments.

Site selection can be based on a number of considerations. Economic considerations, such as price, property size, local zoning or land use ordinances, proximity and access to transportation (pipelines, rail, truck, barge, or ship), and access to electrical infrastructure, are standard. Many companies make decisions based solely on these considerations.

However, environmental considerations are also important. For example, in Louisiana, an applicant and the environmental agency must give due consideration to environmental aspects of the project and an applicant cannot simply rely on business or economic considerations. See e.g., In re: Supplemental Fuels, Inc., 94-1596 (La. App. 1 Cir. 5/9/95), 656 So.2d 29, 39. Environmental considerations could include the attainment status of the area, the amount of wetlands on or adjacent to the property, the property’s location in a floodplain, the water quality standards for the waters receiving permitted discharges from the facility, the level of emissions, and the proximity of residents to the proposed facility.

Environmental justice has added a new level of complexity and considerations to site selection, especially as to the effect the environmental aspects of the facility have on any community in proximity of the proposed facility. In general terms, the demographics of the population in proximity to the proposed site can be obtained and the effects of “pollution” (such as generated waste, wastewater discharges, and air emissions) from the facility on that population can be analyzed.

In this regard, due regard should be given to the site selection team and its organization. Team members representing real estate, economics, and environmental professionals should be included, but, should the circumstances warrant it, consideration should be given to including counsel, along with a modeler, statistician, and toxicologist. The modeler, statistician, and toxicologist should be hired by counsel as consulting experts and should report only to counsel. This will assist in preserving the confidentiality of any communications from the modeler, statistician, and toxicologist regarding the effects of “pollution” on the community.

The demographics of the community in proximity, down to zip codes and census blocks, can be obtained from the US Census and other sources. Further, there may be reliable information available regarding actual impacts in a given area. For example, the Louisiana Tumor Registry compiles actual cancer incidences and mortality data for specific cancers at the census block level.

Once available data is gathered, the modeler, toxicologist, and statistician can evaluate potential impacts on a neighboring community. In these efforts, counsel and these team members should be guided by the legal and policy framework set out in the Draft Revised Investigative Guidance and Toolkit or any other guidance issued by the Biden Administration. In other words, their efforts and analysis should be shaped and guided by the “disparate impact” framework set forth in those documents.

The modeler can use air emission models to predict or identify off-site locations, or receptors, where air emissions are predicted to be located. For example, receptors can be located within the model at locations in and around the community to predict the level of emissions at that location or receptor based on the maximum levels of emissions estimated from the proposed facility. The toxicologist can utilize the predicted information from the model to determine the potential impacts on that population and the statistician can determine if that potential level of impact is statistically significant.

During the permit and public comment process, opponents are likely to insert their own information into the record to attempt to support their claims. Information such as the demographics of an area, the results of screening model runs, such as EPA’s Risk-Screening Environmental Indicators (RSEI) model, and data obtained from EPA’s EJ Screen have all been used. However, the RSEI model and EJ Screen have important caveats as to their use. For example, EPA notes that EJ Screen was developed merely to “highlight places that may be candidates for further review.” There is “uncertainty in the data” and that EJ Screen is “a screening tool and “not a detailed risk analysis.” See www.epa.gov/ejscreen/limitations-and-caveats-using-ejscreen. The applicant and its team should address and refute any comments and submissions utilizing this type of basic screening-level information.

The end result of the process should be a report that can be placed into the record for each potential site to support the decision to choose a particular site. If the analysis indicates that a particular site will not have a disparate impact, based on EPA’s own analytical framework, the site can be evaluated based on economic or environmental considerations. If the analysis indicates that a particular site will have or may have a disparate impact, that site can be ruled out, additional analysis performed to further define the extent of any impact, or perhaps there may be facts supporting a claim of substantial legitimate justification. In this way, the decision to choose a specific site has a viable and supported administrative record that should survive administrative or judicial review and should serve to counter or negate opposition and/or unsupported rhetoric in the record.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part IV: EPA Guidance – The Toolkit

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part IV: EPA Guidance – The Toolkit

On January 18, 2017, EPA issued a “Dear Colleague” letter to introduce Chapter 1 of its Compliance Toolkit and clarify existing law and policy to promote and support compliance with federal civil rights laws. After a reminder that all recipients of EPA financial assistance have an affirmative obligation to comply with federal civil rights obligations and that EPA has a duty to ensure compliance, EPA suggests that enforcement of civil rights laws and environmental laws can be achieved in a manner consistent with sustainable economic development and which ensures the protection of human health and the environment.

Generally, the Toolkit attempts to explain what constitutes intentional discrimination and disparate impact and the proof necessary to establish such claims based on the case law cited therein. Unlike the 2000 Draft Revised Investigative Guidance, which detailed EPA’s investigation and decision-making process and procedures, the Toolkit is primarily a summary of legal standards which EPA will use in investigating and resolving complaints.

EPA defines intentional discrimination (or different treatment) as occurring when a recipient intentionally treats individuals differently or otherwise knowingly causes them harm because of their race, color, national origin, disability, age or sex. Intentional discrimination requires a showing that a challenged action was motivated by an intent to discriminate but does not require showing bad faith, ill will, or evil motive.

To determine if such discrimination exists, EPA will evaluate the “totality of the relevant facts” including direct, circumstantial, and statistical evidence to determine whether intentional discrimination has occurred, citing Washington v. Davis, 426 U.S. 229, 242 (1976). EPA acknowledges that direct proof is often unavailable and, as a result, EPA will consider such evidence as statements by decision makers, the historical background of the events in issue, the sequence of events leading to the decision in issue, a departure from standard procedure (e.g., failure to consider factors normally considered), legislative or administrative history (e.g., minutes of meetings), the foreseeability of the consequences of the action, and a history of discriminatory or segregated conduct, citing Village of Arlington Heights v. Metropolitan Housing Redevelopment Corp., 429 U.S. 252, 266-68 (1977).

EPA also stated that intentional discrimination can be based on a showing of disparate impact coupled other evidence of motive, such as the evidence noted above. EPA relied on Elston v. Talladega County Board of Education, 997 F.2d 1394, 1406 (11th Cir. 1993), which stated: “Discriminatory intent may be established by evidence of such factors as substantial disparate impact, a history of discriminatory official actions, procedural and substantive departures from the norms generally followed by the decision-maker, and discriminatory statements in the legislative or administrative history of the decision.” Thus, disparate impact is “not irrelevant” and can be used with other pertinent facts to prove intentional discrimination. Arlington Heights, 429 U.S. at p. 265.

EPA also suggested that it may analyze claims of intentional discrimination using the “burden shifting analytic framework” utilized in Title VII cases and explained in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under that framework, the complainant must carry the initial burden of establishing a prima facie case of racial discrimination, which EPA stated may be done by showing that: the complainant is a member of a protected class; the complainant was eligible for the recipient’s program, activity or service; the complainant was excluded from that program, activity or service or was otherwise treated in an adverse manner; and an individual who was similarly situated with respect to qualifications, but was not in the complainant’s protected group, was given better treatment. If shown, the burden then shifts to the recipient to establish a legitimate, non-discriminatory reason for the challenged policy or decision and the different treatment.

EPA defines disparate impact (or discriminatory effect) as occurring when a recipient uses a facially neutral procedure or practice that has a significantly adverse (harmful) and disproportionate effect based on race, color, or national origin. In a disparate impact case, the focus is on the consequences of the recipient’s policies or decisions, including the failure to take action, rather than the recipient’s intent.

EPA provides only cursory discussion of a disparate impact analysis, saying that EPA must establish a prima facie case by identifying the specific policy or practice at issue; establishing adversity or harm; establishing disparity; and establishing causation.

Adversity exists when “a fact specific inquiry determines that the nature, size, or likelihood of the impact is sufficient to make it an actionable harm.” The Toolkit does not define what harms many be actionable. To analyze disparity, EPA analyzes whether a disproportionate share of the adversity/harm is borne by individuals based on their race, color, or national origin. A general measure of disparity compares the proportion of persons in the protected class who are adversely affected by the challenged policy or decision and the proportion of persons not in the protected class who are adversely affected. When demonstrating disparity using statistics, the disparity must be statistically significant.

If the prima facie case is established, EPA must then determine whether the recipient can articulate a “substantial legitimate justification” for the challenged policy or practice and determine whether there are any comparably effective alternative practices that would result in less adverse impact (that is, are there less discriminatory alternatives?).

The Toolkit also makes two important points. First, it makes clear that compliance with a NAAQS “would be insufficient … to find that no adverse impacts are occurring for purposes of Title VI.” Thus, the rebuttable presumption established by Select Steel and the 2000 Draft Revised Investigative Guidance was eliminated. Second, complainants do not bear the burden of proving adversity. EPA assumes the responsibility for conducting an investigation of the allegations to determine if there is an adverse impact.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

EPA defines environmental justice as the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. The goal of environmental justice will be achieved when everyone enjoys the same degree of protection from environmental and health hazards, and equal access to the decision-making process to have a healthy environment in which to live, learn, and work. See www.epa.gov/environmentaljustice. To determine whether the goal has been achieved in individual situations, EPA has issued various guidance documents over the years which govern EPA’s investigation of environmental justice complaints.

EPA issued Interim Guidance in February 1998 which provided an internal framework for EPA’s processing of complaints alleging discrimination in environmental permitting. After a series of public meetings and evaluation of public comments on the Interim Guidance, EPA issued the Draft Revised Guidance for Investigating Title VI Administrative Complaints Challenging Permits (the Draft Revised Investigative Guidance). 65 Fed. Reg. 39650 (June 27, 2000). [1]

The Draft Revised Investigative Guidance was developed to address the application of Title VI to alleged adverse disparate impacts caused by environmental permitting. It does not address other applications of Title VI in the environmental context, such as unequal enforcement or public participation. It also does not address discriminatory intent.

The Draft Revised Investigative Guidance provides detailed information regarding EPA’s process and procedures for investigating Title VI complaints related to permitting, including acceptance and rejection of complaints, investigation procedures, informal resolution, and providing ‘due weight’ to a recipient’s submittals in an investigation. Importantly, though, the Draft Revised Investigative Guidance provides EPA’s adverse disparate impact analytical framework and the recipient’s justification of any adverse disparate impact.

EPA’s framework for an adverse disparate impact analysis consists of six steps:

  1. Assess Applicability (determine the type of permit action at issue);
  2. Define Scope of Investigation (determine the source or sources of an alleged impact and which of the sources should be included in an analysis);
  3. Conduct Impact Assessment (determine if the activities of the permitted entity, either alone or in combination with other relevant sources, are likely to result in an impact);
  4. Make Adverse Impact Decision (determine whether the estimated risk or measure of impact is significantly adverse);
  5. Characterize Populations and Conduct Comparisons (determine whether a disparity exists between the affected population and an appropriate comparison population); and
  6. Make Adverse Disparate Impact Decision (determine whether the disparity is significant).

The evaluation in most of the steps could result in the termination of the investigation. For example, EPA could determine in Step 1 that the permit action decreases emissions, in which case EPA would likely close the investigation. Additionally, EPA could determine in Step 4 that any impact is not adverse and if so, “the allegation will not form the basis of a finding of non-compliance.” 65 Fed. Reg. 39676 (June 27, 2000).

In the Step 3 impact assessment, EPA assesses whether the alleged discriminatory act may cause or is associated with one or more impacts. EPA will review whether the entity emits or releases pollutants or substances (called stressors by EPA) that could be the source of the alleged impacts and whether there is a plausible exposure route. For example, the entity could release fine particulate matter into the air and the alleged impact is respiratory ailments or asthma. In this step, EPA reviews, among other things, any direct links to potential impacts, the risks associated with compounds, and concentration levels.

Assuming there is an impact, EPA will determine in Step 4 whether an estimated risk or measure of impact is significantly adverse. EPA would evaluate the risk or measure of impact compared to benchmarks for significance provided under any relevant environmental statute, EPA regulation, or EPA policy and if the risks or other measure of potential impact meet or exceed a relevant significance level, the impact generally would be recognized as adverse under Title VI.

EPA provided an example of potential outcomes of this Step 4 evaluation using a range of risk values. EPA would expect that cumulative cancer risks of less than 1 in 1 million (10-6) would be very unlikely to support a finding of adverse impact while cumulative cancer risks above 1 in 10,000 (10-4) would likely support a finding of adverse impact. EPA may make an adverse impact finding when the risks fall in between those ranges.

EPA also provided guidance on the role of the National Ambient Air Quality Standards (NAAQS) in a finding of adverse impact. NAAQS are set at levels that are protective of human health and the environment with an adequate margin of safety. As such, air quality that adheres to such standards “is presumptively protective of public health in the general population” and “emissions of that pollutant should not be viewed as ‘adverse’ within the meaning of Title VI.” 65 Fed. Reg. 39680 (June 27, 2000). However, this presumption may be overcome, or rebutted, “if the investigation produces evidence that significant adverse impacts may occur.” Id.

This “rebuttable presumption” originated in an EPA decision in 1998 on a Title VI complaint regarding Select Steel Corporation. However, in 2013, EPA stated that it would “eliminate application of the rebuttable presumption when investigating allegations about environmental health-based thresholds.” 78 Fed. Reg. 24740 (April 26, 2013). Although compliance with a health-based threshold “is a serious consideration in an evaluation of whether adverse disparate impact exists” and “strongly suggests that the remaining risks are low and at an acceptable level,” applying the presumption “may not give sufficient consideration to other factors that could also adversely impact human health.” 78 Fed. Reg. 24740-24741 (April 26, 2013). EPA did eliminate application of the rebuttable presumption on January 18, 2017 when it issued its Compliance Toolkit (discussed in Part IV).

EPA would then, in Step 5, determine whether a disparity exists between the affected population and an appropriate comparison population. The affected population is one which suffers the adverse impacts of the stressors from assessed sources. The comparison population would be drawn from those who live within a reference area and may include the general population or the non-affected population for the reference area.

Disparity will be assessed using comparisons both of the different prevalence of race, color, or national origin of the two populations and comparisons of the level of risk of adverse impacts experienced by each population. There is no one formula or analysis to be applied and EPA will “use appropriate comparisons to assess disparate impact depending on the facts and circumstances of the complaint.” 65 Fed. Reg. 39681 (June 27, 2000). EPA could compare the demographic characteristics of most likely affected to the least likely affected or the average risk or measure of

adverse impact by demographic group within the general population or within an affected population.

EPA will then determine in Step 6 whether the disparity is significant. EPA will review the comparisons in Step 5 to determine if the results are consistent across the various comparisons made. Further, EPA announced that disparity “would normally be statistically evaluated to determine whether the differences achieved statistical significance to at least 2 to 3 standard deviations.” 65 Fed. Reg. 39682 (June 27, 2000). EPA will also consider uncertainties, such as the accuracy of predicted risk levels. Regardless, EPA made clear that the significance of a given level of disparity may vary depending upon the facts and circumstances of the complaint.

Based on the above analysis, EPA may make a finding that an impact is both adverse and borne disproportionately by a group of persons. That, however, does not end the inquiry. The recipient may be able to show that the impact is justified. To do so, the recipient must show “that the challenged activity is reasonably necessary to meet a goal that is legitimate, important, and integral to the recipient’s institutional mission.” 65 Fed. Reg. 39683 (June 27, 2000). Such a showing could include such interests as economic development “if the benefits are delivered directly to the affected population and if the broader interest is legitimate, important, and integral to the recipient’s mission.” Id.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part I: The Statute

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part I: The Statute

The Civil Rights Act of 1964 contains multiple titles designed to address discrimination based on race, color, and national origin. Title VI, codified at 42 U.S.C. §2000d, et seq., has been invoked to support claims of discrimination in environmental permitting. Generally, Title VI prohibits discrimination in programs and activities receiving federal financial assistance and contains two main provisions: Section 601 and Section 602.

Section 601 simply states: “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 42 U.S.C. §2000d.

The United States Supreme Court has reviewed Section 601 over the years and has made two important points. First, it is “beyond dispute that private individuals may sue to enforce §601.” Alexander v. Sandoval, 532 U.S. 275, 280, 121 S.Ct. 1511, 1516, 149 L.Ed.2d 517 (2001). Second,

Section 601 “prohibits only intentional discrimination.” Sandoval, 532 U.S. at p. 280. Indeed, “Title VI itself directly reach[es] only instances of intentional discrimination.” Sandoval, 532 U.S. at p. 281, citing Alexander v Choate, 469 U.S. 287 (1985).

Establishing discriminatory intent or purpose “demands a sensitive inquiry into such circumstantial and direct evidence of intent as may be available.” Village of Arlington Heights v. Metropolitan Housing Development Corporation, 429 U.S. 252, 266 (1977). Disproportionate impact is “not irrelevant, but it is not the sole touchstone of an invidious racial discrimination.” Arlington Heights, 429 U.S. at p. 265, citing Washington v. Davis, 426 U.S. 229 (1976). Importantly, “impact alone is not determinative, and the Court must look to other evidence.” Arlington Heights, 429 U.S. at p. 266. Other factors or evidence can include: the historical background of the decision, the specific sequence of events leading up to the decision, departures from the normal procedural sequence, departures from the normal substantive standards, and the legislative or administrative history of the decision. Arlington Heights, 429 U.S. at pp. 267 – 268.

Section 602 states that each Federal department and agency which extends Federal financial assistance to any program or activity “is authorized and directed to effectuate the provisions of section 2000d of this title with respect to such program or activity by issuing rules, regulations, or orders of general applicability.” 42 U.S.C. §2000d-1. However, the Supreme Court has found a very important limitation. In Sandoval, the Supreme Court held: “Neither as originally enacted nor as later amended does Title VI display an intent to create a freestanding private right of action to enforce regulations promulgated under §602.” Sandoval, 532 U.S. at p. 293. Thus, unlike Section 601, a private litigant does not have the right of a private right of action to enforce regulations promulgated pursuant to Section 602.

Although Congress provided the authority to issue regulations, it also identified the method of enforcement of “any requirement adopted pursuant to this section.” 42 U.S.C. §2000d-1. Initially, no action may be taken until the Federal department or agency providing the assistance “has advised the appropriate person or persons of the failure to comply with the requirement and has determined that compliance cannot be secured by voluntary means.” Then, there must be “an express finding on the record, after opportunity for hearing, of a failure to comply with such requirement.” Only then may the Federal department or agency providing the assistance terminate, refuse to grant, or refuse to continue assistance under such program or activity. There is a catch-all allowing compliance to be affected by “any other means authorized by law.” 42 U.S.C. §2000d-1.

Section 606 defines “program or activity” as, among other things, “all of the operations of … a department, agency, special purpose district, or other instrumentality of a State or of a local government … any part of which is extended Federal financial assistance.” 42 U.S.C. §2000d-4a. Under this provision, the operations of a state environmental protection agency would be included within the definition of “program or activity.” Further, the operations of the whole agency are a “program or activity” if “any part” of the agency “is extended Federal financial assistance.”

Finally, Title VI was amended in 1986 to remove claims of sovereign immunity by a State. A State “shall not be immune … from suit in Federal court for a violation of … title VI of the Civil Rights Act of 1964.” 42 U.S.C. §2000d-7. In other words, a State can be sued in federal court under Title VI. Remedies available for a violation by a State are available to the same extent as a claim against any public or private entity other than a State.

The End of Regulation by Guidance Document?

EPA has issued a final rule governing its issuance of guidance documents, declaring that the Rule will lead to enhanced transparency and help ensure that guidance documents are not improperly treated as legally binding requirements by the EPA or by the regulated community. In many instances over the years, guidance documents were issued without public input, even though the policy or interpretation in the guidance document created binding requirements applicable to the regulated community. This Rule ends that practice.

On October 9, 2019, President Trump issued an executive order, “Promoting the Rule of Law Through Improved Agency Guidance Documents.” It declared that agencies sometimes used guidance documents “to regulate the public without following the rulemaking [that is notice and comment] procedures of the” Administrative Procedure Act. It directed that agencies must treat guidance documents as non-binding both in law and in practice, take public input into account in formulating guidance documents, and make guidance documents readily available to the public.

According to EPA, the Rule meets these requirements, and more. The Rule provides definitions of “guidance document” and “significant guidance document,” minimum requirements for a “guidance document” and additional requirements for “significant guidance documents,” procedures for the public to petition the Agency for modification or withdrawal of guidance documents, and an online portal (the EPA Guidance Portal) to identify EPA guidance documents for the public.

A “guidance document” is a statement of general applicability, intended to have future effect on the behavior of regulated parties, that sets forth a policy on a statutory, regulatory, or technical issue, or an interpretation of a statute or regulation. There are a few exclusions form this broad definition, such as rules subject to notice and comment and rules of agency procedure and practice or internal guidance not intended to have substantial future effect on the behavior of regulated parties. Generally, a “significant guidance document” is one that may reasonably be anticipated to lead to an annual effect on the economy of $100 million or more.

All guidance documents must, among other things, include the term “guidance,” include the citation to the statute or regulation to which the guidance document applies or which it interprets, and avoid mandatory language such as ‘shall’ or ‘must.’ Further, it must include a disclaimer that the contents do not have the force and effect of law and that it does not bind the public in any way. Importantly, any guidance document issued by an EPA Regional Office must receive concurrence from an appointed EPA official at EPA headquarters. A significant guidance document must adhere to these requirements, plus it must be subject to notice and comment before finalization.

EPA also included a provision allowing any member of the public to petition EPA for the modification, withdrawal, or reinstatement of a guidance document. EPA will make information about petitions received available to the public and indicated that it should respond to a petition in no more than 90 calendar days after receiving the petition.

Finally, the Rule requires that all guidance documents be included in the EPA Guidance Portal. The Portal currently exists (www.EPA.gov/guidance) and contains the documents meeting the definition of a “guidance document.” The web-page contains the disclaimer that EPA’s guidance documents lack the force and effect of law agency and that it may not cite, use, or rely on any guidance that is not included in the Portal. The executive order and the Rule allow the issuance and use of guidance documents while providing public input and access and general procedures for issuance. Of greater significance and importance to the regulated community, there is some relief from the use of binding guidance documents issued without public knowledge or input.

EPA Announces Major Changes In Oil and Gas Regulations

With the election looming, EPA has finalized a three-year effort to revise, amend, or repeal the 2012 and 2016 new source performance standards regulating volatile organic compound and methane emissions from the oil and gas production, processing, and transmission and storage segments. EPA has issued two rules that make sweeping changes to these Obama-era regulations.
The 2012 rule established NSPS for VOC emissions from these three segments of the oil and natural gas industry. The 2016 rule established NSPS for the three segments for greenhouse gases in the form of limitations on methane. In the 2012 and 2016 rules, EPA interpreted the source category to also include the natural gas transmission and storage segment. Prior to that, it only had included the production and processing segments.
In the current rules, EPA takes aim at the expansion of regulation to the natural gas transmission and storage segment, the regulation of methane from all three segments, and numerous VOC requirements in the oil and gas production and processing segments. To accomplish this, EPA issued two rules. The Policy Rule addresses the regulation of the natural gas transmission and storage segment and the regulation of methane from all three segments. The Technical Rule addresses VOC requirements in the oil and gas production and processing segments.
The Policy Rule contains three main parts. First, it finalizes a proposed rule that the source category includes only the production and processing segments of the industry. EPA reviewed the original scope of the source category published in 1979 and found that it did not include this segment. Instead, the natural gas transmission and storage segment is its own source category. EPA explained that, under CAA Section 111, it can only list a source category for regulation by making a cause-or-contribute-significantly and endangerment finding, which EPA has never done. As a result, EPA rescinded the standards (VOC and methane) applicable to the transmission and storage segment of the industry.
Second, EPA rescinded the methane requirements of the NSPS applicable to sources in the production and processing segments. EPA concluded that the methane requirements are redundant with the existing NSPS for VOC and, thus, establish no additional health protections. EPA stated that rescinding the methane requirements while leaving the VOC emission requirements in place will not affect the amount of methane emission reductions.
Third, EPA included an interpretation of CAA Section 111 which requires thatEPA must make a finding that emissions of an air pollutant from the source category cause or contribute significantly to air pollution which may endanger public health or welfare prior to newly regulating any air pollutant that the EPA did not consider when initially regulating the source category. While seemingly innocuous, this interpretation would seemingly require a finding that methane would ‘cause or contribute’ prior to re-regulating methane from the transmission and storage segment, an unlikely finding under the current administration.
The Technical Rule is somewhat more straightforward and applies to existing requirements applicable in the oil and gas production and processing segments. In general, they address a range of technical and implementation issues in response to administrative petitions for reconsideration and other issues brought to EPA’s attention, including fugitive emissions requirements, provisions to apply for the use of an alternative means of emission limitation, pneumatic pump standards, storage vessel standard applicability determinations, and engineer certifications.
The Policy Rule is effective when published in the Federal Register and the Technical Rule is effective sixty days after publication. With the election pending, the provisions of the Congressional Review Act may play a role in the survival of the two rules. In general terms, the Act allows Congress to vote to disapprove of the regulation (thus preventing it from going into effect) within 60 days after Congress receives the rule.
Taken together, the two rules free the transmission and storage segment from NSPS regulation, establish a framework for regulating new source categories, and substantially revise existing regulations in the production and processing segments. However, it remains to be seen whether these rules will survive a change in administration.