On April 18, 2012, Winston & Strawn and the Environmental Law Institute co-hosted an informative seminar on, “Hydraulic Fracturing Risks and Opportunities: Regulator, NGO, Industry and Investor Perspectives,” in New York City. The meeting was expertly chaired by May Wall, a partner in the law firm’s Environmental Law Department in Washington, D.C. The panelists included Kate Sinding, an NRDC Senior Attorney and Deputy Director of NRDC’s New York Urban Program; John Imse, a principal at Environ in Denver, who advises clients in the oil and gas industry; Lawrence A. Wilkinson, an analyst with Standard & Poor’s Oil & Gas Team; and Carol P. Collier, the Executive Director of the Delaware River Basin Commission. All four speakers were knowledgeable, informative and articulate. Unfortunately, there is insufficient space here to summarize all of the speakers' discussion points.

The U.S. Supreme Court has rejected the federal government’s argument that compliance orders issued by the U.S. Environmental Protection Agency (“EPA”) under the Clean Water Act, 33 U.S.C. §§ 1251 et seq. (the “CWA”), cannot be challenged in court.  In a unanimous opinion issued on March 21, 2012, the Court held that such orders constitute “final agency action” that can be challenged under the Administrative Procedure Act, 5 U.S.C. § 706(2)(a) (the “APA”).  Sackett v. United States Environmental Protection Agency, 566 U.S. ___, No. 10-1062 (Mar. 12, 2012).  In so doing, the Court has weakened one of the favored arrows in the EPA’s enforcement quiver. 

The case arose when Chantell and Mike Sackett bought two-thirds of an acre near Priest Lake, Idaho, intending to build their home there.  The vacant lot is zoned residential and is located in a platted subdivision, with sewer and water hookups.  The lot is separated from the lake by several lots where homes have already been built.  Sackett, slip op. at 3.  The Sacketts applied for and obtained the necessary building permits from the local authorities.  They began preparing the lot to build their home by filling in part of it with dirt and rock.  Id.  Not long after they did so, the EPA hit them with a compliance order. 

As the Court explained, the EPA’s compliance order contained a number of “Findings and Conclusions,” including: that the Sacketts’ property contains “wetlands”; that the property’s wetlands are adjacent to Priest Lake, a “navigable water” under the CWA; and that, by filling in about half an acre of the “wetlands” on their property, the Sacketts had discharged pollutants into waters of the United States in violation of 33 U.S.C. § 1311(a).  Slip op. at 3-4.  The order required the Sacketts to return the property to its prior condition and to seek a wetlands permit – costs that, according to the Sacketts, would add up to tens of thousands of dollars, many times the $23,000 they paid for the property.  Failure to comply with the order could result in fines of up to $75,000 per day – $37,500 for the statutory violation and up to $37,500 for violating the compliance order.  Id. at 2.

The Sacketts tried to challenge the wetlands finding – both before the EPA and in federal court under the APA – but their challenges were rejected.  The district court in Idaho concluded that the CWA precludes judicial review of compliance orders before the EPA has started an enforcement action in federal court, and granted the EPA’s motion to dismiss.  Sackett v. EPA, No. 08-CV-185-N-EJL, 2008 WL 3286801 (D. Idaho Aug. 7, 2008).  The Ninth Circuit affirmed.  Sackett v. EPA, 622 F.3d 1139 (9th Cir. 2010).  In other words, under the lower courts’ decisions, the only way in which the Sacketts could obtain judicial review of the compliance order would be to violate the order, wait for the EPA to sue them, and then raise their arguments in the enforcement action brought by the EPA, while potentially accruing up to $75,000 per day in civil penalties.

In his opinion for a unanimous Court, Justice Scalia set out to explain to the reader “what all the fuss is about.”  After describing the Sacketts’ situation and history – what Justice Scalia referred to as the “strong-arming of regulated parties” by government regulators – the Court held that the Sacketts were entitled to seek relief from the courts. 

The Court explained that the APA has a strong presumption in favor of allowing judicial review of final agency actions.  The Court rejected the EPA’s argument that the lack of an express provision allowing judicial review of administrative compliance orders in the CWA precluded such review, explaining:

[I]f the express provision of judicial review in one section of a long and complicated statute were alone enough to overcome the APA’s presumption of reviewability for all agency action, it would not be much of a presumption at all.

Slip op. at 8.

The Court held that the EPA’s compliance order against the Sacketts met all the requirements for APA judicial review.  First, the Court held that the compliance order was a “final agency action” because it imposed serious legal obligations on the Sacketts, including significant potential double penalties.  Even more importantly, the order represented the “‘consummation’ of the agency’s decisionmaking process” – because the terms of the compliance order were not subject to any further review, as the Sacketts discovered when they unsuccessfully sought a hearing before the EPA.  Slip op. at 5-6.  Second, the order clearly determined the Sacketts’ obligations by ordering them to restore their property to its prior condition.  Finally, the CWA does not expressly preclude review by the courts.  The Court therefore reversed the judgment of the Court of Appeals and remanded for further proceedings.  Id. at 10. 

Justice Ginsburg and Justice Alito filed concurring opinions.  In her one-paragraph concurrence, Justice Ginsburg emphasized that the opinion does not address the question of whether the property owners “could challenge not only the EPA’s authority to regulate their land under the Clean Water Act, but also, at this pre-enforcement stage, the terms and conditions of the compliance order” – a question that is left for another case and another day.

Justice Alito, in contrast, issued a scathing rebuke of the EPA, the CWA, and Congress, stating that “[t]he position taken in this case by the Federal government – a position that the Court now squarely rejects – would have put the property rights of ordinary Americans entirely at the mercy of [EPA] employees.”  Alito, J., concurring op. at 1.  While the Court’s opinion “provides a modest measure of relief” by allowing property owners to challenge the EPA’s jurisdictional determination under the APA, Justice Alito stated that “[r]eal relief requires Congress to do what it should have done in the first place: provide a reasonably clear rule regarding the reach of the Clean Water Act.”  Id. at 2.  Specifically, Judge Alito criticized the EPA’s and Congress’s failure to define what is meant by “the waters of the United States,” leaving this crucial jurisdictional determination to be made “on a case-by-case basis by EPA field staff.”  Id. 

The decision does not reach the merits of the Sacketts’ challenges to the compliance order, nor does it address the Sacketts’ due process argument.  Nonetheless, the decision is significant, and the stakes are high.  While the media has consistently portrayed this case as a battle between property owners as David against the EPA’s Goliath, the opinion also represents a victory for all property owners, including businesses and corporations.  Indeed, General Electric Co. had sought similar relief in a case last year, and filed an amicus brief in support of the Sacketts.  Moreover, the Court’s decision could impact not only CWA enforcement authority, but possibly could also impact review of compliance orders issued under other federal environmental statutes which, like the CWA, do not contain express prohibitions to judicial review.  And, for cases arising out of orders issued pursuant to statutes that do contain an express prohibition against judicial review, the Court may yet decide to go beyond the terms of the statute and the APA and address the due process argument it did not reach in the Sacketts’ case.

The new IOM report, Breast Cancer and the Environment: A Life Course Approach, again emphasizes the difference between how scientific panels go about making a causal inference and the approach too often approved of by credulous judges often insecure about their own ability to think critically and mesmerized by the jargon-laden pronouncements of credentialed experts. Beginning on page 82 under "Hierarchy of Studies" and followed by "Categories of Evidence" the report does a great job of detailing what counts as evidence and the methods and criteria used by organizations like the International Agency for Research on Cancer, the National Toxicology Program, the World Cancer Research Fund / American Institute for Cancer Research in going about collecting, assessing and weighing evidence when making causal judgments. They even put together a helpful summary of the classification systems (see Appendix C, "Classifications Systems Used in Evidence Reviews" at page 312).

Here are a couple of takeaways:

(1) "The criteria aim to be explicit about the weight, or relative importance, given to studies in humans and in animals or other experimental systems"; and

(2) "Strong and consistent positive epidemiologic evidence in rigorously conducted studies is prima facie evidence that the substance is a risk factor." You will quickly note upon reviewing the summary of systems of causal inference that none support anything like the notion embraced by the court in Milward v. Acuity that an expert weighing a subset of the data (each piece of which is either weak, irrelevant or inconsistent) upon the scales of his personal scientific judgment can by "reasoning to the best explanation" reliably reach a causal inference  - especially in the complete absence of any epidemiological evidence to support it. Indeed the "atomization" of evidence decried by the Milward court and those in the "public health movement" who promote mass tort litigation is exactly what IARC, IOM, NTP, EPA and WCRF/AICR do - they assess each piece of evidence, they do it transparently, they do it according to rules laid down before they even go looking for the evidence and then they weigh what's left; again, according to weighting systems that are explicit, consistent and established before the first piece of evidence is examined.

The idea that knowledge comes from scientists taking a "holistic approach to the data" and applying their personal judgment to it is, to be blunt, hooey. That may be a way to arrive at a testable conjecture but without the conjecture passing a test of its predictive power (e.g. a rigorous epidemiological study) it remains nothing but a bald, personal opinion with no foundation beyond the ipse dixit of the expert who induced it.

 David Oliver is managing partner of the Houston office of Vorys, Sater, Seymour and Pease. His practice focuses on civil litigation involving allegations of injuries due to exposure to chemicals or pharmaceuticals; he holds degrees in both chemistry and biology. Read more of David’s work on his blog: Mass Torts: State of the Art. You may contact David through the firm’s website at www.vorys.com.

In the wild, wild west of the internet, it looks like the Federal Trade Commission is saddling up to play the role of sheriff. On November 29, 2011, the FTC announced its proposed settlement of claims against the social networking goliath, Facebook. (By the way, you can read about it on the Commission’s Facebook page. http://www.facebook.com/federaltradecommission?v=wall.) The settlement resolves an eight-count administrative complaint charging Facebook with misleading their users by telling them they would protect the privacy of personal information, but repeatedly allowing that information to be shared with third parties or made public without the users’ knowledge or consent.  (In the matter of Facebook, Inc., File no. 092 3188.) Coming on the heels of the FTC’s March 2011 settlement of charges that Google, Inc. violated its own privacy promises to consumers when it rolled out its social network site, Google Buzz (In the Matter of Google, Inc., File no. 102 3136), the Facebook case demonstrates the agency is willing to use consumer protection laws to “make sure companies live up to the privacy promises they make to American consumers.” http://ftc.gov/opa/2011/11/privacysettlement.shtm.)

On August 17, 2011, the Oil & Gas Law Brief reported that a West Virginia judge had entered an order striking down a ban on hydraulic fracturing enacted by the City of Morgantown.  The judge ruled that West Virginia statutes make oil and gas regulation exclusively a matter of state law, and that local governments do not have authority to enact additional regulations.  That judgment is now final. 

The Fifth Circuit en banc dismissed the appeal in Comer v. Murphy Oil USA after vacating its prior panel decision that allowed Katrina victims to sue energy companies for money damages based on alleged greenhouse gas emissions causing the hurricane’s strength and resulting damage.  The appeal’s dismissal reinstates the district court’s earlier order dismissing the claims on political question and standing grounds. Click here to view the full order (.pdf), released last Friday.  It’s the latest twist in this case's wild ride through the Fifth Circuit.

Recall that Mississippi residents sued many energy companies for money claiming the defendants were responsible for greenhouse gas emissions that were in turn somehow responsible for the severity of Hurricane Katrina and its resulting damages. The federal district court dismissed on both political question and standing grounds. On October 16, 2009, a panel the Fifth Circuit reversed, holding that the case did not present a non-justiciable political question and that plaintiffs have standing to pursue state law damages claims for negligence, trespass, and nuisance. 585 F.3d 855 (5th Cir. 2009). The court wrote: "Here, the plaintiffs' complaint alleges that defendants' emissions caused the plaintiffs' property damage, which is redressable through monetary damages; for example, the plaintiffs allege that defendants' willful, unreasonable use of their property to emit greenhouse gasses constituted private nuisance under Mississippi law because it inflicted injury on the plaintiffs' land by causing both land loss due to sea level rise and property damage due to Hurricane Katrina." The panel held that plaintiffs do not have standing to pursue claims for unjust enrichment, fraudulent misrepresentation, and civil conspiracy. The third judge on the panel concurred, but stated that he thought the case should be dismissed for failure to allege facts sufficient to show proximate cause.  The panel reversed and remanded the case to the district court.

The appellee defendants applied for rehearing en banc of the panel decision and order. A bare quorum of nine out of the full court's 16 active judges (the remaining seven having recused themselves), voted six to three to grant rehearing en banc, which vacated the panel opinion and order. 598 F.3d 208 (5th Cir. 2010). Subsequently, one of the six judges voting to grant rehearing en banc has recused herself, leaving only eight of the 16 active judges to hear the case. Because a quorum was lacking, the remaining eight judges voted five to three to dismiss the appeal. Because the court's prior grant of rehearing en banc had previously vacated the panel's opinion and order, the court's most recent order dismissing the appeal reinstates the district court's initial decision dismissing the case on political question and standing grounds.

Needless to say, the three dissenting judges had some choice things to say about the five-judge decision that vitiated the prior panel decision remanding the case for further proceedings on the state law damages claims for negligence, trespass, and nuisance. We probably have not heard the last of this.

John Parker Sweeney
Womble Carlyle Sandridge & Rice, PLLC
Baltimore, Maryland

Check out yesterday’s Wall Street Journal for a most troubling think-piece exploring the implications of widespread recusals of federal appellate judges who hold energy stocks from appeals involing inchoate climate change nuisance actions.

Wall Street Journal opinion

The WSJ reports that the Fifth Circuit has had to put off the en banc rehearing it had scheduled for last month on the appeal in the Comer case for lack of a quorum of sitting circuit judges. Recall that the trial court had dismissed this class action against fossil fuel energy companies by Mississippi victims of Hurricane Katrina claiming that emissions attributable to the defendants had caused the severe storm damage. A panel of the Fifth Circuit had affirmed the dismissal on political question grounds with one judge noting that he would affirm the dismissal on causation grounds. That Fifth Circuit panel opinion conflicted with the opinion of the Second Circuit in the AEP case, which allowed an action by several states and environmental groups to proceed against fossil fuel burning power plants in the Northeast by reversing a similar dismissal on political question ground by the trial court. The WSJ now suggests that judges who do not want to see an en banc ruling contrary to AEP, which would confirm a split between circuits and set up a potential certiorari vehicle to SCOTUS are manipulating the recusal process to prevent a quorum for the court’s en banc rehearing.

In Connecticut v. American Power, 2009 WL 2996729 (2nd Cir. Sept. 21, 2009), the United States Court of Appeals for the Second Circuit held that a claim filed by eight states, one city and three private land trusts could proceed on the theory that greenhouse gases emitted by five power companies constitute a public nuisance because the emissions contribute to global warming, which in turn poses a past and ongoing threat to persons and property.  The court’s lengthy decision rejected the defendants’ attempts to avoid suit prior to discovery based upon the following key defenses: 

Political Question:  The court held that while this may be a case with political overtones, it does not present a non-justiciable political question.  That is, it does not involve an issue that was constitutionally committed to another branch of government; does not present matters that cannot be resolved through the application of federal common law; and does not require the court to make a decision that will conflict with or frustrate pronouncements made by Congress or the President. 

Standing:  The court held that all plaintiffs could sue in their proprietary capacity as property owners.  In addition, the states could sue parens patriae because they are more than nominal parties and have unique interests in safeguarding the health and well-being of their citizens.  Plaintiffs adequately plead the existence of current and future injuries by making reference to specific environmental changes (i.e. reduced mountain snow pack, coastal erosion) that are caused or contributed to by greenhouse gas emissions, result in damages (i.e. diminished property values, water shortages), and may be reduced or slowed by the relief sought (a cap on greenhouse gas emissions). 

Failure to State a Claim:  The court held that the plaintiffs successfully plead a claim for public nuisance under federal common law by setting forth, in a manner consistent with the Restatement (Second) of Torts, an unreasonable interference with public rights that is ongoing, likely to have a long-lasting effect, and is apparent to the defendants.  The court also held that the land trusts had the right to sue for public nuisance under federal common law because the magnitude of their property interests makes their damages different from those suffered by the general public. 

Displacement:  The court held that plaintiffs’ federal public nuisance claim has not been displaced by federal statutory law.  It rejected the defendants’ argument that the Clean Air Act and five other statutes prove that Congress has legislated comprehensively on the subject because the Clean Air Act does not regulate greenhouse gas emissions at present and the other statutes primarily require the study – but not the regulation – of greenhouse gas emissions.  And, if the EPA does issue final regulations under the Clean Air Act, they will only concern mobile emission sources (i.e. automobiles and light trucks). 

The decision in Connecticut is remarkable because it was the first to permit a climate change public nuisance claim to go forward.  Previously, every court that had heard such a case – including the lower court in Connecticut – dismissed the complaint prior to discovery.  This decision resolved the primary basis for those dismissals (the political question doctrine) as well as several others that appeared to be safe havens for defendants.  In doing so, it reminded defense counsel that the level of specificity required to maintain a claim is much lower at the pleadings stage, clarified federal public nuisance law in the context of pollution cases, applied recent legal and legislative developments to the climate change paradigm (i.e. Massachusetts v. EPA, 127 S. Ct. 1438 (2007)), and provided plaintiffs with guidance on how to frame their claims.  The overall effect was to make climate change public nuisance cases more viable (e.g. Comer v. Murphy Oil USA, Inc., No. 1:05-CV-00436LG (S.D. Miss. Aug. 30, 2007); and Native Village of Kivalina v. ExxonMobile Corp., Civ. No. 08-2095 (N.D. Cal.)).

Sign up now for DRI Climate Change Webcast June 18 1:00-2:30 EDT 

What's the Obama Administration doing about Climate Change?  More in four months than the prior administration did in in eight years.

How will this affect you and your clients? Take 90 minutes to hear Roger Martella, former General Counsel of the United States Environmental Protection Agency, who will share his insights into the strategy and agenda of the new administration. 

The DRI Climate Change Task Force will be hosting its second webinar on June 18th from 1:00 - 2:30 pm EDT, "Climate Change in the Obama Administration: The Status of Proposed Global Warming Policies and Legislation."  You will receive the latest updates on the EPA's "Greenhouse Gas Emissions Reporting Rule" and "Endangerment Finding"; the draft of the American Clean Energy and Security Act of 2009, introduced by Reps. Henry A. Waxman and Edward J. Markey; state and regional greenhouse gas regulatory programs; and the American Recovery and Reinvestment Act provisions on clean energy and carbon capture and storage.

Please take the time to pass on the attached invitation to your colleagues, clients and other contacts and encourage them to join us for this informative session.

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For a change, there are more similarities than differences between the Presidential candidates on climate change policy. Both candidates embrace the necessity of a coherent international and national response to global warming based upon a variety of approaches to limit greenhouse gas emissions.

A quick review of each candidate’s web site on climate change issues reveals proposed programs that are more alike than not. Many of the differences are more stylistic appeals to different audiences than they are real substantive differences.

For instance, John McCain’s site is more crisp and business-like in its presentation, avoiding the more emotionally laden language that the Campaign reserves for other issues that resonate more passionately with the Republican base and independent minded voters.

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