Superfund Legislation Matures While GHG Policy Lags Behind

Wednesday, March 12, 2014 - 11:02

The Editor interviews Charles S. Warren, Partner of Kramer Levin Naftalis & Frankel LLP, and Karen Leo Mintzer, Special Counsel of Kramer Levin Naftalis & Frankel LLP.

Editor: Please tell our readers about your backgrounds in environmental law.

Warren: I began working on environmental issues as head of the Office of Legislation for the U.S. Environmental Protection Agency. I then came back to New York as Regional Administrator for Region 2 EPA and was in charge of administering the environmental laws in the region covering New York, New Jersey, Puerto Rico and the Virgin Islands. I have been in private practice in environmental law for about 30 years dealing with matters from corporate due diligence to Superfund matters, development projects, environmental review, etc.

Mintzer: I have been working as an environmental lawyer for about 18 years. I started my legal career as a litigator, later moving to Sive Paget & Riesel to further my interests in environmental law. There, I litigated environmental cases. I then moved to a broader environmental practice at Kramer Levin, continuing environmental litigation and becoming more involved in environmental review, development projects, permitting and cleanups.

Editor: Governor Cuomo recently proposed amendments to the New York State Brownfield Cleanup Program (BCP) that could potentially expand the program to a greater number of applicant sites but reduce applicants’ eligibility for certain tax credits. Please outline the proposed amendments and discuss the program’s success.

Mintzer: Those are the major changes to the program. The amendments are a response to the success of the valuable tax credits (including the tangible property tax credit), which were available to anyone who was accepted into the program. Some felt that there were sites accepted into the program that, while dirty, did not need the extra cleanup credit incentive because they were located in areas that were already being redeveloped. The administration has now proposed a broader definition for program eligibility. While this new definition makes more brownfields eligible for the program and allows more participants to receive a release once cleanup is complete, it limits those sites that are eligible for the tangible property tax credit.

Warren: The major advance here is in allowing many more sites into the program. Early on, the state found itself giving away a lot of money in tax credits to large projects in New York City, not anticipating that tax credits would not be enough of an incentive for development in less lucrative upstate areas. In New York State, the only state program available to hazardous waste sites is the BCP. If you do not get into the BCP, then you are not going to receive a liability release, which is an important document for owners seeking to sell property or apply for financing. The new amendments to the BCP will allow more sites to participate while significantly limiting the pool of applicants eligible for the most valuable tax credits to those sites that have been vacant for 15 years, vacant and tax delinquent for ten years, or “upside down” – i.e., worth less than the cost of remediation.

Editor: Please discuss Volunteer Cleanup Program reform and the role of state licensed professionals in property investigations and remediation. Who benefits when this process is privatized?

Warren: New York does not have the licensed professional concept in its cleanup statutes; however, many other states do, and, in general, the programs work to everyone’s benefit. Cleanups happen faster, and state agencies devote fewer resources to reviewing and overseeing the cleanup. Cleanups are as rigorous as they are when a state agency oversees them because licensed professionals tend to be very concerned about their reputations, and they make applicants follow the rules and do a good cleanup.

Editor: How do you counsel clients to make project valuations on brownfield site development?

Warren: The key is location. You want areas where you think that development will be favorable and where people will pay to live. New York City is a prime example. Arguably, if there is a site right in the middle of a federal Superfund situation, then that can be a problem because of the lengthy nature of the cleanup process. However, because there are limited sites available, and because banks and contractors have been through the cleanup process many times before, you see more people willing to take on contaminated sites and work through the process. We have seen a number of instances where contaminated locations have become very successful projects.

Mintzer: These days everyone is pretty experienced. As long as you have appropriate measures in place to protect future occupants, very few things are insurmountable.

Editor: CERCLA (Superfund) decisions have historically taken a broad view on liability. Is liability more limited these days? And, if so, has this limited the funds available to clean up the most toxic sites?

Warren: I was part of the EPA task force that developed the Superfund legislation that became law in 1980. Since then, I have handled a number of Superfund cases. The essential Superfund structure is still there, but over time the program has matured and the courts have become more sophisticated. If you are a passive owner of the site and you have not contributed anything to the site, your liability is not going to be as high as it might once have been. However, if you fit under the traditional definitions of a Superfund liable party, as an owner or an operator of a site – as a former owner or operator, or as someone who has transported waste to a site or arranged to have waste transported to a site – you will not avoid liability. This maturing has not limited funds available for cleanup from private parties. In fact, we have two big sites in New York City that, in recent years, were put on the national priority list: the Gowanus Canal and Newtown Creek, and those will require remediation in excess of $500 million. Major parties have already signed a consent order to do work on these sites. These parties are in the process of rounding up everyone else who may have a connection with the contamination. So, I think that while some things have changed at the far reaches of the program, the basic program has not been significantly affected.

Editor: Then the system has matured? I think that’s really illustrative of what we expect of law.

Warren: Yes, that's right. There used to be a lot of effort and money wasted in these cases. Today, if parties cannot make a strong case that they are not liable, they settle as soon as they can to limit their costs. That has been the maturing, and you see fewer cases as a result.

Mintzer: There have also been amendments to the law that have clarified when someone is a responsible party and available defenses, which has, for example, resulted in less lender liability litigation.

Editor: In Utility Air Regulatory Group v. Environmental Protection Agency, the Supreme Court is hearing challenges to EPA rules on gas emissions, specifically, whether EPA has the authority to regulate carbon emissions from stationary sources such as power plants. There is a lot of discussion about whether EPA and President Obama are overreaching their authority. Would you speak about that?

Warren: This is an ongoing situation that really started in 2007 with Massachusetts v. EPA, which predated the Obama administration. There, the Supreme Court said that EPA had the authority under the Clean Air Act to regulate greenhouse gases as a pollutant. That was a key decision. Once the court determined EPA had that authority, the issue became how to regulate those pollutants. Since that ruling, EPA has put out regulations on motor vehicles that have been challenged and upheld. This new case is a continuation of challenges to EPA’s regulations. The crux of this case is that EPA chose to raise the statute’s emissions thresholds so that the standard regulates fewer sources than would otherwise be regulated under the traditional regulations. Frankly, I think the Court is wrestling with whether or not this is a reasonable way for the EPA to address the problem, but I think the Court has already signaled that EPA has the authority to regulate in this area.

I do not understand the argument that the President is taking on legislative authority. The Supreme Court said EPA can regulate, and that is what EPA is doing. There has been a backlash from people who are against any regulation of greenhouse gases; they do not like the idea that any administration is going forward with regulations that are going to regulate those pollutants. Ultimately, if it is a pollutant that can be regulated, how can you say it should be treated any differently than the other regulations that EPA has promulgated?

Mintzer: I read that in the oral argument the lawyer representing the utilities began his argument by stating, “putting aside” the Massachusetts v. EPA holding, to which Chief Justice Roberts responded, “I was in the dissent in that case, but we still can’t do that.” I think Chuck is right: there may be some growing pains about exactly what the regulations look like, but in the end, it will end up on EPA’s side.

Editor: Is this less about EPA and more about that contention that the Obama administration is stretching its executive authority too far?

Warren: Some people in Congress believe the President is trying to stretch his executive authority because he has expressed frustration that Congress cannot do anything. But this is an area that has been around for a long time, and it actually predates this administration. Congress was unwilling to move on environmental legislation even when the Democrats were in office. I do not think this is so much a partisan issue as a regional issue. Senators from coal states – Ohio, West Virginia, Pennsylvania and Virginia – are very much against regulation of greenhouse gases because they think it will hurt the coal industry. That's why you could not get anything passed on the subject when the Democrats had both houses of Congress. If anything is going to happen, it will happen because of administrative regulation. As someone who worked in the U.S. Senate before I went to EPA, I see both sides. It seems to me if Congress has given EPA the authority to regulate emissions from stationary sources under the Clean Air Act and the Supreme Court has said greenhouse gas pollutants are pollutants under the Clean Air Act, then it stands to reason that EPA has the authority to issue regulations dealing with those pollutants.

Editor: Will you expand on how much weight President Obama’s guidelines are likely to carry in the next administration?

Warren: There is always the issue that a new administration will try to change regulations of the past administration. However, I think that once these kinds of regulations go into effect and people know what to expect, it is not easy to turn back the clock. Even before these regulations were developed, we saw a movement away from coal-fired power plants all across the country. One of the major reasons for that is the availability of natural gas. If you go back to the Clean Air Act in 1972 and the amendments of 1977, the expectation was that existing power plants would continue to run but would be phased out over time. Instead of phasing these plants out, however, they kept rehabilitating the plants to keep them going. So you still had a continuation of major emissions from these old plants and instead of being gone in 30 years, 50 years later they are still running and polluting. Now, because of the availability of natural gas, those plants are going to be phased out, regardless of the regulations. We are going to see a much cleaner power sector, even if a new administration comes in that is hostile towards these regulations.

Editor: Is there anything that you would like to add?

Warren: These are very interesting issues and those of us who have followed this for a long time would love to see the U.S. get into the game in terms of climate change in an international sense. The Chinese, for instance, have been investing in alternative energy sources. They are making progress on solar and wind; however, because they have a huge number of factories that use dirty coal and other pollutants, there will be a spike in emissions until they eliminate those plants. In the U.S. I think we are making headway with fuel economy standards. These standards have a major impact on greenhouse gases. As we see more agreement to reduce emissions and cleaner vehicle models come on the market, you are going to see the United States significantly reduce its greenhouse gas emissions.

Please email the interviewees at cwarren@kramerlevin.com or kmintzer@kramerlevin.com with questions about this interview.