The Kentucky Bar Association Environment Energy & Resources

Law Section presents

2013

Kentucky Environmental Law

CLE Seminar

This program has been approved in Kentucky for 6.50 CLE Credits including

1.00 Ethics Credit.

Compiled and Edited by: The Kentucky Bar Association

Office of Continuing Legal Education for

Kentucky Bar Association Environment Energy & Resources Law Section

© 2013 All Rights Reserved Published and Printed by:

The Kentucky Bar Association, April 2013. Editor’s Note: The materials included in this 2013 Kentucky Environmental Law seminar book are intended to provide current and accurate information about the subject matter covered. The program materials were compiled for you by volunteer authors. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgment of the individual legal practitioner. The faculty and staff of the Kentucky Bar Association disclaim liability therefor. Attorneys using these materials or information otherwise conveyed during the program, in dealing with a specific legal matter, have a duty to research original and current sources of authority.

2013 Kentucky Environmental Law CLE Seminar

Table of Contents

Agenda............................................................................................................................. i Speakers ........................................................................................................................ iii Hot Waters ...................................................................................................................... 1 The Superfund Recycling Equity Act (42 U.S.C. §9627) ................................................ 11 A General Look at Genetic Engineering (including GMOs, Clones and Chimeras) and Nanotechnology: When Is Nature Being "Polluted"? .............................................. 21 The Science and Law of Oil Shale and Tar Sands Development in Kentucky ............... 43 Environmental Review under the National Environmental Policy Act and Related Statutes ............................................................................................................ 85 The Problem and Regulation of Invasive Species ....................................................... 103 The Endangered Species Act in Kentucky ................................................................... 109 Environmental Protection Case Law Update ............................................................... 115 Kentucky Department for Environmental Protection Update ........................................ 127 Department for Natural Resources: Trends in Permitting and Enforcement ................. 133 Natural Resources Law Update ................................................................................... 149

OSM's Stream Protection Rulemaking ........................................................................ 155 Perspectives of an Environmental Hearing Officer: Tips and Pointers for Conducting an Effective Administrative Hearing .......................................................... 161 Outside Looking in: Ethical Considerations between Governmental & Private Attorneys ..................................................................................................................... 171 Navigating Murky Waters: Reconciling Competing Ethical Obligations in Environmental Law ...................................................................................................... 179 Attorney Advertising .................................................................................................... 193

i

2013 Environmental Law Update CLE Seminar April 23, 2013

Frankfort, Kentucky

8:15-8:45 a.m. Registration & Continental Breakfast 8:45-9:00 a.m. Welcome

Section Chair Cathy Franck Law and Policy Researcher 9:00-9:30 a.m. Hot Water: Emerging Water Law Issues (.50 CLE credit) LaJuana S. Wilcher English Lucas Priest & Owsley LLP 9:30-10:00 a.m. Recycling and Superfund in Kentucky: Liability Protection under the Superfund Recycling Equity Act (0.50 CLE credit) Christopher J. Bedell, P.E. The David J. Joseph Company 10:00-10:30 a.m. Nanotechnology & Genetic Engineering: When Is Nature Being "Polluted"? (0.50 CLE credit)

Cathy Franck Law and Policy Researcher 10:30-10:45 a.m. Break 10:45-11:15 a.m. The Science and Law of Oil Shale and Tar Sands

Development in Kentucky (0.50 CLE credit) Ronald R. Van Stockum, Jr. Law Offices of Ronald R. Van Stockum, Jr. 11:15 a.m.-12:15 p.m. "Exotic" Environmental Statutes: The 201 Level Course (1.00 CLE credit) Timothy J. Hagerty Frost Brown Todd LLC Professor Anthony E. Chavez Salmon P. Chase College of Law, NKU Kenneth J. Gish, Jr. Stites & Harbison PLLC

ii

12:15-1:15 p.m. Lunch (on your own) 1:15-2:15 p.m. Kentucky Department for Environmental Protection Update: Statutes, Regulations & Case Law (1.00 CLE credit) Jennifer J. Cave Bingham Greenebaum Doll LLP Commissioner R. Bruce Scott, P.E. Director John S. Lyons, Division of Air Quality Director Sandy Gruzesky, P.E., Division of Water Director Anthony R. Hatton, P.G., Division of Waste Management Director Jeffrey Cummins, Division of Enforcement Deputy Commissioner Aaron Keatley, MPA Kentucky Department for Environmental Protection 2:15-3:15 p.m. Kentucky Department for Natural Resources Update: Statutes, Regulations & Case Law (1.00 CLE credit) Commissioner Steve Hohmann Department for Natural Resources W. Blaine Early III Stites & Harbison PLLC Liz Edmondson Liz Edmondson Law PLLC Moderator: Vice Chair Kenneth J. Gish, Jr. 3:15-3:30 p.m. Break 3:30-4:00 p.m. Practice before the Office of Administrative Hearings (0.50 CLE credit) Former Hearing Officer James L. Dickinson Office of Administrative Hearings Energy and Environment Cabinet 4:00-5:00 p.m. Environmental Law and Advertising Ethics (1.00 Ethics credit) John G. Horne II Dinsmore & Shohl LLP Emily C. McKinney Frost Brown Todd LLC Sarah V. Coker Kentucky Bar Association Office of Bar Counsel Moderator: Chair-Elect Philip J. Schworer

iii

Cathy Weller Franck Post Office Box 507 Crestwood, KY 40014-0507 502.271.5177 cathyf2422@gmail.com Cathy Weller Franck serves as Chair of the Kentucky Bar Association's Environment, Energy & Resources Law Section. She received her J.D. from the University of Kentucky College of Law and is also a licensed realtor. Ms. Franck's real estate business over the past fifteen years has included residential, new construction, farm and investment properties involving most types of loan programs. She is currently working in a legal policy research project related to food and agriculture and the environmental interface.

LaJuana S. Wilcher English, Lucas, Priest & Owsley, LLP

1101 College Street Bowling Green, KY 42101

270.781.6500 lajuanawilcher@aol.com

LaJuana S. Wilcher is a partner with English, Lucas, Priest & Owlsey, LLP in Bowling Green, where she practices environmental law. She has worked on natural resource issues for over thirty years, with an emphasis on water issues for twenty of those years. Ms. Wilcher served as the head of the U.S. Environmental Protection Agency's Office of Water (1989-1993), Secretary of Kentucky's Environmental and Public Protection Cabinet (2003-2006), Commissioner of the Ohio River Valley Water Sanitation Commission, and in private practice, as counsel to municipal, corporate and not-for-profit clients across the country. She currently serves as a Commissioner on the U.S. Commission for UNESCO, and as a member of the U.S. Committee for the International Hydrological Programme. She also teaches environmental law and policy at Vermont Law School during the summers. Ms. Wilcher received her undergraduate degree from Western Kentucky University and her J.D. from the Salmon P. Chase College of Law at Northern Kentucky University. She is a member of the Kentucky and District of Columbia Bar Associations.

iv

Christopher J. Bedell, P.E. The David J. Joseph Company 300 Pike Street Cincinnati, OH 45202 513.419.6200 cjb@djj.com Christopher J. Bedell is Senior Vice President and General Counsel for The David J. Joseph Company, one of the largest and oldest metal recycling and trading companies in the United States. He oversees the legal affairs of the company and its subsidiaries. As a member of its operating committee, Mr. Bedell is involved in setting strategic direction and corporate policy, and overseeing the business operations of its fourteen trading offices in North America, Europe, and Asia and its eighty U.S. recycling facilities. He is also a registered professional engineer and manages the company's Environmental, Safety, and Health Department. Mr. Bedell previously engaged in private practice in Cincinnati specializing in environmental law and litigation. Earlier in his career, he was an environmental engineer and served on active duty in the U.S. Army. Mr. Bedell received his B.S.E. from Duke University and his J.D. from the University of Cincinnati, where he was Editor-in-Chief of the Law Review. He is a member of the American, Ohio, Kentucky and Cincinnati Bar Associations.

Ronald R. Van Stockum, Jr. 4163 Zaring Mill Road Shelbyville, KY 40065

502.568.6838 rvs@vanstockum.com

Ronald R. Van Stockum, Jr. is in private practice as a solo practitioner in Shelbyville, where he practices environmental law. Mr. Van Stockum has also served as an adjunct faculty member at the University of Louisville's Louis D. Brandeis School of Law and as a biology instructor at Jefferson Community College in Louisville and Indiana University Southeast in New Albany. He received a B.S. in biology from Santa Clara University in 1972, a M.S. in biology from the University of Louisville in 1974 and both a Ph.D. in biology and a J.D. from the University of Louisville in 1979. In addition to his membership with the Kentucky and Louisville Bar Associations, Mr. Van Stockum is also a member of the Filson Historical Society, the Pendennis Club and is Chairman of the Nature Conservancy.

v

Timothy J. Hagerty Frost Brown Todd LLC 400 West Market Street, Suite 3200 Louisville, KY 40202 502.568.0268 thagerty@fbtlaw.com Timothy J. Hagerty is a member of Frost Brown Todd LLC in Louisville, where he counsels the firm's clients on environmental compliance, liability, and litigation issues arising under federal, state, and local laws, with an emphasis on natural resources law. He also assists the firm's clients in conducting environmental due diligence, negotiating environmental provisions in complex corporate and real estate transactions, and addressing property contamination issues. Prior to joining Frost Brown Todd, Mr. Hagerty practiced environmental law with Beveridge & Diamond, P.C., in Washington, D.C. He received his B.A., summa cum laude, from the University of Louisville in 1991 and his J.D. from Yale Law School in 1994, where he was the Senior Editor for the Yale Law Journal. He is a member of the Energy & Mineral Law Foundation, and the American, Kentucky, District of Columbia and Louisville Bar Associations.

Professor Anthony E. Chavez Northern Kentucky University

Salmon P. Chase College of Law Nunn Drive

Highland Heights, KY 41099 859.572.5355

chaveza1@nku.edu

Anthony E. Chavez is Assistant Professor of Law at Northern Kentucky University's Salmon P. Chase College of Law, where he teaches Civil Procedure and Environmental Law. He also previously taught courses in Contracts, Corporations, Election Law, and Legal Research and Writing. Prior to teaching, Professor Chavez primarily litigated cases under the Voting Rights Act of 1965. He received a Special Achievement Award from the U.S. Department of Justice for his work in the Civil Rights Division's Voting Section. Professor Chavez subsequently served as director of voting rights litigation for the Mexican American Legal Defense and Educational Fund. He received his B.A. from Loyola Marymount University and his J.D. from Yale Law School. Professor Chavez is licensed as both an attorney and a certified public accountant in California. He left his position as the Director of Legal Research and Writing at the University of California at Davis to teach at Chase College of Law.

vi

Kenneth J. Gish, Jr. Stites & Harbison, PLLC 250 West Main Street, Suite 2300 Lexington, KY 40507 859.226.2293 kgish@stites.com Kenneth Gish is a member of the Environmental, Natural Resources and Energy Service Group at Stites & Harbison, PLLC in Lexington, where he focuses his practice on complex facility permitting, electric utility regulation, sustainability, hazardous waste remediation, renewable and alternative energy development, compliance with regulatory requirements and environmental litigation. He received his B.A. from Georgetown University in 1995 and his J.D., cum laude, from the University of Michigan Law School in 2003. Mr. Gish previously practiced in the Seattle office of K&L Gates, LLP. He is a former Director of the Northwest Environmental Business Council (2009-10) and a former vice chair for technology and membership of the American Bar Association's Water Resources Committee. Mr. Gish serves as Treasurer and a member of the Executive Committee for Bluegrass PRIDE, a non-profit organization that provides environmental education and outreach services throughout central Kentucky. He also serves as Vice Chair of the Kentucky Bar Association's Environment, Energy & Resources Law Section, and is a member of the Washington State Bar Association and the Kentucky Chapter of the U.S. Green Building Council's Board of Directors.

Jennifer J. Cave Bingham Greenebaum Doll LLP

300 West Vine Street, Suite 1100 Lexington, KY 40507

859.288.4611 jcave@bgdlegal.com

Jennifer Cave is a partner with Bingham Greenebaum Doll, LLP in Lexington, where she practices environmental permitting, compliance and litigation. She is the immediate past Chair of the Kentucky Bar Association's Environment, Energy & Resources Law Section, and a member of the Leadership Lexington Class of 2013. Ms. Cave serves on the board of directors of the Lexington Humane Society and the Fayette County Bar Association Young Lawyers Section. She is also editor of Bingham's Environmental Letter, which is published bi-monthly. Ms. Cave received her B.S., cum laude, from the University of Kentucky and her J.D., magna cum laude, from Seattle University School of Law. During law school, she served as a legal intern in the U.S. EPA's Office of Regional Counsel in Seattle, Washington. Prior to attending law school, Ms. Cave worked as an environmental consultant in New England and the Pacific Northwest. She is a member of the Kentucky and Washington State Bar Associations.

vii

Commissioner R. Bruce Scott, P.E. Kentucky Department for Environmental Protection 300 Fair Oaks Lane Frankfort, KY 40601 R. Bruce Scott has served as commissioner of the Kentucky Department for Environmental Protection since January 2008. He has served for nearly thirty years in the Department for Environmental Protection, beginning in 1983 as an environmental engineer in the Division of Water. He received his B.S. in chemical engineering from the University of Kentucky and is a registered professional engineer. During his career with the DEP, Commissioner Scott served as manager of the Kentucky Pollutant Discharge Elimination System Branch from 1994-2004. He served as director of the Division of Waste Management from 2004 to January 2008. As commissioner of DEP, he provides leadership and oversight of the six divisions within the Department, including all aspects of the Department's environmental programs for the protection of human health and the environment via the enhancement and protection of the Commonwealth's air, land and water.

Director John S. Lyons

Kentucky Division of Air Quality Kentucky Department for Environmental Protection

200 Fair Oaks Lane Frankfort, KY 40601

John Lyons has served in various capacities for the Department for Environmental Protection during his twenty-three year public service career. In January 2002, he was chosen to serve as the Director for the Kentucky Division of Air Quality. During his tenure, he has been instrumental in reorganization efforts for both the Department for Environmental Protection and the Division for Air Quality, implementing business process efficiencies that have improved the health of the Commonwealth's citizens and Kentucky's environment. Mr. Lyons also serves on the Board of Directors for the Southeastern States Air Manager's Association, the Kentucky Clean Fuels Coalition, the Association of Air Pollution Control Agencies, and is a past board member for the National Association of Clean Air Agencies. Director Sandy Gruzesky, P.E. Kentucky Division of Water Kentucky Department for Environmental Protection 200 Fair Oaks Lane Frankfort, KY 40601 Sandy Gruzesky has been with the Division of Water since 1994, and began serving as Director in April 2008. Prior to that, she served as the assistant director and fulfilled various roles within the NPDES permitting program. Ms. Gruzesky served in the U.S. Navy Civil Engineer Corp in both active duty and reserve roles and is a retired Commander. She earned a B.S. in civil engineering from the University of Pittsburgh and a M.S. in civil engineering from the University of Kentucky. Ms. Gruzesky is a licensed professional engineer in Kentucky.

viii

Director Anthony R. Hatton, P.G. Kentucky Division of Waste Management

Kentucky Department for Environmental Protection 200 Fair Oaks Lane

Frankfort, KY 40601

Anthony Hatton has served as the director for the Kentucky Division of Waste Management (DWM) since April 2008. He began working from the DWM in January 1999, focusing on the oversight of cleanup efforts at Fort Campbell, the Naval Ordnance Station in Louisville and the Lexington Bluegrass Army Depot. He holds a Masters Degree in Geology from Eastern Kentucky University and is a registered professional engineer. During his career with the DWM, Mr. Hatton has served as program manager for oversight cleanup at the Paducah Gaseous Diffusion Plant from 2001-2002, and served as the assistant director of the DWM from July 2002 to April 2008. Prior to his career with the DWM, Mr. Hatton worked as a consulting geologist from 1988-1999. In addition, he worked as an environmental cleanup contractor for the Department of Defense and for the state of South Carolina. Director Jeffrey Cummins Kentucky Division of Enforcement Kentucky Department for Environmental Protection 300 Fair Oaks Lane Frankfort, KY 40601 Jeffrey Cummins has served as director of the Kentucky Division of Enforcement (DENF) since June 2012, and has worked for the Department for Environmental Protection for almost twenty-two years. He began working with DEP in 1991 as an environmental engineering technologist with the Division of Water (DOW) assigned to the oversight of the Paducah Gaseous Diffusion remediation. During his career with DOW and later the Division of Waste Management (DWM), Mr. Cummins served as environmental control supervisor from 1993-2004. He joined the DENF as an environmental enforcement specialist, and was named environmental control manager in February 2007, serving as branch manager and acting division director from 2007-2009. In 2009, he became the assistant director and acting director from September 2009 until June 2012. Mr. Cummins also served as a member of the Environmental Response Team from September 1991 through July 2007. He received his B.S. in environmental engineering technology from Western Kentucky University in 1979. He was employed by the Louisville Water Company from 1979-1982 as a field inspector in distribution water quality. Mr. Cummins then worked for the Kentucky Utilities Company from 1982-1987 as an air quality engineering technician specializing in air quality, and with Neundorfer, Incorporated of Ohio as a consulting engineer and later Manager of Technical Field Services.

ix

Deputy Commissioner Aaron Keatley, MPA Kentucky Department for Environmental Protection

300 Fair Oaks Lane Frankfort, KY 40601

Aaron Keatley is a nineteen-year employee of the Kentucky Department for Environmental Protection. He graduated from Michigan State University with a degree in wildlife and fisheries biology and earned a Masters of Public Administration degree from the University of Kentucky. He began his career with the DEP as a policy analyst. In that capacity, he coordinated many Department and Cabinet-level policy initiatives and projects. Mr. Keatley accepted the position of Enforcement Branch Manager for the Division of Water in 2003 and later became acting director of the newly formed Division of Enforcement. In November 2004, he was appointed director of the Department's newly created Division of Compliance Assistance. Mr. Keatley was appointed Deputy Commissioner of the Kentucky Department for Environmental Protection in 2011. Commissioner Steve Hohmann Kentucky Department for Natural Resources 2 Hudson Hollow Frankfort, KY 40601 502.564.6940 steve.hohmann@ky.gov Steve Hohmann serves as Commissioner for the Kentucky Department for Natural Resources in Frankfort, where he is responsible for overall department management. The Department for Natural Resources regulates all mining operations, forestry, oil and gas development, and conservation efforts in the Commonwealth. From 1995 to 2011, he served as Director of the Kentucky Division of Abandoned Mine Lands (AML), which is responsible for implementing the federally approved abandoned mine land reclamation program in Kentucky. From 1992 to 1995, he served as Director of the Division of Field Services, which is in charge of reclamation enforcement on all coal mining sites for Kentucky's surface mining regulatory program. From 1989 to 1992, he served as Mining Section Supervisor in the Division of Field Services in charge of the program support section for the surface mining regulatory program. Commissioner Hohmann received his B.A. from Morehead State University in 1988. He served as President of the National Association of Abandoned Mine Land Programs in 2003 and 2004. Commissioner Hohmann was the 2009 recipient of the Stan Barnard Award given by the National Association of Abandoned Mine Lands programs for outstanding contributions and dedication to the reclamation of abandoned mine lands.

x

Liz Edmondson Liz Edmondson Law, PLLC Post Office Box 692 Lexington, KY 40588 859.379.5529 liz@lizedmondsonlaw.com Liz Edmondson is an attorney at Liz Edmondson Law, PLLC in Lexington, where she focuses on environmental law, land use and zoning, non-profit law, domestic relations, and appellate practice. Prior to entering private practice, Ms. Edmondson worked as a staff attorney for Morgan Worldwide Consultants, where she managed several high profile government projects designed to minimize impacts from mining operations. She also previously served as a staff attorney for the Kentucky Resources Council. Ms. Edmondson received her B.A., cum laude, from the University of Louisville and her J.D., cum laude, from the University of Louisville Brandeis School of Law. She is a member of the Kentucky Bar Association and its Environment, Energy & Resources Law Section and Young Lawyers Division. She also serves on the board of directors for the Kentucky Resources Council.

W. Blaine Early, III Stites & Harbison PLLC

250 West Main Street, Suite 2300 Lexington, KY 40507

859.226.2284 bearly@stites.com

W. Blaine Early, III is a member of Stites & Harbison PLLC in Lexington, where he practices in the Environmental, Natural Resources, and Energy Service Group. His practice covers a range of environmental law, sustainability, and related administrative and civil litigation that address issues including the Clean Water Act, mining compliance and reclamation, and agricultural aspects of environmental law. He is currently a Co-Vice Chair of the American Bar Association's Water Quality and Wetlands Committee of the Section on Environment, Energy & Resources. He also authors a blog on sustainability at SustainabilityLawTalk.com. Prior to joining the firm in 1998, Dr. Early was a judicial law clerk to Hon. Jennifer B. Coffman, U.S. District Judge for the Eastern and Western Districts of Kentucky. Dr. Early was a professor of biology at Cumberland College in Williamsburg, Kentucky before entering the legal profession. He earned his B.A. from DePauw University, a Ph.D. in biology from the University of Louisville, and his J.D. from the University of Kentucky College of Law. He is a member of the American, Kentucky and Fayette County Bar Associations.

xi

James L. Dickinson 368 Transylvania Park Lexington, KY 40508 Jld50alj@qx.net James L. Dickinson has been a licensed practicing attorney since 1976, and from July 2008 to July 2011 was the Division Director for the Kentucky Division of Surface Mining and Reclamation, Environment and Energy Cabinet, overseeing 177 employees and five regional offices. The Division was responsible for the enforcement of all surface mining regulations. Until recently, he served in the Department of Natural Resources as a policy advisor to the Commissioner. Prior to his being employed in the Department of Natural Resources, he served as an Administrative Hearing Officer of the then Natural Resources and Environmental Protection Cabinet and Environmental and Public Protection Cabinet with a strong emphasis in administrative and environmental law for nearly fifteen years. During the late 1980s and early 1990s, Mr. Dickinson was employed as a staff attorney and supervisor in the legal department of the then NREPC Cabinet with an emphasis on surface mining litigation, as well as environmental and administrative law. Early in his career, he served as an Assistant Attorney General specializing in criminal appeals. From 1980-1983, Mr. Dickinson served as Assistant General Counsel during Governor Brown's administration before joining the Natural Resources and Environmental Protection Cabinet in February 1984. He completed his B.A., magna cum laude, at Emory and Henry College in Emory, Virginia, and received his J.D. from the Marshall-Wythe Law School at William and Mary College. He is a member of the Kentucky Bar Association and past president of the Kentucky Association of Administrative Adjudicators. On occasion, he has taught Surface Mining Law and Administrative Law at Chase College of Law and has been an instructor for the Office of Surface Mining for a number of years.

Philip J. Schworer Frost Brown Todd LLC

7310 Turfway Road Suite 210 Florence, KY 41042

859.817.5903 pschworer@fbtlaw.com

Philip J. Schworer is a member of Frost Brown Todd LLC in Florence, where he practices toxic tort and environmental law. His practice includes environmental litigation, environmental due diligence and negotiations associated with corporate acquisitions and divestitures, and compliance counseling. He received his B.S. in 1977 and his M.S. in 1980 from the University of Cincinnati, and his J.D. in 1986 and LL.D. in 2009 from Northern Kentucky University Salmon P. Chase College of Law. Mr. Schworer is a member of the Defense Research Institute and the Cincinnati Bar Foundation Board of Trustees (2012-present). He recently served as President of the Cincinnati Bar Association (2008-2009), and is also a member of the American, Ohio and Kentucky Bar Associations. Mr. Schworer currently serves as Chair-Elect of the Kentucky Bar Association's Environment, Energy & Resources Law Section.

xii

John G. Horne, II Dinsmore & Shohl LLP 314 West Main Street Frankfort, KY 40601 502.352.4615 john.horne@dinsmore.com

John G. Horne, II is a member of the Litigation Department and Environmental Practice Group with Dinsmore & Shohl LLP in Frankfort. He focuses his practice on regulatory, administrative and all facets of environmental law and has litigated and handled cases involving the Clean Water Act, Clean Air Act, RCRA, CERCLA, and AHERA. Prior to joining Dinsmore, Mr. Horne served as General Counsel to the Energy and Environment Cabinet for the Commonwealth of Kentucky. He practiced in the Department for Environmental Protection working closely with the Commissioner, Division Directors and Secretary's Office on various programs and legal matters related to air, waste and water issues. During this time, he also served as counsel to the Kentucky Mining Board, which consists of Governor-appointed members who review education and training policies for miners, as well as handling drug reinstatement matters. Mr. Horne advised the board of a number of regulatory compliance matters related to their duties, which also included working with the Office of Mine Safety & Licensing. Mr. Horne received his undergraduate degree from the University of Kentucky in 1987 and his J.D. from the University of Kentucky College of Law in 1990. He is a member of the Franklin County Bar Association and the Kentucky Bar Association and its Environment, Energy & Resources Law Section.

Emily C. McKinney Frost Brown Todd LLC

400 West Market Street Suite 3200 Louisville, KY 40202-3363

502.568.0374 emckinney@fbtlaw.com

Emily C. McKinney is a senior associate with Frost Brown Todd LLC in Louisville, where she is a member of the firm's litigation department and environmental practice group. She focuses her environmental practice on regulatory counseling involving the CAA, CWA, CERCLA and RCRA, assisting clients in the purchase and sale of property involving potential environmental contamination, and global climate change and sustainability initiatives. She received her B.S., summa cum laude, from the University of Kentucky in 2005 and her J.D. from University of Chicago Law School in 2008. Ms. McKinney is a member of the Young Professionals Association of Louisville (YPAL), the Greater Louisville, Inc. Environmental Affairs Committee, and the Kentucky and Louisville Bar Associations.

xiii

Sarah V. Coker Kentucky Bar Association 514 West Main Street Frankfort, KY 40601 502.564.3795 scoker@kybar.org

Sarah V. Coker serves as Deputy Bar Counsel with the Kentucky Bar Association. She received her B.A. from the University of Louisville and her J.D. from the Louis D. Brandeis School of Law at the University of Louisville. Ms. Coker is a member of the American and Kentucky Bar Associations and the National Organization of Bar Counsel.

xiv

1

HOT WATERS LaJuana S. Wilcher

I. INTRODUCTION

The Federal Water Pollution Control Act Amendments were enacted in 1972. Amended in 1977 and given the shortened title, "The Clean Water Act," the statute has had few significant changes with the exception of the 1977 amendments and the Water Quality Act of 1987, which added provisions addressing stormwater and water quality standards for toxics, among other things. Unlike the Clean Air Act, which underwent a major overhaul in the 1990s, the evolution of water quality protection under the Clean Water Act ("CWA") implementation during the past forty years has occurred primarily though regulations and interpretive guidance issued by the U.S. Environmental Protection Agency ("EPA" or "Agency"), and through judicial intervention. For almost thirty years, the regulatory reach of the CWA expanded with little interference from the courts. EPA interpretations were routinely upheld by the courts giving deference to EPA. Beginning in the early 21st century, however, the courts began to set limits on the reach of the CWA and the Agency’s interpretations of federal environmental authority.

Developments in the interpretation of the CWA may have significant implications in the regulatory landscape in the Kentucky Pollutant Discharge Elimination System ("KPDES") program, both because Kentucky is authorized to administer the federal permitting program and because Kentucky is limited in requiring certain environmental conditions that are more stringent than those required by federal law. See KRS 224.16-050(4), which provides, "(4) The cabinet shall not impose under any permit issued pursuant to this section any effluent limitation, monitoring requirement, or other condition which is more stringent than the effluent limitation, monitoring requirement, or other condition which would have been applicable under federal regulation if the permit were issued by the federal government." As such, federal interpretations in various jurisdictions may play a major role in many business and development enterprises.

II. THE GOALS AND SCOPE OF THE CWA: WHAT WATERS ARE COVERED?

A. CWA Goals and Policy – §101(a)(1) and (2); 33 U.S.C. §1251(a)(1) and

(2)

(a) The objective of this Act is to restore and maintain the chemical, physical, and biological integrity of the Nation's waters. In order to achieve this objective it is hereby declared that, consistent with the provisions of his Act –

2

(1) it is the national goal that the discharge of pollutants into the navigable waters be eliminated by 1985 (emphasis added);

(2) it is the national goal that wherever

attainable, an interim goal of water quality which provides for the protection and propagation of fish, shellfish, and wildlife and provides for recreation in and on the water be achieved by July 1, 1983.

B. CWA Prohibition of Discharges without a Permit – §301(a); 33 U.S.C.

§1331(a)

(a) Except as in compliance with this section and sections 302, 306, 307, 318, 402, and 404 of this Act, the discharge of any pollutant by any person shall be unlawful.

C. CWA Definition of Navigable Waters – §502(7); 33 U.S.C. §1362(7)

(7) The term "navigable waters" means the waters of the United States, including the territorial seas.

D. Important Cases/EPA Guidance Concerning CWA Jurisdiction

1. U.S. v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985),

where the Court upheld the Corps’ interpretation of "the waters of the United States" to include wetlands that "actually abut[ted] on 'traditional navigable waters.'"

2. Solid Waste Agency of Northern Cook County v. Army Corps of

Engineers, 531 U.S. 159 (2001), where the Court held that "nonnavigable, isolated, intrastate waters," that did not "actually abu[t] on a navigable waterway," were not considered "waters of the United States."

3. Rapanos v. U.S., 547 U.S. 715 (2006), where the Court’s plurality has resulted in various interpretations concerning the jurisdictional reach of the CWA . . . the term "waters of the United States" "includes only those relatively permanent, standing or continuously flowing bodies of water 'forming geographic features' that are described in ordinary parlance as 'streams[,] ... oceans, rivers, [and] lakes,'" AND/OR all waters with a "significant nexus" to "navigable waters" are covered under the CWA. The definition of the term "significant nexus" is the hot topic.

3

4. Cases interpreting Rapanos.

a. U.S. v. Lucas, 516 F.3d 316 (5th Cir. 2008). b. U.S. v. Cundiff, 555 F.3d 200 (6th Cir. 2009).

c. U.S. v. Gerke Excavating, Inc., 464 F.3d 723 (7th Cir.

2006).

d. Northern California River Watch v. City of Healdsburg, 496

F.3d 993 (9th Cir. 2007).

e. U.S. v. Robison, 521 F.3d 1319 (11th Cir. 2008).

f. U.S. v. Johnson, 467 F.3d 56 (1st Cir. 2006).

g. U.S. v. Bailey, 571 F.3d 791 (8th Cir. 2009).

h. Precon Development Corp., Inc. v. U.S. Army Corps of

Engineers, 658 F.Supp.2d 752, 758 (E.D.Va. 2009).

i. U.S. v. Chevron Pipe Line Co., 437 F.Supp.2d 605, 613

(N.D.Tex. 2006).

5. EPA guidance.

a. "Joint Memorandum" providing clarifying guidance on

SWANCC, January 15, 2003. b. "Clean Water Act Jurisdiction following the U.S. Supreme

Court’s Decision in Rapanos v. United States & Carabell v. United States," December 2, 2008.

c. "Draft Guidance Regarding Identification of Waters Protected

by the Clean Water Act," 76 Fed. Reg. 24479, May 2011.

III. STORMWATER A. CWA Definition of "Point Source" – §502(14); 33 U.S. C. §1362(14)

(14) The term "point source" means any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged. This term does not include agricultural stormwater discharges and return flows from irrigated agriculture.

4

B. CWA Regulation of Stormwater – §402(p); 33 U.S.C. §1342(p)

Provides for the regulation of stormwater. EPA regulations (as adopted by Kentucky) target:

1. A discharge associated with industrial activity. 2. A discharge from a municipal separate storm sewer system. 3. A discharge for which EPA or the State determines that the

stormwater discharge contributes to a violation of a water quality standard or is a significant contributor of pollutants to waters of the United States.

C. Federal Stormwater Regulations 40 CFR 122 D. 401 KAR 5:065. KPDES Permit Conditions for Stormwater

1. Section 1. Definitions. Definitions established in 40 C.F.R. 122.2

shall apply for the interpretation of federal regulations that are cited within this administrative regulation.

2. Section 2. Federal Regulations. A KPDES permit limitation,

standard, or condition shall be as established federal stormwater regulations.

3. Section 3. "Waters of the Commonwealth" shall be substituted for

"Waters of the United States" in the federal regulations cited in Section 2 of this administrative regulation.

5

E. EPA Industrial Stormwater Permitting Decision Tree

6

F. Expanding the Scope of Stormwater Regulation

EPA has stated that it intends to propose a rule to strengthen the national stormwater program by June 10, 2013, and complete a final action by December 10, 2014. EPA is considering: 1. Developing performance standards from newly developed and

redeveloped sites to better address stormwater management as projects are built;

2. Expanding the protections of the municipal separate storm sewer

systems (MS4) program; 3. Establishing and implementing a municipal program to

reduce discharges from existing development; 4. Establishing a single set of minimum measures requirements for

regulated MS4s. Industrial requirements may only apply to regulated MS4s serving populations of 100,000 or more;

5. Establishing specific requirements for transportation facilities; and 6. Adding provisions specific to the Chesapeake Bay watershed.

G. Kentucky Stormwater General Permits

1. Pesticides – See: http://water.ky.gov/permitting/Documents/Final%20Pesticides%20Permit%20RTC%20KYG990000.pdf

2. Construction – See:

http://water.ky.gov/permitting/General%20Permit%20Fact%20Sheets/FinalPermitKYR10000RTC_2_.pdf

3. Other industrial activity.

A new Draft General Permit was made available for comment on March 1, 2013. The comment period was until March 31, 2013. Importantly, numeric limits for total suspended solids (“TSS”) and Oil and Grease were removed from a previous version setting limits of 30 mg/l as a monthly average and 60 mg/l as a daily maximum for TSS, and a monthly average of 10 mg/l and a daily maximum of 15 mg/l for oil and gas.

H. The most recent U.S. Supreme Court Case addressing the CWA, Decker

v. Northwest Environmental Defense Center, 2013 WL 1131708 (Mar. 20, 21013), upheld EPA’s interpretation that the term "associated with industrial activity" covered only discharges "from any conveyance that is used for collecting and conveying stormwater and that is directly related

7

to manufacturing, processing or raw materials storage areas at an industrial plant." Accordingly, stormwater discharges from ditches adjacent to logging roads in Oregon did not require a permit. Of perhaps greater significance was the Court’s language concerning the amount of deference that should be given to an agency’s interpretation of its own rules. Justice Scalia would have upheld the Ninth Circuit’s opinion that a stormwater permit was required because that was, in his opinion, a more fair reading of the statute and the regulations in place at the time. He questioned giving deference under Auer v. Robbins, 519 U.S. 452 (1997), as did Chief Justice Roberts, who invited lawyers to raise and fully brief the issue in the Court.

I. Additional Anticipated Rulemaking Concerning Numeric Limitations

As a result of litigation in the Seventh Circuit Court of Appeals, National Association of Homebuilders v. EPA, Case Nos. 09-4113, 10-1247, 10-1876, the parties have agreed that EPA will by April 15, 2013, propose revisions to the numeric limits for sediment in prescribed in EPA’s 2009 construction and development effluent guidelines and the construction general permit.

IV. MONITORING

Required Electronic Discharge Monitoring Reporting – DEP intends to require all KPDES permittees that are required to submit Discharge Monitoring Reports to use NetDMR by mid-2014. NetDMR is a national, web-based application, using Excel based reporting, for permittees to electronically sign and submit DMRs. DEP states that as KPDES permits are renewed, permit language will be modified to reflect the new reporting requirements, and that permittees will receive a notification letter from the Division of Water specifying the date of transition. DEP encourages permittees to go ahead and search for their NetDMR due date and sign up for a NetDMR test account to practice submissions. If a paper DMR is submitted on or after the NetDMR requirement date, it will be returned without being processed (which may lead to a violation for non-submittal). According to DEP, switching to NetDMR will result in reduced paperwork, increased efficiency and improved data quality. For more information see: http://kydep.wordpress.com/2013/03/25/online-tool-released-to-determine-netdmr-due-date/

V. TMDLS AND EPA AUTHORITY TO REGULATE FLOWS (IN STORMWATER)

A recent Virginia case, Virginia Dept. of Transp. v. U.S. E.P.A., 2013 WL 53741 (E.D.Va. Jan. 3, 2013), addressed an issue that has been simmering just below the surface for twenty years . . . . is EPA authorized by the CWA to regulate flows, or just the discharge of pollutants? In that case, EPA sought to issue a TMDL limiting the amount of stormwater flow that was being added to a twenty-five mile segment of Accotink Creek in northern Virginia to protect benthic

8

organisms from the deleterious effects of sediment and other pollutants as was using the quantity of water that could flow into the creek as a surrogate for the amount of pollutants that could be discharged in stormwater. The court rejected EPA’s "attempt to take liberties with the way Congress intended" for the agency to express TMDLs.

EPA Region 4 has publicly stated that they are hopeful that states will fill the gap and regulate flow. Kentucky has written flow requirements in some permits. But see KRS 224.16-050(4).

VI. COAL AND EPA AUTHORITY

In a line of cases holding that EPA had overstepped its bounds in an effort to address mountaintop mining, in the National Mining Ass’n v. Jackson 880 F.Supp.2d 119 (D.D.C. 2012), the District Court for the District of Columbia held that rejected EPA’s arguments that the Agency’s 2011 Final Guidance on Appalachian Surface Mining was not final agency action, that the Final Guidance was not ripe for review, and that the plaintiffs did not have standing to maintain their challenges to the Final Guidance. The court found that the "Guidance" was a de facto legislative rule. EPA has appealed the decision to the DC Circuit.

VII. JUDICIAL REVIEW OF §309 ORDERS – CWA §309(A)(3); 33 U.S.C.

§1339(A)(3)

(3) Whenever on the basis of any information available to him the Administrator finds that any person is in violation of section 301 ... of this Act, or is in violation of any permit condition or limitation implementing any of such sections in a permit issued under section 402 of this Act by him or by a State or in a permit issued under section 404 of this Act by a State, he shall issue an order requiring such person to comply with such section or requirement, or he shall bring a civil action in accordance with subsection (b) of this section.

Sackett v. EPA, ––– U.S. ––––, 132 S.Ct. 1367 (2012), overturned numerous longstanding Circuit Courts of Appeals decisions to hold that a person who is the recipient of an EPA nonpenalty order is entitled to judicial review under the Administrative Procedure Act. In this case, a couple in Idaho place fill material to build their home in a two-thirds acre lot in a subdivision. Shortly after beginning the work, EPA issued an order under §309(a)(3) requiring the Sacketts to remove the fill and engage in tree planting, or risk paying $37,500 in penalties for each day of having unauthorized fill in a wetland and an additional $37,500 per day for violating the order. EPA contended that the Sacketts had no right to appeal this order, and that it was not a final agency action, among other things. The Supreme Court found that the order was a final agency action, and that the CWA did not preclude judicial review, without addressing the Sackett’s constitutional claims that their due process rights had been violated and that they were being denied life, liberty and the pursuit of happiness. Instead, the Court held that the Sacketts could challenge the jurisdictional determination made by EPA, and that challenge is now pending.

9

Justice Alito was particularly annoyed with the federal government, writing in his concurring opinion:

The 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 Environmental Protection Agency (EPA) employees. The reach of the Clean Water Act is notoriously unclear. Any piece of land that is wet at least part of the year is in danger of being classified by EPA employees as wetlands covered by the Act, and according to the Federal Government, if property owners begin to construct a home on a lot that the agency thinks possesses the requisite wetness, the property owners are at the agency’s mercy. . . For 40 years, Congress has done nothing to resolve this critical ambiguity, and the EPA has not seen fit to promulgate a rule providing a clear and sufficiently limited definition of the phrase. Instead, the agency has relied on informal guidance . . . Allowing aggrieved property owners to sue under the Administrative Procedure Act is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem (emphasis added).

10

11

THE SUPERFUND RECYCLING EQUITY ACT (42 U.S.C. §9627) Christopher J. Bedell, P.E.

The Superfund Recycling Equity Act ("SREA"), Section 127 of CERCLA, 42 U.S.C. §9627, exempts certain people and companies who arranged for recycling and recyclable materials from liability under Sections 107(a)(3) and 107(a)(4) of CERCLA.

I. BRIEF BACKGROUND ON CERCLA

A. Before 1970, America had only a few environmental laws and no single agency was charged with enforcing them. Prior to CERCLA, such contamination was addressed, if at all, by common law causes of action such as nuisance, trespass, and strict liability for ultra-hazardous activities. 1 Over the ensuing decade, Congress passed twenty-seven major environmental laws and President Nixon created the Environmental Protection Agency (EPA).2

B. The Superfund statute (Comprehensive Environmental Response,

Compensation and Liability Act) also known as CERCLA: 1. Made culpable contaminators jointly and severally liable for the

cost to clean up their own toxic discharge. 2. If the contributing parties were no longer in business or could not

be identified then the Superfund would pay for a cleanup. 3. Parties who are liable for environmental cleanup costs may seek

contribution from other responsible parties. The right of contribution exists both in cost recovery actions commenced by governmental entities and in private cost recovery actions.3

C. CERCLA does not provide statutory guidance in Superfund allocations other than suggest it occur in an "equitable manner."

D. Since the enactment of the law, a body of case law and practical

experience has developed to enable parties to predict more accurately the range of likely outcomes in allocation disputes.4

1 Martha L. Judy, "Superfund at 30", 11 Vt. J. Envtl. L. 191 (2010).

2 Craig Collins, Toxic Loopholes Failure and Future Prospects for Environmental Law 5 (2010).

3 Ann J.MacNaughton, Environmental Dispute Resolution 144 (2002).

4 Id.

12

II. THE SUPERFUND RECYCLING EQUITY ACT

A. Situation prior to the Enactment of SREA

1. Liability under CERCLA had been controversial when it came to the recycling of materials containing "hazardous materials." Misinterpretation of Superfund liability caused great harm to the recycling industry by imposing potential liability on persons who sold secondary materials for recycling.5

2. Broad interpretation of "arranging for disposal" of materials

containing hazardous substance.6 3. Courts had held liable the persons selling materials like lead

batteries, scrap metal, spent solvent and contaminated styrene for recycling.7 But persons selling analogous virgin materials were not liable under CERCLA, even if the end user caused the same contamination using recycled and virgin materials.

B. The Enactment of SREA

1. Congress passed SREA in 1999 as part of the Omnibus Budget

Appropriations Act of 1999. 2. The amendment was intended to put recycled materials on equal

footing with virgin raw materials, and to correct the unintended consequences of CERCLA that punished recycling.8

5 1 L. of Solid Waste, Pollut. Prevent. and Recycl. §7:7 (2012).

6 Pneumo Abex Corp. v. High Point, Thomasville & Denton R. Co., 142 F.3d 769 (4th Cir. 1998).

7 Government brought action under Comprehensive Environmental Response, Compensation

and Liability Act (CERCLA) to recover costs it incurred in response to alleged release or threatened release of hazardous substances at hazardous waste site, and parties moved for summary judgment. On recommendation of Robert C. Mitchell, United States Magistrate Judge, the District Court, Lewis, J., held that persons who sold scrap materials to site owner "arranged" for treatment and disposal of hazardous substances at site within meaning of CERCLA. U.S. v. Pesses, 794 F.Supp. 151 (W.D. Pa. 1992). 8 "The Superfund Recycling Equity Act of 1995 is intended to place traditional recyclable, or

secondary, materials which are used as feedstocks in the manufacturing process on an equal footing with their virgin, or primary, materials counterparts. Traditional recyclables are made from paper, glass, plastic, metals, textiles, and rubber. This legislation has become necessary because of an unintended consequence of the Comprehensive Emergency Response, Compensation, and Liability Act (CERCLA) or Superfund. Some courts have interpreted CERCLA to mean that the sale of certain traditional recyclable feedstocks is an arrangement for the treatment or disposal of a hazardous substance and, therefore, fully subject to Superfund liability. While there exists in law and legislative history no suggestion whatever that the Congress intended to impede recycling in America by providing a strong preference for the use of virgin materials through the Superfund liability scheme, that is

13

3. The act established a new §127 of CERCLA providing an affirmative defense to liability when "recyclable materials sent for recycling."9

4. Accordingly, when persons establish by preponderance of

evidence that they were arranging for recycling, they will not be liable under §107(a)(3) of CERCLA.

5. Recyclable materials: The defense applicable to recycling

transactions involving materials such as scrap metal, scrap paper, scrap rubber – except whole tires – and spent batteries.10

a. It does not apply to shipping containers containing

hazardous substances, materials containing poly-chlorinated biphenyls at concentrations exceeding fifty parts per million.

b. Spent batteries are subject to the Act, even if they contain

some non-recyclable parts.11

6. Elements of the defense: A recycler defendant has the burden to prove all of the elements in Sections 127(c) and (d), but once he has established he is covered by the bona fide recycling criteria, then the burden of proof shifts to the plaintiff to prove the exclusions under Section 127(f): the recycler must prove the recyclable material:

a. Met a commercial specification. b. Existence of a market for the material.

precisely what has happened." Statements of U.S. Senator (at the time) Blanche Lincoln from the Congressional Record. 141 Cong. Rec. E269-05, (1995). 9 Superfund Recycling Equity Act (SREA) exempts battery recyclers from liability under CERCLA,

but does not affect liability under a state law like the Texas Solid Waste Disposal Act (SWDA). Comprehensive Environmental Response, Compensation, and Liability Act of 1980, §127, 42 U.S.C.A. §9627; V.T.C.A., Health & Safety Code §361.344(a). Del-Ray Battery Co. v. Douglas Battery Co., 635 F.3d 725 (5th Cir. 2011) cert. denied, 132 S.Ct. 559 (2011). 10

CERCLA §127(b). 11

Spent lead-acid batteries were "recyclable" under Superfund Recycling Equity Act, and thus scrap metal dealers that sold batteries to battery breaker for recycling were not subject to contribution liability under CERCLA for cleanup of battery breaking site, even if not all parts of batteries were in fact recyclable. Comprehensive Environmental Response, Compensation, and Liability Act of 1980, §127(b, c), 42 U.S.C.A. §9627(b, c). Gould Inc. v. A & M Battery & Tire Service, 232 F.3d 162 (3d Cir. 2000).

14

c. Substantial portion of the recyclable material made available for use as feedstock for the manufacture of a new saleable product.

d. The recyclable material could have been a replacement or

substitute of a virgin raw material. e. For transactions after February 27, 2000, the person

exercised reasonable care to determine that the consuming facility was in compliance with substantive environmental laws.

7. Additional elements for scrap metal transactions:

a. Compliance with Solid Waste Disposal Act and any applicable regulations and standards promulgated under the Solid Waste Disposal Act.

b. No melting prior to the transaction.

8. Additional elements for spent batteries:

a. No recovery of the valuable components of the battery. b. Lead-acid batteries: compliance with applicable federal

environmental laws related to recycling lead-acid batteries. c. Nickel, cadmium and other spent batteries: compliance

with federal environmental standards.

9. Exclusions:

The defense is not eligible to the individuals if they had an "objectively reasonable" basis to believe that:

a. The recyclable materials would not be recycled; b. The recyclable materials would be burned for energy

recovery or incinerated; c. For transactions occurring after February 27, 2000, that the

consuming facility was not in compliance with substantive provisions of laws related to recycling;

Objective reasonableness will be determined by the:

i. Size of the business; ii. Customary industry practices; iii. Price paid in the transaction;

15

iv. Ability to discover the nature of the recycling

facility's operations concerning the handling and processing associated with the material.

d. The person had "reason to believe" that the hazardous substances had been added to the recyclable materials for purposes other than recycling; and

e. The person failed to exercise "reasonable care" with

respect to managing and handling of the materials.

10. The exemption will not affect any concluded judicial or administrative action or any pending judicial action initiated by the United States prior to the enactment.12

III. CASES

A. Gould, Inc. v. A&M Battery & Tire Service, 232 F.3d 162 (3rd Cir. 2000)

Gould Inc. ("Gould") owned and operated a battery breaking facility which the defendants had shipped lead-acid batteries to for recycling. Gould entered into a Consent Order with USEPA to remediate the site, and in 1991 sued approximately 240 PRPs seeking cost recovery under CERCLA. Following a bench trial regarding allocation of response costs, Gould settled with all but four of the defendants. After the notices of appeal were filed, SREA passed, and the four defendants claimed that the Act shielded them from contribution liability. The plaintiff argued that the requirement under Section 127(c)(4), that the recyclable material could be a replacement or substitute for a virgin raw material, applied to the whole lead-acid battery, and the SREA did not apply unless every component of the battery was recyclable. The Third Circuit rejected that argument, pointing to the Congressional record, and finding that the language of Section 127(c)(4) was intended to explain when a recycling transaction displaces the use of virgin raw materials, not restrict the SREA's coverage to materials that are 100 percent recyclable.

B. Gould, Inc. v. A&M Battery & Tire Service, 176 F.Supp.2d 324 (M.D.Pa. 2001) Upon remand, the parties stipulated that the defendants satisfied all of the elements under Sections 127(c) and (e) (transactions involving lead-acid batteries), thus the second Gould case in District Court was only regarding the exclusions under Section 127(f).

1. Plaintiff's arguments:

a. Defendants were excluded from the exemption because they had an objectively reasonable basis to believe at the

12

SREA §127(i).

16

time that the Gould facility was not in compliance with substantive provisions of the environmental laws, §127(f)(1)(A)(iii), and

b. Defendants had failed to exercise reasonable care with

respect to the management and handling of recyclable material, §127(f)(1)(C).

2. The District Court held:

a. The objectively reasonable basis for belief standard is more rigorous than the simple negligence standard and that the reasonable negligence standard does not apply to all aspects of the recycling transaction. Gould, Inc., 176 F.Supp.2d at 333.

b. Based upon testimony at a hearing, the Court concluded

that the defendants' businesses were small, the parties followed the customary industry practice, and that even though the prices were slightly higher than average, the difference was not significant.

c. The Court concluded, though, that a call or visit to the

consuming facility would have revealed that the facility was doing its best to stay in compliance and that they were running a first-class operation. Further, a check with the governmental agencies would have shown that the agencies may not have been happy with the operation; however, the site was never shut down and the operators argued that they were continually striving to operate a proper facility. Based upon the specific facts of the case, the District Court held that the Plaintiff did not prove any of the exclusions and the Defendants were exempt under the Act.

C. California Dept. of Toxic Substances Control v. Interstate Non-Ferrous

Corp., 298 F.Supp.2d 930 (E.D.Cal. 2003). Insulated copper wire and scrap aluminum were exempt. The issues in that case were regarding Bottom Ash, dross and battery parts.

D. California Dept. of Toxic Substances Control v. Alco Pacific, Inc., 508

F.3d 930 (9th Cir. 2007). The court dismissed the defendants' claim that SREA applied because they did not prove that that the recyclable material met a commercial specification grade at the time of the transaction.

E. U.S. v. Mallinckrodt, Inc., 343 F.Supp.2d 809 (Ed.M. 2004). Court denied

Shell's claim for the recycling exception because the reconditioned fifty-five-gallon drums were excluded from the exception because they were containers thirty to 3,000 liters that have or had hazardous substances adhering to them, which was paint.

17

F. California Dept. of Toxic Substances Control v. Interstate Non-Ferrous Corp., 298 F.Supp.2d 930 (E.D.Cal. 2003).

State sued Barstow, owner of smelting facility that took waste materials to facility for processing under CERCLA for response, removal and cost recovery. All parties brought motions for summary judgment. Barstow claimed that the scrap materials brought to the smelter qualified for the exemption under SREA. The State agreed that Barstow's transactions involving insulated copper wire and scrap aluminum were exempt under §127. However, the State argued that the Bottom Ash, dross and battery parts did not meet the requirements under §127. The court found that the Bottom Ash was not like the batteries in the Gould case, which were brought whole to the recycling plant because, in this case, Barstow brought the insulated copper wire to the smelter to have the copper extracted and returned to Barstow, but the Bottom Ash from the copper extraction remained at the smelter. The Court concluded that there was a genuine issue as to whether Barstow dumped or arranged for the disposal of the Bottom Ash under CERCLA. The Court also found a genuine issue of fact as to the nature of the dross brought to the site and, therefore, whether it qualified as scrap metal to qualify for the exemption. Finally, the Court held that Barstow did not qualify for the recycling exemption for the battery parts because it recovered the valuable components of the batteries, which is expressly excluded in §127(e)(2).

G. U.S. v. Mountain Metal Co., 137 F.Supp.2d 1267 (N.D.Ala. 2001).

United States sought contribution under CERCLA for costs of cleanup of a battery recycling facility. The Court held that all of the sellers to the battery recycling facility fell within the SREA exception to "arranger" liability. The U.S. argued that one Defendant had an objectively reasonable basis to believe the battery recycler, ILCO, was not in compliance. The Court did not agree. The parties stipulated that the Defendant did not know of the non-compliance. Also, the Court found that the Defendant had no reason to know ILCO was not in compliance because they were a small company in New Jersey and ILCO was in Alabama. Also, the last sale to ILCO was in 1984, before USEPA proposed placing ILCO on the NPL list, and before it was actually placed on the list in 1986. Further, there was no evidence that ILCO was listed as a noncomplier in 1984 at the USEPA regional offices and, even if it were, "logic suggests that a small New Jersey company would not have realized it had to contact the EPA's regional office, not its national office, to obtain comprehensive information about ILCO. More importantly, the plaintiffs did not present any evidence that Lion Metals had any reason to become concerned about ILCO's compliance status in 1984. These factors taken together indicate that Lion Metals had no 'objectively reasonable basis' to believe ILCO was in non-compliance."

18

IV. USEPA SREA GUIDANCE

A. EPA has issued guidance as to how it will consider recyclers who may be able to assert the CERCLA defense.13

B. First, the USEPA states that as the recycling exemption is not automatic

and some "parties may prefer the protection afforded by a CERCLA settlement."14 USEPA encourages the Regions to explore settlement with these parties and use the guidance as a tool to craft an appropriate settlement. This could be interpreted to mean that EPA is recommending that it should dispute any initial claim of the recycling defense in the hopes that a PRP would quickly settle to avoid the challenge of proving the defense.

C. Factors in the guidance:

1. Specific facts of the site. 2. How and when the hazardous substances came to be associated

with the recycled materials. 3. Size of the shipping containers. 4. Nature of the transaction. 5. Extent of contamination at the site. 6. Impact of recycled materials at the site based on their relative

toxicity, mobility and persistence. 7. Compliance to the standards regarding the storage, transport and

management or other activities associated with the recyclable material.

8. Satisfaction of all other requirements of CERCLA.

V. ATTORNEY'S FEE

Any person who commences an action in contribution against a person who is not liable by operation of this section shall be liable to that person for all

13

Superfund Recycling Equity Act of 1999: Factors to Consider in a CERCLA Enforcement Case (August 2002) available at http://epa.gov/compliance/resources/policies/cleanup/superfund/srea-guide-1999.pdf. 14

Superfund Recycling Equity Act of 1999: Factors to Consider in a CERCLA Enforcement Case (August 2002) available at http://epa.gov/compliance/resources/policies/cleanup/superfund/srea-guide-1999.pdf.

19

reasonable costs of defending that action, including all reasonable attorney's and expert witness fees.15,16

15

42 U.S.C. §9627(j). 16

Evansville Greenway & Remediation Trust v. S. Indiana Gas & Elec. Co., Inc., 2012 WL 602638 (S.D. Ind. Feb. 23, 2012).

20

21

A GENERAL LOOK AT GENETIC ENGINEERING (INCLUDING GMOS, CLONES, AND CHIMERAS) AND

NANOTECHNOLOGY: WHEN IS NATURE BEING “POLLUTED”? Cathy Franck, J.D.

© 2013 Cathy Franck

I. INTRODUCTION – FRAMEWORKS

Some relevant policy background – framework of how sectors of society and culture which affect policy are organized today:

A. Post Secondary Education Pursuit Framework Arts Sciences Art Chemistry Literature Biology Philosophy Engineering Classics

How has the end-goal of the pursuit of these degrees changed over the years, as our population, thus our dominant culture and society have shifted from rural/agrarian/local & community based areas to metropolitan areas; how have our values changed, and is there value in respecting and recognizing both?

B. Every Day-Life Framework Umbrella

Academia

Wealth of Knowledge Sector

Religion

The Spiritual

Values Sector

Sustenance

Agricultural Value Sector

Business

Corporate Monetary Currency Economic Sector

Government

"The People"

Sustenance

Environmental Value Sector

Media

The Information Empowerment

Sector

Community

Priceless Friends and/or Family

22

C. Local v. National / Global Framework – Framework Can Affect Policy and Vice Versa

1. Information – media.

Small, local newspapers sell out to conglomerates 2. Monetary – banking.

Small, local banks sell out to multi-bank holding company conglomerates; prior to 1984 the statutes in this State (Commonwealth) were structured so that banks could not do business across county lines – banks (with few loophole exceptions) were prohibited from setting up a branch in any county other than where its principal office was located.

3. Agriculture – inputs.

Small, local seed companies sell out to chemical conglomerates. Whereas in the 1930s, many farmers saved their own seed, and others purchased from locally-owned seed companies or co-ops whose seeds were local to the area. By 1997, four of the largest corn seed companies sold almost 70 percent of the corn seed in this country. See USDA Economic Research Service, EIB-16, Agricultural Resources and Environmental Indicators, 67-68 (July 2006), http://www.usda.gov/publications/eib-economic-information-bulletin/eib16.aspx, accessed 6/25/2012.

4. Economic – general.

Small, local stores do not easily compete with organizational slickness of nationwide chains and consumers are easily led away; nationwide chains located locally in some instances cannot compete with transactional facility of internet transactions.

5. Information – recorded knowledge.

Small, local households at one time could purchase a library of information and retain it physically on their own bookshelves, e.g. The Encyclopedia Brittanica. Even this ability is beginning to disappear as some knowledge bases are no longer typeset and sold for private, bound volume ownership. However, the virtual format can be more easily edited and updated online.

23

D. The Attempt at a Framework to Merge the Two Most Independent Sectors: Agriculture and Environment (first together, and then) into the Business Sector

1. Economic gain. 2. The sciences. 3. Related corporations. 4. Taking once-independent contractors and providing an overlay of

a corporate team, organizational framework; providing a sense of belonging.

5. Buzzword – "Science-based." Through what other methodology

can decisions be based? What other foundations exist for creating legal, moral, ethical, and social guidelines? Nature-based, profit-based, ordinary common man common sense-based, principle-based, etc.

6. Some question co-opting (not co-oping).

E. NGOs – Where Do They Fit into this Web of Frameworks? As business has merged with government, to influence it, NGOs come

into existence, to protect those who lose representation. F. "Big" Anything: Small & Local

1. Corporation: sole proprietor. 2. Conglomerate firm: sole practitioner. 3. Company: independent contractor. 4. Large corporation: small company.

To understand policy, one must understand the cultural and societal framework. Once the framework(s) is (are) recognized, the value system of that framework can be deciphered. And the policy choices and existing legal framework can be understood. Take a brief look at a profession with universal qualities. One of the basic tenants of salesmanship, and perhaps all professions, is to look at what motivates an individual to spend his/her life’s time working in a given field, spending the majority of one’s waking time at a given job. The philosophy behind top level salesmanship is that it is important to never focus on the money, never add up what the pay will be; instead, focus on the client’s needs and goals and on doing what is best for the client, regardless of the monetary reward to self. There might be some monetary losses to the salesperson, but doing the ultimate good for the client will ultimately benefit the salesperson, from the standpoint of

24

integrity, inner peace, and positive client relationships – basically, the golden rule. There is clearly a line drawn, that each salesperson recognizes, in knowing whether he/she is putting the client’s interests or self interests first. Societies and cultures also reflect their own overall understanding of that line.

II. ENVIRONMENTAL AND ENVIRONMENTALIST LAWS ARE EXCEEDINGLY

SLOW TO CATCH UP WITH NEW TECHNOLOGIES – NORMALLY REQUIRES YEARS OF TESTING INVOLVED

Exception may occur to quarantine or prohibit the new technology.

A. Obvious Environmental Destructiveness – Extreme Physical Destruction

of Human and Natural Habitats B. Fairly Obvious Mutagenic & Carcinogenic Properties and/or Obvious

Immediate Health Issues C. Public Awareness

III. CURRENT MODERN TECHNOLOGIES HAVE BEEN ROLLED OUT VIA A

QUIETER, MORE DELIBERATE PROCESS, THOUGH LESS PUBLIC AWARENESS

A. Biotechnology (Genetic Engineering), including:

1. Genetically modified organisms (GMOs) (the broader, commonly used term for genetically engineered organisms) / genetically engineered organisms.

2. Clones. 3. Chimeras.

B. Nanotechnology

In the early 1990s, some American media outlets covered the arrival of biotech food and agricultural products in the marketplace.

March 23, 1990 Genetically Engineered Cheese Enzyme Approved – The FDA approved what it says is the first genetically engineered food product for humans – rennin – an enzyme used in making cheese. The FDA announced that this GMO enzyme developed by Pfizer, Inc. was safe for humans. See News Briefs Compiled from Wire Dispatches, The Courier Journal, Mar. 25, 1990, at A6.

1992-93 Calgene FlavrSavr (trademarked) "no-rot" tomato, supposedly lasts two weeks longer than natural tomato. Announced May 27, 1992 that this product was to be released to the general public in the future.

The American news media as shown at the time was generally favorable to balanced, regarding this new technology.

25

However, some law review articles and Congressional Hearings speakers earlier raised the question of caution. See e.g., Note, "Designer Genes that Don’t Fit: A Tort Regime for Commercial Releases of Genetic Engineering Products," 100 Harv. L. Rev. 1086-105 (1987) (hereinafter Note, Harv. L. Rev.), mentioning the possibilities of ecological risks, "super-pest" development, disease. This Note also explains the National Institute of Health’s role in 1976 of creating initial guidelines for this new technology. Such guidelines, according to this Note originally (and until 1978 when exceptions were allowed) prohibited all intentional release of what was then the main terminology for referring to genetically engineered material: recombinant DNA or rDNA. (Although recombination of other parts of cellular makeup can be considered genetic engineering as well.) However, the NIH guidelines refer only to NIH performed or funded research, and not private companies. (With private corporations and major investors in such corporations interested in gaining control of this technology as well as in circumventing NIH guidelines, the Bayh-Dole Act later in 1983 allowed private corporations to collaborate with the public universities and fund their research, then also to co-own any patent resultant from such research. Previously, public universities did not accept funding from private corporations and patents resulting from work at public research institutions funded by public money were issued to the government and belonged to the public.) See also, as mentioned within that Note, "The Potential Environmental Consequences of Genetic Engineering: Hearing before the Subcomm. on Toxic Substances and Environmental Oversight of the Senate Comm. on Environment and Public Works," 98th Cong., 2d Sess. I (1984); and Staff of the Subcomm. on Investigations and Oversight of the House Comm. on Science and Technology, 98th Cong., 2d Sess., The Environmental Implications of Genetic Engineering 20-24 (Comm. Print 1984). See also Ruth E. Harlow, Note, "The EPA and Biotechnology Regulation: Coping with Scientific Uncertainty," 95 Yale L. J. 553-576 (1985-86). Today, even some academic textbooks (see generally William S. Klug, Michael R. Cummings, Charlotte A. Spencer, Michael A. Palladino, Concepts of Genetics, 9, Beth Wilbur et al. eds., 10th ed. 2012) indicate that biotechnology has occurred in our country in a vacuum of little notice, see id., and that there are consumer safety and environmental questions that have not been thoroughly addressed to the consumers’ satisfaction. See id. at 651, raising the issue of consumers’ questions of genetically modified food safety – from the health standpoint, as well as environmental concerns regarding gene transfer, biodiversity loss, toxicity, herbicide resistance, and invasiveness, but; however, not questioning plant incorporated protectants (formerly known as plant-pesticides, some of which are crops that have now been genetically modified to contain pesticide material within the plant structure itself) pollen, nor questioning the effect of synthetically modified pollen of any sort as it interfaces with the entire environment, including human water and air sources, and the eventual cumulative effect of multiple types of GMO pollen interacting with each other and the environment, nor questioning the effect of discharge into soil matter via decay and/or root system discharge, nor questioning the use of genetically engineered microbial pesticides, but; however, raising ethical issues, and indicating that public awareness is not

26

widespread nor is the general populace all that educated/informed of this technology and that law and policy have not yet caught up with the technological activity. See id. at 10-11.

IV. ANOTHER FRAMEWORK – A REGULATORY FRAMEWORK THAT WAS

CREATED FOR THE NEW FIELD OF BIOTECHNOLOGY

The Coordinated Framework for Regulation of Biotechnology (Coordinated Framework) – Created by the White House’s Office of Science and Technology Policy, See 49 Fed. Reg. 50,856 (1984); 51 Fed. Reg. 23302 (1986): A. Environmental Protection Agency (EPA)

1. Initially, Toxic Substances Control Act (TSCA), 15 USC §2601 et.

seq. 2. Animal and Plant Health Inspection Services (APHIS) – microbial

pesticides. 3. Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7

USC §136 et. seq. 4. Federal Food, Drug, and Cosmetic Act (FFDCA) 21 USC §301 et.

seq. 5. National Environmental Policy Act (NEPA), 42 USC §4321 et. seq. 6. Plant Quarantine Act (PQA), 7 USC §151 et. seq.

B. Department of Agriculture (USDA) 1. NEPA, (Environmental Assessment, Environmental Impact

Statement). 2. PQA. 3. Federal Plant Pest Act, 7 USC §150(aa) et. seq. (Repealed).

C. Food and Drug Administration (FDA)

No special treatment for biotech foods under the FFDCA; regulated the same as non-GMO food

D. NIH – Guidelines E. Occupational Safety and Health Administration (OSHA)

No special treatment at this time for biotech products in the workplace.

27

See generally, Note, Harv. L. Rev. at 1089-92. See also National Research Council, Committee on Genetically Modified Pest-Protected Plants, Genetically Modified Pest-Protected Plants – Science and Regulation, 156-59, (2000).

V. GOVERNMENT CHARTERED ORGANIZATION OR GOVERNMENT

DEPARTMENT MATERIALS ADDRESSING BIOTECHNOLOGY THAT EXISTS IN THE OPEN ENVIRONMENT

A. National Academy of Sciences (NAS)

Now a non-profit, private society, was established in 1863 by an Act of Congress, and is under a federal mandate to advise the federal government based on independent, objective opinion, regarding technical and scientific matters. Please note, according to the second (ii) and third (iii) page of the publications "a" and "k" consecutively, shown below, NAS "is dedicated to the furtherance of science and technology …." It has a sister organization, established under its same charter, granted by the federal government in 1863. This sister organization is the National Academy of Engineering (NAE) and was established in 1964. The Institute of Medicine (IM) is another organization with advisory responsibilities derived from the same charter, as well as is the National Research Council.

Some of the publications copyrighted by the NAS on the topic of biotechnology, with some addressing environmental impacts, include:

1. Agricultural Biotechnology: Strategies for National

Competitiveness, (1987). 2. Field Testing Genetically Modified Organisms: Framework for

Decisions, (1989). 3. Managing Global Resources – The U.S. National Plant

Germplasm System, (1991). 4. Managing Global Resources – Agricultural Crop Issues and

Policies, (1993). 5. Genetically Modified Pest-Protected Plants – Science and

Regulation, (2000). 6. Ecological Monitoring of Genetically Modified Crops, (2001). 7. Environmental Effects of Transgenic Plants: Scope and Adequacy

of Review, (2002).

"Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project." Id. at ii (unnumbered page).

28

8. Animal Biotechnology: Science Based Concerns, (2002).

9. Biological Confinement of Genetically Engineered Organisms, (2004).

"Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project." Id. at ii (unnumbered page).

10. Safety of Genetically Engineered Foods: Approaches to

Assessing Unintended Health Effects, (2004).

"The views presented in this report are those of the Committee on Identifying and Assessing Unintended Effects of Genetically Engineered Foods on Human Health and are not necessarily those of the funding agencies." Id. at ii (unnumbered page).

11. The Impact of Genetically Engineered Crops on Farm

Sustainability in the United States, (2010).

"This study was funded by the National Academies. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the organizations or agencies that provided support for this project." Id. at ii (unnumbered page). This study admits upfront the controversy surrounding GE technology, as wells as the limits readers might have in viewing the authors’ impartiality. See id. at p. viii, stating how GE is controversial from both a scientific and ideological standpoint, and emphasizing readers may read the biographies of the authors to know they are accomplished and to see the composition of the committee that constructed this study. Please note, it is possible for scientists to differ in approach and opinion, just as scientific results may vary, regardless of funding. Variable exists. However, some studies above, without such direct language as one immediately preceding, were funded by corporations and other affiliated funders, including those promoting this technology.

B. Congressional Research Service (CRS)

Provides policy and legal analysis to Members of Congress and congressional committees upon request. Its analysis is claimed to be objective and non-partisan. It was established as a department in 1914.

Shown below are a number of research projects, compiled by the CRS that relate to new, emerging fields of science and the products of such fields.

29

1. Genetically engineered/genetically modified plants.

a. R41395, "Deregulating Genetically Engineered Alfalfa and

Sugar Beets: Legal and Administrative Responses," January 25, 2012.

b. RL 32809, "Agricultural Biotechnology: Background and

Recent Issues," Report for Congress, June 18, 2011. c. RL33527, "Technology Transfer: Use of Federally Funded

Research and Development," December 7, 2010. d. RL 32809, "Agricultural Biotechnology: Background and

Recent Issues," Report for Congress, January 28, 2010. e. RL32809, "Agricultural Biotechnology: Background and

Recent Issues," Report for Congress, March 7, 2005. f. RS21620, "Status of Genetically Engineered Wheat in

North America," Report for Congress, Nov. 4, 2004. (Major concern is international market loss; environmentalists and farmers formed a coalition to protest this product; at the time of publication, only one foreign and the most recognized U.S. agri-chemical company have developed such a product.)

g. RL 30594, "Biosafety Protocol for Genetically Modified

Organisms: Overview," Report for Congress, Updated Jan. 18, 2001.

h. RS20507, "Labeling of Genetically Modified Foods,"

Report for Congress, Updated Jan. 18, 2001. i. RS20732, "StarlinkTM Corn Controversy: Background,"

Report for Congress, Updated Jan. 10, 2001. j. RL30648, "An Examination of the Issues Surrounding

Biotechnology Patenting and Its Effect Upon Entrepreneurial Companies," Report for Congress, Updated Aug. 31, 2000.

2. Nanotechnology.

a. RL34511, "Nanotechnology: A Policy Primer," Apr. 13, 2012.

b. RL34401, "The National Nanotechnology Initiative:

Overview, Reauthorization, and Appropriations Issues," Jan. 19, 2011.

30

c. RL34614, "Nanotechnology and Environmental, Health, and Safety: Issues for Consideration," September 29, 2010.

3. Genetically engineered animals and cloning.

a. R4186, "Genetically Engineered Fish and Seafood: Environmental Concerns," June 7, 2011.

b. RL 33334, "Biotechnology in Animal Agriculture: Status

and Current Issues," September 10, 2010. c. RL 33334, "Biotechnology in Animal Agriculture, Status

and Current Issues," Report for Congress, March 27, 2006. d. RL 32974, "Genetically Engineered Fish and Seafood,"

Report for Congress, July 1, 2005. e. RL31211, "Cloning: A Select Chronology, 1997-2004,"

Report for Congress, Updated March 9, 2004. f. RL31211, "Cloning, A Select Chronology, 1997-2003,"

Report for Congress, Updated March 10, 2003. g. RS21517, "State Laws on Human Cloning," Report for

Congress, Updated May 14, 2003.

VI. WHAT TYPE OF SUBSTANCES ARE POLLUTANTS; WHY DO WE CARE; AND, WHO IS IT THAT CARES?

A. Challenges Relating to Earth’s Sustaining Natural Resources

1. A challenge for mankind to survive on the existing resources that nature provides:

a. Water. b. Soil. c. Sunshine. d. Air. e. Food.

2. A challenge to maximize nature’s resources to ensure the

availability of these existing sustaining resources. 3. A determination to maximize and/or increase these resources for

the benefit of mankind, or at least the benefit of some groups.

31

4. A challenge to minimize resource usage, work with nature, allow fields some fallow time for natural soil composition to rebuild.

B. A Substance Can Be Denoted as a Pollutant in a Variety of Ways

1. Private, contractual language. 2. Corporate, contractual language. 3. Statutory language. 4. Regulatory language. 5. Other agency language (including permits). 6. Treaty language. 7. Court system case law. 8. Arbitration case law. 9. Scientific statements. 10. Common sense.

C. People Have Many Different Reasons for Wanting to Prohibit Pollution

Some:

1. Care from an ideological standpoint. 2. Consider it a duty to protect that which cannot protect itself and

see mutation of genes an assault on the building blocks of nature and life.

3. Consider it a basic principle to exercise extreme precaution when

new technologies are introduced. 4. Consider it a basic principle that certain things are not to be

violated. 5. Trust nature and evolution above mankind’s scientific engineering

with such that cross-breeds and infiltrates air, water, consumables.

6. See a direct connection between the health of the environment

and the health of mankind, and develop concern when nature is being affected at the basic cellular level, out of fear of the unknown or otherwise.

32

7. Recognize health risks of substances of longstanding usage which are well-recognized now as causing health and neurological problems to people and damage to the environment, and desire to exercise precaution with new substances.

8. Do not want to see the natural gene tampered with from a

science-based concern standpoint, as science is progressing and finding the specific genes which source specific behaviors, physical characteristics, temperament variations, etc., and as science is progressing and learning more about horizontal (a.k.a. lateral) gene transfer.

9. See great value (beyond monetary) for current and future

generations in the preservation of biodiversity, and that destruction of any level of biodiversity – genetic, species, ecosystem – is counterintuitive.

D. Some people do not see altering particles to the atom scale and cells at

the genetic level as introducing anything potentially destructive into the environment. Nor do they see any ethical issues to be addressed. Some: 1. Believe that man, through science, has the right and duty to

manipulate nature to the potential benefit of all or a sub-group of mankind.

2. Ascribe to one report’s particular presentation which created a

simile between the biological processes used to create beer, wine, and cheese and modern biotechnological processes. See 1981 Office of Technology Assessment Report, U.S. Congress, Impacts of Applied Genetics: Microorganisms, Plants and Animals, 4, 49 (1981) at 137-40. But see Jocelyn E. Krebs, Elliot S. Goldstein, Stephen T. Kilpatrick, Lewin’s Genes X, 51, 10th ed. 2011, for some of the common process methods of modern biotechnology which include: a. Introducing new/foreign DNA by using a virus or bacteria to

infect the cell. b. Attaching the new/foreign DNA to the cellular membrane

with liposomes (which act as fusing agents). c. Using a microneedle and injecting the new/foreign DNA

into the cell nucleus or cytoplasm. d. Coating nanoparticles with the new/foreign DNA and

shooting the nanoparticles into the cell, using a gene gun.

Cheese, wine and beer could be distinguished by the fact they do not reproduce and infiltrate the open environment.

33

3. Believe scientific exploration should incur no limits or boundaries. 4. Do not want to promote a viable system in any economic sector

(such as agriculture) unless it creates profit from inputs, as they want to see wider sharing of the economic power derived from providing all the nation’s necessities, into many sectors.

Would available agriculture systems that instead utilize crop rotation, concurrent crop diversity in planting seed with nature’s genetic makeup, organic cover crop rolling, etc., which may in other ways spread the economic power to others by allowing fewer inputs developed off-farm, meet that need appropriately? A basic question is, how do we create policy to keep our farmers competitive and their products acceptable to all segments of society?

VII. WHAT IS A "POLLUTANT"? A. Liability Insurance Policy, example of language below:

"smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants" at 97 A.L.R. 5th 359, accessed online 2/14/2013.

B. Federal Law

Definition can vary by statute. Some examples include: 1. Clean Air Act (CAA) "Pollutant."

a. Defines "air pollutant" at 49 USC §7602(g) as "any air pollution agent or combination of such agents, including any physical, chemical, biological, radioactive (including source material, special nuclear material, and byproduct material) substance or matter which is emitted into or otherwise enters the ambient air. Such term includes any precursors to the formation of any air pollutant, to the extent the Administrator has identified such precursor or precursors for the particular purpose for which the term ‘air pollutant’ is used."

b. 49 USC §7602(h) continues by stating: "All language

referring to effects on welfare includes, but is not limited to, effects on soils, water, crops, vegetation, manmade materials, animals, wildlife, weather, visibility, and climate, damage to and deterioration of property, and hazards to transportation, as well as effects on economic values and on personal comfort and well-being, whether caused by transformation, conversion, or combination with other air pollutants."

34

c. This statute includes at 42 USC §7419(f) its "Standard to protect health and environment," and provides that the EPA Administrator shall consider and make recommendations based on:

"(1)(C) the actual health effects with respect to persons living in the vicinity of sources, and available epidemiological or other health studies, risks presented by background concentrations of hazardous air pollutants, any uncertainties in risk assessment methodology or other health assessment technique, and any negative health or environmental consequences to the community of efforts to reduce such risks"

2. Resource Conservation and Recovery Act (RCRA) at 42 USC

§6903(5) uses the term "hazardous waste, mean[ing]":

"a solid waste, or combination of solid wastes, which because of its quantity, concentration, or physical, chemical, or infectious characteristics may— (A) cause, or significantly contribute to an increase in mortality or an increase in serious irreversible, or incapacitating reversible, illness; or (B) pose a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported, or disposed of, or otherwise managed."

3. Toxic Substance Control Act (TSCA) at 15 USC §2609(c), in

determining which substances and mixtures to regulate or sanction, directs the EPA Administrator to look at "carcinogenic, mutagenic, teratogenic, and ecological effects of chemical substances and mixtures."

Note, TSCA does not cover "any pesticide (as defined in the Federal Insecticide, Fungicide, and Rodenticide Act) when manufactured, processed, or distributed in commerce for use as a pesticide, … [nor] any source material, special nuclear material, or byproduct material, … [nor] any food, food additive, drug, cosmetic, or device (as such terms are defined in section 201 of the Federal Food, Drug, and Cosmetic Act) when manufactured, processed, or distributed in commerce for use as a food, food additive, drug, cosmetic or device [with the term "food" including poultry, meat, eggs, and their products, as defined by applicable statutes]." 15 USC §2602(c).

35

4. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) defines "hazardous substance" at 42 USC §9601(14) by incorporating "certain lists of substances, wastes and pollutants identified in a number of other environmental states including the Clean Water Act," "pollutants listed in the Solid Waste Disposal Act, as amended by the Resource Conservation and Control Act, 42 USC §6921 et seq.; the Clean Air Act, 42 USC §7401 et. seq., and the Toxic Substances Control Act, 15 USC §2601 et seq."

C. Agency Language

NPDES Permit which defines "toxic pollutant" as meaning:

"those pollutants, or combinations of pollutants, including disease-causing agents, which after discharge and upon exposure, ingestion, inhalation, or assimilation into any organism, either directly from the environment or indirectly by ingestion through food chains, may … cause death, disease, behavioral abnormalities, cancer, genetic mutations, physiological malformations, including malfunctions in reproduction, or physical deformations in such organisms or their offspring."

See, e.g., Pennsylvania Department of Environmental Protection General Sample NPDES Permit for Discharges of Stormwater Associated with Industrial Activities.

The common path in deciding what substances humanity, within our nation, considers not to be a great match for our ecosystem is to scrutinize those substances that create health problems, with some particular consideration in congressional hearings given to the health effects of the youth and the economic costs to providing health care, or in the case of neurological damage, the economic cost to society of low income earners. Human health as a basic theme is considered, as well as is the theme of scrutinizing those substances that interfere with the products and processes of natural environment.

VIII. BIOTECHNOLOGY

Medical biotechnology can take place within a closed, controlled environment. Plant (including grass, tree, flower, crop), animal, and organism biotechnology is released, without control, into the open environment, where it can breed and/or reproduce, unchecked. There is no labeling of any seed, feed, or fiber, providing nature a challenge to maintain its evolved genetics and consumers no ability to exercise freedom of choice.

Some of the Bills Introduced Affecting

A. 112th Congress, 1st Session

1. H.R. 307 Seed Availability and Competition Act.

36

2. H.R. 520 Labeling of GE Fish. 3. H.R. 521 Prevent Approval of GE Fish. 4. H.R. 3553 Genetically Engineered Food Right to Know Act. 5. H.R. 3554 Genetically Engineered Safety Act. 6. H.R. 3555 Genetically Engineered Crop and Animal Farmer

Protection Act (Also referred to as Genetically Engineered Technology Farmer Protection Act).

7. S 229 Labeling of Genetically Engineered Fish. 8. S 230 Prevent Approval of GE Fish.

B. 111th Congress

1. H.R. 5577 Genetically Engineered Food Right to Know Act. 2. H.R. 5578 Genetically Engineered Safety Act. 3. H.R. 5579 Genetically Engineered Technology Farmer Protection

Act. 4. H.R. 6265 Prevent Approval of Genetically Engineered Fish. 5. H.R. 6325 Consumer Right to Know Regarding Cloned Products

and Label Genetically Engineered Fish. 6. S. 3969 Label Genetically Engineered Fish. 7. S. 3971 Prevent Approval of Genetically Engineered Fish.

See also The Code of Federal Regulations, for many of the agency regulations.

IX. NANOTECHNOLOGY

A nanoparticle is a categorization by size. A nanometer is equal to 10-9 meters. Nanotechnology involves the study, creation, and attempt to control particles that have dimensions of less than 100 nanometers. (10-9m roughly equals 500 atom diameters.) Matter, when synthetically broken down into super small particles, takes on some different characteristics as the particles decrease to sub-atomic size. Some changes include:

37

Macro size Nano size Opaque can become Transparent Chemically stable can become Combustible Electrical insulator can become Electrical conductor Small surface area can become Collective large surface area

See generally Fundamentals of Materials Science and Engineering, 4th Ed., William D. Callister, Jr. & David G. Rethwisch, (2012), p. 11. Newly developed materials must be assessed for toxicity and harm to humans and other living beings. The main concern expressed with nanoparticles seems to be the overall surface area-to-volume ratios have increased and this modifies the chemical nature of the particle. Other concerns include that the small size can allow for absorption through the skin, intestinal tract, and lungs, and may lead to health issues. Id. at 12. Another potential issue is that the body’s filtering organs, such as the liver, may not be designed to remove nanoparticles from the bloodstream. And what effect do these particles have on all living plants, beings, and organisms when the particles are released into the open environment. Some nanoparticles occur naturally, such as those found in smoke. However, this recent technology which allows scientists to deliberately engineer nanoparticles from larger particles has become an issue of study. Researchers are exploring medicinal value of nanoparticles, and they are also exploring use of nanoparticles in agricultural pesticides, in food products to enhance taste, in food packaging materials, cosmetics, sunscreen and among other uses such as in tires, tennis balls, and other consumer products.

Some Bills Affecting:

A. 112th Congress

1. H.R. 2749 Nanotechnology Advancement and New Opportunities Act.

2. H.R. 2359 Safe Cosmetics Act.

3. S. 1669 Nanotechnology Regulatory Science Act of 2011.

4. H.R. 820 Nanotechnology Advancement and New Opportunities Act.

B. Previous Congress Introductions

1. H.R. 5116 National Nanotechnology Initiative Amendments Act of 2010.

2. H.R. 554 National Nanotechnology Initiative Amendments Act of 2009.

3. S. 2942 Nanotechnology Safety Act of 2010.

4. S. 1482 National Nanotechnology Amendments Act of 2009.

38

X. CLONING

Timeline excerpts below from Mary V. Wright, Cong. Research Serv., RL31211, "Cloning: A Select Chronology, 1997-2004," CRS Report for Congress, Updated March 9, 2004. February 23, 1997 – Dolly the sheep is cloned from adult sheep cells. Genetics are exactly identical to the sheep from which she was cloned. February 24, 1997 – President Clinton asks National Bioethics Advisory Commission to study legal and ethical aspects of cloning. March 2, 1997 – Two monkeys were cloned from embryo cells. March 4, 1997 – President Clinton issues memo for executive department and agency heads entitled "Prohibition on Federal Funding for Cloning of Human Beings." House Committee on Science subcommittee on Technology holds hearing – "Bio Technology and the Ethics of Cloning: How Far Should We Go?" … June 17, 1997 – Senate Labor and Human Resources Committee subcommittee on Public Health and Safety holds hearing – "Ethics and Theology: A Continuation of the National Discussion on Human Cloning." … August 7, 1997 – Gene, the bull, is cloned from fetal stem cells. December 18, 1997 – Researchers create lambs that carry a human gene, using nuclear transfer technology. November 28, 2001 – President Bush issues Executive Order 13237 which establishes the President’s Council on Bioethics. Other cloning processes are invented; goats are cloned to produce milk containing a human protein. For the entire timeline, refer to the CRS report at id.

Some Proposed Bills:

A. H.R. 6325 Consumer Right to Know Regarding Cloned Products and Label Genetically Engineered Fish

B. H.R. 6623 Human Cloning Prohibition Act of 2012

XI. CHIMERAS

Chimeras contain genetic material from two entirely different species, that have been synthesized by biotechnology and such genetic matter occurs either in the created chimeric being or its offspring; however, the genetic material does not mix in the same cell. Thus, the chimera has cells from two different beings, and

39

none of its individual cells contain cellular material mixed from both beings that were used to create the chimera. For more information on chimeras, please see Ryan Hagglund, "Patentability of Human-Animal Chimeras," Santa Clara Computer & High Tech. L. J., Vol. 25 (2008) p. 51-104.

Why are there any concerns at all? Many of the concerns regarding new technologies stem from the recognition that sometimes science deems a type of matter or product safe, then later it reverses itself. Lead paint, lead in gasoline, asbestos insulation, are just a few examples. Some court cases are beginning to recognize the progression of science in the informational knowledge it acquires. See, e.g., International Dairy Foods Ass'n. v. Boggs, 2010 WL 3782193 (6th Cir. Sep. 30, 2010) at 6. "The failure to discover [a genetically engineered hormone] in a [a consumable product] is not necessarily because [the artificial hormone] is absent in such [product], but rather because scientists have been unable to perfect a test to discover it." Many scientists recognize the present limitations and ongoing changes in knowledge and information that take place within the field of science. See Elizabeth Pennisi, "Does a Gene’s Location in the Nucleus Matter?," 334 Science 1050-51 (2011) (part of a series of articles reflecting the cover topic of the edition referring to what we don’t understand about cellular makeup, activity and function). Some people have an innate sense of the integrity of all life and value its composition of natural individuality and diverse grouping of such individual entities. They view forced genetic mixing at the cellular level (or in the case of chimeras, with such close cellular proximity sharing space within the same engineered being) as the ultimate in the unhealthy act of "boundary crossing." Whereas the cigarette industry did not create any framework to contain cigarette smoke so that it would not affect people who were offended by it and ultimately many people suffered from second-hand smoke inhalation, it could be argued had smokers found a way to smoke without their product "crossing boundaries" to affect other people and/or their property (clothes smelling after a night out at a restaurant, etc.), the tobacco industry might still be producing for the local cigarette industry in quantities of years’ past. These ethical, moral (harmonious), legal, and social issues were not addressed. With most people, it is when "my" smoke affects "you" directly, or perhaps when "your" synthesized pollen lands on "my" property, that you will hear the complaints. And when genetically engineered pollen lands on organic farm land (which has been mapped out with a variety of plantings, farmed using rotational methods, cover crops later rolled in spring, worked to best avoid use of synthetic pesticides and fertilizers, farmed more as an expertise craftsmanship, seeded with seed from the purest as close to nature genetics to be found, as "organic" is the only federal label in this country that indicates GMO-free), or on any land that utilizes a GMO-free system, a significant boundary has been crossed. It is more so boundary crossing than when a group of smokers at the next table in the restaurant blows smoke for the non-smokers to inhale. It is boundary crossing of destruction of a way of life which has a specific end goal: the preservation of

40

nature’s genetics in the crops and animals some of our farmers raise for sustenance, which such farmers raise with the understanding that nature’s genetics in our sustenance are the genetics that are life- and health-providing. And with the understanding that we don’t know all there is to know yet about the secrets of DNA, RNA, chromosomes, transcription, gene silencing, horizontal transfer, and other physical traits and activities involved in genetic engineering and the cumulative effects of releasing such modified pollen, root matter, and other organisms into the environment. What kind of framework does our nation need to create for the new, emerging, potentially controversial technologies, and how do we protect those who are reliant on a livelihood and lifestyle that is threatened by any such new, non-traditional technology, which has the ability to cross-breed with the existent traditional methodology products. And how do we protect those economically who have become reliant on a livelihood that is based on new, emerging technologies. As with almost all policy questions, there is no simple answer. Some states have attempted to address this issue at the state level. Early on, in 1988, Maine created a Commission on Biotechnology and Genetic Engineering "to address the legitimate concerns of the public about the release of microorganisms into the environment as a result of the increased use of biotechnology in agricultural and other industries." See Executive Summary of the commission to Study Biotechnology & Genetic Engineering, 1, (1988). Washington State has attempted to define "sustainable" in a way that cannot be co-opted, see RCW 15.92.010 (11), and to create its own state agricultural extension system by establishing "[a] center for sustaining agriculture and natural resources … at Washington State University. The center shall provide leadership in research, extension, and resident instruction programs to sustain agriculture and natural resources." RCW 15.92.020.

Iowa, in 1989, through its Groundwater Protection Act, see IA Code §266.39 (2011), has established the Leopold Center for Sustainable Agriculture, and Section B provides for research grants. Some counties, townships, and countries prohibit the planting of genetically engineered seed within their boundaries, and some countries label genetically engineered food products on the food packages. Some states within this country currently have their own labeling initiatives in the works. The balance – between a healthy and favored agricultural economy, a reassuring, traditional food and textile supply, a vibrant community, informed consumers, and a healthy, natural, unpolluted environment in which to enjoy all – is delicate. For those interested in understanding the reasoning behind bringing such a concept as cellular synthetic modification into existence, understanding of patent laws and ownership of nature are important, as well as understanding the concepts written about in Section V. above. For those interested in better understanding policy creation and politics, some insight may be attained from quietly heralded documentaries such as The Future of Food (Lily Films, 2004) or The World According to Monsanto (National Film Board of Canada, 2008). On the other hand, standard big-screen movies exploring the topic of policy unfolding

41

(via a different issue) include Enron: The Smartest Guys in the Room (Magnolia Home Entertainment, 2005). As a wrap-up: Per a January 2011 Wall Street Journal article, New York’s then-new attorney general, Eric Schneiderman ran on a platform that included cleaning up the state capitol, its judicial system and the environment. The article also listed some items that may have been on his agenda, including workplace discrimination and companies that commit "green fraud" by claiming products are organic when they are not. This was attributed to sources familiar with his office. See "A New New York State of Mind, Top Cop Cut from a Different Cloth," The Wall Street Journal, January 15-16, 2011, at B1. See also a New York Times quote attributed to A. Steiner, in "Trying to Lace Together a Consensus on Biodiversity across a Global Landscape," September 30, 2010, at A8, here paraphrased, indicating:

We are wiping away information from "the hard disk of life" without even arriving at the beginning of the understanding of its value.

While consumers in this country are beginning to become aware of these changes in life that surround us, and while legislatures are taking small steps to protect nature’s genetics, and while courts are grappling with how to deal with this issue within the framework of the law, most of which was written before this technology existed, science continues to experiment, invent, and create. If yield increase is the goal, can such be accomplished through traditional breeding methods? If reduction of toxic agricultural byproducts is a goal, can such be accomplished through traditional breeding and farming methods? How does one regulate particles so small as to be practically undetectable? Can harmonious policy be created? How do we keep our living support system (both those intended to remain within nature, such trees, grasses, other plants and animals and products targeted for consumer use, such as food, feed, fuel & fiber) acceptable to all within this modern world, and modern economy?

Note: This material is a brief summary of the information available on this topic, and is not intended to be comprehensive. In each category of material listed, much information has been omitted, due to space. Also, information regarding various state, county, and federal laws and regulations are not included, nor is the tracing of case law as relates to each of the different topics. Due to the space limitation, this is merely a brief, general introduction of the subject matter.

42

43

THE SCIENCE AND LAW OF OIL SHALE AND

TAR SANDS DEVELOPMENT IN KENTUCKY Ronald R. Van Stockum, Jr.

© 2013 Ronald R. Van Stockum, Jr.

I. SELECTED SIGNIFICANT DATES

1541 Spanish Conquistador DeSoto travels through Western Kentucky. 1694 English patent issued for "Oyle from a kind of stone." 1719 Canadian Hudson Bay Company brought oil sand by Native Americans. 1751 Christopher Gist visits Big Bone Lick, Blue Lick and Drennon's Lick in

Kentucky. 1818 Martin Beatty brine well, drilled in McCreary County, Kentucky, produces

oil. 1840 Canadian oil shale reported in Alberta, New Brunswick, Canada. 1854 Kentucky Geological Survey established. 1859 Colonel E.L. Drake drills oil well "gusher" in Titusville, Pennsylvania. 1859 50 small shale oil extraction plants operate in Eastern United States. 1865 Oil shale first mined in Australia. 1872 United States Mining Law 1898 Oil pipeline from Monticello to Somerset, KY to Hamlen, West VA. 1901 Spindletop well in Beaumont, Texas produces oil gusher. 1911 Standard Oil Company broken up by United States Supreme Court. 1916 Oil well drilled near Irvine, Kentucky. 1917 Catlin Shale Products Company opens oil shale retort furnace, Elko

Nevada. 1918 Swiss Oil Company (later Ashland Oil) chartered in Kentucky. 1920 United States Mineral Leasing Act 1925 Floyd Collins trapped in Sand Cave near Mammoth Cave in Kentucky. 1935 Interstate Oil and Gas Compact Commission (IOGCC) formed. 1957 Union Oil Furnace Co. opens shale oil plant, Parachute Creek, Colorado. 1960 Kentucky Division of Oil and Gas established. 1960 Kentucky passes "Oil and Gas Conservation Act." (KRS Chapter 353). 1961 Kentucky implements well plugging and abandonment regulations. 1962 Great Canadian Oil Sands Limited begins tar sands operation in Alberta,

Canada. 1976 Federal Land Policy and Management Act (FLPMA). 1977 Massive hydraulic fracturing utilized at the DOE Eastern Gas Shales

Project. 1978 Federal Natural Gas Policy Act 1980 Addington Brothers focus on Kentucky oil shale leases.

This seminar material is for instructional purposes only. Application to specific legal or factual

issues necessitates a detailed analysis beyond that provided herein. Emphasis is added throughout to highlight the presentation. Statutory and regulatory provisions are selected for instructional purposes and are not inclusive of all potentially applicable provisions. THIS IS AN ADVERTISEMENT

44

1980 Federal Crude Oil Windfall Tax Act 1981 1981 Eastern Oil Shale Symposium, Lexington, Kentucky. 1983 Groundwater Protection Council (GWPC) formed in Oklahoma. 1987 Federal Oil and Gas Leasing Reform Act of 1987 1989 Federal Natural Gas Well-head Decontrol Act 1992 Federal National Energy Policy Act 1997 Slick-water fracturing developed in Texas Barnett Shale by Mitchell

Energy. 2004 Kentucky Revised Statute Chapter 349, dealing with coal bed methane. 2005 The Oil Shale, Tar Sands, and Other Strategic Unconventional Fuels Act

of 2005. 2005 The Energy Policy Act of 2005 2007 Kentucky passes "The Energy Incentives Development Act." 2010 Original phase of Keystone pipeline from Alberta, Canada begins

operating. 2011 FracFocus formed by GWPC and IOGCC.

II. UNCONVENTIONAL ENERGY SOURCES

A. Shale Gas B. Tight Gas Sands C. Coal Bed Methane D. Heavy Oil Tar Sands E. Methane Hydrates

III. SELECTED POTENTIAL "FRACKING" ENVIRONMENTAL ISSUES

A. Potential Drinking Water Aquifer Contamination B. Use of Available Water Resources for Community and Industry C. Land Use Issues (zoning) D. Greenhouse Gas Release, Climate Change and Global Warming E. Increased Truck Traffic on Transportation Infrastructure F. Chemical Composition of Fractionation Fluids G. Earthquakes and Seismic Effects H. Technically Enhanced Naturally Occurring Radioactive Materials (TENR)

or Naturally Occurring Radioactive Materials (NORM) I. Air Pollution, including Air Toxics J. Contaminants in Fractionation Wastewater, including "Flowback"

45

K. Wastewater Disposal, including Underground Injection L. Hydraulic Fractionation Water Discharge, including Brine M. Spill Prevention Control and Countermeasures (SPCC) N. Impact on Aquatic Habitats O. Stormwater Discharges P. Well Construction, Casing and Plugging Q. Impact of Abandoned Wells R. Environmental Justice Issues S. Resource Sterilization

IV. SELECTED FEDERAL LAWS

A. Safe Drinking Water Act, 42 U.S.C. Chapter 6A, Subchapter XII – Safety of Public Water Systems

1. Regulation for State Programs, 42 U.S.C. §300h [See also the

Energy Policy Act of 2005]…

"(d) 'Underground injection' defined; under-ground injection endangerment of drinking water sources

For purposes of this part:

(1) UNDERGROUND INJECTION. – The term

'underground injection' –

(A) means the subsurface emplacement of fluids by well injection; and

(B) excludes –

(i) the underground injection of natural

gas for purposes of storage; and (ii) the underground injection of

fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities. [Emphasis added].

46

(2) Underground injection endangers drinking water sources if such injection may result in the presence in underground water which supplies or can reasonably be expected to supply any public water system of any contaminant, and if the presence of such contaminant may result in such system's not complying with any national primary drinking water regulation or may otherwise adversely affect the health of persons."

B. Federal Water Pollution Control Act

1. Definitions, 33 U.S.C. §1362.

"(24) OIL AND GAS EXPLORATION AND PRODUCTION. – The term 'oil and gas exploration, production, processing, or treatment operations or transmission facilities' means all field activities or operations associated with exploration, production, processing, or treatment operations, or transmission facilities, including activities necessary to prepare a site for drilling and for the movement and placement of drilling equipment, whether or not such field activities or operations may be considered to be construction activities." [Emphasis added].

2. National Pollutant Discharge Elimination System, 33 U.S.C.

§1342.

"(l) Limitation on permit requirement…

(2) Stormwater runoff from oil, gas, and mining operations

The Administrator shall not require a permit under this section, nor shall the Administrator directly or indirectly require any State to require a permit, for discharges of stormwater runoff from mining operations or oil and gas exploration, production, processing, or treatment operations or transmission facilities, composed entirely of flows which are from conveyances or systems of conveyances (including but not limited to pipes, conduits, ditches, and channels) used for collecting and conveying precipitation runoff and which are not contaminated by contact with, or do not come into contact with, any overburden, raw material, intermediate products, finished product, byproduct, or waste products located on the site of such operations." [Emphasis added].

47

C. Clean Air Act

1. Hazardous Air Pollutants, 42 U.S.C. §7412.

"(n) Other provisions (4) Oil and gas wells; pipeline facilities

(A) Notwithstanding the provisions of subsection (a) of

this section, emissions from any oil or gas exploration or production well (with its associated equipment) and emissions from any pipeline compressor or pump station shall not be aggregated with emissions from other similar units, whether or not such units are in a contiguous area or under common control, to determine whether such units or stations are major sources, and in the case of any oil or gas exploration or production well (with its associated equipment), such emissions shall not be aggregated for any purpose under this section.

(B) The Administrator shall not list oil and gas

production wells (with its associated equipment) as an area source category under subsection (c) of this section, except that the Administrator may establish an area source category for oil and gas production wells located in any metropolitan statistical area or consolidated metropolitan statistical area with a population in excess of 1 million, if the Administrator determines that emissions of hazardous air pollutants from such wells present more than a negligible risk of adverse effects to public health." [Emphasis added].

D. Orphaned, Abandoned, or Idled Wells on Federal Land, 42 U.S.C.

§15907

"(a) In general The Secretary, in cooperation with the Secretary of Agriculture,

shall establish a program not later than 1 year after August 8, 2005, to remediate, reclaim, and close orphaned, abandoned, or idled oil and gas wells located on land administered by the land management agencies within the Department of the Interior and the Department of Agriculture."

V. SELECTED FEDERAL REGULATION

A. Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Review; Final

48

Rule; 40 CFR Parts 60 and 63; August 16, 2012, Federal Register, Volume 77, No. 159, Pgs. 49,490 et seq. [But see industry and environmental group lawsuits]

1. NSPS Standard for VOCs. 2. New Source Performance Standard for Sulfur Dioxide. 3. Major Source Air Toxic Standard for Oil and Natural Gas

Production. 4. Major Sources of Natural Gas Transmission and Storage Air Toxic

Standard.

B. EPA "Fracking Study"

1. "Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources," in 2011.

2. The final draft report is expected in 2014.

C. "Special Waste," including crude oil and natural gas exploration and

development waste, is exempt from Resource Conservation Recovery Act (RCRA) hazardous waste rules. In 1978, EPA also exempted the category entitled "oil and gas drilling muds and oil production brines." In 1980, the Solid Waste Disposal Act amendments included the "Bentsen Amendment" exempting "drilling fluids, produced waters and other wastes associated with the exploration, development and production of crude oil or natural gas."

VI. SELECTED KENTUCKY STATUTES

A. KRS Chapter 353: Mineral Conservation and Development… 1. .020 Oil and gas lease or contract, when lessor may avoid… 2. .080 Drilling through coal bed. 3. .090 Gas found beneath or between coal beds. 4. .100 Casings to remain in place during life of productive well… 5. .120 Method of plugging well drilled through coal-bearing

strata… 6. .140 Gas escape pipe, when to be used. 7. .150 Unused oil, gas or salt water well to be closed to prevent

waste. 8. .160 Gas waste to be prevented – Presumption of negligence.

49

9. .170 Putting pressure on strata – Wells may remain open if conforming to Federal Safe Drinking Water Act.

10. .180 Requirements for plugging abandoned well – Bids –

Remedy for possessor of adjacent land or for department… 11. .200 Department for Natural Resources to enforce oil and gas

law – Hearings… 12. .400 Legislative declarations concerning availability and

reliability of natural gas supplies – Construction of KRS 353.400 to 353.410…

13. .630 Pooling of oil and gas interests – Conditions… 14. .752 Kentucky Gas Pipeline Authority established –

Membership… 15. .802 Legislative findings and declarations relating to geologic

storage of carbon dioxide…

B. KRS Chapter 349: Coalbed Methane Development VII. SELECTED KENTUCKY REGULATIONS

A. 805 KAR Chapter 1 Division of Oil and Gas… 1. 020 Protection of fresh water zones… 2. 060 Plugging wells; noncoal-bearing strata. 3. 070 Plugging wells; coal-bearing strata. 4. 080 Gas storage reservoirs; drilling, plugging in vicinity. 5. 100 Commission's rules of procedure; spacing of deep well

drilling; wildcat wells and pooling of interests. 6. 110 Underground injection control… 7. 130 Deep well administrative regulation relating to casing,

cementing, plugging, gas detection and blow-out prevention. 8. 140 Directional and horizontal wells…

B. 805 KAR Chapter 9: Coal Bed Methane 1. 010 Protection of fresh water zones… 2. 040 Plugging wells.

50

3. 050 Gas storage reservoirs; drilling, plugging in vicinity… 4. 070 Directional and horizontal wells…

C. 405 KAR Chapter 30: Oil Shale Operations…

1. 110 Public participation in inspection and enforcement. 2. 121 Oil shale exploration… 3. 170 Citizen demands for enforcement… 4. 220 Postmining land use. 5. 230 Air resources protection. 6. 240 Protection of fish, wildlife, and related environmental

values… 7. 260 Access roads, haul roads, overland conveyor systems,

pipelines, and other transport facilities. 8. 270 Casing and sealing of drilled holes… 9. 300 Protection of the hydrologic system… 10. 320 Water quality standards, effluent limitations, and

monitoring… 11. 360 Waste management provisions…

D. 401 KAR 5:090. Control of Water Pollution from Oil and Gas Facilities 1. Section 5. Produced Water Disposal. 2. Section 6. Disposal of Produced Water off the Facility… 3. Section 8. Surface Discharges of Produced Water… 4. Section 11. Disposal Wells… 5. Section 13. Spills and Leaks.

E. 401 KAR 10:031. Surface Water Standards

Section 6. Pollutants. (1) Allowable instream concentrations of pollutants are listed in Table 1 of this section.

51

Table 1 Chloride (water quality criteria (mg/l)) – 250,000 (human health – DWS) – 1,200,000 (warm water aquatic habitat – acute) – 600,000 (warm water aquatic habitat – chronic)

VIII. GEOLOGY OF KENTUCKY

A. Stratographic Column (Kentucky Geological Survey, www.uky.edu/KGS)

Era System and Series Million Years before Present

Resource

Mesozoic Cretaceous 144 Lignite?

Jurassic 208 (not present in KY)

Triassic 245 (not present in KY)

Paleozoic Permian Carboniferous System

286 (not present in KY)

(Pennsylvanian) (Mississippian)

320 360

Coal, oil, gas, sand Oil, gas, tar sand

Devonian 408 Oil and gas

Siluran 438 Oil and gas

Ordovician 505 Oil and gas

Cambrian 544 Oil and gas

Precambrian 4,500 Potential gas

B. Devonian Life Forms

1. Continental drift – Gondwanaland under South Pole, Kentucky

land mass forming as part of Laurasia at the Equator. 2. The Devonian Period expressed great evolution in fishes and

aquatic life forms. The development of aquatic organisms able to crawl upon the land, was significant in the evolution of amphibians. The land surface itself, in areas which were to become Kentucky, was marshy, containing primitive plant life forms, including early insects.

3. There was a great, mass extinction of up to 70 percent of animal

species at the end of the Devonian Period. The cause of the mass extinction is not certain. An interesting hypothesis relates to expanded vegetation on land increasing soil formation and rock weathering which, in turn, bound and removed carbon dioxide

52

from the atmosphere. At the end of the Devonian Period, sea levels dropped and glaciers appeared in parts of Gondwanaland.

4. Animal groups.

a. Sponges. b. Brachiopods. c. Nautiloids. d. Agnathas. e. Chondrichthyes. f. Tetrapods. g. Scorpions. h. Amphibians.

5. Plant groups.

a. Fungi. b. Chlorophytes. c. Horsetails. d. Bryophytes. e. Lycopods.

6. It is generally believed that Devonian Age shales are the source rocks for most of the oil and gas "plays" in Kentucky. An example would be the migration of heavy oils into the overlying tar sand deposits of the Mississippian Age near Western Kentucky's Mammoth Cave in Edmonson County, Kentucky.

IX. KENTUCKY SHALE GAS AND TAR SANDS

A. Shale Gas

1. Location (see maps).

2. Example (see handout samples and attached photograph).

3. Drilling method (see maps).

a. Hydraulic fracturing ("fracking").

b. Horizontal drilling.

c. "Fracking" materials.

i. Fluids.

ii. Gases (including nitrogen gas in Kentucky).

iii. Chemicals.

iv. "Proppants." v. Diesel fuel (petroleum distillates).

53

d. In the Marcellus Shale, typical "frack" fluids contain approximately 99 percent water and sand (proppant). Additional chemicals make up the remaining 1 percent and could include acid, antibacterial agent, breaker, corrosion inhibitor, friction reducer, gelling agent, iron control, scale inhibitor, and surfactant. Depending on the shale field being drilled, additional additives such as clay stabilizer, cross linker, non-demulsifier, and PH adjusting agent might also be found.

e. Proppants include sand or ceramic beads to hold open

fractures.

4. The "Kick Off Point" (KOP) is the area in a drilled well that begins the bend in the drilling to a horizontal plane. It can take six hundred feet to complete the bend. There are, on average, approximately 5,000 pounds per square inch of pressure placed in the fractionation well. Sand or tiny ceramic balls (proppants) are injected to prop open cracks related to the fractionation process. The horizontal wells can travel as far as 3,000 feet and are restricted, in part, by laws regarding property rights and "spacing."

5. VOCs and methane, in addition to air toxics, can escape a well

completion operation during that period of time known as "flowback." During this time, reservoir gas, water, and fractionation fluids return to the surface at great volume and at high velocity. Such well completion period may last between three and ten days.

6. More than 5 million gallons can be used at a hydraulic fracturing

well site and, mixed with sand (proppant) and chemicals, can be injected under as much pressure as 10,000 pounds per square inch.

B. Tar Sands

1. Location (see maps). 2. Example (see handout samples and attached photographs).

3. Heavy oil is found in tar sands in Western Kentucky (Edmonson,

Grayson, Butler, Warren, and Logan Counties). In 2012, the Arrakais Oil Recovery Company announced a mining operation on 120 acres in Logan County. It could produce as many as 1,000 barrels of oil a day (42,000 gallons). The Hart County Stone Co. in Edmonson County, Kentucky also has plans to mine tar sands.

4. Kentucky's "tar sands" are not loose sands but are actually

heavy oils trapped in the pores of solid sandstone rock, unlike the unconsolidated "oil sands" in Alberta, Canada.

54

5. There may be as many as 6 billion barrels of oil in the Western Kentucky counties with tar sands. These heavy oils exist in Mississippi and Pennsylvanian rock formations at the edge of the Eastern Interior Illinois Geologic Basin. Some enhanced recovery techniques to retrieve this oil involve Direct Current (DC) to heat the heavy oils several hundred feet below the surface. Another technique of heavy oil extraction involves the use of Microwave Radiation to assist in their removal.

C. Data in Kentucky

1. There are approximately 26,500 active oil wells and approximately 7,900 inactive oil wells in Kentucky.

2. There are approximately 26,300 active gas wells and 3,600

inactive gas wells in Kentucky. 3. There are approximately 12,000 abandoned oil and gas wells in

Kentucky that may not have been plugged, or may have had their steel casings removed.

4. There are approximately 3,400 Class II EPA regulated

underground injection (UIC) wells in Kentucky. 5. Many oil and gas well logs are based upon readings of gamma ray

radiation reflecting the presence of organic chemicals. 6. Many Kentucky oil and gas well logs are maintained in the core

library of the Kentucky Geologic Society. 7. Kentucky's deepest producing natural gas wells are drilled into the

Cambrian, Rome Formation exceeding 7,500 feet in depth.

X. KENTUCKY ENERGY AND ENVIRONMENTAL CABINET

A. Division of Oil and Gas

1. Director – Kim Collings.

2. Assistant Director – Marvin Combs.

3. Branch offices.

a. Pikeville – Vacant.

b. Barbourville – Jerry Finley.

c. Madisonville – Cyrus Britt.

d. Glasgow – Ron Norris.

4. Twenty-two people in Division.

55

B. Oil and Gas Commission 1. D. Michael Wallen. 2. Stephen Harris. 3. Oliver Barber III. 4. Oda Inglis.

C. The mission of the Kentucky Division of Oil and Gas is "… to regulate the

crude oil and natural gas industry in the Commonwealth; protect the correlative rights of mineral owners, fresh water zones and mineral coal seams; and conserve and protect oil and gas reserves in Kentucky." (Hydraulic Fracking in Kentucky, Kentucky Division of Oil and Gas).

D. The Kentucky Division of Oil and Gas states, in regards to horizontal

drilling in Kentucky, that, "…operators in Kentucky have improved success in the Devonian shale when combining horizontal drilling with fracturing techniques involving nitrogen. Advantages: 1) reduces surface impact with multiple horizontal wells on a single well pad; 2) reduces negative impact on mining industry; 3) allows operator the ability to drill around surface/topographic features; 4) increases exposure to shale reservoir which increases reserve recovery." (Hydraulic Fracking in Kentucky, Kentucky Division of Oil and Gas).

XI. OIL AND GAS AGENCIES AND ENTITIES

A. Kentucky Geological Survey, James C. Cobb, State Geologist and

Director, Lexington, Kentucky, 859-323-0559, established in 1854. B. Kentucky Oil and Gas Association, Andrew McNeill, Executive Director,

Frankfort, Kentucky, 502-226-1955, formed in 1931. C. The Interstate Oil and Gas Compact Commission (IOGCC) was formed in

1935 as a multi-state government agency. Mike Smith, Executive Director, Oklahoma City, Oklahoma, 405-525-3592.

D. Kentucky Energy and Environment Cabinet, Department for Natural

Resources, Oil and Gas Division, Kim Collings, Director, Frankfort, Kentucky, 502-573-0147, established in 1960.

E. Groundwater Protection Council, Mike Paque, Executive Director,

Oklahoma City, Oklahoma, 405-516-4972, established in 1983 as a nonprofit corporation of state groundwater regulatory agencies.

F. The Groundwater Protection Council and the Interstate Oil and Gas

Compact Commission formed the National Hydraulic Fracking Chemical Registry, entitled FracFocus Chemical Disclosure Registry, www.fracfocus.org, in 2011. Companies voluntarily agree to post records

56

relating to hydraulic fracturing activities as well as disclosure of chemical usage. Kentucky is not currently participating in the FracFocus system.

XII. UNDERGROUND INJECTION

A. Underground Injection (UIC)

1. EPA Class II Wells – oil and gas related injection wells. 2. Safe Drinking Water Act Regulations for UIC Class II Wells, 40

CFR Part 144. 3. Kentucky has for two years been seeking primacy for EPA's Class

II UIC well programs. 4. 805 KAR 1:110, Kentucky underground injection regulations

(awaiting primacy). B. EPA regulated Class II wells. EPA regulates 168,069 such wells

nationally (2011 data). C. Kentucky has 3,165 EPA regulated Class II wells. D. EPA Region IV UIC contact for Class II Wells – Jim Ferreira (404) 562-

9399. E. EPA does regulate the use of diesel fuel in fracking operations through

the Underground Injection Control Program. XIII. SELECTED DATA ON UNCONVENTIONAL SOURCES OF ENERGY

A. Kentucky

1. There are approximately ten permits for coal methane wells in

Kentucky. 2. In 2013, Kentucky Representative Gooch introduced a Bill in

Kentucky Legislature to regulate remediation of oil and gas wells. (HB 348).

3. In Kentucky, due to the presence of higher percentages of clay in

the shale, hydraulic fracturing is not efficient. The swelling of the clay coming in contact with the frac water results in the sealing of the fractures. Since the late 1980s, Kentucky has used liquefied nitrogen gas in its fractionation processes.

4. Around 2005, Eastern Kentucky gas fields began to be exploited

using horizontal drilling techniques. 5. Natural gas that is retrieved from Kentucky wells must have

nitrogen gas removed in order to be placed in pipelines for

57

transportation. New air pollution regulations recently promulgated by the EPA may impact the release of waste gases from these operations.

6. During World War II, the need for additional steel during the war

effort caused many abandoned wells in Kentucky to have their steel casings removed and recycled.

7. Kentucky is a "capture" state which relates to the ownership and

withdrawal of natural resources which can migrate in the subsurface.

8. Kentucky oil formations are known as the 1) Big lime oil formation;

2) Brerea oil formation; 3) Devonian shale oil formation; 4) Corniferous oil formation.

9. Kentucky has produced approximately 6 trillion cubic feet of

natural gas since nitrogen fracking was introduced in Kentucky. 10. Kentucky may have as many as 40,000 producing gas wells,

mostly located in the Northeastern part of the state. 11. As much as 174 quadrillion BTU remain in Kentucky in its total oil

and gas resources. 12. It costs between $1.25 and $3.5 million to drill a horizontal

fractionation well in Kentucky. 13. Ninety percent of gas produced in Kentucky is shipped elsewhere. 14. The New Albany Black Shale in Kentucky can produce twenty-one

gallons of oil and 4,000 cubic feet of gas for each ton of rock processed. The New Albany Black Shale ranges in thickness from 100 feet near Louisville to greater than 800 feet below Pine Mountain, Kentucky.

15. There are approximately 18,000 producing oil wells and 13,000

producing gas wells in Kentucky. The state of Kentucky maintains a database which contains information on 136,286 wells in Kentucky. There are at least 1,500 known pools of oil and gas in the Kentucky subsurface. Oil is most often produced from Mississippi limestone and sandstone in the Western and Eastern portions of the state and from Ordovician limestone in the South Central portions of the state.

58

B. National 1. Controversial communities.

a. Pavillion, Wyoming, Wind River Aquifer. In 2008, residents

complained of odor, discolored water, and illness. Encana Corp., a natural gas company, operated in the area.

b. Dimock, Pennsylvania, 2009. Methane and chemical

contamination identified in thirteen wells. Federal and state studies. Cabot Oil and Gas Corporation operated in the area.

c. Raton Basin in Northern New Mexico and Southern

Colorado (Trinidad). USGS investigation identifies increase in seismic activities possibly relating to underground injection of fracking waste.

d. Oklahoma and Texas seismic activity is being investigated

by the USGS, Oklahoma Geological Society and the University of Texas.

2. New York State does not currently allow hydraulic fracturing. New

York State is currently under a hydraulic fracturing moratorium on shale gas drilling. This moratorium has been in place since 2008 and is the subject of much controversy in the state. It appears that the state government will not finish reviewing the issue until 2014.

3. Shale oil films and documentaries.

a. Gasland, 2010, Josh Fox, nominated for 2010 Academy

Award for Best Documentary Feature. Expose on environmental problems with fracking. Picked up by HBO.

b. Truthland, 2012, Independent Petroleum Association of

America (IPAA) and Energy in America (EID); thirty-four minutes, viewable on "YouTube." A rebuttal to "Gasland".

c. Fracknation, 2013, Phelim McAleer and Ann McElhinney.

A rebuttal to "Gasland." d. Promised Land, 2012, Full length feature film starring Matt

Damon. Plot involves obtaining mineral rights leases in Pennsylvania.

4. In the mid 1880s, Pennsylvania and Kentucky druggists sold oil

from brine and gas wells as a medicine. The oils were marketed with such names as "Seneca Oil." "Kier's Petroleum or Rock Oil" was sold as "nature's remedy celebrated for its wonderful

59

curative powers, taken from a well 400 feet below the Earth's surface."

5. Kerogen is the intermediate stage in the transformation of organic

matter into petroleum. The transformation occurs first at low temperature (diagenesis) where oxygen, nitrogen and sulfur is released. Final transformation occurs at higher temperatures and pressures (catagenesis) with the ultimate result in methane gas and graphite.

6. Produced water, drilling mud, sludge, slimes, evaporation ponds

and pits can contain naturally occurring radioactive material (NORM) from the rock and related soil. NORM can concentrate in mineral scales that form in pipes and also be present in other oil and gas wastes. Radium-226, radium-228, and radon gas may be present in some wastes. (See also KRS 211.863 and the Central Midwest Interstate Low-Level Radioactive Waste Commission.)

7. The organic material in shale oil is considered to be predominantly

the decomposition of algae, unlike coal, which has a higher proportion of vascular organic material.

8. The Marcellus Shale covers an area approximately the size of the

country of Greece and lies 6,000 feet below the surface of New York, Pennsylvania, West Virginia and Ohio.

9. Approximately 11,500 existing wells are hydraulically fractionated

annually. 10. In the United States, there are 1.5 million miles of natural gas

pipeline. 11. There are approximately 1.2 million fractionated wells in the

United States and approximately 100,000 with horizontal borings. 12. Hydraulic fractionation has been used since the late 1940s in the

Oklahoma and Texas region. Prior experiments removing gas from shale included the use of explosives.

13. Alberta, Canada has abundant shale formations (the Duvernay,

Monteney, and Muskwa) which together may have more than 3,300 trillion cubic feet of natural gas, 58 billion barrels of gas liquids, and 425 billion barrels of oil.

14. The Green River formation in the Western United States is the

largest oil shale deposit in the world. It may contain 1.5 trillion U.S. barrels of oil in 213 billion tons of shale.

15. The Governor of Nebraska has recently approved a rerouting of

the Keystone XL Oil Sands Pipeline through less sensitive areas of the state, thereby avoiding the environmentally significant Sand

60

Hills area. However, the pipeline will still cross the important Ogallala Aquifer.

16. Much of the opposition to the Keystone XL Pipeline involves

concern that utilization of Canadian tar sands and shale gas resources will increase greenhouse gas emissions and result in greater climate change.

17. One hundred years ago hydraulic fracturing was developed to

break out granite blocks from production quarries.

XIV. SELECTED ENERGY AND ECONOMIC DATA

A. Mexico has the fourth largest reserves of gas in the world. Remex, the Mexican oil company nationalized in 1938, has few oil shale wells and imports gas from the U.S.

B. China has as much as twice the amount of recoverable oil shale gas than

is found in the United States. Without development of its shale resources, China will import 50 percent of its natural gas by 2020.

C. The low price of natural gas, and increased environmental regulation, has

reduced the share of coal in the American electrical power generation market to less than 35 percent from greater than 50 percent ten years ago.

D. In 2000, 5 percent of natural gas came from shale in the United States.

In 2010, including tight gas and coal bed methane, that figure increased to 60 percent.

E. By 2020, the United States' production of oil from shale should reach 10

mb/d (million barrels per day). F. Natural gas derived liquids (NGLs) are the basis of ethylene production,

the basic building block of much of the petrochemical industry. With inexpensive gas being delivered in pipelines from the Northeast and the Gulf States, Kentucky is ideally situated to benefit from the shale gas revolution.

G. American steel industries and fertilizer industries benefit significantly from

abundant, inexpensive natural gas prices. There are approximately 10.2 billion cubic feet of natural gas passing through Kentucky pipelines every day. Pennsylvania and Ohio are producing more gas than can be used in the Northeast. Therefore, pipelines carrying natural gas in Kentucky may be reversed to deliver the natural gas supplies south. The auto industry, aluminum industry, and chemical industry in Kentucky stands to benefit greatly by the increased production of natural gas and the delivery of competitively priced supplies of natural gas from the Northeast.

61

H. America's power and utility sectors are developing plans to reduce their dependence on coal and increase the utilization of abundant, inexpensive natural gas. Coal to Gas Switching (C2G) for fuel used by electrical utilities are driven by abundant gas supplies and historically low (decades) price. Environmental regulation may accelerate the closing of sixty gigawatts of coal based electricity generation by 2025.

I. In 2010, natural gas hit twenty-year lows below $2.00/MMBTU (Henry

Hub). J. United States Congressman Markey (D-Mass) proposed, in 2013, a bill

entitled "Keep American Natural Gas Here Act." Political opposition, supported by U.S. industrial concerns, may result in a cap on the export of Liquid Natural Gas (LNG) from the U.S.

K. "Standard Producers AD8 Oil and Gas Lease Form" is a standard

form for oil, gas and mineral leasing. L. For gas drilling to be profitable in Kentucky, the price should be between

$4.00 and $5.00 per million cubic feet. Recently as low as $2.00, the price for natural gas has risen in the range of $3.00 per million cubic feet but is expected to remain at these lower levels for an extended period of time.

M. Electrical power generating plants that utilize coal as its fuel may see a

closure of as much as 18 percent of the coal-fired capacity in the United States by the year 2020 because of abundant quantities of inexpensive natural gas and additional environmental air pollution regulations.

N. Wet shale gas contains higher levels of ethane and propane as well as

petroleum condensates which make the product more valuable. Methane, propane and butane are considered natural gas liquids.

O. In Pittsburgh, because of lower natural gas prices, consuming utilities

have fallen by more than 30 percent over the past three years. P. The Keystone XL Pipeline, when completed, is expected to carry 700,000

barrels per day of crude from Canada to the Gulf Coast refineries. Q. Environmental groups have filed suit against the EPA over its air pollution

regulations for natural gas exploration, in part because the rule does not regulate methane, a potent greenhouse gas.

R. Fixed costs for the production of one megawatt of electrical capacity is

$90,000 for nuclear plants, $30,000 for coal plants, and $15,000 for gas plants. The cost of fuel drives the economics of electrical generation and, with natural gas prices expected to remain low for decades, there will be pressure on utilities to move to natural gas and away from coal and nuclear for electrical generation.

62

S. Internationally, the pace of shale gas development has been slowed due to the government ownership of mineral rights, lack of infrastructure and environmental concerns. There is also a lack of geologic data in much of the world's shale oil areas.

T. Abundant and inexpensive ethane is a primary feedstock for the chemical

industry and is much cheaper than ethane produced from crude oil stocks.

U. Methane has twenty-five times the impact as a greenhouse gas than

carbon dioxide but remains in the atmosphere for less than ten years, whereas carbon dioxide can remain in the atmosphere for as long as 200 years.

V. Germany has decided, because of the nuclear accident in Japan, to retire

its six nuclear electrical generating power plants by 2020. Germany was anticipating replacing that capacity with coal fired plants. However, it appears that Germany has at least fifty years of natural gas supplies in its oil shale resources which, if utilized, would be more cost-effective than coal and potentially reduce the impacts to global warming.

XV. MAPS AND PHOTOGRAPHS (SEE ATTACHED OR IN POWERPOINT SLIDE

PRESENTATION)

1. Road Cut Oil Shale photograph. 2. Kentucky Tar Sands Rock photograph. 3. Physiographic Diagram of Kentucky (Kentucky Geological Survey,

www.uky.edu/KGS). 4. Geologic Map of Kentucky – periods (Noger, USGS). 5. Kentucky Geologic Basins (May, modified from Noger, 1984). 6. Lower 48 States Shale Plays (Energy Information Service (EIA)). 7. Gas production in conventional fields, lower forty-eight states (Energy

Information Service (EIA)). 8. Fuels map of Kentucky (Kentucky Geological Survey, www.uky.edu/KGS). 9. 2011 Kentucky gas well location (Kentucky Geological Survey,

www.uky.edu/KGS). 10. Horizontal Wells in Kentucky (Kentucky Geological Survey,

www.uky.edu/KGS). 11. North American Shale Plays (2011) (Energy Information Service (EIA)).

63

12. Marcellus shale gas play, Appalachian Basin (Energy Information Service (EIA), USGS).

13. Generalized energy source cross section (Energy Information Service

(EIA)). 14. Hydraulic fracturing (Pro Publica, www.propublica.org/special/hydraulic-

fracturing-national). 15. Kentucky Interstate Pipelines. 16. Kentucky tar sands 2nd photograph. 17. Principal areas of occurrence of tar sands in Kentucky (Kentucky

Geological Survey, www.uky.edu/KGS).

XVI. REFERENCES AND RESOURCES

A. Analysis of Reserve Pit Sludge from Unconventional Natural Gas Hydraulic Fracturing and Drilling Operations for the Presence of Technologically Enhanced Naturally Occurring Radioactive Material (TENORM), 2013, Alisa L. Rich, Ernest C. Crosby, New Solutions, Vol. 23(1) 117-135, 2013.

B. Annual Energy Outlook 2013 Early Release, The United States Energy

Information Administration (EIA). C. Are Seismicity Rate Changes in the Midcontinent Natural or Manmade?

2012, Ellsworth et al., Annual Meeting of the Seismological Society of America, San Diego, California.

D. Blackridge Resource Partners, Lexington, Kentucky, William S.

Daugherty, William G. Barr, James McDaniel, and John R. Bender. E. Commonwealth of Kentucky Class II Injection Well Operator Manual,

Commonwealth of Kentucky, US EPA, Oil and Gas Industry. F. May, Dr. Michael T., Department of Geography and Geology, Western

Kentucky University, Bowling Green, Kentucky. G. Kentucky Rock Asphalt (KY rock road surfacing material), 1992, Jerry G.

Rose, University of Kentucky. H. Information on Shale Resources, Development and Environmental and

Public Health Risks, The Government Accounting Office (GAO), September 5, 2012, GAO-12-732.

I. Interstate Oil and Gas Commission (IOGCC) Guidelines for Waste

Management Programs Related to Oil and Gas Exploration and Production, 1990.

64

J. "Methane and the Greenhouse-Gas Footprint of Natural Gas from Shale Productions," 2010, Robert W. Howarth, Renee Santoro and Anthony Ingraffea, Cornell University; Climate Change, DOI 10.1007/s, 10584-011-0061-5.

K. Natural or Man-Made? Triggers and Limits to Induced Earthquakes.

2012, McGarr, Holland, Frohlich. Session at the 2012 Fall Meeting of the American Geophysical Union, San Francisco, CA.

L. Oil and Gas, Information on Shale Resources, Development and

Environmental and Public Health Risks, September 2012, United States Government Accountability Office, GAO-12-732.

M. Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking

Water Resources, Office of Research and Development, U.S. Environmental Protection Agency, Washington, D.C., November, 2011, EPA-600-R-11-122.

N. Profile of the Oil and Gas Extraction Industry, EPA Office of Compliance

Sector Notebook Project, Office of Enforcement and Compliance Assurance (OECA), United States Environmental Protection Agency, 2000, EPA/310-R-99-006.

O. "Renewed Interest in Heavy Oils and Rock Asphalt in South Central,

Kentucky," 2009, Michael T. May and Kenneth W. Cuehn, Western Kentucky University, World Oil, Volume 230, No. 8.

P. Separating Fact from Fiction in Shale Gas Development, 2012, University

of Texas. Withdrawn by the University after independent investigation by the University disclosed conflicts of interest.

Q. Shale Oil and Tar Sands, The Promises and Pit Falls, Richard B. Lyttle,

1982, Franklin Watts Publishing. R. Tar-Sand Resources of Western Kentucky, Martin C. Noger, 1984,

Kentucky Geological Survey, Series XI, 1999, Reprint 45. S. Tar Sands (Rock Asphalt) of Kentucky – A Review, McGrain, Preston,

Report of Investigations 19, Series X, Kentucky Geological Survey, 1976, 16 pages.

T. The Elusive Bonanza, The Story of Oil Shale – America's Richest and

Most Neglected Natural Resource, Chris Welles, 1970, E.P. Dutton and Co., Inc.

U. The Exception: The Story of Ashland Oil and Refining Company, Otto J.

Scott, 1968, McGraw-Hill, Inc. V. The Shale Revolution, 2012, Credit Suisse, www.credit-

suisse.com/researchandanalytics.

65

X. SkyTruth Fracking Chemical Database, http://frack.skytruth.org/fracking-chemical-database.

66

I-64

road cut

oil shale bank

67

Kentucky rock tar sands

68

69

Geologic Map of Kentucky

70

Eastern

Interior

Basin W. VA.

VA.

KY.

MO.

ILL.

OHIO IND.

Explanation Fault

Tar Sands Outcrop Area

INDIANAPOLIS

FRANKFORT

SPRINGFIELD

NASHVILLE

TENN.

Mississippi

Embayment

LEXINGTON

KNOXVILLE

PADUCAH

LOUISVILLE

EVANSVILLE

CINCINNATI

BLOOMINGTON

0 25 50 75 100 MILES

0 100 KILOMETERS

Kentucky Geologic Basins

71

72

73

Fuels Map of Kentucky

74

2011 Kentucky Gas Wells

75

Horizontal Wells in Kentucky

76

77

78

Generalized energy source cross section

79

Hydraulic Fracturing

Pro Publica

80

81

Kentucky Tar Sands

82

83

84

85

ENVIRONMENTAL REVIEW UNDER THE NATIONAL ENVIRONMENTAL POLICY ACT AND RELATED STATUTES

Timothy J. Hagerty

I. ENVIRONMENTAL REVIEW UNDER THE NATIONAL ENVIRONMENTAL

POLICY ACT A. Background

1. The statute.

The National Environmental Policy Act, 42 U.S.C. §4321 et seq. (“NEPA”), was enacted to create a framework within the Federal government for including environmental considerations among the factors ordinarily examined in the decision-making process. The heart of NEPA is the environmental impact statement (“EIS”), which must be prepared for all major federal actions significantly affecting the quality of the human environment. 42 U.S.C. §4332(2)(C). The EIS requirement must be satisfied by the federal agency responsible for the proposed action. The responsible agency must consult with other federal agencies that have jurisdiction or special expertise with respect to any environmental impact involved, and must provide the public with notice and an opportunity to comment on the proposed action. The principal purpose of the EIS is to ensure that agencies give proper consideration to the environmental consequences of their actions and that the public is informed about the environmental impact of proposed agency actions. Nevertheless, NEPA is a procedural statute, specifying particular procedures that must be followed in making a project decision; it does not mandate any particular substantive outcome. Thus, the agency is not required to select the environmentally preferable alternative.

2. The regulations.

The Council on Environmental Quality (“CEQ”) has adopted regulations to implement the requirements of NEPA, including the EIS requirements. See 40 C.F.R. parts 1500-08. In addition, many federal agencies have developed their own agency-specific regulations and guidance documents to better integrate the NEPA requirements into that Agency’s mission.

B. Categorical Exclusions and Environmental Assessments

In determining whether to prepare an EIS, the federal agency must determine whether the proposed action is one which:

86

1. Normally requires an EIS.

In this case, some environmental documentation is required, and the presumption is that an EIS is required. However, if the agency believes that an EIS is nevertheless unnecessary, it may be able to demonstrate that no EIS is required through the preparation of an Environmental Assessment (“EA”) (see discussion below and 40 C.F.R. §§1501.3, 1508.9); or

2. Normally does not require either an EIS or an EA.

In this case, the project may fit within a “categorical exclusion,” exempting the agency from the requirement to prepare any environmental documentation. Individual agencies generally adopt regulations containing categorical exclusions for certain projects typically sponsored by such agencies.

3. EAs.

If the proposed action does not fit within a categorical exclusion, the agency must at least prepare an EA, which is a concise document that serves to provide sufficient information concerning the project’s likely environmental impacts to determine whether an EIS must be prepared. The EA must describe briefly the need for and alternatives to the proposal, the environmental impacts of the proposed action and alternatives, and a list of agencies and persons contacted. 40 C.F.R. §1508.9. (An EA need not be prepared if the agency has decided to prepare an EIS.)

4. Final documents.

After completing an EA, the agency must prepare one of the following documents: a. An EIS, if the agency determines that the proposed action

may have significant effects on the human environment.

b. A Finding of No Significant Impact, or “FONSI,” presenting the reasons why an action will not have a significant impact on the human environment, and for which an EIS therefore will not be prepared. The EA (or a summary) should be appended to the FONSI. 40 C.F.R. §1501.4(e), 1508.13. The agency may proceed with the proposed action based on the FONSI, after sufficient notice to the public.

Note: If a proposed action is closely similar to one which normally requires an EIS, the agency must make the FONSI available for public review for thirty days before making a final determination. 40 C.F.R. §1501.4(e)(2).

87

C. Environmental Impact Statement 1. Scoping.

The regulations require an “early and open” process for determining the scope of issues to be addressed in the EIS. This process includes a Federal Register notice describing the proposed action, possible alternatives, and the scoping process. The agency must invite the participation of affected government agencies, Indian tribes, the proponent of the action, and other “interested persons.” 40 C.F.R. §1501.7.

2. Contents of EIS.

An EIS must include the following elements:

a. Summary: Stresses major conclusions, areas of controversy, and issues to be resolved.

b. Statement of Purpose and Need: States the underlying

purpose and need to which the agency is responding. c. Alternatives Analysis: This is the “heart” of the EIS,

presenting the environmental impacts of the proposed action and the alternatives, in comparative form. This must include all “reasonable” alternatives, including those not within the jurisdiction of the lead agency, as well as the “no action” alternative. The preferred alternatives should be identified, if one exists.

d. Affected Environment: Succinctly describes the

environment of the area to be affected. e. Environmental Consequences: Discusses the

environmental impacts of the proposed action and alternatives, including direct and indirect effects and their significance; energy and natural resource requirements and conservation potential of various alternatives and mitigation measures; urban quality, historic, and cultural resources; and means to mitigate adverse environmental impacts.

f. List of preparers. g. Appendices (material related to EIS and its analyses).

See 40 C.F.R. §1502.10-1502.19.

The analysis of “indirect effects” includes “cumulative effects,”

defined as the impact on the environment that results from the incremental impact of the action when added to other past,

88

present, and reasonably foreseeable future actions regardless of what agency or person undertakes those other actions. Such effects can result from individually minor but collectively significant actions taking place over a period of time. 40 C.F.R. §1508.7. “Indirect effects” also include “growth inducing effects” of the proposed action. 40 C.F.R. §1508.8.

3. Summary of EIS preparation process.

The EIS must be prepared in two stages, and also may be supplemented.

a. A Draft Environmental Impact Statement, or “DEIS,” must

be prepared first. The DEIS must satisfy to the fullest extent possible the statutory requirements for a final EIS.

The agency must publish the DEIS and obtain comments

on it from any federal agency that has jurisdiction or special expertise with respect to any environmental impact associated with the proposed action, or that is authorized to develop and enforce environmental standards (e.g., EPA, U.S. Fish & Wildlife Service, etc.). The agency also must seek comments from certain state and local agencies, Indian tribes, the applicant (if any), and the public. See 40 C.F.R. part 1503.

b. A Final Environmental Impact Statement, or “FEIS,” must

respond to all comments received on the DEIS, including any responsible opposing view that was not adequately discussed in the DEIS and the agency’s response to such views. The agency may respond to comments by modifying alternatives (including the proposed action), developing and evaluating new alternatives, supplementing or modifying its analyses, making factual corrections, or explaining why the comments do not warrant further response. All substantive comments (or summaries) must be attached to the FEIS. 40 C.F.R. §1503.4.

The agency may (but need not) request comments on the

FEIS before making a final decision. Other agencies and persons may, in any case, make comments before a final decision is made.

c. A Supplemental EIS must be prepared (for either a DEIS

or FEIS) if: i. The agency makes substantial changes in the

proposed action that are relevant to environmental concerns; or

89

ii. There are significant new circumstances or information relevant to environmental concerns that bear on the proposed action or its impacts.

The agency also may prepare a Supplemental EIS if it determines that the purposes of NEPA would be furthered by doing so. The same procedures and requirements apply to Supplements as apply to DEISs and FEISs. 40 C.F.R. §1502.9(c).

4. Record of decision.

After making a final project decision, the responsible agency must provide a concise statement of its decision – called a Record of Decision, or “ROD.” The ROD should identify all alternatives considered and specify the alternative(s) deemed to be environmentally preferable. The agency also must identify the considerations that entered into its decision. Finally, the ROD must state whether all practicable means to avoid or minimize environmental harm have been adopted, and if not, why they were not. 40 C.F.R. §1505.2.

An agency may not issue a ROD until the later of ninety days after the Federal Register notice of the public availability of the DEIS or thirty days after the Federal Register notice of the public availability of the FEIS.

5. Agency cooperation.

If more than one agency is involved in the proposed action, a “lead agency” shall supervise the preparation of the EIS. Other federal agencies with jurisdiction by law over all or a portion of the project or its impacts will be “cooperating agencies.” Agencies with special expertise also may be cooperating agencies, upon the request of the lead agency. Cooperating agencies participate in the NEPA process from the outset, including scoping, preparing the environmental documentation, and commenting on the EIS. See 40 C.F.R. §§1501.5-1501.6.

EISs also should, to the extent possible, be prepared concurrently

and in integration with environmental analyses and studies under the Fish and Wildlife Coordination Act (16 U.S.C. §661 et seq.), the National Historic Preservation Act (16 U.S.C. §470 et seq.), the Endangered Species Act (16 U.S.C. §1531 et seq.), and other environmental review laws and executive orders. 40 C.F.R. §1502.25. EISs should include a discussion of Environmental Justice issues, pursuant to Executive Order No. 12898.

90

II. SELECTED ISSUES IN NEPA COMPLIANCE

A. “Purpose and Need”

The CEQ regulations say very little about what is required in the statement of “purpose and need” for the proposed action, but this statement nevertheless has become the subject of increased controversy in recent years. 1. CEQ regulation.

“Purpose and need. The [EIS] shall briefly specify the underlying purpose and need to which the agency is responding in proposing the alternatives including the proposed action.” 40 C.F.R. §1502.13.

2. Judicial interpretation. Federal courts generally will accord a high degree of deference to an agency’s formulation of purpose and need, but that deference is not absolute. Courts, nevertheless, have emphasized the importance of the statement of purpose and need. See, e.g., Simmons v. U.S. Army Corps of Engineers, 120 F.3d 664, 667 (7th Cir. 1997): “[T]he first thing an agency must define is the project’s purpose. [Citation omitted.] The broader the purpose, the wider the range of alternatives; and vice versa. . . . If the agency constricts the definition of the project’s purpose and thereby excludes what truly are reasonable alternatives, the EIS cannot fulfill its role.”

B. Range of Alternatives

1. The statute.

a. Section 102(2)(C) of NEPA (the EIS requirement) calls for

a “detailed statement by the responsible official on . . . (iii) alternatives to the proposed action.” 42 U.S.C. §4332(2)(C)(iii).

b. Section 102(2)(E) also states: “The Congress authorizes

and directs that, to the fullest extent possible . . . all agencies of the Federal Government shall . . . study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources.” 42 U.S.C. §4332(2)(E) (emphasis added).

91

2. The regulations. a. The alternatives analysis is the “heart of the environmental

impact statement.” 40 C.F.R. §1502.14. b. The alternatives analysis must:

i. “Rigorously explore and objectively evaluate all reasonable alternatives, and for alternatives which were eliminated from detailed study, briefly discuss the reasons for their having been eliminated.”

ii. “Devote substantial treatment to each alternatives

considered in detail” to ensure a fair evaluation of their comparative merits.

iii. Examine alternatives that are not within the

jurisdiction of the lead agency, if those alternatives would accomplish the agency’s purpose and need.

iv. Include the “no action” alternative.

v. Identify the agency’s “preferred alternative.

vi. Include appropriate mitigation measures not

already included in the proposed action or alternatives.

40 C.F.R. §1502.14. c. The agency must not “commit resources prejudicing

selection of alternatives before making a final decision.” 40 C.F.R. §1502.2(f). Prior to issuance of the ROD, the agency cannot take any action to “limit the choice of reasonable alternatives,” or allow any non-Federal applicant to take such action. 40 C.F.R. §1506.1(a)(1), (b).

C. Connected Actions and “Segmentation”

1. The regulations.

a. The CEQ regulations provide that “[t]o determine the scope of environmental impact statements, agencies shall consider 3 types of actions . . . . They include:

(a) Actions (other than unconnected single actions) which may be: (1) Connected actions, which means that they are closely related and therefore

92

should be discussed in the same impact statement. Actions are connected if they: (i) Automatically trigger other actions which may require environmental impact statements. (ii) Cannot or will not proceed unless other actions are taken previously or simultaneously. (iii) Are interdependent parts of a larger action and depend on the larger action for their justification. (2) Cumulative actions, which when viewed with other proposed actions have cumulatively significant impacts and should therefore be discussed in the same impact statement. (3) Similar actions, which when viewed with other reasonably foreseeable or proposed agency actions, have similarities that provide a basis for evaluating their environmental consequences together, such as common timing or geography. Any agency may wish to analyze these actions in the same impact statement. It should do so when the best way to assess adequately the combined impacts of similar actions or reasonable alternatives to such actions is to treat them in a single impact statement.”

40 C.F.R. §1508.25. b. The CEQ regulations also provide that “[w]hen preparing

statements on broad actions (including proposals by more than one agency), agencies may find it useful to evaluate the proposal(s) in one of the following ways:

i. Geographically, including actions occurring in the

same general location, such as body of water, region, or metropolitan area.

ii. Generically, including actions which have relevant

similarities, such as common timing, impacts, alternatives, methods of implementation, media, or subject matter.

93

iii. By stage of technological development including federal or federally assisted research, development or demonstration programs for new technologies which, if applied, could significantly affect the quality of the human environment.”

40 C.F.R. §1502.4(c). c. In evaluating the “intensity” of a proposed action – in order

to determine whether it will have a “significant” environmental effect – an agency is required to consider “[w]hether the action is related to other actions with individually insignificant but cumulatively significant impacts. Significance exists if it is reasonable to anticipate a cumulatively significant impact on the environment. Significance cannot be avoided by terming an action temporary or breaking it down into small component parts.” 40 C.F.R. §1508.27(b)(7) (emphasis added).

D. Indirect and Cumulative Impacts

1. The regulations.

a. “Effects” include “direct effects, which are caused by the action and occur at the same time and place,” and

Indirect effects, which are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable. Indirect effects may include growth inducing effects and other effects related to induced changes in the pattern of land use, population density or growth rate, and related effects on air and water and other natural systems, including ecosystems. Effects and impacts as used in these regulations are synonymous. Effects includes ecological . . . aesthetic, historic, cultural, economic, social, or health, whether direct, indirect, or cumulative.

40 C.F.R. §1508.8 (emphasis added).

b. “Cumulative impact” is “the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions regardless of what agency (Federal or non-Federal) or person undertakes such other actions. Cumulative impacts can result from individually

94

minor but collectively significant actions taking place over a period of time.” 40 C.F.R. §1508.7 (emphasis added).

E. The “Small Federal Handle” Problem

1. The issue

At what point does federal participation in a project proposed by a non-federal entity (private party, state or local government, etc.) “federalize” the action and subject it to the requirements of NEPA? Also, when must the non-federal portion of an overall project with both federal and non-federal elements be included within the NEPA scope of analysis?

2. Common situations. a. Nonfederal actions that require federal permits or

approvals, such as permits from the U.S. Army Corps of Engineers under Section 10 of the Rivers and Harbors Act and Section 404 of the Clean Water Act; or Secretary of the Interior approval of Indian contracts.

b. Nonfederal actions eligible for federal assistance, such as

mass transit systems; highway construction; housing developments HUD mortgage insurance; and HUD funding for a portion of a project.

III. OTHER FEDERAL STATUTES

A. National Historic Preservation Act

Section 106 of the National Historic Preservation Act (“NHPA”) requires every federal agency with jurisdiction over a proposed federal or federally assisted undertaking to “take into account” the effect of that undertaking on historic properties, prior to approving the expenditure of federal funds or issuing a license for the undertaking. 16 U.S.C. §470f. The Section 106 review process is governed by regulations promulgated by the Advisory Council on Historic Preservation (“ACHP” or “Council”), see 36 C.F.R. part 800 (“Protection of Historic Properties”). 1. Regulatory framework.

The purpose of §106 of the NHPA is to take into account the effect of Federal undertakings on historic properties by identifying historic properties potentially affected by the undertaking, assessing the effects of the undertaking and seeking to avoid, minimize or mitigate any adverse effects on those properties. 36 C.F.R. §800.1(a). The process is administered by the sponsoring Federal Agency, in consultation with the State Historic Preservation Officer (“SHPO”), representatives of local governments, the applicant(s) for Federal assistance, if any, and

95

individuals and organizations which have demonstrated an interest in the undertaking. 36 C.F.R. §800.2. The Agency must “seek and consider views of the public” with due respect to the complexities and individual circumstances of the undertaking. 36 C.F.R. §800.2(d). The Council also may participate in the consultation when “its involvement is necessary to ensure that the purposes of section 106 and the Act are met . . . .” 36 C.F.R. §800.2(b)(1).

a. The roles and obligations of the parties.

i. Agency official.

The Federal Agency has the statutory responsibility of fulfilling the Section 106 requirements. Id. §800.2(a). The Agency must ensure that an Agency Official with jurisdiction over the undertaking takes financial and legal responsibility for Section 106 compliance, and that all actions taken on behalf of the Agency meet professional standards. Id. §800.2(a), (a)(1).

ii. Contractors.

The regulations permit the Agency to use the services of a contractor to prepare information, analyses, or recommendations. Id. §800.2(a)(3). The Agency, however, remains responsible for satisfying the regulations and for making sure that the contractor’s work meets the appropriate standards. Id.

iii. Council.

Although the Council’s primary responsibility is to implement Section 106 review through promulgating regulations, by giving advice and guidance on the procedures, and by generally overseeing the process, it has some responsibilities involving individual undertakings. Id. §800.2(b). The Council is to consult with and make comments to the Agency regarding Section 106 review for individual undertakings as needed. There are several stages of the Section 106 review process at which the Council may become involved based upon its own initiation or at the behest of the Agency or the consulting parties.

96

iv. State Historic Preservation Officer.

The role of the SHPO is to reflect the interests of the State and its citizens in preserving cultural heritage. SHPOs are to advise and assist the Agency in carrying out Section 106 review. Id. §800.2(c)(1).

If, at any stage, the SHPO fails to respond to the

Agency within thirty days of receipt of a request for review of a finding or determination, the Agency may either proceed to the next step in the Section 106 process using the finding or determination, or may consult with the Council in lieu of the SHPO. If the SHPO later reenters the process, the Agency is not required to reconsider these findings and determinations. Id. §800.3(c)(4).

v. Other consulting parties.

Other parties who have consultative roles in the Section 106 process are the Tribal Historic Preservation Officer; Indian Tribes and Native Hawaiian organizations that attach religious or cultural significance to the historic properties; representatives of local governments that have jurisdiction over the area in which the undertaking may have effects; applicants for federal assistance; and certain individuals and organizations that have a demonstrated interest in the undertaking because of their legal or economic relation to the undertaking or affected properties, or their concern with the undertaking’s effects on historic properties. Id. §800.2(c). The regulations define “consultation” as “the process of seeking, discussing, and considering the views of the other participants, and, where feasible, seeking agreement with them . . . .” Id. §800.16(f).

vi. Public.

The regulations state that the views of the public are “essential to informed Federal decisionmaking in the section 106 process.” Id. §800.2(d). However, the Agency is to consider the public’s views “in a manner that reflects the nature and complexity of the undertaking and its effects on historic properties, the likely interest of the public in the effects on historic properties, confidentiality concerns of private individuals and businesses, and the relationship of the Federal involvement to the

97

undertaking.” Id. Thus, the Agency can determine what topics are suited to public discussion and how to involve the public on those issues.

b. Initiating the §106 process.

Initiating the §106 Process essentially involves determining if §106 is applicable to the proposed project and contacting all of the parties essential to the review process.

i. Establishing an undertaking.

The first step in the §106 process is determining whether the Federal action constitutes an “undertaking.” Id. §800.3(a). An “undertaking” is defined as a “project, activity, or program funded in whole or part under the direct or indirect jurisdiction of a Federal agency . . ..” Id. §800.16(y). Also, the Federal agency needs to determine whether the undertaking is the type of action which could potentially cause effects on historic properties. Id. §800.3(a).

ii. Identify the appropriate SHPO and other consulting

parties.

The next step requires the Agency to identify and contact the SHPO(s) involved, the local governments that have jurisdiction over the area which may be affected, the applicant for federal assistance or approval, if any, and any Indian tribe or Native Hawaiian organizations which may attach religious or cultural significance to historic properties in the project area. Id. §800.3(f). The agency, in consultation with the SHPO(s), also must consider all written requests from individuals and organizations which have requested to be involved as consulting parties. Id. §§800.3(f)(3), 800.2(c)(6).

iii. Plan to involve the public.

The Agency should also determine what issues are appropriate for public input and plan how it will notify and involve the public on those issues. Id. §800.3(e). Public involvement is an important and pervasive requirement in the revised Section 106 regulations.

98

c. Identifying historic properties.

The next major step in the §106 review process involves determining the number and significance of the historic properties which might be affected by the undertaking.

i. Determining the area of potential effects.

The Agency, in consultation with the SHPO, must determine the geographic area in which the undertaking may cause changes to historic properties. Id. §§800.4(a), 800.16(d). Next, the Agency must gather existing information on historic properties within that area and seek new information from the consulting parties, those “individuals and organizations likely to have knowledge of” historic properties in the area, and any tribes identified earlier. Id. §800.4(a).

ii. Identify and evaluate historic properties.

Using the information gathered, the Agency must then make a good faith effort to identify the historic properties which exist within the Area of Potential Effects. Id. §800.4(b). Next, the Agency must work with the SHPO to determine whether identified historic properties that are not already listed on the National Register are eligible for registry. Id. §800.4(c). If there are no historic properties or there will be no effect upon the historic properties that are present, the Agency may conclude the Section 106 process. Id. §800.4(d)(1). However, if historic properties exist which may be affected, the Agency must continue the Section 106 review and invite the consulting parties’ views on the potential effects. Id. §800.4(d)(2).

d. Assessing adverse effects.

If the Agency and the SHPO determine that some eligible

historic properties might be affected by the undertaking, they must assess the extent of the adverse effects. Id. §800.5. An adverse effect exists if the undertaking might diminish, “directly or indirectly, any of the characteristics of a historic property that qualify the property for inclusion in the National Register.” Id. §800.5(a)(1). Examples of adverse effects include:

i. “Physical destruction of or damage to all or part of

the property,” Id. §800.5(a)(2)(i);

99

ii. “Alteration of the property . . . that is not consistent with the Secretary’s Standards for the Treatment of Historic Properties . . .,” Id. §800.5(a)(2)(ii); and

iii. “Introduction of visual, atmospheric or audible

elements that diminish the integrity of the property’s significant historic features.” Id. §800.5(a)(2)(v).

Once these determinations are made, the process requires

the Agency to seek the agreement of the SHPO and consulting parties concerning its adverse effect findings. If they cannot agree and no resolution can be made, the regulations look to the Council to help resolve the matter. Id. §800.5(c).

e. Resolving adverse effects.

If the agency decides that adverse effects may occur, it

must consult with the SHPO and other parties “to develop and evaluate alternatives or modifications that could avoid, minimize or mitigate adverse effects on historic properties.” Id. §800.6(a).

i. Memorandum of agreement.

If the Agency, the SHPO, and the Council – if it is a consulting party – agree on how to resolve the adverse effects, they are to execute a Memorandum of Agreement (“MOA”) which details their plans and governs the undertaking. Id. §800.6(b)(1)(iv). They also may invite the other consulting parties or any party that assumes a responsibility under the MOA to be a signatory, but even if those parties refuse to sign, the MOA is still effective. Id. §800.6(c)(2). If the Council does not participate in this resolution process, then the Agency must also submit the MOA to the Council before approving the undertaking. Id. §800.6(b)(1)(iv). The MOA evidences the Agency’s compliance with §106 and terminates the review process. Id.

ii. Council involvement.

The Council may become involved in the process if the Agency and the SHPO cannot agree, or if it is invited to join by the Agency or another consulting party. Id. §§800.6(a)(1), 800.7(a). If it joins the process, the Council will work with the Agency and the SHPO to resolve the adverse effects and to sign an MOA. Id. §800.6(b)(2).

100

iii. Failure to resolve adverse effects.

If no agreement can be reached or if the Agency terminates consultation, the Agency must ask the Council to comment on the undertaking. Id. §800.7(a). The Council also may terminate consultation on its own initiative (if it has been involved) and opt to provide comments. The Agency then must take the Council’s comment into account in reaching a final decision on the undertaking (but is not legally bound by it). Id. §800.7(c)(4). If the SHPO terminates the consultation, the Council and the Agency may still agree and sign an MOA. Id. §800.7(a)(2).

2. Special requirements for protecting National Historic Landmarks.

When the Agency determines that a National Historic Landmark

(“NHL”) may be directly and adversely affected by an undertaking, Section 110(f) of the NHPA requires the Agency to minimize harm to the maximum extent possible. 16 U.S.C. §470h-2(f); 36 C.F.R. §800.10(a). The Agency must request that the Council participate in consultation to resolve the adverse effects on the NHL and must follow the process outlined above. 36 C.F.R. §800.10(b). The Agency also must notify the Secretary of the Interior and invite him to participate in the consultation. Id. §800.10(c).

3. Similarities between NEPA and NHPA.

While not identical, NEPA and Section 106 of the NHPA are similar in a number of respects. First and foremost, the requirement to prepare an EIS and the requirement to engage in Section 106 consultation are both procedural in nature, not mandating any particular result, but instead specifying a particular process that must be followed in arriving at a result. Further, both statutes explicitly call for coordination between the EIS and Section 106 processes (among others) for projects that implicate issues under each statute. Thus, proposed actions with some sort of federal involvement, funding, or approval will often involve similar compliance issues under both NEPA and Section 106. Other similarities between NEPA’s EIS requirement and Section 106 consultation include: a. Actions affected: Both statutes inject specific concerns –

for NEPA, environmental; for Section 106, historic preservation – into the decision-making of federal agencies concerning proposed actions within their jurisdiction. As a practical matter, an action that qualifies as a “major federal action” under NEPA often will qualify as a federal “undertaking” under Section 106 as well, and vice versa.

101

b. Alternatives: Both statutes require a consideration of

alternatives to the proposed action, with a goal of avoiding or minimizing adverse effects to the extent possible.

c. Coordination with other agencies: Both statutes require

the responsible federal agency to coordinate with and involve other federal, state, and local agencies that have jurisdiction over, or expertise with respect to, the proposed action and its impacts.

d. Public involvement: Both statutes require public notice and

opportunity to comment. e. Effect on project decision: Neither statute ultimately may

hold up a project decision, as long as the procedural requirements have been satisfied. The responsible agency must consider and respond to criticisms from other agencies and the public, and include such responses in its final decision documents.

Despite these similarities, certain differences should be kept in mind: f. Study area: The area of potential effects studied under

Section 106 may not be the same geographic area that should be studied under an EIS or an EA.

g. Adverse effects: Adverse effects may have a different

level of significance under NEPA and under Section 106. For example, a particular effect that is “adverse” for Section 106 purposes may be considered an “indirect effect” under NEPA and, thus, may not be as central in the NEPA analysis as it is under Section 106.

h. Independent obligations: Although agencies routinely

include impacts to cultural resources or historic resources in their EIS analyses, their obligations under Section 106 are independent from NEPA, and must be met even when NEPA obligations do not arise.

B. Other Statutes

1. Section 404 of the Clean Water Act.

Many public and private projects require permits from the U.S. Army Corps of Engineers for impacts to “navigable waters,” including wetlands, under Section 404 of the Clean Water Act, 33 U.S.C. §1344. Because the issuance of such permits constitutes federal action, NEPA compliance is generally required for such actions. The Corps’ Section 404 regulatory program contains its

102

own substantive environmental standards, most notably in the EPA-promulgated “Section 404(b)(1) Guidelines,” 40 C.F.R. part 230. These guidelines require the analysis of alternatives and measures to avoid, minimize, and mitigate impacts to aquatic resources. Care must be taken to harmonize the alternatives analysis requirements of NEPA and Section 404, as well as the evaluation of environmental consequences.

2. Endangered Species Act.

Section 7 of the federal Endangered Species Act (“ESA”) requires consultation by federal agencies with the U.S. Fish & Wildlife Service and the National Marine Fisheries Service (where appropriate) to ensure that their actions are not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of critical habitat. 16 U.S.C. §1536(a)(2). Again, compliance with Section 7 of the ESA generally must be coordinated with NEPA review efforts.

3. Environmental justice.

Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” requires that “each Federal agency make achieving environmental justice part of its mission by identifying and addressing, as appropriate, disproportionately high and adverse human health and environmental effects of its programs, policies, and activities on minority populations and low-income populations.” The memorandum from the President to the heads of departments and agencies specifically recognized the importance of NEPA procedures for identifying and addressing environmental justice concerns.

103

THE PROBLEM AND REGULATION OF INVASIVE SPECIES Professor Anthony E. Chavez

I. THE GOOD AND THE BAD OF INVASIVE SPECIES

Invasive species consist of species that evolved elsewhere and have been purposefully or accidentally relocated.1 The introduction of these species does or is likely to cause economic or environmental harm or harm to human health.2 The concept includes a species’ seeds, eggs, spores, or other biological material capable of propagating the foreign species.3 One study estimated that, at the end of the last century, the United States had at least 50,000 invasive species.4 Invasive, or alien, species may consist of animals, plants, fish, or other organisms. Species become introduced to new environments through a number of means, most unintentional, but many intentional. Intentional introduction occurs through acquisition of species as pets or for landscaping.5 Species also are transported intentionally to provide sources of food or to help control current species (some of which may have been intentionally introduced themselves).6 Unintentional introductions occur through numerous means. In many instances, species relocated intentionally escape into the environment and cannot be recaptured. Species often are unknowingly included with transportation devices, both private and commercial, or their cargo. The rate and risk of alien species has increased enormously as humans have begun to travel farther and faster. Also, goods and materials are more frequently being traded among more nations.7 Land and water alterations open new pathways for species.8 Finally,

1 Ecological Society of America, untitled flyer (2004), available at

http://www.esa.org/education/edupdfs/invasion.pdf. 2 Exec. Order No. 13,112, 64 Fed. Reg. 6183, 6183 (Feb. 8, 1999).

3 Id.

4 David Pimentel, S. McNair, J. Jaecka, et al., "Economic and Environmental Threats of Alien

Plant, Animal, and Microbe Invasions", 84 Agriculture, Ecosystems and Environment 1, 1 (2001). Worldwide, the study estimated that 480,000 species had been introduced into ecosystems. The actual number might be much larger. Scientists estimate that we have actually identified only 1.5 million of an estimated 10 million species worldwide. 5 Environmental Protection Agency, "Pathways for Invasive Species Introduction" (undated),

available at http://water.epa.gov/type/oceb/habitat/pathways.cfm. 6 Id.

7 Pimentel, supra note 4 at 3.

8 Id.

104

as climate change constricts the habitats of some species while expanding those of others, we can anticipate that they will move accordingly.9 Because alien species are not native to their new habitats, they can cause a number of problems. These include competition, predation, or hybridization.10 Alien species may compete with native species for food, breeding habitat, and space.11 In this competition, they often enjoy an advantage over native species since local species have not evolved to respond to them and their natural predators often are not present. Furthermore, native species may not have developed appropriate defenses to withstand their new predators. As a result, nearly half of the species identified in the United States as being endangered or threatened are considered at risk primarily because of competition with and predation by alien species. Invasive species also may introduce additional new species or disrupt ecosystems.12

Besides harm to other species, invasive species cause other impacts, including financial. Nearly three-fourths of weeds in the United States originally were introduced plant species. Weeds reduce crop yields by as much as 12 percent. This represents a crop loss of approximately $28 billion annually.13 Alien plant pathogens also cause significant loss, totaling nearly $24 billion annually. Another $2 billion in forest products losses derive from non-indigenous plant pathogens,14 as well as an equivalent amount in losses caused by invasive pest insects and mites.15 A similar loss is caused by alien insects, such as fire ants and termites.16 Removal of invasive species is costly but often unsuccessful. For instance, to date the removal of zebra mussels has cost hundreds of millions of dollars, yet they have not been eradicated.17 Overall, the costs of invasives have been estimated to exceed $130 billion annually.18

9 Fiona Harvey, "Climate Change Driving Species out of Habitats Much Faster than Expected,"

The Guardian, August 18, 2011, available at http://www.guardian.co.uk/environment /2011/aug/18/climate-change-species-habitats. 10

Royal Society for the Protection of Birds, Invasive Non-native Species, available at http://www.rspb.org.uk/ourwork/policy/species/nonnative/index.aspx. 11

Id. 12

Id. 13

Pimentel, supra note 4 at 5. 14

Id. at 7. 15

Id. at 6. 16

Id. at 11. 17

James T. Carlton, "Environmental Impacts of Marine Exotics", Action Bioscience (May 2004), available at http://www.actionbioscience.org/biodiversity/carlton.html. The mussel, the size of a fingernail and originally found in the Black Sea, has spread rapidly since the 1980s to all of the Great Lakes, the Mississippi River, and several other waterways. Id. Where established, they develop high population density and feed on particles in the water that serve as food for other competitors, resulting in declines in their populations. Furthermore, because of the density of

105

Not all alien species have caused only adverse consequences. Indeed, a number of species introduced to new ecosystems have provided significant economic benefits. Introduced species include corn, wheat, rice, domestic chicken, and cattle. Combined they provide more than 98 percent of the world food supply, with a value of $5 trillion in 1998.19 Alien species have also played important roles in landscape restoration, biological pest control, sport, pets, and food processing.20

II. REGULATION OF INVASIVE SPECIES

The earliest attempt by the United States to regulate invasive species came in the Lacey Act. Congress passed the Act in 1900 and significantly amended it in 1981 and 2008.21 The Lacey Act contains two main provisions. The first prohibits the import, export, or transport of any fish, wildlife, or plant made illegal by any United States or foreign law.22 Second, it identifies specific species that may not be imported.23 The banned species include the mongoose, fruit bat, English sparrow, starling, and any other species designated as "injurious" by the Department of Agriculture.24 Species can be added through the rulemaking process, but only one has been added in the past decade, and the average time to add a species to the banned list exceeds four years.25 The Act provides for civil fines of $10,000 and criminal penalties of $20,000 or up to five years in prison.26 The Lacey Act has been criticized on several grounds. First, its list of species is reactive. Imported species are presumed to pose little or no risk until deemed otherwise by the Fish and Wildlife Service. This problem is often compounded by

zebra mussel populations, they clog pipes used for power and manufacturing plants and can even sink vessels. Jason A. Boothe, "Defending the Homeland: A Call to Action in the War against Aquatic Invasive Species," 21 Tul. Envtl. L.J. 407, 411 (2008). 18

Jane Cynthia Graham, "Snakes on a Plain, or in a Wetland: Fighting Back Invasive Nonnative Animals – Proposing a Federal Comprehensive Invasive Nonnative Animal Species Statute," 25 Tul. Envtl. L.J. 19, 26 (2011). 19

Pimentel, supra note 4 at 1. 20

Id. at 3. 21

Rachel White & Stephanie Showalter Otts, "Preventing the Spread of Zebra and Quagga Mussels: The Role of the Lacey Act," 3 Arizona J. Env. L & Pol'y 85, 86 (2013). 22

16 U.S.C. §3372(a). 23

18 U.S.C. §42(a)(1). 24

Robert S. Anderson, "The Lacey Act: America's Premier Weapon in the Fight against Unlawful Wildlife Trafficking," 16 Pub. Land L. Rev. 27, 37 (1995). 25

Boothe, supra note 17 at 38. 26

16 U.S.C. §3373.

106

a substantial delay between the introduction of a species into the country and when the impacts of that invasive species are first noticed.27 Furthermore, the scope of the act is limited to only the most egregious species, those that are considered injurious.28 Finally, once an imported species causes problems, the Lacey Act provides no response or cleanup mechanism to restore ecosystems.29

Under some circumstances, the Endangered Species Act (ESA) can regulate invasive species, but its application is limited. Although it protects threatened and endangered species, the Act’s protections are not targeted to injuries caused by other species. Section 9 of the ESA prohibits the take of an endangered or threatened species.30 Section 9 has broad application,31 yet it still requires an actor to trigger its protections. In Palila v. Hawaii Department of Land and Natural Resources,32 the court applied Section 9 to prohibit the introduction of a species. Specifically, the Hawaiian Land and Natural Resources Department introduced mouflon sheep into the habitat of palila, a finch-billed bird and an endangered species. The Department introduced the sheep for the enjoyment of sport hunters. The sheep, however, feed on mamane trees, which are the exclusive food source for the palila and also provide shelter and nesting.33 The Ninth Circuit held that the harm to the palila’s habitat constituted a take, and it affirmed the lower court’s order that the Department remove the sheep. Palila, in which the courts applied the ESA to protect a species from the introduction of a new species to its habitat, nevertheless illustrates some of the limitations of the Act. Section 9 applied because an actor who introduced the new species – the state’s Land and Resources Department – could be identified. The section would be powerless if the introducer of the species could not be found or was not human (the species relocated on its own). Furthermore, Section 9’s protections take effect only when a listed species is implicated (here, the palila). Absent a listed species, the introduction of the sheep, no matter how detrimental to the ecosystem, would not have been prohibited. Finally, as with the Lacey Act, the ESA’s protections also suffer from being reactive. In Palila,

27

White, supra note 21 at 101. Because of this delay, the species often continues to spread even after listing. One study found that of seven species established by the time of listing, at least five spread to additional states after listing. Graham, supra note 18 at 40. 28

Shannon K. Baruch, "The Proposed Florida Nonindigenous Species Statute: A Salvation for the Lacey Act," 10 Fla. J. Int'l L. 185, 201 (1995). 29

Graham, supra note 18 at 42. 30

16 U.S.C. §1538(a). 31

As opposed to Section 7 of the ESA, which applies only to the acts of federal agencies. 16 U.S.C. §1536(a). 32

852 F.2d 1106 (9th Cir.1988). 33

Id. at 1107, n.2 and accompanying text.

107

had the sheep been harder to eradicate or their damage more immediate, the outcome of the case would have occurred too late to have saved the birds.34 In attempts to confront the issues of invasive species directly, Presidents Carter and Clinton issued executive orders aimed at this problem. 1977’s Executive Order 11,987 directs agencies to restrict the importation and introduction of exotic species into ecosystems of property owned or operated by the federal government.35 However, the order lacked support, and agency enforcement was limited.36

Twenty-two years later, President Clinton officially revoked the Order through Executive Order 13,112. This Order instructs federal agencies to prevent the introduction of invasive species, monitor such species' populations, provide for restoration of affected native species and ecosystems, and promote public education.37 The Order also established the National Invasive Species Council to oversee the Order, coordinate federal agency activities, and issue a National Invasive Species Management Plan (NISMP).38 The NISMP, however, has been criticized as ineffective. Most U.S. biologists believe that it complicates the regulation of invasive species. It also fails to set specific targets or timetables against which to measure success.39 The problem of zebra mussels prompted two congressional actions. First, the Nonindigeneous Aquatic Species Nuisance Prevention and Control Act of 1990 (NANPCA) requires the Secretary of Transportation to promulgate rules preventing the release of species into the Great Lakes as a result of ballast water discharge. NANPCA, however, was deficient. It focused exclusively on ships putting into port in the Great Lakes, and it addressed only ballast discharge, just one of several means of introduction.40 Subsequently, Congress passed the National Invasive Species Act of 1996 (NISA). NISA reauthorized NANPCA. It requires ships operating in the Great Lakes to exchange ballast water prior to putting into port. NISA also provides for the establishment of voluntary national guidelines to prevent the introduction of

34

The mouflon sheep were introduced between 1962 and 1966; the Ninth Circuit ruled in 1988. Palila, 852 F.2d at 1107. 35

Exec. Order No. 11,987, 42 Fed. Reg. 26,949 (May 24, 1977). 36

Robert Brown, "Exotic Pets Invade United States Ecosystems: Legislative Failure and a Proposed Solution," 81 Ind. L.J. 713, 722 (2006). 37

Exec. Order No. 13,112, 64 Fed. Reg. 6183 (Feb. 3, 1999). 38

Brown, supra note 36. 39

Id. at 722-23. 40

Viki Nadol, "Aquatic Invasive Species in the Coastal West: An Analysis of State Regulation within a Federal Framework," 29 Envtl. L. 339, 358 (1999).

108

species as a result of ballast water discharge.41 However, to date, mandatory ballast exchange is only required in the Great Lakes, and no voluntary guidelines have been created for the rest of the country. Therefore, NISA has the same shortcomings as NANPCA: its mandatory regulations are limited to the Great Lakes and it addresses only ballast water. NISA also lacks a viable enforcement mechanism.42

These focused and limited efforts by the federal government leave the states with substantial freedom to develop their own efforts. Unfortunately, the result has been fragmented and limited efforts. For instance, only twenty-one states limit private ownership of some species, but fifteen have no permit or license requirements.43 The resulting gap in regulatory coverage enables significant distribution of species.44

41

Id. 42

Id. at 359. 43

Brown, supra note 36 at 724. 44

Id. at 725.

109

THE ENDANGERED SPECIES ACT IN KENTUCKY Kenneth J. Gish, Jr.

I. ENDANGERED SPECIES ACT

In 1973, Congress passed the Endangered Species Act ("ESA"), 16 U.S.C. §1531 et seq., to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved, to provide a program for the conservation of such endangered species and threatened species…"1 At its core, the ESA is designed to prevent the irreversible extinction of plant and animal species. Which agency has jurisdiction for enforcement of the ESA depends on the species to be protected. The United States Fish and Wildlife Service ("USFWS") has jurisdiction over plants, terrestrial animals, and freshwater fish. The National Oceanic and Atmospheric Administration's National Marine Fisheries Service ("NOAA Fisheries") manages threatened and endangered marine animals and anadromous fish species. Because the USFWS has jurisdiction over the threatened and endangered species found in Kentucky, all references in this paper are to USFWS.

II. LISTING/HABITAT DESIGNATION

The ESA provides protections for species that are determined to be "threatened" or "endangered." The Act defines a threatened species as "any species which is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range."2 Endangered species are defined to mean "any species which is in danger of extinction throughout all or a significant portion of its range other than a species of the Class Insecta determined by the Secretary to constitute a pest whose protection under the provisions of this chapter would present an overwhelming and overriding risk to man."3 As of January 2013, the USFWS has listed 2,054 species as threatened or endangered, 1,436 of which are found in the United States.4 The process and criteria for listing a species as threatened or endangered is outlined in Section 4 of the ESA. In making a listing decision, the USFWS must consider the following factors:

the present or threatened destruction, modification, or curtailment of its habitat or range;

1 16 U.S.C. §1531(b).

2 16 U.S.C. §1532(20).

3 16 U.S.C §1532(6).

4 http://www.fws.gov/endangered/esa-library/pdf/ESA_basics.pdf .

110

overutilization for commercial, recreational, scientific, or educational purposes;

disease or predation;

the inadequacy of existing regulatory mechanisms; or

other natural or manmade factors affecting its continued existence.5 The USFWS must make the listing determination "solely on the basis of the best scientific and commercial data available to him after conducting a review of the status of the species."6 The agency must also take into account any effort being made by any state or foreign nation to protect the species. Once a species has been designated as threatened or endangered, the agency must then designate critical habitat for that species.7 An endangered species' critical habitats are the specific geographic areas "on which are found those physical or biological features (I) essential to the conservation of the species and (II) which may require special management considerations or protections."8

III. PROHIBITION ON TAKE

The key provision through which the ESA seeks to protect threatened and endangered species is its prohibition on the "take" of such species. The Act makes it unlawful for anyone to:

import any such species into, or export any such species from the United States;

take any such species within the United States or the territorial sea of the United States;

take any such species upon the high seas;

possess, sell, deliver, carry, transport, or ship, by any means whatsoever, any such species taken in violation of subparagraphs (B) and (C);

deliver, receive, carry, transport, or ship in interstate or foreign commerce, by any means whatsoever and in the course of a commercial activity, any such species;

sell or offer for sale in interstate or foreign commerce any such species; or

5 16 U.S.C §1533(a)(1).

6 16 U.S.C §1533(b)(1)(A).

7 16 U.S.C §1533(a)(3)(A).

8 16 U.S.C §1532(5)(A)(i).

111

violate any regulation pertaining to such species or to any threatened species of fish or wildlife listed pursuant to section 1533 of this title and promulgated by the Secretary pursuant to authority provided by this chapter.9

The ESA broadly defines "take" to mean "to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct."10 Through the adoption of regulations, the agencies have included significant habitat modification as part of the definition of "harm" that is embedded within the definition of take provided that the habitat modification "actually kills or injures wildlife by significantly impairing essential behavioral patterns, including breeding, feeding or sheltering."11 Without a permit, any "take" is prohibited by Section 10 of the ESA12 and punished either as a civil violation (with a maximum of $25,000 per violation)13 or criminally.14

IV. SECTION 7 CONSULTATIONS

Where any federal permit or funding is required for a proposed action, the permitting agency must consult with the USFWS under Section 7 of the Act. Section 7 consultation requires that

Each Federal agency shall, in consultation with and with the assistance of the Secretary, insure that any action authorized, funded, or carried out by such agency (hereinafter in this section referred to as an "agency action") is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species which is determined by the Secretary, after consultation as appropriate with affected States, to be critical, unless such agency has been granted an exemption for such action by the Committee pursuant to subsection (h) of this section. In fulfilling the requirements of this paragraph each agency shall use the best scientific and commercial data available.15

Unless it is clear that a proposed action is likely to adversely affect listed species or critical habitat, consultation under Section 7 is a two-step process. In the first

9 16 U.S.C §1538(a)(1).

10

16 U.S.C. §1532(19). 11

50 CFR 17.3. See also, Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687 (1995). 12

16 U.S.C. §1538(a)(1). 13

16 U.S.C. §1540(a). 14

16 U.S.C. §1540(b). 15

16 U.S.C. §1536(a)(2).

112

optional step, called informal consultation, the permitting agency works with the USFWS to determine:16

Whether the project is a "major construction activity?"

Whether listed species or critical habitats are present?

Whether the project "may affect species or critical habitat?"

Whether the project is "likely to adversely affect listed species or critical habitat?"

If the project is a major construction activity and listed species or critical habitats are present, a biological assessment is prepared. The purpose of the biological assessment is to determine whether it is likely to adversely affect listed species or critical habitat.17 If the biological assessment determines that the project is not likely to adversely affect listed species or critical habitat, the consultation is ended. If there is a determination that the action is "likely to affect," formal consultation is required. Formal consultation revolves around the preparation of a biological opinion by the USFWS.18 A biological opinion determines whether the proposed action will jeopardize the continued existence of a listed species or result in the destruction or adverse modification of critical habitat.19 If a biological opinion concludes that the action will jeopardize the listed species, the USFWS may include reasonable and prudent alternatives to the project to avoid the jeopardy determination.20 If there are no reasonable and prudent alternatives, the project cannot go forward.21 If the project results in a "no jeopardy" opinion (meaning that while the project will affect listed species it will not jeopardize their continued existence), the USFWS will include an "incidental take permit" in the opinion.22 The incidental take permit

16

A flow chart from the Endangered Species Consultation Handbook for the informal consultation process is included as part of Exhibit A. All exhibits referenced in this document are available online at http://www.kybar.org/331. 17

50 CFR 402.13(a). 18

A flow chart from the Endangered Species Consultation Handbook for the formal consultation process is included as part of Exhibit A. 19

50 CFR 402.14(h). 20

Id. 21

50 CFR 402.15. ESA regulations do allow a project proponent, where there are no reasonable and prudent alternatives, to seek an exemption by petitioning the Endangered Species Committee (the "God Squad") for permission to proceed with a project that will jeopardize the continued existence of a listed species. Such exemptions have rarely been granted. 22

50 CFR 401.14(i).

113

allows, as the name suggests, the incidental "take" of endangered species and identified reasonable and prudent measures to limit such take.

V. ENDANGERED SPECIES IN KENTUCKY

As of November 21, 2012, there were forty-seven species listed as threatened or endangered that lived in Kentucky.23 Of these, the majority were freshwater mussels. The species with the most impact on development and other activities, however, is likely the Indiana bat (myotis sodalis). The Indiana bat is one of the seven endangered species within the state for which critical habitat has been designated.

On January 2, 2011, the USFWS issued a final biological opinion regarding the Service's continued participation in and approval of conservation memoranda of agreement for the Indiana bat. The biological opinion evaluated the impact of agreements between the USFWS and other entities that would allow for recovery-focused conservation benefits while allowing up to 12,500 acres of habitat removal in Kentucky. USFWS concluded that, while the actions that would be allowed by the subsequent agreements would impact Indiana bats, entering into memoranda of agreement would not reduce the likelihood of both the survival and recovery of the Indiana bat. The opinion included an incidental take statement, allowing limited take of Indiana bats provided identified reasonable and prudent measures ("RPMs") were taken. Importantly, the RPMs included a limit on the incidental take to those bats taken on 2,500 acres annually and 12,500 acres cumulatively for total habitat loss limits. Following the issuance of the biological opinion, the USFWS and Kentucky Division of Forestry ("KDOF") entered into an Indiana Bat Conservation Memorandum of Agreement.24 The Agreement authorizes KDOF to conduct certain forestry activities without conducting project-specific evaluations of impacts on Indiana bat populations, provided certain identified minimization and mitigation measures are met. Projects meeting the following criteria must undergo project-specific evaluations:

Projects resulting in the loss of more than 250 acres of Indiana bat habitat.

Projects occurring within one mile of priority one or two hibernacula.

Projects occurring within a half mile of priority three or four hibernacula.

Projects resulting in impacts to identified hibernacula with percent forest cover less than 60 percent in the ten-mile radius surrounding the entrance.

Projects resulting in impacts to identified maternity areas with percent forest cover less than 45 percent.

23

A copy of the November 21, 2012 list of threatened and endangered species is attached as Exhibit B. 24

A copy of the USFWS & KDOF Memorandum of Agreement is attached as Exhibit C.

114

Projects resulting in impacts to known maternity habitat between June 1 and July 31. Limited clearing may be approved only after a detailed survey to ensure that no primary maternity roosts are removed during this sensitive period.

The total acreage of adverse effects to the Indiana bat for the duration of the MOA is limited to all the Indiana bats within 2,000 acres and 400 acres annually. Acreage of incidental take is determined using a formula based on the type of activity authorized and the type of activity to be undertaken. All activities taken under the MOA must comply with the Avoidance, Minimization and Mitigation Measures incorporated by reference into the MOA. Through the MOA, KDOF and USFWS have provided an efficient method of engaging in important forestry activities while minimizing the impacts on, and, in many instances improving the quality of, habitat of the endangered Indiana bat in Kentucky.

115

ENVIRONMENTAL PROTECTION CASE LAW UPDATE Jennifer J. Cave

© Jennifer J. Cave (2013)

I. AIR

Native Village of Kivalina v. ExxonMobil Corp., 696 F.3d 849 (9th Cir. 2012)

A. Factual Background

The City of Kivalina sits on the tip of a six-mile barrier reef on the northwest coast of Alaska, approximately seventy miles north of the Arctic Circle. The city is home to members of the Village of Kivalina, a self-governing, federally recognized tribe of Inupiat Native Alaskans. The villagers of Kivalina alleged that they depended on the sea ice that forms on their coastline to shield the Village from powerful coastal storms. In recent years, the villagers alleged the sea ice has formed later in the year, attached later than usual, broken up earlier than expected, and has been thinner and less extensive in nature. As a result, the Village of Kivalina alleged it has been impacted by storm waves and surges destroying the land where it sits threatening buildings and critical infrastructure in the city.

B. District Court Dismissal

Kivalina contended that greenhouse gas emissions resulting in global warming is destroying its land by melting the arctic sea ice that formerly protected the Village from winter storms. In response, the Village filed suit against twenty-two oil, energy, and utility companies alleging that they, as substantial contributors to global warming, are responsible for its injuries under a public nuisance theory. The Village sought monetary damages so that it could relocate further inland. In 2009, the Northern District of California dismissed the case finding that it presented a nonjusticiable political question and for lack of standing. The Village appealed, and while the appeal was pending with the Ninth Circuit, the Supreme Court decided a similar case, American Electric Power Co., Inc. (AEP) v. Connecticut, 131 S.Ct. 2527 (June 20, 2011).

C. Supreme Court’s Ruling in American Electric Power

In AEP, several states, New York City, and three private land trusts alleged federal public nuisance and sought injunctive relief in the form of a cap on carbon dioxide emissions from defendants’ power plants. The district court dismissed the lawsuit in 2005, holding that the claims constituted nonjusticiable political questions that could not be adjudicated by federal courts. In 2009, the Second Circuit Court of Appeals reversed. The Supreme Court subsequently accepted review and held that any potentially viable federal common law nuisance cause of action for greenhouse gas emissions had been displaced by the Clean Air Act,

116

which the Supreme Court, in Massachusetts v. EPA, 549 U.S. 497 (2007), held authorizes EPA to regulate greenhouse gas emissions. The Court concluded that the various statutory provisions of the Clean Air Act governing pollutant emissions from existing stationary sources covered the very type of emitters that plaintiffs had sought to enjoin in the case. In reaching its decision, the Court determined that federal judges lacked the scientific, economic, and technological resources available to EPA in regulating greenhouse gas emissions.

D. Ninth Circuit Dismissal

In the Kivalina appeal, the Ninth Circuit Court conducted a two-part analysis to find that the Clean Air Act, and the Environmental Protection Agency (EPA)’s action the Act authorizes, displaced Kivalina’s claims. First, the Ninth Circuit Court determined that federal common law includes the general subject of environmental law and specifically includes interstate air pollution. Under federal common law, a public nuisance is defined as an “unreasonable interference with a right common to the general public.” Restatement (Second) of Torts §821B(1). Then, the Ninth Circuit Court determined that public nuisance claims can only be brought under the federal common law when the courts are “compelled to consider federal questions which cannot be answered from federal statutes alone.” City of Milwaukee v. Illinois and Michigan, 451 U.S. 304, 314 (1981). Where federal statutes directly answer the federal question at issue, federal common law does not provide a remedy because legislative action displaces the common law. The Ninth Circuit Court relied on the Supreme Court’s decision in AEP to find that since Congress had directly addressed the issue of domestic greenhouse gas emissions from stationary sources, the Clean Air Act displaced the Village's federal common law claims. Even though the plaintiffs in AEP sought abatement of emissions and Kivalina sought money damages, the Ninth Circuit found that the remedy asserted is not relevant to the applicability of the doctrine of displacement. In addition, the Ninth Circuit found that the fact that the damage occurred before EPA acted to establish greenhouse gas standards did not alter its analysis.

II. WATER

A. LA County Flood Control District v. Natural Resources Defense Council,

Inc., 133 S. Ct. 710 (2013)

1. Factual background.

The Los Angeles County basin covers approximately 4,500 square miles. Stormwater within the basin is collected by municipal separate stormwater sewer systems (MS4s) operated by a number of entities, including eighty-four unincorporated cities, Los Angeles County, and the LA County Flood Control District

117

(District). All of these MS4s were regulated under one basin-wide National Pollution Discharge Elimination System (NPDES) permit (the Permit). The District’s MS4 is by far the largest within the basin, consisting of approximately 500 miles of open channel and 2,800 miles of storm drains, and which discharges into the Los Angeles and San Gabriel rivers. Downstream from these discharge points, the District constructed concrete channels in each river for flood control. Near the end of each concrete channel is a monitoring station where the river water is tested for pollutants. Monitoring at these stations has shown that the water flowing out of the concrete channels into the natural river course contains pollutant levels exceeding the limits set in the Permit.

2. District Court rules in favor of the District.

In 2008, two environmental groups, Natural Resources Defense Council and Santa Monica Baykeeper (Plaintiffs), filed a Clean Water Act citizen suit alleging that the District’s MS4 was improperly discharging pollutants in violation of the Permit. The District sought summary judgment, arguing that the water flowing from the concrete channels did not constitute a “discharge” under the Clean Water Act, relying on the Supreme Court’s prior decision in South Florida Water Management District v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004). In Miccosukee Tribe, the Supreme Court held that moving water from one portion of a waterbody into another does not constitute an addition of pollution so as to constitute a “discharge” under the Clean Water Act. The district court found in favor of the District finding that Plaintiffs did not provide the court with the necessary evidence to establish that the Los Angeles and San Gabriel Rivers below the monitoring stations are bodies of water that are distinct from the MS4 above the monitoring stations. As such, the court concluded there was no evidence showing that discharges from the district portions of the MS4 are contributing to the exceedances at the stations. Ultimately, the district court granted summary judgment in favor of the District.

3. Reversal by the Ninth Circuit.

On appeal, the Ninth Circuit Court of Appeals reversed and remanded the case to the district court to enter judgment against the District. The Ninth Circuit held that the district court had erred in concluding that there had not been a “discharge” under the Clean Water Act from the Petitioners’ MS4 into the Los Angeles or San Gabriel Rivers. The court concluded that a “discharge” occurred when the water flowed out of the concrete channel and back into the naturally occurring part of the river.

118

The Ninth Circuit found that the MS4 is distinct from the two navigable rivers because the MS4 is an intrastate manmade construction and not a naturally occurring river. The appellate court rejected the District’s argument that merely channeling pollutants created by other upstream municipalities or industrial NPDES permittees should not create Clean Water Act liability because the District’s discharges did not add or generate those pollutants. The Court explained that the Clean Water Act does not distinguish between those who add pollution and those who convey the pollution added by others. As a result, the Court concluded that the water flowing from the end of the concrete channels into the rivers constituted discharges under the Clean Water Act. Natural Resources Defense Council, Inc. v. County of Los Angeles, 673 F.3d 880 (9th Cir. 2011).

4. Supreme Court review.

The District sought review by the Supreme Court, arguing that the Ninth Circuit’s decision directly contravened Miccosukee Tribe’s holding that simply transferring water from one portion of a single body of water into another portion does not constitute the “addition” of pollutants for purposes of the Clean Water Act. The Supreme Court accepted review of the case, and, on January 8, 2013, issued a decision reversing and remanding the decision of the Ninth Circuit. The Supreme Court held that no “discharge” occurs when water flows from one portion of a river to another through a concrete flood control channel. In reaching its decision, the Court looked at the Clean Water Act’s definition of “discharge of a pollutant” which is “any addition of any pollutant to navigable waters to any point source.” The Court noted that “under a common understanding of the meaning of the word ‘add’ no pollutants are ‘added’ to a waterbody when water is merely transferred between different portions of that waterbody.” LA County Flood Control District v. NRDC, Inc., 133 S.Ct. 710, 713 (2013). Relying on Miccosukee, the Court stated that “no discharge of pollutants occurs when water, rather than being removed and then returned to a waterbody, simply flows from one portion of the waterbody to another.” Id. As a result, the Supreme Court held that the flow of water from an improved portion of a navigable waterway into an unimproved portion of the very same waterway does not qualify as a discharge of pollutants under the Clean Water Act. Id.

B. Friends of the Everglades v. South Florida Water Management District,

678 F.3d 1199 (11th Cir. 2012)

1. Factual background.

Lake Okeechobee in Florida is the second largest fresh water lake in the continental United States. Water flow into and out of the

119

lake is controlled through a series of gates, dykes, canals, and pump stations, which are operated by the South Florida Water Management District (District). The District’s flow diversion facilities collect rainwater from multiple uses in canals and pump it back into the lake.

2. District Court decision.

In 2002, environmental groups filed suit in district court alleging the Clean Water Act requires the District to obtain an NPDES Permit for the discharge of water from the flow diversion facility. In 2006, the District Court agreed and held that the Clean Water Act required the District to obtain an NPDES Permit to operate the flow diversion facilities because the water transfers resulted in the discharge of pollutants into Lake Okeechobee. In a subsequent 2007 decision, the District Court issued an injunction, ordering the District to obtain an NPDES Permit for the water transfers. Following the decisions, the Miccosukee Tribe, which had intervened as a Plaintiff in 2002, sought attorneys’ fees as a prevailing party under the Clean Water Act. The District Court never ruled on the motion for attorneys’ fees because the parties had entered settlement negotiations relating to payment of attorneys’ fees.

3. Promulgation of EPA’s Water Transfers Rule.

The District appealed the decision to the Eleventh Circuit. While the appeal was pending, EPA issued the “Water Transfers Rule” in 2008. 73 Fed. Reg. 33697 (June 13, 2008). Under the Water Transfers Rule, EPA clarified that water transfers are not subject to NPDES requirements because transferring contaminated water between distinct waterbodies does not constitute an “addition” of pollutants to “navigable waters” triggering NPDES requirement. As a result, in the ensuing appeal, the District argued that the NPDES Permit was not warranted based on EPA’s Clean Water Act interpretation in the new Water Transfers Rule. The Eleventh Circuit agreed and upheld EPA’s new water transfer rule and reversed the district court’s decision that the District was required to obtain an NPDES Permit for the water transfers. Following that decision, the Miccosukee Tribe reinstated its motions for attorneys’ fees. The district court denied the fee petition and the Tribe appealed to the Eleventh Circuit.

4. The Eleventh Circuit’s decision regarding fees.

On appeal, the Tribe argued that it was entitled to attorneys’ fees under the Clean Water Act as a “prevailing or substantially prevailing party” because it achieved some relief through its suit. Specifically, the Tribe argued that it not only achieved an injunction at the District Court level, but that the lawsuit also served as a catalyst for the promulgation of EPA’s Water

120

Transfers Rule. In the alternative, the Tribe sought a fee award on equitable grounds, arguing that it had no control over the timing of the promulgation of EPA’s Water Transfers Rule and urged the Eleventh Circuit to consider the District’s influence on the EPA to enact the rule.

The court rejected the Tribe’s arguments and affirmed the district court’s denial of fees. The court explained that a “prevailing party” is one who prevails on “any significant issue” and thereby achieves some benefit by bringing suit. Alternatively, a prevailing or substantially prevailing party “is one who prevailed in ‘what the lawsuit originally sought to accomplish’” or when the party’s suit has “advanced the goals” of the Clean Water Act. Ultimately, the Eleventh Circuit found that the Tribe had not prevailed in its suit. Although the Tribe secured an injunction before the district court, that injunction was subsequently reversed on appeal. The Court also rejected the Tribe’s argument that fees were appropriate because its suit served as a catalyst for the promulgation of EPA’s water transfers rule, even though the rule was contrary to the Tribe’s position. The Court found that the Tribe could cite no law in support of its position for attorney’s fees in this regard.

C. National Min. Ass'n v. Jackson, 880 F.Supp.2d 119 (D.D.C. 2012)

The National Mining Association, along with the States of Kentucky and West Virginia, sued EPA to halt the agency’s implementation of the “Enhanced Coordination Process” by EPA and the Army Corps of Engineers for CWA Section 404 permits at surface coal mining facilities in Appalachia, and to halt implementation of EPA’s Interim Detailed Guidance (and subsequently issued “Final Guidance”) on CWA Section 402 permits for surface coal mining facilities in Appalachia. NMA and the states argued that EPA and the Corps violated the federal Administrative Procedures Act (APA) by implementing these guidance documents as regulations despite the fact that they had not been subject to public notice and comment. EPA’s “guidance” document directed EPA regional offices in certain states to object to CWA Section 402 permits issued by states that did not require compliance with a conductivity “benchmark” established by EPA. The guidance also urged EPA regions to implement certain best management practices (BMP) plans into surface coal mine permits issued by state authorities under the Surface Mining Control and Reclamation Act (SMCRA). Additionally, the guidance directed how states should conduct the analysis of whether a given discharge had a reasonable potential to violate water quality standards. Although the agency argued that the guidance was not binding, the district court found that the guidance was being implemented as if it were a binding regulation, and was therefore “final agency action” subject to judicial review. The court held that to the extent the EPA was interfering with state permitting authority under SMCRA by requiring or dictating the

121

content of BMP plans, the agency had overstepped its statutory authority under SMCRA. The court also found that with respect to the conductivity “benchmark,” EPA had impermissibly established a state water quality standard, affirming that the establishment of such standards is a responsibility of the states, not the federal government. Finally, in an issue of particular importance in Kentucky, the court held that EPA was impermissibly interpreting the reasonable potential analysis regulations by interfering with the manner in which states were conducting this analysis. EPA has since appealed the District Court’s decision to the D.C. Circuit. Briefing in the case is expected to extend over the course of the next several months, with no decision expected before summer of 2013.

D. Commonwealth v. Sharp et al., 2012 WL 1889307 (Ky. App. May 25,

2012), Case Nos. 2009-CA-002190, 2009-CA-2325, 2009-CA-002283, 2009-CA-002326 1. Background.

Farmers with operations located in western Kentucky entered into agreements with Tosh Farms to raise hogs owned and supplied by Tosh Farms in exchange for monthly compensation. The Division of Water issued No-Discharge Operational permits to the Farmers for the operations on July 7, 2006. Thereafter, individuals that own land near the Farmers’ proposed operations filed Petitions for Hearing pursuant to KRS Chapter 224 challenging the Cabinet’s issuance of the Farmers’ No-Discharge Operational permits on various grounds. After a fourteen-day evidentiary hearing and Report and Recommendation by the Hearing Officer, the Cabinet Secretary issued a Final Order rejecting in part and granting in part the Petitioners’ claims. Petitioners then appealed the Secretary’s Final Order to the Franklin Circuit Court.

2. Franklin Circuit Court.

By Opinion and Order entered November 17, 2009, the Franklin Circuit Court reversed in part and affirmed in part the Secretary’s Order, and remanded the case to the Cabinet. The circuit court reversed the ruling of the Secretary on four issues, holding that the Cabinet erred: (1) in failing to require the Farmers to obtain Kentucky Pollution Discharge Elimination System (KPDES) permits rather than No-Discharge permits; (2) in failing to require Tosh Farms to sign the Farmers’ permit applications as co-permittee; (3) in failing to exercise discretionary “special condition” authority to perform an air emissions risk assessment and/or impose conditions relating to air emissions in connection with the Farmers’ permits; and (4) in failing to exercise discretionary “special condition” authority to impose effluent or other limitations relating to pathogens in the permits.

122

On the first issue, the court held that it was error for the Secretary to interpret the KPDES permit program to only apply to animal farming operations that resulted in discharges of pollutants to waters of the Commonwealth. Relying on a general Kentucky statute prohibiting water pollution (KRS 224.70-110), the circuit court held that the KPDES permit program was “far broader” than its federal counterpart (the NPDES permit program) and applied to both “direct” and “indirect” discharges that “cause or contribute to the pollution of the waters of the Commonwealth.” On this basis, the circuit court found that federal law interpreting the scope of the federal NPDES permit program has “no application” to the issue of whether the Farmers were required to obtain KPDES permits and, as a result, it was error for the Secretary to rely on federal case law under the NPDES permit program to support the Cabinet’s construction of the KPDES permit program.

3. Kentucky Court of Appeals.

Both the Farmers and the Cabinet appealed the court’s four holdings reversing the Secretary. Oral argument was held on July 20, 2011, and a decision was issued on May 25, 2012. The Court of Appeals reversed the circuit court and held that KPDES permits were not necessary for the Farmers’ operations and Tosh Farms was not required to sign the Farmers’ permit applications as a co-permittee. Additionally, the Court of Appeals found that the Cabinet was not required to exercise its discretionary “special condition” authority to require analysis or permit conditions relating to hazardous or toxic air emissions. As of the date of these materials, a motion for discretionary review is pending with the Kentucky Supreme Court.

E. EEC et al. v. Frasure Creek Mining, LLC et al., Franklin Circuit Court, Civil

Action Nos. 10-CI-01867 and 10-CI-01868 (Consolidated) (Pending). 1. Background.

Environmental interest groups gave notice of their intent to file a Clean Water Act citizen suit against coal mining companies based on allegedly false discharge monitoring reports submitted to the Division of Water pursuant to the mining operations’ KPDES permits. Subsequently, the Energy and Environment Cabinet filed enforcement actions in Franklin Circuit Court pursuant to KRS Chapter 224 relating to the alleged violations. Concurrently, proposed consent judgments resolving the claims were lodged with the court. Environmental interest groups moved to intervene to contest the consent judgments and bring federal Clean Water Act Section 505 citizen suit claims. Over the companies’ objection, intervention was granted.

123

2. Issues presented.

Key legal issues that could potentially be addressed in the litigation include: (1) Can a Clean Water Act citizen suit be heard by state court? (2) Is the Franklin Circuit Court the proper venue for a Clean Water Act citizen suit claim? (3) Can citizens intervene in a KRS Chapter 224 enforcement case? (4) Must there be public notice of state consent judgment settlements? and (5) What is the standard, if any, for court entry of consent judgments in Kentucky? With regard to the third question, the Kentucky Court of Appeals, on petition for writ of prohibition, held on July 19, 2011, that the Circuit Court had jurisdiction to allow Petitioners to intervene in the proceeding but did not squarely address any of the other issues. The Kentucky Supreme Court, in a decision styled Com., Energy and Environment Cabinet v. Shepherd, 366 S.W.3d 1 (Ky. 2012), upheld the Court of Appeals’ decision, holding that the Franklin Circuit Court had jurisdiction to proceed. The Supreme Court declined to address the remaining issues, on the grounds that they could be raised in any appeal of a final order of the Franklin Circuit Court. The parties engaged in several months of mediation following the Supreme Court’s ruling. Following this mediation, in October 2012, the Cabinet and environmental interest group intervenors reached agreement on a consent judgment with respect to the claims against ICG. This consent judgment required ICG to pay in excess of $500,000 in civil penalties, agree to certain remedial measures, and to make certain additional payments in lieu of civil penalties. The consent judgment between the Cabinet and Frasure Creek remains pending before Judge Shepherd. Frasure Creek has reported to the Franklin Circuit Court that, due to certain financial difficulties, it cannot pay more than the amount agreed to in that consent judgment, and that further negotiation with the environmental interest groups would not be productive. The intervening environmental interest groups also filed a federal citizen suit against Frasure Creek in 2012, alleging the same violations identified in the Frasure Creek-Cabinet consent judgment, as well as other KPDES permit violations related to exceedances of KPDES permit limits. Frasure Creek responded with a motion to dismiss that complaint. In its motion, Frasure Creek argued that the claims overlapping between the Franklin Circuit Court and federal court actions were subject to the “diligent prosecution” bar of the Clean Water Act (which prohibits a citizen suit respecting alleged violations that are already the subject of a government enforcement action in state or federal court). Frasure Creek also argued that the plaintiffs lacked standing to pursue the other allegations in their federal citizen suit complaint. Judge Thapar of the U.S. District Court for the Eastern District of Kentucky heard oral argument on Frasure Creek’s motion in

124

October 2012, but days after the motion was heard the environmental plaintiffs voluntarily dismissed their federal action.

F. Energy and Environment Cabinet v. Nally & Hamilton Enterprises, Inc.,

OAH File No. 42445-039

The Cabinet filed an administrative complaint against Nally & Hamilton alleging numerous KPDES permit violations, including discharging without a KPDES permit, permit effluent limit exceedances, and many of the same recordkeeping and reporting issues involved in the similar Frasure Creek case discussed above. As in the Frasure Creek case, environmental interest groups intervened in this administrative proceeding. The Cabinet and Nally & Hamilton ultimately entered into an administrative agreed order to resolve the violations. The environmental intervenors, who were allowed to file objections to the Agreed Order with the Cabinet Secretary, ultimately appealed the Secretary’s decision to enter the Agreed Order to the Franklin Circuit Court. This appeal presented the Franklin Circuit Court with the novel issue of whether such intervenors had a right to veto or prevent the entry of such a settlement negotiated between the Cabinet and an alleged violator. Without directly addressing this issue, the Franklin Circuit Court affirmed the entry of the Agreed Order. In its opinion, the Franklin Circuit Court emphasized the narrow scope of judicial review of the administrative action, holding that such action could only be overturned if arbitrary and capricious. Based on the facts in the underlying action, the Court held that the Cabinet’s decision to enter into the settlement was not arbitrary and capricious, but instead a reasonable response to the alleged violations. This order was not appealed by the environmental interest groups. The environmental interest groups also filed a parallel federal citizen suit respecting the same violations alleged by the Cabinet in this administrative case. After the Agreed Order with the Cabinet in the administrative case was entered by the Secretary, Nally & Hamilton moved to dismiss the federal case, arguing that it was mooted by the Agreed Order because the same relief requested by the plaintiffs in the federal case had been awarded to the Cabinet in the federal action. The federal court agreed that the case was moot and dismissed the suit. This decision was not appealed to the Sixth Circuit.

G. Energy and Environment Cabinet v. Frasure Creek Mining, LLC, OAH File

No. DOW-33597-047

The Cabinet filed a complaint pursuant to KRS 224 alleging that Frasure Creek violated KPDES permit effluent limitations at numerous facilities, after the effective date of the consent judgment described in the case above. The Cabinet and Frasure Creek resolved the violations by an Agreed Order. As in the above Nally & Hamilton case, environmental interest groups intervened and were permitted to file objections to the agreed order with the Secretary. In their objections, intervenors have

125

raised new issues not present in their objections to the Nally & Hamilton agreed order. Specifically, in addition to challenging the substance of the Agreed Order, the intervenors have argued to the Secretary that because the Cabinet entered into the Agreed Order without the intervenors’ consent, the Cabinet violated the intervenors’ due process rights and certain Clean Water Act regulations related to the rights of interested citizens in state enforcement actions. As of the date of these materials, the objections of the intervenors are currently pending before the Cabinet Secretary.

126

127

KENTUCKY DEPARTMENT FOR ENVIRONMENTAL PROTECTION UPDATE I. KENTUCKY DIVISION OF ENFORCEMENT

A. New Legislation 2013 Session: None B. New Statues/Regulations: None C. Significant Case Law: None D. Changes in DENF Management

1. Jeff Cummins was promoted to Director. 2. Mark Cleland was promoted to Assistant Director. 3. Michael Kroeger was promoted to the supervisor of the Air and

Water Section of the Civil Enforcement Branch. 4. The Civil Enforcement Branch has been consolidated into two

sections:

a. Air and Water (Michael Kroeger, supervisor). b. Waste Management (Justin Schul, supervisor).

E. Trends in Compliance and Enforcement

Below are three-year trends for enforcement and compliance for FY2010 through FY2012.

1. New cases.

a. New case referrals from the media divisions have

decreased 30 percent to 60 percent. b. New case referrals from within DENF have increased 580

percent. c. Total new case referrals have decreased by 3.5 percent. d. New case referrals increased in the Drinking Water (58

percent) and Wastewater (109 percent) programs. e. All other programs saw decreases in new case referrals of

44 percent to 74 percent.

128

2. Active cases.

The number of active cases at DENF has decreased by 12 percent.

3. Civil penalties collected

a. The amount of civil penalties collected has increased 60

percent. b. Civil penalty collected increased in all media (air, waste,

water, UST).

4. Notifications (NOVs and LOWs) issues.

a. The number of notifications issued by the Department decreased 39 percent.

b. Notifications decreased at DAQ (23 percent) and DWM (88

percent). c. Notifications increased at DOW (2.4 percent) and DENF

(189 percent). d. Notifications increased for the Water Resources (6.6

percent) and the Wastewater (58 percent) programs. e. Notifications decreased for all other programs between 21

percent and 100 percent.

5. Ratios of new enforcement cases referred to notifications issued.

a. KY DEP’s ratio of new cases to notifications issued increased 59 percent.

b. The ratio increased for DWM (281 percent) and DENF

(135 percent). c. The ratio decreased for DAQ (25 percent) and DOW (31

percent).

II. KENTUCKY DIVISION OF WASTE MANAGEMENT

A. New Legislation 2013 Session

1. Cabinet has proposed to extend three deadlines in the PSTEAF petroleum storage tank statute to ensure that petroleum storage tank owners in Kentucky have access to funds for tank closure and environmental clean-up.

129

2. Without funding, leaking and abandoned underground storage tanks will become an increased burden upon the public.

3. Extensions of these deadlines have occurred several times, most

recently in the 2004, 2007 and 2010 legislative sessions. 4. These extensions do not entail raising new revenue or redirecting

existing revenue. 5. These extensions simply continue to allow underground storage

tank owners to be eligible to have access to existing and recurring funds for tank closure and environmental clean-up as necessary.

B. New Statutes/Regulations

1. DWM is currently working on regulation development related to KRS 224.01-415.

2. This statute resulted from HB465 from the 2012 legislative

session. 3. The purpose of HB465 was to develop a process where a person

can purchase property that may be or is subject to KRS 224.01-400 or KRS 224.01-405 to voluntarily seek written certainty from the Cabinet that specifies the purchaser is not responsible for the cleanup of the contamination.

4. HB465 also made some significant clarifications regarding UST

facilities (KRS 224.60-135 and KRS 224.60-138). 5. KRS 224.60-135 – “A property owner who is not also the

petroleum storage tank owner or operator shall have no obligation to perform corrective action for a release into the environment from a petroleum storage tank.”

6. KRS 224.60-138 – “If corrective action for a release from or

closure of a petroleum storage tank reduces levels of contamination to less than the standards established pursuant to the administrative regulations adopted under KRS 224.60-137, then the cabinet shall approve the corrective action or closure and issue a notice to the owner or operator that no further action is required to address the petroleum contamination. This notice shall indicate that the property is not subject to any additional actions under KRS 224.01-400 or 224.01-405.”

C. Significant Case Law: None D. Changes in DWM Management

1. Tim Hubbard, Assistant Director of DWM, is currently the acting

manager of the Superfund Branch.

130

2. Gary Logsdon is now the manager of the Recycling and Local Assistance Branch.

3. Shawn Cecil is in the DEP Commissioner's Office and is the

department lead on the final closure activities at the Maxey Flats Project. Shawn is also heavily involved in Brownfield redevelopment issues at the department and division level.

III. KENTUCKY DIVISION OF AIR QUALITY

A. New Legislation 2013 Session: None B. New Statutes/Regulations

1. Mercury and Air Toxics Standards – With power company plans to comply with MATS coming together, the Division for Air Quality will be receiving requests for a one-year extension to the compliance date of April 16, 2015. A recent meeting with the Utility Information Exchange of Kentucky revealed that the agency can expect to receive several requests.

2. One-hour SO2 National Ambient Air Quality Standard – EPA is

required to make non-attainment designations for the standard in June 2013. Kentucky has two counties that are measuring non-attainment for the standard and State Implementation Plan (SIP) development will be required to delineate the activities the state will pursue to bring these areas back into compliance.

3. Federal Litigation on Various Air Quality Rules – The Division

continues to track a multitude of federal litigation that impacts significant parts of its program. Of particular interest are rulings that affect SIP submittals made by the division over the past couple of years.

C. Significant Case Law: None D. Changes in DAQ Management

Andrea Smith is now the manager of the Program Planning and Support Branch.

IV. KENTUCKY DIVISION OF WATER

A. New Legislation 2013 Session: None B. New Statutes/Regulations

1. Triennial review of Water Quality Standards (to be heard before ARRS on Feb. 11, 2013).

131

Revisions to 401 KAR 10:002 Definitions; 401 KAR 10:026 Designated Uses of Surface Waters; 401 KAR 10:030 Antidegradation Policy Implementation Methodology; and 401 KAR 10:031 Surface Water Standards.

2. Wastewater Lab Certification Regulations.

Regulation and manual scheduled for filing in March 2013.

3. Federal rulemaking.

a. CWA: thirteen at pre-proposal phase, three at proposal

phase, and two relatively recently finalized. b. SDWA: four at pre-proposal phase and one at proposal

phase. C. Significant Case Law

1. National Mining Association, et al. (Plaintiffs) v. USEPA, Sierra Club, et al. (Defendants), Case 1:10-cv-1220-RBW, et al.

Facts: NMA sued EPA to halt the Enhanced Coordination Process for review of 404 permits by EPA and Army Corps of Engineers and to halt implementation of EPA’s Interim Detailed Guidance (later, Final Detailed Guidance) for the review of 402 permits for surface coal mining facilities; Key joined as a Plaintiff-Intervenor.

2. Commonwealth of Ky, Energy and Environment Cabinet v.

International Coal Group, LLC (ICG) and Frasure Creek Mining, LLC, Franklin Circuit Court, Civil Action Nos. 10-CI-1867 and 10-CI-1868 (consolidated) (Complaints and tendered Consent Judgments filed December 2010; Intervenors objected).

3. Commonwealth of Ky, Energy and Environment Cabinet v.

Frasure Creek Mining, LLC (administrative case), OAH File No. DOW-33597-047.

4. EEC v. Nally & Hamilton, OAH File No. DOW-42445-039

(complaint filed May 6, 2011).

5. Federal (from Environmental Reporter January 25, 2013).

a. EPA asserts its authority not to impose standards for state waters.

b. EPA plans to clarify guidelines on affordability of clean

water obligations.

132

D. Trends in Compliance and Enforcement

1. New coal mining inspection process. 2. DMR FAQ document for coal. 3. Electronic reporting of DMRs. 4. EPA enforcement priorities. 5. Trends in Kentucky.

E. Changes in DOW Management

Jon Trout is now the manager of the Resource Planning and Program Support Branch.

133

DEPARTMENT FOR NATURAL RESOURCES: TRENDS IN PERMITTING AND ENFORCEMENT

Steve Hohmann Commissioner, Department for Natural Resources (DNR)

I. OVERVIEW OF THE DEPARTMENT FOR NATURAL RESOURCES

The Department for Natural Resources (DNR or the Department) is the largest governmental agency within the Energy and Environment Cabinet, consisting of nearly 760 employees and including nine separate and distinct statutory units – the Commissioner's Office, the Office of Mine Safety and Licensing, and the Divisions of Abandoned Mine Lands, Conservation, Forestry, Mine Permits, Mine Reclamation and Enforcement, Oil and Gas, and Technical and Administrative Support. The Department through its statutes and regulations (KRS Chapters 350, 351 and 353) is responsible for the permitting and enforcement of all surface mining permits and oil and gas wells. This work is performed primarily through the Divisions of Mine Permitting, Mine Reclamation and Enforcement, and Oil and Gas.

II. BACKGROUND

A. Permitting Requirements

1. In general – KRS 350.060 and various sections of 405 KAR 8:030

and 8:040 require any surface mining applicant to first obtain a permit to conduct mining and reclamation activities in the Commonwealth. A permit is also required for coal exploration activities. Permits are required to cover any surface coal extraction activities; underground permits that have surface impacts are also required to permit the surface effects of their activities.

2. These permits are sometimes referred to as being a SMCRA

permit because they are based in large part on the permitting standards set out in the federal Surface Mining Control and Reclamation Act of 1977. PL. 95-87. Since 1984, Kentucky has had the primary authority to control its surface mining program. 30 CFR 917.

2. Time for issuance – Permit applications, depending on type, are

supposed to be issued in a set period of time, usually sixty-five working days from the date a new application is determined to be administratively complete. 405 KAR 8:010, §16. Permit applications not timely processed are called delinquent permits.

134

3. Components – Some of the more critical components of the surface mining permit are:

a. Ownership and control information / past violation history. b. Mining sequence plan which sets out the mine extraction

plan. c. Sediment and erosion control plan and hydrologic

assessments. d. Topsoil handling plan (particularly important in prime farm

land areas). e. Reclamation plan and contemporaneous reclamation plans

detailing how the mining areas are to be returned to its approximate original contour within the statutory deadlines, unless a variance is approved.

f. Post-mining land use plan.

i. The post-mining land plan describes how the land

will be used upon completion of mining. It must be same or higher level of use. Commercial development, for example, is a higher use than pasturage or hay land.

ii. Permittees, however, are being encouraged to

employ reforestation techniques as outlined in Reclamation Advisory Memoranda (RAMs), Nos. 124 and 144.

g. Blasting plan.

i. The plan can be approved as part of the permit

application or within thirty days of commencement of mining activities.

ii. Blasting plans are typically handled through a

separate permitting process and are reviewed by both the Division of Mine Permits (DMP) and the Explosives and Blasting Branch within Division of Mine Reclamation and Enforcement (DMRE).

4. Bonding – Before issuance, all permittees must post a surety bond

in the amount calculated by DMP. KRS 350.060(11), KRS 350.062.

5. Other required permits – Before surface mining activities can

begin, a permittee must obtain all other needed permits and licenses, including a license from the Office of Mine Safety and

135

Licensing (OMSL) and the Mine Safety and Health Administration (MSHA). The mining entity must also obtain in accordance with the Clean Water Act, CWA (Federal Water Pollution Control Act), (33 USC 1251-1376) a Section 401 permit from the Division of Mine Permits, a Section 402 permit from the Division of Water (KPDES), and in some instances, a Section 404 permit from the United States Army Corps of Engineers. (401, 402, and 404 refer to sections of the CWA), 33 USC §§1341, 1342 and 1343, respectively. The following is a brief review of the elements of these non-SMCRA permits:

a. Section 401 – Water Quality Certification.

This certification allows the entity to gain final approval of a 404 permit.

b. Section 402 – Discharge Compliance and Monitoring.

i. In Clean Water Act parlance this is the National

Pollutant Discharge Elimination permit (NPDES). The Kentucky Division of Water has primacy to administer this program on behalf of EPA under its regulations and issues a KPDES.

ii. General Permits used to be the norm. They were

basically a one size fit all surface mining permits that were issued for purposes of monitoring effluent discharges from mine sites, primarily manganese (Mn), iron (Fe), and acidity (pH) and alkalinity, total suspended solids and conductivity.

c. Individual Permits are needed in instances where

permittee is discharging into impaired waters, outstanding resource waters or otherwise does not qualify for a General Permit.

d. Section 404 – Infill and Dredging Permits.

i. These permits are needed in instances where the

permittee will be filling in or dredging "waters of the United States."

ii. This type of permit is applicable to a mining hollow

fill that is sited in an area where the Corps has made a jurisdictional determination (JD) for waters of the United States that a 404 permit is required.

e. The definition of "waters of the United States" was

significantly expanded in the U.S. Supreme Court decision of Rapanos v. United States, 547 U.S. 715 (2006) with its "significant nexus" test. As a result, the Corps of Engineers

136

is heavily involved in reviewing permit applications that are proposing to locate hollow fills in areas where the Corps has jurisdiction.

f. Miscellaneous permits and clearances.

i. Clearance letters for absence of threatened or

endangered species may be required from U.S. Fish and Wildlife Service.

ii. Certificates from State Historic Preservation Office

(SHPO) may be necessary.

B. Enforcement (Surface Mining Permits)

1. In general.

a. Once a permit is actually issued, it becomes subject to inspection and enforcement by the Environmental Inspectors within the DMRE. Inspections are performed in the field using electronic tablets. All enforcement "paper" is primarily electronic and managed through the "Doctree" system, the Department's electronic filing system.

b. There are thirty-nine performance standards set out in 405

KAR Chapters 16 (Surface) and 18 (underground). Inspections are conducted pursuant to 405 KAR 12:030.

2. Inspections.

a. KRS 350.465 mandates inspection of permits. Frequency

of inspections is set out in 405 KAR 12:010, §4. b. Inspections are conducted monthly with one complete

inspection and three partial inspections performed quarterly.

c. Inspections also include reviewing ground and surface

water reports required under SMCRA as well as the review of Discharge Monitoring Reports required by the KPDES permit and submitted pursuant to 405 KAR 16:070/18:070.

d. Inspections can lead to the following enforcement actions,

if violations of SMCRA or KPDES are observed:

i. Notice of Noncompliance.

a) Inspectors are required to cite observed violations which cannot be immediately corrected. Violations are cited in a Notice of Noncompliance. (405 KAR 12:030) and

137

served in accordance with 12:030, §5. The inspector gives the operator a deadline to have the corrective action to abate the noncompliance completed.

b) New feature – Per a recent amendment to

KRS 350.130 in 2010, enforcement documents can be sent by registered email to permittees who submit their email addresses to the Department. (Applicable only to Natural Resources/ not DEP).

ii. Cessation Orders.

a) If the violation is not abated within the deadline for completion given in the Notice of Noncompliance, the inspector may issue a Failure to Abate Cessation Order.

b) Cessation Orders carry penalties of $750 a

day per violation and are in addition to any penalty assessed for the noncompliance.

c) Inspector also has the authority to issue

Imminent Danger Cessation Orders, if a practice or condition is creating an imminent danger to the health or safety of the public or to the environment.

d) Illegal Mining Cessation Orders are issues

in situations where an inspector identifies surface mining operations that do not have a permit.

3. Bond forfeitures and permit revocation.

In general:

a. Permits can be revoked and performance bonds can be

forfeited for failure to complete required reclamation work or to abate violations cited in a Cessation Order.

b. Three types of forfeiture actions are possible:

i. If permit is expired, it can be administratively

forfeited by DMRE Division Director. 405 KAR 10:050, §2.

ii. Unexpired permits can only be forfeited through the

filing of an administrative complaint. Sureties that post the performance bond must first be given an

138

opportunity to reclaim the permitted area in lieu of forfeiture. 405 KAR 10:050, §3. See also KRS 350.130.

iii. Even if the violations are timely reclaimed, if there

is a persistent pattern of violations (two or more in a twelve month period) due to the unwarranted failure of the permittee to comply or if willfully caused by the permittee, the permit can be revoked and the bond forfeited. 405 KAR 12:030, §8.

4. Alternative enforcement.

a. In general.

i. The Department has the authority to seek specific

injunctive relief against the owners and operators to perform required reclamation or reimburse state for costs expended towards reclamation.

ii. The Department also has the authority to seek

individual penalties against any owner or operator who willfully authorizes the commission of a violation or willfully fails to comply with an order of the Department. KRS 350.990.

b. Citizen's Requests for Inspection and Ten Day Notices.

i. Citizens may request through 405 KAR 12.030 that

DMRE personnel conduct an inspection of a mine site to determine if the site is in compliance. Inspection and response must be made within ten days.

ii. Alternatively citizen may file a request with the

federal Office of Surface Mining (OSM), which oversees state enforcement for an inspection. These requests are routed to DMRE for an investigation and report. If OSM is not satisfied with state response it can issue a federal Notice of Noncompliance.

C. Oil and Gas Permits

1. Permitting.

In general:

a. Starting in the 1960s, legislation was put in place requiring

oil and gas operators to obtain from the Department for Mines and Minerals an oil or gas well permit. Through a

139

series of reorganizations, those functions are now being administered by the Division of Oil and Gas (DOG). KRS 353.570 et seq. and 805 KAR 1:020, et seq.

b. The components of permits, including the posting of a

surety bond, are set out in KRS 573.590. Most wells are located in the east, south central and western portions of the state.

c. Horizontal wells now constitute 6.6 percent of all wells

being drilled. This number is down from 21 percent and is a result of a decrease in drilling for natural gas.

d. An important function of the Division is the supervision of

the plugging of abandoned wells through the abandoned well plugging program. KRS 353.180.

2. Compliance inspection.

a. DOG implemented a five-year inspection plan that requires

all producing wells to be routinely inspected at least once every five years (as directed in the Inspector's Manual)

b. Oil and Gas inspectors perform a variety of inspections

during the lifetime of the oil or gas well operations. The following are the types of inspections performed by DOG inspectors:

i. Pre-spud Inspections of well site and constructed access road are performed on severed mineral tracts to ensure compliance with regulatory standards. "Spud" is the term used for the commencement of rotary drilling of the well. The well operator must notify the inspector at least twenty-four hours prior to drilling or spudding.

ii. Drilling Inspections are performed during the time

the well is being drilled to verify that surface/intermediate casing is set at sufficient depth to protect drinking water aquifers.

iii. Completion Inspections are conducted at the end of

drilling. iv. Production Inspections are an inspection of the

gathering lines of producing well after the wellhead is tied into gathering line. The purpose is to verify that gathering line has good integrity and pipeline markers installed.

140

v. Plugging Inspections are conducted when production ends. The inspector will review well data in order to design the plugging and abandonment procedures for the exhausted well. The operator is required to provide all well data to inspector.

iv. Final Reclamation Inspections are conducted on

severed mineral tracts to ensure erosion control measures are in place and reclamation completed after well is plugged and well site reclaimed.

3. Violations.

As of April 1 of this year, DOG will have seventeen field inspectors, down one inspector from three years ago. Violation issuance procedure is as follows: a. If an inspector identifies a field violation of any section of

KRS Chapter 353, he forwards the finding to the Frankfort office, which issues the Notice of Violation.

b. Regulatory authority for issuance of Notice of Violations is

set out in KRS 353.500 through KRS 353.720 c. The oil and gas operator is notified via certified mail and

directed to contact the inspector to correct the violation. d. Forfeiture of the oil or gas well bond occurs if a violation is

not abated.

4. Citizens' Inspections.

DOG personnel respond to citizen inquiries. Citizens are in many ways the eyes and ears of the Division. The following are typical complaints that are investigated by the DOG inspectors:

a. Leaks at casing head or discharge/release of oil around

stuffing box on production tubing. b. Poorly constructed access roads or excessive water run-

off. c. Well site hasn't been reclaimed per reclamation plan,

discharge or debris from well site may impact stream or adjacent property.

d. Slides from well sites, access roads, gathering line right-of-

ways. If slides are also related surface mining activities DMRE is notified.

141

e. Allegations that gathering lines were not properly installed or there is no-right-of way agreement.

f. Reports of gas from water wells or contamination. The

inspector will inspect adjacent wells in vicinity.

III. TRENDS

A. Impacts of Budget Reductions to the Department

1. Personnel impacts.

a. Since 2008, the Department has seen a cumulative reduction in its budget of about 35 percent.

b. The effect of these cuts is being primarily felt by the

Division of Forestry, Division of Conservation, and DOG. c. Notwithstanding these drastic cuts, the Department is still

able to get the bulk of its work done, effectively and on time – mainly through innovation and reallocation of resources.

d. Forestry is undergoing reorganization due to budget

reductions. DOF began this fiscal year with a $1.2 million budget shortfall. The division is reorganizing its field offices from nine districts to five regions. The reorganization became effective February 16, 2013. Staffing will be reduced from 174 to fewer than 160 through the realignment.

2. Equipment impacts.

Reductions in state funds have impacted DMP and DMRE because the Department could not meet its 50/50 match requirements for funds allocated by the federal government through its administrative and enforcement grant to DNR. Over 3.4 million dollars in federal grant money has been returned over the last three years because of insufficient state funds appropriated to meet the federal monies available. Because of lack of matching general funds, the Department could not match all of the money set aside by OSM for the hiring of staff and the purchase of replacement equipment. The Department has not been able to replace outdated laptops, inspector tablets, computers, or a sufficient number of worn out vehicles in over four years.

142

B. Permitting

1. Permits.

a. In 2010, KRS 350.060 was amended and permit fees were significantly raised. 405 KAR 8:010.

b. Because of previous budget cuts and corresponding loss

of DMP personnel, delinquent permits reached a high of 180 permits in late 2009 / early 2010.

c. As a result of the increased fees beginning in 2010, DMP

was able to restore its staff level to its historic norms of about 100 personnel during 2011 and early 2012.

d. The result of the increased fees has been a drastic decline

in the number of delinquent permits to less than 1 percent of the pending applications.

e. DMP has experienced a severe reduction in permit fees

during 2012. Acreage fees have decreased by 55 percent. Other fees have also curtailed. The reduction is due to fewer permit applications submitted. As the coal business in Eastern Kentucky continues to decline, DMP revenues will continue to fall. The DMP has reduced staff from ninety-six in early 2012 to eighty-one in February 2013.

2. E-Permits.

DNR RAM 147 provided the coal mining industry with notice that effective January 1, 2011, all surface coal mining permits would have to be submitted in an electronic format.

Results of electronic permitting:

a. Has been a substantial decrease in the turnaround time for

the review and resubmission of permit applications. b. Several permitting sections can now work on a given

permit application simultaneously. Permits are no longer being handled in a linear fashion, whereas before, the paper application could only be reviewed one section at a time.

c. Beginning April 8th of this year, all new permit applications

will be submitted using Microsoft Access-based application forms. This change from Microsoft Office-based application forms in the e-permitting process will allow for improvements in permit review processing time and also make it easier for permit applicants to build, assemble, and

143

verify application information. This e-permitting improvement will allow for the:

i. Establishment of a direct data connection to the

Surface Mining Information System; ii. Addition of extracts to allow reviewers to verify

submitted data through GIS; iii. Addition of new tools which will evaluate data prior

to submission and after receipt; and iv. Creation of additional tools to assist the consultant

in preparing the application. v. DMP is providing an array of support to new form

users through a comprehensive user's guide, video guides to frequently asked questions, training sessions upon request, and individual assistance through phone support.

C. Enforcement

1. Permit load.

a. The DMRE has sustained a significant loss of experienced inspection personnel over the past four years. The Division has prioritized tight budgets for hiring replacement staff and training needs while reducing or eliminating equipment and vehicle purchases.

b. The average permit load, as of December 31, 2012, was

28.4 permits per inspector statewide average. This is down from a high of thirty-two permits per inspector in January 2009.

c. By agreement with OSM the average permit load should

be twenty-four permits per inspector. With the downturn in new permits being issued and a decline in coal production especially in eastern Kentucky, it is not anticipated the ratio will substantially increase in the near term.

2. Frequency.

a. DMRE and OSM also measure the frequency of permit

inspections by each inspector. If an inspector misses a mandatory inspection frequency of inspection declines. 405 KAR 12:010, Section 3(5).

b. Historically, frequency had been kept in the high 90

percentile.

144

c. Due to a loss in inspection personnel beginning in 2009, the frequency ratio dropped to 83 percent.

d. Frequency has since increased to an overall rate in 2012

of 93 percent. In the last two quarters of 2012, frequency was reached on 99.5 percent of permits.

3. Effects resulting from loss of personnel and budget reductions.

a. Beginning in 2009, a loss of experienced inspection

personnel and lack of funding to fill vacancies led to the DMRE taking a priority frequency inspection approach, meaning active permits are given highest priority and regulatory frequency rates are maintained. Inactive permits, such as permits given a phase II bond release, are given a lower inspection frequency priority. This approach has since been abandoned and inspectors are now required to meet frequency on all permits.

b. Industry compliance with regulatory standards has

decreased. Although it may be a coincidence, between 2000 and 2005, industry was deemed by OSM to be in compliance with all regulatory standards 83 percent of the time. However, compliance has declined and was 77 percent in 2009, 65 percent in 2010, and 70 percent in 2011. Final compliance data for 2012 are not yet complete.

4. Number of enforcement actions.

a. The number of non-compliances issued by DMRE

decreased from 2011 to 2012 by 252. In 2011 DMRE issued 1,493 non-compliances. In 2012 DMRE issued 1,241. The decrease is due to fewer active coal operations. The number of actively producing coal permits has decreased from 346 in January 2012 to 216 in January 2013.

b. The number of Failure to Abate Cessation Orders has

decreased from 190 in 2011 to 182 in 2012. c. Assessed penalties have decreased from $12.3 million in

2011 to over $8.2 million in 2012. d. DMRE inspectors cited violations of water monitoring and

other surface water related issues more than any other performance standard in 2012.

145

5. Decrease in flyrock events.

a. In general, a flyrock event is a blasting operation that results in overburden material being ejected from the permitted area or coming too close to a protected structure located on a permitted area. 405 KAR 7:070; KRS 351.330(14).

b. Coal mining related flyrock events have decreased

significantly from a high of nineteen in 2008 to three in FY 2012.

c. The significant reduction in flyrock events is due in part to an enhanced enforcement process, which mandates the immediate suspension of blasting licenses and certifications. In extreme instances where two or more flyrock events occur within a six month period, the blasting contractor's license to operate is subject to suspension as well.

6. Bond forfeitures.

a. Bond forfeitures have declined over the past four years

from a high of twenty-four in both 2008 and 2009 to seventeen in 2011 and six in 2012.

b. The high incidence of forfeitures in 2008 and 2009 were

due in part to an increase in the number of administrative bond forfeiture actions initiated by DMRE and better coordination between the Office of General Counsel and DMRE.

D. Trends in Oil and Gas

1. DOG permitting.

a. There has been a steady decline since 2009 in the number

of horizontal drilling permits, from a high of 367 permits in FY 09 to only 142 permits in FY 12.

b. The number of well head permits has also declined from a

high of 2261 in FY 08 to a low of 1118 in FY 12. c. This trend is expected to continue as the price of natural

gas remains low.

2. DOG inspections.

The number of inspections performed has remained relatively steady with a high of 14,174 inspections in FY 09 to 12,445 in FY 12.

146

IV. ISSUES CONFRONTING DNR

A. Bond Calculations and Adequacy of Performance Bond Amounts Statutes require each surface or underground mining permittee in Kentucky to post a reclamation bond prior to the issuance of a mining permit. The reclamation bond for each operation must be sufficient to guarantee that the Commonwealth has adequate funds to reclaim the site if the bond is forfeited. Kentucky last reviewed and changed its bonding rates to accurately reflect the cost of reclamation in 1992-93. Since that time the cost to reclaim forfeited mine sites has increased while the bond amount provided to the Commonwealth has not. Consequently, a large gap has developed between the true cost of reclamation on a forfeited site and the amount of bond available to the DNR to adequately perform reclamation. DNR has determined that requiring adequate full cost reclamation bonds for each site is impractical and unaffordable to many coal operations in the Commonwealth. Therefore, DNR is addressing this issue by: 1) implementing new bonding protocols that increase the amount of the individual bond and; 2) proposing establishment of a reclamation guarantee fund (bond pool) to supplement the individual bond for each mining permit in case the individual bond is insufficient to achieve adequate reclamation. (DNR currently operates a bond pool established by statute. This pool is voluntary and entry to the pool is based on an applicant's compliance record with surface mining regulations. Not all mining operations are eligible to enter this pool.) OSM has advised DNR that its bonding program is deficient in requiring sufficient reclamation bond and is requiring the Commonwealth to adjust its bonding program to conform to SMCRA and statutory standards.

B. Permitting without Hollow fills and In-Stream Ponds

1. In general – Necessity of 404 permits.

a. Uncertainty in the water quality implications surrounding the 404 permitting process have severely impacted 404 permit issuances from the COE.

b. Due to the delay in 404 permit issuance, mine operators

have great difficulty properly disposing of excess spoil from mining. Mine operators are finding innovative and controversial methods to cope with the spoil disposal problem.

2. Sediment control.

a. Another issue facing coal operators involves in-stream

sediment control ponds. A typical hollow fill has a sediment control pond at the toe of the hollow fill, which may be in

147

the center of the wet weather drainage channel for the hollow that is being filled. However, placement of the sediment structure at such a location nearly always requires the issuance of a 404 permit, unless the pond can be located above the area where the Corps jurisdiction begins.

b. Typical solution by permittees to avoid the need for a 404

permits is to propose a series of on-bench structures outside the 404 jurisdictional areas.

3. Off site impacts.

a. Absence of hollow fill permits and enforcement issues in

determining whether a permit is in compliance with its backfilling and grading plan and AOC requirements are creating on some permits major stability issues leading to off permit slides during heavy rainfall events and mudflows to receiving streams.

b. The presence of on-bench sediment control ponds, which

frequently leak, often creates instability on the steep slope area below the discharge point of the sediment structure.

V. LEGAL SERVICES SUPPORT FOR DNR

A. The Natural Resources Legal Division provides legal services and

support to all Divisions within the DNR. The Division is headed by a General Counsel and a contingent of fourteen staff attorneys and support personnel.

B. The Division consists of three sections, a Litigation Section, Hearings &

Appellate Unit, and a Collections Section. C. As of February 28th of this year, there were 5,936 open case files being

handled by the Natural Resources Legal Division. By far, the majority of cases were from the Division of Mine Reclamation and Enforcement with 4,557 cases. This represents nearly 77 percent of all open files in the division.

148

149

NATURAL RESOURCES LAW UPDATE W. Blaine Early III

I. INTRODUCTION

This portion of the panel discussion focuses on two developments that affect natural resources development and the potential liabilities of owners of the real property used for that development. First is the reclamation surety bond program that Kentucky requires as a component of its implementation of the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. §1201 et seq. Second is landowner liability for discharges of pollutants in alleged violation of the Clean Water Act ("CWA"), 33 U.S.C. §1251 et seq.

II. SURFACE MINING CONTROL AND RECLAMATION ACT

When Congress adopted SMCRA in 1977, it declared the purposes of the Act to include the establishment of "a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations . . . [and to] assure that surface coal mining operations are so conducted as to protect the environment . . . ."1 SMCRA provides authority for a state to administer its own mining program consistent with SMCRA under a grant of jurisdiction from the U.S. Department of Interior, Office of Surface Mining ("OSM").2 The Kentucky Energy and Environment Cabinet ("Cabinet") administers the SMCRA in Kentucky through its Department of Natural Resources ("DNR") with the approval of OSM.3

Before beginning mining, a person must first obtain a permit.4 Among other requirements, a permit applicant must provide detailed information regarding the proposed plan for restoring the affected land, that is, a reclamation plan.5 The reclamation obligations include restoring the land affected by mining to a condition capable of supporting pre-mining uses, backfilling and grading to the approximate original contour, establishing successful revegetation on the permit area, and protecting the hydrologic balance.6 The SMCRA expressly requires protection of water quality and water resources, including water wells.7 Under

1 30 U.S.C. §1202.

2 30 U.S.C. §1253.

3 30 C.F.R. Part 917.

4 30 U.S.C. §§1256; KRS 350.060(1)(a).

5 30 U.S.C. §§1257(d) and 1258; KRS 350.062; 405 KAR 8:030 §24 and 405 KAR 8:040 §24.

6 See, e.g., 30 U.S.C. §1258; KRS 350.405, 350.410-421. See also Natural Resources and

Environmental Protection Cabinet v. Whitley Development Corp., 940 S.W.2d 904, 907 (Ky. App. 1997). 7 See, e.g., KRS 350.420 and 421. Title 30 C.F.R. §816.41(d), states, in pertinent part, as

follows:

150

OSM's policies, mining permits should not be approved "if the determination of probably hydrologic consequences or other reliable hydrologic analysis predicts the formation of post mining pollutional discharges that would require continuing long term treatment without a defined end point."8

An applicant for a permit must provide acceptable financial assurance to secure "faithful performance of all of the requirements" of SMCRA.9 The financial guarantee is intended to pay for the work in case the permittee is unable to complete the required reclamation. Those financial guarantees may be in the form of corporate surety bonds,10 cash collateral bonds,11 or securities.12 The required amount of financial assurance is supposed to be "sufficient to assure the completion of the reclamation plan if the work has to be performed by the regulatory authority in the event of forfeiture . . . ."13

As mining and reclamation are completed on a permit, the DNR may release defined portions of the financial assurance according to a phased schedule. Phase I bond release generally allows for 60 percent of the bond amount after the area affected by mining is backfilled and graded, topsoil is replaced, drainage is established, and the site is seeded and mulched; an additional 25 percent, Phase II, is released after demonstration of successful revegetation. Phase III bond release of the remaining 15 percent is possible following five years of site stability, established successful vegetative cover, completion of the entire reclamation plan, and proof that the site can support the approved post-mining

Surface-water protection. In order to protect the hydrologic balance, surface mining activities shall be conducted according to the plan approved under §780.21(h) of this chapter, and the following: (1) Surface-water quality shall be protected by handling earth materials, ground-water discharges, and runoff in a manner that minimizes the formation of acidic or toxic drainage; prevents, to the extent possible using the best technology currently available, additional contribution of suspended solids to streamflow outside the permit area; and otherwise prevents water pollution. If drainage control, restabilization and revegetation of disturbed areas, diversion of runoff, mulching, or other reclamation and remedial practices are not adequate to meet the requirements of this section and §816.42, the operator shall use and maintain the necessary water-treatment facilities or water quality controls.

8 See "Bonding and Other Financial Assurance Mechanisms for Treatment of Long-Term

Pollutional Discharges and Acid/Toxic Mine Drainage (AMD) Related Issues". 67 Fed. Reg. 35070-35073 (May 17, 2002). See also: http://www.osmre.gov/amdpol.txt. 9 30 U.S.C. §1259(a); KRS 350.064.

10

30 C.F.R. §800.20. 11

30 C.F.R. §800.21. 12

30 C.F.R. §800.12. See also KRS 350.064(2); 405 KAR 10:015 §3. 13

30 U.S.C. §1259(a). See also 30 C.F.R. §800.14(b); KRS 350.064; 405 KAR 10:015 §6.

151

land use.14 Each phase of the release requires public notice and inspection by the DNR.15

If the permittee does not meet its obligations, then the DNR may revoke the permit and take or forfeit the financial assurance.16 The forfeited financial assurance is to be used by the DNR to complete reclamation, and any excess funds not required are to be returned to the entity from whom they were collected.17 Under certain circumstances, however, the cost to complete reclamation is more than the amount of available financial assurance. This "underbonded" situation may be particularly troubling in instances of large-scale surface disturbance such as that observed in mountaintop mining or where long-term water pollution requires ongoing and sometimes expensive treatment.

In 2010 a study of the adequacy of Kentucky's reclamation bond program called attention to the problem of underbonded sites. Since that time OSM and the DNR have engaged in negotiations on strategies to address the issues. These ongoing discussions produced emergency regulations promulgated by the DNR in May 2012, and the introduction of HB 424 in the 2013 legislative session to formalize changes in Kentucky's bond program. Another member of today's panel will discuss the details of those changes.

III. THE CLEAN WATER ACT

The objectives of the CWA include restoring and maintaining the chemical, physical, and biological integrity of the nation's waters; eliminating the discharge of pollutants into the nation's waters; protecting the propagation of fish, shellfish, and wildlife; and providing for recreation.18 As one implementing strategy, the CWA prohibits the discharge of pollutants into the waters of the United States unless the discharge is done according to a permit.19 Therefore, in addition to the permits required for coal mining by SMCRA and the permits required for extraction of other resources such as oil and natural gas20 and limestone,21 these natural resource operations require additional permits related to the discharge of pollutants to waters of the Commonwealth.

14

405 KAR 10:040. 15

Id. 16

KRS 350.130. 17

KRS 350.131(2). 18

33 U.S.C. §1251. 19

See, e.g., 33 U.S.C. §1311. 20

See, e.g., 805 KAR Chapter 1. 21

See, e.g., 405 KAR Chapter 5.

152

Discharge of pollutants from a point source may be allowed under permits issued under the National Pollution Discharge Elimination System ("NPDES").22 Title 33 U.S.C. §1342(b) allows states to seek approval of their own programs to issue the appropriate permits under state law. Kentucky's implementation of this system is the Kentucky Pollution Discharge Elimination System ("KPDES").23 Kentucky's KPDES program has been approved by the EPA pursuant to 40 C.F.R. Part 123, and Kentucky and EPA have entered into a National Pollutant Discharge Elimination System Memorandum of Agreement between the Commonwealth of Kentucky and the United States Environmental Protection Agency Region IV.

The statutory authority for, and the interaction of state and federal regulatory agencies in the process of issuing NPDES permits for Appalachian mining operations are the subject of current litigation.24 These matters are currently before the U.S. Court of Appeals for the D.C. Circuit.25 As these regulatory matters develop, other litigation may have a profound impact on the values and liabilities of real property associated with natural resource extraction.

Citizen suits under Section 50526 of the CWA have been effective in enforcing (and sometimes expanding the reach of) this statutory program. At least sixty days prior to bringing suit under this provision, the prospective plaintiff must issue a notice of intent to sue ("NOI"). Two such notices, one of which has ripened into a civil action, may eventually result in decisions that impose responsibility on property owners because of past resource extraction on their properties.

In Southern Appalachian Mountain Stewards v. Penn Virginia Operating Co., LLC,27 the plaintiffs alleged violations of the CWA that stemmed from discharges of pollutants from piles of coal processing waste or "gob" piles. A copy of the First Amended Complaint is attached as Exhibit 1. The gob piles at issue in the case are the result of mining and processing operations that took place from 1900 to the 1950s, many years before enactment of either the CWA or SMCRA. The gob piles consist of waste from cleaning or processing raw coal. There is no allegation that the defendant in question, Penn Virginia Operating Co., LLC, operated the mines or the coal processing facilities from which the gob was produced.

22

33 U.S.C. §1342. 23

401 KAR 5:050 to 401 KAR 5:080. 24

Nat'l Mining Ass'n v. Jackson, 816 F.Supp.2d 37 (D.D.C. 2011); Nat'l Mining Ass'n v. Jackson, 880 F.Supp.2d 119, (D.D.C. 2012). 25

Nat'l Mining Ass'n v. Jackson, Case No. 12-5310 and 5311, Court of Appeals for the District of Columbia Circuit. 26

33 U.S.C. §1365. 27

2013 WL 57648 (W.D.Va. Jan. 3, 2013).

153

In a decision issued on January 3, 2013, the court denied the defendant's motion to dismiss. The court found that the plaintiffs had sufficiently pleaded all of the elements necessary to state a claim under the CWA: "(1) the defendant is a person under the CWA; (2) the defendant is adding pollutants to the waters of the United States; (3) those pollutants are being released from a point source; and (4) the defendant either does not have a permit for the discharge of pollutants from the point source, or the defendant does have a permit but is violating the permit." A copy of the opinion is attached as Exhibit 2. The court noted the important differences and standards between motion to dismiss that was before it and a motion for summary judgment. However, observing that the CWA generally prohibits the discharge of pollutants, the court wrote that the CWA "contains no causation requirements; in other words, it is not a defense that a person currently discharging pollutants did not initially cause the discharge." In a similar case against landowners, in June 2012 Appalachian Mountain Advocates and others gave notice of intent to sue two different landowners (Dingess-Rum Properties, Inc. and WPP, LLC) in West Virginia for alleged discharges of selenium and pollutants associated with increases in conductivity. The NOI alleges two point sources, each of which is related to a pond that lies below the toe (or bottom) of a reclaimed valley or hollow fill. The alleged discharges come from mining operations that were previously operated under SMCRA permits issued by the West Virginia DEP, but where mining and reclamation has been completed and all of the bonds have been fully released (Phase III). As in the Penn Virginia case, it appears that the prospective defendants were not directly involved in operating the mines. These two cases may have broad implications for owners of land that was involved in resource extraction. Whether liability under the CWA will be imposed on the landowners remains to be seen.

IV. CONCLUSION

Extraction of natural resources from the earth is a destructive process that requires careful planning and expensive restoration. The court in Nat'l Mining Ass'n v. Jackson, characterized the quandary we face as follows: "How best to strike a balance between, on the one hand, the need to preserve the verdant landscapes and natural resources of Appalachia and, on the other hand, the economic role that coal mining plays in the region is not . . . a question for the court to decide."28 Regulatory authorities, the regulated community, and ordinary citizens must take steps to ensure that complete restoration can be accomplished after the extraction. Mineral and other property owners must evaluate the impact that incomplete or inadequate restoration may have on their liability for future environmental harms.

28

Nat'l Mining Ass'n v. Jackson, 880 F.Supp.2d 119 (D.D.C. 2012).

154

155

OSM’S STREAM PROTECTION RULEMAKING Liz Edmondson

I. INTRODUCTION

The Office of Surface Mining Reclamation and Enforcement (“OSM”) is currently undertaking a rulemaking that would result in comprehensive revisions to the current rules implementing the Surface Mining Control and Reclamation Act (“SMCRA”). This presentation first provides background information on OSM’s previous rulemakings and how those relate to the proposed rule revisions. Next, an overview of the elements proposed as part of the rulemaking is presented. Finally, this presentation analyzes the potential effects of the rulemaking on coal mining in Appalachia.

II. PROCEDURAL HISTORY A. 1983 Rule

1. Currently, most jurisdictions operate under rules consistent with the 1983 rules. 1 The goal of the 1983 rules was to allow surface mining operations as long as protections were provided to streams with significant environmental resources, namely intermittent and perennial streams. 48 Fed. Reg. 30313 (June 30, 1983).

2. The text of the Stream Buffer Zone portion of the 1983 rule states:

“[n]o land within 100 feet of a perennial stream or an intermittent stream shall be disturbed by surface mining activities, unless the regulatory authority specifically authorizes surface mining activities closer to, or through, such a stream.” 30 CFR §816.57(a) (1983). The regulatory authority can authorize surface mining activities inside the buffer zone only upon a finding that the activity “will not cause or contribute to the violation of applicable State or Federal water quality standards, and will not adversely affect the water quantity and quality or other environmental resources of the stream.” Id. Mining activities inside the buffer zone could also be authorized in connection with a stream channel diversion. Id.

3. Historically, the 1983 rule relating to stream buffer zones has been

applied by OSM and state regulatory authorities to allow the construction of excess spoil fills, coal refuse impoundments, refuse piles, and sedimentation ponds in intermittent and

1 Most states have OSM-approved programs and implement regulations consistent with the

federal regulations. Because of the litigation surrounding the 2008 Stream Buffer Zone Rule, states with approved regulatory programs have not implemented regulations consistent with the 2008 rule and still operate under rules adopted in harmony with the 1983 rules. The exceptions are Washington (which does not currently produce coal), Tennessee, and some Tribal lands. These jurisdictions have federal programs administered by OSM and operate under the 2008 rule, which is the current federal regulation.

156

perennial streams and within the stream buffer zone. 73 Fed. Reg. 75814, 75817 (December 12, 2008). However, significant controversy has existed regarding the extent to which the placement of fill material in intermittent or perennial streams is consistent with the 1983 rule. See, e.g. Bragg v. West Virginia Coal Association, 248 F.3d 275 (4th Cir. 2001), cert. denied, 534 U.S. 1113 (2002); Kentuckians for the Commonwealth, Inc. v. Rivenburgh, 317 F.3d 425 (4th Cir. 2003).

B. 2008 Stream Buffer Zone Rule

In December 2008, OSM published a final rule intended to clarify the controversy surrounding the stream buffer zone rule. Environmental groups saw the rule as a weakening of the 1983 rule since it specifically authorized the placement of excess spoil material in streams. However, the rule did tighten requirements related to excess spoil disposal by requiring operations to avoid and minimize excess spoil creation, consider alternatives to excess spoil disposal within the stream buffer zone, and minimize impacts to fish, wildlife, and related environmental values.

III. 2008 STREAM BUFFER ZONE RULE LITIGATION

A. Shortly after OSM published its final SBZ Rule in December 2008, environmental groups challenged the rulemaking in two separate lawsuits. In a complaint filed on December 22, 2008, in the U.S. District Court of the District of Columbia, Coal River Mountain Watch and seven other environmental organizations sought vacatur of the 2008 SBZ Rule. Coal River Mountain Watch, et al. v. Kempthorne, et al., Case No. 1:108-cv-02212. The National Parks Conservation Association also challenged the 2008 SBZ Rule in a separate complaint. National Parks Conservation Association v. Salazar, et al., Case No. 1:09-cv-0115-BJR (D.D.C.). The two cases were ultimately consolidated and the National Mining Association intervened as a defendant.

B. In April 2009, OSM, after agreeing with environmental group claims under

the Endangered Species Act, moved to vacate the rule. The Court denied the motion since it would violate the Administrative Procedures Act by failing to provide for public notice and a comment period. As a result, OSM began a new rulemaking process and published an Advance Notice of Proposed Rulemaking (“ANPR”) on November 30, 2009. 74 Fed. Reg. 62663 (November 30, 2009).

C. In an out-of-court settlement, OSM agreed to use its best efforts to sign a proposed rule by February 28, 2011, that would amend or replace the 2008 SBZ Rule. OSM also agreed to use its best efforts to sign a final action on this proposed rule by June 29, 2012. The Plaintiff environmental groups agreed to stay the pending complaints during OSM’s rulemaking initiatives. OSM did not meet either of the agreed upon deadlines and the Plaintiffs provided the Defendants a thirty-day notice of their intent to move the court to lift the stay of the case on February 25, 2013.

157

IV. STREAM PROTECTION RULEMAKING A. Background and Elements of the Proposed Rule

1. On June 11, 2009, OSM, as part of the Department of the Interior, entered into a Memorandum of Understanding with the U.S. Environmental Protection Agency and the U.S. Department of the Army to implement an interagency action plan on Appalachian Surface Coal Mining. As part of that memorandum, OSM agreed to consider revisions to current SMCRA regulations, including the SBZ Rule and regulations relating to approximate original contour requirements, as well as any other revisions that may better protect the public health and environment in Appalachia from coal mining impacts.

2. As a result, OSM’s November 30, 2009, ANPR included a broader

potential range of regulatory changes than previously contemplated by the SBZ Rule. OSM received over 32,700 comments in response to the November 30, 2009, ANPR, many of which also recommended more comprehensive changes to SMCRA regulations than originally addressed in the SBZ Rule. OSM published a Notice of Intent to prepare an environmental impact statement (75 Fed. Reg. 22723 (April 30, 2010)), followed by a subsequent Notice of Intent (“NOI”) on June 18, 2010, which expanded the scoping opportunities and provided alternatives to the actions proposed in the previous NOI. 75 Fed. Reg. 34666 (June 18, 2010).

3. The June 18, 2010, NOI stated that the purpose of the proposed

rulemaking was to “improve protection of streams from the impacts of surface coal mining operations nationwide.” 75 Fed. Reg. 34666, 34667 (June 18, 2010). The following elements were proposed as part of the rulemaking:

a. Baseline data – Adding more extensive baseline data

requirements for permit applications, including additional hydrologic, geologic, and biologic information.

b. Material damage – Developing a definition for the term

“material damage to the hydrologic balance outside the permit area,” which is currently undefined in OSM regulations.

c. Mining in or near streams – revising regulations governing

mining in, near, or through streams. d. Monitoring requirements – Adding more extensive

monitoring requirements after permit issuance for surface water, groundwater, and aquatic biota.

158

e. Corrective action thresholds – Establishing corrective action thresholds.

f. Fill optimization – Revising rules relating to backfilling and

grading and excess spoil disposal and incorporating landforming principles into the reclamation process.

g. Approximate original contour exceptions – Limiting

variances from approximate original contour. h. Reforestation – Requiring reforestation of previously

forested areas. i. Permit coordination – Coordinating the SMCRA and CWA

permitting processes. j. Financial assurances – Codifying and clarifying OSM’s

March 13, 1997, policy statement relating to acid mine drainage.

k. Stream definitions – Revising the definitions of perennial,

intermittent, and ephemeral streams.

B. Potential Impacts of the Stream Protection Rule on Mining in Kentucky

1. While OSM has not yet published a proposed rule or a draft environmental impact statement, in general revisions such as those contemplated by the ANPR would likely minimize the environmental impacts of mining operations while increasing costs to mine operators. For example, increasing baseline data and monitoring requirements could allow for a better assessment of selenium bearing material prior to mining, but more comprehensive geological testing would add costs to a mining operation. Similarly, the incorporation of landforming principles might add to grading and reclamation costs, but create more natural topography and drainage patterns post-mining. Other provisions may limit the ability of operators to mine in certain ways, but could also benefit the environment. Tightening up requirements for approximate original contour variances may result in less variances being issued, but could also encourage the minimization of excess spoil fills and a return to more natural post-mining land uses.

2. The proposed rule could also affect coal production by increasing

the costs of mining operations. However, if the rule results in production shifts to underground mining, more jobs may be created since underground mines typically require more employees.

159

C. Current Status of the Rulemaking

1. According to a February 7, 2013, Award Notice (www.fedbizopps.gov), OSM recently awarded $784,000 to Industrial Economics, Inc. to supplement its existing contract to prepare an analysis of the proposed Stream Protection Rule. The contract includes the development of three additional engineering analyses, additions and revisions to models and forecasts, and revisions to impact statements. The contract was awarded February 1, 2013.

2. As stated above, the litigation relating to the SBZ seems to also

be moving forward, making it likely that OSM may complete its rulemaking process more quickly. However, the rulemaking process has also been under intense scrutiny from the U.S. House Natural Resources Committee, which has held multiple hearings and conducted an investigation into the rulemaking process.

160

161

PERSPECTIVES OF AN ENVIRONMENTAL HEARING OFFICER TIPS AND POINTERS FOR CONDUCTING AN EFFECTIVE

ADMINISTRATIVE HEARING James L. Dickinson, Esq.

I. OVERVIEW-DISCLAIMER

A. Focus of this talk will be to provide you with my perspective as a former

hearing officer as to how to present an effective case at the administrative level.

B. Most of my experience has been with interpreting KRS Chapter 224, 350

and to a lesser extent KRS Chapter 13B. Most of my tips and references will be based on my prior work with the Office of Administrative Hearings.

C. The opinions set forth in this paper are mine and mine alone. They do

not represent the opinion of any agency with which I may have been previously associated.

II. FILING OF THE PETITION OR REQUEST FOR HEARING

A. Double check the relevant statute regarding the filing of an appeal. Don’t

assume. Generally speaking petitions from an adverse final determination must be filed within thirty days of receipt of final decision\or actual notice.

TIP – In your petition or entry of appearance include your e-mail address along with regular mail address and phone number.

B. Timely Filing Is Jurisdictional 1. Jenny Wiley Health Care Center. v Com., 828 S.W.2d 657 (Ky.

1992). 2. Fox v. House, 912 S.W.2d 450 (Ky. App. 1995). 3. Utica Mutual Insurance Co. v. Natural Resources and

Environmental Protection Cabinet, AOF-22371-042 (1995) (The case of the errant word processor).

4. Consider faxing your request. Some agencies will now accept

email filings followed by hard copy, but check first.

Example 400 KAR 1:090 §4.

C. Legal Holidays

KRS 446.030 – Prevailing case law seems to indicate that an extra day is tacked on regardless of whether the office is closed or not. Weird v.

162

Emberton 306 S.W.3d 67 (Ky. 2010). See also Wilkins v. Kentucky Retirement Systems Bd. of Trustees, 276 S.W.3d 812 (Ky. 2009).

D. What Constitutes Actual Notice\Newspaper Advertisements

1. In permit construction cases, deadline in newspaper may extend

the filing period for someone who has received a letter notifying him or her of the Cabinet’s decision to issue a construction permit. SORE v. Natural Resources and Environmental Protection Cabinet, DWM-21955-042 (Prehearing Conference Report 1995).

2. Surface mining anomaly.

a. Some decisions characterized as being final aren’t really

final at all. Apollo Fuels, Inc v, Natural Resources and Environmental Protection Cabinet, PDH-22738-042 (Rendered 1996).

b. Citizen complaint letters\referral for investigation.

E. What Should You File? A Novel or a Short Story?

1. TIP – Strike a balance between the two extremes. Don’t let tactical

considerations, or sheer laziness obscure your case to the point that the Hearing Officer does not understand what you are trying to say.

2. TIP – Form generic petitions for a hearing are irritating. 3. TIP – After setting out the parties to the action, a chronological

timeline will help orient the hearing officer. Then you can set out your cause of action.

F. For Environmental Attorneys Filing upon Receipt of a NOV – Should You

File? 1. This may be out of date but Cabinet’s position Not a final

determination. Final determination is made when violation is abated and agency conference with violator has taken place.

2. Relatively recent federal case law, still under review, indicates that

the issuance of an administrative Order by EPA is an appealable action. Immediately filing a petition may have the effect of resolving issues quickly. To a certain extent, the issuance of NOV creates a reporting issue for large publicly held corporations – hence the desire to litigate the case quickly.

3. But premature filing may have the effect of delaying settlement of

the case within the agency.

163

G. When to Intervene and Status of Intervenors when Principal Parties Are Trying to Settle; 401 KAR 100:010 §11

H. Naming of a Third Party Defendant

Cannot be done without the agency’s consent. I. Petitions Initiated by Corporate Client\Unauthorized Practice of Law

Issues

1. Petitions will usually be accepted with a warning letter. 2. If retained after petition has been filed, you need to promptly file

entry of appearance and amended petition. 3. TIP – Include email address on entry of appearance.

III. SCHEDULING OF THE FORMAL ADMINISTRATIVE HEARING

Contrary to the wording of KRS 224.10-420(1), a formal hearing is NEVER scheduled in the Administrative Summons. There will ALWAYS be at least one prehearing conference. This point is true of most other agencies as well. A. Time for Filing of Amended Petition

1. Without leave prior to filing of Answer. 2. Thereafter, at anytime with leave of Hearing Officer so long as it

does not have the effect of delaying the case or causing prejudice to the Respondent.

3. TIP – Preferred practice – File a complete Amended Petition. Not

an addendum. 4. TIP – Multiple Amended Petitions can be dangerous to your case

and exasperating to the Hearing Officer.

B. Scheduling of Formal\Status Conference

1. Please bring your calendar. 2. Consult with client prior to conference as to his schedule and

whether he is willing to mediate.

C. Keeping the Hearing Officer in the Loop\Failing to Appear

1. Don’t settle the case and then forget to tell the Hearing Officer. 2. Show cause procedures for failure to appear.

164

D. Recusal Issues – Should You File

1. Grounds for Recusal set out in KRS 13B.-040(2). 2. Unless you are positive that the conflict is going to adversely

affect your client, it is best to proceed with caution. The social friend dilemma.

3. Usually the Hearing Officer will withdraw on his own accord, if he

sees a problem. IV. REFERRAL TO MEDIATION

A. An Overview of 400 KAR 7:090 §7 and KRS 13B.070(3) B. Tips for an Effective Mediation Conference

1. Don’t agree to mediation simply because you think it may please

the Hearing Officer. You are making a commitment to explore settlement of case in good faith.

2. Avoid the temptation of viewing mediation as an opportunity to

conduct discovery. 3. Have a representative with full authority to settle present at

conference or make sure you have clear authority to settle. 4. File complete answers to forms submitted in mediation packet.

Your opponents and hearing officer will not see them. This is definitely not the time to be coy.

5. Mediation is NOT arbitration – don’t try the case. 6. In private sessions with mediator be candid as to your

expectations and what you can reasonably expect from the process.

7. Don’t expect to win everything. Remember the goal in mediation

is to create as much as possible a win-win situation. It is not a "I win\you lose" process.

V. DISCOVERY ISSUES

A. Overview of 400 KAR 1:040 / KRS 13B.080 B. Tips for More Effective Discovery Practice

1. Response to Interrogatories – usually have to be filed in the

agency where the hearing is being held.

165

2. Timing for the filing of depositions a. Most agencies have limited storage room and overworked

administrative assistants. b. Don’t file depositions until you have to. See 400 KAR

1:090 §15. Must be filed if it is being quoted or referred to in any motion or is referred to during the formal hearing.

c. TIP: Just because it is filed, it is not in the Formal

Administrative Hearing record until you move for its admission as an exhibit. It is permissible to use the transcript that is in the file, if pre-filed before the hearing.

3. Motions to compel\Waiving of time limits for Responses to Motion

to Compel\Filing of proposed order. 400 KAR 1:040 §10. See also Motion practice under 400 KAR 7:090 §9.

a. Requirement of certificate of good faith effort to resolve.

b. But, it is not good practice to set out in motion copies of the

correspondence concerning the issue.

4. Making your motion understandable.

Utilization of bullets\brevity is NOT a bad thing. 5. Making the call to your opponent before the motion conference.

Now that you have your opponent’s attention – give him\her a call.

6. If you resolve the issues, it is quite all right to cancel the motion

hearing. But keep the Hearing Officer in the loop and file motion to withdraw motion to compel along with agreement.

7. Filing of electronic copy of motion and order.

In this instance, filing of a proposed order would be helpful. VI. FINAL PREHEARING CONFERENCE\MOTION FOR SUMMARY

DISPOSITION\MOTION FOR CONTINUANCE A. Motion for Continuance – Construction of 400 KAR 1:090 §11

When is "good cause" an absolute requirement? As a general rule, if the motion is opposed or a continuance has been previously granted, hearing officer will want to make a finding of good cause.

166

B. Motion Practice pertaining to Motions for Summary Disposition

1. Overview of 401 KAR 100:010 §3(4) and 400 KAR 1:090 §9.

Steelvest applies to administrative hearings. 2. The pesky "accompanied by an order rule." See §§9(9) and (10).

Does it really apply to Motions for Summary Disposition? Not really, but get permission first.

3. Practical elements of Summary Disposition.

a. Statement of facts\Putting yourself in the Hearing Officers

head\Necessity of his making a record. This is not the place to be making an argument.

b. Alternative – Joint stipulation of facts. c. Affidavits and depositions.

Don’t be chintzy with the extracts- give the hearing officer some context for referenced material.

d. Brevity is king. Be kind to the Hearing Officer. e. Attaching authorities.

Hearing officer can readily access statutes, SW Reporters and regulations. Anything else, you need to supply a copy. DO NOT USE SPIRAL BINDERS.

f. Submit an electronic version of Motion. (optional)

C. The Final Prehearing Memorandum

1. Must be filed – Failure to file or filing of incomplete prehearing

memorandum can have a disastrous effect on your case. Rebuttal evidence and witnesses do not have to be listed.

2. If done properly can be an excellent resource for the Hearing

Officer and for yourself. 3. Use it as a tool for organizing your case. 4. Don’t overlook the issues to be decided and the necessity of

outlining the elements of the regulation that has to be proven. 5. First opportunity to address issue of penalty and factors

supporting your case concerning amount of penalty.

167

D. Organization of Documents\Pre-hearing Agreements 1. Meeting with the opposition\best opportunity to settle. 2. Joint exhibits in complex cases\Use of file folders. 3. Joint stipulations. 4. Waiving of foundation requirements. 5. The looming problem of digital photographs and electronic

documents. 6. The importance and utility of joint exhibits and stipulations.

VII. FORMAL HEARING

A. The Case in Chief 1. It’s an administrative hearing, not a jury trial. More importantly,

you don’t have a jury to impress. Rules of admission are more flexible. BUT don’t bury the hearing officer in exhibits.

2. Educating the Hearing Officer\KISS.

If the hearing is heavy on technical issues, your expert has to be the teacher.

3. Issues about hearsay\limited use of objections\scintilla rule. 4. Dual witnesses\calling witnesses out of order. 5. Document management.

a. In making copies don’t forget the Hearing Officer. b. If you anticipate marking up an exhibit, make an extra one

that will not be marked. c. Electronic aids – the advent of the smart phone and iPad.

B. Penalties (Enforcement Cases) 1. NREPC v. Maggard, DWM-19198-038 (1994) (penalties factors in

general – derived from EPA standards). 2. NREPC v. Cumberland Wood and Chair, DOW-18965-042 (1998).

Individual liability for corporate owners is a possibility in limited situations where direct control or responsibility for a hazardous waste facility is shown.

168

3. Specific points to keep in mind.

a. Documentation of extent of environmental harm. b. Documentation of remedial costs. c. Emergency response costs are not penalties. d. Penalty issues probably need to be addressed during

discovery as well. e. Other Maggard factors.

4. Making a recommendation of penalty to the Hearing Officer. Yes

you are going to win, but it doesn’t hurt to have a Plan B. 5. How many days to assess usually when observed, but there are

exceptions. (Continuing environmental harm – damaged stream situations).

C. Issues of Candor, Civility and Comity

Guiding star as to these principles can be found in Section 3 of the Rules of the Supreme Court, specifically Rule 3.1, 3.3 and 3.4 and 3.5. Even in administrative hearings, attorneys should abide by these rules.

1. Candor.

a. Keep your reputation. There is a line between zealously representing your client and losing your reputation for being forthright. If the Hearing Officer ever suspects you of duplicity, your effectiveness is done – probably for all time.

b. The peril of being "too cute by half." The paradox of a

pyrrhic victory. c. Omissions – for the state agency attorney, whether you

like it or not, if there is a critical exculpatory fact that should be known to the Hearing Officer, it must not be omitted.

d. Ex parte communications – KRS 13B.100.

Best avoided – if the hearing officer feels you have stepped over the line, he/she will embarrass you by making a note of it in the record and determining whether the communication prevents him/her from being impartial.

e. Email communications.

169

2. Civility. a. Temper tantrums are rarely effective. Don’t impress your

client at the expense of your case.

b. Don’t be a jerk at the hearing. Kill with kindness. c. Objections: when and how. Sometimes it is best to let an

objection pass unless it is needed to preserve the record. Example – Leading questions.

3. Comity.

a. Hearings and your representation of your client are not

personal, nor shouldn’t be. b. Cooperation leads to better results than constant jousting. c. The rule of what comes around, goes around. d. Don’t let yourself be hoisted on your own petard. e. Discovery fights – don’t – everyone loses, including your

client.

D. Miscellaneous Tips about Formal Hearings

1. Appearance and dress – nothing distracting. Watch the cologne and perfume.

2. Opening statement – brief but necessary to orient the hearing officer to the main issues. If offered, opposing counsel, should go ahead and immediately present an opening statement.

3. Exhibits – make sure you have oriented the Hearing Officer and

he is focused on you. Example – you and the witness are merrily going along with an exhibit while the judge is still looking for the exhibit.

4. Marking exhibits – create a master exhibit and preserve for your

record, one clean copy of the exhibit. 5. Cross examination – judges rarely like seeing a slaughter. Best

cross examination is the one that shows the inconsistencies of the testimony.

6. Rebuttal – everyone may be tired but don’t miss the opportunity to

shore up weak points of your case.

170

7. Closing statements. a. Brevity is best. b. TIP – If there is a post hearing briefing schedule, it is

perfectly OK to skip the closing argument – save it for your briefs.

VIII. POST HEARING ISSUES AND BRIEFING

A. Identification of Issues

Make the hearing officer tell you what he is thinking. B. Writing the Post Hearing Brief – Adhere to the Page Limits

1. Filing of findings of fact: your chance to be a hearing officer. See

comments in Section VI B above. Filing of electronic documents is strongly encouraged.

2. Don’t be argumentative in the proposed findings. Hearing Officer

will not review the arguments in his findings. He may do that in the conclusions of law.

IX. FILING OF EXCEPTIONS

A. Timing for Exceptions

1 Check the applicable regulation or statute. 2. For example note the subtle difference between the filing of

exceptions in so-called Chapter 224 cases and Chapter 350 cases.

A DRAFT SECRETARY’S ORDER MUST BE FILED with the Exceptions.

3. Three day mail rule is NOT applicable. 4. The oddity of not being able to respond in Chapter 224 cases (but

some do anyway). B. What Needs to be Included in Exceptions\the Issue of Preservation

In a nutshell, it would be prudent to file exceptions.

X. QUESTIONS

171

OUTSIDE LOOKING IN: ETHICAL CONSIDERATIONS BETWEEN GOVERNMENTAL &

PRIVATE ATTORNEYS John G. Horne, II

I. RULE 1.11. SPECIAL CONFLICTS OF INTEREST FOR FORMER AND

CURRENT GOVERNMENT OFFICERS AND EMPLOYEES1

A. Government Lawyers Going into the Private Sector

1. This practice is not discouraged by the Rules as pointed out in Commentary,2 Comment 4:

“On the other hand, the rules governing lawyers presently or formerly employed by a government agency should not be so restrictive as to inhibit transfer of employment to and from the government. The government has a legitimate need to attract qualified lawyers as well as to maintain high ethical standards. Thus a former government lawyer is disqualified only from particular matters in which the lawyer participated personally and substantially.”

2. What is “substantial” involvement?

a. “Participated personally and substantially” is a phrase that appears throughout the Rules and Commentary.

b. Terminology Rule 1.0(l) ‘‘‘Substantial’ when used in

reference to degree or extent denotes a material matter of clear and weighty importance.”

3. Governmental attorney seeking private employment.

a. A government attorney may not negotiate employment with any person who is a party in a matter in which the lawyer is participating personally and substantially. (See Ky. Bar Association on Ethics, Formal Op. KBA E-407, (1999))3

1 The Kentucky Rules of Professional Conduct Rule X will be referred to by the shorthand “Rule”

with the particular rule number throughout this outline. 2 The Kentucky Supreme Court Commentary to the Kentucky Rules of Professional Conduct will

be referred to as the “Commentary” throughout this outline. 3 In 2009, the Kentucky Rules of Professional Conduct were amended to reflect the American Bar

Association (ABA) rules known as Ethics 2000. Presently, eighteen states now model after the newer ABA rules while twenty-three base their rules on prior versions of the ABA model. The outline refers to several KBA Ethics Opinions issued prior to the rule changes in 2009 and should therefore be weighed against any changes to the rules since their issuance when applying to a present day event.

172

b. Rule 1.11(d)(2)(ii) cannot negotiate for employment with persons involved in a matter in which a lawyer is participating; except those governmental attorneys serving as law clerks to a judge or other judicial arbitrator.

4. Kentucky’s Executive Branch Code of Ethics – KRS 11A-040 Acts

Prohibited for public servant or officer- Exception.

a. KRS 11A.040(6) – former attorney seeking to contract with a state agency.

b. KRS 11A.040(7) – former attorney seeking employment

from an entity which does business with or is regulated by the state.

c. KRS 11A.040(8) – former attorney who seeks to register

as a lobbyist. d. KRS 11A.040(9) – former attorney contemplating

representation of another before a state agency.

B. Private Lawyers Going into Government

1. One is not prevented from receiving compensation (e.g. partnership share) established by a prior independent agreement but that lawyer cannot receive compensation directly relating to the fee in the matter for which the lawyer is disqualified. (See Commentary, Comment 6)

2. “Except as law may otherwise expressly permit, a lawyer currently

serving as a public officer or employee: (1) is subject to Rules 1.7 and 1.9; and . . .” (See Rule 1.11(d))

a. Rule 1.7. Conflict of interest: current clients – Comments

34 and 35 deal with organizational client.

b. Rule 1.9. Duties to former Clients – See infra I. E.

C. For Government Lawyers Moving between Governmental Agencies See Specifically Commentary, Comment 5 to Rule 1.11

D. Rule Affecting the New Firm for Whom the Government Lawyer Joins Is

Addressed by 1.11(b) and not necessarily Rule 1.10

1. A former government lawyer’s new firm would need to be cognizant of Rule 1.11(b) that the Commentary says supersedes Rule 1.10 where applicable. See Commentary, Comment 2.

2. “The disqualification of lawyers associated in a firm with former or

current government lawyers is governed by Rule 1.11.” (See Rule 1.10(e))

173

E. Rule 1.9. Duties to Former Clients

1. Commentary, Comment 1: “Current and former government lawyers must comply with this Rule to the extent required by Rule 1.11.”

2. Commentary, Comment 2: “In the case of an organizational client,

general knowledge of the client’s policies and practices ordinarily will not preclude a subsequent representation; on the other hand, knowledge of specific facts gained in a prior representation that are relevant to the matter in question ordinarily will preclude such a representation.”

3. Former in-house lawyer for entity may not represent a client in a

matter adverse to the interest of entity if matter is “substantially” related to matters handled by lawyer when he or she worked in-house for entity. (See Ky. Bar Association on Ethics, Formal Op. KBA E-387, (1995))

F. Conflict between Kentucky Ethics Laws and Supreme Court Rules of

Professional Conduct

1. Commentary, Comment 1: “In addition, such a lawyer may be subject to statutes and government regulations regarding conflict of interest. Such statutes and regulations may circumscribe the extent to which the government agency may give consent under this Rule.”

2. Does the passage of time matter regarding conflict of interest?

Does KRS 11A.040(9) give implied consent after passage of a year under Rule 1.11(a)(2)?

II. WHO IS MY CLIENT? – GOVERNMENT ATTORNEY A. Rule 1.13 Organization as a Client

1. “The duty defined in this Rule applies to governmental organizations.” Commentary, Comment 9.

2. Commentary, Comment 9, deals entirely with government

agencies and recognizes a different balance may be appropriate between maintaining confidentiality and preventing wrongful acts since the public business is involved.

3. Balance between accepting the policy and operations decisions,

including ones entailing serious risk, which are not the lawyer’s affair versus actions that violate a legal obligation. (See Commentary, Comment 3)

a. Referral to a higher authority in the organization may be

necessary.

174

b. Rule 1.2(b) – an attorney’s representation is not an

endorsement of political views. 4. Set in the context of employment law, the law review article by

Professor Ariana R. Levinson is a good overview of the question: Who is the client? (2010 General Law issue: Article: "Legal Ethics in the Employment Law Context: Who is the Client?", 37 N. Ky. L. Rev. 1 (2010))

B. Governor, Cabinet Secretary, Commissioner . . .

1. From whom do you take your direction? Each organization is different. If in doubt, ask your supervisor to clarify the proper chain of command.

a. Must adhere to your client’s decision concerning the

objectives of the representation. (See Rule 1.2(a)) b. “When constituents of the organization make decisions for

it, the decision ordinarily must be accepted by the lawyer even if their utility or prudence is doubtful.” (Rule 1.13 Commentary, Comment 3)

c. One does not represent individuals, when organization’s

views are adverse to constituents of the organization, you must explain identity of the client. (See Rule 1.13(f))

2. How far down the chain of command does the attorney-client

privilege go?

a. Upjohn Co. v. U.S., 449 U.S. 383 (1981), is the major Supreme Court decision that addresses the attorney-client privilege in the corporate setting among conflicted decisions from the circuit and district courts.

i. It was a decision in which the majority affirmed that

the attorney-client privilege existed for corporations; however, no consensus for a specific test was reached, believing that any such approach would violate the spirit of Federal Rules of Evidence 501.

ii. D.C. District Court adopted a subject matter test in

relying upon Upjohn and other cases. Independent Petrochemical Corp. v. Aetna Cas. and Sur. Co. 672 F.Supp 1 (D.D.C., 1986).

iii. Because Upjohn is not a constitutional decision

each state is free to adopt its own rule. Some states have embraced the guidance of the

175

Supreme Court; others modified it while it was rejected by others.

b. The Kentucky Supreme Court embraced the Upjohn

decision in the Lexington Public Library v. Clark, 90 S.W.3d 53 (Ky. 2002) case.

3. Kentucky Rules of Evidence Rule 503 defines lawyer-client

privilege and includes a corporation, association or other organization or entity.

a. Communication does need to be made directly to an

attorney; communications between employees that are forwarded to attorney and can otherwise satisfy the rule are also protected. Lexington Public Library at 59.

b. The Lexington Public Library case followed other courts in

holding that a distinction to the privilege is made between communications for legal purposes to which the privilege applies and to those for business purposes to which it does not apply.

c. Rule 1.6 Confidentiality of Information.

(i) Commentary, Comment 2 states: “A fundamental principal in the client-lawyer relationship is that, in the absences of the client’s informed consent, the lawyer must not reveal information relating to the representation.”

(ii) Commentary, Comment 3 speaks to the effect

confidentiality is given by related bodies of law and in summary states: “A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law.”

C. Other Executive Branch Agencies, Legislative and Judicial Are not Clients

D. While corporations and government entities are not exact comparisons

there are many similarities when it comes to following Rule 1.13. For a good perspective on the corporation as an organizational client, see the law review article written by Professor Sherman L. Cohn, Georgetown University Law Center. ("The Organizational Client: Attorney-Client Privilege and the No-Contact Rule", 10 Geo. J. Legal Ethics 739 (1997))

176

III. PRIVATE ATTORNEYS – COMMUNICATIONS WITH GOVERNMENT EMPLOYEES

A. Rule 4.2 Communications with Person Represented by Counsel

1. Ex parte communications – private attorney speaking to

government employees without government lawyer present – when appropriate.

a. Commentary, Comment 4: “This rule does not prohibit

communication with a represented person, or an employee or agent of such person, concerning matters outside of representation.”

Cannot prevent private attorney calling about other matters outside of the representation – cannot impose a blanket no call. (See Ky. Bar Association on Ethics, Formal Op. KBA E-332, (1988)

b. Commentary, Comment 7: “In the case of a represented

organization, this Rule prohibits communications to a constituent of the organization who supervises, directs or regularly consults with the organization's lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability.”

c. Managerial v. non-managerial employee.

i. A lawyer who knows an organization is represented by counsel in a matter may not interview an employee who has a management position in the organization without the consent of the organization’s counsel. (See Ky. Bar Association on Ethics, Formal Op. KBA E-382, (1995))

ii. Non-managerial person – one who cannot make an

admission on the part of the organization. (See Ky. Bar Association on Ethics, Formal Op. KBA E-382, (1995))

d. What about the current employee who wants to talk to

opposing counsel who is representing party adverse to government?

2. Speaking to former employees.

a. Commentary No. 7: “Consent of the organization’s lawyer is not required for communication with a former constituent.”

177

b. A lawyer may speak to an unrepresented former employee of an organization without consent of or notification to the organization’s lawyer. (See Ky. Bar Association on Ethics, Formal Op. KBA E-381, (1995))

c. The government is not responsible for finding former

employees for you. B. Rule 4.3 Dealing with Unrepresented Person

1. “In the event the person with whom the lawyer communicates is not known to be represented by counsel in the matter, the lawyer’s communications are subject to Rule 4.3.” (See Commentary, Comment 9 to Rule 4.2)

2. Commentary, Comment 1: “In order to avoid a misunderstanding,

a lawyer will typically need to identify the lawyer’s client and, where necessary, explain that the client has interests opposed to those of the unrepresented-person.”

3. If an individual tells you that an attorney represents him or her,

then you should accept that as fact and act accordingly. 4. Rule 1.13(f) dealing with organization’s constituents whose

interest or views is adverse to constituent. (See II.B.1.c. supra)

C. Rule 4.4 Respect for Rights of Third Persons

1. “In communicating with a current or former constituent of an organization, a lawyer must not use methods of obtaining evidence that violate the legal rights of the organization. See Rule 4.4” (See Commentary, Comment 7 to Rule 4.2)

2. Commentary, Comment 1: “Responsibility to a client . . . does not

imply that a lawyer may disregard the rights of third persons. It is impractical to catalogue all such rights, but they include legal restrictions on methods of obtaining evidence from third persons and unwarranted intrusions into privileged relationships, such as the client-lawyer relationship.”

IV. GOVERNMENT AND NON-GOVERNMENT ATTORNEY RELATIONSHIP

WHILE ADVERSARIAL DOES NOT HAVE TO EQUAL HOSTILITY A. Rule 3.4 Fairness to Opposing Party and Counsel

B. Golden Rule: Do unto Others What You Would Have Them Do unto You. Treat Others as You Wish to Be Treated.

C. Let the Non-lawyers, the Technical People, Speak

178

179

NAVIGATING MURKY WATERS: RECONCILING COMPETING ETHICAL OBLIGATIONS IN ENVIRONMENTAL LAW

Emily C. McKinney

While all attorneys in Kentucky must adhere to the Supreme Court’s Rules of Professional Conduct, the practice of environmental law presents unique ethical challenges. Particularly given the strict liability nature of much of environmental law, and the potential criminal liability that may be incurred, environmental lawyers must be especially mindful of Rule 1.2’s prohibition on a lawyer assisting a client in the commission of a crime. At the same time, Rule 1.6 places strict limits on disclosure of information related to the representation of a client. These and other ethics rules may at times seem to be in conflict, and require lawyers to carefully consider their obligations under each rule. This presentation will address, through hypothetical situations, some of the ethics rules that an environmental lawyer may have to reconcile in the course of representing a client. I. BASIC HYPOTHETICAL

A lawyer represents Acme Company, which owns a parcel of property. The lawyer learns that employees of the company have been dumping Waste X into a surface impoundment located on the property. (The company does not have any permits or other type of regulatory permission for this activity.) A. What obligations does the lawyer have to report this activity “up the chain”

of Acme Company?

1. Rule 1.13: Organization as a Client

(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances, to the highest authority that can act in behalf of the organization as determined by applicable law.

180

(c) Except as provided in paragraph (d), if,

(1) despite the lawyer’s efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law, and (2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.

Comment 4. In determining how to proceed under paragraph (b), the lawyer should give due consideration to the seriousness of the violation and its consequences, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters, and any other relevant considerations. Ordinarily, referral to a higher authority would be necessary. In some circumstances, however, it may be appropriate for the lawyer to ask the constituent to reconsider the matter; for example, if the circumstances involve a constituent’s innocent misunderstanding of law and subsequent acceptance of the lawyer’s advice, the lawyer may reasonably conclude that the best interest of the organization does not require that the matter be referred to higher authority. If a constituent persists in conduct contrary to the lawyer’s advice, it will be necessary for the lawyer to take steps to have the matter reviewed by a higher authority in the organization. If the matter is of sufficient seriousness and importance or urgency to the organization, referral to higher authority in the organization may be necessary even if the lawyer has not communicated with the constituent. Any measures taken should, to the extent practicable, minimize the risk of revealing information relating to the representation to persons outside the organization. Even in circumstances where a lawyer is not obligated by Rule 1.13 to proceed, a

181

lawyer may bring to the attention of an organizational client, including its highest authority, matters that the lawyer reasonably believes to be of sufficient importance to warrant doing so in the best interest of the organization. Comment 5. Paragraph (b) also makes clear that when it is reasonably necessary to enable the organization to address the matter in a timely and appropriate manner, the lawyer must refer the matter to higher authority, including, if warranted by the circumstances, the highest authority that can act on behalf of the organization under applicable law. The organization’s highest authority to whom a matter may be referred ordinarily will be the board of directors or similar governing body. However, applicable law may prescribe that under certain conditions the highest authority reposes elsewhere, for example, in the independent directors of a corporation.

2. Analysis

a. This illegal disposal of Waste X clearly represents a

“violation of law that reasonably might be imputed to the organization” as contemplated in Rule 1.13. Given the potential civil and criminal penalties, it is also “likely to result in substantial injury to the organization.”

b. The lawyer must make a determination whether it is in the

best interest of the company to refer the matter to a higher authority within the organization. Comment 4 advises that the lawyer should “give due consideration to the seriousness of the violation and its consequences, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters.”

c. This is probably not a circumstance where the lawyer

would “ask the constituent to reconsider the matter,” since illegal disposal has already taken place.

d. It may also be necessary, depending on the seriousness of

the violation, to refer the matter to the highest authority in the organization. For a company, this would most likely be the board of directors.

e. If the lawyer finds it necessary to take this matter “up the

chain of command” in the company, he or she must be careful not to reveal information to persons outside the organization in doing so.

182

B. Is the lawyer required, or permitted, to disclose information about the illegal disposal to regulators or other third parties?

1. Rule 1.6: Confidentiality of Information

(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b). (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:

(1) to prevent reasonably certain death or substantial bodily harm; (2) to secure legal advice about the lawyer's compliance with these Rules; (3) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding, including a disciplinary proceeding, concerning the lawyer's representation of the client; or

(4) to comply with other law or a court order.

Comment 6. Although the public interest is usually best served by a strict rule requiring lawyers to preserve the confidentiality of information relating to the representation of their clients, the confidentiality rule is subject to limited exceptions. Paragraph (b)(1), recognizes the overriding value of life and physical integrity and permits disclosure reasonably necessary to prevent reasonably certain death or substantial bodily harm. Such harm is reasonably certain to occur if it will be suffered imminently or if there is a present and substantial threat that a person will suffer such harm at a later date if the lawyer fails to take action necessary to eliminate the threat. Thus, a lawyer who knows that a client has accidentally discharged toxic waste into a town's water supply may reveal this information to

183

the authorities if there is a present and substantial risk that a person who drinks the water will contract a life-threatening or debilitating disease and the lawyer's disclosure is necessary to eliminate the threat or reduce the number of victims. Comment 12. Paragraph (b) permits disclosure only to the extent the lawyer reasonably believes the disclosure is necessary to accomplish one of the purposes specified. Where practicable, the lawyer should first seek to persuade the client to take suitable action to obviate the need for disclosure. In any case, a disclosure adverse to the client's interest should be no greater than the lawyer reasonably believes necessary to accomplish the purpose. If the disclosure will be made in connection with a judicial proceeding, the disclosure should be made in a manner that limits access to the information to the tribunal or other persons having a need to know it and appropriate protective orders or other arrangements should be sought by the lawyer to the fullest extent practicable. Comment 13. Paragraph (b) permits but does not require the disclosure of information relating to a client's representation to accomplish the purposes specified in paragraphs (b)(1) through (b)(6). In exercising the discretion conferred by this Rule, the lawyer may consider such factors as the nature of the lawyer's relationship with the client and with those who might be injured by the client, the lawyer's own involvement in the transaction and factors that may extenuate the conduct in question. A lawyer's decision not to disclose as permitted by paragraph (b) does not violate this Rule. Disclosure may be required, however, by other Rules. Some Rules require disclosure only if such disclosure would be permitted by paragraph (b). See Rules 1.2(d), 4.1(b), 8.1 and 8.3. Rule 3.3, on the other hand, requires disclosure in some circumstances regardless of whether such disclosure is permitted by this Rule. See Rule 3.3(c).

2. Analysis

a. Note that the requirements for confidentiality in Rule 1.6

are not limited to client communications or information learned in the course of representation – they cover all information relating to the representation, whatever its source.

184

b. The only part of Rule 1.6 that would allow a lawyer to disclose the illegal dumping is if the lawyer “reasonably believes [disclosure to be] necessary” to “prevent reasonably certain death or substantial bodily harm.” Comment 6 makes clear that the “overriding value of life and physical integrity” may override the lawyer’s duty of confidentiality to a client in this circumstance.

c. What is “reasonably certain death or substantial bodily

harm”? Comment 6 says that harm is reasonably certain to occur if “it will be suffered imminently or if there is a present and substantial threat that a person will suffer such harm at a later date if the lawyer fails to take action necessary to eliminate the threat.”

d. What if the lawyer knows that Waste X is toxic, that it can

leach into groundwater, and that children near the property drink groundwater-supplied water? Comment 6 addresses a similar situation, and says that the lawyer “may reveal this information to the authorities if there is a present and substantial risk that a person who drinks the water will contract a life-threatening or debilitating disease and the lawyer's disclosure is necessary to eliminate the threat or reduce the number of victims.” So if Waste X is likely to cause severe health problems if it is consumed, and the lawyer could lead to the company stopping the illegal disposal and regulators taking action to protect the water source, the lawyer could disclose the activity under Rule 1.6(b).

i. But note: disclosure under Rule 1.6(b) is

PERMISSIVE, not MANDATORY. Comment 13 clarifies that a lawyer’s decision not to disclose under Rule 1.6(b) does not violate the rule. (Other rules may require disclosure in certain circumstances, such as Rule 1.2(d), prohibiting a lawyer from assisting in a crime or fraud. In our hypothetical, even though the illegal dumping may be a crime, the lawyer hasn’t assisted in it.)

ii. Some other states, such as Florida, require

disclosure – a lawyer “shall” reveal client confidences when necessary to “prevent a death or substantial bodily harm to another.” See Fla. Rules of Prof’l Conduct R.4-1.6(b)(2).

e. In this type of situation, the lawyer wouldn’t normally have

very much (if any) information on the identity of the waste, its potential health effects, and how likely it is that others will be exposed to it. The rules do not create any affirmative obligation for the lawyer to investigate and find

185

answers to these questions. The comments leave the “corollary” to Rule 1.6 unspoken: if the lawyer doesn’t believe disclosure is “reasonably necessary” to prevent “reasonably certain death or substantial bodily harm,” the lawyer is not ethically permitted to disclose the information.

f. Comment 12 advises that, where practicable, the lawyer

should first “seek to persuade the client to take suitable action to obviate the need for disclosure.” This may apply especially in situations where the potential crime or fraud has not yet taken place. (So, for example, if the lawyer found out that employees of the company were considering disposing of Waste X on their property without a permit.)

II. ADDITIONAL INFORMATION FOR HYPOTHETICAL

Acme Company is considering selling the piece of property. Before the lawyer finds out about the illegal disposal of Waste X, Acme has the lawyer prepare an opinion letter for the potential purchaser based on an environmental audit of the property that the lawyer supervised. The illegal disposal had been occurring at the time the audit was conducted, but it was not discovered during the audit process. The lawyer knows that the purchaser inquired whether hazardous wastes had ever been disposed of on the property, and that Acme representatives responded that no such disposal has occurred.

What are the lawyer’s obligations with respect to the purchase once he becomes aware of the illegal disposal?

A. Rule 1.2: Scope of Representation and Allocation of Authority Between

Client and Lawyer

(d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law. Comment 10. When the client's course of action has already begun and is continuing, the lawyer's responsibility is especially delicate. The lawyer is required to avoid assisting the client, for example, by drafting or delivering documents that the lawyer knows are fraudulent or by suggesting how the wrongdoing might be concealed. A lawyer may not continue assisting a client in conduct that the lawyer originally supposed was legally proper but then discovers is criminal or fraudulent. The lawyer must, therefore, withdraw from the representation, of the client in the matter. See Rule 1.16(a). In some cases, withdrawal

186

alone might be insufficient. It may be necessary for the lawyer to give notice of the fact of withdrawal and to disaffirm any opinion, document, affirmation or the like. See Rule 4.1.

B. Rule 4.1: Truthfulness in Statements to Others

In the course of representing a client a lawyer: (a) shall not knowingly make a false statement of material fact or law to a third person; and (b) if a false statement of material fact or law has been made, shall take reasonable remedial measures to avoid assisting a fraudulent or criminal act by a client including, if necessary, disclosure of a material fact, unless prohibited by Rule 1.6. Comment 3. Under Rule 1.2(d), a lawyer is prohibited from counseling or assisting a client in conduct that the lawyer knows is criminal or fraudulent. Paragraph (b) states a specific application of the principle set forth in Rule 1.2(d) and addresses the situation where a client’s crime or fraud takes the form of a lie or misrepresentation. Ordinarily a lawyer can avoid assisting in a client’s crime or fraud by withdrawing from the representation. Nonetheless, sometimes a lawyer is required to take more overt measures such as giving notice of the fact of withdrawal, disaffirming an opinion, document, affirmation or the like, to prevent the lawyer’s services’ being used to further the client’s crime or fraud. In extreme cases, substantive law may require a lawyer to disclose information relating to the representation to avoid being deemed to have assisted in the client’s crime or fraud. If the lawyer can avoid assisting a client’s crime or fraud only by disclosing this information, then under paragraph (b) the lawyer is required to do so, unless the disclosure is prohibited by Rule 1.6. [See also, Rules 1.6(b), 1.13 (c) and 8.4(c).]

C. Rule 1.16: Declining or Terminating Representation

(a) Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:

(1) the representation will result in violation of the Rules of Professional Conduct or other law; or

187

(2) the lawyer's physical or mental condition materially impairs the lawyer's ability to represent the client; or (3) the lawyer is discharged.

(b) Except as stated in paragraph (c), a lawyer may withdraw from representing a client if:

(1) withdrawal can be accomplished without material adverse effect on the interests of the client; or (2) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent; or (3) the client has used the lawyer's services to perpetrate a crime or fraud; or (4) the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement; or (5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled; or (6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (7) other good cause for withdrawal exists.

Comment 7. A lawyer may withdraw from representation in some circumstances. The lawyer has the option to withdraw if it can be accomplished without material adverse effect on the client's interests. Withdrawal is also justified if the client persists in a course of action that the lawyer reasonably believes is criminal or fraudulent, for a lawyer is not required to be associated with such conduct even if the lawyer does not further it. Withdrawal is also permitted if the lawyer's services were misused in the past even if that would materially prejudice the client. The lawyer also may withdraw where the client insists on taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement.

188

D. Analysis

1. This situation requires the lawyer to reconcile multiple, seemingly conflicting, ethics rules. Rule 4.1(b) requires the lawyer to take “reasonable remedial measures” to avoid assisting in a client’s criminal or fraudulent act, including disclosure. But Rule 1.6 puts strict limits on the lawyer’s ability to disclose this information.

2. Is the lawyer required to withdraw under Rule 1.16?

a. The lawyer now knows that portions of his opinion letter,

and the environmental audit he supervised, contain false representations based on false information provided by the client. He knows that the client intends to rely on these false representations in negotiations with the potential purchaser. The lawyer believes that by continuing to represent Acme in this matter, he would be put in the position of assisting the client’s continuing fraudulent course of conduct in violation of Rule 1.2(d).

b. An ABA formal ethics opinion dealt with an analogous

situation where a lawyer had written an opinion letter to a lender based on financial statements she later learned were false. ABA Formal Op. 92-366. The opinion explains that the lawyer’s “assistance” would stem in part on the bank’s reliance on her prior representations. In that case, the Committee held that Rule 1.16(a)(1) compels the lawyer to withdraw from representation of the company in any matters involving her opinion, the erroneous financial statements, or the bank.

c. In our hypothetical, this reasoning would lead the lawyer to

conclude that he must withdraw from representing Acme, at least in matters relating to the sale of the property, his opinion letter to the prospective purchaser, or the environmental audit.

3. Is the lawyer required or permitted to disclose the false

representations?

a. None of the situations allowing disclosure of confidential information in Rule 1.6(b) apply here. In this hypothetical, the lawyer is not aware of any imminent death or substantial bodily harm that could be prevented by his disclosure. So the rules do not allow the lawyer to ethically disclose the illegal disposal to the prospective purchaser, the regulators, or anyone else.

Interestingly, the Model Rules (and some states) have exceptions in Rule 1.6(b) that would allow for disclosure to prevent a client from committing a crime or fraud that is

189

reasonably certain to result in substantial injury to the financial interests or property of a third party. But Kentucky did not adopt this provision of the Model Rules.

b. May (or must) the lawyer disaffirm his opinion letter in the

course of withdrawing from representation of Acme in the sale of the property?

i. This is sometimes referred to as “noisy withdrawal,”

since disaffirming work product is likely to have the collateral consequence of indirectly signaling the client’s wrongdoing.

ii. Disaffirming an opinion, document, or affirmation is

expressly contemplated in Comment 7 to Rule 1.16.

iii. In the ABA formal opinion involving the bank loan,

the Committee held that “disaffirmance is not allowed where the fraud is completed, and the client does not, so far as the lawyer knows or reasonably believes, intend to make further fraudulent use of the lawyer’s services.” ABA Op. 92-366. So in our situation, if the sale had already been completed, or if the deal with the prospective purchaser fell through, the lawyer could not ethically disaffirm his opinion letter because the client no longer intends to make fraudulent use of the letter.

iv. If the sale was still pending and the client intended

to use the lawyer’s opinion letter in furtherance of the sale, disavowing the opinion letter may actually be necessary in order to effectuate withdrawal. The ABA formal opinion explains that “under the injunction in Rule 1.2(d) that a lawyer shall not ‘assist a client in conduct the lawyer knows is criminal or fraudulent,’ the term ‘assist’ must be reasonably construed to cover a failure to repudiate or otherwise disassociate herself from prior work product the lawyer knows or has reason to believe is furthering the client’s continuing or future criminal or fraudulent conduct.” ABA Op. 92-366.

v. Bottom line: in order to fully effectuate the

withdrawal mandated by Rule 1.16(a)(1), and avoid assisting in client fraud as required by Rule 1.2(d), a lawyer may have to repudiate preexisting work product in addition to refusing to perform any further work for the client on matters involving the false statements. Whether disaffirmance of work

190

product is required turns primarily on whether the fraud is already complete, or whether the client is likely to use the work product in furthering the fraud in the future.

vi. The ABA formal opinion cautions, however, that

“disaffirmance should be a last resort, and should in any event go no further than necessary to accomplish its purpose of avoiding the lawyer’s assisting the client’s fraud.” ABA Op. 92-366.

III. FINAL HYPOTHETICAL

Acme Company engaged in illegal disposal of Waste X on property it owned. The company did not use outside counsel at that time. EPA and the state environmental agency start an investigation into the dumping of Waste X on the property. The investigation leads to a criminal prosecution of Acme Company and its management. A lawyer at a local firm is hired as Acme’s trial counsel. Acme directs the lawyer to hire the appropriate consultants to assist her in trial preparation and to appear as expert witnesses at the trial. What are the lawyer’s ethical obligations in selecting and working with consultants before and during the trial?

A. Because of the complexities and technical nature of environmental

litigation, environmental lawyers need to be able to effectively use and manage experts in order to provide competent representation. Under Rule 1.1, competent representation requires the “legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”

B. What ethical obligations arise in the process of selecting experts?

1. In the process of interviewing experts to select the best expert for

the client’s case, a lawyer may have to reveal confidential information about the client and the client’s case. Thus, it is important to have the expert execute a written confidentiality agreement to assure that this information will not be disclosed to opposing counsel or to the public. The agreement should also specify that if the expert is not retained by you, that he or she will not be engaged by opposing counsel.

2. A lawyer should also consider potential conflicts of interest among

the parties, their counsel, and the potential expert. During the interview, the lawyer should discuss any work the expert has done on behalf of the opposing party, its counsel, or your client.

C. During trial preparation, may the lawyer work with the expert in preparing

the expert’s opinion? May the lawyer “suggest” what the opinion should state?

191

1. In preparing for trial, the lawyer may (and should) share relevant facts with the expert, as well as discuss trial testimony expected from other witnesses. The attorney may review documents or other physical evidence with the expert, and may discuss the applicability of the law to the facts at issue. The attorney may also discuss the expert’s role in the case, his or her demeanor, and questions likely to be asked in cross-examination. However, the attorney may not draft language for the expert or manipulate the expert’s testimony in any way.

2. The lawyer should be careful not to cross over from preparation to

coaching when working with the expert. 3. “A lawyer who did not prepare his or her witness for testimony,

having had an opportunity to do so, would not be doing his or her professional job properly.” D.C. Bar, Ethics Opinion No. 79 (1979).

IV. CONCLUSION

A. The practice of environmental law requires lawyers to understand and

apply complex legal, scientific, technical, and moral concepts on a daily basis. The ethical challenges faced by environmental lawyers are not unique to our practice, but these issues are often exacerbated by the technical and scientific nature of environmental law, as well as its significant implications for public health and safety. Environmental lawyers must play the dual roles of “zealous advocate” and “protector of the public interest.”

B. It is interesting to note that environmental lawyers are distinguished by

their low rate of professional liability claims. This certainly does not reflect an absence of ethical issues in this area of law. To the contrary, the practice of environmental law is fraught with ethical tensions and quandaries. Hopefully, rather, this fact reflects the seriousness with which environmental lawyers approach their ethical obligations.

192

193

ATTORNEY ADVERTISING Sarah V. Coker

Attorney Advertising

Kentucky Supreme Court Rules

3.130-7.01 – 7.50

Attorneys’ Advertising Commission Regulations 1 - 16

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

What is an advertisement?

Any information containing a lawyer's

name or other identifying information –

SCR 3.130-7.02(1)

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

194

Types of Advertisements

Announcement, 0%Billboards, 2% Brochure, 1%

Direct Mail, 3%

Email, 6%

Newsletter, 2%

Newspaper, 12%

Other*, 8%

Press Release, 0%

Print Ads, 17%

Prof. Directory, 0%Radio, 4%

TV, 27%

Web, 15%

Yellow Pages, 5%

FISCAL YEAR 2011 - 2012

Announcement

Billboards

Brochure

Direct Mail

Email

Newsletter

Newspaper

Other*

Press Release

Print Ads

Prof. Directory

Radio

TV

Web

Yellow Pages

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Submission of Advertisements

Every advertisement must be submitted to

the Attorneys' Advertising Commission

Requirements:

Three copies BY MAIL

Fees

Advisory opinion

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

When should I submit my ad?

Simultaneous to publication

SCR 3.130-7.05(2)

Commission may review

If ad is not compliant, may have to withdraw it later or change

Fee for resubmission

30 days prior to publication

SCR 3.130-7.06

Commission will review

Defense to discipline

No additional fee for changes

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

195

What happens after I submit an

advertisement?

Receipt notice

Advisory opinion:

Decision within 30 days

Notice of whether ad is compliant

Simultaneous:

Notice may be sent for noncompliance

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Number of Submissions

320

523

787746

884

987

1,174

1,344

1,507 1,514

1,714

0

200

400

600

800

1000

1200

1400

1600

1800

2000 -

2001

2001 -

2002

2002 -

2003

2003 -

2004

2004 -

2005

2005 -

2006

2006 -

2007

2007 -

2008

2008 -

2009

2009 -

2010

2010 -

2011

Submissions for 2000 - 2011

320

523

787746

884

987

1,174

1,344

1,507 1,514

1,714 1,689

0

200

400

600

800

1000

1200

1400

1600

1800

2000 - 2001 2001 - 2002 2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012

Submissions for 2000 - 2012

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

SCR 3.130-7.15

Advertisements CANNOT be:

False

Deceptive

Misleading

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

196

AAC Regulation No. 1

(B) – What may constitute a material

misrepresentation

(C) – Information required to avoid a misleading

omission

(D) – Ads that create unjustified expectations or

make unsubstantiated comparisons

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

THIS IS AN ADVERTISEMENT

Required in all advertisements

Where should it be within the ad itself?

Telephone or radio

Television

Print ads

Websites

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Fee information

"Routine Services"

- detailed description of what services are

included

"COURT COSTS AND CASE EXPENSES

WILL BE THE RESPONSIBILITY OF THE

CLIENT."

Contingency fees

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

197

Prohibited Direct ContactSCR 3.130-7.09(1)

Lawyer may not initiate contact or

solicit professional employment

- In person

- Live telephone

- Real time electronic means

Indirect contact through another. SCR 3.130-

8.4(a)

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Prohibited Direct ContactSCR 3.130-7.09(2)

Even if contact is not prohibited by

7.09(1), the lawyer shall not solicit if:

The person has indicated to the lawyer

that they do not want to be solicited

Solicitation involves coercion, duress or

harassment

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Permissible Direct ContactSCR 3.130-7.09(3)

Written, recorded, or electronic communication

- Conform to 7.15

- "THIS IS AN ADVERTISEMENT"

- "ADVERTISEMENT"

- 30 day waiting period after mass disaster

as defined by SCR 3.130-7.60

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

198

Referrals?

SCR 3.130-7.20(2)

A lawyer cannot give anything of value to a

non-lawyer for recommending the lawyer's

services.

SCR 3.130-7.20(5)

If the lawyer or law firm is advertising for the

purpose of referring clients elsewhere, the ad

must contain a prominent statement of that

fact.

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Required information

Licensed Kentucky lawyer or law firm

with a licensed Kentucky lawyer

"Services may/will be performed by

others"

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Prohibited TerminologySCR 3.130-7.40

Ads may not contain any form of the words:

Expert

Certified

Authority

Specialist

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

199

Exceptions to SCR 3.130-7.40

Certified by state/national organization

Proof that organization is qualified

Name of organization in advertisement

"Kentucky does not certify specialties"

End of certification = end of advertisement

Patent Lawyer

Admiralty

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Firm Names & LetterheadsSCR 3.130-7.50

Compliance with 7.15

Legal entity

Suspended or disbarred lawyer

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

Common Advertising Mistakes

"THIS IS AN ADVERTISEMENT"

Office location

Graphic = Filing Fee

"Services may/will be performed by

others"

Envelope for direct mail advertisements

Contingent fee disclaimer

Wrong fee payment

When to submit by e-mail/facsimile

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

200

www.kybar.org

Kentucky Supreme Court Rules

AAC Regulations

Frequently Asked Questions

Ethics Opinions

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

____________________________

201

202