Contributed By Brunini, Grantham, Grower & Hewes, PLLC
In the USA, Congress has enacted federal environmental laws that have national application. The state governments, as well as local governments within many states, have also enacted environmental programmes that are applicable within their own geographic boundaries. Federal environmental laws were designed to be administered at the state and local levels, wherever possible, with the clear intent of using the strengths of federal, state and local governments in a partnership to protect public health and the nation’s air, water and land. State and local governments are expected to assume primary responsibility for the implementation of national programmes, while the federal government is to provide national environmental leadership, develop general programme frameworks, establish standards as required by congressional acts, conduct research and national information collection, provide technical support to states, and ensure national compliance with environmental quality standards, primarily through the United States Environmental Protection Agency (EPA). Most states assume a dual role of administering their own environmental laws, coupled with receiving approval from the EPA to implement permitting and compliance required by federal laws through a “delegation” memorandum of understanding agreement between the EPA and a state environmental agency.
EPA administers most federal programmes, but not all. For example, the United States Fish and Wildlife Service administers most of the Endangered Species Act, which places important restrictions on new land, energy and infrastructure development in much of the country. Similarly, the United States Army Corps of Engineers (COE), in conjunction with the EPA, permits structures or works in the navigable waters of the USA (that is, any stream large enough to support navigation by very small watercraft), and also discharges of dredged or fill material into wetlands and smaller streams sufficiently connected to navigable waters to be subject to federal jurisdiction.
For ongoing operations with environmentally related issues – air emissions, water discharges, or land-based waste disposal, for example – the regulatory programme will require a permit with a defined term such as five or ten years, which must be renewed on whatever terms are appropriate at the time of renewal. Permits will include limitations based on the performance achieved by the control technology on which the regulator predicates the limit, or based on a back-calculation of the emissions limitation necessary to achieve a particular ambient quality – such as a maximum air pollutant concentration in the ambient air or a maximum in-stream concentration of a water pollutant.
Federal statutes addressing ongoing facility operations include the following:
Certain environmental regulatory programmes require the review of new projects or major modifications to existing facilities before construction begins. In particular, the National Environmental Policy Act (NEPA) requires the preparation of an environmental impact statement (EIS) for any major federal action (a permit, a grant, an actual federal construction project) that will have a significant impact on the environment. The EIS offers an integrated analysis of all the direct and many indirect environmental impacts of the action that the federal decision maker must consider before taking action. However, NEPA includes no substantive standards. Many states have parallel requirements, although the extent to which the state environmental review programmes impose substantive constraints varies from state to state, as does the extent to which they apply to private projects.
Most constitutional due process rights assure some kind of hearing before a regulatory decision or promptly afterward, and an opportunity at some point for judicial review. The federal Administrative Procedure Act and some of the federal environmental statutes specify when and how one may exercise those rights, and who may exercise those rights. State statutes do the same for state regulatory programmes. Because most federal environmental permit decisions are made by state regulators under approved or delegated programmes, the administrative hearing and the opportunity for judicial review are in the state system under state law. These systems vary substantially in whether administrative hearings are trial-type proceedings, what rights third parties have, whether the parties can develop evidence or are restricted to a previously developed administrative record, whether review is deferential or de novo, and, importantly, when review must be sought at the administrative or judicial level. Actions become administratively final and unappealable very promptly in most programmes; limitation periods as short as 30 days are not uncommon, and they are not uniform across states and sometimes across programmes. Which decisions are final for purposes of review also varies across jurisdictions and programmes.
The key regulatory authorities and bodies responsible for environmental policy and enforcement in the USA are as follows:
Each regulatory statute typically requires the regulated entity to maintain books and records for specified periods, and to allow the regulator access to them upon demand. In addition, undertaking a regulated activity entails consenting to inspections and other entries.
Regulated entities typically have reporting obligations when an incident occurs, often on a very tight schedule. Failure to report in a timely way may itself be a violation.
In the event that the regulators seek to investigate or to enforce outside the context of a permit or other approval, either the statute will provide the right to the administrative agency to issue an order for access or the regulator must seek a search warrant.
The primary activities for which a permit is required are the following.
Permits are obtained by application to the permitting agency. Typically, the applicant or a person opposing the permit may demand an evidentiary hearing before the permit is issued. The permittee and often third parties have a right to administrative or judicial review of a final permitting decision. In the federal court system, the person challenging a permitting action must have the minimum constitutional stake in the challenged decision in order to have standing. Otherwise, the matter is not a “case or controversy” within the meaning of Article III of the US Constitution.
At some level, environmental law in the USA may be seen as an elaboration on the English common law of public nuisance. The government can usually assert a statutory provision to obtain a court order requiring a person who has caused pollution that remains evident in the environment to abate the public nuisance. In some circumstances, the administrative agency may itself issue an administrative order to the same effect. The authorities vary from state to state, from the federal government to state government, and across types of pollution.
When the pollution causes personal injury or property damage, with limited exceptions, common law tort principles – and at times statutory rights – allow private plaintiffs to recover money damages for those harms or an injunction to abate the pollution may be available.
Generally, responsibility for an environmental condition rests with the current owner or operator of the land or the facility where that condition exists, even if a predecessor is the original cause. See 11.1 Key Laws Governing Contaminated Land concerning contaminated land. By contrast, liability for non-compliance generally rests with the person who caused the non-compliance. Thus, if a pollutant is spilled, only the spiller is generally liable, unless the spill causes a continuing condition.
When the business entity changes hands, the liability of the business entity is not affected. If a facility operated by a corporation experiences an air pollution incident, the liability for any damages caused by that incident remains with the corporation, even if all of the stock is sold to a new owner.
In general, see 11.1 Key Laws Governing Contaminated Land concerning environmental incidents. In addition, an environmental incident can give rise to common law tort claims for nuisance, trespass or negligence, and, in some cases, strict liability for an abnormally dangerous activity. Nuisance is an unreasonable interference with the use or enjoyment of land. Trespass is an unprivileged interference with a land occupier’s right to exclusive possession of property. Negligence is a failure to take due care to avoid injury to another. Strict liability is imposed when the defendant’s activity poses an abnormal risk to others; the typical example would be blasting. When the incident or damage arises from the sale or distribution of a product, such as asbestos-containing insulation or a chemical for consumer use, product liability theories may apply.
These theories all depend upon state law, and so the specific law applicable to each claim varies from state to state. However, in almost all jurisdictions, a tort claim requires proof of a causal connection between the alleged tort and damages suffered by the plaintiff. Damages generally fall into two categories: losses due to a personal injury (an illness, for example), and losses due to property damage (a reduction in value, for example, or the imposition of additional costs).
Causation is a key defence in environmental cases. This generally requires proof that a completed route of exposure to a pollutant exists, that exposure actually occurred, and that the exposure caused an alleged harm. Statutes at times shift that burden of proof, establishing presumptions in favour of the plaintiff.
Most states impose a relatively short limitation period on actions for personal injuries or property damage; two years is a common length, with the time generally running from when the plaintiff acquires the right to sue. Environmental torts may be hard to detect; contamination of one’s well is much more subtle than an automobile accident. Many states apply the “discovery rule” to torts such as these, and the limitation period begins to run from the time when the plaintiff knew, or in the exercise of reasonable diligence ought to have known, of his or her right to bring suit. For torts arising from exposure to the release of a hazardous substance, Section 309 of CERCLA requires application of the discovery rule to state law torts. Despite this, expiration of the limitation period is a common defence in environmental toxic tort cases.
A corporation that owns or operates a facility that caused environmental damage or was guilty of non-compliance will almost uniformly be responsible for that damage or non-compliance. It may be subject not only to tort claims, but also to claims for injunctive relief, administrative penalties, judicially imposed civil penalties, and fines. Moreover, a corporation that is guilty of criminal violation of a federal environmental statute will be debarred from doing business with the federal government. It may also be debarred from public contracts in some states, and may be disabled from obtaining new, modified, or renewed environmental permits.
An issue arises as to whether a current corporation is a successor to a corporation that is responsible for environmental damage or breaches of environmental law. In general, corporate successor liability is a matter for the state law of the law of incorporation of the corporation. The federal courts will generally apply that state law in federal environmental cases.
When corporations merge, the liabilities of both corporations generally remain with the successor. However, when an acquiring corporation purchases only the assets of the seller, the liabilities remain with the seller. In many states, the purchase of assets with consideration consisting at least partially of stock in the acquiring entity will be treated as a de facto merger, and liabilities will pass. When the consideration is cash, liabilities generally do not pass.
The liability of shareholders or corporate parents varies from state to state and, when liability is statutory, from statute to statute. In the absence of specific guidance, many courts will follow United States v Bestfoods, 524 US 51 (1998), holding that a corporate parent is not liable under CERCLA as an owner of its subsidiary’s facility or as an operator of that facility unless its behaviour with respect to the subsidiary was idiosyncratic. However, some state statutes specifically list corporate shareholders as people responsible for a violation. Furthermore, a shareholder who personally causes the damage or the non-compliance may be individually liable.
Directors and corporate officers may be personally liable for environmental damage or breaches of environmental law if they were directly involved in the activity which caused the damage or the breach. Moreover, under the responsible corporate officer doctrine set out in United States v Park, 421 US 658 (1975), a corporate officer can be responsible, in that case criminally, when they should have known about the violation and should have taken steps to avoid or abate it. The Clean Air Act and certain other environmental permitting programmes require the permit application and certain periodic certifications to be signed by a responsible corporate officer, thus exposing the officer to civil liability, penalties, and even criminal liability.
Individuals can insure against some liabilities, but typically cannot insure against criminal liability and often cannot insure against fines and penalties.
Lenders are typically not liable for environmental damage or breaches of environmental law unless they themselves directed the act that gave rise to the damage or non-compliance. So, for example, a lender's refusal to extend credit that is necessary to keep pollution control equipment operating would generally not give rise to liability, although peculiar circumstances could arise. However, if the lender had the right under the loan agreement to direct, and in fact did direct, the borrower to turn off the pollution control equipment, the lender would have a weaker position.
The issue of lender liability has been addressed specifically in the context of contaminated land. CERCLA was amended in 1996 largely to exempt lenders, even foreclosing lenders, from liability as owners or operators of their borrowers’ facilities, provided that they acted as secured lenders, not as investors (Pub. L. No. 104-208, §§ 2501-05, 11 Stat. 3009, 3009-462 to 469 (Sept. 30, 1996)). Many states have adopted similar lender liability protections. To reiterate, a lender engaged in an aggressive work-out or that takes control of a facility in foreclosure can face liability if it steps beyond the role of secured lender. Note that the only reason anyone would consider pursuing the lender is that an incident occurred and no one else is available to pay; all of the lender’s actions will be reviewed in hindsight.
Lenders often conduct diligence before extending credit, in order to understand the risk and properly value any collateral. They may also include covenants limiting the use of the property or policing housekeeping and compliance. Insurance may be available.
Prudent lenders will have policies in place tailored to the particular state in which they are operating and often to the sort of business in which the borrower is engaged.
Civil claims for compensation or injunctive relief against environmental damages are typically based on common law tort claims. See 5.2 Types of Liability and Key Defences concerning common law tort claims.
Exemplary or punitive damages are rare, and typically apply only to intentional bad acts. The circumstances in which they are permissible vary from state to state. The Supreme Court has expressed certain constitutional limits on the relationship between a punitive damages award and the underlying compensatory damages (see, eg, Exxon Shipping Co. v Baker, 554 US 471 (2008), concerning the reduction of punitive damages award to victims of the Exxon Valdez oil spill).
Class actions are sometimes possible for environmental-related civil claims. However, there must generally be commonality in injuries and damages among members of the class, which can be difficult to show in an environmental toxic tort because the damage to each person and each property can often be said to be unique.
Recent landmark environmental liability cases include the following:
Landmark environmental cases regarding the scope of important federal laws, such as the Clean Air Act and the Clean Water Act, and the authority of the U.S. Environmental Protection Agency to promulgate environmental regulations under these laws include the following:
Environmental liability may be apportioned contractually between private parties, but typically that is not binding on regulators. As between the parties to an indemnification or other contractual undertaking, the contract will generally govern. Without more, an indemnification or contractual undertaking will not make the indemnitor liable under an environmental statute. The indemnitor would have to be a regulated person under whatever statute applies.
On the other hand, if the contract amounts to an assumption of responsibility, rather than just an indemnification, regulators may be convinced to pursue the assuming party first. In almost no circumstances can a contract absolve the indemnitee of any liability it had to the regulators or even to third persons as the result of the indemnitee’s environmental non-compliance or damage.
Insurance is available. The precise terms are negotiated based on particular circumstances.
Covered risks include tort liability, clean-up liability, natural resource damages, certain sorts of civil penalties, and sometimes cost overruns on clean-up projects.
The key federal laws addressing contaminated land are the Resource Conservation and Recovery Act (RCRA – 42 U.S.C. §§ 6901, et seq), and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA – 42 U.S.C. §§ 9601, et seq).
RCRA addresses the clean-up of solid and hazardous wastes at RCRA-regulated facilities that have a hazardous waste treatment, storage, or disposal permit. It also regulates underground storage tanks for hazardous substances and petroleum, including the clean-up of releases.
CERCLA addresses releases of hazardous substances and is particularly important at abandoned sites where there is no current owner or operator who is financially capable of responding to a release. Subject to certain statutory defences, CERCLA imposes liability on past owners and operators at the time of disposal, on any generators who sent waste to the site, and on any transporters who selected the site for disposal.
Other federal statutes address specific situations. For instance, the Clean Water Act at 33 U.S.C. §1321 addresses discharges of oil and hazardous substances into waters of the USA or adjoining shorelines, and the Oil Pollution Act, 33 U.S.C. § 2701, et seq, addresses liability for oil spills.
In addition to the federal laws, the states have their own laws and regulations, many of which are more stringent in effect and broader in scope than the federal laws.
The USA is a party to the United Nations Framework Convention on Climate Change and the 2015 Paris Agreement. The Trump Administration has started the process to withdraw the USA from the international agreements, but that is a multi-year process which is ongoing. The Obama Administration sought to meet the country’s obligations by promulgating regulations known as the Clean Power Plan under the federal Clean Air Act (42 U.S.C. §§ 7401, et seq). On 19 June 2019, EPA issued its new Affordable Clean Energy rule (ACE), which is described by the U.S. EPA as “an effort to provide existing coal-fired electric utility generating units, or EGUs, with achievable and realistic standards for reducing greenhouse gas (GHG) emissions.” This action was finalised in conjunction with two related, but separate and distinct rulemakings:
EPA’s description of the objectives of ACE is that the rule “provides states with new emission guidelines that will inform the state’s development of standards of performance to reduce carbon dioxide (CO₂) emissions from existing coal-fired EGUs – consistent with EPA’s role as defined in the CAA”. The ACE rule is currently, and will continue to be, the subject of ongoing litigation as are other Trump Administration EPA-proposed regulatory rollbacks.
Policy and legal requirements to reduce greenhouse gas emissions are uncertain at this time due to ongoing regulatory amendment efforts by the Trump Administration, which generally have been met by judicial challenges by environmentalists. Nonetheless, market forces, investor social policies, and efforts by some states continue to reduce greenhouse gas emissions.
The new ACE rule establishes heat rate improvement (HRI), or efficiency improvement, for electric utilities. The Trump Administration EPA asserts that is the best system of emissions reduction (BSER) for carbon dioxide (CO₂) from coal-fired EGUs. By employing a broad range of HRI technologies and techniques, EGUs can more efficiently generate electricity with less carbon intensity. The ACE rule lists six HRI “candidate technologies”, as well as additional operating and maintenance practices. For each candidate technology, EPA has provided information regarding the degree of emission limitation achievable through application of the BSER as ranges of expected improvement and cost. The states’ role is to develop plans that establish unit-specific standards of performance that reflect application of the BSER.
Asbestos is a hazardous air pollutant regulated by the Clean Air Act (42 U.S.C. § 7412). Demolition or renovation of a building constructed with asbestos-containing materials is subject to a prohibition against emissions to the atmosphere, prior to notification to the regulator, use of trained and properly equipped workers, and certain work practices (40 C.F.R. §§ 61.140-.157).
The federal Resource Conservation and Recovery Act (RCRA – 42 U.S.C. 6901, et seq), is the backbone of waste regulation in the USA. The two primary parts are Subtitle C, which addresses hazardous waste management, and Subtitle D, which addresses solid waste disposal. Most of the states have implemented laws and regulations consistent with RCRA, or more stringent than it.
A producer or consignor of waste may retain liability for waste after it has been disposed by a third party. Under CERCLA, 42 U.S.C. 9607(a)(3), one of the categories of potentially responsible parties is persons who arranged for the disposal of hazardous substances. CERCLA litigation among PRP groups over remediation costs at multi-party disposal sites has been fairly common.
The imminent hazard provision of RCRA, (42 U.S.C. §6973), makes not only owners and operators of solid wastes or hazardous wastes potentially subject to corrective action orders, but also generators and transporters of such wastes.
The USA has few, if any, laws requiring manufacturers to take back or recycle goods. Some states require bottle and can-recycling deposits to encourage recycling, but most other recycling programmes are voluntary.
CERCLA requires immediate reporting to the National Response Center (NRC) of a release of a reportable quantity of a hazardous substance (42 U.S.C. 9603(a)).
The Emergency Planning and Community Right-to-Know Act (EPCRA) requires immediate reporting of a release of any extremely hazardous substance or hazardous substance to the state emergency response commission and to the local emergency planning committee (42 U.S.C. §11004(a)).
The Clean Water Act (CWA) requires immediate reporting of any discharge of a reportable quantity of oil or a hazardous substance to waters of the USA (33 U.S.C. §1321(b)(5)).
In addition to the above emergency release reporting, EPCRA requires an annual report to the United States Environmental Protection Agency of discharges and emissions to the environment from a facility. Also, air, water and waste permits require reporting or record-keeping of most variances from the permit requirements.
The federal government and most states maintain public websites containing certain information about environmental permits and remediation sites. In addition, federal records are publicly available under the federal Freedom of Information Act, and most states have similar open records laws that make their records available. In general, all records of federal, state and local government agencies and quasi-governmental authorities are subject to open records laws, although there are exceptions, such as for records of criminal investigations and internal deliberations.
The federal Securities and Exchange Commission requires publicly traded corporations to disclose certain liabilities, including environmental.
Environmental due diligence is typically conducted. One component of several of the statutory CERCLA defences is that the purchaser of a contaminated property conducted all appropriate inquiries into the environmental condition of the property before the acquisition, so that is a primary driver of transactional due diligence. In addition, economic evaluation by a potential purchaser requires the investigation of significant factors potentially affecting the value of the property, which includes not only whether a property is contaminated and the extent of any such contamination, but also whether any existing operation on the property is environmentally compliant or whether any proposed operation can obtain any necessary permitting.
Typically a purchaser will inspect the assets – often including interviews of key employees, reviewing the seller’s records including its environmental compliance records, and reviewing all public records of environmental agencies pertaining to the company and its assets. At 42 U.S.C. §9601(35)(B), CERCLA specifies the scope of “all appropriate inquiries” necessary to qualify for the CERCLA defences. The corresponding regulations (40 CFR Part 312) provide further guidance, including adopting ASTM International Standard E1527-13, entitled “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”, as an accepted means of conducting environmental due diligence. Note that CERCLA due diligence does not address all aspects of environmental compliance, such as permitting, record keeping, etc, so compliance should be addressed additionally.
A seller is not typically required by law to disclose environmental information. There are some exceptions – for example, many states require environmental disclosure in the sale of residential property. Also, there are some situations involving contaminated property in which the owner must place a notice of the contamination in the public land records in order to advise future owners of the situation.
At the federal level, the government has chosen to encourage green activities through incentives such as tax credits for renewable energy and solar and tax deductions for energy-efficient design and improvements to residential and commercial buildings.
At the state level, many states impose fees or taxes to help pay for the operation of their environmental agencies. For example, many states charge permit application fees, air emissions fees, taxes on fuel to fund underground storage tank release response, disposal fees for used automotive tires and batteries, etc.