By Elizabeth Koniers Brown, Esq., and Alex Horowitz, Thomson-Reuters
Overview
In-house counsel should not consider enforcement by the U.S Environmental Protection Agency or Department of Justice their only litigation risk in environmental and energy law. While the Justice Department recently announced the largest Superfund settlement in history and EPA remains forceful in its enforcement rhetoric, the total number of actions may be on the decline. EPA's enforcement was already showing "multi-year declines" when the agency announced a new strategic plan for 2014 to 2018 that focuses on the "biggest" polluters. So, what about citizen suits? The days of suits over discharge limits are not gone, but more plaintiffs are passing on "alphabet soup"; more environmental groups and even corporations filing civil suits are turning to novel and what's-old-is-new-again theories.
Preemption has created uncertainty for some tort-based claims. Federal common law is generally considered preempted by federal environmental statutes, but the status of state common-law claims and the role of savings clauses in statutes such as the Clean Air Act, Clean Water Act and CERCLA is less settled. For example, in 2013 the Third U.S. Circuit Court of Appeals said the Clean Air Act does not preempt state common-law tort claims against a utility, but the utility has asked the Supreme Court to review the case. With this background in mind, we present ten legal theories in-house counsel should familiarize themselves with before they must defend against them.
1. Private Nuisance
With neighbors and landowners increasingly resistant to energy projects in their proverbial backyards, suits alleging nuisance may be on the rise. Even "green" energy projects are not immune. A complaint filed in a West Virginia federal district court blames headaches and other health problems on pulsation noise and vibrations from wind turbines. In another case out of an Arkansas federal district court, a homeowner won a jury verdict after alleging XTO Energy's drilling activity damaged her home. A judge upheld compensatory and punitive damages for common-law claims of nuisance and trespass as well as negligence. That case is on appeal.
2. Public Nuisance
Whether they concern gasoline additives or the popular Sriracha chili sauce, public nuisance claims continue to appear in environmental lawsuits. Distinct from private nuisance, public nuisance tackles "unreasonable interference" with a right held by the general public. The claim can be brought by private and public plaintiffs. Private plaintiffs must establish they suffered a distinct harm the general public did not suffer. New Jersey's attempt to invoke this claim was recently limited by the Southern District of New York in an ongoing litigation over groundwater contamination by gasoline additive MTBE. Although the state's claim remains, the decision highlights that private plaintiffs need to prove "special harm" and that public plaintiffs are limited to abatement. Spurred by public complaints, chili sauce maker Huy Fong Foods is facing public nuisance claims in a legal battle with the town of Irwindale, Calif., over odors and other impacts from manufacturing operations.
3. Trespass
Trespass describes a legal claim for injuries resulting from the wrongful entry of property. In states where groundwater is owned by the surface owner, energy extraction and waste injection projects may face underground trespass claims. Not surprisingly, Texas has already been a battleground for trespass claims related to energy and environmental issues. In the 2008 Garza Energy Trust case, the state Supreme Court knocked down a trespass claim against a company for subsurface migration of hydraulic fracturing fluids and proppants based in part on public policy favoring energy extraction. But now the court is considering whether trespass claims can proceed based on underground injection practices. The court heard arguments in January in a case alleging trespass of injected wastewater into the groundwater underlying a rice farm.
4. State Constitutional Law
Environmental plaintiffs may invoke state constitutional provisions about the environment more frequently after the Pennsylvania Supreme Court's decision in Robinson Township. The case gave new teeth to Pennsylvania's Environmental Rights Amendment in the context of land use and energy extraction. While Pennsylvania is the only state that provides specific rights, the constitutions of Illinois, Montana and Hawaii also contain environmental language. After Robinson Township, environmental groups may begin efforts to amend or add such provisions in other states. It may also spur new claims in the energy and environmental field in Montana, Illinois and Hawaii.
5. Eminent Domain
After a high-profile decision, private property owners may try to block government-backed energy projects by raising eminent domain issues. In March, a Nebraska state court judge struck down a Nebraska law approving the route for TransCanada's Keystone XL pipeline on eminent domain grounds. The decision came as a major victory to local landowners opposing the project. The decision is striking considering an unsuccessful bid in 2011 to challenge company use of eminent domain for the pipeline's Texas segment. As Forbes reported, a Texas state judge upheld the action in a 15-word text message. It remains to be seen how translatable this success will be, but environmental plaintiffs may consider more eminent domain challenges as energy infrastructure projects increase.
6. International Law
Is your passport valid? With the export of LNG and other global energy issues increasingly taking center stage, international law may be the next go-to for both opponents and backers. Two recent environmental disputes over nuclear energy have raised questions of international law in notable ways. In the first, petitioners from the Navajo Nation filed a complaint in 2011 with the Inter-American Commission on Human Rights, arguing a Nuclear Regulatory Commission license for uranium production violated international laws by putting tribal rights to clean water at risk. The case has yet to be reviewed by the Commission, but it is notable because the plaintiffs made their bid as a next step after losing a 10th Circuit U.S. Court of Appeals case attempting to revoke the license. In the second, the state of South Carolina sued the U.S. Department of Energy alleging the government's plan to abandon a plutonium recycling plant violated a nuclear nonproliferation treaty with Russia.
7. RCRA is the New Black
The federal Resource Conservation and Recovery Act regulates the treatment, storage and disposal of solid and hazardous wastes. Plaintiffs are increasingly proceeding with RCRA citizen suits alleging an "imminent and substantial endangerment" to "health or the environment." The statute has traditionally been considered less desirable than Clean Water Act citizen suits, due to the longer notice period, but commenters point to the breadth of the "endangerment" language, changes in Superfund interpretation and federal enforcement declines to explain the increase in RCRA suits.
8. Clean Air Act "Upset" Events
These claims focus on unplanned emissions from maintenance, startup or shutdown activity under the federal Clean Air Act. Out of three recent citizen suits brought in Texas federal district courts, a defense verdict was reached in one involving Luminant Generating's "Big Brown" plant, including an award of litigation costs and expert fees. Suits against ExxonMobil and another Luminant plant are still pending. The EPA is also considering regulatory updates in summer 2014 covering the changes at issue in these suits.
9. Carbon Risk
Investors are increasingly calling for energy companies to identify their so-called carbon asset risk, including what Reuters recently described as "strategies for competing in a lower-carbon future."
ExxonMobil recently set the bar by agreeing to publish its risk assessment. Companies that delay or resist following suit may face litigation. Additionally, Harvard University has recently announced its signing of the United Nations-backed code of responsible investment. The move could spur more organizations to follow suit and in turn increase pressure on energy companies for more transparency and disclosure. An Indiana citizen group recently pursued litigation to make a state commission consider the costs of future carbon regulation in its new facility planning analysis. While the court rejected this effort, the complaint may signal more cases asserting similar claims in the future.
10. When Shareholders Sue
Shareholders are increasingly concerned with risk, including the risk of environmental noncompliance, potentially affecting creativity and innovation in achieving compliance.
Truckmaker Navistar is facing an investor suit in Illinois federal district court over its decision to use a nonconventional technology to achieve diesel emission limits. In it, certain shareholders allege the company overinvested in a "doomed" strategy for environmental compliance.
A notable decision out of the Ninth Circuit U.S. Circuit Court of Appeals highlights investor lawsuits aimed at taking a company to task for less-than-full environmental transparency. In it, an appellate panel reinstated a shareholder suit against BP related to two 2006 oil spills in Alaska. The panel said BP acted recklessly in public statements about its environmental compliance following the spills, and the plaintiffs' claims were sufficient to withstand a motion to dismiss.
Conclusion
The points highlighted here are meant to provide a brief snapshot of legal theories that may arise in environmental and energy lawsuits. In-house counsel must assess the risk to their companies based on industry practice, compliance history, shareholder considerations and corporate culture.
