Calm After the Storm: Grandmother of Environmental Lawsuits Settled by Mediation

After more than a decade of litigation-intensive environmental controversies, environmental groups and their opponents have begun to look for alternative means of settling disputes. Formal litigation can be so burdensome and take so long to resolve that it may present one of the least efficient and least effective means of obtaining relief. Mediation, a technique that is in a relatively early stage of development in environmental disputes, is emerging as one promising method of conflict resolution. It recently scored its biggest triumph with the settlement of the long-standing dispute over energy and water resources on the Hudson River.

Fifteen years ago, environmental plaintiffs in the dispute charted new legal terrain by winning court acceptance of the notion that a conservation association had standing to challenge a hydroelectric facility license on aesthetic, conservation, and recreation grounds.¹ A final court resolution failed to emerge, however, and parties in the Storm King controversy have again broken new ground by abandoning the courts and settling their claims in the largest mediated settlement of an environmental dispute that has occurred to date. In what is being hailed by observes from all quarters as a milestone in the evolution of environmental law,² 11 parties representing conservation interests, utilities, and governmental agencies³ signed an agreement on December 19, 1980 that settled their demands and grievances. The agreement, which is incorporated into an Environmental Protection Agency (EPA) order, strikes a balance between cost-effective hydroelectric power generation on the Hudson River and protection of its fish and other aquatic resources. If the required consent from relevant federal and state regulatory agencies is forthcoming as expected,⁴ the agreement could take effect on or before May 15, 1981.

History of the Dispute

The agreement follows nearly 20 years of controversy. It began in 1962 when residents near the site of a proposed pumped-storage hydroelectric plant adjacent to Storm Highlands on the Hudson River became concerned with the visual impact the plant would have on the natural beauty of the area. A coalition of citizen groups known as the Scenic Hudson Preservation Conference challenged the Federal Power Commission's (FPC's)⁵ grant of a license to Consolidated Edison Company of New York, Inc. to build the plant. In a 1965 decision, the Second Circuit Court of Appeals,after determining that plaintiffs had standing, voided the license because the agency had failed to compile an adequate record to support its findings, had failed to consider alternatives sufficiently, and had not weighed the need for preserving the area's unique beauty and historical significance, as the Federal Power Act required.⁶ The court remanded the case to the FPC for new proceedings consistent with the Act's requirements.⁷ On remand, the FPC reissued the license after considering the factors the court had delineated. Scenic Hudson again challenged the license, and this time the Second Circuit upheld it, finding that the FPC had complied with all statutory requirements (including the National Environmental Policy Act (NEPA)⁸ and had not acted arbitrarily and capriciously in determining that the need for the plant outweighed all other considerations.⁹

While the federal appeal was pending, Scenic Hudson began pursuing relief in New York state courts. Early in 1972, the trial court ruled that the New York Commissioner of Environmental Quality had exceeded his jurisdiction in certifying that the proposed Storm King plant met applicable water quality standards.¹⁰ The court's appellate division reversed the lower court's order and held that the Commissioner could issue the certification since there was a reasonable basis for his finding that water quality would not be adversely affected.¹¹ In 1973 the Court of Appeals of New York affirmed, agreeing that the Commissioner's action had a reasonable basis and ruling that all issues other than water quality were extraneous [11 ELR 10075] to the proceeding since the FPC's approval of the project had already been litigated.¹²

The conservation forces persisted, and in 1973 Scenic Hudson and the Hudson River Fishermen's Association each petitioned the FPC to consider newly discovered threats to the river's fisch resources. Scenic Hudson petitioned for complete reconsideration of the Storm King license based on new evidence that due to upstream tidal currents, fish eggs or larvae of the anadromous striped bass might be exposed four times rather than once each day to the plant's water intake system. The Fishermen's Association petitioned only for a limited hearing to consider closing the plant's intake system during spawning season. The FPC denied both petitions and, on appeal, the Second Circuit dismissed Scenic Hudson's petition to review the FPC's order.¹³ Based in large measure on Consolidated Edison's oral testimony that the plant could operate effectively without drawing river water during spawning season, the court vacated the FPC's denial of the Fishermen's Association petition and remanded for hearings limited to the issue of modifying the plant's intake schedule during spawning season.¹⁴ The Fishermen's Association petition was significant because it marked the first time conservation interests proposed something less than a complete relinquishment of the Storm King license, indicating the first possibility of agreement between the parties.

Scenic Hudson had in the meantime taken another tack in the federal courts and achieved partial success. In 1974, the Second Circuit affirmed¹⁵ a lower court ruling that Consolidated Edison needed a permit from the Army Corps of Engineers under § 404 of the Federal Water Pollution Control Act (FWPCA)¹⁶ to dump rock and fill from the Strom King construction into the river. The court refused to expand the scope of the lower court's injunction, which did not prohibit construction activities other than rock and fill dumping.

By 1975 the arena of the conflict had expanded.Pursuant to the FWPCA, the EPA that year proposed issuance of national pollutant discharge elimination system (NPDES) permits for the Indian Point, Roseton, and Bowline hydroelectric plants on the Hudson will conditions requiring that they convert to closed-cycle cooling by retrofitting cooling towers. The utilities challenged the proposed conditions in adjudicatory hearings before the EPA.¹⁷ In the course of these proceedings, the utilities attacked EPA's jurisdiction to issue the permits.¹⁸ The jurisdictional challenge was taken into federal court, and the Second Circuit ruled that EPA had jurisdiction to issue the permits and remanded the case.¹⁹ The parties were still litigating the merits of the proposed license conditions in EPA proceedings up to the time of the mediated settlement.

Several other related cases were also on the dockets when the mediated agreement was signed, including two suits initiated in federal court in 1972 by the Fishermen's Association to require the Corps of Engineers to prepare environmental impact statements (EISs) under NEPA on their operations at the Bowline and Roseton plants.²⁰ Also pending was the attempt of New York's Attorney General, in court and in administrative proceedings, to abate the public nuisance of fishkills arising from the operation of the plants along the Hudson.²¹

Resolution of the issues in these cases had to await the outcome of the EPA proceedings, which was not expected until the early 1980s. The legal stalemate was knocked off dead center in August 1979 when Russell Train, former administrator of the EPA and president of the World Wildlife Fund in the United State, got the parties to sit down together and begin the mediation process. Train, who had volunteered his services as a mediator, had earlier approached each of the parties endeavoring to bring them to the mediation table. Under his guidance, a series of fifteen sessions followed the initial August 1979 meeting. Although the talks broke down several times and agreement appeared especially tenuous in the final days preceding settlement, negotiations continued for sixteen months until the agreement was signed in December 1980. When the agreement takes effect, all proceedings on the court and administrative dockets, including the EPA proceedings, will be discontinued with prejudice.

Terms of Agreement

Under the terms of the mediated agteement, Consolidated Edison agreed to surrender its license to build the Storm King facility and donate the 500-acre site to the Palisades Interstate Park Commission and the Village of Cornwall for park use. Utilities operating six hydroelectric plants along the Hudson (the Indian Point nuclear plants and the Roseton and Bowline fossil fuel plants) agreed to take mitigating steps to reduce the destruction of aquatic life, including: (1) partial "outages" (cessation of river water withdrawal) during the May-August spawning and nursery season; (2) installation of angled screens and barrier nets at intake points to prevent fish from becoming caught on the screens or drawn into the plants; (3) installation and use of dual speed pumps to minimiz rates of water withdrawal. In addition, they agreed to build and operate a hatchery for stocking the river with striped bass and to provide a $12 million endowment [11 ELR 10076] to fund research on mitigating fish impacts by power plants and to conduct a biological monitoring program. The utilities also agreed not to build open-cycle power plants along the Hudson for 25 years.²²

The non-utility parties agreed to drop their demands that the utilities convert their existing Hudson River plants to closed-cycle cooling by installing cooling towers. They further agreed to discontinue, "with prejudice," all administrative proceedings and litigation pending at the time of the settlement. The duration of the agreement is ten years from its effective date, after which time the obligations of all parties will cease.

What could prove to be the agreement's undoing is that it does not take effect until the last of several things occurs: (1) EPA issues an order, to which the National Marine Fisheries Service and the Attorney General of Massachusetts consent, that incorporates the agreement's terms; (2) the parties to a stipulation concerning Indian Point 3's final EIS²³ agree that when the agreement takes effect the stipulation will have no further effect; (3) the New York State Public Service Commission and the New Jersey Board of Utility Commissioners approve the agreement.²⁴ The agreement provides that if any of these approvals and consents have not been given by May 15, 1981, parties may thereafter opt out of the agreement. If any party opts out, the agreement will terminate.²⁵

Legal Issues

The agreement's substantive provisions and status as a consent agreement incorporated into an EPA order raise several legal issues.

Enforceability

The agreement designates the Federal District Court for the Southern District of New York and the Supreme Court of New York as the courts to hear claims for breaches of performance. Yet the intent of the parties was that infractions would be remedied by the signatories themselves pursuant to the provisions of the agreement.

The viability of one of the agreement's self-enforcing provisions for breach in performance is questionable, however, although attorneys involved in the settlement state that it was drafted in conformity with New York case law. The agreement imposes a schedule of "monetary penalties"²⁶ on the utilities for delays in installing the required angled screens, dual speed pumps, and fish hatchery. These penalties are "in addition to any other remedies that may be available to the non-utility parties in equity or at law, including any penalties which may be sought by any agency pursuant to statute."²⁷ Presumably such penalties will be paid, if appropriate, without dispute. If, however, court enforcement become necessary the distinctions between "liquidated damages" (which are enforceable) and "punitive damages" (which are not) may prove to be a problem.²⁸

Res judicata

It seems clear that when the agreement expires the parties will be barred from initiating new lawsuits on the causes of action that gave rise to the settlement. This is as much because of the agreement's status as an EPA order and the particular facts of this case²⁹ as bacause the agreement provides that the parties will discontinue all pending litigation and administrative proceedings with prejudice. Presumably, a mediated settlement not incorporated into an administrative or court order would have no res judicata effect.³⁰

Collateral estoppel

Similarly, non-signatories will probably be barred from raising against signatories claims that were settled by the agreement.³¹ As a practical matter, it is unlikely that any groups or individuals exist who would bring such claims, for the EPA order has been consented to by all participants in the EPA proceedings. Anyone who had knowledge of the proceedings but did not participate probably would be barred from raising the same issues since his interests were represented by participants. His claims would probably be barred by laches as well. But collateral estoppel issues might arise in other fact situations where environmental settlements are not incorporated into court or administrative orders and do not have the participation or consent of as complete a constituency of interests as is possible. Since there is a paucity of experience on these questions in the field of environmental [11 ELR 10077] law, jurists may have to look to other areas of law, such as labor law, that are rich with precedent on mediated and arbitrated settlements.

Impact of the Settlement

The mediated settlement of an 18-year-old controversy on the Hudson River may be an anomalous confluence of events that created a climate hospitable to mediation. On the other hand, it may contain some elements universal to environmental controversies and could presage the evolution of an alternative to the courts as a forum for resolving environmental conflicts.

Writers on the theory of social conflict resolution have identified certain features in any conflict that will make it more amenable to settlement by mediation and arbitration than to resolution through the courts. Elements that favor mediation include numerosity of parties, complexity of issues, and a balancing of rights and interests that calls for compromise rather than winner-take-all solutions.³²

In addition, the following conditions are also thought to be necessary for successful mediation: (1) consensus on what the issues are; (2) parties that are clearly identified and visible; (3) a sense of urgency about settling the dispute; (4) a realization that objectives cannot be achieved unilaterally;³³ and (5) equality in the parties' bargaining power.³⁴

Certain facts in the Storm King dispute comport with the mediation "model." First, there were many parties. Four utility companies, three conservation organizations, and four governmental agencies ultimately signed the agreement, and several others consented to it. Also present in this case was an enormous complexity of issues, with the cost of producting electric power and the asserted need to produce more weighted against the impacts on water quality and aquatic populations in the Hudson River. To protect the water resources by obviating the need to draw great volumes of water from the river and dissipating waste heat back into it, the environmental groups wanted the utilities to convert their existing steam-electric generating plants to closed-cycle cooling by installing cooling towers. They also wanted to block construction and operation of Consolidated Edison's planned pumped- storage hydroelectric facility on Storm King Mountain. The utilities wanted to build Storm King and did not want to install the expensive cooling towers. Given the range, complexity, and legitimacy of the parties' respective interests, it was clear that no one of them would get all it wanted without making concessions. The arrived-at compromise would have been far harder, if not impossible, for a court to forge than it was through the mediation process.

The sheer longevity of the dispute on the Hudson River served to (1) identify the interested parties and make them visible, (2) develop a consensus on what the issues were, and (3) create a sense of urgency about ending the dispute. The parties had reached an impassed and were experiencing external pressures to resolve their differences; the holding posture the utilities were forced to maintain was costly, and the fishkills and imbalances in the acquatic ecosystem were continuing unabated year after year. The utilities' legitimate economic concern about installing cooling towers was a factor conservation groups could not ignore; the utilities likewise had to acknowledge the ecological price their operations exacted. Equality in the adversaries' bargaining positions had been achieved through litigation.

In these respects the Storm King settlement is a textbook example of an environmental dispute that is amenable to a mediated settlement. Thus, observers do not exaggerate by hailing it as a significant precedent for the emerging field of environmental mediation. But Storm King's precedential value for future environmental mediation is not without limits; the facts of the case are in some ways an anomaly. For example, whether the agreement takes effect is contingent upon the actions of non-signatory third parties as well as signatories. Certainly such contingency provisions will be the "soft underbelly" of mediated agreements where third-party consent cannot be assured. In such cases, the provision for termination as of right by any dissatisfied party because a non-signatory's approval does not seem likely would be particularly harsh. This feature may prove to be less successfully applied to other mediated environmental disputes. Similarly, the res judicata and collateral estoppel effect that this agreement has should not be presumed for settlements that are not incorporated into adjudicatory orders. Drafters of future agreements who use this settlement as a model will also have to carefully scrutinize provisions such as that prescribing "monetary penalties" for breaches of performance and tailor such self-enforcing provisions to comport with their own state laws.

Conclusion

Storm King has pushed the frontiers of environmental dispute resolution to uncharted territory and is correctly hailed by observers as a milestone. It may presage the establishment, in time, of a formal or even government-sanctioned forum in which parties can meet and forge mediated settlements or perhaps engage in binding arbitration. But, as an observer of another mediated environmental settlement³⁵ has noted:

… mediation is not a panacea and we are only beginning to explore its potential and limitations. We must continue to take care to provide conflict resolution processes which "fit" particular situations and do not fall into the trap of trying to force situations to fit processes with which we might be enamoured.³⁶

With this caveat in mind, the Storm King settlement may be welcomed with cautious optimism as an exciting development in the state of the art of environmental dispute resolution.

1. Scenic Hudson Preservation Conference v. Federal Power Commission (Scenic Hudson I), 354 F.2d 608, 1 ELR 20292 (2d Cir. 1965), cert. denied, 384 U.S. 941 (1966).

2. See A Peace Treaty for the Hudson, N.Y. Times, Dec. 20, 1980, § 1 (editorial) at 24; Temple, Peace at Storm King, 7 EPA J. 28 (Feb. 1981); Sandler, Settlement on the Hudson, 2 AMICUS J. 42 (Spring 1981).

3. Parties to the agreement are the Environmental Protection Agency (EPA), Department of Environmental Conservation of the State of New York, Attorney General of the State of New York, Power Authority of the State of New York, Hudson River Fishermen's Association, Scenic Hudson Preservation Conference, Natural Resources Defense Council, Inc., Central Hudson Gas & Electric Corp., Consolidated Edison Co. of New York, Inc., Orange & Rockland Utilities, Inc., and Niagara Mohawk Power Corp.

4. Telephone interview with Ross Sandler, attorney for Natural Resources Defense Council and Hudson River Fishermen's Association in the negotiations leading to settlement, April 20, 1981.

5. Now the Federal Energy Regulatory Commission.

6. Federal Power Act, 16 U.S.C. §§ 791-825a (1964).

7. Supra note 1.

8. 42 U.S.C. §§ 4321-4361, ELR STAT. & REG. 41009. The court concluded that the FPC had complied with the specific directives of § 102 of the National Environmental Policy Act and that its environmental findings were supported by substantial evidence.

9. Scenic Hudson Preservation Conference v. Federal Power Commission (Scenic Hudson II), 453 F.2d 463, 1 ELR 20496 (2d Cir. 1971), cert. denied, 407 U.S. 926, 2 ELR 20436 (1972).

10. Scenic Hudson Preservation Conference v. Diamond, 330 N.Y.S.2d 71, 2 ELR 20207 (N.Y. Sup. Ct. 1972).

11. DeRham v. Diamond, 333 N.Y.S.2d 771, 2 ELR 20499 (N.Y. App. Div. 1972).

12. DeRham v. Diamond, 343 N.Y.S.2d 84, 32 N.Y.2d 34, 3 ELR 20327 (N.Y. 1973).

13. Hudson River Fishermen's Ass'n v. FPC, 498 F.2d 827, 832 (2d Cir. 1974).

14. Id. at 835.

15. Scenic Hudson Preservation Conference v. Callaway, 499 F.2d 127, 4 ELR 20530 (2d Cir. 1974).

16. 33 U.S.C. § 1344, ELR STAT. & REG. 42142.

17. EPA Docket No. C/II-WP-77-01.

18. At a prehearing conference in February 1977, the utilities raised the issue of whether EPA still had jurisdiction to issue NPDES permits in light of its earlier approval of New York State's program for issuing the NPDES permits.

19. Central Hudson Gas & Electric Corp. v. EPA, 587 F.2d 549 (2d Cir. 1978).

20. Hudson River Fishermen's Ass'n v. Orange & Rockland Utilities, Inc., No. 72 Civ. 5460 (S.D.N.Y.); Hudson River Fishermen's Ass'n v. Central Hudson Gas & Electric Corp., No. 72 Civ. 5459 (S.D.N.Y.).

21. State v. Consolidated Edison Co., Index No. 41228/1970 (N.Y. Sup. Ct.). The case was still on the docket but was inactive because the Attorney General subsequently intervened in various administrative proceedings before the Atomic Energy Commission, the Nuclear Regulatory Commission, the Federal Energy Regulatory Commission, and EPA, where he pursued the nuisance claim.

22. Niagara Mohawk agreed to this provision for the stretch of the Hudson extending 150 miles north of the George Washington Bridge. The agreement excepts the utilities' 25-year covenant from its general provision that the parties' obligations shall cease when the ten-year term of the agreement expires.

23. The concurrence of all parties except the Nuclear Regulatory Commission and the New York Atomic Energy Council is required.

24. The approval of the New Jersey Board of Utility Commissions is required only if Orange & Rockland Utilities, Inc. requests it.

25. By April 20, 1981, the conditions stated in (1) and (2) had occurred; the conditions in (3) had not occurred but no problems were anticipated.

26. Settlement Agreement, December 19, 1980, at 26. A copy of the agreement is available from ELR (Text 38 pp. $5.25, ELR Order No. A-1015; Attachments 30 pp. $4.25, ELR Order No. A-1016).

27. Id. at 27-28.

28. Insofar as the payments are intended to be liquidated damages, the common law conditions for imposing them seem to exist: the actual damages (the losses in fish populations) are speculative or unascertainable and, to a large degree, are not compensable because the losses are irretrievable. However, the enforceability of the payments is not so clear. Their characterization as "monetary penalties" and the fact that they are imposed in addition to existing statutory and judicial remedies (so stated in the agreement) create a strong presumption that they are not liquidated damages and instead suggest that they may be impermissible punitive damages for breach of a civil contract obligation. But the fact that the agreement is incorporated into an EPA order may save this provision; the "monetary penalties" may be treated as the equivalent of an administrative fine.

29. A settlement embodied in an adjudicatory order has the same res judicata and collateral estoppel effect as a litigated adjudication. But even if this settlement were not incorporated into an EPA order, the parties could not challenge the NPDES permits that were the subject of the settlement since the agreement's ten-year term will outlive the five-year permits. The barties (and anyone else) would be free, however, to challenge any new permits in existence when the agreement expires.

30. Supra note 27, at 29.

31. See note 30, supra.

32. See, e.g., HERITAGE CONSERVATION AND RECREATION SERVICE, WORKSHOP ON ENVIRONMENTAL CONFLICT MANAGEMENT 12-13 (Spring 1980); Cormick, Mediating Environmental Controversies: Perspectives and First Experience, 2 EARTH L.J. 215, 218 (1976).

33. See, e.g., Cormick, supra note 32, at 216; Bellman, A Mediator Is a Mediator Is …, ENVT'L CONSENSUS 4 (Spring 1980).

34. See, e.g., Golten, Confessions of an Environmental Litigator, ENVT'L CONSENSUS 2 (Spring 1980). Ross Sandler (see note 4, supra) also expressed the importance of this element.

35. The dispute centered around a proposal for the Army Corps of Engineers to build a flood control dam on the Snoqualmie River near Seattle, Washington.

36. Cormick, supra note 32, at 224.