Taking Environmental Justice Claims Seriously

Jeffrey B. Gracer

Editors' Summary: Environmental justice issues have been the focus of much attention in recent months. In a case of first impression, the Third Circuit held last December that community groups can bring civil rights actions in federal court to collaterally attack state environmental permit decisions. Thispast February, EPA issued an interim guidance document on environmental justice which, among other things, would allow community groups to challenge state permit decisions after they are made — including permit renewals and modifications. This Dialogue focuses on these twin developments that raise important strategic issues for developers and companies seeking governmental approvals for projects located in geographic areas with significant minority or low-income populations.

Jeffrey B. Gracer is a member of Lowenstein Sandler PC in Roseland, New Jersey, where he practices environmental law. Zvia A. Shapiro, an associate at the firm, assisted in the preparation of this Dialogue.

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Environmental justice claims are gaining acceptance in the courts and administrative agencies and recently have created significant impediments to successful project development. As a result, it is becoming essential for developers to anticipate the possibility of such claims at the project planning and permit application stages and to integrate environmental justice concerns into the permitting process. A Third Circuit decision recently accepted for appeal to the U.S. Supreme Court and a recent interim guidance issued by the U.S. Environmental Protection Agency (EPA) have brought these issues to the fore.

Environmental justice concerns typically arise when a predominantly minority community asserts that it is shouldering more than its fair share of the burdens associated with polluting activities. Although there has been considerable political debate about the issue for years, that debate is now having impacts on pending projects. To cite just a few examples:

. In April 1997, the New Jersey Department of Environmental Protection withheld approval of an application to convert a solid waste transfer station into a $ 63 million sludge treatment plant after EPA and Newark residents raised environmental justice concerns.¹

. In July 1997, community groups in Los Angeles, California, filed a federal civil rights lawsuit against the South Coast Air Quality Management District and the California Air Resources Board challenging approval of a pollution trading program for local refineries. The groups allege that allowing pollution credits to replace stack emission reductions has an adverse impact on minority communities.²

. In September 1997, EPA withheld approval of air permits for a proposed $ 700 million plastics manufacturing plant in Convent, Louisiana, after a coalition of citizen groups alleged the facility would "disproportionately burden the surrounding predominantly African-American and low-income populations with increased levels of pollution, and increased health and environmental risks."³

Companies tend to underestimate the ability of environmental justice concerns to delay or derail projects. EPA's regulations implementing Title VI of the 1964 Civil Rights Act (Title VI)⁴ have long required state environmental agencies to avoid "criteria or methods" that "have the effect of subjecting individuals to discrimination because of their race, color, national origin, or sex …."⁵ President Clinton's 1994 environmental justice Executive Order also directs federal agencies to consider the impacts of their actions on minority and low-income populations.⁶ Until recently, however, there were relatively few high-profile cases in which environmental justice claims became material impediments to project development or permit renewal. The issue played out most often in task forces and broad policy formulations, with little practical impact on the regulated community.

That picture has changed for two principal reasons. First, in a case of first impression, the Third Circuit held last December in Chester Residents Concerned for Quality Living v. Seif⁷ that community groups can bring civil rights actions in federal court to collaterally attack state environmental permit decisions. The Supreme Court accepted this case for review. Second, EPA issued an interim guidance document [28 ELR 10374] on environmental justice which, among other things, would allow community groups to challenge state permit decisions after they are made — including permit renewals and modifications.⁸ These twin developments raise important strategic issues for developers and companies seeking governmental approvals for projects located in geographic areas with significant minority or low-income populations.

The Chester Residents Decision

In Chester Residents, a community group asserted that the Pennsylvania Department of Environmental Protection (PADEP) licensed a disproportionate number of waste facilities in a predominantly minority neighborhood in violation of EPA's Title VI regulations. They relied on data showing that PADEP issued five waste facility permits with a total annual capacity of 2.1 million tons in the city of Chester, a predominantly African American community, but issued only two such permits with a total annual capacity of 1,400 tons in other areas of predominantly white Delaware County.⁹ The community group filed suit in the Eastern District of Pennsylvania, alleging that PADEP's permit decision had a discriminatory impact on minorities. The district court dismissed the suit, holding that plaintiffs did not have a private right-of-action to enforce EPA's Title VI regulations. The Third Circuit reversed.

In many respects, the Third Circuit's ruling could be viewed as a straightforward application of traditional civil rights law. Although § 601 of Title VI reaches only intentional discrimination, § 602 allows federal agencies to regulate policies or practices that are neutral on their face but have a disparate impact on minorities.¹⁰ The Supreme Court will now decide whether litigants have a private right-of-action to enforce disparate impact regulations, as several federal appellate courts have so held.¹¹ Accordingly, the Third Circuit's holding was not a significant departure from prior case law.

Of greater practical significance, the Third Circuit also held that citizen groups can bring suit directly in federal court without first exhausting administrative remedies before EPA. While EPA's regulations establish an administrative process for raising environmental justice claims,¹² the Third Circuit's ruling allows private litigants to bypass that process entirely. Indeed, the panel expressly rejected PADEP's argument that EPA is a necessary "gatekeeper to enforcement."¹³ This aspect of the court's ruling raises important questions of finality for project developers.

Collateral Attacks on State Permits

The Chester Residents decision provides powerful leverage to community groups in siting and permitting matters. Whenever a project can be alleged to result in a disproportionate impact on a minority community, the permit can be challenged immediately and directly in federal court. As a result, project developers must plan for the possibility of such suits, take steps to avoid them when possible, and, if necessary, lay the groundwork for defending their permits. Although such lawsuits will likely be brought against the state permitting agency itself, as was the case in Chester Residents, the project proponent's interests will be threatened directly by such a suit, making intervention a practical necessity in most instances.

If the Third Circuit's Chester Residents decision stands, it will have substantial impacts on project siting and permitting. The ability to defend a permit after it is issued will depend in large part on how well environmental justice concerns have been anticipated, analyzed, and managed by the developer throughout the permitting process. Companies must ensure that environmental justice concerns are integrated into the permit strategy. Ideally, a project proponent should identify community interests early in the process and secure broad support for the project so that significant opposition does not materialize. Whether or not that is possible, the permitting record should establish that environmental justice issues have been considered by the permitting agency and, when appropriate, document steps taken to mitigate disproportionate impacts. Without such precautions, the permit approval may be vulnerable to later federal judicial invalidation.

EPA's Environmental Justice Guidance

On February 5, 1998, EPA issued an interim guidance document on environmental justice. The document's stated purpose is to provide a framework for processing administrative complaints regarding environmental permitting activities within EPA's Office of Civil Rights. However, a number of statements and conclusions included in the guidance will likely be cited by project opponents in federal lawsuits. Some of the more significant and controversial aspects of the guidance are discussed below.

The guidance states that "individuals may file a private right of action in court to enforce the nondiscrimination requirements in Title VI or EPA's implementing regulations without exhausting administrative remedies."¹⁴ It thus adopts the Chester Residents decision as nationwide policy.

The guidance also allows environmental justice claims to be raised in connection with permit modifications and renewals. Minor permit modifications generally will not trigger environmental justice concerns. However, permit modifications "that result in a net increase of pollution impacts … may provide a basis for an adverse disparate impact finding."¹⁵ Of even greater significance, EPA will review permit renewals as if they were plenary applications for new facility permits, even if the facility is not proposing a net increase in activities. As a result, facilities that have been operating [28 ELR 10375] in a community for years could face environmental justice challenges in connection with permit renewals as well as major permit modifications.

To determine whether a community group has stated a prima facie case of disparate impact, EPA's interim guidance document provides only a broad framework. According to the guidance, EPA will: (1) identify the population affected by the permit; (2) analyze other permitted facilities in the community and their aggregate impacts on racial and ethnic populations; (3) compare the impacts on affected and unaffected populations; and (4) determine whether any observed disparate impacts are significant. The document does not specify how EPA will define the affected and unaffected populations, although it does refer generally to proximity and contamination pathways. It also does not define what methodology EPA will utilize to determine whether a disparity is statistically significant. These issues — the proper unit of measure for disparate impact analysis and statistical significance — lie at the heart of disparate impact analysis and have generated considerable debate in court decisions and professional literature.¹⁶ Although the courts and administrative agencies have acquired substantial experience applying disparate impact theory in the employment discrimination and fair lending contexts over a period of years, extension of that theory to the environmental permitting context is essentially untested. In the absence of more specific guidance regarding what constitutes a disparate impact in this context, environmental justice claims will be decided on a case-by-case basis against a backdrop of substantial uncertainty.

In addition, EPA appears to have shifted the ultimate burden of proof to the permitting agency. Under traditional civil rights jurisprudence, once a plaintiff makes out a prima facie case of disparate impact, the burden shifts to the defending party to demonstrate either that there is no disparate impact or that any impact is justified by legitimate considerations.¹⁷ After that intermediate burden is met, the burden shifts back to the plaintiff to carry its ultimate burden of proving that the business objective can be met in a less discriminatory manner.¹⁸ EPA's guidance appears to place the final burden of proof improperly on the permitting agency. In other words, the state agency not only must establish that the permit is necessary to advance a "substantial, legitimate interest,"¹⁹ but must also prove that there is no less discriminatory alternative. EPA's guidance does not require the project challenger to prove that less discriminatory alternatives would satisfy legitimate business interests. Because disparate impact cases are often won or lost based on which party bears the burden of proof, this departure from established practice could be significant.

The guidance also identifies alternatives and mitigation measures as key concepts, but it does not indicate how these concepts should be applied in the environmental justice context. For example, analysis of project alternatives is a standard feature of environmental impact analysis. It is unclear in the environmental justice context, however, whether a developer can choose not to pursue an alternate site based on cost, site access or suitability, market factors, availability of infrastructure, or other legitimate business considerations. Similarly, mitigation of environmental impacts is a familiar concept. Mitigation of environmental justice concerns is far less familiar. EPA does not identify categories of mitigation measures that would be acceptable, such as job training for community residents or host community benefit payments, for example. Additional guidance would be helpful in this regard.

In effect, EPA seeks to establish a broad, open-ended administrative process for assessing environmental justice complaints that is separate and apart from the state permitting process and that takes place after the state permit is issued. This raises substantial finality concerns. For example, when a permit is issued under a federally delegated program, EPA's environmental comments are typically addressed by the state before the final permit is issued. Under the environmental justice guidance, even after the traditional permitting process has been successfully completed, another unit of EPA could demand additional changes or withdrawal of the permit based on environmental justice concerns.

EPA's proposal has raised substantial concerns. For example, the Environmental Council of the States, an organization of environmental officials from 49 states, the District of Columbia, and two U.S. territories, recently issued a resolution asking EPA to withdraw the interim guidance, noting that it would "clearly disrupt the management of environmental permitting programs."²⁰ Industry groups also have indicated that they will oppose EPA's interim guidance.²¹ It remains to be seen whether EPA will modify or withdraw its interim guidance to address the concerns of state agencies and industry groups, or whether a lawsuit will be filed challenging EPA's authority to regulate environmental justice issues as proposed.

Strategic and Policy Implications

If the Third Circuit's Chester Residents decision stands, project developers can expect to see a proliferation of environmental justice claims filed in federal court. Even if the Supreme Court accepts review and reverses, EPA is likely to retain and exercise Title VI oversight authority over state environmental agencies. As a result, environmental justice claims are likely to be a factor in project development for some time to come.

To function effectively in this new arena, companies will have to remain sensitive to legitimate citizen concerns about project impacts, yet at the same time advance pragmatic business objectives. Important strategic and policy implications include the following:

. Corporate development executives will be more likely to consider whether a proposed site could raise environmental justice concerns. This will require review of existing and pending projects in the community and input from local counsel and community relations experts.

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. If a site is likely to raise environmental justice concerns, companies will consider alternate sites. This could lead, paradoxically, to less development in urban areas and more suburban sprawl, contrary to most federal and state policy initiatives, including brownfields redevelopment.

. Where a project must be sited in a potentially impacted community, sophisticated developers will be well-advised to formulate strategies for addressing and, where possible, resolving environmental justice concerns during the permitting process. If the administrative record does not address environmental justice issues, the permit may not survive a subsequent challenge in court or before EPA.

Conclusion

To date, EPA and the federal courts have approached environmental justice issues principally through the prism of traditional civil rights law. While that is a good starting point, greater attention is needed to legitimate business issues raised in the environmental permitting context, especially the need for finality and predictability. Unless these considerations are also taken seriously, environmental justice will be on a collision course with efforts to promote sustainable urban redevelopment.

1. Enviro Justice: Issue Tips Scale Against NJ Sewage Plant, AM. POL. NETWORK, INC., Apr. 1, 1997, at 1.

2. Marla Cone, Civil Rights Suit Attacks Trade in Pollution Credits, L.A. TIMES, July 23, 1997, at 1.

3. Sara Shipley, Race, Jobs Pollution in Bayou, CHRISTIAN SCI. MONITOR, Jan. 12, 1998, at 1.

4. 40 C.F.R. pt. 7 (1997).

5. Id. § 7.35(b).

6. Exec. Order No. 12898, 3 C.F.R. 859 (1995), ELR ADMIN. MAT. II 45075.

7. 132 F.3d 925, 28 ELR 20487 (3d Cir. 1997).

8. U.S. EPA, INTERIM GUIDANCE FOR INVESTIGATING TITLE VI ADMINISTRATIVE COMPLAINTS CHALLENGING PERMITS (Feb. 5, 1998) (available from the ELR Document Service, ELR Order No. AD-3660) [hereinafter INTERIM GUIDANCE].

9. Chester Residents, 132 F.3d at 927 n.1, 28 ELR at 20487 n.1.

10. Alexander v. Choate, 469 U.S. 287 (1985); Guardians Assoc. v. Civil Service Comm'n, 463 U.S. 582 (1983).

11. See Chester Residents, 132 F.3d at 932-33, 28 ELR at 20489-90 and cases cited therein.

12. 40 C.F.R. § 7.120.

13. Chester Residents, 132 F.3d at 935, 28 ELR at 20491. The court found that the administrative process for raising such issues was created solely to provide notice to the state agency that EPA "has begun an investigation which may culminate in the termination of its funding." Id.

14. INTERIM GUIDANCE, supra note 8, at 4.

15. Id. at 7.

16. VICKY BEEN, ZONING AND LAND USE CONTROLS, ch. 25D (1995).

17. See, e.g., Larry P. v. Riles, 793 F.2d 969, 982 & n.9 (9th Cir. 1984).

18. See, e.g., Elston v. Talladega County Bd. of Educ., 997 F.2d 1394, 1407 (11th Cir. 1993).

19. INTERIM GUIDANCE, supra note 8, at 5.

20. State Agency Chiefs Ask EPA to Withdraw New Guidance on Civil Rights Complaints, 28 Env't Rep. (BNA) 2531 (Apr. 3, 1998).

21. John H. Cushman Jr., Pollution Policy Is Unfair Burden, States Tell EPA, N.Y. TIMES, May 10, 1998, at Al.