32 ELR 10488 | Environmental Law Reporter | copyright © 2002 | All rights reserved

Environmental Enforcement: Industry Should Not Be Complacent

Kevin Gaynor heads Vinson & Elkins' Washington, D.C., environmental practice. Ben Lippard is an associate in that practice group.

[32 ELR 10488]

Any suggestion that the U.S. Environmental Protection Agency's (EPA's) enforcement activity is less than vigorous is incorrect. Instead, EPA is pushing enforcement on all fronts. Its cases are also increasingly innovative. EPA referrals of criminal cases to the U.S. Department of Justice (DOJ) steadily and dramatically increased from 20 in fiscal year (FY) 1982 to 107 in FY 1992 to a record 278 in FY 1997 and declined slightly in FY 2000 to 236. Criminal fines, which in FY 1997 reached a record $ 169.3 million,¹ declined in FY 1999 to $ 61.5 million but doubled in FY 2000 to $ 122 million.² Years assessed for criminal sentences rose from 146 years in FY 2001 to 256 years in FY 2002.³ Federal courts imposed jail time of 146 years in FY 2000. At the close of FY 2000, the total of all criminal fines assessed under the criminal enforcement program neared $ 720 million.⁴

Overall, EPA brought a record total of 6,027 civil judicial, criminal, and administrative enforcement actions in FY 2000, an increase of nearly 65% from FY 1999. EPA referred 368 civil cases to the DOJ, a slight reduction from FY 1999 and a 30% increase over FY 1996. EPA also issued a record 1,763 administrative complaints, up nearly 8% from FY 1999. Additionally, EPA forced defendants to spend $ 2.6 billion to correct violations and take additional steps to promote environmental protection. Civil penalties dropped slightly in FY 2000 to $ 102.6 million from the record $ 166.7 million in penalties assessed in FY 1999, which included the largest Clean Air Act (CAA) and Resource Conservation and Recovery Act (RCRA) penalties in EPA's history.⁵ But violators paid over $ 125 million in civil penalties in FY 2002, with an additional $ 25 million allocated to states in shared penalties.⁶

EPA is attempting to measure enforcement by qualitative measures such as pollutant reduction.⁷ For example, EPA stated that in FY 1999, over 6.8 billion pounds of pollutants were eliminated due to EPA enforcement actions and in FY 1999 1.6 billion pounds of pollutants were eliminated as a result of EPA civil settlements. As part of this effort, EPA and the DOJ are using the leverage of settlements to force defendants to agree to improvements in environmental management systems and the institution of preventive actions that are not only burdensome and costly to the facility at issue, but may extend to all of a company's facilities, not merely the facility that committed the violation. These measures far exceed what the government could obtain in relief if it obtained a favorable verdict in court.

Over the past few years, EPA has also identified industry sectors requiring special attention. Since FY 1996, EPA has selected 11 sectors as priorities.⁸ In theory, this allows EPA to marshal resources and think comprehensively about the nature of the problems and how it intends to use its enforcement tools to achieve certain results.

EPA's coal-fired power plant enforcement initiative is its most ambitious and controversial. Although the lawsuits against the originally named utility defendants continue, a review of the overall enforcement initiative is ongoing within the executive branch, putting on hold actions against other utilities. It is a fair statement that under EPA's legal theories, every utility in the country has been violating the new source review (NSR) requirements since their inception in 1978. If EPA is correct, why has it taken over 20 years to initiate these actions against the most visible and highly regulated industry in the United States? EPA will have to answer this question and many more for the initiative to achieve success.

The disturbing trend toward criminalization of environmental violations continues. EPA criminal investigators are likely to appear in any enforcement effort by EPA. It has reached the point where it is impossible to counsel clients on what kinds of violations will not be treated criminally. While EPA may revel in this lack of predictability, it is becoming more and more difficult for companies, plant managers, and environmental professionals to operate from day to day without fear of being indicted. Two recent casesin particular, the recent, well-publicized criminal actions the United States brought against a Koch Industries plant and a Huntsman Chemical plant in Texas, have elevated industry's concerns that highly technical and debatable violations of environmental regulations can lead to criminal indictments. This atmosphere of fear and unpredictability undermines industry's ability to make intelligent decisions regarding the operation of its facilities and to attract and retain highly competent individuals to run them. In the long run, this will undermine environmental compliance and cause relations between EPA and industry to become increasingly hostile, instead of cooperative, to the detriment of the environment.

[32 ELR 10489]

To counteract, in part, government excesses, courts are taking harder looks at agency actions. In Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers (SWANCC),⁹ the U.S. Supreme Court cut back the government's authority to regulate isolated wetlands, which may have a carry-over effect on the breadth of EPA's authority to regulate under the Clean Water Act (CWA) in cases in which EPA cannot demonstrate a direct connection to navigable waters. In United States v. American National Can Co.,¹⁰ a federal district court substantially restricted what EPA pronouncements will be entitled to Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.¹¹ deference, which may undercut EPA's enforcement ability. Citizens groups, however, appear to have obtained a significant victory in Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc.,¹² in which the Court held that civil penalties paid to the government are sufficient to support Article III standing due to their deterrent effect. This decision substantially undercut a prior opinion¹³ which suggested citizen-plaintiffs might seldom have Article III standing. Laidlaw, coupled with ever-more inventive legal theories asserted by private plaintiffs, suggests that whatever EPA does, aggressive private enforcement of environmental laws will be a reality for the foreseeable future.

A case to watch is General Electric's (GE's) constitutional challenge to EPA's routine use of its extraordinary power under § 106 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), under which it can force a company to expend hundreds of millions of dollars to comply with a § 106 order before the company can obtain judicial review of the order.¹⁴ Fundamentally, GE is arguing EPA's use of § 106 deprives it of a meaningful hearing at a meaningful time, as required by Ex parte Young¹⁵ and its progeny. While this Dialogue does not discuss the GE case in detail, the claim is a very important one with potentially large implications for the future of CERCLA.

This Dialogue explores these and other developments.

Coal Power Plant Initiative

This section presents a general sketch of some of the issues in EPA's current enforcement initiative targeting coal-fired electric utilities, an initiative that was recently tepidly endorsed by the DOJ pursuant to a review requested by Vice President Richard Cheney.¹⁶ Although not explicitly stated as such in the report, the standard the reviewers appeared to be applying was the low bar in Rule 11 of the Federal Rules of Civil Procedure—did a reasonable basis exist for bringing the suits—rather than whether commencing the actions was wise from a policy prospective or a prudent exercise of prosecutorial discretion. Since a contrary conclusion could have subjected the DOJ and EPA to Rule 11 sanctions, the reviewers' conclusion was hardly surprising. It is worth examining this initiative closely for several reasons. First, it will resolve, one way or the other, key legal issues associated with a complex part of the CAA, the NSR program, which has significance for many types of facilities. Second, it demonstrates EPA's continued willingness to undertake large-scale enforcement actions in cases where it believes industry noncompliance is widespread. Finally, it demonstrates the danger associated with being singled out as a test case for EPA's enforcement priorities, and argues for a proactive approach to the management of compliance issues. For these reasons, this Dialogue explores the coalfired utility initiative in some detail.

In its enforcement initiative, EPA has alleged that these utilities violated certain provisions of the CAA when they allegedly modified their plants without obtaining proper permits or installing appropriate emission control equipment. The legal requirements at the heart of this initiative are applicable to many other industries, as the NSR and new source performance standards (NSPS) programs apply to all facilities that are considered major emitting facilities under the CAA. In fact, similar enforcement initiatives have occurred in both the pulp and paper and petroleum refining industries. Thus, the outcome of this enforcement initiative will have consequences that affect many industries, not just electric utilities. Moreover, the initiative has become increasingly controversial, as industry and environmentalists, as well as northeastern and midwestern state governments, have become involved in the political aspects of the dispute. Indeed, it should be noted that political developments may substantially change the situation, either through the development of new regulatory standards or otherwise.

In the fall of 1999, EPA formally commenced the initiative against coal-fired electric utilities by filing eight lawsuits. Seven companies were initially sued in various federal courts, while the Tennessee Valley Authority (TVA) was sued administratively. To date, one utility has settled its lawsuit with EPA (Tampa Electric Company). Other utilities (Cinergy and Virginia Power, which was not sued in the initial round of 1999 lawsuits) have reached "agreements in principle" with EPA, which, despite the passage of many months, still have not resulted in final consent decrees. However, on January 23, 2002, EPA announced it lodged a consent decree with a New Jersey utility (PSEG) covering alleged NSR violations.

The TVA administrative hearing is concluded, and the EPA Environmental Appeals Board (EAB) rendered a decision supporting EPA's position in the enforcement initiative¹⁷; the TVA is appealing the EAB's decision before the U.S. Court of Appeals for the Eleventh Circuit. The Eleventh Circuit determined that the jurisdictional issues should be considered first, as there were several complex jurisdictional issues before that court. First, and most significant, was the question of whether the TVA, as an instrumentality of the federal government, had the ability to bring an action for judicial review of an EPA administrative order in federal court. Additionally, EPA contested whether the private party intervenors in the Eleventh Circuit proceeding [32 ELR 10490] had standing to intervene. The TVA and the utility intervenors won a resounding victory before the Eleventh Circuit on these jurisdictional issues. On January 8, 2002, the Eleventh Circuit determined that the TVA was entitled to bring its action against EPA due to its independent litigating authority, that the intra-executive branch nature of the dispute did not render the dispute nonjusticiable, and that the utility intervenors had sufficient interest in the outcome of the case to support standing.¹⁸ Oral argument on the merits is expected to be scheduled sometime in March or April 2002.

Finally, six utilities are still actively and aggressively challenging EPA's claims (these utilities are American Electric Power, FirstEnergy, Duke Power, Illinois Power, Southern Company, and the Southern Indiana Gas & Electric Company (SIGECO)).¹⁹

In this initiative, EPA has alleged that the coal-fired utilities violated the NSR provisions of the CAA, particularly those relating to the prevention of significant deterioration (PSD) and the NSPS of the CAA. EPA claims that the utilities undertook "major modifications" of their plants without obtaining necessary PSD permits or complying with the NSPS. Significantly, EPA alleges that the utilities failed to install the best available control technologies (BACT) when they modified their facilities, as required by these programs.

CAA PSD and NSPS Provisions

The starting point for understanding this enforcement initiative is with the general structure of the CAA. The CAA created national ambient air quality standards (NAAQS), through which EPA established maximum ambient concentrations for specific pollutants, including nitrogen oxides (NO_x), sulfur dioxide (SO₂), carbon monoxide (CO), and particulate matter (PM). Under the NAAQS, every region of the country is classified based upon whether it meets the standards. Areas are thus classified as "attainment," "non-attainment," or "unclassified." The goal of the CAA is to bring "non-attainment" areas into, and keep "attainment" areas in, compliance with the NAAQS. The PSD and NSPS provisions of the CAA are designed to do just that.

The NSPS program establishes technology-based emission standards for a number of industrial categories. Under this program, new or modified emission sources must meet the NSPS technology-based pollution control requirements. The PSD program requires any new facility, or "major modification" of an existing facility, to obtain a preconstruction permit. If the source is located in an attainment or unclassified area, then the permit is a PSD permit. If the source is located in a non-attainment area, then the permit is a "non-attainment NSR permit."

The PSD and NSPS programs in effect "grandfathered" those sources existing at the time the PSD and NSPS provisions of the CAA were enacted from immediately meeting the more stringent PSD and NSPS emission standards. However, when grandfathered facilities undergo "modifications," they are required to comply with the NSPS and PSD programs, including the use of BACT for that industrial category.

While there are significant distinctions between the NSPS and PSD programs, many of the key concepts which are at the heart of EPA's enforcement initiative are similar enough to warrant being addressed together.

Definition of Modification

At the heart of the litigation in EPA's enforcement initiative is the definition of "modification." "The term 'modification' means any physical change, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted."²⁰ Thus, to be a "modification," a project must be (1) a physical change (2) that causes (3) an emissions increase. It is worth noting that EPA argues that this test as a two-part standard, choosing not to recognize "causation" as a separate element of the test. A significant issue in the litigation is EPA's ability to satisfy this causation requirement. Remarkably, prior to litigation, EPA never articulated a methodology for calculating whether a particular project caused an emission increase. Instead, it has been developing emissions calculation methodologies for the litigation that the utilities contend to be both unprecedented and legally incorrect.

Physical Change

While the basic determination of whether there was an actual physical change at a source is simple—basically, any physical alteration of a facility meets this definition—the more difficult challenge is determining whether one of the several regulatory exceptions to the definition of "physical change" applies. The key exclusion from the regulatory definition of physical change is for "routine maintenance, repair and replacement" projects (hereinafter referred to as "routine maintenance"). Under the applicable regulations, routine maintenance projects are not "physical changes" within the meaning of NSPS and PSD programs, so the requirement to install upgraded pollution controls does not apply to such projects.

This "routine maintenance" exclusion is at the heart of the dispute between the targeted electric utilities and EPA. What complicates this issue is that there is very little EPA guidance on what constitutes routine maintenance. In a 1992 Federal Register notice, EPA wrote that the

determination of whether the repair or replacement of a particular item of equipment is "routine" under the NSR regulations, while made on a case-by-case basis, must be based on the evaluation of whether that type of equipment has been repaired or replaced by sources within the relevant industrial category.²¹

EPA also promised to issue guidance on this issue, recognizing that industry commentors had argued that what is "routine" is not self-evident, but has never done this.

In its brief in the TVA EAB proceeding, EPA elaborated that the routine maintenance exclusion required "a case-by-case determination by weighing (1) the nature [and] extent, (2) purpose, (3) frequency, and (4) cost of the work, as well as other relevant factors, to arrive at a common [32 ELR 10491] sense finding."²² This list of factors follows from the U.S. Court of Appeals for the Seventh Circuit's 1990 decision in Wisconsin Electric Power Co. v. Reilly (WEPCO).²³ In the WEPCO case, the utility challenged EPA's determination that a proposed project required a PSD permit. While the utilities appear to generally agree that these factors are relevant criteria, they vigorously dispute how these criteria should be interpreted.

The fundamental difference between EPA's position and the TVA's position (which in general is industry's position regarding routine maintenance) is the determination of the basis for comparison. The question becomes whether a project is "routine compared to what?" "TVA's approach looks first to industry practice to determine whether the activity has been undertaken elsewhere. If it has, then, in the TVA's view, it should be regarded as routine."²⁴ In other words, if certain projects are "routinely" undertaken at a number of facilities throughout the industry, in the TVA's view, the project is routine. To support this position, the TVA issued a report as what major projects were "routine" in its system.²⁵

EPA argues instead that "routineness should be determined according to a broader range of considerations, including, most notably, the significance of the project in the life of the unit in question. Thus . . . an activity is more likely to be regarded as routine if it is not unusual in the life of a given unit."²⁶ EPA's approach thus looks at how often a project is performed on the same unit, notwithstanding its earlier pronouncements that the proper approach was to look at the industry as a whole.

The EAB rejected the TVA's position, noting that it would "become the exception that swallows the rule." Instead, the EAB suggested that projects which are "unusual or once- or twice-in-a-lifetime occurrences" would not likely be routine.²⁷ The EAB next addressed the four "routineness" factors, and found that the TVA had not demonstrated that the projects at issue were routine maintenance, and thus that physical changes were made to the targeted units.

Emission Increases

The second major point of debate in this enforcement initiative involves how emissions increases should be calculated under the PSD program. The NSPS and PSD programs differ in calculating emissions increases. Under the NSPS program, increases in the hourly emission rate of a physically changed unit trigger the NSPS requirements. Under the PSD program, it is the increase in the annual amount of certain pollutants emitted which trigger preconstruction permit requirements. The EAB rejected the TVA's argument that the CAA requires the application of the NSPS emissions increase test as part of the PSD program.²⁸

In determining whether there has been an emissions increase at a facility, a baseline emissions level must first be determined. Under the CAA's regulations, the baseline emissions are "the average rate, in tons per year, at which the unit actually emitted the pollutant during a two-year period which . . . is representative of normal source operations."²⁹ Obviously, how to calculate the baseline is an important issue, since that determines what kinds of projects trigger NSR.

In the EAB proceeding, EPA argued that the two-year period immediately prior to the physical change was the "default" period for establishing the baseline emissions. The TVA argued, however, that the two years immediately proceeding a project were not necessarily representative of normal operations. Instead, the TVA argued that the consecutive 24-month period with the highest emissions out of the 5-year period proceeding the project was the most representative of normal unit operations; this is the "high two-of-five" period. By using the high two-of-five period, independent demand factors, such as weather and the availability of other units on the system, which are not deemed representative of normal operations, are excluded from the baseline. The EAB accepted the TVA's argument, because EPA did not present sufficient evidence to rebut the TVA's evidence that the high two-of-five was the appropriate baseline.³⁰

Once a baseline emissions level is calculated, it must be compared to the post-physical change emissions. In the preconstruction permitting context, EPA often argues that an "actual-to-potential" test should be used to determine if there will be an emissions increase. Under this test, the baseline is compared with the potential, maximum emissions from the changed unit. EPA argues that because a unit being physically changed would not yet have commenced "normal operations" as a changed unit, its post-change actual emissions are presumed to be the unit's post-change potential to emit.

In the TVA case, EPA argued that the actual-to-potential test should be used because these emissions increase calculations should have been performed by the TVA prior to any changes being made to the units. However, because of the way EPA framed the issue in its notice of violation to the TVA, the EAB used a different test, which it called a "retrospective prediction" test, for calculating emissions increases.

Under this retrospective prediction test, the changed unit's potential to emit is calculated by looking back at the information available during the project planning, and determined based upon that "historic" information, what engineers would have predicted the potential to emit to be after the change. In other words, the post-change emissions were based upon a determination of what would have been put into a PSD permit application if one had been completed before construction. In using the retrospective prediction test, the EAB rejected the TVA's argument that the post-change emissions should be calculated using the "confirmed-actual" emissions data. The TVA essentially argued that the actual post-change emissions data was available, and should therefore be used to determine if there actually was an increase in emissions. Using this data, most of the TVA's units did not show an emission increase. Rejecting the TVA's position, the EAB reasoned that the PSD program contemplates preconstruction review, and therefore post-change [32 ELR 10492] data should not factor into PSD determinations. It should be noted that the utility industry believes that EPA's position has numerous weaknesses regarding the calculation of emission increases.³¹

Industry Defenses

The utility defendants in the enforcement initiative have asserted a number of legal defenses in addition to the substantive dispute with EPA regarding the correct interpretation of the CAA. These defenses include fair notice and retroactivity defenses based on constitutional principles and principles of administrative law.

The fair notice doctrine is a due process doctrine under which a person or company may not be held liable for violating the law unless the law, or applicable regulations implementing that law, made the obligations of that person or company clear. Thus, EPA cannot enforce its regulatory interpretation of the "modification" definition, and specifically its view of routine maintenance, unless it first provided fair notice of the meaning of these terms.

In this enforcement action, industry is arguing that EPA has never formally defined what maintenance practices are "routine." The coal-fired generating industry argues that it has always understood that maintenance practices that are standard within the industry, such as the projects described in EPA's complaints in the enforcement initiative cases, were "routine." Industry claims to have acted in accordance with this understanding for years. Further, industry believes that EPA had full knowledge of the types of projects conducted throughout the electric utility industry and that EPA's "silence" was essentially an acceptance of the industry view that these projects wereroutine. In the TVA case, the EAB ignored numerous EPA statements supporting industry's position and rejected the fair notice argument, noting that the TVA had failed to establish that the meaning of routine maintenance was not "ascertainably certain" from the regulations and EPA statements about those regulations.

The utilities have also argued that EPA's legal interpretation represents a retroactive change in law that is forbidden by both substantive and procedural requirements of constitutional and administrative law. Should the utility cases proceed to trial and appeal, it is likely that the scope of these potential defenses will be examined by courts in detail.

Analysis

Through this enforcement initiative, EPA is pursuing vigorous and aggressive enforcement of the CAA NSR and NSPS programs. The utility industry believes the initiative is based on novel and incorrect interpretations of the statute and regulations. The lesson to be drawn by entities that are not directly involved in the litigation, particularly those in industrial categories targeted by EPA, is that when EPA demonstrates interest in PSD/NSPS issues at a facility, through, most likely, a CAA § 114 Request for Information, those requests must be taken very seriously. Counsel can be very helpful in responding to such requests, through the proper arrangement of documents and management of company statements to minimize the chances of an ensuing enforcement action.

This enforcement initiative also highlights the importance of proactively addressing CAA compliance, and the need to stay up to date with agency actions. To this end, companies which believe they may have significant exposure based on possible PSD violations regarding past projects may want to reevaluate those projects in light of this current enforcement initiative and analyze possible defenses and the likelihood of prevailing on the merits. After such an analysis is done, decisions can be made as to whether to fight if sued or evaluate self-reporting options. Counsel for utilities should also consider the desirability of approaching state regulators to receive "applicability determinations" for future projects involving significant boiler component replacement or significant maintenance projects at other types of facilities.

Finally, the ultimate outcome of this enforcement initiative will be very important to all of industry. Both legal and political developments may be very significant in determining whether EPA or industry is victorious or if some negotiated, regulatory, or legislative resolution will result. It is also fair to say that unlike many enforcement actions where EPA has the upper hand, EPA finds itself in a dogfight in which the industry defendants have a number of excellent substantive defenses and need to win only one to prevail. The ultimate outcome of this initiative remains in doubt.

Restrictions on EPA Enforcement

Ongoing developments in the field of wetlands enforcement have been a mixed bag for both the government and the regulated community. The recent decision in SWANCC may substantially limit wetlands enforcement, but it is difficult to predict what the ultimate outcome will be. This case can be described as a major defeat for the government. The government has, however, recently obtained several key victories in the areas of sidecasting and the ongoing struggle over the Tulloch rule, which defines EPA's and the U.S. Army Corps of Engineers' (Corps') ability to regulate "incidental fallback" from activities in wetlands.

SWANCC

SWANCC, in which the Court held that the Corps' jurisdiction over wetlands did not extend to "isolated" wetlands, was a major defeat for the government. For many years, the Corps had asserted jurisdiction over "isolated" wetlands—those not adjacent to navigable waters or their tributaries—on the basis of the "migratory bird rule,"³² which purported to extend Corps jurisdiction under CWA § 404 to isolated wetlands used as habitat by migratory birds, endangered species, or used to irrigate crops sold in interstate commerce. The rule represented an attempt by the Corps to extend § 404 jurisdiction to the limits of the U.S. Congress' power under the U.S. Commerce Clause of the U.S. Constitution.³³

[32 ELR 10493]

The SWANCC Court did not reach the constitutional question regarding whether the Commerce Clause would allow Congress to assert federal jurisdiction over "isolated" wetlands. Instead, it reviewed the statutory language contained in the CWA and held that the language of that provision did not authorize the Corps to assert jurisdiction over wetlands in such a broad manner. In doing so, the Court relied on the Act's use of the term "navigable" waters and found that Congress' use of this term showed an intent to rely on "its traditional jurisdiction over waters that were or had been navigable in fact or which could reasonably be so made."³⁴ The significance of this is that the statutory language of the Act gives no clear indication that Congress intended for the CWA to reach as far as the Commerce Clause might allow. As a result, the Court held that although the term "navigable" is of "limited import" in the CWA — justifying the Court's extension of § 404 jurisdiction to wetlands "adjacent to" navigable waters in United States v. Riverside Bayview Homes, Inc.³⁵ — this term does not allow § 404 to extend to isolated wetlands, since that reading of the CWA would give the term "navigable" no effect whatsoever.³⁶

Thus, the Court held that § 404 of the CWA did not apply to wetlands or ponds "not adjacent to open water."³⁷ In doing so, the Court relied on a number of interesting legal principles. First, the Court rejected the Corps' argument that a series of failed efforts to pass legislation designed to rein in the Corps' expansive reading of the CWA indicated congressional acquiescence to the Corps' view of the law. In rejecting this argument, the Court noted that "failed legislative proposals are a potentially dangerous ground on which to rest an interpretation of a past statute."³⁸ The Court also rejected the Corps' claim for Chevron deference, stating that "where an administrative interpretation of a statute invokes the outer limits of Congress' power, we expect a clear indication that Congress intended that result," based on the Court's prudential desire not to reach unnecessary constitutional issue and an assumption that Congress does not "casually authorize administrative agencies to push the limit of congressional authority."³⁹ Thus, to avoid the constitutional issues regarding whether or not the Commerce Clause would support a reading of the CWA that regulated isolated wetlands, the Court "read the statute as written" and rejected the Corps' interpretation.⁴⁰

The dissent sharply criticized this decision on policy grounds, arguing that Congress' intent was to protect all wetlands from environmental degradation, making the majority's reliance on the term "navigable" suspect.⁴¹ As a textual matter, the dissent argued that since the CWA defines "navigable waters" to include "all 'waters of the United States,'" the use of the term navigable does not limit the reach of § 404 jurisdiction.⁴² The dissent also relied on CWA § 404(g)(1), which includes a provision allowing states to develop regulatory programs regarding navigable waters other than those that may be used to transport interstate commerce (and their adjacent wetlands).⁴³ In the dissent's view, this provision suggests that the CWA applies to something more than navigable waters and adjacent wetlands, and that the only thing this could possibly mean is isolated wetlands. The dissent also heavily relied on legislative history and suggested that the regulation of isolated wetlands is well within Congress' Commerce Clause jurisdiction.⁴⁴

Given the SWANCC opinion, the battle will now most likely shift to what, exactly, is an "adjacent" wetland (subject to § 404 jurisdiction) and what is an "isolated" wetland (most likely not subject to § 404 jurisdiction). Indeed, the dissent's characterization of the wetland at issue in Riverside Bayview, which was held to be "adjacent to" navigable waters for purposes of § 404, as not having a "hydrological" connection to waters of the United States suggests that the question of whether a wetland is "adjacent to" navigable waters will be an important issue for the lower courts to resolve in the future.⁴⁵ Moreover, EPA and the Corps have taken the position that SWANCC is limited only to "isolated" wetlands where jurisdiction arises from the presence of migratory birds, but that "other connections" with interstate commerce may still support § 404 jurisdiction.⁴⁶ More to the point, this memorandum describes CWA jurisdiction as "basically intact" after SWANCC.⁴⁷ Thus, the ultimate meaning of SWANCC will most likely be a point of contention in many enforcement actions and Corps' permitting decisions in the near future.

The uncertainty surrounding the ultimate potential impact of SWANCC can be illustrated by comparing two recent decisions from the U.S. Court of Appeals for the Federal Circuit. In Rice v. Harken Exploration Corp.,⁴⁸ the U.S. Court of Appeals for the Fifth Circuit held that groundwater was not a "navigable water" for purposes of the Oil Pollution Act (OPA),⁴⁹ and that a spill of oil to land that entered groundwater was not covered by the OPA. In doing so, the Rice court relied on the SWANCC decision as "limiting the scope of the [CWA]" and held that SWANCC limited CWA jurisdiction to waters that are "actually navigable or [] adjacent to an open body of navigable water."⁵⁰ The court went on to hold that groundwater was not covered by the OPA since, as in SWANCC, the OPA was not intended to exert Congress' Commerce Clause power "to the fullest possible degree."⁵¹ The court also concluded that "intermittent streams" were not subject to the OPA, since there was no record evidence that they were "sufficiently linked to an open body of navigable water[.]"⁵² This case appears to represent a significant narrowing of federal jurisdiction under the [32 ELR 10494] OPA and, by implication, under the CWA, based largely on the decision in SWANCC.

Another decision, this one issued by the U.S. Court of Appeals for the Ninth Circuit, appears to stand for the proposition that SWANCC has not effected a significant change in CWA jurisdiction. In Headwaters, Inc. v. Talent Irrigation District,⁵³ the court held that a series of irrigation canals that flowed intermittently into navigable waters were subject to CWA jurisdiction.⁵⁴ The court distinguished SWANCC, apparently interpreting that decision as primarily concerned with the migratory bird rule and not limiting the CWA jurisdiction that applies to "tributaries" of navigable waters.⁵⁵ The court held that because the irrigation canals received water from natural streams and lakes and divert water to natural streams and lakes, CWA jurisdiction was appropriate.⁵⁶ Importantly, the Headwaters court rejected the defendant's argument and held that even if the irrigation canals were separated from navigable waters by a system of "waste gates," the canals were still "waters of the United States" for purposes of the CWA. This case is important both for its limited reading of SWANCC and its broad understanding of the tributary issue, which is potentially relevant to the question of what "adjacent to" means after SWANCC.

Thus, although SWANCC was certainly a defeat for the Corps and EPA, it is unclear what the ultimate significance of this decision will be, whether it is a broad and significant limitation on the applicability of the CWA, including EPA's jurisdiction under § 402 for enforcement actions based on illegal discharges of pollutants to "waters of the United States," or if it merely limits to the Corps' ability to assert CWA jurisdiction on cases at the margins of § 404 jurisdiction. Since courts appear to already be extracting very different lessons from SWANCC, it is likely that this issue will be the subject of future disputes between regulated parties and the federal government.

United States v. Deaton⁵⁷

Sidecasting is the practice of placing excavated fill materials from trenching in wetlands next to the trench or ditch. Whether or not this practice constituted the "addition of a pollutant" to waters of the United States appeared to be an open issue, at least in the U.S. Court of Appeals for the Fourth Circuit, after that court's decision in United States v. Wilson,⁵⁸ which implied that the technique of sidecasting does not violate the CWA prohibition against discharge of fill material without a permit. The Wilson court held that while sidecasting moves excavated dirt from one location to another, it does not involve the addition of any material to the wetland. Subsequently, however, the Fourth Circuit decided Deaton, which squarely held that sidecasting is the "addition of a pollutant" for purposes of the CWA.

The potential breadth of this opinion can be summarized by the language of the panel:

The idea that there could be an addition of a pollutant without an addition of material seems to us entirely unremarkable, at least when an activity transforms some material from a nonpollutant into a pollutant, as occurred here. In the course of digging a ditch across the [] property, the contractor removed earth and vegetable matter from the wetland. Once it was removed, that material became "dredged spoil," a statutory pollutant and a type of material that up until then was not present on the [] property. It is of no consequence that what is now dredged spoil was previously present on the same property in the less threatening form of dirt and vegetation in an undisturbed state. What is important is that once that material was excavated from the wetland, its redeposit in that same wetland added a pollutant where none had been before.⁵⁹

This opinion provides strong support for the government's view that the "addition of a pollutant" language of the CWA is to be interpreted broadly rather than narrowly, and includes the redeposit of materials that were originally present in the wetland.

Just how broadly this language can be read is illustrated by a recent opinion of the Ninth Circuit, Borden Ranch Partnership v. U.S. Army Corps of Engineers,⁶⁰ which held that a technique called "deep-ripping"—essentially a form of plowing—requires a § 404 permit, because "soil was wrenched up, moved around, and redeposited somewhere else" in a wetland.⁶¹ The opinion relies heavily on Deaton, although it neglects the important role the Deaton court gave to the inclusion of "dredged spoil" in the definition of a "pollutant." The effect of Borden Ranch is to make subject to § 404 any activity that, in the court's view, adversely effects the ecology of a wetland:

These cases recognize that activities that destroy the ecology of a wetland are not immune from the [CWA] merely because they do not involve the introduction of material brought in from somewhere else.⁶²

This represents a radically broad reading of the § 404 permitting requirement. It should also be noted that the Borden Ranch court held that each pass of the "[deep] ripper" was a separate violation of the CWA.⁶³ Thus, this case is best understood as not only broadening the scope of § 404, but substantially increasing the penalty exposure associated with wetlands activities.

American Mining Congress v. U.S. Army Corps of Engineers⁶⁴

Perhaps unsurprisingly, the struggle over the Tulloch rule continues, with the most recent decision coming from the U.S. District Court for the District of Columbia on a motion to enforce the injunction upheld by the U.S. Court of Appeals for the District of Columbia Circuit in National Mining Ass'n v. U.S. Army Corps of Engineers.⁶⁵ In the National Mining decision, the court considered the Corps' interim rule of May 10, 1999, which purported to subject the redeposit of dredged material, other than incidental [32 ELR 10495] fallback, to the § 404 permitting requirement, and provided that the Corps would determine what was incidental fallback on a case-by-case basis. The district court determined that this rule did not violate the injunction it had entered against nationwide enforcement of the Tulloch rule. Some background is required to understand this decision.

On June 19, 1998, a three-judge panel of the D.C. Circuit issued an important decision affecting the construction industry and land developers. Since the adoption of the so-called Tulloch rule in 1993, the Corps required permits under the § 404 permit program of the CWA for all excavation activities in waters subject to regulation under the CWA, including wetlands. The D.C. Circuit held that by regulating the incidental fallback of material that occurs during excavation, the 1993 regulation is invalid and exceeds the Corps' regulatory authority under the CWA.⁶⁶ The circuit court also expressly prohibited enforcement of the regulation anywhere in the United States.

Section 404 of the CWA authorizes the Corps to issue permits "for the discharge of dredged or fill material into . . . navigable waters."⁶⁷ "Discharge" is defined as "any addition of any pollutant to navigable waters."⁶⁸ By judicial decisions, the term "navigable waters" has been interpreted to include land that supports vegetation adapted for life in saturated soil conditions. Consequently, the § 404 permit program has become the primary federal regulatory program for wetlands.

In 1993, to settle litigation in North Carolina brought by environmental groups, the Corps expanded its long-established definition of discharge of dredged material to include the incidental fallback of material into waters or wetlands during the process of dredging or excavation. This new rule subjected to federal regulation virtually all excavation and dredging in wetlands.

The rules were promptly challenged by a group of trade organizations, but relief was a long time coming. In the spring of 1997, the trial court held the excavation rule invalid and enjoined its enforcement in American Mining Congress v. U.S. Army Corps of Engineers.⁶⁹ The Corps appealed and obtained a stay that allowed the regulation to remain in effect during the pendency of the appeal. The recent appellate decision affirmed the opinion of the trial court.

The D.C. Circuit found the rule to be invalid primarily because the statutory authority of the Corps is limited to regulating "discharges," which are defined as the "addition of a pollutant" to waters protected by the CWA.⁷⁰ The Corps described fallback in its brief to the court as occurring "when a bucket used to excavate material from the bottom of a river, stream, or wetland is raised and soils or sediments fall from the bucket back into the water."⁷¹ The court reasoned that fallback, which returns material virtually to the spot from which it came, is not an "addition" of anything.

The CWA definition of "pollutant" includes "dredge spoil," "rock," and "sand." The Corps argued that wetland soil undergoes a legal metamorphosis during the dredging process becoming a "pollutant." When a portion of the soil excavated falls back into the water, the Corps maintains that there has been the "addition of a pollutant."⁷² The court found that argument "ingenious but unconvincing."⁷³ The court highlighted the unreasonableness of the Corps' inter-pretation of the CWA by focusing on the hypotheticals raised at oral argument. During oral argument of the case, counsel for the Corps asserted that under the Corps' interpretation of its authority under the CWA, the Corps could require a permit to ride a bicycle across a wetland or to cut a tree in a wetland.⁷⁴

The invalidation of the rule does not mean, however, that the Corps cannot regulate some types of redeposit of dredged material under CWA § 404. The court's opinion holds only that by asserting jurisdiction over "any redeposit," including incidental fallback, the rule exceeds the statutory authority.⁷⁵ Types of activity that are likely to be unaffected by this decision include mechanical land clearing, sidecasting, and some types of mining activities involving the resuspension of dredged material into a body of water. These activities will likely continue to require permits.

The American Mining Congress decision supports this understanding of the state of the law after invalidation of the Tulloch rule. The court held that the invalidation of the Tulloch rule was directed at the issue of "incidental . . . redeposit" and that the Corps retained the authority to regulate the other forms of redeposit of materials incident to construction activities in wetlands.⁷⁶ Although the court refused to create a bright-line rule regarding the definition of "incidental fallback," it cautioned the Corps and EPA not to create an "unduly narrow" definition of that term in order to escape the effect of the court's injunction, and admonished the agencies to adhere to an "objective and goodfaith" reading of past decisions regarding the permissible scope of § 404.⁷⁷

The stage is set for more litigation regarding the final version of the revised Tulloch rule, which went into effect April 17, 2001. The rule appears to capture much, if not all, of what the Tulloch rule originally covered. As the Corps explained:

The Corps and EPA regard the use of mechanized earth-moving equipment to conduct landclearing, ditching, channelization, in-stream mining or other earth-moving activity in waters of the United States as resulting in a discharge of dredged material unless project-specific evidence shows that the activity results in only incidental fallback.⁷⁸

This rule has been challenged in a number of lawsuits, and the ongoing struggle over the Tulloch rule will continue.⁷⁹

Thus, limitations of the ability of the federal government to enforce the wetlands regulations can best be described as being in a state of flux. Future developments in this area will [32 ELR 10496] be very interesting, and there appears to be a lot of room for creative arguments regarding the ultimate meaning of the recent decisions in this area.

Statute of Limitations

This issue is the subject of heated litigation arising out of EPA's recent enforcement initiatives against the electric utilities and the pulp and paper industry. The government has taken the position in these enforcement actions that it is entitled to both civil penalties and injunctive relief for alleged PSD/NSR violations that occurred as many as 20 years ago.

The government's position builds on the important victory for the United States in United States v. Telluride Co.,⁸⁰ where the U.S. Court of Appeals for the Tenth Circuit reversed a district court decision and held that U.S. claims for injunctive relief are not actions for a penalty within the meaning of 28 U.S.C. § 2462, which bars judicial claims for penalties brought five years after a violation occurred. The issue in Telluride was a demand by the United States that the defendant restore 45 acres of wetlands that it illegally filled from 1981 to 1989. The defendant argued the injunctive relief was punitive and thus barred by the statute of limitations. The court concluded, however, that the injunction, although potentially costly, was remedial and therefore not barred.

This position has been largely accepted by the federal courts, which have held that injunctive relief is generally not barred by the statute of limitations applicable to enforcement actions, notwithstanding the Telluride court's recognition that there may be a difference between punitive and remedial injunctive relief.⁸¹ Several courts in the utility initiative have held that injunctive relief is not barred by the statute of limitations.⁸² It should be noted that an argument can be made that "punitive" injunctive relief is barred and that the "collateral remedy rule" bars injunctive claims in EPA enforcement actions. Although this view has not been accepted by courts in the enforcement initiative to date, it remains an interesting argument that defendants should consider when faced with claims for significant injunctive relief.

In Telluride, the United States had also been seeking penalties, which it conceded were time-barred, contrary to its sometimes-asserted "continuing violation" theory. Under this theory, the five-year statutory period does not begin to run until the violation is corrected. The government's concession in Telluride on this point raises into question the viability of the government's continuing violation theory, at least where the act—the placement of the fill—occurred five years prior to the enforcement action.⁸³ Notwithstanding this concession in Telluride, the United States has aggressively pursued penalties for very old projects in the utility enforcement cases and appears to have settled on the position that the statute of limitations acts to limit the number of days of violation for which the United States can obtain penalties to the five years prior to bringing suit, no matter how old the violation. Needless to say, given the astronomical penalties available under this view of the law § 2462 gives no comfort to defendants.

EPA appears to be winning the "continuing violation" argument in the context of wetlands and hazardous waste disposal; courts appear to be holding that filling a wetland is a continuing violation, as is "disposal" under RCRA.⁸⁴ On the issue of "continuing violations" as it applies to air permitting requirements, however, industry may have the upper hand. Recent decisions coming out of the refinery and pulp and paper initiative have held that civil penalties are not available for failure to obtain PSD permits for projects conducted more than five years before bringing suit⁸⁵; a court hearing a case involving the coal-fired utility initiative, however, has held that this is a "continuing violation" and penalties are not barred.⁸⁶ More decisions on this issue should emerge from the ongoing enforcement initiative in the near future.

Overfiling

The U.S. District Court for the Western District of Missouri, in Harmon Industries, Inc. v. Browner,⁸⁷ reversed the EAB's decision affirming an administrative law judge's decision assessing $ 586,716 in penalties against Harmon on the ground that EPA did not have the authority to overfile once Harmon and the state of Missouri entered into a consent decree resolving Harmon's liability. The court reasoned that, under RCRA, once EPA delegates RCRA program authority to a state, EPA can only enforce violations if the state is inactive; if EPA disagrees with a state's resolution of an enforcement matter, RCRA only gives it the authority to withdraw delegation but not the authority to overfile. The court also based its decision on grounds of res judicata, finding that the state and EPA were in privity. Thus, the state's resolution of the matter bound EPA.

This decision was affirmed by the U.S. Court of Appeals for the Eighth Circuit on September 16, 1999.⁸⁸ Much like the district court, the Eighth Circuit primarily grounded its decision on the plain language of RCRA, which provides that a state program, once approved by EPA, is to operate "in lieu of" the federal program in all respects, including enforcement.⁸⁹ Moreover, the court also noted that state actions under a delegated RCRA program are to be given the same force and effect as federal ones, further supporting the court's ruling that RCRA does not authorize EPA overfiling.⁹⁰ The court went on to evaluate the legislative history of RCRA and found nothing that authorized EPA to conduct a competing enforcement action under the state [32 ELR 10497] program.⁹¹ The court also upheld the lower court's ruling on res judicata, applying Missouri state law to determine that EPA was bound by the state's resolution of the enforcement action against Harmon, and rejected EPA's assertion of sovereign immunity as a defense to res judicata.⁹²

The decisions of these courts appear to be well grounded in law and do not appear to be based on a misunderstanding of the role overfiling currently plays in EPA enforcement policy. In fact, the Eighth Circuit explicitly noted that overfiling is a frequent practice of EPA.⁹³ Thus, the Eighth Circuit's opinion appears to recognize EPA's practices, no matter how well established, cannot trump the plain language of the statutes that EPA is charged with administering. This decision has begun to make an appearance in practically every defense brief opposing EPA enforcement actions brought by overfiling, and it seems quite likely that many courts will have the opportunity to consider this issue in the near future.

Harmon has been criticized by at least one federal district court as based on a misreading of the "in lieu of" language in RCRA. In United States v. Power Engineering Co.,⁹⁴ the U.S. District Court for the District of Colorado held that while the "in lieu of" language requires that state regulations approved by EPA "supplant" the federal regulations,⁹⁵ this does not foreclose EPA overfiling. The Power Engineering court criticized the Harmon court's rationale that the "in lieu of" language applied to enforcement, as well as administration, of a state hazardous waste program.⁹⁶ The Power Engineering court also found that res judicata did not apply because the federal government did not have a "laboring oar" in the earlier state proceedings, which, in that court's view, required the federal government to exert some "control" over the litigation.⁹⁷ Needless to say, under such a narrow view of res judicata, the doctrine will seldom prevent EPA from overfiling.

Finally, the Power Engineering court looked to the legislative purposes of RCRA, and found that EPA's ability to overfile was essential to the statutory structure as a check on collusive settlement of enforcement actions between industry and state environmental authorities.⁹⁸ Whatever the real-world probability of such collusion, it seems likely that the arguments accepted by the Power Engineering court may well be accepted by at least some circuit courts other than the Eighth Circuit, setting the stage for a potential circuit split on EPA's ability to overfile. Whether EPA is likely to seek certiorari review of adverse decisions is unclear; it did not seek certiorari in Harmon, perhaps fearful of an adverse decision that would be applicable nationwide.

Later decisions have also emphasized the specific "in lieu of" language contained in RCRA, reading Harmon as the interpretation of specific statutory language rather than a generalized limitation on the ability to overfile. For example, in United States v. Murphy Oil USA,⁹⁹ a federal district court observed that the CAA does not contain the same language relied on by the Eighth Circuit in Harmon.¹⁰⁰ Another district court, in United States v. LTV Steel,¹⁰¹ refused to apply the Eighth Circuit's rationale in Harmon to the CAA because it found that "the [CAA] contains language in its enforcement section which seems to anticipate overfiling."¹⁰² The LTV court also found no res judicata because the judgment in that case was based on a local ordinance and EPA was bringing a claim under federal law.¹⁰³ The court also noted that EPA and the municipality that resoived the earlier claim were not the same party for res judicata purposes.¹⁰⁴

It should also be noted that the doctrine of res judicata may also be available to foreclose state actions if there has been a previous federal enforcement action regarding the same violations. In State Water Control Board v. Smithfield Foods, Inc.,¹⁰⁵ the Virginia Supreme Court held that a state agency's claims for violations of a state-issued national pollutant discharge elimination system permit were barred by res judicata due to a previous federal enforcement action regarding the same permit, in which the state agency had been given the opportunity to participate but declined. The court relied on the fact that the interest of the state and federal governments in enforcing the terms of the permit was mutual enough, based on the regulatory structure and the similar interest in environmental protection, to find that the two governments were in privity, making them functionally the same party for res judicata purposes.¹⁰⁶ This holding was based, in part, on the state agency's concession before the lower court that the only issue to be resolved was that of privity, allowing the Virginia Supreme Court to avoid a potentially complex legal issue regarding another element of res judicata, the requirement of an identity of the claim or cause of action.¹⁰⁷ It appears possible that allegations of different violations of the state permit might not be barred by res judicata, but the Virginia Supreme Court left that more difficult issue for another day.

Moreover, it appears that while a civil resolution of alleged environmental violations may foreclose subsequent civil enforcement actions, a federal district court has stated in dicta that state civil resolutions of RCRA violations do not bar subsequent federal criminal enforcement actions for the same violations: "Had the state of California previously prosecuted Defendants criminally for the same conduct alleged in the Indictment, Browner [Harmon] might have been applicable by analogy—as California did not, it is not."¹⁰⁸ While it is unclear whether or not this statement will be endorsed by other courts in the future, it makes it possible that EPA could seek criminal penalties for violations that are resolved civilly in jurisdictions following the Eighth Circuit's rationale in Harmon. This makes it important for entities [32 ELR 10498] in such jurisdictions to seek a global, i.e., civil and criminal, resolution of state claims when attempting to resolve environmental violations with state agencies in an effort to take advantage of Harmon.

Finally, a similar and important result was reached by the Ninth Circuit, which confronted an easier question in United States v. Elias¹⁰⁹ —can a federal criminal prosecution be brought when a state RCRA program has been approved if no state action has been filed? — and concluded that the federal government's criminal enforcement authority is not supplanted by the "in lieu of language" contained in RCRA. In Elias, the Ninth Circuit relied heavily on the reasoning of the district court in United States v. Flanagan,¹¹⁰ and concluded that Harmon is "not about if, but about when, the United States can bring a civil enforcement action in federal court after it has authorized a state program."¹¹¹ Thus, while the federal government loses its primary role in enforcing RCRA as a result of the "in lieu of" language, it retains its secondary authority to bring enforcement actions in cases where the state does not act. More significantly, Elias stands for the proposition that federal enforcement actions can be used to enforce the federal felony-level sentences for RCRA violations—an important point, since the Ninth Circuit observed that many state programs only include misdemeanor penalties for hazardous waste violations.¹¹² According to the Ninth Circuit, the delegation of a state program affects only "the definition of hazardous waste and the sovereign from whom a permit is necessary[.]"¹¹³

More ominously for the regulated community, the Ninth Circuit expressed skepticism regarding the Harmon rationale generally—for example, criticizing it for lacking Chevron deference¹¹⁴ — and broadly stated that the federal government "retains both its criminal and civil enforcement powers. . . . we believe RCRA only contemplates that the federal permitting scheme is supplanted by authorized state ones."¹¹⁵ This statement appears to represent the Ninth Circuit's hostility to any limitations on EPA's authority to overfile, and does not bode well for entities that try to rely on the Harmon argument in that jurisdiction. It is a very short step from the Elias court's rationale that the federal government can use secondary enforcement authority when the state fails to act, to a potential decision that the federal government can use its secondary enforcement authority to act when the state's resolution of the enforcement action is, in EPA's view, an inadequate sanction. The Elias court's rationale that federal enforcement authority preserves the more-severe federal sanctions appears to contemplate just such a result.¹¹⁶

The issue of overfiling post-Harmon will likely be complicated, and future developments in this area will be very important to practitioners attempting to negotiate settlements of environmental violations with both state and federal agencies.

Deliberative-Process Privilege

One collateral effect of EPA's coal-fired utility initiative is litigation over the scope and applicability of the "deliberative-process" privilege, a privilege that allows a government agency to withhold documents from discovery to the extent that they are predecisional, deliberative documents that the agency uses in the development of its policies. This privilege was first recognized by the U.S. Court of Claims in 1958,¹¹⁷ and, although the underlying legal foundation for this privilege is relatively sketchy and has largely gone unexamined by courts,¹¹⁸ numerous federal courts have recognized the existence of this privilege.¹¹⁹ In response to discovery requests served by several utility industry defendants, EPA and the DOJ have withheld many thousands of documents under claims of deliberative-process privilege. At least one of the utility defendants has moved to compel production of these documents, and it is anticipated that similar discovery disputes will arise in the other utility cases. Thus, it is likely that significant decisions regarding both substantive and procedural elements of the deliberative-process privilege will emerge from this litigation. These decisions will help shape the availability of discovery against federal agencies in future enforcement proceedings.

There are several key points of dispute regarding the deliberative-process privilege. The first relates to the methods required to assert the deliberative-process privilege itself. The deliberative-process privilege, as a general matter, requires that a senior agency official must (1) personally review the documents in question, (2) demonstrate the reasons the documents must remain confidential, and (3) specifically identify the documents to be withheld.¹²⁰ Usually, this procedure is accomplished by affidavit or declaration. In the utility litigation, the DOJ has taken the position that since these procedural requirements are impractical in cases where so many documents are privileged, that senior agency personnel may review a "representative sample" of documents. It remains to be seen whether courts will relax the procedural protections associated with the deliberative-process privilege in light of such concerns.

It is likely that the courts in the utility initiative will also issue important decisions regarding the substantive issues associated with the deliberative-process privilege. There are several elements that could be significant. First, the deliberative-process privilege applies only to documents that are "predecisional" in nature.¹²¹ The government's position in the utility initiative has been, to date, not to identify particular decisions that the documents are related to, but to assert that the ongoing administration of the CAA programs at issue makes certain documents "predecisional." Courts appear [32 ELR 10499] to be divided on this issue,¹²² and this issue will need to be decided by courts in the utility initiative. Second, the documents withheld as privileged must be "deliberative" in nature.¹²³ While this inquiry is necessarily done on a document-by-document basis, it is likely that judicial pronouncements on this issue will be of importance in defining this element of the privilege.

Finally, the deliberative-process privilege is a "qualified" one, and can be overcome by a showing of substantial need.¹²⁴ This is a five-factor inquiry that turns on (1) the relevance of the documents at issue, (2) the availability of other evidence, (3) the government's role in the litigation, (4) the seriousness of the litigation and the issues involved, and (5) the risk of chilling future agency deliberations.¹²⁵ The utility defendants have argued that EPA is changing its legal interpretation of the CAA, to their significant detriment, and that the defendants need access to documents describing the EPA's past legal interpretations and administration of the CAA in order to have a meaningful opportunity to present defenses based on this alleged change. It remains to be seen whether a court will find substantial need in these circumstances.

Changes in Agency Interpretation

EPA suffered a significant defeat in an enforcement action brought under the asbestos CAA national emission standards for hazardous air pollutants (NESHAP), United States v. American National Can Co.¹²⁶ In that case, EPA alleged that unauthorized scavenging at a vacant manufacturing facility that resulted in the disturbance of friable asbestos-containing materials was "renovation" for purposes of the asbestos NESHAP and brought a judicial enforcement action against the owner of the facility for failure to comply with work-practice standards for asbestos removal during renovation.¹²⁷ The defendant argued that since the unauthorized scavenging was not "renovation," these work practice standards did not apply. The court rejected EPA's claims that "the term 'renovation' does, and always has, encompassed unauthorized scavenging."¹²⁸ Instead, the court held that the asbestos NESHAP does not apply to unauthorized scavenging.

In reaching this conclusion, the court acknowledged that EPA's interpretation of an ambiguous statutory scheme is entitled to deference under Chevron, and also recognized that an agency's construction of its own regulations is entitled to even greater deference and must be followed by a court unless it is "plainly erroneous or inconsistent with the regulation."¹²⁹ But the court noted that an agency litigating position is not entitled to any deference in the absence of an official agency interpretation.¹³⁰ Even applying the standard deference due an agency's interpretation of law, however, the court found that it was confronted with "one of those unusual cases in which an agency's construction of its own regulation cannot survive judicial review."¹³¹

The court first turned to the plain meaning of the term "renovation" and relied on dictionary definitions to conclude that scavenging did not fall within the meaning of this term.¹³² The court also looked to the underlying regulatory structure and found that because many of the regulatory requirements—such as the requirement of advance notice before "renovation" activities, which obviously cannot be complied with in advance of unauthorized scavenging—were nonsensical as applied to unauthorized scavenging, the proper interpretation of the regulation was that scavenging was not covered.¹³³

The court also rejected EPA's arguments based on a provision in the NESHAP that defined "renovation" as including activities that alter a facility "in any way."¹³⁴ The court concluded that because the language "in any way" was added during a revision of the regulation that was not meant to increase the stringency of the regulation, the effect of this change was not to include unauthorized scavenging in the regulation.¹³⁵ Significantly, the court also looked to the enforcement history of the NESHAP, which did not contain a single instance where EPA had ever assessed a civil penalty for unauthorized scavenging, and concluded that the "lack of enforcement speaks volumes" regarding the actual meaning of the regulation at issue.¹³⁶ This rationale is significant, as it may be used to challenge EPA's ongoing attempts to broaden the scope of existing regulation through aggressive new interpretation of regulatory terms. It is likely that the viability of challenging new EPA interpretations on these grounds will be extensively litigated in the coal-fired utility cases described above.

The court also observed that the salutary public purposes of environmental statutes cannot justify EPA's attempts to broaden the reach of its regulations through an aggressive litigating strategy:

While we are constrained to disagree with the EPA's position in this case, we are not unmindful of the environmental hazards posed by unauthorized scavenging in asbestos-tainted buildings. Nor do we disregard the laudable policy behind the CAA, which was enacted "to protect and enhance the quality of the nation's air resources. However, the EPA cannot enforce unforeseen interpretations of the asbestos NESHAP simply by invoking the spirit of the CAA, and is particularly forbidden from doing so for the first time in the course of a litigation. The regulated public must be informed in advance of the rules of the game.¹³⁷

This perhaps reflects a judicial sentiment that is more concerned with fundamental fairness issues and less concerned with the advancement of environmental policy goals whatever [32 ELR 10500] the unfairness to specific defendants. As such, it is probably very different than EPA's perspective on these issues, and defendants advancing these types of arguments as part of an enforcement defense strategy can expect significant opposition from EPA.

Finally, it should also be noted that the American National Can decision builds on a recent decision of the D.C. Circuit, Appalachian Power Co. v. EPA,¹³⁸ which held that EPA may not broaden the substantive requirements of agency regulations by issuing informal guidance. The American National Can court noted that EPA is not allowed to change its regulations in this manner and by doing so evade the notice-and-comment requirements of the Administrative Procedure Act:

Indeed, with respect to agency action, the regulated public also must have an opportunity to participate in setting those rules. That is the essence of notice and comment rulemaking. The EPA cannot escape the strictures of the notice-and-comment process by cloaking a substantive addition to the asbestos NESHAP (such as regulating scavenging) in the guise of a mere interpretation of an extant regulation. . . . EPA attempts to broaden the scope of the asbestos NESHAP in a substantive manner without engaging in notice and comment rulemaking, and thereby violates a basic canon of administrative law.¹³⁹

Cases like American National Can and Appalachian Power perhaps represent a growing judicial discomfort with EPA's attempts to broaden regulatory obligations through enforcement actions or the issuance of informal guidance. While the administrative law issues related to this question are complex, they should be investigated fully by counsel involved in environmental enforcement actions where changes in the interpretation of EPA regulations are at issue.

Innovative Theories of Civil Liability

Of great concern to the regulated community are several innovative new cases brought by various private parties alleging violations of environmental laws. Perhaps most aggressive is a class-action complaint filed on February 28, 2001, which alleges that Smithfield Foods, Inc., a major producer of pork products, systematically violated environmental laws related to air emissions, waste handling, and water discharges from its hog farming and slaughtering operations.¹⁴⁰ This class action alleges, inter alia, that the profits gained from a failure to comply with environmental laws and reinvested into Smithfield's business was a civil violation of the money laundering, mail, and wire fraud provisions of the Racketeer-Influenced and Corrupt Organizations Act (RICO).¹⁴¹ Under RICO, the plaintiffs can recover treble damages and attorneys fees. This use of RICO against corporations involved in ordinary business operations is troubling, to say the least, and if a court were to allow such a theory to go forward, it will represent a new danger to many companies with a less-than-perfect record of environmental compliance. A successful class action of this nature will expose industry to numerous future class actions brought by entrepreneurial plaintiffs' attorneys. It is unclear at this time what the ultimate outcome of this litigation will be.

Smithfield is also a target of more traditional, yet very substantial, citizen suits seeking declaratory judgment, injunctive relief, and civil penalties for violations of both the CWA and RCRA.¹⁴² These suits have more chance of succeeding in light of the Court's decision in Laidlaw, described above. This also reflects the significant concern that environmental groups have regarding concentrated animal-feeding operations, and companies involved in such operations can expect heightened attention from environmental citizens' groups in the future.

In another innovative civil action, an entity that purchased a loan secured by contaminated property at a substantial discount has sued a number of defendants under RCRA, CERCLA, and state common law regarding public nuisance.¹⁴³ The suit alleges that plaintiff has standing because the contamination of its collateral prevented effective foreclosure, and asked that defendants be ordered to fund a cleanup conducted under RCRA's "imminent and substantial endangerment" provisions. This use of RCRA to force cleanup of contaminated property by entities who would be potentially responsible parties (PRPs) under CERCLA could effectively both accelerate and broaden cleanup obligations at contaminated sites, since standard CERCLA liability generally only requires PRPs to reimburse a party that has expended response costs, and state common-law claims generally incorporate causation requirements that can be difficult for plaintiffs to prove. From a plaintiff's point of view, RCRA's "imminent and substantial endangerment" suit would appear to be a superior weapon.

Environmental Justice

In broad terms, environmental justice concerns center on the argument that communities of color bear a disproportionately high burden of environmental hazards.¹⁴⁴ Environmental justice advocates and EPA have focused heightened attention since the early 1990s on the role that Title VI of the Civil Rights Act of 1964 can play in remedying perceived environmental inequities. Over the past two years, this effort has focused on application of civil rights law to the processes employed by states and local municipalities in issuing industrial use facility siting permits and the potentially disparate impacts these processes are alleged to impose on minorities, using Title VI, § 602, as the vehicle for this effort.

Communities complaining of discriminatory effects from the actions of local permitting agencies in receipt of federal funding have used two vehicles for enforcing EPA's regulations against disparate impact discrimination: filing a complaint with EPA; and bringing suit in federal court under Title [32 ELR 10501] VI itself. Recent developments, however, have dramatically changed this enforcement landscape.

Considering first the regulatory framework, on June 16, 2000, EPA issued Draft Title VI Guidance for EPA Assistance Recipients Administering Environmental Permitting Programs (Draft Recipient Guidance). On the same date, EPA also issued Draft Revised Guidance for Investigating Title VI Administrative Complaints Challenging Permits (Draft Revised Investigation Guidance), superceding the Agency's 1998 interim guidance. Both of these documents are intended to ensure that permits issued by EPA financial assistance recipients are free from intentional discrimination and do not have discriminatory effects.

EPA's Draft Recipient Guidance is intended to assist state and local recipients of EPA funding to develop and implement programs and activities to address issues that might arise under Title VI. The guidance suggests three approaches for addressing Title VI concerns: a comprehensive approach; an area-specific approach; or a case-by-case approach. The guidance further suggests activities and programs, such as staff training, public participation, impact and demographic analyses, intergovernmental involvement, alternative dispute resolution, and the reduction or elimination of alleged adverse disparate impacts.

Regarding the issue of enforcement, EPA's Draft Revised Investigation Guidance describes the process by which EPA will address and investigate Title VI complaints in response to new and modified facility permits issued by state and local agencies. This guidance describes EPA review to determine if there is a valid Title VI claim, investigative procedures, informal resolution, adverse disparate impact analyses, and criteria for determining whether a finding of noncompliance is warranted. In broad terms, this newer guidance differs from the 1998 guidance by offering more extensive direction on mitigation, informal resolution, and adverse disparity analysis; and also by describing what responses or actions the Agency may consider throughout each stage of the investigation.

Even though existing facilities must be cognizant of Title VI concerns, the guidance will likely have little impact on current permit holders or brownfields projects. For example, to date, there have not been any complaints filed under Title VI in connection with brownfields pilot projects. EPA attributes this, at least in part, to the collaborative community process and close attention paid to environmental justice issues in the formation and in the maintenance of these projects. Further, by focusing on state and local recipients of EPA funding, not individual permittees themselves, Title VI regulatory complaints will not suspend or reverse issued permits. However, permit modifications are, of course, open to Title VI review upon challenge.

Turning to private litigation as a means of enforcement, the environmental justice terrain has changed drastically during the past year. In Alexander v. Sandoval,¹⁴⁵ the Supreme Court significantly undercut the viability of such litigation by holding that there is no private cause of action under § 602 to enforce regulations that prohibit federally funded state and local agencies from acts that disparately impact minorities. While this decision firmly closed the direct route to private enforcement of EPA's disparate impact regulations by using Title VI itself, the Court, however, left open the possibility that a private litigant could enforce these regulations under 42 U.S.C. § 1983.¹⁴⁶

In the wake of the Sandoval decision, the U.S. Court of Appeals for the Third Circuit addressed this untouched question and quickly further tipped the split in the circuits against allowing private enforcement of EPA disparate impact regulations under § 1983. In South Camden Citizens in Action v. New Jersey Department of Environmental Protection,¹⁴⁷ the state agency appealed a lower court decision upholding, under § 1983, an earlier preliminary injunction on the basis that it had failed to consider the potentially adverse and disparate impacts of an air permit for St. Lawrence Cement Company's proposed blast furnace slag processing facility. Central to the court's decision were the facts that Title VI does not explicitly prohibit unintentional discrimination, and that this prohibition emanates solely from EPA's regulations. Consequently, the South Camden court considered whether a regulation, standing alone, can create a privately enforceable right. Overturning the lower court, the Third Circuit ultimately held that EPA's disparate impact regulations alone were not sufficient to create a federal right enforceable through § 1983. In so holding, the Third Circuit joins the Fourth and Eleventh Circuits in finding that regulations alone will not create a right actionable under § 1983; the U.S. Court of Appeals for the Sixth Circuit has held to the contrary, with the remaining circuits still silent.¹⁴⁸

Beyond the clear impact of the South Camden holding—the apparent end of private law suits to enforce EPA's prohibition against unintentional discrimination—the dicta of the case carries even further reaching implications.¹⁴⁹ The court noted: "The regulations do more than define or flesh out the content of a specific right conferred upon the plaintiffs by Title VI. Instead, the regulations implement Title VI to give the statute a scope beyond that Congress contemplated, as Title VI does not establish a right to be free of disparate impact discrimination."¹⁵⁰ Thus, the ruling contributes to the possibility that EPA regulations themselves will ultimately be declared unconstitutional should a pending EPA regulatory claim be decided against a state and challenged in the courts. Clearly, given its far reaching implications in both litigation and regulatory contexts, the South Camden case will most likely be appealed to the Supreme Court.¹⁵¹

In a related development, in the summer of 2001, EPA Administrator Christine Todd Whitman created a special [32 ELR 10502] task force under the Office of Enforcement and Compliance Assurance (OECA) to resolve the case backlog (currently reported at around 60 cases, according to EPA) of Title VI civil rights complaints over the next two years. By creating this special task force under the auspices of the OECA, EPA has begun to direct some of its enforcement efforts toward facilities located in minority areas in which residents have filed Title VI complaints. Further, considering the backlog and its attendant sensitivity, and the political frustration within minority communities, companies operating in these areas can expect a harsh enforcement response to any environmental incidents associated with one of these facilities. In the end, many fear that this task force will provide EPA, at least temporarily, with stronger, and more politically attractive, enforcement tools

Parallel Proceedings

The following is a discussion of the government's use of its civil and criminal powers—parallel proceedings. The government's aggressive use of both authorities is on the increase, spurred apparently by the 1997 Supreme Court decision, Hudson v. United States,¹⁵² which overruled United States v. Halper.¹⁵³ In Halper, the Court emphasized that given the prohibition of the Double Jeopardy Clause, a punitive civil fine imposed in a case might bar subsequent imposition of a criminal penalty based on the same conduct. In Hudson, the Court emphasized that the Double Jeopardy Clause only protects against imposition of successive criminal punishments for the same offense, and held that counts should look to legislative intent (rather than whether the "purpose" or "effect" of a civil penalty was remedial or punitive) to determine whether a civil penalty was intended to be criminal.

We are seeing emboldened civil environmental prosecutors appear in significant matters in which criminal environmental investigations are ongoing. The civil matters are being pursued by civil prosecutors with little coordination with criminal prosecutors and are equally difficult to resolve. Historically, civil matters would have taken the more traditional back seat to the criminal matters. This preference had been based on a concern that the civil action, particularly through the discovery mechanisms available to a defendant in a civil action, could impede the criminal action. There was the secondary concern of "piling-on" if the civil action resulted in a sizable penalty, prior to the resolution of the criminal action, which Halper reinforced. With Halper overturned, the government appears to care little about appearing overly zealous.

Overview

The primary environmental statutes authorize both criminal and civil enforcement actions for the same violations of their provisions and also authorize EPA to seek information and undertake administrative inspections of companies. EPA and the DOJ, therefore, have the option of pursuing both avenues in an appropriate situation, using civil injunctions to prevent further environmental harm and to commence cleanup procedures while simultaneously exacting criminal penalties to punish the wrongdoer further. From the government's perspective, parallel proceedings have the dual effect of promoting environmental compliance through civil injunctions and large monetary penalties while also deterring future violations by imposing personal and corporate criminal liability. From the defendant's point of view, the government's use of parallel proceedings can be highly burdensome, may expose it to varied and multiple penalties for a single instance of unlawful conduct, and may provide the government with an advance look at defense litigation strategies.

Defense counsel must carefully monitor the government's conduct in parallel proceedings. A number of defenses may arise due to the complex nature of dual proceedings. The government's overzealous use of civil and criminal proceedings may arm the defendant with a viable claim of prosecutorial misconduct.¹⁵⁴ Potential improprieties include exploiting evidence obtained from one proceeding to benefit the other, misusing civil or criminal discovery mechanisms, threatening to use doubled sanctions and sentences, impinging on the role of the grand jury, and unlawfully disclosing grand jury material in violation of Rule 6(e) of the Federal Rules of Criminal Procedure. In addition to possible defenses, the civil discovery afforded by a parallel proceeding may also enable the defendant to "divine the underpinnings of the government's criminal case" in advance of the commencement of prosecution.

To avert potential risks to the prosecution, both the DOJ's Environment and Natural Resources Division and EPA have issued internal guidelines for the prosecution of parallel proceedings.¹⁵⁵

Integrated Enforcement

The most recent directive, entitled Integrated Enforcement Policy (Directive 99-21), was issued by the DOJ in April 1999 and consists of the following main points.

Joint Cooperation of DOJ Civil and Criminal Attorneys

DOJ civil and criminal attorneys are encouraged to exchange information and evidence as early as possible in the referral process, conduct joint investigations where appropriate, and consult together on an ongoing basis, subject to legal and ethical restraints discussed in the directive.

Limitations

The following limitations are set forth in the directive:

. Civil and administrative discovery must be justified by genuine civil and administrative case purposes, not as a pretext to obtain information for a criminal investigation.¹⁵⁶

[32 ELR 10503]

. FRCP 6(e) concerning disclosure of grand jury information must be complied with.¹⁵⁷

. Information obtained in a criminal investigation may be shared with civil attorneys subject to Rule 6(e).

. After a grand jury has been convened, only documented pre-grand jury information can be shared.

. A criminal prosecution cannot be used as a threat to obtain a civil settlement and vice versa.

. A defendant cannot trade civil relief in exchange for a reduction in a criminal penalty.

. Global settlements will not be considered unless requested by a defendant and decisions regarding civil relief will be made by civil attorneys and decisions regarding criminal relief will be made by criminal attorneys.

Cross-Referrals

Civil attorneys are encouraged to look for criminal conduct in cases they are handling, e.g., falsification of data. Similarly, the DOJ's Environment and Natural Resources Division is encouraged to utilize civil attorneys to obtain injunctive relief and to set up procedures to ensure that cases it declines to prosecute are referred for civil disposition.

Although not discussed in the latest directive, the government believes that Miranda warnings (Miranda v. Arizona)¹⁵⁸ are unnecessary during civil discovery. But government attorneys must be careful not to mislead a person as to the possibility of use in the criminal enforcement context of information provided in response to an Agency request. They should make clear that the decision to pursue a matter civilly, criminally, or administratively is made by the government in exercising its prosecutorial discretion.

Global Settlements

The DOJ issued a new global settlement policy (Directive 99-20) in April 1999. The following are the key points in the policy.

. Last minute requests from defense counsel for a global resolution where there has not been an ongoing parallel proceeding are disfavored.

. Criminal plea agreements must be handled by criminal attorneys and civil settlements must be handled by civil attorneys.

. Each part of the settlement must separately satisfy the appropriate criminal and civil criteria.

. With respect to civil settlements, all affected client agencies must approve it.

. Separate documents must memorialize the criminal plea agreement and the civil settlement.

. A defendant may not trade civil relief in exchange for reduction in a criminal penalty.

Analysis

The government must utilize parallel proceedings cautiously since improper government conduct can sacrifice one or both avenues of enforcement. Nevertheless, it appears to be moving toward a greater use of parallel proceedings to effect a more complete resolution of a defendant's liability. This translates into a much more expensive resolution for the defendant as separate, expensive settlements with civil and criminal prosecutors become necessary. Those under investigation should recognize the difficulties the government faces in coincidental criminal and civil proceedings, while bearing in mind that, if successful, parallel proceedings are an attractive means of simultaneously accomplishing the government's dual goals of deterrence and restitution. Finally, parties need to assume that information gathered through the government's various information gathering authorities will be shared by civil and criminal prosecutors.

Parent-Subsidiary Liability

In United States v. Bestfoods,¹⁵⁹ the Supreme Court handed the government a major defeat in ruling the traditional common-law principles of limited corporate liability apply to cases decided under CERCLA. A parent's control over its subsidiary does not make it an "operator" of a facility subject to CERCLA liability owned and operated by the subsidiary unless the corporate veil can be pierced using traditional standards of veil piercing. The sole exception to this general rule is where the parent's activity cause it to be an "operator." According to the Court, an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations.¹⁶⁰

While the Court vacated and remanded the Sixth Circuit's ruling in United States v. Cordova Chemical Co. of Michigan,¹⁶¹ which had held veil piercing was the only avenue to parent liability, for a determination of whether the parent, Bestfoods, could be held liable as an operator, it was a hollow victory for the government; it lost the liberal United States v. Kayser-Roth Corp.¹⁶² standard pursuant to which "active involvement" by the parent over the subsidiary's operations generally would be sufficient to cause the parent to become an operator. It is the Kayser-Roth standard, which arguably could be satisfied by showing a traditional parent-subsidiary relationship, that the government has heavily relied on to establish parental liability.

In the criminal context, the United States has pushed an "agency" rather than an "operator" concept. In the United [32 ELR 10504] States v. Exxon Corp. & Exxon Shipping Co.¹⁶³ case, the government argued that Exxon Shipping Company was a mere agent of Exxon Corporation which would have caused Exxon Corporation to be criminally and civilly responsible for the Valdez spill. As the case settled, the matter was never decided. The facts that the government alleged, however, demonstrated nothing more than a parent-subsidiary relationship. Bestfoods will make the government's chances of winning on this theory unlikely. Bestfoods does not, however, provide individual corporate employees protection from liability. Individual defendants who actively participate or exercise control over activities resulting in criminal violations, appear to remain personally liable as operators.¹⁶⁴

Lower courts appear to have consistently applied Bestfoods and required plaintiffs to either pierce the corporate veil or establish that the parent was an "operator."¹⁶⁵ The government or other plaintiffs will have difficulty in establishing liability on parent companies under CERCLA. The veil-piercing requirement of Bestfoods is strengthened not only by its application in lower courts but also by the support the Court's analysis has received in other aspects of both CERCLA and parental liability. For example, in Commander Oil Corp. v. Barlo Equipment Corp.,¹⁶⁶ the court applied Bestfoods' analysis of the term "operator" to define the term "owner." Similarly, the Eighth Circuit cited Bestfoods when it held that liability will not "be imposed on the parent corporation merely because directors of the parent corporation also serve as directors of the subsidiary."¹⁶⁷ Thus, the veilpiercing requirement will significantly hinder the government's ability to establish liability on parent companies that exert some control over a subsidiary but insufficient control to pierce the corporate veil under the applicable law.¹⁶⁸

1. Press Release, U.S. EPA, EPA Sets Records for Enforcement While Expanding Program for Industry to Disclosure and Correct Violations (Dec. 22, 1997); Press Release, U.S. EPA, EPA Enforcement and Compliance Assurance Accomplishments Report FY 1996 (May 1997), at A-4.

2. Press Release, U.S. EPA, EPA Releases FY 2000 Enforcement and Compliance Assurance Data (Jan. 19, 2001).

3. U.S. EPA, COMPLIANCE AND ENFORCEMENT PROGRESS IN FY 2001 (2002).

4. Press Release, supra note 2.

5. Press Release, U.S. EPA, Highlights of FY 1999 EPA Enforcement and Compliance Assurance Activities (Jan. 19, 2000).

6. U.S. EPA, supra note 4 (Detailed Summary).

7. U.S. EPA, ENFORCEMENT & COMPLIANCE ASSURANCE ACCOMPLISHMENTS REPORT FY 1999, at 4 (2000).

8. These are concentrated animal feeding operations, automotive service and repair shops, coal-fired power plants, dry cleaning, industrial organics, chemical preparations, iron and steel, municipalities, petroleum refineries, primary nonferrous metals, and pulp mills.

9. 531 U.S. 159, 31 ELR 20382 (2001).

10. No. 98 C 5133, 2001 WL 13628 (D.D.C. Jan. 5, 2001).

11. 467 U.S. 121, 16 ELR 20086 (1985).

12. 120 S. Ct. 693, 30 ELR 20246 (2000).

13. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 28 ELR 20434 (1998).

14. See 42 U.S.C. § 9606(a), ELR STAT. CERCLA § 106(a).

15. 209 U.S. 123 (1908).

16. OFFICE OF LEGAL POLICY, U.S. DOJ, NEW SOURCE REVIEW: AN ANALYSIS OF THE CONSISTENCY OF ENFORCEMENT ACTIONS WITH THE CLEAN AIR ACT AND IMPLEMENTING REGULATIONS (2002).

17. In re Tennessee Valley Auth., CAA Docket No. 00-6 (Sept. 15, 2000), ADMIN. MAT. 41231. See ARNOLD W. REITZE JR., AIR POLLUTION CONTROL LAW: COMPLIANCE AND ENFORCEMENT 205 (Envtl. L. Inst. 2001).

18. See Tennessee Valley Auth. v. EPA, No. 00-12310, 2002 WL 21785 (11th Cir. Jan. 8, 2002).

19. Vinson & Elkins represents SIGECO in its defense against EPA's claims and Kevin Gaynor is lead counsel. Ben Lippard has also been extensively involved in the case.

20. 42 U.S.C. § 7411(a)(4), ELR STAT. CAA § 111(a)(4).

21. 57 Fed. Reg. 32314, 32326 (July 21, 1992).

22. Final Order on Reconsideration, In re Tennessee Valley Auth., at 48, ADMIN. MAT. at 41231 [hereinafter EAB Opinion].

23. 893 F.2d 901, 20 ELR 20414 (7th Cir. 1990). See REITZE, supra note 17, at 182-86.

24. EAB Opinion, supra note 22, at 49, ADMIN. MAT. at 41231.

25. TVA, ROUTINE MAINTENANCE OF ELECTRIC GENERATING STATIONS (2000). See also 65 Fed. Reg. 35154 (June 1, 2000).

26. EAB Opinion, supra note 22, at 50, ADMIN. MAT. at 41231.

27. Id. at 52, ADMIN. MAT. at 41231.

28. Id. at 99, ADMIN. MAT. at 41231.

29. 40 C.F.R. § 52.21(b)(21)(ii).

30. EAB Opinion, supra note 22, at 103, ADMIN. MAT. at 41231.

31. For example, EPA has advocated use of an industry-kept data system, the generation availability data system (GADS), to project emissions increases. GADS tracks unit availability and the various "outages" of a unit resulting from failure of various boiler components. EPA has taken the position that reductions in "outages" that result from a component replacement give rise to emissions increases that trigger PSD. The utility defendants disagree with this methodology, in part because GADS measures unit availability, not usage.

32. 51 Fed. Reg. 41216, 41217 (Nov. 13, 1986).

33. 33 C.F.R. § 328.3(a)(3) (Corps regulation); 40 C.F.R. § 230.3(s)(3) (EPA regulation).

34. SWANCC, 531 U.S. at 167, 31 ELR at 20383.

35. 474 U.S. 121, 16 ELR 20086 (1985).

36. 531 U.S. at 172, 31 ELR at 20384.

37. Id. at 168, 31 ELR at 20383.

38. Id. at 169-70, 31 ELR at 20384 (internal quotations and citations omitted).

39. Id. at 172-73, 31 ELR at 20384.

40. Id. at 174, 31 ELR at 20385.

41. Id. at 178-80, 31 ELR at 20386 (Stevens. J., dissenting).

42. Id. at 180-81, 31 ELR 20386 (Stevens, J., dissenting).

43. Id. at 188-89, 31 ELR at 20388.

44. Id. at 192-96, 31 ELR at 20389.

45. Id. at 176 n.2,31 ELR at 20385 n.2.

46. Mcmorandum from Gary S. Guzy, General Counsel, U.S. EPA, and Robert M. Andersen, Chief Counsel, the Corps, Regarding Supreme Court Ruling Concerning CWA Jurisdiction Over Isolated Waters 4 (Jan. 19, 2001).

47. Id. at 5.

48. 250 F.3d 264, 31 ELR 20599 (5th Cir. 2001).

49. 33 U.S.C. §§ 2701-2761, ELR STAT. OPA §§ 1001-7001.

50. 250 F.3d at 269, 31 ELR at 20600.

51. Id. at 269, 31 ELR at 20601.

52. Id. at 271, 31 ELR at 20601.

53. 243 F.3d 526, 31 ELR 20535 (9th Cir. 2001).

54. Id. at 533-34, 31 ELR at 20537.

55. Id.

56. Id.

57. 209 F.3d 331, 30 ELR 20508 (4th Cir. 2000).

58. 133 F.3d 251, 28 ELR 20299 (4th Cir. 1997).

59. 209 F.3d at 335-36, 30 ELR at 20510 (emphasis in original).

60. 261 F.3d 810, 32 ELR 20011 (9th Cir. 2001).

61. Id. at 815, 32 ELR at 20012.

62. Id. at 814-15, 32 ELR at 20012.

63. Id. at 813, 32 ELR at 20012.

65. 145 F.3d 1399, 28 ELR 21318 (D.C. Cir. 1998).

66. Id.

67. 33 U.S.C. § 1344, ELR STAT. FWPCA § 404.

68. Id. § 1362(12), ELR STAT. FWPCA § 502(12).

69. 951 F. Supp. 267, 27 ELR 20589 (D.D.C. 1997).

70. 33 U.S.C. §§ 1344, 1362(12), ELR STAT. FWPCA §§ 404, 502(12).

71. American Mining Congress v. Corps of Eng'rs, 145 F.3d 1399, 1403, 28 ELR 21318, 21319 (D.C. Cir. 1998).

72. Id.

73. Id. at 1404, 28 ELR at 21320.

74. Id. at 1404 n.4, 28 ELR at 21320 n.4.

75. Id. at 1401, 28 ELR at 21319.

77. Id. at 31.

78. 66 Fed. Reg. 4550, 4575 (Jan. 17, 2001).

79. Association of Home Builders v. Corps of Eng'rs, No. 1:01CV01274 (D.D.C. filed Feb. 12, 2001); Stone, Sand & Gravel Ass'n v. Corps of Eng'rs, No. 1:01CV0320 (D.D.C. filed Feb. 12, 2001).

80. 146 F.3d 1241, 28 ELR 21334 (10th Cir. 1998).

81. Id. at 1246, 28 ELR at 21336.

83. See 28 U.S.C. § 2462. EPA successfully argued this theory in Harmon Indus., Inc. v. Browner, 19 F. Supp. 2d 988, 29 ELR 20035 (W.D. Mo. 1998), but the case involved a continuing pattern of illegal disposal of waste solvents, with the latest illegal disposal within the five-year period.

84. See, e.g., United States v. White, 766 F. Supp. 873, 22 ELR 20050 (E.D. Wash. 1991); United States v. Reaves, 923 F. Supp. 1530, 26 ELR 21394 (M.D. Fla. 1996).

85. United States v. Westvaco, 144 F. Supp. 2d 439, 441 (D. Md. 2001); Murphy Oil, 143 F. Supp. 2d at 1084.

86. American Elec. Power, 136 F. Supp. 2d at 811.

87. 19 F. Supp. 2d 988, 29 ELR 20035 (W.D. Mo. 1998).

88. Harmon Indus., Inc. v. Browner, 191 F.3d 894, 29 ELR 21412 (8th Cir. 1999).

89. Id. at 899, 29 ELR at 21413.

90. Id.

91. Id. at 902, 29 ELR at 21414.

92. Id. at 903-04, 29 ELR at 21414.

93. Id. at 898, 29 ELR at 21413.

94. 125 F. Supp. 2d 1050, 31 ELR 20335 (D. Colo. 2000).

95. Id. at 1059, 31 ELR at 20338.

96. Id. at 1060, 31 ELR at 20338.

97. Id. at 1065-66, 31 ELR at 20341.

98. Id. at 1064-65, 31 ELR at 20341.

99. 143 F. Supp. 2d 1054 (W.D. Wis. 2001).

100. Id. at 1091 (collecting cases).

101. 118 F. Supp. 2d 827 (N.D. Ohio 2000).

102. Id. at 833.

103. Id. at 836.

104. Id. at 836. The LTV court invoked the same "laboring oar" test as the Power Engineering court.

105. 542 S.E.2d 766, 31 ELR Digest 20502 (Va. 2001).

106. Id. at 770, 31 ELR Digest at 20502.

107. Id. at 769, 31 ELR Digest at 20502.

108. United States v. Flanagan, 126 F. Supp. 2d 1284, 1289 (C.D. Cal. 2000) (emphasis added).

109. 269 F.3d 1003|}, 1012, 32 ELR 20218, 20219-20 (9th Cir. 2001).

110. 126 F. Supp. 2d 1284 (C.D. Cal. 2000).

111. Id. at 1011, 32 ELR at 20219 (internal footnote omitted).

112. Id. at 1012, 32 ELR at 20220.

113. Id.

114. Id. at 1011 n.25, 32 ELR at 20219} n.25.

115. Id. at 1012, 32 ELR at 20220 (internal footnote omitted).

116. Id.

117. Kaiser Aluminum & Chem. Corp. v. United States, 157 F. Supp. 939 (1958).

118. See Gerald Wetlaufer, Justifying Secrecy: An Objection to the General Deliberative Privilege, 65 IND. L.J. 845 (1990).

119. See, e.g., National Labor Relations Bd. v. Sears, Roebuck & Co., 421 U.S. 132 (1975); Renegotiation Bd. v. Grumman Aircraft Eng'g Corp., 421 U.S. 168 (1975); Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854 (D.C. Cir. 1980).

120. Ferrell v. Housing & Urban Dev., 177 F.R.D. 425, 428 (N.D. Ill. 1998). See also K.L., L.F. & R.B. v. Edgar, 964 F. Supp. 1206, 1209 (N.D. Ill. 1997); United States v. O'Neill, 619 F.2d 222, 226 (3d Cir. 1980).

121. Sears, 421 U.S. at 151.

122. Compare City of Virginia Beach v. United States, 995 F.2d 1247, 1253 (4th Cir. 1993) (no specific decision must be identified to assert privilege) with Maricopa Audubon Soc'y v. U.S. Forest Serv., 108 F.3d 1089, 27 ELR 20845 (9th Cir. 1997) (specific decision must be identified).

123. See Grumman Aircraft, 421 U.S. at 170.

124. See Edgar, 964 F. Supp. at 1206.

125. Id.

126. 126 F. Supp. 2d 521 (N.D. Ill. 2000).

127. Id. at 524.

128. Id. at 525.

129. Id.

130. Id.

131. Id. at 526.

132. Id.

133. Id. at 526-27.

134. Id. at 528.

135. Id.

136. Id.

137. Id. at 530 (citations and footnotes omitted).

138. 208 F.3d 1015, 30 ELR 20560 (D.C. Cir. 2000).

139. 126 F. Supp. 2d at 530 (internal citations omitted).

140. Anderson et al. v. Smithfield Foods, Inc., No. 8:01-CV-441-T-17TBM (M.D. Fla. complaint filed Feb. 28, 2001).

141. 18 U.S.C. §§ 1961 et seq.

142. See, e.g., Water Keeper Alliance, Inc. v. Smithfield Foods, Inc., Civ. No. 4:01-CV-27-H(4) (E.D.N.C. complaint filed Feb. 28, 2001).

143. DMJ Assocs., LLP v. Capasso et al., Civil Action No. CV-97-7285 (E.D.N.Y. filed Dec. 10, 1997). Vinson & Elkins represents one of the defendants.

144. For a general discussion of environmental justice issues and the state of the law before the recent South Camden decision, see Julia B. Latham, Disparate Impact Lawsuits Under Title VI, Section 602: Can a Legal Tool Build Environmental Justice?, 27 B.C. ENVTL. AFF. L. REV. 631 (2000). Ms. Latham is an associate in Vinson & Elkins' Washington environmental practice and a former clerk to Judge Herbert Y.C. Choy of the Ninth Circuit.

145. 121 S. Ct. 1511 (2001) (class action suit under Title VI by driver license applicant for discriminatory impact of state's English-only driver's license examination).

146. 121 S. Ct. at 1527 (Stevens, J., dissenting).

147. No. 01-702, 2001 WL 1602144 (3d Cir. Dec. 17, 2001).

n148 Id. at * 10, * 15. It should be noted that the Sixth Circuit decided Loschiavo v. City of Dearborn, 33 F.3d 548 (6th Cir. 1994), before the Supreme Court decided Sandoval. While Sandoval did not overrule Loschiavo because the Court did not directly address the § 1983 issue, the Court's admonition that "language in a regulation may invoke a private right of action that Congress through statutory text created, but it may not create a right that Congress has not," casts doubt on the future of the Sixth Circuit's holding. Id. at * 12 (quoting Sandoval, 121 S. Ct. at 1522).

149. Even in light of the South Camden decision, facilities should be prepared for the possibility of environmental justice suits brought under other civil rights statutes, such as the Fair Housing Act, and common-law tort causes of action, such as public and private nuisance.

n150 2001 WL 1602144, at * 14.

151. It should be noted that in addition to EPA, about 40 other federal agencies have similar regulatory prohibitions against disparate impacts that are imperiled by this Third Circuit decision.

152. 118 S. Ct. 488 (1997).

153. 490 U.S. 435 (1989), overruled by Hudson, 118 S. Ct. at 488.

154. See Roger J. Marzulla, Land Division Confronts the Emerging Need for Civil and Criminal Environmental Enforcement, 2 NAT'L ENVTL. ENFORCEMENT J. 3, 4 (1987-1988).

155. E.g., U.S. EPA, Memorandum of Steven Herman to Assistant Administrators et al., EPA Revised Policy on Initiating and Maintaining Parallel Enforcement Proceedings (June 22, 1994); Land and Natural Resources Div., DOJ, Directive No. 5-87, Guidelines for Civil and Criminal Parallel Proceedings (Oct. 13, 1987). See also E. Ojala, Legal Issues Arising in Parallel Proceedings, 11 NAT'L ENVTL. ENFORCEMENT J. 3 (1996).

156. There is no limit on use of civil discovery information in a criminal case where the civil action was brought in good faith. United States v. Kordel, 397 U.S. 1, 6 (1970).

157. With few exceptions, Rule 6(e) prohibits the disclosure of matters occurring before a grand jury. Although civil use of grand jury materials is not per se illegal, the Supreme Court has interpreted Rule 6(e) to prohibit federal prosecutors from disclosing grand jury matters to DOJ civil attorneys for use in civil suits, unless the government can demonstrate a particularized need for the materials. United States v. Sells Eng'g, Inc., 463 U.S. 418 (1983). Therefore, any disclosed information should not come from the prosecutor's use of the grand jury process. However, information obtained, for example, pursuant to a search warrant can generally be disclosed.

158. 384 U.S. 436 (1966).

159. 524 U.S. 51, 28 ELR 21225 (1998).

160. The Bestfoods decision resolved an issue that had long divided the federal courts. For a complete analysis of the decision in this context, see George C. Hopkins, United States v. Bestfoods: The U.S. Supreme Court Sets New Limits on the Direct Liability of Parent Corporations for Pollutions Acts of Subsidiaries, 29 ELR 10545 (Sept. 1999).

161. 113 F.3d 572, 27 ELR 20949 (6th Cir. 1997).

162. 910 F.2d 24, 20 ELR 21462 (1st Cir. 1990), cert. denied, 498 U.S. 1084 (1991).

163. Crim. No. A90-015-CR (D. Alaska 1990).

164. See, e.g., Norfolk S. Ry. Co. v. Gee Co., No. 98 C 1619, 1999 WL 286287 (N.D. Ill. Apr. 23, 1999) (slip op.).

165. See Carter-Jones Lumber Co. v. LTV Steel Co., 237 F.3d 745, 31 ELR 20406 (6th Cir. 2001).

166. 215 F.3d 321, 30 ELR 20679 (2d Cir. 2000).

167. Pearson v. Component Tech. Corp., 247 F.3d 471, 484 (8th Cir. 2001).

168. The issue of whether state or federal common law governs piercing the corporate veil in cases that apply Bestfoods has not been addressed by the Supreme Court. In Carter-Jones Lumber Co., 237 F.3d at 746 n.1, the court held that state common law applies.

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