“International Pollution: Can We Really Just Blame Canada?”

This comment was written by former Comments Editor Jamie Wilhite appearing in JNREL Vol. 21 No. 2. Staff member Andrew Leung wrote the following abstract.

In deciding Pakootas v. Teck Cominco Metals, Ltd., 452 F.3d 1066 (9^th Cir. 2006), the Ninth Circuit extended liability under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") to a foreign corporation when the disposal at issue occurred outside of the United States. "International Pollution: Can We Really Just Blame Canada?" explains the court's analysis and logic in making this revolutionary step for the environment.

The alleged polluting party in Pakootas is Teck Cominco Metals ("Cominco"), also a party to the infamous Trail Smelter Arbitration, a landmark case of international environmental law. Between 1906 and 1995, Cominco dumped smelting waste product ("slag") into the Canadian portion of the Columbia River. River currents then carried the slag and associated pollutants downstream into American territory, where the harm is alleged to have occurred. After investigation, the Environmental Protection Agency ("EPA") ordered Cominco to perform a remedial investigation/feasibility study of the area. When Cominco refused and the EPA failed to compel action, two members of the Colville Indian Tribes brought suit, seeking damages and injunctive relief.

CERCLA was enacted in 1980 by Congress as a remedial statute. "CERCLA promotes the cleanup of polluted areas and attaches strict liability for clean-up costs to those responsible for the pollution." The United States District Court for the Western District of Washington found that Cominco could be held liable either as a "generator" or an "arranger" potentially responsible party ("PRP"). The Ninth Circuit found that CERCLA liability could be extended to Cominco only if three conditions were satisfied: (1) a "facility" where the release or threatened release of hazardous waste occurred; (2) a "release" or "threatened release" of waste at aforementioned facility; and (3) a defendant that falls within one of the enumerated PRP categories.

The requirement of a "facility" is met when plaintiff demonstrates that defendant has a site where CERCLA hazardous materials are disposed of. The court found that Cominco's "facility" qualified because of the "extent of contamination in the United States associated with the Upper Columbia River." Although it in undisputed that Cominco released mining waste and byproduct into the Canadian portion of the Columbia River, courts have held that CERCLA liability only arises when there is a domestic release. To meet that requirement the Ninth Circuit found that an adequate domestic "release" occurred within American territory when chemicals and hazardous substances leached out of the slag after it had traveled downstream.

"Arranger" PRP liability applies only to "any person who by contract, agreement, or otherwise arranged for disposal or treatment, of hazardous substances owned or possessed by such party, by any other party or entity." Cominco argued that the act of disposing of one's own hazardous material falls without the scope of CERCLA "arranger" liability because it does not involve "any other party or entity." The Ninth Circuit rejected this interpretation, holding that it would seriously restrict CERCLA's reach and provide environmental agencies without recourse against companies that disposed of their own waste illicitly.

Pakootas v. Teck Cominco Metals, Ltd. is groundbreaking in that it is the first application of CERCLA to a foreign entity when the disposal of waste occurs outside of the United States. However, as a practical matter, CERCLA will not soon be extended to foreign entities across the globe whose activities will eventually have an effect on American soil.

“2006 Eminent Domain Ballot Initiatives: Citizens’ Voice or Crying Wolf?”

Appearing in JNREL Vol. 21 No. 2 this comment was written by former staff member Ryan Daugherty. The following abstract was written by staff member Kyle Hermanson.

Citizens of the United States view the right to own and use land as a fundamental right. While strong property rights are a valued ideal, too strong a grip on this view could be injurious to society as a whole. In 2006, a handful of states passed, or nearly passed, radical reactionary ballot initiatives in response to the United States Supreme Court decision in Kelo v. New London, 545 U.S. 469 (2005). Citizens voted for these initiatives aiming to prevent their state courts from applying the broad definition "public use" used by the U.S. Supreme Court in Kelo in their states. In Kelo, the Supreme Court held that the promotion of economic development qualified as a "public use" under the Just Compensation Clause of the U.S. Constitution. However, the ballot measures passed in response to Kelo are far more potent then they appear, challenging the concept of land use planning as a whole.

Ballot initiatives can be a powerful tool for citizens. Measures authorizing direct popular participation in law-making are liberally construed, often cannot be vetoed by the governor, and allow the measure's sponsors to construct the initiative as they wish, so long as it complies with state conditions and procedures. The 2006 eminent domain ballot initiatives include either one or both of two components: a provision outlawing "Kelo- style eminent domain," and a provision that introduces a "pay-or-waive scheme." Outlawing "Kelo-style eminent domain" means banning the taking of private property or residences for use by a private or quasi-private entity and a "pay-or-waive" scheme requires the government to waive any newly enacted regulations on the use of land or pay just compensation to the land owner. These kinds of ballot initiatives were passed in Oregon and Arizona and defeated in Washington and California.

The consequences of these measures are beginning to be felt in the states that passed them. In Oregon, where the measure required that certain listed takings be construed in favor of compensation, there were over six billion dollars worth of unpaid claims against the state as of November 2006. In Arizona, the measure did not include an exception allowing takings for conservation purposes without required compensation. This forces the state government to compensate landowners for conservation-based restrictions on the use of their land. As a result, government officials will be fiscally unable to enforce new conservation regulations.

In Kentucky, state legislators have redefined eminent domain in response to Kelo as "the right of the Commonwealth to take for a public use." "Public use" in Kentucky means "ownership, possession, occupation or enjoyment of the property by a local government entity; removal of blighted properties; or for use by a public utility," and "[p]rohibits the transfer of private property to another private entity for economic development purposes." This clarification makes a ballot initiative clearly unnecessary, as state statute prevents a "Kelo-style" invasion in Kentucky. However, property protections in Kentucky could use further reform, as the definition of "blighted area" is too broad, including such subjective features as inadequate street layout or improper subdivision. Furthermore, the legislature has not clearly delineated allowable or prohibited public uses of property subject to eminent domain. Kentucky's responded with moderation to Kelo, but the people may still want stronger provisions.

“Save Our Mountains: The Impact of Save Our Cumberland Mountains v. Kempthorne in Encouraging NEPA Efficiency”

Former staff member Lindsay Yeakel wrote this comment appearing in JNREL Vol. 21, No. 2. The following abstract was written by staff member Nick Kloiber.

On January 1, 1970, Congress enacted the National Environmental Policy Act ("NEPA"), requiring that any proposed action involving federal funds or permits must be approved by the proper federal agency, which may require an environmental assessment (EA) or a published environmental impact statement (EIS). The overall effect of this law has required agencies to consider environmental concerns in their decision making process.

In Save Our Cumberland Mountains v. Kempthorne, 453 F.3d 334 (6th Cir. 2006), the question was raised about how far agencies must go to be in compliance with NEPA. The plaintiffs challenged an agency's ruling of no significant impact in relation to a coal mining permit application, arguing that the decision was arbitrary and that EA issued by the Agency was incomplete in that it didn't consider sufficient alternatives to the proposal.

The Sixth Circuit held that the agency met the requirements of NEPA in reaching its decision of no significant impact. The agency considered environmental impact, issues of resulting damage if the permit were issued, and looked at studies of comparative mining operations to decide that the current application would have no significant impact, and thus did not abuse its discretion or reach the decision arbitrarily.

The Court did, however, side with the plaintiffs in holding that the agency failed to consider sufficient alternatives to the proposal. The agency had argued it had a binary choice between granting and denying, whereas NEPA required it to study alternatives available. The Court reasoned that the agency could limit the scope of their review to reasonable alternatives, while not limiting it to a binary choice alone.

The decision in Kempthorne provides a better understanding of just what an Agency must do to satisfy the requirements of NEPA. It encourages companies seeking permits to do environmental studies prior to submitting an application, allowing the agency to incorporate the information into an EA without having to spend time and money on a full EIS. It also requires all agencies to look at reasonable alternatives to the proposal they are evaluating, instead of just granting or denying the application. This helps to ensure EA's accomplish their goals and that agency findings of no significant impact aren't arbitrary but are backed up by not just research but by consideration of alternatives. The overall cost, time, and effort savings encouraged by Kempthorne are a win-win for agencies, the environment and industry alike.

“King Fish: Pushing the Limits of Judicial Authority in National Wildlife Federation v. National Marine Fisheries Service.”

Former staff member Stuart Lipke wrote this comment appearing in JNREL Vol. 21 No. 2. Staff member Matt Cocanougher wrote the following abstract.

The salmon industry in the Northwest United States serves many different purposes at the same time. This fish has historically been a part of Native American religion and has currently become a major source of income for the area. Unfortunately, operation of the Colombia River's hydroelectric dams has begun to kill many of the salmon, as they swim into the dam's turbines. Because of this problem, several different species of salmon have been added onto the list of endangered species protected by the Endangered Species Act ("ESA").

National Wildlife Federation v. National Marine Fisheries Service, 422 F.3d 782 (9th Cir. 2005) (per curiam) was a result of a decision by an Oregon federal district court to grant an injunction which required the dam administrators on five dams along the Snake River to increase spill over as a way to protect the salmon. The dam administrators, Federal Columbia River Power System ("FCRPS"), were forced to follow four procedures outlined in the ESA. FCRPS was first obligated to consult an agency to determine whether an action is likely to threaten an endangered species. Next, the ESA requires that the agency which is actually carrying out the consultation use the best scientific and commercial data available. After the first two steps, the consulting agency issues a biological opinion outlining the anticipated impact on the species and the future risk to the species. Finally, the consulting agency makes a jeopardy determination which looks to the potential cumulative effects of the proposed action coupled with the current status of the species or habitat.

In this case, the National Wildlife Federation (NWF), along with the State of Oregon and others brought suit in federal court alleging that the National Marine Fisheries Service ("NMFS"), the consulting agency for FCRPS, failed to conduct a proper jeopardy determination during their consultation for their biological opinion of 2004. After finding several failures on NMFS's part, the district court granted a preliminary injunction, ordering FCRPS and other agencies to increase summer spill for several dams. NMFS appealed this preliminary injunction to the Ninth Circuit Court of Appeals. The Ninth Circuit rejected NMFS's arguments on appeal. It held that when Congress passed the ESA, it decided to tip the balance in favor of the endangered species in the event of hardships between the species and other industries. Next, the court found that the district court did not abuse its discretion in this case because it reasonably found that irreparable harm would result from inaction, and its actions were in furtherance of the ESA. Lastly, the court concluded that the district court's argument was narrowly tailored to fit the circumstances at hand, especially as NMFS failed to raise this issue during the injunction hearing.

This case highlights two key issues. The first is whether the district court's proactive role in granting the preliminary injunction crosses over into the realm of the executive branch's enforcement power. The second is what would happen if the district court actually determined that breaching the dams was necessary to carry out the ESA, which has not been done by a court before. Both of these issues remain politically contested and their resolution will have a big impact on the salmon industry.

“A Tough Row to Hoe: What Partlo v. Johanns Means for the Organic Food Industry”

Appearing in JNREL Vol. 21 No. 2 this comment was written by former staff member Karen Campion. Staff Member Natasha Camenisch wrote the following abstract.

Organic farming has become a popular sector of agriculture in the United States. Organic farmers do not use chemicals on their crops and "currently draw a premium of anywhere from 10% to 130% over the price of conventional produce" because of their farming methods. Since organic farmers are making a huge profit off their crops, the amount of cropland dedicated to growing certified organic crops, fruits, and vegetables is continually growing. As a result of the benefits of organic farming, many consumers have sought to protect the integrity of this agriculture practice.

Congress enacted the Crop Loss Disaster Assistance Program (CLDAP) to provide "emergency assistance to all farmers who lost crops due to a disaster, as soon as practicable." Partlo v. U.S., 2006 WL 1663380 at *33 (D.D.C. 2006). In 1995, the CLDAP established separate payment rates and yields were established for different end uses of the same crop. The rates were meant to reflect the differences in price that produce would have commanded on the open market but for having been ruined in a disaster.

In 1998, organic farmers suffered a serious setback. The Secretary of Agriculture issued regulations specifying that "in spite of differences in yield or values," separate rates would not be established for "crops with different cultural practices, such as organically or hydroponically grown." Id. at *4. In Partlo v. Johanns, the court determined that there was no duty on the Secretary to establish distinct rates.

Organic farming has a number of health and environmental benefits. The Partlo decision could make organic farming less attractive for farmers and consumers alike. In her comment titled, "A Tough Row to Hoe: What Partlo v. Johanns Means for the Organic Food Industry," Karen Campion analyzes the court's explanation of why the plaintiff's Equal Protection rights were not violated and how the Administrative Procedures Act was not violated.

Does the Kentucky River Authority have the power to close locks on the river?

This post was written by Production Editor Mark Rouse.

According to the Kentucky Court of Appeals the answer is "yes." Kentucky River Authority v. City of Danville, 932 S.W.2d 374 (Ky. App. 1996). As early as the 1800's the U.S. Army Corp. of Engineers started building a lock and dam system on the Kentucky River. Andy Mead, "Kentucky River: A River to Nowhere" LEXINGTON HERALD LEADER, Oct. 19, 2009 available at http://www.kentucky.com/latest_news/story/982597.html. One of the primary goals of the system was to connect the "lumber and coal rich region of eastern Kentucky" with the Ohio River to increase trade of such resources throughout the United States and the world. See Finance.Ky.Gov, "Locks and Dams" http://finance.ky.gov/ourcabinet/attached+agencies/Id.htm. Today the lock and dam system of the Kentucky River primarily serves recreational boaters. After operating for almost two hundred years the U.S. Army Corp. of Engineers started discussing closing the system in the 1980s and has transferred or is in the process of transferring all dams and locks to the Commonwealth. See Andy Mead, " Kentucky River: A River to Nowhere" and Finance.Ky.Gov, "Locks and Dams."

When visiting the Kentucky River Authority's website describing the lock and dam system on the Kentucky River a visitor is greeted with the following quote by William Ellis. " One of the largest tributaries that flows into the majestic Ohio, the Kentucky River cuts a swath through the heart of the Bluegrass. Its 255 miles have formed a living thread that binds the people and places of the state." Finance.Ky.Gov, "Locks and Dams." The dams and locks between the Ohio River and Frankfort are in need of repair and the Kentucky River Authority is considering putting up barriers across Dam 4 in Frankfort essentially turning portions of the River into lakes. See Andy Mead, "Kentucky River: A River to Nowhere." Dam 4 is still controlled by the U.S. Army Corp. of Engineers but the Kentucky River Authority is "responsible for the conservation of the Kentucky River basin waters" which suggests that the Kentucky River Authority has the power to regulate what activities occur on the Kentucky River including the activities of the dams and locks system. See 932 S.W.2d at 376. The Kentucky General Assembly in years past has appropriated money to maintain the dam and lock system but considering a cost/benefit analysis the Kentucky River Authority has decided that the system is too expensive to maintain for the minimal amount of boat traffic. See Any Mead, "Kentucky River: A River to Nowhere."

Tourism in Kentucky is expected to reach a record high next fall when the World Equestrian Games visit the Bluegrass. All across the Commonwealth new developments and tourist attractions have been prepared for this international event. What better way to celebrate the cultural diversity of the Bluegrass than by providing international visitors with a relaxing cruise down the scenic Kentucky River? The cost might be high of repairing the dam and lock system for boat travel but by doing so the world can celebrate and experience the River William Ellis spoke so fondly of.

“The Terminator a Trendsetter? How California’s Global Warming Solutions Act Will Impact California, the United States, and the World.”

Appearing in JNREL Vol. 21, No. 2 this Note was written by former JNREL Technical Editor Keeana Sajadi. Staff member Jessica Drake wrote the following abstract.

In September of 2006, Arnold Schwarzenegger, Governor of the state of California, signed into law the most comprehensive greenhouse emission reduction program in the United States at that time, the Global Warming Solutions Act (GWSA). The Act would require reporting of the current emissions and a detailed timeline to reduce pollution rates in California to 1990 levels by the year 2020. The state established itself as a leader who would, through their efforts and projected success in such reductions as well as increases in overall energy expenses and job creations, gain governmental following by the United States and the world.

Because California is the twelfth largest emitter in the world of this pollution, it will use GWSA to reduce the associated stigma with that status and minimize its role in the harsh effects resulting from greenhouse emissions made by the state itself, other states of America, and counties around the world. Besides GWSA's establishment of short-term goals for reductions, it also allows the California Air Resources Board, created by GWSA to implement a specific reduction plan and timeline, to provide future guidance to the Governor once the 2020 goal is attained. Further, it applies the program with an eye toward creating a workable market-based compliance mechanism, limiting emissions through automobiles, and minimizing leakage of emission to surrounding areas because of reductions in California.

The implementation of such a bold step in environmental protection incites opposition from individuals and industries that will be currently affected. Farmers, power companies, and car manufacturers argue against this drastic plan that will require major changes for their operations. However, the benefits for the state, country and world-at-large overshadow those concerns. Because the program indirectly provides lower long-term energy costs, major increases in employment opportunities, better economic spending and saving, and progression in innovative technology that should ensure a better future for our natural environment, it is well worth the short-term discomfort for such industries today. Although there are critics with legitimate concerns, the GWSA benefits will outweigh any burdens imposed.

For a more specific and thorough analysis of California's monumental effort to reduce these emissions and encourage others to follow its lead, read Keeana Sajadi's "The Terminator a Trendsetter? How California's Global Warming Solutions Act will Impact California, the United States and the World," JNREL Vol. 21, No. 2.

“Parental Control: The Impact of the Sarbanes-Oxley Act Upon Environmental Disclosure Requirements of Public Companies”

This Note was written by former staff member Dawn R. Franklin. The abstract was written by staff member Tanner James.

A law is only as good as its enforcement, and in the world of publicly-traded corporations, poor enforcement invites exploitation and noncompliance. In the context of the environment, this creates one unsuspecting loser: the shareholders. Through delayed, misleading, or simply nonexistent reports, companies dupe shareholders in to paying premium prices per share while hiding environmental violations that, once made public, will result in plummeting share value.

As protection, shareholders must rely on regulatory statutes and policies that are often more bark than bite. Regulation S-K and Financial Accounting Standard No. 5 ("FAS 5") both explicitly require routine environmental status reports, especially if a liability may reasonably exist. Furthermore, there are also implied disclosure requirements in the Securities Exchange Acts of 1933 and 1934, as well as Environmental Protection Agency policies that exist to stimulate more frequent, honest, and accurate environmental reporting. Unfortunately, although the guidelines and requirements are well-established, the incentive to break or circumvent the rules (e.g., more investors) has long outweighed the risk of violation.

Times have changed, however. The adoption of the Sarbanes-Oxley Act of 2002 ("SOX") heralded a new era of corporate disclosure. The rules remain the same—Regulation S-K, FAS 5, etc., all exist unchanged. The key difference is in the enforcement. Specifically, SOX gave the old rules new teeth.

To encourage compliance, SOX introduced a new element of accountability: the consequences of failure to comply are shared by the company and their senior officers. For instance, willful false certification of required reports could result in a $5 million dollar fine and 20 years in prison for a guilty officer. Few CEOs are willing to risk their money and freedom in exchange for temporarily-misled stockholders.

While the incentive for better reporting is a key benefit to SOX, the trickle-down effect is just as important. More accountability at the top turns in to more accountability throughout, and, in turn, better organization. Ultimately everything comes together to paint a much happier, fairer picture for both shareholders and the environment, alike. No longer do shareholders have to rely on illusory protection from unenforced regulations. With corporate officers finding themselves under the intense heat of the SOX spotlight, shareholders can invest with confidence, knowing that there are not any hidden environmental catastrophes looming.

“When Parents Act Like Children: CERCLA Liability of a Parent Corporation for its Subsidiary Corporation”

This comment was written by former staff member Griffin Farris and appeared in JNREL Vol. 22 No. 1. The abstract was written by staff member Brandon Wells.

The modern corporation form often allows business owners to maintain limited liability for actions of the corporation by setting up subsidiaries. This insulation came under review in the context of pollution and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in the Supreme Court case, United States v. Bestfoods, 524 U.S. 51 (1998). In Bestfoods, the Supreme Court was concerned with the liability of two different parent corporations that had at one time owned a polluting Michigan chemical manufacturing plant. The district court had found the parent companies liable as operators, and the Sixth Circuit had overturned that decision, finding that parent liability could only be established by showing a piercing of the corporate veil.

The Supreme Court's analysis began by noting two competing principles of corporate law. These are 1) that parent companies may protect themselves from liability by establishing subsidiaries, and 2) that there are instances that warrant "piercing the corporate veil" and holding the parent company liable for the actions of the subsidiary. The Court noted that these issues seem to be wholly irrelevant when discussing liability under CERCLA, as the statute is only concerned with whether the parent corporation is acting as an "operator" of a subsidiary polluting facility. The Court devised a definition for the term "operator" as "someone who directs the workings of, manages, or conducts the affairs of a facility." Bestfoods, 524 U.S.
at 66.

In the context of pollution, the court said that "an operator must manage, direct, or conduct operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Id. at 66-67. The Supreme Court then remanded the case to the district court, where the court found that the parent companies were not liable, even when focusing on the Supreme Court's definition of an "operator".

In cases that followed the Supreme Court's decision in Bestfoods, courts were more willing to find liability on the part of the parent company. Findings of liability were often based on evidence that the parent company was an "operator" of the subsidiary. Notable facts included a coordinator of the parent company taking part in the subsidiary plant's waste management designs; a requirement that the subsidiary notify the parent of any environmental communications; and active involvement by officers in disposal arrangements.

Based on subsequent consistent findings of liability for parent companies, the district court in Bestfoods was erroneous in its findings. In Bestfoods, many of the officers of the parent company held board positions in the subsidiary, and meetings often took place at both the parent and the subsidiary. Also, the parent company made many recommendations to the subsidiary as to how they should handle specific environmental matters. Although the district court rejected this argument because the subsidiary didn't follow the recommendations, it ignored the fact that the parent was still trying to control the subsidiary through management, albeit rather ineffective management. The factual scenario in Bestfoods was similar to cases finding liability, the only real distinction being that control from the parent was followed to a lesser extent. Although the district court found for no liability, based on the actions of the parent, it should have followed later cases that found liability on the part of the parent corporation.

In Bestfoods, the Supreme Court struck a balance between the two competing corporate law principles. Bestfoods recognized that while the corporate form is in place to allow for limited liability in many circumstances, it is not an absolute limitation on liability and there are situations where liability will still be found. Balancing these principles only makes sense when the entire factual account is taken into consideration. When only focusing on a single act, it may not establish liability on the parent as an "operator". But in order to best effectuate the ruling of Bestfoods, continuous acts of the parent as an "operator" of the subsidiary may give rise to parent liability.