Local “Fracking” Bans Face Constitutional Takings Challenges

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Ben Tannen, Sidley Austin LLP

Recently, the citizens of Denton, Texas voted to ban hydraulic fracturing within the city limits, becoming the first municipality in the state to do so. One day later, the Texas Oil and Gas Association filed suit, arguing the ordinance was unconstitutional and preempted by state law. N1 In enacting a ban, Denton joined the list of municipalities that have adopted limits on hydraulic fracturing, N2 including a number of outright bans. N3 The bans reflect the ongoing battle between state and local interests over the value and risks of oil and gas development. The legality of local bans is being hotly disputed in the courts, with two common challenges being that the bans are preempted by state law or constitute an unconstitutional taking.

Preemption

Plaintiffs have challenged local bans as expressly preempted by or in direct conflict with a comprehensive state oil and gas statute—quite simply, the argument goes, municipalities and other local governments cannot prohibit what has already been expressly authorized by the state. Moreover, as a policy matter, allowing local governments to restrict or otherwise regulate oil and gas development would create a patchwork of regulation within a state—or even within a single county. To date, several courts have found preemption, but others have deferred to local land use authority. N4

Takings

Plaintiffs have also challenged local bans on constitutional grounds, N5 asserting a range of claims, including a Takings claim under the Fifth Amendment (and state analogs). N6 Although as of yet no courts have ruled on the issue, here are a few of the basics:

Of course a traditional “taking” occurs when the government actually causes a “permanent physical occupation” of an individual’s property. N7 A regulation, however, can be a taking when it affects or limits the use of private property to a sufficient degree. N8 According to the Supreme Court, a “regulatory” taking occurs if the regulation deprives the property holder of all economically beneficial use of their property, Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), or satisfies a three-part balancing test set out by the Court in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). Continue reading

WLF Web Seminar to Address Lessons of “Stage-Managed” Litigation in Ecuador Vs. Chevron

PodiumPic1Tomorrow morning from 10:00 a.m. to 11:00 a.m., Washington Legal Foundation will be broadcasting a live Web Seminar program entitled Aguinda v. Chevron: The Remarkable Rise and Fall of a Stage-Managed Litigation & PR Crusade. You can register for free viewing by clicking on the program title.

Our speakers will be Paul M. Barrett, Assistant Managing Editor of Bloomberg BusinessWeek and author of the just-released book Law of the Jungle; and Eric G. Lasker, a partner with the Hollingsworth LLP law firm.

Even though the litigation accusing Chevron of environmental harm in Ecuador has been going on for over two decades, the case itself, and Chevron’s counter-litigation alleging the plaintiffs’ lawyers committed fraud, remain unresolved. The U.S. Court of Appeals for the Second Circuit will soon hear the plaintiffs’ lawyers’ appeal of Federal District Court Judge Lewis Kaplan’s RICO ruling. And just yesterday, the U.S. Court of Appeals for the Fourth Circuit affirmed a lower court’s order that two lawyers affiliated with lead plaintiffs’ lawyer Steven Donziger provide documents and computer drives Chevron sought in support of its RICO charges. Paul Barrett’s coverage of that Fourth Circuit ruling can be read here.

Federal Court “Shall” Hear Challenge on EPA’s Failure to Assess Job-Loss Impact of its Rules

EPA-LogoSection 321(a) of the federal Clean Air Act (CAA), titled “Continuous Evaluation of Potential Loss or Shifts of Employment,” states plainly:

The Administrator shall conduct continuing evaluations of potential loss or shifts of employment which may result from the administration or enforcement of the provisions of this chapter and applicable implementation plans, including where appropriate, investigating threatened plant closures or reductions in employment allegedly resulting from such administration or enforcement.

The Environmental Protection Agency (EPA) has long treated this as yet another optional duty, which it may or may not perform at its discretion. Murray Energy Corporation and a number of other coal companies that have suffered substantial job losses due to environmental regulations disagree. The word “shall” in § 321(a), they argue, reflects that Congress required EPA to do this. Last March, these companies filed suit in the Northern District of West Virginia, seeking declaratory and injunctive relief. A June 6 WLF Legal Backgrounder by Vermont Law School Professor Mark Latham and Shook, Hardy & Bacon L.L.P. attorneys Victor Schwartz and Chris Appel, Is EPA Ignoring Clean Air Act Mandate to Analyze Impact of Regulations on Jobs?, described the suit and its arguments.

On September 16, Chief Judge John Preston Bailey rejected EPA’s specious argument that the agency is protected by sovereign immunity and allowed the suit to proceed. The plaintiffs sued under a section of the CAA which permits actions if EPA has failed to perform a non-discretionary duty. The court thus had to determine whether EPA had discretion to ignore § 321(a).

As Chief Judge Bailey noted, courts need not defer to federal agencies’ positions when determining jurisdiction. And Chief Judge Bailey certainly offered no deference. He cited extensive case law that supported Murray Energy’s argument that “shall” reflects a mandatory duty. As one court stated, “The word ‘shall’ does not convey discretion. It is not a leeway word, but a word of command.” EPA argued that § 321(a)’s lack of a “date-certain deadline” renders the provision discretionary. Chief Judge Bailey found that while that issue “was open to question,” relevant precedent dictated that the lack of a deadline was not “fatal to plaintiffs’ case.”  He added, “While EPA may have discretion as to the timing of such evaluations, it does not have the discretion to categorically refuse to conduct any such evaluations.”

In addition, Chief Judge Bailey refused to strike the plaintiffs’ request for injunctive relief.

Given the enormous implications of this case for EPA and for regulated entities, this decision marks, as the saying goes, merely the end of the beginning for Murray Energy Corp. v. McCarthy.

Also published by Forbes.com at WLF’s contributor site

Federal Appeals Courts Reject Clean Water Act “Permit Shield” Defense

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

In the past two months, two federal circuit courts examined the extent of the Clean Water Act’s (“CWA”) “permit shield” defense and reached similar conclusions—the defense cannot be used by a party that does not completely fulfil certain National Pollution Discharge Elimination System (NPDES) permit, or permit application, obligations. Permit holders and applicants should be wary of the risk presented by this emerging case law, as the decisions could open the door to increased enforcement, unless an applicant has provided to the permitting authority a wide range of data regarding its discharge during the application process.

Generally, the CWA shields a permit holder from liability if the party possesses or has applied for an NPDES permit through the appropriate federal and state regulatory framework. The permit shield states that “compliance with a permit issued pursuant to this section shall be deemed compliance,” see 33 U.S.C. § 1342(k). The shield protects permit holders from challenges that their permits are not sufficiently stringent as well as actions to compel the permit holder to change its operations following changes to CWA regulations. Continue reading

Seventh Circuit Ruling Exposes Federal Regulators to Public Nuisance Claims

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

In recent years, plaintiffs have increasingly asserted public and private nuisance theories in cases seeking damages and remedies to address alleged environmental harms, despite the fact that the defendant was in compliance with relevant federal law—and in particular, the Clean Air Act (CAA). Defendants have opposed these suits on multiple grounds, including arguing the CAA preempts these common law claims. Most prominently, in American Elec. Power Co., Inc. v. Connecticut, 131 S. Ct. 2527 (2011), the Supreme Court held the CAA displaced public nuisance claims under federal common law, but left open the question whether the Act would similarly limit state common law tort claims. Last year, in Bell v. Cheswick Generating Station, 734 F. 3d 188 (3rd Cir. 2013), the U.S. Court of Appeals for the Third Circuit addressed the issue, holding the CAA did not preempt state common law claims of the source state. It now appears that the Sixth Circuit will get into the act, as the district court certified an interlocutory appeal in Merrick v. Diageo Americas Supply, (W.D. Ky. June 12, 2014), where, like Cheswick, the court had held the CAA does not preempt source state common law tort claims.

Recently, a unanimous panel of the Seventh Circuit weighed in on a similar but somewhat different variation on the theme of claims for public and private nuisance in Michigan, et al. v. United States Army Corps of Engineers, et al. (No. 12-3800). There, the court determined that governmental agencies may be subject to public nuisance suits despite maintaining a waterway as authorized by federal statute, but ultimately dismissed the suit after finding that Asian Carp are not an imminent threat to the Great Lakes. Continue reading

EPA’s “Waters of the U.S.” Proposal: Coming Soon to a Back Yard Near You?

 wetlandGuest Commentary

by Scott McFadin, a 2014 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

On April 21, the Environmental Protection Agency (EPA) and the United States Army Corps of Engineers issued proposed regulations that would increase their regulatory jurisdiction under the Clean Water Act (CWA). The Act gives EPA authority to regulate “waters of the United States.” Over the past two decades, federal courts have (pardon the pun) muddied the waters on agencies’ authority. The most recent Supreme Court pronouncement on federal regulators’ jurisdiction, Rapanos v. U.S., held that the agencies only have jurisdiction over waters or wetlands with a “significant nexus” to traditional navigable waters. EPA has taken advantage of this unclear legal guidance, proposing a stunningly broad definition of “waters of the United States.” EPA claims its definition merely clarifies existing guidance on “waters,” and will in fact reduce the scope of its jurisdictions. When one considers EPA’s own proposed definitional language, testimony from respected trade groups, and social scientists, however, the truly expansive reach of the new rule becomes quite clear. In classic bureaucratic fashion, EPA has proposed a regulation that is long enough to deter it being read and far-reaching enough to arguably provide jurisdiction over a dry ditch in your backyard.

Much like Humpty Dumpty in Through the Looking Glass, EPA is quite masterful at using words in just the way they choose them to mean.1 Continue reading

New York Court of Appeals Upholds Local Ordinances Restricting Hydraulic Fracturing

sboxermanFeatured Expert Column – Environmental Law and Policy

by Samuel B. Boxerman, Sidley Austin LLP with Joel F. Visser, Sidley Austin LLP

*Editor’s note: Washington Legal Foundation filed an amicus brief in support of the Petitioners in the case discussed below.

Across the country, companies are using hydraulic fracturing techniques to develop shale oil and gas resources that create jobs and provide for economic growth. However, developers face a determined opposition that is using referenda, court challenges, and municipal ordinances in an effort to stymie development. In a long-awaited ruling issued today in In re: Mark S. Wallach, as Chapter 7 Trustee for Norse Energy Corp. USA v. Town of Dryden, Case No. 130, and Cooperstown Holstein Corp. v. Town of Middlefield, Case No. 131, the New York Court of Appeals gave this round to the opponents of development, finding the towns’ home rule authority gave it the power to ban development unless explicitly preempted by state statute.

The Court affirmed the appellate court decision that the towns’ prohibitions on oil and gas development were valid zoning ordinances and not preempted by New York’s Oil, Gas and Solution Mining Law (“OGSML”). Two judges dissented from the opinion and would have held that the complete prohibitions on oil and gas activities essentially regulated how oil and gas development can occur and are preempted by the OGSML. The Court made clear, however, that its decision did not address the merits of hydraulic fracturing generally and asserted that such decisions involved policy questions that should be left to the coordinate branches of government.

The OGSML’s supersession clause at issue states: “The provisions of this article [i.e., the OGSML] shall supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law.” ECL 23-0303(2)). Continue reading