Reversing 30-Year Policy, U.S. DOJ Says Settlements Can No Longer Include Supplemental Environmental Projects (SEPs)

This post was co-authored by Beth Ginsberg & Krista McIntyre.

The U.S. Department of Justice (U.S. DOJ) recently issued a memorandum stating that settlements, including consent decrees, entered by the Environmental Protection Agency (EPA) and other federal agencies can no longer include a Supplemental Environmental Project (SEP), unless the SEP is expressly authorized by Congress. Companies and individuals accused of violating environmental laws and permits, like Clean Air Act and Clean Water Act permits, commonly agree to perform SEPs to fund projects that go beyond compliance instead of paying a higher cash penalty to the U.S. Treasury. Going forward, companies, individuals, and local governments will no longer have SEPs as a settlement option.

To support this policy reversal after more than 30 years, U.S. DOJ cites to the Miscellaneous Receipts Act, which grants only Congress the authority to decide how to appropriate federal funds. The U.S. DOJ views SEPs as federal funds, and, in U.S. DOJ’s opinion, the EPA and other federal agencies lack the authority to divert those funds to third party recipients and to select the projects that should receive the funds. The power of the purse rests squarely with Congress. “[W]ith SEPs, money otherwise destined for the Treasury finds its way to another destination, not at the insistence of Congress, where the Constitution puts that authority, but instead at the insistence of an administrative agency, or a non-federal entity, or some combination thereof.” Continue Reading

Oil & Gas Related Bills Update for the 2019-2020 Legislative Session

Stoel Rives’ Oil & Gas Team has been monitoring bills introduced by California legislators since the beginning of the 2019-2020 Legislative Session.  Below is the latest update on a list of bills, summarized pursuant to the Legislative Counsel’s Digest, that our team has been following and will continue to monitor as the 2019-2020 Legislative Session proceeds.

Please also see our Renewable + Law post summarizing bills related to other energy topics here.

AB 345 (Muratsuchi, D): Natural Resources: Oil and Gas: Regulation of Operations.

STATUS: Last amended March 18, 2019; currently in Senate Appropriations suspense file.

Would require the Secretary of the Natural Resources Agency to create an environmental justice program within the agency to identify and address any gaps in existing programs, policies, or activities that may impede the achievement of environmental justice. The bill, contingent upon funding for this purpose, would require the secretary to establish a grant-based reimbursement program to enable environmental justice and community groups to meaningfully participate in rulemaking and other regulatory processes at departments and entities within the agency.

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SWRCB Releases Draft Implementation Guidance Regarding the Procedures for Discharges of Dredged or Fill Material

On February 14, 2020, the State Water Resources Control Board (SWRCB) published Draft Guidance for the State Wetland Definition and Procedures for Discharges of Dredged or Fill Material to Waters of the State (Draft Guidance). The Draft Guidance pertains to the SWRCB’s adoption of a State Wetland Definition and Procedures for Discharges of Dredged or Fill Material to Waters of the State (Procedures) that were approved by the California Office of Administrative Law (OAL) on August 29, 2019.

The Procedures, formerly known as the Wetland Riparian Area Protection Policy, apply to all discharges of dredged or fill material to waters of the state, not just wetlands. The Procedures consist of four major elements: 1) definition of a wetland; 2) a framework for determining if a feature that meets the wetland definition is a water of the state; 3) wetland delineation procedures; and 4) procedures for the submittal, review and approval of applications for Water Quality Certifications and Waste Discharge Requirements for dredge or fill activities. The Procedures will become effective on May 28, 2020.

The goal of the Draft Guidance is to provide applicants with general guidance in preparing application materials for a dredge or fill project. While the Draft Guidance does not address all possible topics related to implementation of the Procedures, the topics covered reflect the most common requests from stakeholders.

The SWRCB will hold public workshops and trainings throughout California to discuss and receive feedback on the Draft Guidance, the first of which is scheduled for February 28, 2020 from 9:00am – 12:00pm at CalEPA Headquarters in Sacramento:

CalEPA Headquarters – Sierra Hearing Room, 2nd Floor
1001 I Street, Sacramento, CA 95814

Written comments on the Draft Guidance are due by March 13, 2020, as outlined here.

Between April 22, 2020 and May 20, 2020 – after the Draft Guidance is finalized but before the May 28, 2020 effective date of the Procedures – SWRCB and Regional Water Quality Control Board staff will also hold additional public trainings throughout California regarding the Procedures. After each training session, staff will be available to answer questions. A detailed schedule for the public trainings is available at
https://www.waterboards.ca.gov/water_issues/programs/cwa401/docs/dredge_fill/notice_dredgeguidance.pdf

For more information on the Procedures, the Draft Guidance, or public workshops and trainings, please see https://www.waterboards.ca.gov/water_issues/programs/cwa401/wrapp.html.

DTSC and SWRCB Release Draft Supplemental Vapor Intrusion Guidance

On February 14, 2020, the State Water Resources Control Board (SWRCB) and the California Department of Toxic Substances Control (DTSC) issued a public notice regarding the release of Draft Supplemental Guidance: Screening and Evaluating Vapor Intrusion (Draft Guidance) that  supplements existing vapor intrusion guidance issued in 2011.  The Draft Guidance is now available for public review and comment.  Comments are due by 12:00pm on April 30, 2020. Continue Reading

CalGEM’s Public Health Rulemaking Workshops

The California Geologic Energy Management Division (“CalGEM”), formerly known as the Division of Oil, Gas, and Geothermal Resources (“DOGGR”), is actively working on revising its regulations to better align its regulatory mandates with the new goals of Assembly Bill 1057, which requires CalGEM to focus on protecting public health and the environment, and less on efficient and effective oil and gas production. The scope and extent of these regulatory changes may have far-reaching consequences for the oil and gas industry in California. As part of its pre-rulemaking process, CalGEM is hosting community workshops and accepting public comments regarding its proposed regulatory changes.

I.      WHY IS CALGEM HOSTING WORKSHOPS?

While CalGEM’s materials on its pre-rulemaking process do not explain the exact nature or effect of these workshops, CalGEM’s workshops align with its new focus and November 2019 announcement of new oil and gas initiatives.  Effective January 1, 2020, Assembly Bill 1057 changed DOGGR’s name to CalGEM and updated CalGEM’s focus from development and production of petroleum resources to transitioning to a low-carbon future and protecting public health, safety and the environment.  In addition, last November CalGEM released a series of initiatives targeting certain oil and gas extraction methods, intended to safeguard public health and the environment.  The November initiatives include:

  1. Imposing a moratorium on new oil extraction wells that use high-pressure steam to break oil formations below the ground;
  2. Announcing new rules for public health and safety protections near oil and gas extraction facilities would be updated and strengthened; and
  3. Completing an independent audit of CalGEM’s permitting processes for well stimulation and underground injection control and a scientific review of pending well stimulation permits to ensure public health, safety and environmental protections are met prior to approving each permit.

These initiatives are in line with the State of California’s overall climate goal of achieving carbon neutrality by 2045.  California intends to meet this goal, in part, by decreasing fossil fuel dependence and consumption. Continue Reading

CalGEM Issues Notice to Operators Regarding Cyclic Steam Moratorium

Oil rig at sunsetNearly two months ago, on November 19, 2019, the Department of Conservation’s Division of Oil, Gas and Geothermal Resources[1] (“DOGGR”) announced a moratorium on approvals of new oil extraction wells that use a high-pressure cyclic steaming process to break apart a geological formation to extract oil.

The announcement did not contain much, if any, detail for the timing of the regulatory framework needed to implement the moratorium, or how it would be carried out in practice.  Finally, on January 7, 2020, the California Geologic Energy Management Division (“CalGEM”) (formerly DOGGR) issued its long-awaited Notice to Operators regarding the moratorium (“NTO”) that offered industry some guidance on how the moratorium will be put into place and how it will be tailored over time.  The NTO expands on DOGGR’s November announcement, and states that the moratorium applies to new projects and wells that inject steam underground at high pressure to break rock formation and allow oil production.  The moratorium does not affect proposed projects that use cyclic steaming at pressures that are demonstrated to take place below the fracture pressure.

During the moratorium, CalGEM, in consultation with experts from the Lawrence Livermore National Laboratory, will review the practice of high-pressure cyclic steam operations above the fracture pressure to determine whether such operations can be performed safely, and if so, to identify specific criteria to be incorporated into CalGEM’s regulations.  The NTO states that this review could lead to new safety requirements for cyclic steam above the fracture pressure, updated regulations, or an indefinite halt on new projects using this technique.

The NTO is available here: https://www.conservation.ca.gov/calgem/for_operators/Pages/NoticetoOperator.aspx

[1] As of January 1, 2020, DOGGR is now the California Geologic Energy Management Division, or CalGEM.

California SWRCB Launches Senate Bill 205 Compliance Page

This information is provided as a follow-up to our blog post titled “Senate Bill 205 Imposes New Requirements for Industrial Companies in California” published on January 3, 2020.

The State Water Resources Control Board (“SWRCB”) published a new page on its website that provides implementation information for Senate Bill 205.  This page includes helpful information on Senate Bill 205, business requirements, city and county requirements, permit application information, and resources for compliance. Continue Reading

Senate Bill 205 Imposes New Requirements for Industrial Companies in California

Last fall, the California Legislature enacted Senate Bill 205 in an effort to more effectively control stormwater pollution from regulated industrial companies.  Effective January 1, 2020, an industrial company will not be able to receive an initial business license or business license renewal unless it can demonstrate compliance with the National Pollutant Discharge Elimination System (“NPDES”) stormwater permit program.  Continue Reading

Southern California Environmental Law Update

This is the first in a series of posts to provide the latest on environmental and legal developments affecting oil and gas operations and development and other industries in Los Angeles and adjacent counties, as well as the southern San Joaquin Valley. In this post, we’ll provide an update on legislation proposed in 2019 that affects industry in southern California, implementation of significant legislation previously adopted, and initiatives in Los Angeles to limit oil and gas operations.

AB 617 Implementation

The stated goal of AB 617 (Garcia, 2017) is to protect communities with disproportionate levels of air emissions and provide stricter penalties for certain infractions by regulated entities. In line with AB 617, the California Air Resources Board (CARB) is implementing the Community Air Protection Program and finalized its first annual selection of communities for participation in the Program in September 2018. Air districts are now identifying candidate communities to be considered for the second year of the Community Air Protection Program. CARB isn’t likely to vote on the selections until later in 2019.

In the first round of community selection, South Coast Air Quality Management District (South Coast Air District) chose (1) Wilmington/West Long Beach/Carson; (2) San Bernardino/Muscoy; and (3) Boyle Heights/East Los Angeles/West Commerce. On September 6, 2019, South Coast Air District’s Governing Board approved Community Emission Reduction Programs for these areas. Most of the plans set goals for action, and enhanced enforcement, rulemaking and incentive grants will follow. The plan for San Bernardino/Muscoy focuses on truck, rail bus traffic, warehouses (as an indirect source), concrete and asphalt batch plants, and rock and aggregate plants. The plan for Boyle Heights/East Los Angeles/West Commerce focuses on neighborhood and freeway truck and bus traffic, railyards, metal processing facilities, rendering facilities, auto body shops, and general industrial facilities, along with reducing exposure at schools, childcare facilities, community centers, libraries, and public housing projects. Continue Reading

California Court of Appeal Rejects “Substantial Factor” Test for Regional Board to Issue a Cleanup and Abatement Order to a Responsible Person

After years of investigation, the San Diego Regional Water Quality Control Board (“Regional Board”) issued a cleanup and abatement order (“CAO”) to San Diego Gas & Electric Company (“SDG&E”) after finding that SDG&E caused or permitted waste to be discharged into the San Diego Bay, and thereby created, or threatened to create, pollution and nuisance conditions.  SDG&E contested its designation as a “responsible person” under California Water Code section 13304 and petitioned for a writ of mandate to have the CAO vacated, arguing that the nuisance element of section 13304 must be construed in light of common law nuisance principles, and that the Regional Board had not demonstrated by substantial evidence that SDG&E’s actions were a substantial factor in creating, or threatening to create, a condition of pollution or nuisance.  In furtherance of this argument, SDG&E relied on two cases, City of Modesto Redevelopment Agency v. Superior Court (2004) 119 Cal.App.4th 28 (Modesto I) and City of Modesto v. Dow Chemical Co. (2018) 19 Cal.App.5th 130 (Modesto II), stating that the Modesto cases required application of the “substantial factor” causation test to determine whether SDG&E created or threatened to create a condition of pollution or nuisance.  The Superior Court of San Diego County denied the writ, and SDG&E appealed.

In June, the California Court of Appeal, Fourth Appellate District upheld the trial court’s denial and held that SDG&E was properly designated as a “responsible person” under section 13304.  The appellate court distinguished the Modesto cases cited by SDG&E, stating that the fact that discharged solvents constituted a nuisance was never in dispute in the Modesto cases.  Instead, the Modesto cases  focused on “the issue of causation in the context of whether defendants who had no physical control over the discharged waste…could be found a ‘cause’ of the discharge based on the equipment they designed or instructions they gave.”  (SDG&E v. San Diego Regional Water Quality Control Board, D073968, p. 20.)   The court held that the nuisance creation element of section 13304 does not require application of the common law substantial factor test for causation, and that a Regional Board is not required to find that a person was a substantial factor in creating a nuisance prior to issuing a CAO to that person.  Section 13304 requires that a Regional Board establish a causal or connecting link between a person and an actual or threatened discharge of waste into state waters and that the discharge of waste created, or threatened to create, a condition of pollution or nuisance before issuing a CAO.  Because substantial evidence supported the Regional Board’s finding that waste discharged by, and directly attributed to SDG&E, created, or threatened to create, a condition of pollution or nuisance, the Regional Board’s CAO issued to SDG&E was valid.

The appellate court opinion can be found here.

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