Our latest summary of some recent developments in the courts and the federal agencies includes a unique case involving salt marshes adjacent to San Francisco Bay.
THE FEDERAL COURTS
A Wolf Among the Butterflies
On October 13, 2020, the U.S. Court of Appeals for the District of Columbia Circuit decided the case of North American Butterfly Association v. Chad Wolf, Acting Secretary of the Department of Homeland Security. The National Butterfly Center is a 100-acre wildlife sanctuary located in Texas along the border between the United States and Mexico, and in 2017, the DHS exerted control over a segment of the sanctuary to construct facilities to impede unauthorized entry into the United States. It was alleged that the government failed to provide advance notice to the sanctuary before it entered the sanctuary to build its facilities. The Association filed a lawsuit to halt these actions for several reasons, including constitutional claims and two federal environmental laws (NEPA and the Endangered Species Act), but the lower court dismissed the lawsuit because of the provisions of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). That law forecloses the applicability of these laws if the Secretary of DHS issues appropriate declaration. On appeal, the DC Circuit held, in a 2 to 1 decision, that the lawsuit should not have been dismissed. The plaintiffs had standing to file this lawsuit, but the jurisdiction stripping provisions of the IIRIRA, when invoked, required that the statutory claims be dismissed as well as a constitutional Fourth Amendment search and seizure claim. However, the plaintiff’s Fifth Amendment claim that the government’s actions violated their right to procedural due process must be reviewed. The Center was given no notice of the government’s claims and no opportunity to be heard before these actions were taken. The dissenting judge argued that the court was being asked to review a non-final decision, which it should not do.
Keeping Bureau of Land Management Authority Rooted in the Ground
On October 8, 2020, a Wyoming federal court held in State of Wyoming v. U.S. Department of the Interior that a 2016 Department of the Interior federal methane rule applicable to oil and gas operations on federal lands was illegal because the Department and the Bureau of Land Management (BLM) had no statutory authority under the Mineral Leasing Act to promulgate air quality regulations. The decision is fairly long (57 pages), with the court explicating the tangled history of this rule and its challenges in other courts. As this court points out, operators of oil and gas production facilities must manage the disposition of excess methane gas that is generated along with the production of oil and gas. Venting and flaring of this excess gas are used for reasons of safety or a lack of infrastructure to transport the gas. Believing the management of these byproducts is an air quality issue, the Department subjected its management to special BLM air quality controls. However, the court concluded this regulatory decision conflicted with the primary authority of the EPA to formulate these controls under the Clean Air Act. Accordingly, the court vacated these rules, with a few exceptions. (Similar litigation continues in another circuit—the Ninth Circuit.)
The CWA Holds Sway Over Salt Ponds and the Bay
On October 5, 2020, the U.S. District Court for the Northern District of California decided a novel Clean Water Act case, San Francisco Baykeeper, et al., v. U.S. Environmental Protection Agency. The plaintiffs filed a lawsuit challenging a 2019 Clean Water Act jurisdictional determination applicable to commercial salt pond operations in the southwestern San Francisco Bay area. Prior to its commercial development, the area was a tidal salt marsh. Over the years, using a series a permits from the U.S. Army Corps of Engineers, the area was converted into the Redwood City Salt Plant well before the Clean Water Act (CWA) was enacted in 1972, and its new regulatory protections for “water of the United States.” In May 2019, EPA (not the Corps of Engineers) made a jurisdictional determination that there were no CWA jurisdictional waters at the salt production complex. This determination was based on the agency’s conclusion that the site was transformed into “fast land” before the CWA was enacted, and Ninth Circuit precedent. The court rejected EPA’s determination, holding that the agency erroneously relied on inapplicable precedent, and not on the CWA’s many rules interpreting “waters of the U.S.” over the years, especially those in existence in 2016. The court also noted that there appears to be a hydrological connection between the Bay and the salt ponds. The court remanded the matter to the agency to consider the issue anew, and to evaluate the nexus.
Bureau of Land Management—Methane Rules, Rescinded
Regarding the BLM’s methane rules, it should be noted that EPA recently issued two new Clean Air Act rules that rescind the 2016 rules which established new standards for regulating the emission of methane, a greenhouse gas, from segments of the oi land gas production category. The Rescission Rule was published on September 14, 2020 (85 FR 57018), and was effective on publication, and a revised VOC Rule was published on September 15, 2020 (85 FR 57398), effective 60 days later. An administrative stay was issued by the DC Circuit, and briefs have been filed on behalf of the petitioners and the government.
SEC—Modernizing Reporting Obligations and Simplifying Compliance
On October 8, 2020, the SEC promulgated rules which modernize a number of standard SEC reporting obligations (i. e., 17 CFR Sections 229.101; 103; and 105). (See 85 FR 63726; the effective date is November 9, 2020.) These rules are intended to inform the public and investors of the description of the business, legal proceedings ,and the risk factors the business must evaluate. According to the SEC, these proposals were intended “to improve these disclosures for investors and to simplify compliance for registrants.” For example, the regulatory compliance disclosure requirements now include as a topic “all material government regulations,” not just environmental laws. The sanctions disclosure threshold was increased from $100,000 to $300,000, but the agency declined to require as a discussable risk factor, how climate change will affect a registrant’s access to raw materials. Since environmental disclosures are such an important consideration for many companies, these changes may be of interest.