13 August 2018

Sidley Environmental Trends

Topics discussed this week include:

  • Manufacturer held liable for asbestos-related injury stemming from replacement parts it did not make.
  • Novel watershed permit issued for Cape Cod towns.
  • CERCLA claims constitutionally barred against state government entities.
  • EPA to revisit Wood Heater New Source Performance Standards.
  • BLM must consider downstream greenhouse gas releases under NEPA.

Manufacturer held liable for asbestos-related injury stemming from replacement parts it did not make. A New Jersey appeals court has ruled that manufacturers of products with asbestos-containing components have a duty to warn users of replacement parts with the same risk, even if they don’t make them. In Whelan v. Armstrong, the plaintiff sued a number of companies claiming his mesothelioma was caused by exposure to asbestos during his work as a plumber and mechanic from the 1950s to 1971. The companies argued, in part, that they had no liability for replacement parts they didn’t manufacture.

The court found that if a product was marketed to end users containing asbestos parts that were “integral” to its function, and the manufacturer was aware that replacement parts would eventually be needed, it has a duty to warn. The court stated that “A product that contained asbestos when it was supplied by the manufacturer, with no warning as to the dangers posed by the asbestos-containing component, and that contained asbestos when encountered by a worker years later, remains in substantially the same defective condition, whether or not its original asbestos has been replaced with other asbestos.”

A similar issue, in the maritime context, is the subject of a federal circuit split. The U.S. Court of Appeals for the Sixth Circuit has held that a defendant cannot be held liable for injuries allegedly caused by components that are manufactured, sold and distributed by third parties and that are added to the defendant’s products post-sale, as a manufacturer is liable for only the injuries that it causes, not for those caused by others. However, the Third Circuit has held that a defendant may be held liable for injuries caused by the products of a third party. Accordingly, a petition for review was filed with the U.S. Supreme Court that urges the court to resolve the circuit split.

Novel watershed permit issued for Cape Cod towns. The Massachusetts Department of Environmental Protection has issued a first-of-its kind “watershed” permit. Instead of issuing individual permits, the Cape Cod towns of Brewster, Chatham, Harwich and Orleans were issued a joint permit that addresses water quality concerns. None of the towns has a municipal public sewer system, and most homes rely on septic systems. The towns have grown, and the additional septic systems installed have leaked excess nitrogen to the point where fish and their habitats are being harmed.

The 20-year permit, issued after consultation with the Environmental Protection Agency (EPA), allows the towns to reduce nitrogen pollution through efforts like fertilizer reduction and improved aquaculture. Each town has its own nitrogen removal target, and the towns must meet and show progress through reports every five years.

CERCLA claims constitutionally barred against state government entities. The U.S. Court of Appeals for the Fifth Circuit has ruled that a group of Texas state agencies and universities cannot be sued for funding cleanup activities at a Superfund site, as the agencies and schools have sovereign immunity as arms of the state. (Oil Recovery Site Potentially Responsible Parties Group v. Railroad Commission of Texas, et al., case number 17-20361).

The plaintiff had originally sued more than 1,200 parties that it believed was responsible for environmental remediation costs for the cleanup of a Superfund site in Pasadena, Texas, under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The Texas Department of Transportation, Texas A&M University and eight other agencies and schools argued that they were immune from the lawsuit, as sovereign immunity under the Eleventh Amendment bars lawsuits against states and arms of the state unless the state consents to the suit or Congress abrogates that immunity.

The court found that CERCLA does not circumvent that immunity. Each named agency and school was included in the state budget, receives substantial funding from the state treasury, lacks local autonomy, has statewide regulatory power and is overseen by state officials. Therefore, they were rightfully “arms of the state,” afforded sovereign immunity.

EPA to revisit Wood Heater New Source Performance Standards. The EPA will soon propose to postpone the compliance date for selling wood stoves that do not comply the 2015 New Source Performance Standards for new residential wood heaters. The rule required manufacturers to redesign wood heaters to emit fewer pollutants. Industry argued that most forced-air furnaces would not be able to comply with the rule’s technology requirements, and, at a minimum, retailers need a chance to sell off their existing stocks of wood stoves before the new rules take effect.

On Aug. 3, the EPA sent a proposal for review to the Office of Management and Budget that would allow retailers “a period of time” after the May 2020 compliance date to sell units that were manufactured before the compliance deadline. This action comes in the midst of litigation challenging these standards. In April, the EPA asked the U.S. Court of Appeals for the District of Columbia Circuit for more time to file its response to the lawsuit, saying it has decided to take another look at its 2015 regulation.

BLM must consider downstream greenhouse gas releases under NEPA. A federal judge in Montana has directed the Bureau of Land Management (BLM) to conduct a new National Environmental Policy Act (NEPA) review of management plans for the fossil fuel-rich Powder River Basin (PRB), to consider the downstream greenhouse gases (GHGs) that could be released if the fuel is extracted and burned. However, Judge Brian Morris of the U.S. District Court for the District of Montana declined to enjoin any leasing in the region or to vacate the 15 resource management plans (RMPs) at issue in the suit. (Western Organization of Resource Councils, et al. v. BLM, et al.)

In March, Judge Morris ruled that BLM violated NEPA for failing to assess the downstream GHGs of the fossil fuel that could be extracted under the plans. However, he declined to rule on the appropriate remedy. BLM attorneys asked the judge to remand the record of decision supporting the RMPs without vacatur for corrective NEPA analysis. In his ruling, Judge Morris largely adopted the remedy proposed by BLM. BLM must now complete new coal screening and remedial NEPA analyses by Nov. 29, 2019, that consider the GHGs that could be released under the plans. The order also requires that any new or pending coal, oil or gas resources subject to two of the RMPs undergo a comprehensive NEPA environmental analysis.

Morris’ ruling was the second to require downstream GHG analyses. In August 2017, the U.S. Court of Appeals for the District of Columbia Circuit ordered the Federal Energy Regulatory Commission to consider the GHGs emitted when gas from a major southeast pipeline network would be burned for electricity at existing and planned power plants in Florida.

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