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WWW.THERECORDER.COM | THE RECORDER WEEK OF APRIL 9, 2012 | 15 A SPECIAL SUBSTANTIVE COLLECTION FROM THE RECORDER EnvironMEntAL LAw A case for early mediation . . . . . . . .16 Richard J. McAdams Renewable energy — it’s about location . . . . . . . . . .18 Mathew J. Swain and Ashley E. Breakﬁeld Cap-and-trade uncertainty . . . . . . . . . . . .19 Robert Lawrence Court sets aside recent GHE limits . . . . . . . . . . . .20 Todd Williams See more In Practice articles online at therecorder.com Supreme Court weighs PPACA ISTOCKPHOTO Resolving arbitrability Second District creates conﬂict in appellate procedure Proposition 65 alive at 25 ADR hits Europe Offshore investment A quarter century after passage, the California law still helps consumers make New way of doing business informed choices about products affecting their health Chevron fails to stall enforcement occupational, environmental or consumer- pertise used in developing regulations. product exposures they may experience every The office has adopted regulations in Title 27 UCL standing day. of the California Code of Regulations that pro- vide compliance assistance via voluntary “safe The right to ‘stay put’ Carol J. Monahan-Cummings A sELf-ExECutinG LAw harbor” provisions setting no significant risk A unique aspect of the law, which can be very levels for carcinogens and maximum allowable What in-house counsel want confusing to businesses and their counsel, is dose levels for developmental or reproductive Environmental Law the way in which the law was structured to be toxins. These safe harbor levels can help busi- Shedding light on self-executing. Efforts were made by the authors nesses determine whether a warning is required ‘Prometheus’ T of the initiative to limit the potential for govern- for exposures to listed chemicals. wenty-five years ago, California vot- mental interference or foot-dragging in the list- Businesses must still quantify the anticipated A new group faces ers overwhelmingly passed an ini- ing of chemicals or enforcement of the statu- level of exposure from a given activity or prod- disenfranchisement tiative called “The Safe Drinking tory mandates. Rather than establish a tradi- uct before they can apply the safe harbor level. Water and Toxic Enforcement Act tional regulatory program, Prop 65 requires the Other regulations provide exceptions to the Decisions that shape of 1986” (Health and Safety Code governor to publish a list of chemicals known warning requirements for certain exposures the workplace §25249.5). The initiative is commonly known to cause cancer or developmental or reproduc- (see for example, §25501 — exposures to natu- as Proposition 65. This unique law requires tive harm. Twelve months later, businesses are rally-occurring chemicals in foods), suggested Path for generics open businesses with 10 or more employees to pro- automatically prohibited from knowingly and content and methods for providing warnings in biotech vide warnings when they expose people to intentionally causing an exposure to those (§25601 et seq.), scientific methodologies for chemicals known to cause cancer or develop- chemicals without an adequate warning. calculating exposures that require a warning, So your paralegal is mental or reproductive harm. It also prohibits and procedures for requesting technical advice applying to law school the discharge of these chemicals into sources thE LEAd AGEnCy And its rEGuLAtory concerning the application of the law to various of drinking water. In part, Prop 65 is a “right to funCtions situations (§25204). The office provides a variety know” law. Unlike many other federal or state Since 1991, California’s governors have del- of helpful information on its website (www.oe- laws, it does not directly regulate the use, emis- egated their listing duties to the Office of Envi- hha.ca.gov/prop65.html), including the current sion or exposure to any chemical. Instead, it ronmental Health Hazard Assessment, within list of chemicals, the statute, regulations and simply requires businesses to inform consum- the California Environmental Protection Agen- case law relating to the act, along with scien- ers when they are being exposed to the chemi- cy. This office is staffed by scientists and physi- tific information and fact sheets for individual cals, providing essential information that allows cians rather than traditional regulators. These listed chemicals. people to make informed choices regarding the professionals comb the scientific literature on chemicals, determine whether sufficient evi- wArninGs Carol J. Monahan-Cummings has been the dence exists for listing and provide support to Businesses can be sued by state and local chief counsel for the state Oﬃce of Environ- the state’s “qualified experts,” a group of Cali- prosecutors or private individuals acting in the mental Health Hazard Assessment since 2003. fornia experts who independently determine public interest for failing to warn about chemi- She spends about 80 percent of her time on is- whether a chemical causes cancer or develop- cal exposures related to their products or ser- sues related to Proposition 65. mental effects. They also provide scientific ex- See MONAHAN-CUMMINGS page 21 16 | WEEK OF APRIL 9, 2012 THE RECORDER | WWW.THERECORDER.COM A case for early mediation Coming to the table at the outset of the dispute often leaves parties with broader options for negotiations and mutually acceptable resolution does not mandate mediation, but allows the diation are set to expire on Jan. 1, 2016. successful negotiations in environmental court to “invite the parties to consider” al- There is little evidence that these proce- cases, including the following: ternative dispute resolution, and addresses dures are extensively used or widely suc- 1. A forum recognizing equality: The set- such potential issues as statutory time lim- cessful. While many experienced land use ting for early stage mediation must be one richard J. McAdams its and “open meeting law” requirements attorneys achieve results outside the court- of mutual respect and equally-shared com- that could arise during negotiations pursu- room, it seems more a product of direct pro- munication. All involved must have confi- ant to the statute. fessional relationships developed over dence in the process from the outset. Un- Environmental Law time, rather than the result of the codified fortunately, many attempts at early meet- F procedures. Where such trust does not ex- ings involve only a developer’s staged slide- or many years, the California Leg- Early-stage mediation ist between disputants, there are unan- show attempting to persuade an invited islature has sent strong e ncour- swered questions about the newest statute audience or an uninterrupted barrage of agement to opposing litigants in offers the advantage of with one side concerned about delay and criticisms from citizen groups aimed at the land use disputes to resolve their an open, more global frivolous claims and the other uncertain project proponents. Compare such unpro- issues through mediation. It has about the tolling of limitation periods. In ductive events to a facilitated roundtable been the declared intent of several statu- framework for the addition, there is shared concern over the discussion free of any power imbalance. tory enactments that matters broadly la- beled “environmental disputes,” such as exchange of positions, short time for the lead agency to respond and the fact that the law is silent as to any 2. Motivated parties: Whether arising from developed trust, time pressure from CEQA challenges, contested planning and thus broadening the role of the project proponent. external sources, including public agencies, zoning decisions, and disputed permit ap- Perhaps these doubts could be overcome or other factors, a gathering of strongly mo- plications could benefit from negotiations chances for a creative by such measures as (1) a request, not just tivated parties gives impetus to results. It is among the parties and resolution outside and mutually beneficial a “demand”— for mediation that contains a truism that participants who enter into of the courtroom. a suggested framework for negotiations — mediation with a desire to resolve a dispute California Government Code §66030 et resolution. truly an “invitation” to mediate; (2) the lead and who are open to a creative exchange of seq., set forth what the Legislature described agency’s willingness to allow a response ideas have the most productive negotia- as “formal mediation processes for land use More recent enactments (California Pub- from the real party in interest; (3) the real tions. disputes” brought in superior court, recog- lic Resources Code §21167, et seq.) have party’s participation; (4) a mediator’s abil- 3. Involvement of key decision makers: nizing the delay, uncertainty and cost of been specifically directed to CEQA cases. ity to work with the parties to establish a The mediation needs to include the major such contentious litigation. The legislation Section 21167.8 mandates a “settlement framework of issues, a time table for nego- players — people with the authority to meeting” in the nature of a “meet and con- tiations and resolution of any issues con- speak and act on behalf of their constitu- Hon. Richard J. McAdams (Ret.) brings fer” after service of a petition or complaint cerning statutory time limits. ents, or at least with a minimum of outside more than 40 years of legal knowledge and and within certain time limits. The latest consultation and advice. experience in his approach to ADR. He is enactment, §21167.10, effective July 1, 2011, A CAsE for EArLy MEdiAtion 4. A carefully structured process: From recognized as one of the most accomplished provides a method for a prospective peti- In spite of well-intentioned statutes and the outset, a comprehensive framework for judges on California’s appellate bench for tioner to make a pre-litigation mediation the commendable efforts of many attorneys mediation should be established. Such a his engagement and leadership in judicial request to the lead agency which the agen- and parties who voluntarily and indepen- “memorandum of understanding” serves education and administration. He can be cy may accept and “proceed with media- dently engage in alternative processes, as a set of ground rules and can include pro- reached at firstname.lastname@example.org. tion” or deny. Key provisions affecting me- there is a strong argument to be made for visions for such matters as the anticipated bringing stakeholders together much ear- issues for discussion, time deadlines (with lier than the courthouse steps. This model freedom to extend by agreement), the role Cox, Castle & Nicholson LLP congratulates envisions a forum to be held at the earliest of the mediator, the need and mechanism possible time — long before positions have for gathering and exchanging critical infor- our Northern California Environmental, hardened, emotions and tempers have mation, including necessary scientific data Land Use & Natural Resources lawyers on flared, heavy financial commitments have or other expert-generated materials, confi- been made, and before the involvement of dentiality, anticipated implementation is- being selected as one of the Leading a decision making board or agency. Inter- sues and allocation of mediation costs. Northern California Environmental Law ested parties and potential adversaries 5. Confidentiality: Although the final would convene to listen and learn, ex- product of most environmental settlements Practice Groups. change views, and most importantly, seek should best be open and subject to public a path toward a mutually beneficial out- scrutiny, absolute confidentiality should come through structured negotiations. govern the process of mediation. Any ques- Cox, Castle & Nicholson LLP handles Greater support needs to be given to such tion of keeping constituent groups informed environmental, land use and natural early-stage mediation — support from the should be resolved in the ground rules. resources matters throughout the state. Legislature as well as the legal profession, 6. Perseverance: The parties must be will- the government and the business and en- ing to commit the necessary time for nego- Our 25 attorneys focused in these practice vironmental/citizen advocacy communi- tiations, commensurate to the nature of the areas are leaders in nearly every aspect of ty. dispute, and to persevere. Experience Early-stage mediation offers many ad- shows that even if initial sessions do not environmental law, including regulatory vantages. There are, of course, the financial, achieve full resolution, participants who are compliance, transactional counseling and emotional and control-over-outcome ben- open to the opportunity to engage in further efits inherent in all mediations, as well as mediation are able to break off, re-examine litigation matters. They also regularly the advantage of confidentiality. In envi- positions, and return to overcome what represent developers and providers of ronmental cases, there is a vital additional once seemed to have been an unbreakable advantage to an early gathering: the ability impasse. renewable energy, including work on some to consider broad issues. One of the prima- Across the nation and around the world, of the largest renewable energy projects in ry limitations with mediation during or on there are stunning examples of mediated California. the eve of litigation is that the topics “on the environmental disputes, including some table” tend to focus on specific issues as that seemed incapable of commencing, let framed by the litigation — e.g., whether alone resolving. From New York’s Hudson proper CEQA procedures were followed or River to Port Townsend, Wash., citizen whether the record sustains a finding of a groups, developers, utilities and public project’s conformity with an ordinance or agencies have successfully resolved seem- a general plan. It is difficult — and often ingly intractable differences through me- impossible — to move the parties beyond diation. the narrow issues. Early-stage mediation Perhaps no better pre-litigation example offers the advantage of an open, more glob- exists than one closer to home, the Tejon al framework for the exchange of positions, Ranch Conservancy, described as the “Holy WWW.COXCASTLE.COM thus broadening the chances for a creative Grail of conservation in California” by Joel and mutually beneficial resolution. Reynolds of the Natural Resources Defense Of course, it is overly idealistic to believe Council. This dispute arose out of the po- that by merely gathering, a settlement will tential development of the largest privately SAN FRANCISCO LOS ANGELES ORANGE COUNTY be magically created. There are many fac- owned property in the state, involving four tors at play that provide a foundation for See McADAMS page 21 LEADING ENVIRONMENTAL PRACTICES | 17 T o create our list of leading environmental practices Editor Liz Enochs and Substantive Law Editor Vitaly Gashpar in the San Francisco Bay Area, we asked law firms to also surveyed lawyers knowledgeable about environmental submit nominations that included up to five key play- law for their confidential assessments and suggestions of ers and some of their recent notable results. Recorder Projects practices that ought to be included in a go-to list. ALLEn MAtkins LECk GAMBLE MALLory & nAtsis MEyErs nAvE riBACk siLvEr & wiLson Sandi Nichols, (pictured) James Burroughs, David Cooke, James Amrit Kulkarni (pictured), Kenton Alm, Julia Bond, Timothy Meeder, Robert Wyatt Cremin, Steve Mattas Competitors say the firm has one of the best environmental practices, with industrial A household name among governmental entities, the firm routinely scores wins for clients relying on it to ensure business as usual. Active in compliance, permitting and its municipal clients at trial and on appeal. It also advises on CEQA, water rights and litigation. The firm is also an annual sponsor of the State Bar Environmental Law Con- land use issues, and represents municipalities in multimillion-dollar development proj- ference in Yosemite. ects in Northern California and across the state. Morrison & foErstEr BArG Coffin LEwis & trApp Christopher Carr (pictured), Michele Corash, David Gold, Zane John Barg (pictured), Richard Coffin, Stephen Lewis, R. Morgan Gresham, Michael Jacob Steel Gilhuly, Brian Haughton Its lawyers are shaping the look of the Bay Area. Partner David Gold leads the firm’s Barg Coffin gets props from competitors, and has secured big wins in the Supreme team in its permitting work in CEQA and natural resources in development of a 3.1 mil- Court, as well as federal and state appellate courts. Barg Coffin attorneys are also very lion-square-foot campus for one of the Bay Area’s largest tech companies. And partner active in the Bar Association of San Francisco’s environmental law section, with attor- Zane Gresham heads a team in planning, entitlements and infrastructure development neys serving in executive roles. in the $1.5 billion Oyster Point Marina project. On the litigation front, in 2011, the firm successfully defeated two class actions consolidated as MDL cases on behalf of 19 mem- bers of the Grocery Manufacturers Association. Cox CAstLE & niChoLson nAturAL rEsourCEs dEfEnsE CounCiL R. Clark Morrison (pictured), Stuart Block, Robert Doty, Anne Mudge, Michael Zischke Cox Castle prides itself on being at the forefront of climate change, helping clients Michael Wall (pictured), Johanna Wald, Kate Poole, Selena Kyle navigate alternative energy frontiers. The firm represents the builder of the world’s larg- est wind energy project. It also represents clients in CEQA and environmental cleanup The NRDC has fought many of California’s most critical environmental battles. Michael litigation. Cox Castle is cited by peers as among the best. Wall, who heads the litigation team, forced a cleanup of the Suisun Bay “ghost fleet,” won a landmark environmental justice victory in Tennessee, and led a trial to safeguard the delta smelt. Johanna Wald protects wild places, steering renewables away from sensitive lands. Kate Poole leads the group’s delta protection work. Selena Kyle recently had the fArELLA BrAun & MArtEL Legislature’s $150 million raid on energy efficiency programs held unconstitutional. shEppArd, MuLLin, riChtEr & hAMpton James Colopy (pictured), James Bruen, Christopher Locke, Paul “Skip” Spaulding III, David Lazerwitz The firm’s work ranges from environmental and permitting work for an alternative energy company to defending a railroad in a mass tort. Its lawyers represent some of the Robert Uram (pictured), M. Elizabeth McDaniel, Judy Davidoff, top players in the alternative energy market in the development of two solar photovol- Arthur Friedman, Neil Popovic taic facilities. In 2010, the firm as plaintiffs counsel brought to a successful resolution a pair of complex cases on behalf of a real estate developer. Many of Farella’s environmen- The group combines top-level talent with a breadth of expertise in the field. It assists tal lawyers serve in leadership roles at Bay Area bar associations. clients in getting alternative energy projects off the ground, while also doing CEQA-re- lated work on behalf of private and municipal clients. On the litigation side, the firm recently scored a win on appeal, affirming a dismissal of a putative class action. LozEAu drury wEndEL, rosEn, BLACk & dEAn Michael Lozeau (pictured), Richard Drury, Douglas Chermak, Christina Caro Greggory Brandt (pictured), Bruce Flushman, Stephen McKae, With just five attorneys, this small Oakland firm punches above its weight, thanks to Christine Noma, Jonathan Redding name partners Michael Lozeau and Richard Drury’s years of expertise in CEQA, as well as clean air and water laws. Its lawyers have won a unanimous California Supreme Court The firm boasts a broad practice, serving clients ranging from individual landowners ruling requiring CEQA review for a ConocoPhillips diesel project, secured a precedent to multinational corporations. Partner Bruce Flushman was involved in the exchange that the state Department of Water Resources must abide by the California Endangered and sale of the Port of Oakland public trust land as part of a $35 million development. Species Act, and used the courts to force the state’s two largest school bus companies to Attorneys Stephen McKae and Christine Noma are founders and officers of the Alameda curb emissions. County Bar Association’s environmental, land use and sustainability section. 18 | WEEK OF APRIL 9, 2012 THE RECORDER | WWW.THERECORDER.COM Renewable energy — it’s about location When it comes to wind and solar farms, suitable, unencumbered land is California’s scarce resource mented by local governments, typically but the courts have not resolved whether this or council to make five mandatory findings, counties. It authorizes local governments to extends to utility-scale renewable energy including that there is no noncontracted establish agricultural preserves and offer projects or is limited to facilities that support land nearby that is suitable and available for contracts to landowners that provide prop- existing agricultural uses. the project, and that cancellation will not re- erty tax reductions in exchange for long-term Wind farms appear amenable to a com- sult in the removal of adjacent land from ag- Mathew J. swain and Ashley E. Breakfield restriction on the use of their land to agricul- patibility finding. While the size of the over- ricultural use or cause discontiguous pat- tural or compatible open space uses. Until all project site may be several thousand terns of urban development. recently, these contracts had a 10-year initial acres, each wind turbine can be separated The second, and more promising option Environmental Law term, and contracted land in Farmland Se- by hundreds of feet, depending on height for renewable energy developers, is where I curity Zones had 20-year initial terms. Under and rotor diameter, and each tower’s foun- the city or county finds that cancellation is n the current renewable energy boom, Assembly Bill 1265, passed in 2011, local gov- dation occupies a relatively small footprint in the public interest. Specifically, the local developers of utility-scale solar and ernments may reduce the contract term from within the project boundary. Because the government must find that other public con- wind projects share a common need: 10 to nine years and from 20 to 18 years. turbines are widely spaced and the rotors are cerns substantially outweigh the objectives large tracts of relatively flat, undevel- As of 2009, there were approximately 15 far above the ground, agricultural activities of the act and there is no noncontracted land oped land. California possesses an million acres across 54 counties under Wil- can continue to be carried out within the nearby that is both available and suitable for abundance of such land with high solar and liamson Act contracts — about half of all project area. In fact, many counties, such as the alternative use. Indeed, the Department wind resource potential, but more than 30 farmland in California. Because utility-scale Kern County, have made general findings of Conservation has noted that “because it million acres are already under agricultural renewable energy developers need large that wind farms are compatible under the is the policy of the state to require that a por- production. One of the principal hurdles fac- tracts of contiguous land, typically hundreds, act. tion of its energy is generated using renew- ing development on much of this agricul- if not thousands, of acres, they frequently Compatibility findings for solar farms able sources, it is logical to expect that a local tural land is the California Land Conserva- encounter parcels under Williamson Act prove more difficult. These projects consist jurisdiction could find that the siting of a so- tion Act, commonly known as the William- contracts, restricted to agricultural uses. Par- of dense installations of energy generating lar energy project makes the public interest son Act. ties interested in utilizing contracted land for equipment (e.g., arrays of photovoltaic pan- findings required for cancellation of a Wil- Passed in 1965, the Williamson Act seeks such projects have four options to move for- els) mounted close to the ground. This makes liamson Act contract.” The same can be ex- to stave off the loss of agricultural land to ward. it difficult for the land underneath the arrays pected for wind farms, although because urban development. The act is overseen by to support active agriculture use, and im- they have a greater chance of succeeding un- the Department of Conservation and imple- option 1: CoMpAtiBiLity findinG practical for the use of agricultural equip- der the compatibility option, they are more The first option is to obtain a finding from ment. Therefore, in most cases, such inten- likely to avoid seeking cancellation. Mathew J. Swain is an associate in Farel- the local government that the renewable en- sive development may be incompatible with Cancellation removes the agricultural use la Braun & Martel’s San Francisco oﬃce, ergy project is compatible with the act. Gen- agricultural or open space uses. restriction, but at significant expense. The where his practice emphasizes strategic erally, a use is compatible so long as it does The act provides a fallback option for proj- landowner is assessed a fee equal to 12.5 per- environmental permitting and compliance not significantly compromise, displace or ects that cannot obtain a compatibility find- cent of the fair market value of the property, advice on renewable energy projects. Ashley impair the current or future agricultural use ing. The local government may issue a con- which reduces this option’s appeal. E. Breakﬁeld is an environmental litigation and capability of the land, or result in sig- ditional use permit allowing the project to associate in Farella’s San Francisco oﬃce. nificant removal of adjacent contracted land be built on contracted land if, among other option 4: nonrEnEwAL The authors would like to thank Farella real from agricultural or open space use. In ad- things, the conditions will avoid or mitigate Nonrenewal is the last option for develop- estate associate Navjot Athwal for his con- dition, the act provides that “electrical facil- impacts to on- and/or off-site agriculture, the ing a renewable energy project on land un- tributions to this article. ities” are compatible uses as a matter of law, use is consistent with the purposes of the act, der Williamson Act contract. The process is and the findings consider the productive ca- straightforward: The landowner files a notice pability of the land. of nonrenewal and waits out the remaining term of the contract, a minimum of eight option 2: years. The use restrictions remain in effect soLAr EAsEMEnt undEr AB 618 until the contract expires and the property In recognition of its competing policy di- taxes gradually increase to a fair market val- rectives to preserve agricultural land and ue assessment during the term of the cancel- open space on the one hand, and achieve a lation. Although this is a relatively straight- 33 percent renewable portfolio standard on forward option, it is the least viable from a the other hand, and perhaps in recognition project development standpoint. The expi- Kent Julia Tim Amrit Adam Steve of the “compatibility barrier” noted above, ration period is simply too long for project Alm Bond Cremin Kulkarni Lindgren Mattas California enacted a solar easement program developers to invest capital, lock down fi- last year under Assembly Bill 618. nancing or meet energy delivery deadlines Congratulations to our AB 618 authorizes parties to a Williamson Act contract, after approval by the Depart- under power purchase agreements. furthEr ChALLEnGEs Environmental Law ment of Conservation and in consultation with the Department of Food and Agricul- Other than nonrenewal, each option for ture, to mutually agree to rescind the con- developing a renewable energy project on Attorneys tract in order to simultaneously enter into a land currently under Williamson Act con- temporary solar-use easement. The term of tract bears the risk that it could be undone Recognized by the Recorder as one of the ‘Top 10’ the easement must be no less than 20 years. by the courts. The act provides that compat- Environmental Law Practice Groups in Northern California In addition, the local government must ibility findings may be challenged in court charge the landowner a 6.25 percent fee by any owner of land that is under William- CEQA & NEPA Tidelands Trust based upon the fair market value of the prop- son Act contract in the local jurisdiction, as erty at the time of rescission. well as all landowners within one mile of the Clean Water Act Climate Change This program is not applicable to all agri- subject land. In addition, any person that has & Water Rights Development Agreements cultural land, however. The subject land participated in the public process may chal- Airport Land Use & Vested Rights must not be designated as prime or unique lenge the issuance of a conditional use per- Compatibility Plans farmland, or of national importance, unless mit or contract cancellation by petitioning Development Fees the Department of Conservation determines the court for a writ of administrative man- Brownﬁelds & Exactions otherwise. In addition, the land must consist damus. How smoothly the new AB 618 solar CERCLA/RCRA General & Speciﬁc Plans of soils with significantly reduced agricul- easement program functions and is inter- tural productivity due to synthetic or natural preted by the courts also remains to be seen. Coastal Act Wetlands & Endangered chemical contamination or other physical Without a doubt, given the environmental Energy Species reasons. and financial stakes at issue, we can expect each option to be tested, challenged and in Solid Waste option 3: CAnCELLAtion many cases successfully utilized in the years The third option is for the landowner to to come. cancel the Williamson Act contract, which Moreover, obtaining adequate land is but 800.464.3559 www.meyersnave.com is both difficult and expensive, and disfa- one hurdle a renewable energy project de- vored by the courts. veloper faces. Obtaining the necessary per- There are only two circumstances under mits and entitlements is another, as is finding which a local government may approve can- a buyer for the power and obtaining suffi- cellation of a contract. The first is where can- cient financing. Then there’s building the cellation is deemed consistent with the pur- darn thing and connecting it to the grid. But poses of the act. This requires the local board it all starts with finding the right spot. WWW.THERECORDER.COM | THE RECORDER WEEK OF APRIL 9, 2012 | 19 Cap-and-trade uncertainty Implementation of AB32 is bogged down by delays every step of the way, creating a climate of speculation 2008, ARB revised its projected 2020 emis- comments. Most of the comments from ated a rulemaking in March 2011 sion levels downward to 507 million regulated utilities oppose the purchase (11-03-012) to determine how to distrib- tonnes equivalent, and revised the annu- limitations, arguing that these added lim- ute the proceeds of the auctions. In its al caps accordingly. This 15 percent re- itations on purchasing and trading are not original proposal on this topic, the CPUC robert Lawrence duction in the projected emissions reflects necessary or protective of ratepayers. asked interested parties to comment on the difficulty in predicting the appropriate Without assurances of cost recovery for ways to rebate proceeds taking into con- cap even when data are available. their purchases, and without free access sideration the goals of the program and Environmental Law Without current data, the task is even to allowance markets, utilities will be un- consumer fairness. The majority of utili- C more difficult. Since 2008, ARB has not able to purchase allowances in the most ties and consumer groups recommended alifornia’s Air Resources Board posted data regarding aggregate green- cost-effective manner. paying rebates to electric ratepayers. En- has missed a series of deadlines house gas emissions in California. Al- The CPUC is also considering another vironmental groups and renewable ener- in its greenhouse gas cap-and- though a mandatory reporting rule will thorny issue involving independent gen- gy developers urge continuing subsidies trade program, and has delayed improve the situation going forward, the erating entities from which utilities pur- for alternative energy and conservation. implementation again. On data for 2011 emissions have not been re- chase substantial amounts of electricity. A modified schedule issued in November March 27, Air Resources Board Chair Mary ported yet. No one knows whether the These sales usually take place pursuant to 2011 projected June 2012 as the date of Nichols announced that the allowance 2013 cap of 162.8 million tonnes of CO2 purchase agreements, and some of these issuance of a proposed decision on reve- auction scheduled for Aug. 15 would be equivalents will generate high or low al- purchase agreements do not allow some nue allocation. Until the nature of any re- postponed to the Nov. 14 auction. With a lowance prices. generators to recover their allowance bate program is understood, the net price compliance date of Jan. 1, 2013, the exten- The result of this uncertainty is that bid- costs from their utility customers. The effects of the auction program will remain sion exacerbates uncertainties relating to ders in the November auction will not problem occurs with pre-AB32 contracts, unclear. program implementation. have adequate information upon which as well as post-AB32 contracts, because The allowance auctions will be run by AB32, California’s Global Warming So- to base their bids. The August auction the parties subject to surrender require- a third-party private contractor selected lutions Act enacted in 2006, authorized would have assisted businesses in under- ments were first identified years after by ARB pursuant to a procurement pro- ARB to implement a range of actions to standing the market price for allowances, AB32 was enacted. The CPUC is consider- cess. The engagement of the contractor reduce greenhouse gas emissions in Cal- and in planning their businesses for 2013. ing whether and how to ensure that these and development of auction procedures ifornia to 1990 levels by 2020. A central Now, the first point at which businesses costs get paid. Failure to do so may mean are behind schedule. The original sched- component of the program was “market- will be able to understand the potential that operating some generation facilities ule called for the engagement of the auc- based” alternatives for regulating emis- financial impact of the cap-and-trade pro- will become uneconomical to operate, tion administrator and completion of the sions. ARB identified “cap-and-trade” as gram is when the results of the November which can result in blackouts and price auction procedures by February 2012. The the preferred market-based alternative in auction are released, approximately a spikes for electricity in periods of high de- auction procedures have not been pro- 2008. ARB adopted “final” regulations im- month before the compliance require- mand. posed yet. Since the auction procedures plementing the program in October 2011, ments start. At that point, regulated enti- The use of auction revenues is another have to be final by June for a rehearsal auc- after delaying the scheduled start date ties will be unable to plan investments to unresolved issue that could affect imple- tion in August, it is not clear that they can from Jan. 1 of this year to Jan. 1, 2013. In reduce emissions. If allowances are priced mentation. Allowances auctions will cost be completed in time. Elements of the its adopting resolution, ARB acknowl- too high, the only compliance alternatives California consumers and ratepayers a auction procedures may need to be issued edged then that there were some remain- will be moving business activities out of minimum of $650 million in the first year. by ARB for public review and comment, ing open issues that could require addi- California or reducing operations. The governor’s 2012 budget identifies $1 resulting in further delays. tional regulatory changes. Utilities may be in a better position gen- billion of revenues to be raised from cap- The cap-and-trade program is current- The basic elements of the cap-and-trade erally than regulated industries. Although and-trade auctions, $500 million of which ly being finalized for its debut in a Novem- program are by now familiar to Califor- utilities receive allowances “for free,” most is earmarked to offset governmental costs ber auction, after ARB recently delayed nians following AB32. ARB has established utilities return the allowances to ARB for associated with climate change. The re- the original August date. Several uncer- an annual cap on greenhouse gas emis- auction. In theory, the utilities bidding at mainder could be allocated to energy con- tainties affecting the program make it dif- sions for selected segments of the Califor- the upcoming auction can bid whatever servation, renewable energy investment ficult to predict whether the program can nia economy. The right to emit green- they want, because they are required by and other related programs. According to be successfully launched this year or to house gases will be represented by regula- law to serve their customers and comply the Legislative Analyst’s Office in a report plan for the consequences in 2013. In the tory “allowances,” each of which will au- with ARB’s requirements. As a result, they on Cap-and-Trade Auction Revenues is- remainder of 2012, AB32 watchers should thorize holders to emit one metric ton would normally be entitled to recovery sued on Feb. 16, the total revenues could anticipate multiple cap-and-trade devel- (tonne) of greenhouse gases (in carbon from ratepayers of costs incurred for com- be billions of dollars more than project- opments that will either help resolve these dioxide equivalents). Allowances will be pliance with law. But there is uncertainty ed. uncertainties or require further delays in allocated by ARB to regulated entities facing the utilities as well. By agreement with ARB the CPUC initi- the planned schedule. through a variety of mechanisms, includ- The California Public Utilities Commis- ing free distribution of most allowances sion clarified in August 2011 that it would and auctions of 65 million other allow- use the ongoing procurement rulemaking ances. (10-05-006) to address utilities’ cost recov- Stay current on the latest California legal develop- The most significant uncertainty facing ery from ratepayers for the acquisition of regulated entities is the cost of allowanc- allowances. In a proposed decision issued ments and decisions with exclusive, daily News and es allocated by auctions. ARB established Feb. 21, the CPUC expressed concerns that a minimum price for auctioned allowanc- utilities might purchase an incorrect num- Case alert emails. es of $10/tonne, escalating by 5 percent ber of allowances. If utilities purchase too per year. But the price of allowances will many allowances, or purchase too few, also be driven by supply and demand. If they may incur unnecessary costs or loss- ARB establishes the cap on allowances es that would be borne by ratepayers. To above normal demand, then the allow- mitigate this risk, the CPUC has proposed ances should not cost much more than the purchase limitations on utilities, includ- $10 minimum. If ARB establishes the cap ing minimum and maximum purchase at a level below the otherwise ordinary de- obligations for each auction. mand, then the scarcity of allowances The CPUC has also expressed concern should drive up the price of allowances. about the types of purchases utilities If ARB underestimates demand by a wide might make. Based on the perceived po- margin, allowance prices could spike dra- tential for abuse or mistakes, the CPUC matically. has proposed to regulate bilateral pur- There is no assurance that ARB has set chases, and prohibit some other forms of the cap at a level that will result in reason- procurement. In short, the CPUC has pro- able allowance prices. In December 2007, posed additional limitations on market ARB projected that 2020 emissions of participation (above and beyond those greenhouse gases would reach 596 million imposed by ARB) on which the cap-and- tonnes of CO2 equivalents. As a result of trade markets depend for efficient opera- the economic downturn that began in tion. The CPUC proceedings on these issues Robert Lawrence is a partner at Marten do not yet appear to be near resolution. Law in San Francisco and focuses on en- At this point, the CPUC has made concep- ergy and environmental matters. tual proposals and received extensive 20 | WEEK OF APRIL 9, 2012 THE RECORDER | WWW.THERECORDER.COM Court sets aside recent GHE limits Alameda County judge sided with plaintiff’s argument that BAAQMD thresholds were themselves a CEQA project requiring impact analysis Ironically, the reason the thresholds were se significant impact necessitating prepa- He ordered BAAQMD to not dissemi- struck down was that the air district itself ration of an environmental impact report nate the existing or any new thresholds failed to analyze the potential environ- and adoption of mitigation measures. until it fully complies with its obligations mental impact of the thresholds pursuant During the approval process for the under CEQA, including studying their po- todd williams to CEQA before their adoption. thresholds, several typically divergent in- tential effect on future development in the Adoption of thresholds: CEQA requires terest groups found common ground. Cit- region. public agencies to analyze and consider ies, as well as development, transit, afford- BAAQMD has not indicated if it will ap- Environmental Law the environmental effects of their pro- able housing and economic growth advo- peal, but invalidation of the thresholds in A posed actions and avoid or reduce signif- cates, joined together to criticize the their entirety presents uncertainty for cur- fter years of debate, analysis icant environmental impacts when feasi- thresholds on the grounds that they would rent Bay Area project applicants and local of greenhouse gas emissions ble. In March 2010, the California Natural be so easily exceeded that EIRs would be agencies regarding proper evaluation of is now an accepted part of re- Resources Agency adopted updated CEQA required for even small infill projects in air quality (including greenhouse gas) im- quired review under the Cal- guidelines that included a requirement scenarios where an EIR would not have pacts in CEQA documents. While the deci- ifornia Environmental Qual- that agencies determine the significance been required previously. For example, sion is not precedential, it may serve as a ity Act. However, determining what of greenhouse gas emissions prior to ap- under the thresholds, relatively modest warning to other air districts considering amount of greenhouse gas emissions proving projects. 14 Cal. Code Regs projects such as an 8,000-square-foot su- quantitative greenhouse gas thresholds would result in a significant impact re- §15064.4. In order to determine whether permarket, a 78-unit apartment complex that a CEQA analysis of the impact of such mains in flux. an impact is significant (and requires mit- or a 19,000-square-foot shopping center standards should be conducted. The question of the proper threshold igation), the agency approving a project would all trigger a significant greenhouse CEQA encourages local agencies to was thrown into further disarray on March generally compares the project’s impact gas emission impact. adopt thresholds of significance to evalu- 5, when Alameda County Superior Court (e.g., traffic, noise, air quality) against an The added time and cost involved in ate environmental impacts so long as Judge Frank Roesch ordered that the Bay adopted threshold. preparing such reports, and the ensuing those thresholds are supported by sub- Area Air Quality Management District set In June 2010, BAAQMD — the agency legal exposure, would, they argued, make stantial evidence and adopted through a aside CEQA air quality thresholds it ad- charged with primary responsibility for infill “smart growth” development less fea- public review process. Thus, Bay Area cit- opted in 2010. (California Building Indus- control of air pollution in the Bay Area for sible. The impact of the thresholds, they ies and counties may adopt their own try Association v. Bay Area Air Quality all sources other than vehicles — adopted claimed would be to discourage infill greenhouse gas thresholds as long as it Management District, RG10-548693.) new air quality thresholds of significance growth in favor of sprawl. comports with CEQA’s requirements. for use in CEQA analyses. Their adoption The BAAQMD thresholds were also crit- Courts have upheld reliance on such Todd Williams is a partner at Wendel, was controversial. icized because they introduced a new re- thresholds, for example where the thresh- Rosen, Black & Dean in Oakland. He rep- BAAQMD became the first California air quirement for projects proposed within old is based on compliance with AB 32. resents public and private clients, including district to set numeric significance thresh- 1,000 feet of existing pollution sources in- Citizens for Responsible and Equitable En- landowners and developers of residential, olds for evaluating the environmental ef- cluding most freeways. Such projects were vironmental Development v. City of Chula commercial and industrial property, as fects of greenhouse gas emissions. (Other asked to perform a risk and hazard assess- Vista, 11 C.D.O.S. 8619. well as local agencies, in land use, real es- regional air districts have set more quali- ment to determine the potential health As for BAAQMD’s requirement for new tate and environmental litigation matters tative standards.) Under the BAAQMD impacts on new project residents from ex- projects to perform a risk and hazard risk and administrative proceedings. He can be thresholds, if a project’s emissions exceed- isting, background pollution. This require- assessment, since Judge Roesch invalidat- reached at TAWilliams@wendel.com. ed the thresholds, it would result in a per ment further discouraged infill develop- ed the thresholds in their entirety, he opt- ment, critics claimed. ed to not specifically reach the issue. Traditionally, CEQA examines a proj- Clearly, the requirement is on hold while ect’s impacts on the surrounding environ- the thresholds are invalidated. Further, in- SPILLS ment, rather than the existing environ- clusion of such an obligation pursuant to ment’s impact on a project and its resi- CEQA is in serious doubt. Two CEQA cas- dents. es decided last year reject the assertion While the BAAQMD thresholds are not that a project must evaluate impacts of the HAPPEN! strictly binding on other Bay Area agen- surrounding environment on project res- cies, BAAQMD’s stated policy was that all idents, calling into question the basis for public agencies in the Bay Area apply the a requirement to do a such a risk assess- thresholds. In practice, Bay Area cities and ment under CEQA. counties widely use the thresholds in part In Ballona Wetlands Land Trust v. City Tank Leaks Commercial Vehicle Accidents due to BAAQMD’s expertise and concern over legal challenges by project opponents of Los Angeles, 201 Cal.App.4th 455 (2011), the Second District Court of Appeal reject- Fires Natural Disasters if they are not followed. Following the thresholds’ approval, the ed a challenge to an EIR on the basis that it failed to address sea level rise impacts on California Building Industry Association the project and invalidated a Resources When they do, you need experienced legal help. sued, claiming BAAQMD neglected to an- alyze the thresholds themselves as a “proj- Agency CEQA Guideline (14 Cal. Code Regs. §15126.2(a)) to the extent it required Call the Environmental Law Offices Of ect” under CEQA, including failure to otherwise. In South Orange County Waste- study the impacts of the thresholds on fu- water Authority v. City of Dana Point, 196 Hans W. Herb ture development patterns. CEQA defines a project to include any activity undertak- Cal.App.4th 1604 (2011), the Fourth District rejected a petitioner’s request that an EIR (REA No. 01675) be prepared to analyze the impact of an ex- en by a public agency which may cause either a direct physical change in the en- isting sewage treatment plant on a pro- Experienced and trained legal teams vironment or a reasonably foreseeable in- posed zoning amendment that would allow direct physical change in the environ- a mixed use project on adjacent land. available 24 hours a day ment. Taken together, these recent court of ap- BAAQMD argued that the thresholds peal decisions as well as the BAAQMD de- were not a “project” for CEQA purposes cision suggest that courts may take a hard- Full-service professional environmental and that even if they were, no adverse en- er line against arguments that CEQA re- services available vironmental impacts would result. Roesch agreed with the CBIA and or- quires analysis of impacts on the residents and users of a project. In addition, as agen- dered BAAQMD to vacate the thresholds cies develop thresholds to address emerg- When spills happen, call us at (800) 767-9562 entirely. He found that at the time the thresholds were adopted, BAAQMD had ing impacts such as greenhouse gas emis- sions and global climate change, they must www.tankman.com evidence that the thresholds could cause take steps to consider whether the thresh- SBN 136018 a reasonably foreseeable indirect change olds themselves may have environmental in the environment and might discourage consequences. urban infill development, encourage sub- It is not yet known how BAAQMD will Phone: (707) 576-0757 urban development or change land use address the court’s ruling, including patterns, but did not engage in any CEQA whether it intends to prepare an EIR, or Fax: (707) 575-0364 analysis. He rejected BAAQMD’s conten- appeal. BAAQMD is required to report A great place to take a leak! tion that adoption of the thresholds qual- ified for CEQA’s “common sense” exemp- back to Roesch within 90 days regarding compliance with his writ of mandate. Stay tion. 14 Cal. Code Regs §15061(b)(3). tuned. WWW.THERECORDER.COM | THE RECORDER WEEK OF APRIL 9, 2012 | 21 MONAHAN read and dismissed by others, and result in changed behavior for still others, which all Continued from page 15 accomplishes the primary goal of the law: environmental land use real estate construction green building litigation informed choices. vices. These lawsuits can result in agree- Few law firms can compete with the depth and breadth of legal ceqa ments for reformulation or other actions to LitiGAtion issuEs talent, resources, experience and track record of Wendel Rosen’s reduce or eliminate chemical exposures. For Prop 65 cases can be difficult and expen- climate change example, Prop 65 enforcement actions have sive to defend because the law shifts the Environmental Practice Group. Chalking up more than 150 years permitting led businesses to reduce diesel exhaust emis- burden of proof to the manufacturer, dis- of combined experience, the attorneys in this practice have emissions reporting sions from port facilities, lead exposures tributor or retailer to prove that a warning reputations as tireless advocates helping a variety of clients, from clean ups from calcium supplements, acrylamide in is not required. (Health and Safety Code individual landowners to multinational corporations, navigate the cost recovery certain snack foods, lead levels in Mexican §25249.10(c)) Plaintiffs need only show that candies and lead levels in children’s jewelry the product causes an exposure to a listed complex laws and regulations that govern environmental rcra/cercla and other toys. All of these actions improve chemical; they need not prove that the re- practices, land use and sustainability. endangered species public health and protect the environment. sulting exposure actually requires a warn- tideland boundaries In some cases where reducing exposures ing. Businesses, on the other hand, must As practice and industry leaders, Wendel Rosen’s attorneys stormwater or reformulation of products is not feasible, prove that the exposure does not occur at a warnings are provided. Examples include level sufficient to require a warning. Viola- handle precedent setting cases, contentious litigation, compliance bay preservation warnings for lead in dishware and crystal, tions of the act can result in penalties of up and regulatory challenges, and complex transactions throughout water rights acrylamide in French fries and coffee, form- to $2,500 per day per violation, though they California, in air, on land and at sea. aldehyde gas exposures from hair-straight- are seldom calculated on that basis. The ening products, mercury in fresh fish and penalty, as well as the likelihood that plain- environmental exposures to airborne asbes- tiffs will recover their attorneys fees and tos. These warnings may be short and sim- costs, creates a strong incentive for busi- ple, consistent with the safe harbor regula- nesses to settle rather than litigate the avail- tory language, or longer and more nuanced. able defenses under the statute. In each case, the essential message must be Recognizing the possibility that private conveyed: The product or activity will expose plaintiffs would abuse the statute, the Legis- people to chemicals known to cause cancer lature amended Prop 65 to permit the attor- or developmental or reproductive harm. ney general’s office to oversee private litiga- Because California is such a huge market, tion and take actions to curb private abuses the potential for product warnings can have of the system. All private enforcers are re- national and even global impacts on busi- quired to provide a 60-day notice to the state nesses. If a business provides a warning on and local prosecutors as well as the alleged a product, those products may end up being violator prior to bringing an enforcement ac- sold or transported outside California, which tion. They must also provide a “Certificate of in turn can require the business to answer Merit” to the AG demonstrating the basis for questions and explain why the warning is the notice. Settlements are public records provided. Further, when a business decides and must be reviewed and approved by a to reformulate its product to avoid a warning, court to ensure they comply with the intent it will often reformulate on a nationwide ba- and purposes of the law. The attorney gen- sis, not just in California alone. eral’s office has adopted regulations that pro- Another unique way the law affects Cali- vide guidance concerning Prop 65 settle- wendel.com/environmental fornia businesses is by allowing them a ments. (See Title 11, Cal. Code of Regs., §3000 “grace period” to reformulate or otherwise et seq.) reduce or remove listed chemicals to avoid providing a warning. The 12-month grace suMMAry period between the listing of the chemical Prop 65 is alive and well at age 25, still REPRINTS and the warning requirement allows time for functioning as a deterrent to chemical dis- a business to explore its options and deter- charges and a vehicle for informed choices. mine whether to provide a warning or take Because it was approved as a voter initiative & E-PRINTS other appropriate steps before any enforce- and can only be substantially changed or re- ment action can be taken. This can be par- pealed by another initiative, it is likely to be ticularly helpful for food manufacturers, per- around for a long time. Because virtually all sonal care product makers, food supplement companies doing businesses in California or manufacturers and other businesses whose shipping into California could be affected by customers may be concerned about warn- this law, private attorneys need to become ings for these types of products. knowledgeable about its provisions to help While it has been said that Californians their clients prevent problems or defend law- suffer from “warning fatigue” due to a pro- suits when they are filed. Public prosecutors WHEN YOUR FIRM IS IN THE NEWS liferation of warnings for certain types of and potential plaintiffs should also be aware SPREAD THE WORD WITH chemical exposures, there is a segment of the of the law so they can consider it as an im- population that takes the warnings very seri- portant tool to protect the public health and PROFESSIONALLY PRODUCED ously. Warnings may be ignored by some, the environment from toxic chemicals. REPRINTS McADAMS There are of course limitations and chal- lenges to the mediation of environmental Call us today for a professionally produced reprint or E-print of an article from today’s paper. Continued from page 16 disputes. For example, notwithstanding an agreement among potential adversaries, a • A perfect piece to display in your office ecosystems from the grasslands of the Mo- public agency remains free to exercise its jave Desert to the coastal mountain ranges discretion concerning a matter before it; • A great leave behind at presentations and areas critical to the California condor. groups or individuals can splinter off and • Add this to your bio on your web site Instead of a predicted 50 years of piecemeal leave the negotiations; key public officials proposals and litigation, the CEO and oth- and agencies may not be willing or able to er executives from the developer Tejon participate (but it may be productive to For more information contact: Ranch Co. and senior staff members from keep them informed where possible and to Lauren Poeta, a coalition of environmental groups, in- look to them as a source of information); or Account Executive cluding NRDC, the Sierra Club, the Plan- the issues may involve unusually complex email@example.com ning and Conservation League and Audu- technical issues (perhaps calling for a neu- bon California, worked across the table for tral expert adviser for the mediator). How- T: 347-227-3177 two years to achieve a settlement. As a re- ever, none of these potential factors should F: 347-227-3747 sult, 90 percent of the property was con- preclude the attempt to meet and negoti- served, public access was guaranteed, and ate. the Tejon Ranch Conservancy was created While the Legislature and the courts RECORDER to oversee and maintain the public lands. could do more to strengthen the role of me- The company remains free to pursue delin- diation of environmental disputes, the op- eated real estate and commercial develop- portunity for successful early resolution will ESSENTIAL CALIFORNIA LEGAL CONTENT ment in other portions, subject to all appli- always rest within the control of motivated cable federal, state and local rules and pro- and creative parties and their counsel, fa- 1035 Market Street, Suite 500, San Francisco, CA 94103 cesses. In return, the groups have agreed cilitated by experienced and engaged me- not to oppose these projects. diators.
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