Lawsuit Filed in August 2012 To Compel California To Set A Drinking Water Standard For Hexavalent Chromium

Hexavalent chromium (“Cr6”) is an element that is found in drinking water from natural sources and from historical industrial uses.  At present, there is no separate drinking water standard for Cr6.  There is a federal and state drinking water standard for total chromium (all valences of chromium including Cr6).  The federal drinking water standard for total chromium is 100 micrograms per liter of water (“ug/L”) and the California drinking water standard for total chromium is 50 ug/L.

On August 14, 2012, the Natural Resources Defense Council (“NRDC”) and the Environmental Working Group (“EWG”) filed a lawsuit in Alameda County Superior Court attempting to get a Court to set a date certain by which the California Department of Public Health (“DPH”) must set a drinking water standard for Cr6 in California.  The lawsuit relies on a 2001 statute passed in California in response to the Academy Award winning film Erin Brockovich that was released in 2000.  The primary focus of the movie was air/inhalation exposure to Cr6, not drinking water exposure. The statute, Health & Safety Code §116365.5, nevertheless required DPH to provide a report to the Legislature by January 1, 2003 regarding its progress in setting a drinking water standard for Cr6, and to finalize a drinking water standard for Cr6 by January 1, 2004.  For a number of reasons, that deadline was not met.

The current estimate for DPH to set a draft drinking water standard for Cr6 is July 2013, with a final standard adopted between July 2014 and July 2015.  The reason for the delays is that the toxicology of Cr6 through ingestion has been very uncertain, and from a number of experts’ perspectives, remains uncertain.  In order to set a drinking water standard under the California Safe Drinking Water, California must first set Public Health Goal (“PHG”) for the chemical in question. Health & Safety Code § 116365.  A PHG is set based solely on California’s evaluation of available toxicology. That process went through a number of iterations in California because a PHG was initially set that was not supported by the relevant science.  See DPH's timeline for drinking water regulations for Cr6.

In July 2011, California set a new PHG for Cr6 of .02 ug/L, more than 2500 times more stringent than the current drinking water standard for total chromium in California, and more than 5000 times more stringent than the current federal drinking water standard for total chromium.  The July 2011 PHG remains controversial among a number of scientists, and the process of setting a drinking water standard for Cr6 will be contentious.  The August 14 lawsuit will add to that contentiousness. 

This blog will periodically update the status of the development of a drinking water standard for Cr6 in California and the status of the NRDC lawsuit.

--Rick Coffin

For more information, contact Rick Coffin at (415) 228-5420, rcc@bcltlaw.com

California Supreme Court Upholds "All-Sums" and Stacking Insurance Approach To Long-Tail Property Loss

 In yet another chapter to the Stringfellow Acid Pits waste site saga, the California Supreme Court, in an August 9, 2012 unanimous decision, ruled that where there are "long-tail" continuous injuries (common in environmental and toxic tort cases where contamination occurs over the course of many years), an insurer providing coverage for any portion of the "long-tail" period may be liable for the entire loss, up to policy limits.  Further, the Court held that where there were multiple policy years involved, the policy limits of each year could be "stacked" to form "one giant “uber-policy,” thereby increasing the total amount of insurance coverage available to pay clean-up costs or other damages.

In The State of California v. Continental Insurance Co., et al. (No. S170560), the Court addressed the extent to which various insurers were required to reimburse the State of California, which was found liable in federal court in 1998 for contamination at Stringfellow. The State had various occurrence-based policies with various insurers during the many years the site was in operation.  Each policy provided that the insurer agreed "to pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of liability imposed by law ...  for damages ... because of injury to or destruction of property ..." (emphasis added).  It was undisputed that the damage to the Stringfellow site "occurred" during numerous policy periods, and that it would have been impossible to prove what specific property damage occurred during any one policy period.

The Court concluded that all of the policies at issue covered the risk at some point during the property loss, thereby triggering each insurer's indemnity obligations.  Citing to Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645 (1995) and Aerojet-General Corp. v. Transport Indem. Co., 17 Cal. 4th 38 (1997), the Court held that the "all-sums" language in the policies meant that each successive insurer who provided coverage for the risk during the long-tail property damage period was severally liable for the entire loss, up to each respective policy's limits, even if some of the damage occurred before or after the insurer's policy period or during times when the policyholder had no insurance.  In doing so, the Court rejected the insurers' arguments for pro rata allocation, under which damages are spread across all of the years in which the long-tail loss took place, with the policyholder liable for damage assigned to periods in which it chose not to purchase insurance, or can otherwise not establish coverage.

The Court next turned to how to address the situation where the continuous "long-tail" loss exceeds the limits of any single policy.  Under those circumstances, the Court applied an "all-sums-stacking-rule," which effectively stacks the limits of each policy from different policies to create a giant "uber-policy."  Under that approach, instead of treating the long-tail injury as though it occurred in only one defined policy period, as a prior California intermediate appellate court had ruled, now all triggered insurance would be treated as if it were purchased for one long policy period, with a coverage limit equal to the sum of all purchased insurance policies. 

As the Court noted, the "all-sums-stacking rule" is advantageous because:

1. it is equitable in light of the characteristics of a long-tail injury, 
2. the insured's expectations are met because it paid premiums for coverage, along with the respective policy limits, in each of the policy periods in question, 
3. it meets the insurer's expectations because the insurer "reasonably expects to pay for property damage occurring during a long-tail loss it covered, but only up to policy limits," and 
4. it fixes the insurer's liability without the complication of artificially breaking the long-tail injury into "distinct periods of injury" to try to somehow calculate actual injury during the designated policy period.

The "all-sums-stacking-rule" will prove beneficial to policyholders subject to environmental clean-up obligations where the contamination was caused over a long period of time and is not easily divisible, by allowing them to stack the policy limits from each year, thereby exceeding any recovery than would otherwise be available if only one policy were triggered.

 

Insureds should not expect policies going forward to be so generous, however.  The Court specifically indicated that "in the future, contracting parties can write into their policies whatever language they agree upon, including limitations on indemnity, equitable pro rata coverage allocation rules, and prohibitions on stacking."

--Josh Bloom and Jon Enscoe

For more information, contact Josh Bloom at (415) 228-5406, jab@bcltlaw.com or Jon Enscoe at (415) 228-5495, je@bcltlaw.com

California Green Chemistry Regulations Proposed

On July 27, the California Department of Toxic Substances Control (DTSC) issued revised proposed Safer Consumer Product Alternatives regulations, more commonly referred to as the "Green Chemistry" regulations.  This is DTSC's third attempt to get the Green Chemistry program off the ground, and is the result of an extensive informal review process. 

The basic structure of the regulations has remained consistent throughout each proposed iteration, outlined by a four-step process: 

1. Identification of Chemicals of Concern,
2. Development of a Priority Products list, for which Alternatives Analyses must be conducted,
3. Performance of an Alternatives Analysis for each Priority Product by manufacturers, importers, or retailers, and
4. DTSC's "regulatory responses" following the Alternatives Analysis, which, at its most extreme, may result in prohibiting the sale of the product in California.

The proposed Green Chemistry regulations are the most ambitious in the nation, the impacts will be far- reaching, and once implemented will likely be viewed as a model by other states.  

A public hearing is scheduled for 10:00 a.m. on September 10, 2012 at 1001 "I" Street in Sacramento, and the 45-day public comment period ends on September 11, 2012.

--Josh Bloom

Update:  The Department of Toxic Substances Control has extended the public comment period for the proposed Green Chemistry regulations, to October 11, 2012. The public hearing will proceed as initially scheduled on September 10, 2012.

Barg Coffin has an extensive consumer products practice, including Green Chemistry, Proposition 65, metals in jewelry, and CPSIA laws.  If you would like more information about the proposed Green Chemistry regulations, please contact Josh Bloom jab@bcltlaw.com, (415) 228-5406, or Rick Coffin rcc@bcltlaw.com, (415) 228-5420.  On the web at www.bcltlaw.com

Central Valley Project Water Supply Contracts Withstand ESA Challenge in Ninth Circuit

On July 17, 2012, the Ninth Circuit, in a 2:1 opinion, affirmed Judge Oliver Wanger’s ruling that the United States Bureau of Reclamation (“Bureau”) did not violate the federal Endangered Species Act (“ESA”) when it renewed 41 water supply contracts in 2005 as part of its operation of the Central Valley Project (“CVP”) in California’s Sacramento-San Joaquin River Delta (“Delta”).

                          

The Ninth Circuit’s decision is the latest chapter in the clash between water supply, water rights and the ESA in the embattled Delta.  Plaintiffs in this case, Natural Resources Defense Council and other environmental groups, alleged that the Bureau failed to comply with Section 7(a)(2) of the ESA, which requires federal agencies to consult with U.S. Fish and Wildlife Service (“Service”) if their actions may affect a listed species or critical habitat, when it renewed the 41 water supply contracts in reliance on inadequate ESA review.  Two sets of water supply contracts were at issue—the “DMC Contracts” and the “Settlement Contracts.”  

First, with respect to the DMC Contracts, the court concluded that plaintiffs could not proceed to the merits of their case because they failed to meet threshold Article III standing requirements.  Specifically, plaintiffs failed to establish the requisite causal connection between the threatened injury—harm to the threatened delta smelt—and the Bureau’s renewal of the DMC Contracts because those contracts contained a “shortage provision” that allowed the Bureau to take actions necessary to comply with the ESA, including restricting water deliveries for the benefit of the delta smelt.

Second, with respect to the “Settlement Contracts,” the court found that although plaintiffs had established requisite Article III standing, their claims nonetheless failed because the Bureau’s renewal of the Settlement Contracts was not a discretionary action subject to the ESA’s Section 7(a)(2) consultation requirements.  The court held that the Bureau’s “hands were tied” insofar as its inability to impose any measures that would restrict water deliveries to these contractors due to requirements imposed by the Reclamation Act, the Central Valley Project Improvement Act, the California Water Resource’s Control Board Decision granting the Bureau rights to operate the CVP, the terms of the Settlement Contracts themselves which resolved senior water rights claims in conjunction with the state’s grant of water rights to the Bureau, and California law governing water rights.  Thus, based on the Supreme Court’s decision in National Association of Home Builders v. Defenders of Wildlife, which held that Section 7(a)(2) of the ESA only applies to discretionary acts by Federal agencies, the Bureau was not required to consult with Service when it renewed the Settlement Contracts.   

Dissenting Judge Richard A. Paez disagreed on both counts, concluding that plaintiffs had established the requisite standing to challenge the DMC contracts because the record supported a finding that ESA compliance by the Bureau could potentially advance plaintiffs’ concrete interest in protecting the delta smelt and its habitat through various measures including providing less water to the contractors and altering the timing of the water deliveries to the benefit of the delta smelt—a showing sufficient to establish standing for the alleged procedural injury.  With respect to the Settlement Contracts, Judge Paez concluded that the Bureau was obligated to consult with the Service pursuant to Section 7(a)(2) of the ESA because it maintained discretion not only in its decision of whether to renew the Settlement Contracts but also in its renegotiation of contract terms, also potentially to the benefit of the delta smelt.   

--Nicole Martin

Supreme Court Allows Pre-Enforcement Challenge to EPA Administrative Order

In a unanimous decision authored by Justice Scalia, the Supreme Court on March 21 ruled that administrative orders issued by EPA are subject to pre-enforcement judicial review under the Administrative Procedure Act.  In that case, Sackett v. Environmental Protection Agency, No. 10-1062, EPA issued a compliance order alleging that landowners had illegally placed fill material in wetlands, without a permit required under section 404 of the Clean Water Act.  The order directed the landowners to restore the property.  The landowners requested a hearing from EPA, taking the position that EPA lacked jurisdiction to regulate the wetlands because the wetlands did not meet the definition of "waters of the United States" under the Clean Water Act.  EPA denied the request, and the landowners sued under the APA.

The Court ruled that the order was a "final agency action" subject to the APA, and that the landowners could therefore challenge the order.  The Court considered it significant that EPA took the position that the landowners could be liable not only for penalties of up to $37,500 per day of violation for violating the statute, but also an additional $37,500 per day for not complying with the compliance order, and took EPA to task for expecting the landowner to wait until EPA files a judicial action as potential penalties continued to pile up.  The Court further noted that the fact that the government had not yet brought a judicial action against the defendants was not a justification to deny the defendants the right to challenge EPA's administrative order.

The ruling removes a significant source of uncertainty for landowners who have previously been forced to decide whether to comply with an EPA administrative order, or to refuse to comply and run the risk of substantial penalties if the order was later determined to be valid.  However, Justice Ginsburg, in a noteworthy concurrence, pointed out that the Court's ruling allowing pre-enforcement review applied only to the landowners' challenge to EPA's authority to regulate their land under the Clean Water Act, but did not address whether pre-enforcement review would be allowed to challenge the terms and conditions of EPA's administrative order.

--Josh Bloom

EPA Releases Final Health Assessment for Tetrachloroethylene (PERC)

On February 10, 2012, the U.S. Environmental Protection Agency (EPA) posted the agency’s final toxicological review of tetrachloroethylene. Tetrachloroethylene – also known as PERC, or PCE – is a solvent widely used in the dry cleaning industry. The review characterizes PERC as a “likely human carcinogen” and provides estimates for both cancer and non-cancer effects of exposure to the chemical. EPA's new calculated cancer risks for PCE are lower than the current values used by EPA, while non-cancer risks are higher by an order of magnitude or more.  Thus, risk-based screening levels based on EPA's newly-calculated cancer risks may increase, resulting in less stringent cleanup standards at PCE-contaminated sites.

Many states, including California, already have stricter risk-based cleanup standards for PCE, and will not be immediately affected by the new federal standards.  The new standard will be used to develop a revised Maximum Contaminant Level (MCL, the federal drinking water standard) for PCE, but it is too early to predict whether that standard will be lower than the current MCL.

-Chris Jensen and Morgan Gilhuly

Ninth Circuit Invalidates State Implementation Plan

California's Central Valley is once again without an approved State Implementation Plan for ozone. On Friday, January 20, the Ninth Circuit held, in Sierra Club v. US EPA, that EPA had acted arbitrarily and capriciously in approving the 2004 plan.

The Valley is an extreme non-attainment area for ozone, and has been a non-attainment area since 1991. California proposed a SIP for the Valley in 2004, but amendments to the plan and EPA's review took so long that by the time EPA approved the plan, which was based on 2004 data, in 2010 there was more current data that EPA chose not to consider in approving the SIP. The Ninth Circuit held that the SIP was required to be based on "current" and "accurate" data, and although that standard doesn't require constant updating, EPA could not ignore data that was collected in 2007 and in EPA's possession when it approved the SIP.