The Sixth Circuit issued an order on September 9, 2022 granting review of a class certification from March 7, 2022 that certified a class of roughly 11.8 million Ohio residents claiming injuries from per- and polyfluoroalkyl substances, or PFAS.

Background

Filed in 2018 in the Southern District Court of Ohio, the lawsuit alleged the named defendants (large chemical companies) manufactured and distributed PFAS substances despite knowing the dangers, and engaged in efforts to mislead the public and regulators about the alleged harms from PFAS substances.  The plaintiff sought to certify a nationwide class of every individual in the United States with PFAS in their blood and sought injunctive relief through funding by the defendants for a “science panel” to study the effects of PFAS and potentially provide medical monitoring to every member of the class.

The district court judge certified a class of every individual “subject to the laws of Ohio” whose blood contains 0.05 parts per trillion PFOA (a specific PFAS) and at least 0.05 parts per trillion of any other PFAS (amounts noted as currently undetectable with available technology).  Additionally, the plaintiff admitted that he did not know which defendant (if any) caused the PFAS in his blood, and has not alleged any health condition as a result of the exposure.  Rather, he alleged the levels of PFAS in his blood causes him to face a “risk of developing various diseases.”

The defendants petitioned for interlocutory review of the class certification advancing four arguments.  First, the defendants argued that the named plaintiff lacks standing because he failed to show an injury in fact, his asserted injury cannot be traced to the defendants, and that an Article III court cannot order the remedy sought.  Second, the defendants argued the class is not cohesive and cannot satisfy Federal Rule of Civil Procedure 23(b)(2) because the class members were allegedly exposed in different ways, in different amounts, to different substances, and at different times.  The defendants pointed out that they would also likely suffer different outcomes based on individual factors.  Third, the defendants alleged that the plaintiff’s vague description of the remedy fails to describe the injunctive relief sought.  Fourth, the defendants argued that the district court failed to adequately consider the “preclusive effect of a non-opt-out class” regarding possible claims of absent class members when it certified the class.

The Sixth Circuit’s Order

On defendants’ first argument, the Sixth Circuit found “sufficient ‘weakness’” in the plaintiff’s standing to merit further review.  Regarding the alleged injury, the Sixth Circuit found that the plaintiff’s allegations of increased risk of disease based on certain PFAS in his blood and the request for a science panel to be at odds – he simultaneously claims to be sufficiently likely to develop a disease and thus injured, but requested a science panel to determine whether he is at the risk.  Additionally, the requested science panel would not appear to be capable of redressing his injury (PFAS in his blood).  On traceability, the Sixth Circuit also pointed out that the plaintiff could not establish who caused his alleged injury, and his exposure could be the result of a “litany” of exposure pathways not involving the defendants.

Regarding defendants’ second argument on class cohesion, the Sixth Circuit expressed serious doubts in whether commonality could exist among the class with respect to exposure and relief.  Even if one class member could prove an elevated risk of injury given the PFAS in their blood, such a finding would not necessarily prove that elevated risk for other class members given a variety of factors impacting risk, including age, genetics, medical history, lifestyle, and time of exposure.

The Sixth Circuit also questioned whether plaintiff’s description of the remedy was sufficiently specific to certify the class.  The plaintiff argued that they need only request an injunction ordering defendants to pay for a science panel and medical monitoring for individuals in need as determined by the science panel.  The Sixth Circuit noted instead that relief must be described in “reasonably particular detail” when it comes to class-wide injunctions, and found the district court’s conclusions subject to serious dispute

Though the Sixth Circuit did not address the defendants’ fourth argument, it noted that precedent regarding the “death knell” of litigation counseled in favor of an interlocutory appeal.  The term is applied in cases where failure to certify a class would cause plaintiffs to abandon their claims.  Here, the Sixth Circuit acknowledged that a “reverse death knell” situation existed – by certifying the class, the threatened massive liability would induce the defendants to settle rather than defend the action on the merits.  Two factors weighing heavily on this finding were the size of the class and scope of potential liability.  The Sixth Circuit also determined that the district court’s grant of class certification weighed in favor of an interlocutory order.

Based on these findings, the Sixth Circuit granted defendants’ request to present the case before a merits panel for review.

Conclusion

The Sixth Circuit’s interlocutory order provides early insight on the intricacies and potential strengths and weaknesses of PFAS class action litigation.  While the interlocutory order is not a final order regarding the merits of the litigation, it is clear that the Sixth Circuit will be seeking additional legal and factual support from the plaintiff to justify the district court’s certification.  A date for the merits panel hearing has not yet been scheduled.  

Introduction

President Biden signed the Inflation Reduction Act of 2022 (the Act) into law on August 16, 2022.  The Act represents an expansive investment in the energy industry, with many provisions targeting clean energy and climate change issues through funding and tax credits.  However, several notable provisions from an environmental permitting and compliance standpoint are buried amongst the financial and tax provisions.  These environmental provisions relate to permitting and compliance that the regulated industry, especially energy companies, should watch closely.

Funding for Permitting and Programmatic Development

The Act provided significant funding to regulatory authorities for a number of permitting-related activities. 

For example, the National Oceanic and Atmospheric Administration (NOAA) received $20 million to assist with permitting and project review.  The funds are meant to result in more efficient, accurate, and timely reviews for planning, permitting and approval processes through hiring and training personnel and obtaining new technical and scientific services and equipment. 

The United States Environmental Protection Agency (U.S. EPA) received $40 million for its permitting and project review efforts.  The funds will be utilized to develop efficient, accurate, and timely reviews for permitting and approval processes through hiring and training of personnel, development of U.S. EPA programmatic documents, procurement of technical or scientific services for reviews, development of environmental data and new information systems, purchase of new equipment, developing new guidance documents, and more.

The Act provided over $62.5 million to the Council on Environmental Quality to develop programmatic documents, tools, guidance, and improvement engagement.  These funds will also support collection of data regarding environmental justice issues, climate change data, development of mapping/screening tools, and tracking and evaluation of cumulative impacts. 

Several other federal agencies received millions in funding for review and planning of electricity generation infrastructure, like the Federal Energy Regulatory Commission, the Department of Energy, and the Department of the Interior.  Funding will be used to facilitate timely and efficient reviews, as well as generate environmental programmatic documents, environmental data, and increase stakeholder and community involvement. 

In sum, regulators involved in environmental and energy permitting received a substantial boost in funding targeting the permitting process, including supporting the development and build out of programmatic documents and capabilities.  The funding could improve the timing of the permitting processes for these agencies, but it could also lead to additional administrative burdens in the form of new application and compliance materials and increased regulatory scrutiny where a regulator has more time and money to invest in the regulatory process.

Continue Reading Environmental aspects of the Inflation Reduction Act of 2022

As anticipated, on Friday the U.S. Environmental Protection Agency (EPA) issued a proposed Risk Management Program (RMP) Safer Communities by Chemical Accident Prevention rule pursuant to the Clean Air Act. The proposed rule would reinstate certain provisions newly introduced to the RMP rule (originally promulgated in 1991) late in the Obama administration and subsequently removed by the Trump administration in 2019.  The EPA has additionally added significant new requirements not originally in the 2017 draft RMP rule, including provisions aimed to further current policies on environmental justice and climate change.  The proposed RMP rule also appears to draw influence from recommendations made by the Chemical Safety Board (CSB) as well as state updates to process safety regulations in the past decade, most notably the California Accidental Release Prevention Program (CalARP) and the California Refinery Process Safety Management (PSM) Standard. 

These changes, including the addition of requirements regarding employee participation, public availability of information, inherent safety, third party auditing, facility siting and natural hazards consideration, as well as emergency response planning, will result in covered RMP facilities having to significantly revisit and revise their RMP programs and plans.  Certain requirements also appear to be directly aimed at limiting stationary sources’ ability to privately manage their internal risk management decisions.  For example, covered facilities would now be required to document any revisions between draft and final compliance audits and provide justifications for rejected RMP program recommendations.

According to EPA Administrator Michael Regan, “protecting public health is central to EPA’s mission, particularly as we adapt to the challenges of climate change, and the proposal announced today advances this effort, especially for those in vulnerable communities.  This rule will better protect communities from chemical accidents, and advance environmental justice for communities that have been disproportionately impacted by these facilities.”  EPA estimates the rule will cost approximately $77 million a year.

Comments on the proposed rule are due to EPA within 60 days of its publication in the Federal Register and may be submitted online, via mail, or hand-delivery.

Continue Reading EPA Proposes Expansive Changes to EPA RMP Rule

Over the last year, we have seen the emergence of a new carbon market based on the tokenisation of voluntary carbon credits. It represents a new, decentralised approach towards scaling up the carbon market, and it has seen very rapid growth since its inception.

The reasons for that growth are clear: it allows anyone with access to cryptocurrency software to instantly buy and sell tokenised carbon credits, without needing to hold an account in the underlying carbon credit program registry or undergo the usual KYC checks that come along with that. In that sense, it has the potential to unlock a huge segment of the carbon credit consumer market.

Like any new technology, it can be both a force for good and bad; the other side of the (digital) coin is that the proliferation of carbon credit-backed cryptocurrencies represents a threat to the integrity of the whole carbon market; it reality, a tokenised carbon credit is completely disconnected from the underlying carbon credit: it gives no right to the underlying credit, only a contractual right (as against the token issuer) to the environmental claims attached to it; and it is not controlled or backed by the carbon credit program provider. There is obvious scope for greenwashing and fraudulent schemes, which we have already seen happening.

It is clear that if the crypto carbon market is to have a future as a credible part of the wider carbon market, rather than as a marginal, high-risk product, it must be subject to controls to ensure that tokenised carbon credits possess the same fundamental attributes/qualities as the underlying carbon credits themselves, i.e. that the claimed carbon offsets must be real, additional, permanent, robustly quantified, independently verified, and uniquely claimed.

Continue Reading The crypto carbon market: where next?

The U.S. Securities and Exchange Commission is requiring large business to report on their (indirect) Scope 3 emissions. This reporting obligation comes in addition to company reporting on the carbon impact of its own activities and the power it consumes.


Key takeaways

A company’s reporting obligation would depend on a number of specific factors, which you can read more about in our blog post.
The final rule likely will face an administrative challenge.

Public concerns about federal policies around GHG emissions and climate change have risen.

View full report

The voluntary carbon market has really taken off in the last few years, with the adoption of the Paris Agreement in 2016 and the Glasgow Climate Pact of 2021. It has been fueled also by numerous new net-zero emission commitments by governments and corporates.

Key takeaways

There’s a lot of uncertainty around the legal nature of voluntary carbon credits, including what title can be claimed in them and what security can be taken over them

A two-tier voluntary carbon market labelling/pricing structure may develop: one for credits that comply with Paris Agreement rules, and another for credits that do not

The lack of market standard trading documentation for voluntary carbon credits is both a hindrance and an opportunity

View full report

Before the 2010s, many real estate deals closed without the mere mention of per- and polyfluoroalkyl substances (PFAS) as part of negotiations or in diligence.  Leap forward a decade to 2022 and diligence questions relating to the presence of PFAS on real estate are essentially market, especially for industrial and some commercial properties.  The paradigm shift cannot be attributed solely to one force; instead, a culmination of regulatory, statutory, judicial, and transactional considerations have elevated PFAS to an issue that could seriously impede or even kill a deal. 

Whether involved as a seller, buyer, lender, or another interested party concerned about the liabilities, there are several key considerations, among others, that parties to real estate transactions should be aware of in 2022.

Continue Reading PFAS and Real Estate Transactions: Key Considerations in 2022

Can carbon-neutral fossil fuels can gain credibility and scale up through voluntary efforts, or will market adoption have to be compelled through mandatory regulation?

Key takeaways
1. Fossil fuel producers are looking for interim solutions during the green energy transition
2. Use of the carbon-neutral label is susceptible to being seen as ‘greenwashing’
3. A global regulatory regime to regulate carbon-neutral fossil fuels is not likely soon
4. Industry initiatives to develop voluntary standards are in a nascent stage

View full report.

In this article, we take stock of the Carbon Border Adjustment Mechanism (CBAM), and similar initiatives in the United States, Canada, the United Kingdom, South Korea, and China, and what they mean for the energy sector.


Key takeaways:

  1. Importers will pay more to bring carbon-intensive goods into the European Union
  2. The EU CBAM is expected in 2023 and other countries are introducing their own measures
  3. The EU’s measures will likely set the standard, but conflicting regimes will remain
  4. Calculating carbon contents of imports and payments exporting and importing companies to do a lot of extra work
  5. Covered goods do not include energy goods yet

In a highly anticipated decision, the U.S. Supreme Court (Court) rejected U.S. EPA’s (EPA) Clean Power Plan in West Virginia v. EPA on June 30, 2022.  Relying upon the “major questions doctrine,” the Court found that Congress had not intended to authorize EPA to regulate emissions using “generation shifting” (i.e., requirements that power production be transitioned from coal to gas and then from gas to renewables) as a “best system of emission reduction… that has been adequately demonstrated” under Section 111(d) of the Clean Air Act. 

Writing for the majority, Chief Justice John Roberts concluded that the Clean Power Plan’s scheme, which would require a substantial shift in electricity generation from coal-fired power plants to natural gas-fired plants and renewables, was beyond the authority granted to EPA in Section 111(d).  The Court read Section 111(d), its legislative history, and its past use as proof of Congress’s intent to limit Section 111(d) to the application of technological controls on individual facilities. The opinion characterized the generation-shifting aspects of the Clean Power Plan as making a “very different kind of policy judgment” – one that determined how much coal-based generation there should be in the U.S. over the coming decades.  After further analysis, the Court found it was “not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d),” and overturned the rule.

In supporting its ruling, the Court attempted to identify the circumstances under which it would apply heightened scrutiny to regulatory action of the kind involved in this case.  It collected a series of recent cases in which the Court had ruled that a regulatory agency had exceeded its authority by implementing “sweeping and consequential” regulations.  It referred to this body of case law as the “major questions doctrine” (which the dissent noted was a term never before used in any Court decision).  In such major cases, the agency must present more than a “merely plausible textual basis for the agency action” – instead, it must demonstrate “clear congressional authorization” for the power it claims.

The immediate impact of this ruling is limited, as EPA had already advised the Court and the regulated community that it intends to re-write the Clean Power Plan entirely.  The Court also didn’t go as far as some had believed it might by potentially restricting EPA’s right to regulate greenhouse gas emissions altogether.  What does seem clear from this decision, however, is that EPA will need to either closely tie any Section 111(d) limitations in its new Clean Power Plan to technology-based controls, or find new support in the Clean Air Act for its plan.  The ruling also appears to have implications for various other environmental law matters, such as EPA’s proposed new source rule part OOOOc to apply to existing oil and gas sources.  We will cover such impacts in future materials.