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©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Presentation on theme: "©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part."— Presentation transcript:

1 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E NVIRONMENTAL L AW Chapter 21 Meiners, Ringleb & Edwards The Legal Environment of Business, 12 th Edition

2 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E NVIRONMENTAL R EGULATION Federal control of the environment essentially began in 1970 EPA created to implement and enforce federal environmental mandates Since 1970, explosion of federal regulation Created Environmental Protection Agency (EPA) Clean Air Act Clean Water Act Toxic Substances Control Act Resource Conservation and Recovery Act The Superfund Species Protection Global Environmental Issues

3 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. P OLLUTION AND THE C OMMON L AW Nuisance Law Public nuisance: Unreasonable interference with right held in common by public Private nuisance: Substantial and unreasonable interference with use and enjoyment of land of another.  Open to private litigation Trespass Physical invasion Unauthorized breach of boundaries of another’s land Often hard to distinguish trespass and nuisance

4 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. N EGLIGENCE, S TRICT L IABILITY, AND P OLLUTION Negligence Failure to use reasonable care to prevent pollution from causing a foreseeable injury. Strict Liability for Abnormally Dangerous Activities Applied to businesses producing toxic chemicals or emitting toxic pollutants. Courts look at the location of a business relative to population centers.

5 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. W ATER R IGHTS AND P OLLUTION No common law right to pollute water Most states rely on riparian water law People living along streams & bodies of waters have right to use reasonable amounts of water, but must allow water to flow downstream in usable form. Therefore, there is no right to use and pollute water that later affects downstream users. Nuisance and other common-law rights used in the enforcement of riparian water rights. Western states have variety of other water rights that also protect water rights.

6 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE W HALEN V. U NION B AG & P APER C O. Whalen used water from a nearby creek to water livestock and plants. UB&P built a pulp mill upstream and polluted the creek. Whalen sued for damages & an injunction to stop the pollution. The trial court awarded $312/year and issued an injunction. Appellate court reduced damages to $100/per year & eliminated injunction. Whalen appealed to NY Appeals Court. The NY appeals court ruled: The injunction could not be eliminated simply because it would cause great expense for UB&P as compared to the slight damage done to Whalen. The NY court of appeals reinstated the injunction and awarded costs to Whalen.

7 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C LEAN A IR A CT Clean Air Act 1970, Amended in 1977 and 1990 EPA establishes National Ambient Air Quality Standards (NAAQS) NAAQS established when air pollution “may reasonably be anticipated to endanger public health and welfare” Each state develops a State Implementation Plan (SIP) (long, very detailed) which must include:  Enforceable emission limits  Schedules and timetables for compliance  Measures for monitoring air quality & emissions  Adequate resources for implementing and enforcing SIP

8 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T HE P ERMIT S YSTEM Clean Air Areas (better than NAAQS) Attainment areas or prevention of significant deterioration (PSD) areas Only slight increase allowed (maximum allowable increase) Can construct in PSD only if: Agree to Best Available Control Technology (BACT) and won’t exceed maximum allowable increase Dirty Air Area Nonattainment areas – even more restrictions than for PSD areas Emissions Offset Policy has three requirements for construction (1) Controlled to maximum degree possible Use Lowest Achievable Emissions Rate (LAER) technology  (2) Any other operations they own meet SIP requirements  (3) Pollution from new operation must be offset by more than 1 to 1 from other plants in area When plant operates air quality should improve State laws are expanding requirements for new projects

9 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. M OBILE S OURCES OF P OLLUTION Vehicles are a primary source of pollution that affects the ozone The law imposes direct controls on certain emissions State Implementation Plans (SIPs) often impose tougher standards that could include Vehicle emission inspections Vapor recovery systems at gas stations Reformulated gasoline Alternative fuel sources Forced carpooling

10 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE A MERICAN T RUCKING A SSOCIATION V. EPA Congress gave California permission to regulate emissions from in- use non-road mobile sources of pollution. Applies to engines that run transportation refrigeration units (TRUs). Other states may follow California’s rule. EPA must approve proposed CA regulation unless EPA finds standard unjustified given air conditions in CA (or compliance cost is too high). California Air Resources Board Plan: To reduce particulate matter emissions from diesel TRU engines by 75% by 2010 and 85% by : Rule began to phase in – applied to trucks based in and operating in California. TRU owners must replace an old engine with new compliant one. EPA reviewed & approved standard, finding cost was not unreasonable. The American Trucking Association (ATA) challenged EPA’s decision as arbitrary and capricious. (Continued)

11 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. HELD: ATA’s petition for review denied. When regulating mobile pollution sources states and EPA share responsibility. Mobile engines are either 1) new on-road, 2) new non-road 3) in-use on-road, and 4) in-use non-road. ATA argues that California’s rules is de facto national rule because trucks passing through CA are subject to the rule. Court disagreed. This rule only applies in California. If ATA’s members do not operate in CA, they need not comply. EPA adequately considered costs of CA’s TRU rule. Businesses can comply with about $2,000-$5000/unit. EPA’s phased implementation helps to minimize costs. EPA considered the cost and determined the rule reasonable. Congress chose to permit California “to blaze its own trail with minimum federal oversight.” C ASE C ASE A MERICAN T RUCKING A SSOCIATION V. EPA

12 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. T OXIC P OLLUTANTS 1990 amended Clean Air Act lists 189 substances declared as hazardous air pollutants EPA sets maximum achievable control technology (MAMT) standards for each one General goal: 90% reduction in emissions for pollutants that had been uncontrolled 75% reduction in cancer caused by air pollution These rules are highly technical Tough standards for many pollutants From dry-cleaning establishments to commercial bakeries.

13 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E NFORCEMENT EPA has primary authority to enforce Clean Air Act & other environmental statutes State agencies also are involved Citizens, including environmental groups, can bring citizens suits Recently more environmental offenses have been criminally prosecuted Over 200 criminal indictments per year EPA and state agencies collect hundreds of billions of dollars in fines each year in civil and criminal cases Carrot-and-Stick Approach U.S. Sentencing Guidelines punishment for environmental crimes reduce penalties imposed on a company if there is voluntary reporting of illegal actions, cooperation w/investigations, educating workforce, etc.

14 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. I NTERNATIONAL P ERSPECTIVE I NTERNATIONAL P ERSPECTIVE “INDUSTRIALIZATION BRINGS ENVIRONMENTAL PROBLEMS IN CHINA” As economy of China has grown in past two decades, environmental damage has increased. China has laws and agencies dealing with pollution. On the books, structure looks like EPA. In practice, there is little enforcement. At least 70% of major rivers are “severely polluted”. Chinese monitoring agency says no major city has good air quality. Waters around coastal cities are “badly polluted.” Warnings that marine ecological systems near Shanghai and other major cities are “dangerously close to collapse.” When a fertilizer plant dumped large amounts of ammonia & nitrate into a river, killing 450,000 pounds of fish and poisoning drinking water for downstream cities, nothing much happened. State EPA said there is no authority to shut down offenders; can only fine them small amounts; and basically “it’s a cost that doesn’t matter” to them.

15 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C LEAN W ATER A CT Passed in 1972, amended in 1977 and 1986 Objective: “restore and maintain the chemical, physical and biological integrity of Nation’s waters.” Unlawful to dump pollutants or move water from one place to another in “navigable waters” without permit National Pollution Discharge Elimination System (NPDES) Permits Almost all waters are under EPA jurisdiction 5 main elements: (1) National effluent standards for each industry (2) Water quality standards set by states w/EPA approval (3) Discharge permit program to enforce pollution limits (4) Special provisions for toxic chemicals & oil spills (5) Construction grants and loans for publicly owned treatment works (POTWs)

16 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. o Water pollution coming from a pipe (point source) – easiest to ID o Billions spent to treat – publically owned treatment works (POTWs) o States must designate intended use of all surface water o Water dumped into drinking areas must be cleaner than water in recreation areas o Controlled with permit system – Industrial permits are under National Pollutant Discharge Elimination System (NPDES) o Control Technology: Each firm in industry must meet effluent (pollutant) limits for chemical dumped into wastewater o Conventional pollutants, i.e. human waste are controlled by best conventional technology (BAT) (cost effectiveness will be considered) o Toxic or unconventional pollution has tighter control and is with best available technology that is the best control “capable of being achieved.” (costs not so important) o Industrial Permits: If new plant or source of pollution created, even tighter controls called new source performance standards (NSPS) (use best technology existing to minimize pollution) P OINT S OURCE P OLLUTION

17 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. E NFORCEMENT Permit system is a key to enforcement. States have primary responsibility for enforcing permits, subject to EPA monitoring and approval. Operating without a permit or discharge more pollution than allowed violates the law. Firms must monitor their own performance and file discharge monitoring reports (DMRs) (available for public inspection). Lying about violations is more serious than admissions. Serious violations can lead to criminal prosecution. Citizen suits against polluters are common under the Clean Water Act.

18 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE D ECKER V. N ORTHWEST E NVIRONMENTAL D EFENSE C ENTER Clean Water Act requires NPDES permits for those who discharge pollutants from any point source into navigable waters. One EPA regulation: Silvicultural Rule regarding logging operations. Permits are required unless discharges are composed only of stormwater. Permits needed at sawmills; but usually not required for runoff along logging roads. Georgia Pacific (G-P) has contract with Oregon to harvest timber from state forests. When raining, water runs off logging roads used by G-P. Northwest Environmental Defense Center (NEDC) brought citizen suit against G-P, state of Oregon and EPA because G-P not required to obtain NPDES permits. District Court: Dismissed suit. Found permits not needed – logging roads were not industrial operations. Court of Appeals: Reversed. Logging roads were “associated with industrial activity”, so permits required. Defendants appealed. (Continued)

19 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Under Clean Water Act, petitioners are required to secure NPDES permits for discharges of channeled stormwater runoff ONLY IF discharges were “associated with industrial activity.” Otherwise, discharges fall within Act’s exemption of “discharges composed entirely of stormwater.” Definitions of “industrial” and “industry”: Can refer to business activity in general OR can be limited to “economic activity concerned with the processing of raw materials....” EPA takes view that regulation refers to “facilities” and classification of “establishment” Suggest industrial sites more fixed and permanent than outdoor timber- harvesting operations....” Court usually defers to agency interpretations. Oregon has extensive stormwater runoff management system. Further federal regulation would duplicate and be counterproductive of Oregon’s existing system. HELD: Reversed. No permit needed. C ASE C ASE D ECKER V. N ORTHWEST E NVIRONMENTAL D EFENSE C ENTER

20 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. N ONPOINT S OURCE P OLLUTION AND W ETLANDS Nonpoint Source Pollution o Construction sites, run-off from street, mining operations and agriculture, etc. o Difficult to solve technologically – political issues o Expensive to treat o No easy way to capture contaminated water to treat it o Cities have old-fashioned storm water-sewage systems – same pipes carry runoff & sewage Wetlands o Formerly destroyed, they are now protected o Problem: They breed mosquitoes o Use permit system o Permit to dredge or fill wetlands may require restoration to wetlands o Mitigation banking: Construction project ”buys” other wetlands or restores wetlands in exchange for the right to fill some wetlands o Wetlands Takings: Prohibitions on building or modifying land

21 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE H EARTS B LUFF G AME R ANCH, I NC. V. US Hearts Bluff bought 4000 acres in Texas to use in a “mitigation bank” to offset land use elsewhere for wetlands preservation. Work is done under supervision of Army Corps. Corps issues Section 404 permits involving wetlands damage. Before buying, company contacted Corps seeking assurances that land was suitable for mitigation banking. Corps held is was suitable, but noted land was in an area planned by State of Texas for a reservoir. 2 years later, Texas announced it would build the reservoir. Corps Held: Hearts Bluff property would not be used for mitigation. Hearts Bluff sued government for uncompensated taking under 5 th Amendment. Value of land was much lower when the mitigation bank status was denied. Claims Court: Denied Claim. Plaintiff appealed. (Continued)

22 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sec. 404 permits are “separate & distinct” from mitigation banking program. They sell credits from the mitigation banking program to Section 404 permit holders or applicants. Mitigation banking program doesn’t restrict land use prior to entering into a mitigation banking instrument. The program simply gives access to “credit swapping program.” Hearts Bluff hasn’t been disturbed in use of property. It simply purchased property it hoped to use for mitigation. At no point did Hearts Bluff possess right to sell/transfer mitigation credits or instrument. Without such an instrument, Hearts Bluff can still sell/assign/transfer land – or exclude others from its use. Corps’ denial did not diminish any right Hearts Bluff possessed the day it purchased the land, after it applied for permit, or after Corps denied permit. Owning land doesn’t give rise to run a mitigation bank. Mitigation instrument is not a cognizable property interest. HELD: Affirmed. C ASE C ASE H EARTS B LUFF G AME R ANCH, I NC. V. US

23 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. L AND P OLLUTION Toxic Substance Control Act passed in 1976 (TSCA) EPA controls, tracks chemicals Biotechnology monitored  Manipulation of biological processes to produce chemicals of living organisms for commercial use Pesticides Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) in 1947 Most are toxic, some extremely so states can also regulate Registration of pesticide good for 5 years if: Product does what it claims it will Registration material accurate, label accurate on proper product use Will do what it should w/out “unreasonable adverse effects on the environment” See Exhibit 21.4 See Exhibit 21.5

24 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. R ESOURCE C ONSERVATION AND R ECOVERY A CT (Passed in 1976; Amended in 1984) Covers toxic substances in market or at disposal Transportation, storage, treatment and disposal Old procedure Out of sight, out of mind Now must have permit from EPA to run treatment, storage and disposal sites (TSD) Hazardous wastes defined Have ignitability Have reactivity Have toxicity Manifest system TSD sites must keep manifest Waste must be packaged and labeled appropriately Identifies origin, shipping route and final destination Provides “cradle to grave” control over hazardous waste

25 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S UPERFUND Comprehensive Environmental Response, Compensation and Liability Act (CERCLA – 1980); Amended in 1986 Clean up old hazardous waste sites National Priority List (NPL): Hazard Ranking System of those deemed most in need of action. Since may have many potentially responsible parties (PRPs) for a site, they can be held liable. Includes: Current owners; Prior owners at time of waste disposal; Waste generator who arranged for disposal at site; Transporter who selected site Parties wrangle over responsibility: Strictly liable – Joint & Several Liability Owners can be responsible for cleanup of toxic waste they did not generate. So do an environmental audit of property prior to its purchase. EPA is responsible for cleanups at federal facilities. Because of potential liability, some property is abandoned (brownfields) & not used productively – no one wants to have to clean the site.

26 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. S PECIES P ROTECTION AND H ABITAT P ROTECTION 1973 Endangered Species Act (ESA) Covers all species, not just humans. Fish and Wildlife Service (FWS) of Department of Interior primarily responsible for ESA. Very uncertain and controversial area. Secretary of Interior declares species of animal or plant life “endangered” and establishes the “critical areas of habitat” of such species that is listed. “Endangered” means any species which is in danger of extinction throughout all or a significant portion of its range. Federal court stopped logging on federal land in Washington, Oregon and California to protect habitat of spotted owl at cost of $25 - $50 billion.

27 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE I N RE P OLAR B EAR E NDANGERED S PECIES A CT L ISTING In 2005 Fish and Wildlife Service (FWS) petitioned to list the polar bear under Endangered Species Act (ESA) as threatened or endangered. Bear population now healthy and spread over 19 areas in the Arctic. After 3-year review, FWS found that, due to effects of global climate change, polar bear is likely to become endangered species over next 45 years. Various groups challenged the listing. Said it was either overly restrictive or insufficiently protective. Attacked the listing as “arbitrary and capricious” in violation of Administrative Procedure Act (APA). District Court: Rejected claims. Upheld FWS rule. Interested parties appealed. (Continued)

28 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Issue: Whether Listing Rule is product of “reasoned decision- making” Listing Rule rests on 3-part thesis: (1) Polar bear is dependent upon sea ice for survival. (2) Sea ice is declining. (3) Climatic changes have/will continue to dramatically reduce Arctic sea ice – This will jeopardize polar bear populations. AFFIRMED. Challenge rejected. Listing is not arbitrary and capricious. The polar bear is threatened within meaning of the ESA. Listing rule is product of careful & comprehensive study and analysis. FWS clearly explained the anticipated loss renders this species likely to become endangered. C ASE C ASE I N RE P OLAR B EAR E NDANGERED S PECIES A CT L ISTING

29 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. G LOBAL E NVIRONMENTAL I SSUES Ozone Chlorofluorocarbons (CFCs) are “eating” ozone layer which protects earth from ultraviolet radiation’ Producers of CFCs agreed to phase out production in the Montreal Protocol Climate Change Looked at by developed nations but as yet not a major unified approach International Cooperation CFC production control Montreal Protocol provided fund, set up by wealthier nations, to pay poorer nations to sign agreement to ban CFCs

30 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE M ASSACHUSETTS V. EPA HELD: EPA has the statutory authority (and duty) to regulate the emission of gasses form motor vehicles. Risk of catastrophic harm, though remote, is real. Regulating vehicle emissions will not by itself reverse global warming, but that does not mean the court lacks jurisdiction to decide that EPA has a duty to slow or reduce it.

31 ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C ASE C ASE M ASSACHUSETTS V. EPA 12 states, local government & private organizations sued EPA. Said EPA did not live up to Clean Air Act obligation to regulate greenhouse gases resulting from vehicle emissions. EPA said regulations were sufficient. Appeals court agreed. Plaintiffs appealed to Supreme Court. EPA is to protect Massachusetts and others from emissions of motor vehicle engines. Harms from such emissions are well-recognized. Already environmental changes such as global retreat of mountain glaciers, reduction in snow-cover, earlier spring melting of rivers/lakes, rise of sea levels, etc. are occurring. EPA says the motor vehicles do not contribute significantly to injuries. Problem lies w/developing nations’ industrial pollution.


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