ENVIRONMENTAL LAW UPDATE

Running Down the Clock—The Biden Administration’s Recent Environmental Regulatory Actions

Environmental Law Update provides information on current topics of interest in the environmental law area. The editors of Probate & Property welcome suggestions and contributions from readers.

Environmental Law Update Editor: Nancy J. Rich, Katten Muchin Rosenman LLP, Chicago, IL

The last year of a US presidential term usually produces a flurry of regulatory activity. The current administration devoted much of its first three years in office to developing and refining discrete environmental policies, such as the PFAS Roadmap issued in October 2021 to address contamination from per- and poly-fluoroalkyl substances (PFAS). Still, it did not propose significant regulations under traditional environmental laws. During those years, the administration focused on clean energy initiatives to reduce greenhouse gas (GHG) emissions. During its final year, the administration has broadened its focus to include proposed regulations and policies under “traditional” federal laws governing hazardous waste, clean water, clean air, and toxic chemicals. This column briefly overviews the administration’s efforts and the potential implications for the regulated community.

Clean Energy Initiatives

The Inflation Reduction Act contains several tax incentives, including those designed to make energy-efficiency retrofits of existing buildings more likely, increase clean energy use, and reduce GHG emissions. In March 2022, the Securities and Exchange Commission (SEC) issued proposed regulations requiring publicly traded companies to disclose climate risks related to their business operation.

The proposed SEC regulations will require public companies to report their Scope 1, Scope 2, and certain Scope 3 GHG emissions. Scope 1 emissions are the GHG emissions that a company makes directly (e.g., operating computer equipment, data centers, boilers, and vehicles). Scope 2 emissions are the emissions the company makes indirectly (e.g., heating and cooling buildings by buying electricity or energy from GHG sources).

Scope 3 emissions are all the emissions not associated with the company itself but those for which the company is indirectly responsible, both up and down its value chain (e.g., from buying products from its suppliers and from its products when customers use them). The SEC’s proposed rule would cover Scope 3 emissions when they are “material” and when companies have set reduction targets. As of March 2024, the SEC plans to issue a scaled-back final regulation on March 6, 2024. If the SEC’s final regulation eliminates Scope 3 emissions from its final rule, it would deviate from the European Union’s recent rules, which made Scope 3 disclosures mandatory for large companies beginning in 2024.

Regular watchers of environmental regulatory trends know that California has historically enacted environmental laws and regulations that, in areas not preempted by federal law, are more stringent than federal requirements. This trend continues regarding GHG reporting. In October 2023, California Governor Gavin Newsom signed three landmark climate disclosure bills that were more stringent than the proposed and anticipated final SEC rules. California’s new laws address (1) GHG emissions reporting in compliance with the Greenhouse Gas Protocol, (2) climate-related financial risk reporting in accordance with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), and (3) disclosure of information about certain emissions claims and the sale and use of carbon offsets.

Although the SEC’s climate disclosure proposal includes GHG Protocol and TCFD requirements, unlike the SEC’s proposed rule, California’s requirements apply to both private and public companies that have business activities in California. The Voluntary Carbon Market Disclosures Act applies to entities that (1) operate and make emissions claims within California or (2) buy or sell carbon offsets within California. A.B. 1305, codified at 26 Cal. Health & Safety Code § 44475.

The Climate Corporate Data Accountability Act applies only to business entities with annual revenue over $1 billion that do business in California. Cal. S.B. 253, codified at 26 Cal. Health & Safety Code § 38532. It requires disclosure of Scope 1, Scope 2, and Scope 3 GHG emissions. Annual reporting of Scope 1 and Scope 2 GHC emissions will be required for covered entities beginning in 2026 (for the 2025 fiscal year). Annual reporting of Scope 3 GHG emissions will be required starting in 2027. The Climate Risk Reporting Act addresses climate-related financial risks of GHG emissions. S.B. 261 (2023), codified at Cal. Health & Safety Code § 38533. It applies to business entities that do business in California if their annual revenue exceeds $500 million. Disclosure will be required on or before January 1, 2026, and biennially after that.

Environmental Regulations and Policies

Significant recent regulatory actions of the Environmental Protection Agency (EPA) include requiring more stringent particulate emission standards under the Clean Air Act, proposing to regulate certain PFAS as hazardous substances, and issuing a policy to reduce acceptable levels of lead at remediation sites.

More Stringent Health-Based Particulate Matter Standard

On February 7, 2024, EPA revised the primary (health-based) annual standard for PM2.5 from 12.0 parts per billion (ppb or µg/m3) to 9.0 µg/m3. EPA retained the 24-hour standard for PM2.5 and the current primary 24-hour standard for PM10, which protects against coarse particles. EPA is also not presently changing the secondary (welfare-based) standards for fine particles and coarse particles.

Proposed PFAS Regulations

On February 8, 2024, EPA released two proposed regulations addressing PFAS under RCRA. One regulation proposes to list nine PFAS as hazardous constituents under RCRA. The other proposed regulation changes the regulatory definition of “hazardous waste” for the purposes of RCRA’s Corrective Action Program.

If finalized, the new regulations would apply to permitted operators of hazardous waste treatment, storage, and disposal facilities (TSDFs) with solid waste management units required by their permits to take corrective action for releases of hazardous waste and constituents. Although other sections of RCRA reference “hazardous constituents,” EPA expects only negligible effects because of existing processes and procedures. Future EPA rules may require that other entities that generate, transport, or store PFAS treat their PFAS as hazardous waste under RCRA.

Lead Screening Levels at Certain Remediation Sites

EPA recently lowered the recommended regional screening level (RSL) and regional removal management level (RML) for lead-contaminated soil in residential areas where children live and play from 400 parts per million (ppm) to 200 ppm. EPA recommends using an even lower RSL of 100 ppm in areas with other sources of lead exposure (including lead water service lines and lead-based paint) and areas identified as non-attainment areas for lead emissions under the Clean Air Act. The guidance applies to sites addressed under CERCLA and at RCRA Corrective Action facilities.

RSLs are conservative values used to identify contaminated media (i.e., air, water, or soil) that may require further study. RMLs are generic levels used to define areas, contaminants, and conditions that may warrant a removal action under CERCLA, such as providing alternative drinking water or hot-spot remediation.

“Residential” sites include all areas where children have unrestricted access, including properties where children may live, but also vacant lots in residential areas, schools, daycare facilities, community centers, playgrounds, parks, and other recreational areas.

The regulated community should know that the new guidance can trigger a reopener for Superfund and RCRA Corrective Action sites where lead remedies have already been completed or are underway. In the new guidance, EPA acknowledges that a “significant number of residential properties could undergo evaluation and cleanup because of this guidance.”

Revised Wetlands Regulation and Guidance after Sackett

In May 2023, the US Supreme Court’s decision in Sackett II limited the jurisdiction of EPA and the Army Corps of Engineers over wetlands. Sackett v. EPA, 598 U.S. 651 (2023) (Sackett II). The Court held that the Clean Water Act’s use of “waters” encompasses only those relatively permanent, standing, or continuously flowing bodies of water forming geographical features that are described in ordinary parlance as streams, oceans, rivers, and lakes. The Court held that the Clean Water Act “extends to only those wetlands that are as a practical matter indistinguishable from [other jurisdictional] waters of the United States.” The Court further stated that for the federal government to assert jurisdiction over a wetland, it must show “that the wetland has a continuous surface connection with that water [i.e., an otherwise jurisdictional water], making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.”

In August 2023, EPA and the Corps issued a regulation to conform the “waters of the United States” definition to the Supreme Court’s decision in Sackett II. This conforming rule amends the provisions of the January 18, 2023, definition of “waters of the United States” that are invalid under the Supreme Court’s interpretation of the Clean Water Act in the Sackett II decision. The final amended conforming rule became effective on September 8, 2023. 40 C.F.R. § 120.2(a)(4)(ii).

A guidance document issued by EPA and the Corps in November 2023 is arguably more stringent than allowed by the Court’s decision in Sackett II and the August 2023 conforming regulation. The guidance focuses solely on the “continuous surface connection” language of Sackett II and does not discuss the Court’s requirement that the wetland be indistinguishable from water subject to the Clean Water Act. The guidance broadly states that a continuous surface connection may be created by “a discrete feature like a non-jurisdictional ditch, swale, pipe, or culvert” and that such connection results in the wetland becoming subject to the Clean Water Act. As a result, further litigation is likely to attempt to require EPA and the Corps to comply with the Court’s holding in Sackett II.