Regulatory framework and policy
What is the primary environmental legislation in your jurisdiction?
The National Environmental Policy Act is an umbrella procedural statute that requires federal agencies to consider the environmental impacts of their actions.
Several substantive statutes are media-specific:
The Clean Air Act regulates air quality and emissions.
The Clean Water Act regulates water quality and discharges.
The Safe Drinking Water Act establishes drinking water standards for tap water and underground injection rules.
The Resource Conservation and Recovery Act regulates hazardous and solid waste management.
The Comprehensive Environmental Response, Compensation and Liability Act addresses remediation of legacy disposal sites and release reporting.
The Oil Pollution Act provides for oil spill prevention and response.
Other statutes are resource-specific. The Endangered Species Act protects listed endangered and threatened species and critical habitat. Other statutes protect certain species, including the Migratory Bird Treaty Act, the Bald and Golden Eagle Protection Act and the Marine Mammal Protection Act. Other statutes govern natural resource planning and development on federal lands onshore and on the Outer Continental Shelf, including:
the Mineral Leasing Act;
the Outer Continental Shelf Lands Act;
the Federal Land Policy and Management Act;
the Mining Law 1872;
the National Forest Management Act;
the National Park Service Organic Act;
the Wild and Scenic Rivers Act;
the National Wildlife Refuge System Administration Act;
the Rivers and Harbors Act; and
the Coastal Zone Management Act.
Additional statutes cover certain products or wastes:
The Toxic Substances Control Act regulates new and existing chemicals and products that contain these chemicals.
Pesticides are regulated under the Federal Insecticide, Fungicide and Rodenticide Act.
Food, drugs and cosmetics are regulated under the Federal Food, Drug and Cosmetic Act.
Still more statutes focus on human health and safety:
The Hazardous Materials Transportation Act regulates transportation of hazardous materials.
The Occupational Safety and Health Act regulates hazards in the workplace.
The Emergency Planning and Community Right-to-Know Act provides emergency planning and notification for hazardous and toxic chemicals.
The federal and state governments share authority to administer some federal environmental programmes (eg, the Clean Air Act and Clean Water Act). States also have their own, sometimes more stringent, environmental laws. Counties, cities and other local government entities may have their own requirements as well.
Is your jurisdiction a signatory to any international environmental agreements/commitments?
Yes. For example, regionally, the United States and Canada have an Air Quality Agreement. The United States is also party to the North American Agreement on Environmental Cooperation and the North American Free Trade Agreement and its side agreements, which have environmental aspects.
Multilaterally, the United States is party to, among other agreements:
the 1972 Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter;
the 1973 Convention on International Trade in Endangered Species of Wild Fauna and Flora; and
the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer.
The United States ratified the Paris Agreement on climate change as an executive agreement in September 2016, but in August 2017 initiated the process for withdrawal, which cannot be effective before November 2020.
The State Department maintains a complete list of international agreements to which the United States is party (www.state.gov/s/l/treaty/tif/index.htm
). The United States is not a party to a number of other multilateral environmental agreements.
Which government bodies regulate compliance with environmental legislation and what is the extent of their powers?
The Environmental Protection Agency (EPA) is the lead federal agency for implementing many federal environmental statutes. It directly administers permitting programmes for various industrial operations or delegates such functions to states under continuing EPA oversight.
The US Department of the Interior and the Forest Service implement a variety of laws addressing environmental reviews, wildlife and cultural and historic resources on federally owned or managed lands. Other federal agencies may also have power to administer certain specific programmes.
Each state has at least one agency with responsibility for administering environmental laws and enforcement. Federal and state agencies often share administration and enforcement of environmental laws. States generally take the lead for Clean Air Act, Clean Water Act and Resource Conservation and Recovery Act permits, inspections, and enforcement. The EPA retains significant enforcement authority with regard to alleged violations of these statutes at individual facilities. In other areas the EPA generally takes the lead on enforcement.
Most of these agencies are delegated power by environmental statutes to promulgate their own implementing regulations.
The Department of Justice litigates court cases arising under federal environmental laws on behalf of the federal government, whether as plaintiff or defendant. Individual agencies, their counsel and their adjudicative bodies may handle available administrative appeals before a case reaches a court.
How would you describe current government policy on environmental regulation and how does it compare on an international scale?
The last three decades have largely been devoid of significant environmental legislation, so most environmental policy has developed within federal agencies and courts and at non-federal levels. Generally, international developments mirror current policy trends at the state and local levels more than nationally. The current administration is adding flexibility to and reducing burdens from federal environmental programmes. There is an overall de-emphasis on climate change and proposed major funding cuts for federal environmental agencies. To fill the perceived void, a number of states and localities remain active in proposing and advancing their state-level environmental programmes. However, overall the United States maintains a robust, multifaceted environmental regulatory system relative to other countries.
Activities subject to permit
Which activities require an environmental permit and how are they classified for such purposes?
Certain environmental permits can cover a range of activities but address specific environmental media. For example, the Clean Air Act requires pre-construction and operating permits (New Source Review and Title V). The Clean Water Act authorises permits for point source discharges into waters of the United States and the filling of jurisdictional wetlands.
Other permits authorise and regulate specific activities or industries. Under the Clean Air Act, for example, different facilities and equipment are subject to particular emissions standards. Others authorise mining, well drilling and waste management.
Which authority issues permits?
Often the Environmental Protection Agency (EPA) or delegated states. Clean Water Act wetlands permits are issued by the US Army Corps of Engineers with EPA oversight. Federal agencies with jurisdiction over federally owned or managed lands may permit surface or subsurface activities on those lands. State and local authorities also may issue or review permits.
What are the procedural and documentary requirements to obtain a permit?
Requirements vary significantly. Typically, agencies require a complete application to explain the proposed activities, any anticipated adverse environmental consequences and any actions to limit or mitigate them. Applicants generally must then address any questions or concerns from the agencies. Public involvement sometimes is required or warranted.
Do any permit fees apply?
Yes, in most cases. Fees vary across programmes. Agencies usually charge fees to recoup their administrative costs from users of the corresponding permit programme.
Validity period and renewal
What is the validity period for permits and how can they be renewed?
Permit terms vary widely, from months to several years. Federal agency regulations for most permit programmes provide whether and how the permits can be renewed, and whether the renewal process differs from the original permitting process.
Can permits be transferred? If so, what procedure applies?
Yes, but it varies. Typically, agencies retain discretion to approve or deny a transfer, and to ensure that the transferee is qualified to hold the permit.
Are permit decisions subject to appeal? If so, what procedure applies?
Mostly yes. Administrative review or appeal procedures differ among agencies. Once administrative remedies have been exhausted, a final agency action may be appealed to federal district court, or in some instances directly to a US court of appeals. Individual environmental statutes or the general venue statute dictate where a lawsuit may be brought. Judicial review follows the Federal Rules of Civil Procedure, the Federal Rules of Appellate Procedure and individual courts’ local rules.
What are the consequences of violating permit rules and decisions?
Federal and state agencies may pursue injunctive relief and require the abatement or cessation of permit violations or environmental harm. Remedial steps may include installing equipment to control emissions, ceasing certain activities or revoking a permit or shutting down a facility. Many environmental statutes also authorise civil and criminal penalties, often calculated on a per-day, per-violation basis. Agencies may – and sometimes must – issue warnings or notices of violations before taking more severe enforcement actions. An agency typically may pursue an administrative enforcement action or sue the violator in federal court. In some instances, absent government enforcement, citizen suits may be brought in federal court against violators.
Environmental impact assessments
Projects subject to assessment
What projects require a preliminary environmental impact assessment?
The National Environmental Policy Act (NEPA) applies to most discretionary federal agency actions, including approving, financing, assisting or conducting plans, projects or programmes, whether regional or site-specific. Certain actions are exempt from NEPA, such as ministerial agency actions or where potentially duplicative environmental reviews are required. In some ‘small handles’ situations where only a small component or minor approval involves a federal nexus, NEPA might not apply to the larger project.
NEPA requires an environmental impact statement for “proposals for… major Federal actions significantly affecting the quality of the human environment”. A less detailed environmental assessment may suffice for a federal agency action with insignificant or unclear impacts. Finally, categorical exclusions apply to categories of agency actions that do not significantly affect the environment individually or cumulatively. An agency can perform more detailed review under NEPA than legally required.
Certain states have laws analogous to NEPA, which vary significantly.
Scope of assessment
What environmental factors and risks fall within the scope of the impact assessment report?
Agencies must consider the direct, indirect and cumulative effects of their actions, including ecological, aesthetic, historic, cultural, economic, social or health considerations. Such effects must:
be reasonably foreseeable;
bear a reasonably close causal relationship to the federal agency action at issue; and
interrelate with environmental considerations.
Through upfront scoping, agencies can determine which types of effects are pertinent to the action at issue and which can be eliminated from further consideration.
Who conducts assessments?
The lead federal agency, with invited assistance by cooperating or participating federal, state, tribal and local agencies with jurisdiction or special expertise. The lead agency also may hire and supervise third-party consultants, typically funded by the project proponent, to prepare the National Environmental Policy Act analysis. The project proponent and public also submit information and comments during this process.
Are the results of impact assessments publicly available?
Yes. Most categorical exclusions are issued without public comment. Environmental assessments are increasingly published in draft form for public comment, before the agency finalises it and issues a finding of no significant impact. An environmental impact statement elicits the most public process, requiring the agency to publish in the Federal Register a notice of intent, a notice that a draft environmental impact statement is available for public comment, and notices of the final environmental impact statement and the record of decision. Agencies now post certain projects to a publicly available dashboard and track their environmental review and permitting progress.
Can the results of an impact assessment be contested? If so, what procedure applies?
Yes, when the agency issues its final decision. Some agencies allow an initial administrative appeal. Final agency actions may be challenged under the National Environmental Policy Act in a federal district court, often where the relevant project is located. The time for filing a complaint is limited by statute and may range from a few months to a few years. Courts evaluate compliance based on the underlying administrative record and apply a ‘rule of reason’ that largely defers to an agency’s ‘hard look’.
What regime governs liability for soil pollution (including the allocation, transfer and limitation of liability)?
The Comprehensive Environmental Response, Compensation and Liability Act (Superfund) and similar state laws. The Environmental Protection Agency (EPA) lists sites on the National Priority List based on a hazard ranking system. Liability under the act and state laws is typically strict, joint and several, and retroactive, even to legacy contamination sites. States also implement voluntary clean-up and brownfields programmes aimed at remediating and reusing legacy contaminated soil sites.
What environmental due diligence measures are recommended before concluding land transactions?
The purchaser should conduct environmental due diligence that is proportionate to the anticipated risk depending on the operations at the site, both historical and upcoming. For example, a property with a history of industrial operations will pose a greater risk of latent contamination than a property that has only ever been used to host office buildings. In addition, if the purchaser intends to change the type of operations from industrial operations to operations that may directly affect a vulnerable population (eg, a school or an apartment building), the purchaser should take extra precautions to ensure that the property is sufficiently clean for the intended use.
The purchaser should always:
review environmental studies and reports for the subject property, if available;
review prior purchase agreements and their corresponding schedules to identify environmental concerns and understand historical allocation of environmental liability; and
interview individuals who have actual knowledge of the site’s current and historical operations.
A purchaser desiring environmental protections under the 2002 Brownfields Amendments to the Comprehensive Environmental Response, Compensation and Liability Act should also conduct “all appropriate inquiries” before purchase, especially if there is a history of on-site contamination or chemically intensive operations. This involves retaining an environmental consultant to conduct a Phase I environmental site assessment, including an evaluation of potential vapour intrusion risk, to better gauge the current condition of the property.
Because information gathered during environmental due diligence can greatly affect the negotiating power of the purchaser, it should be conducted early enough to ensure that the purchase agreement reflects the environmental risk that the purchaser may be assuming.
What remediation and clean-up measures are typically applied and how can remediation costs be recovered?
Under the Comprehensive Environmental Response, Compensation and Liability Act and similar state laws, identified potentially responsible parties (PRPs) typically undertake a remedial investigation/feasibility study. Based on the results, the EPA selects a remedy for the site through a record of decision. Remediation may include a range of steps such as soil/sediment removal, capping, treatment or monitored natural attenuation. Remedies often include adaptive management steps based on ongoing monitoring. Under Sections 107 and 113 of the act, the EPA or PRPs undertaking the remedy can seek cost recovery or contribution of remediation costs from other PRPs; the available remedy and time limits differ by court jurisdictions and type of costs incurred. The EPA or states also can undertake or mandate that PRPs undertake time-critical interim actions to address imminent environmental threats.
How are air emissions regulated? What air quality standards and emission limits apply?
The Clean Air Act requires the Environmental Protection Agency (EPA) to set National Ambient Air Quality Standards (NAAQS) for common, criteria air pollutants that endanger public health or welfare nationwide. To date, the EPA has established NAAQS for six pollutants:
particulate matter (coarse and fine);
carbon monoxide, and
The act also requires the EPA to regulate emissions of listed hazardous air pollutants (HAPs). States must adopt state implementation plans (SIPs) to achieve the NAAQS and to control emissions of criteria and hazardous pollutants within their boundaries.
The act requires new or modified sources of air pollutants to obtain pre-construction approval. The preconstruction permit programme requires project proponents to demonstrate that emissions from the new or modified sources will not cause or contribute to an increase in air pollutants that would degrade air quality, and requires installation of certain levels of pollution control equipment depending on the area’s air quality. Following construction, new or modified sources must obtain operating permits, which require compliance with equipment standards (eg, best available pollution control equipment) and emissions limits. These standards and limits vary based on facility type and the nature of emissions. Permitting thresholds, emissions limits and equipment standards are generally more stringent for sources emitting HAPs or located in NAAQS non-attainment areas.
Although the EPA issues permits in some circumstances, most permits are issued by state or local air pollution control agencies under their SIP authority (with EPA oversight). Operating permits are generally required for larger sources and sources that are subject to new source performance standards, HAP standards and acid rain control requirements. Operating permits typically last for five years and include enforceable emissions standards and limitations (which vary by industry or source category), compliance schedules, and monitoring and reporting requirements.
Beyond stationary sources, the EPA has broad authority over mobile sources including aircraft, on-road vehicles and non-road engines and equipment. It sets emission standards for vehicles, imposes testing and certification for engines and controls fuel formulations and additives. Passenger cars and light-duty trucks must meet tailpipe emission standards for various air pollutants and greenhouse gases. Fuel economy standards for model years 2022 to 2025 are currently under review. In August 2016 the EPA finalised a finding that greenhouse gas emissions from certain classes of aircraft endanger human health and welfare, which is a precursor to adopting greenhouse gas standards for aircraft.
The Clean Air Act also requires the EPA to address ozone-depleting substances, acid rain and regional haze. In light of litigation and Trump administration developments, the future of the above regulatory programmes and other initiatives – such as the Clean Power Plan aimed at greenhouse gas emissions reductions from existing power plants – remains uncertain.
What are the consequences of non-compliance with air emissions regulations?
The EPA maintains joint authority with delegated states to enforce violations of the Clean Air Act. The EPA and state agencies may enforce non-compliance with the act through administrative and judicial means. Under the act, the EPA has the authority to seek information from sources, inspect facilities, require monitoring or testing and require document production. The EPA thus may assess a source’s compliance with permit or regulatory requirements. If the EPA determines that a violation has occurred, it may:
issue an administrative compliance order;
issue an administrative penalty order; or
bring a civil or criminal action.
The EPA often seeks injunctive relief specifying the terms and conditions under which a source must come into compliance, and also may seek substantial administrative penalties.
What rules govern the discharge of wastewater and the protection of water resources?
The Clean Water Act requires a permit for any person or entity to discharge either pollutants or dredged or fill material to waters of the United States (which include jurisdictional wetlands). The Environmental Protection Agency (EPA) oversees the former; the US Army Corps of Engineers oversees the latter (subject to EPA veto). Individual states also maintain their own programmes regulating these discharges to surface waters, and may be delegated authority to implement the act within their borders. State law governs extraction of water for consumptive use.
What are the consequences of non-compliance with water pollution regulations?
Non-compliance with water pollution regulations or a permit issued pursuant to such regulations may result in the imposition of civil penalties, injunctive relief or other relief required to remedy damage to the environment caused by the non-compliance. The EPA, states and private citizens may all seek these civil remedies. Knowing or intentional non-compliance also may yield criminal liability.
Waste and hazardous substances
How is ‘waste’ defined in your jurisdiction?
The Resource Conservation and Recovery Act defines ‘solid waste’ as “any garbage, refuse, sludge… and other discarded material”. Under the act, ‘solid’ wastes include solid, liquid, semi-solid or contained gaseous material. Solid wastes classified as ‘hazardous wastes’ include:
certain specifically listed wastes;
wastes that fail generic characteristics of toxicity, reactivity, corrosivity or flammability;
certain mixtures of hazardous wastes and other solid wastes, and residues from treatment of hazardous waste; and
media (eg, soil and debris) that contain hazardous waste.
Under state law, additional provisions may expand the generic characteristics of hazardous waste or the list of wastes identified as hazardous in that state.
What rules and procedures govern the handling of waste, with particular respect to:
The Resource Conservation and Recovery Act regulates the storage of hazardous waste. Depending on the size and type of facility, regulations under the act may impose accumulation time limits and technical standards (eg, for containers, tanks, drip pads or containment buildings), as well as training requirements, air emission limitations and the development of contingency plans and emergency procedures.
The act requires transporters of hazardous waste to obtain an Environmental Protection Agency (EPA) identification number and comply with the EPA’s hazardous waste manifest system. Exemptions exist for transporters of certain recycled or reclaimed hazardous wastes generated by small-quantity generators. Transporters must also take certain actions in response to discharges or spills of hazardous waste. Transporters must also comply with applicable Department of Transportation regulations that apply to the transport of hazardous materials by rail, aircraft, water vessel or truck. These include recordkeeping, training, manifest, labelling and packaging requirements. The act also restricts the export and import of hazardous waste.
The act requires that certain hazardous wastes meet treatment standards before land disposal. Certain treatment standards are numerical and others require the use of certain treatment technologies. The act also imposes recordkeeping requirements on disposers of hazardous waste.
EPA regulations and guidance documents help companies to determine whether recycled materials are subject to requirements under the act (ie, whether the recycled materials meet the definition of ‘solid waste’). Recycling standards under the act range from full regulation to full exemption from regulation. Certain recycled materials are:
specifically excluded from the definition of ‘solid waste’ (eg, waste used as an ingredient);
considered solid wastes but not hazardous wastes; or
considered hazardous wastes but are subject to alternative regulatory controls.
What is the extent of a waste producer’s liability after transferral of waste (eg, to a waste disposal agent)?
Under the Comprehensive Environmental Response, Compensation and Liability Act, parties that arrange for waste disposal, treatment or transport may be subject to ongoing liability for improperly managed waste. Companies that transfer waste should carefully consider their potential liability by, for example, obtaining appropriate insurance coverage and negotiating appropriate contractual language with the waste disposal agent.
Are waste producers bound by any waste recovery obligations?
The Resource Conservation and Recovery Act exempts certain recyclable materials (including certain by-products) and recycling activities from its hazardous waste regulations, generally if specified conditions are met. Federal law does not mandate waste recycling in lieu of disposal. Under various state laws, extended producer responsibility requirements (including recycling targets) may apply for certain products.
Waste disposal agents
How are the business activities of waste disposal agents/landfill operators regulated?
The EPA applies different requirements to different types of landfills, including municipal solid waste landfills, industrial waste landfills and hazardous waste landfills. It imposes design standards on hazardous waste landfills, including the use of a double liner and a leak detection system. Operators are subject to inspection, monitoring and release response obligations, as well as post-closure requirements.
What special rules, regulations and safeguards apply to the handling and disposal of hazardous materials?
Subtitle C of the Resource Conservation and Recovery Act regulates generation, treatment, storage, disposal and management of hazardous wastes.
The Hazardous Materials Transportation Act governs transport and handling of hazardous materials.
The EPA requires facilities that produce, handle, process, distribute or store extremely hazardous substances to develop and implement a risk management plan.
The Occupational Safety and Health Act sets general industry standards and specific construction, maritime and agriculture industry standards to limit on-the-job injuries and occupational disease risks for workers. Under this act, employers must provide personal protective equipment and grant employees access to their medical records. Extensive regulations guard against workplace hazards, including standards for process safety management of highly hazardous chemicals and employee exposure to various air contaminants, asbestos and other substances. Licensing, training and certification requirements also apply to certain activities regulated under the act.
Chemical and product regulation
What environmental regulations and procedures apply to the production, transportation and sale of chemicals and other products?
Toxic Substances Control Act reporting, recordkeeping and other requirements may apply to manufacturers (including importers), processors, distributors and users of chemical substances. Manufacturing a non-exempt new chemical substance (not on the inventory under the act) is prohibited unless and until the Environmental Protection Agency (EPA) makes an affirmative finding either that a chemical is not likely to present an unreasonable risk or that manufacture may begin subject to a compliance order imposing restrictions on the new chemical. Designated ‘significant new uses’ of approximately 2,800 chemicals are subject to similar notification and review requirements.
Following amendments to the act passed in 2016, the EPA also has authority to:
prioritise chemicals for in-depth review;
conduct risk evaluations of high-priority chemicals; and
regulate those chemicals found to present an unreasonable risk under the conditions of use.
The EPA further exercises authority under the act to issue either orders or rules requiring testing by manufacturers and processors. For new chemicals (ie, not on the inventory), the EPA must now make affirmative findings (eg, whether a chemical is likely to present an unreasonable risk under the conditions of use) with an order to follow if the ‘likely to present’ finding is made. EPA actions may pre-empt certain state restrictions on chemicals.
As part of the EPA’s current revisions to the inventory under the act, manufacturers and importers of chemicals must submit reports to the EPA regarding the manufacture or import of chemical substances for non-exempt commercial purposes between June 21 2006 and June 21 2016 (look-back period). Those reports are due by February 7 2018. Processors may also notify the EPA of chemical substances which they processed for non-exempt commercial purposes during the look-back period until October 5 2018. The EPA will publish a new version of the inventory which identifies those chemical substances that are considered to be active chemical substances.
The EPA is also prioritising chemicals for possible regulation pursuant to the 2016 statutory amendments to the act. A new EPA rule, effective September 18 2017, sets forth a risk-based screening process and criteria for identifying and designating high-priority substances, which must undergo risk evaluations, and low-priority substances, which do not meet the high-priority screening criteria and will not receive risk evaluations. The EPA should soon begin using this process to evaluate chemicals.
The Consumer Product Safety Improvement Act 2008, implemented by the Consumer Product Safety Commission (CPSC), limits the levels of lead, phthalates and certain chemicals allowed in children’s products. The CPSC also administers the Federal Hazardous Substances Act, which requires precautionary labelling to alert consumers to certain products’ potential hazards. Moreover, the Federal Trade Commission has established ‘green guides’ for environmental marketing claims. States additionally have imposed requirements to regulate and restrict the sale of certain products containing specified hazardous substances.
Types of liability
What types of liability can arise for environmental damage (eg, administrative, civil, criminal)?
There is no US generalised regime for environmental damages. Statutes, regulations and common law can impose various types of liability, including administrative, civil and criminal. Courts in turn establish precedent for liability in cases arising under various environmental laws. Alleged violators may face government administrative actions, civil suits or citizen suits. Only the government can prosecute criminal liability in court.
The government generally follows proportional enforcement. Minor offences may trigger administrative or civil sanctions; more serious and intentional violations trigger more severe sanctions or even criminal charges. The government’s burden of proof is highest in criminal cases.
Some programmes also impose strict liability based on party status. For example, for remediation and cost recovery for contaminated sites, the Comprehensive Environmental Response, Compensation and Liability Act imposes joint and several liability on each potentially responsible party (PRP), including current or former owners or operators, transporters or arrangers who disposed of hazardous substances, absent sufficient evidence to apportion the harm among PRPs or other applicable defences to liability. Separately, the Resource Conservation and Recovery Act authorises the government or private parties to seek relief for “imminent and substantial endangerment” to the environment.
Directors’ and officers’ liability
Can directors and officers be held personally liable for company environmental offences? If so, can liability be limited through insurance coverage and/or contractual indemnities?
Generally not for routine environmental violations. However, some federal environmental statutes, including the Clean Air Act, specifically state that an ‘operator’ or ‘responsible corporate officer’ can include “any person who is senior management personnel or a corporate officer”. In addition, a number of reports submitted to the Environmental Protection Agency and state agencies are required to include formal certifications (under oath) with regard to the accuracy of the information contained therein, which can provide the basis for claims against corporate officers.
More often, various theories under laws governing the internal governance of corporations and other business enterprises can support personal liability of corporate directors and officers under environmental and other public health laws – for example:
The corporate veil is pierced;
The director or officer personally participated in the improper activity; or
The director or officer personally exercised substantial control and supervision over the project in question.
US law generally does not permit liability based only on the corporate position or job title of director or officer. However, federal prosecutors can rely on a range of surrogates to prove the executive’s knowledge. Therefore, criminal charges can be pursued when the directors or officers:
are personally aware of, or involved in, the commission of a crime;
aid and abet a crime;
fail to prevent the commission of a crime by others within the corporation by either turning ‘wilfully blind’ or negligently supervising the conduct of those subject to their control; or
fail to implement preventive measures to ensure that violations do not occur.
Directors’ and officers’ (D&O) liability insurance is available to cover loss incurred by individual directors or officers due to legal actions against them in their capacity as directors and officers, generally including defence costs. Most corporations also contractually indemnify their directors and officers for their individual risk, although some states place limits on corporate indemnification, such as in shareholder derivative and bad-faith suits. Corporations can obtain coverage under D&O insurance for reimbursement of their indemnification obligations, and sometimes for their own liability risk. D&O insurance is not standardised and coverage can vary.
Liability for authorised activity
Can environmental liability arise even in the course of authorised activities (eg, operations subject to environmental permits)?
Yes, but not always. Many environmental statutes and common law causes of action are strict liability in nature and can therefore give rise to liability even for permitted operations. For example, the Comprehensive Environmental Response, Compensation and Liability Act imposes joint and several liability on PRPs to fund the clean-up of contaminated property regardless of whether the activities were permitted. However, the fact that activities are authorised may be considered in allocation among PRPs. By contrast, Clean Air Act or Clean Water Act permits often provide a shield to the permittee for actions in compliance with the permit. The case law is not uniform regarding the scope of the permit shield for different Clean Air Act or Clean Water Act permits and it is important to include clear permit shield language in an individual permit.
What defences are available to environmental offenders?
In civil cases:
statutes of limitations;
ambiguity of statutory or regulatory language;
compliance with a valid permit; and
Limited statutory defences also may be available.
In criminal cases, additional defences include:
lack of knowledge;
the government’s failure to meet its heightened burden of proof; and
other constitutional arguments uniquely applicable to criminal cases (eg, lack of fair notice or void for vagueness).
Liability in share sale/asset purchase
What rules govern the transfer of environmental liability in share sales and asset purchases?
A share purchaser generally acquires all the corporate target’s assets and liabilities, including the predecessor’s environmental liabilities. An asset purchaser may be able to acquire the assets free of environmental liabilities arising from pre-closing regulatory non-compliance by the target and from historic offsite disposal.
However, various courts have held asset purchasers responsible for these types of environmental liabilities. Additionally, an asset purchaser may have ownership-based liability under the Comprehensive Environmental Response, Compensation and Liability Act or state statutes when acquiring contaminated real property. Limited statutory defences apply to entities that qualify as a ‘bona fide prospective purchaser’ or ‘innocent landowner’. State or local property transfer laws also can impose remedial, investigatory and other obligations for property or business transactions, and thereby affect the negotiating position and obligations of the parties.
What environmental due diligence measures are recommended before concluding share sales/asset purchases?
check for regulatory compliance of the facilities;
conduct “all appropriate inquiries” under the 2002 Brownfields Amendments to the Comprehensive Environmental Response, Compensation and Liability Act, including evaluating the target facilities’ environmental conditions and assessing potential liability and costs associated with onsite remediation; and
evaluate the potential liabilities associated with the current and historical generation and offsite disposal of wastes from the target’s operations.
A purchaser of an interest in real property (fee simple or leasehold) also should conduct environmental due diligence specific to the land acquisition.
Can lenders be held liable for environmental offences?
Yes, but some lender defences and safe harbours may be available. Additionally, specialty lender liability insurance policies can provide coverage to lenders against borrower default for risks relating to new, unknown or undisclosed environmental conditions, and sometimes for conditions that are disclosed in a Phase I assessment.
Because the borrower bears the brunt of potential environmental exposure in a real estate or business transaction, its environmental representations in a credit agreement generally have a high threshold for breach. For example, environmental representations may have a qualifier of “except as [would/could] be expected to have a Material Adverse Effect”. While this language is customary, lenders should review the agreement provisions and definitions – particularly the definition of ‘material adverse effect’ or its equivalent – to ensure that they have not made themselves vulnerable to liability for environmental offences under the contract.
Reporting and disclosure obligations
Under what circumstances must environmental damage be reported to the authorities?
Certain releases of hazardous substances or oil must be reported under federal laws and related regulations. Reporting obligations are usually triggered by a hazardous substance release in an amount that meets or exceeds a regulatory reportable quantity or causes a visible oil sheen.
Reporting may also be triggered under individual permits or state law requirements. For example, some states may require facilities that are stationary sources of air pollutants to report any deviation from the conditions outlined in their operating permits, including exceedances of emissions limits.
Is information on environmental damage/compliance available in a public register?
Generally, no. The Environmental Protection Agency (EPA) maintains an enforcement and compliance history online (ECHO) platform, an interactive public database that provides facilities’ compliance history under various federal laws. According to the EPA, ECHO covers over 900,000 regulated facilities nationwide. Some state-level public databases have certain state programme compliance information.
Are regular environmental audits required?
Generally, no. Environmental permits may require audits. The EPA launched an audit policy in 2000 to encourage self-policing by regulated entities to voluntarily identify and report environmental violations. If regulated entities satisfy the auditing conditions in a self-audit, they may enjoy certain incentives in potential enforcement actions (eg, reduced penalties or avoided criminal prosecution).
What environmental disclosures are required in sales transactions?
Many US real estate transactions follow the ‘buyer beware’ rule, which puts the burden on the buyer to inquire about environmental and other issues. Some states imply warranties of fitness or habitability in residential real estate and certain statutes have mandatory disclosure requirements. For example, sales or leases of certain residential properties may require the disclosure of lead-based paint hazards on the properties under the federal Residential Lead-Based Paint Hazard Reduction Act 1992. State laws may also have disclosure requirements.
Federal and state laws also require environmental disclosures in other contexts. For example, the federal law governing pesticides requires certain labelling, as does the state of California for chemicals known to cause cancer or developmental or reproductive toxicity (Proposition 65). Voluntary disclosure also can provide some measure of protection against future claims if the buyer is fully informed and accepts the associated risk.
What types of environmental insurance are available and what do they cover?
Pollution legal liability/premises pollution liability – for environmental contamination discovered during the policy period, including:
first party onsite clean-up;
third-party claims for costs for offsite clean-up, property damage and bodily injury resulting from the contamination;
natural resource damages;
liability for non-owned disposal sites;
civil (but not criminal) fines; and
Contractors pollution liability – for contractors for losses from pollution conditions caused by covered operations, including those caused by subcontractors.
Comprehensive general liability – for third-party claims for bodily injury and property damage arising out of accidents or occurrences. These typically include absolute pollution exclusions, but historical policies before 1986 (especially those before the 1970s) may provide coverage because they do not include absolute or any pollution exclusions.
Directors’ and officers’ liability – for loss incurred by individual directors or officers due to legal actions against them in their capacity as directors and officers, generally including defence costs.
Errors and omissions – professional liability policies can provide coverage to environmental professionals that provide consulting services, such as Phase I or II investigations, environmental auditing and others.
Lender liability – covers lenders against borrower default for risks relating to new, unknown or undisclosed environmental conditions, and sometimes for conditions that are disclosed in a Phase I assessment.
First-party property – although some first-party property policies exclude environmental risks, others provide some coverage for clean-up of the policyholder’s property.
Clean-up cost cap – for contamination clean-ups that exceed projected costs by a certain amount (rarely offered and premiums are often prohibitively high).
Many carriers offer their own specialty lines of coverage and other policies can be written to cover specific environmental risks.
Is environmental insurance mandatory and/or commonly purchased?
Environmental insurance is not mandatory in the United States. Many large companies choose to purchase some form of environmental insurance. Premiums generally are becoming more affordable and it is a viable avenue of risk management, but many smaller companies elect not to obtain insurance or to self-insure for environmental liabilities.
What environmental taxes are levied in your jurisdiction?
Most US environmental programmes are regulation based, not tax based. Some environmental tax programmes do exist. For example, the Oil Pollution Act established a federal trust fund to clean up oil spills, financed by a per-barrel tax collected from the oil industry. An underground storage tank trust fund is funded by taxes on certain motor fuels. A federal tax also applies to use or import ozone-depleting chemicals. The Surface Mine Control and Reclamation Act authorises a reclamation programme for abandoned mine land, which is funded by a coal tax.
Environmental taxes are more prevalent on the state and local levels, including taxes relating to waste and battery disposal, chemicals, petroleum, tires, air emissions, oil spill response, litter control and water quality.
Climate change issues
Emissions, renewables and efficiency
What regulations, targets and/or incentive schemes are in place to:
(a) Reduce greenhouse gas emissions?
The Environmental Protection Agency (EPA) has undertaken a series of regulatory actions and courts have rendered decisions in individual cases addressing greenhouse gas emissions from various sectors, typically under the authority of the Clean Air Act. Most notably, the Supreme Court’s 2007 opinion in Massachusetts v EPA determined that greenhouse gases are an ‘air pollutant’ under the Clean Air Act. The EPA issued its public endangerment finding in 2009 for the six main greenhouse gases recognised by the United Nations, and for greenhouse gas emissions from motor vehicles, as a prerequisite for further greenhouse gas regulation.
Examples of greenhouse gas regulatory efforts resulting from the 2009 endangerment finding and related EPA findings include:
the 2013 Obama Climate Action Plan;
greenhouse gas emission and fuel economy standards for new light-duty vehicles and engines;
greenhouse gas emissions and fuel economy standards for medium and heavy-duty trucks;
steps towards possible aircraft engine greenhouse gas emissions standards;
incorporation of greenhouse gases into stationary source permitting programmes;
new source performance standards for existing and new electric generating units, including the Clean Power Plan; and
new source performance standards for methane emissions from oil and gas facilities
While the overall policy direction has been toward mandatory and incentivised greenhouse gas reductions, that direction and the fate of the EPA’s recent steps are uncertain following the administration change in January 2017. For example, the Trump administration has rescinded the 2013 Climate Action Plan. The Clean Power Plan is in litigation, its effectiveness has been stayed in federal court and the EPA recently proposed to rescind the rule. The EPA is also reconsidering corporate average fuel economy standards and greenhouse gas emission standards for model year 2022-2025 vehicles. Litigation is ongoing and likely against perceived rollbacks by the EPA.
Actions towards greenhouse gas reductions continue at the state and regional levels. The Regional Greenhouse Gas Initiative (RGGI) is a voluntary, market-based greenhouse gas cap-and-trade scheme among several eastern states’ power sectors. RGGI membership continues to grow and change. California has also been a leader in the greenhouse gas area, including passage of AB 32 in 2006 and other meaningful laws since. Several other states have adopted greenhouse gas emission reduction laws, largely focused in the power sector. Cities and municipalities also have measures in place.
(b) Promote renewable energy/energy efficiency?
The United States lacks a comprehensive national policy on renewable energy or energy efficiency. Several federal and state initiatives aim to promote renewable energy development and energy efficiency as a means to reduce greenhouse gas emissions.
Regarding renewable energy, at the state level, binding renewable portfolio standards (RPS) exist in 29 states and Washington DC. Eight other states have non-binding RPS programmes or renewable energy goals. Electric utilities achieve the targets principally through a system of tradeable renewable energy credits. ‘Green’ power programmes allow US customers to purchase low-carbon power from their utility. Net metering programmes are another tool used in 38 states and Washington DC to allow grid-connected customers with onsite renewable energy systems to offset use of electricity and sell excess electricity to their utility. Many states also have adopted feed-in tariff programmes that provide a higher price to consumers generating renewable energy (often solar). Two key statutory federal tax credits – the production tax credit (for wind) and the investment tax credit (for solar) – have financially supported renewable energy development. The Department of Energy loan guarantee programme also backs investment in renewable power, energy efficiency and commercial climate technologies. Federal agencies, mainly within the Department of the Interior, also are taking steps to encourage and streamline permitting for renewable power generation on federally owned or managed lands, with mixed results to date.
Regarding energy efficiency, the Obama administration undertook several executive actions and signed a bill increasing building efficiency standards. The Trump administration, by contrast, has proposed to eliminate all funding for the Energy Star programme and other programmes aimed at research into new technologies, and has declined to finalise rules setting new appliance energy standards. Most national energy efficiency policies continue to rely on voluntary measures.
What regulations are in place to protect biodiversity and natural areas?
The federal Endangered Species Act provides for protection and recovery of imperilled species and the ecosystems on which they depend. A species must be formally listed by the US Fish and Wildlife Service or the National Marine Fisheries Service as ‘endangered’ or ‘threatened’ (ie, likely to become endangered). Unless they can reach a ‘no effect’ determination for their actions, federal agencies must informally or formally consult with the services to ensure that their actions potentially affecting any listed species are “not likely to jeopardize the continued existence” of the species, or result in “destruction or adverse modification” of the species’ designated critical habitat. Private persons and agencies cannot ‘take’ listed species incidental to their otherwise authorised actions without prior authorisation from the services, including required avoidance, minimisation or mitigation steps – otherwise injunctions, civil penalties or criminal penalties may result. Several states have enacted similar laws protecting other at-risk plants and animals (in addition to the federal Endangered Species Act list) within those states. The Migratory Bird Treaty Act and the Bald and Golden Eagle Protection Act, and their respective regulations, also protect against certain actions ‘taking’ migratory birds and eagles.
Several categories of federally owned and managed lands are set aside for conservation and recreational purposes and under various agencies’ jurisdiction. Such designations are usually by Congress pursuant to an organic statute and a site-specific statute, with the exception of the presidential designations of national monuments under the Antiquities Act. Other categories of protected areas include national parks, national wildlife refuges, national forests, wild and scenic rivers and wilderness areas. Each type of designation entails balancing predominant or multiple uses. Individual states and localities also have systems of protected areas.