Environmental Crimes Blog

Arkema Indictment

On August, 3, 2018, Arkema (a French chemical company), Richard Rowe (Arkema CEO) and Leslie Comardelle (Arkema’s plant manager), were indicted by a Harris County grand jury for the reckless emission of an air contaminant in violation of the Texas Water Code. A few friends have already written about the indictment (Mark L. Farley and Paige Gallaspy at Katten Muchin Rosenman LLP and Benjamin H. Patton and Mary M. Balaster at Reed Smith LLP). Here are links to the two blog posts:

https://www.lexology.com/library/detail.aspx?g=d7dbcb23-7887-409d-8966-573a3a50f874&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=lexology+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2018-08-13&utm_term and https://www.lexology.com/library/detail.aspx?g=7bcf0547-0738-4120-a377-9f228924ac1c&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2018-08-13&utm_term=

From my perspective, this indictment continues a trend that began shortly after the September 11, 2001, terror attacks: the criminalization of industrial accidents. Could Arkema been better prepared for the after-effects of a hurricane? Perhaps. Was industry as a whole prepared? No. Interestingly, the federal agency responsible for the enforcement of the environmental laws has not criminally investigated Arkema to the point of indictment. And interestingly, the TCEQ was not involved in the investigation either. The investigation was solely that of the Harris County Sheriff’s Office, the Houston Police Department’s Environmental Investigations Unit, and the Harris County District Attorney’s Office Environmental Crimes Division.

The company and the individuals have all retained excellent counsel. And I am sure one of the first things the counsel will do is check and see if the TCEQ was consulted.  Section 7.203 of the Texas Water Code requires a peace officer investigating an alleged environmental violation by a person who holds a permit from the TCEQ to refer the case to the commission before a criminal prosecution can begin. Tex. Water Code Ann. § 7.203 (Vernon 2010). In other words, before a peace officer may refer an alleged criminal environmental violation to a prosecuting attorney for criminal prosecution, the peace officer must notify the TCEQ in writing for the TCEQ to determine whether civil or administrative duties will adequately and appropriately address the violations. Id. A peace officer must follow this procedure anytime the alleged criminal environmental violations involve a person, or an employee of a person, who holds a permit issued by the TCEQ and the activity constituting a violation is related to the activity for which the permit was issued. Id.  

Time will tell, but if I was a betting man, I am willing to bet that this procedure was not followed.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Grizzly Bears – Self-Defense?

On June 26, 2018, the Ninth Circuit Court of Appeals issued its opinion that reversed the trial court conviction of a Montana man who had been convicted under the criminal provisions of the Endangered Species Act for shooting and killing a grizzly bear. United States v. Charette, ___ F.3d ___, No. 17-30059 (9th Cir. June 26, 2018).

Brian Charette shot the grizzly bear as it was harassing horses in a pasture behind his rural home. The government indicted Charette on one count of “taking” a threatened species in violation of the ESA. Charette was convicted in a bench trial before a magistrate judge and the report and recommendation was affirmed by the district court. Charette then appealed. There were a number of issues raised by Charette that were rejected by the Ninth Circuit; however, ruled that there was an error in how the trial court handled the affirmative defense of self-defense.

The ESA provides, at 16 U.S.C. § 1540(b)(3), that a defense to the “taking” is “if the defendant committed the offense based on a good faith belief that he was acting to protect himself or herself, a member of his or her family, or any other individual, from bodily harm from any endangered or threatened species.” The trial court ruled that good faith must be determined using an “objectively reasonable standard.” The Ninth Circuit disagreed, holding that the standard only required a subjective belief in the need to protect oneself or others. That standard would be “satisfied when a defendant actually, even if unreasonably, believes his actions are necessary to protect himself or others from perceived danger from a grizzly bear.” As a result, the case was remanded to the trial court to make a determination in applying the subjective standard. In the original trial, Charette had elected not to testify in support of his claim of self-defense. He will now get an opportunity to rethink that decisions.

More later.

As always, feel free to contact me at walter.james@jamespllc.com.

WDJiii

The Carrot or the Stick?

When I first started practicing environmental law in 1987, I read the book “America’s Future in Toxic Waste Management: Lessons from Europe” by Bruce W. Piasecki and Gary A. Davis. In the book, they discussed the difference in philosophies between European environmental enforcement theories (the carrot) and the United States’ philosophy (the stick). 

My good friend, Brent Fewell, with the Earth and Water Group, recently posted on Facebook, regarding the current administration’s attempts to use the “carrot” approach to enforcement – that is, (and I am paraphrasing somewhat here) give non-compliers notice that they are noncompliant, give them sufficient time and the tools to come into compliance, warn them of the consequences of continued noncompliance and then if the regulated entity fails to heed the advice and take advantage of the leniency, then drop the hammer.  

Generally speaking, I am in favor of that approach. The question then becomes, how are the noncompliant entities going to come to the attention of the agency?  Inspections are down, there are fewer agency employees, federal grants to state agencies are drying up, cooperative federalism only works so far, state agencies do not have the budgetary luxury of picking up the enforcement slack.  So how will the noncompliant company come to the attention of the agency?  In some sense, this approach provides an incentive to be in noncompliance, especially if it gives the regulated entity a competitive advantage. 

On June 11, 2018, E&E News published an article entitled “Trump's EPA Turns to Less Punitive Responses to Pollution” by Mike Soraghan, E&E News reporter. In essence, the article was setting out that the “enforcement initiatives” were going to become “compliance initiatives.”  “The plan is to give state governments more authority in setting priorities for enforcement programs, according to a memo obtained by E&E News. Officials also want to remove from the priority-setting process considerations about consistency and using penalties to maintain a ‘level playing field’ for companies.”

 Observing this from my vantage point, that approach will further weaken a substantially reduced enforcement agenda. The states are simply not equipped, or qualified, to deal with issues that cross state borders or affect entire regions of the country, if not the entirety of the country.  While the oil and gas industry complained about the enforcement efforts launched after the Obama administration made "energy extraction" an enforcement priority, imagine the cacophony of the vagaries of enforcement by North Dakota, by Louisiana, by Texas, by Alaska and by Pennsylvania.  According to the article, “Inspections of ‘energy extraction’ sites dropped by one-third in EPA Administrator Scott Pruitt's first fiscal year, according to EPA's website.” 

There are a plethora of issues that scream for national enforcement (clean water, drinking water, clean air). And while these areas need a national approach and an incentive approach to compliance may work, there are way too many issues to leave to state enforcement or state-only input.  Some states are unwilling to undertake enforcement against industry that supplies a significant tax employment base.  State agencies also will not consider a broader picture.  Clean water, clean air, safe drinking water and its enforcement may very well take divergent paths in different states as the different states will have different budgetary constraints as well as interests. 

The agency that watches over an industry may lose its way in its efforts to present a friendlier face. Then again, that is just my opinion. 

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Texas Supreme Court Holds Manager Personally Liable for Environmental Penalties

This is a guest post from my good friend Jim Smith at Crain Caton.

In State of Texas v. Morello, the Texas Supreme Court reversed a mid-level appellate court and reinstated a trial court’s judgment making Bernard Morello personally liable for approximately $400,000 in civil penalties for environmental violations.

The Company’s History of Permit Violations

Morello had been the sole member and manager of White Lion Holdings, a limited liability company.  The State alleged that White Lion consistently violated its hazardous waste permit.  Based on these violations, the State received a judgement of a similar penalty amount against White Lion, which was affirmed in a separate appeal.

Morello’s Personal Involvement

The State also sued Morello, individually.  The State alleged, and the courts agreed, that Morello was the sole decision-maker for the limited liability company. Moreover, Mr. Morello personally removed water treatment equipment from the facility, and was responsible for having monitor well protective housing caps discarded. The trial court determined that this involvement was enough to make Morello personally liable for the civil penalties. Neither

“Fraud” nor “Tortious” Acts Required

The mid-level appellate court had reversed the civil penalty award as to Morello.  That court reasoned that Mr. Morello did not individually participate in tortious or fraudulent acts, and therefore, as an agent of the limited liability company that owned the facility, he could not be held individually liable.

The Texas Supreme Court rejected that argument and reversed the mid-level court. The Supreme Court examined the Texas environmental statutes and determined that the State could hold an individual liable without proving fraudulent or tortious acts by that individual.  Morello was the sole decision-maker.  He personally removed water treatment equipment and had monitoring well protective housing caps discarded.  These circumstances were enough to make Morello personally liable for the civil penalties.

Decision Makers Can Be Liable for Allowing Violations

The Supreme Court’s discussion of personal liability suggests that an individual who is the sole decision-maker for a corporation or limited liability company will generally have civil liability for the environmental violations of the entity, because Texas law states that no person shall “cause” or “allow” environmental violations.

At least as to civil penalties, individual managers should expect that they can be held liable if their decisions constitute causing or allowing violations of Texas environmental laws, even if the entity owning the facility or holding the permit is a corporation or limited liability company.

For a copy of the Supreme Court’s opinion http://www.txcourts.gov/media/1440618/160457.pdf

Thanks Jim!

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Decrease in Enforcement under the Trump Administration

As if there was any real doubt, the New York Times (yes, derided by the current administration as fake news) reports that USEPA penalties against the regulated community “comes with an astersik.” See, Rise in E.P.A. Penalties Against Polluters Comes With an Asterisk, by Eric Lipton and Danielle, Ivory.  https://www.nytimes.com/2018/02/08/business/epa-penalties-polluters.html

Despite puffing its chest with the release of data showing “a large increase in penalties against polluters,” in fact virtually every single one of these cases was initiated under the Obama administration.

Even assuming the correctness of the old adage artfully used by Mark Twain that there are “lies, damn lies and statistics,” the numbers themselves do not lie. The Trump administration is bringing fewer enforcement cases, both civil and criminal. And this is not a trend that will reverse itself under this administration under its “cooperative federalism.” Down-streaming enforcement to the states, who in most instances, do not have the expertise, man power or money, places the public at risk.

The American public should be concerned about the lack of enforcement.  Look no further than Flint, Michigan.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii  

The Cost of Noncompliance is Now More Expensive.

On January 10, 2018, the USEPA published its annual civil monetary penalty adjustment as required by the 2015 revisions to the Federal Civil Penalties Inflation Adjustment Act. https://www.environmentallawandpolicy.com/wp-content/uploads/sites/452/2018/01/2018-00287.pdf  It used to be that the USEPA adjusted penalty levels for inflation once every several years. Now, the USEAP are required to adjust the penalty amounts every year.

The inflation adjustment effects all federal environmental statutes and increase the penalties for the per-day violations and the per-violation maximums. Under the adjustment civil penalties (assessed on or after January 15, 2018, for violations occurring after November 2, 2015), for example, increase as follows: CAA: from $95,284.00 to $97,229.00; CWA: from $52,414.00 to $53,484.00; and RCRA: from $71,264.00 to $72,718.00.

Remember, the cost of compliance pales in comparison to the cost of enforcement.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Do You Have An International Client or Travel Out of the US?

Yes, the US customs agents demand to search attorneys’ iPhones and iPads (and other mobile devices) upon the attorney’s reentry into the country (may not happen often, but it happens often enough).  On January 4, 2018, Customs and Border Protection (CBP) released a new directive on searches of an attorney’s mobile devices. A portion of it deals with privileged information on an attorney’s mobile device.

Under this new directive, CBP has new procedures that an agent must use when there is data protected by the attorney-client privilege or work product exemption.  Essentially, once an attorney asserts that there is privileged information on the mobile device, the CBP Associate/Assistant Chief Counsel office will get involved. The big change is that the border patrol agent cannot decide on his/her own to ignore the assertion of privilege. And it appears that the attorney may be forced to provide a full privilege log. Even after all of that, it remains unclear how CBP will deal with the privileged information. 

        5.2 Review and Handling of Privileged or Other Sensitive Material

5.2.1    Officers encountering information they identify as, or that is asserted to be, protected by the attorney-client privilege or attorney work product doctrine shall adhere to the following procedures.

5.2.1.1    The Officer shall seek clarification, if practicable in writing, from the individual asserting this privilege as to specific files, file types, folders, categories of files, attorney or client names, email addresses, phone numbers, or other particulars that may assist CBP in identifying privileged information.    

5.2.1.2    Prior to any border search of files or other materials over which a privilege has been asserted, the Officer will contact the CBP Associate/Assistant Chief Counsel office.  In coordination with the CBP Associate/Assistant Chief Counsel office, which will coordinate with the U.S. Attorney's Office as needed, Officers will ensure the segregation of any privileged material from other information examined during a border search to ensure that any privileged material is handled appropriately while also ensuring that CBP accomplishes its critical border security mission. This segregation process will occur through the establishment of a Filter Team composed of legal and operational representatives, or through another appropriate measure with written concurrence of the CBP Associate/Assistant Chief Counsel office.

5.2.1.3    At the completion of the CBP review, unless any materials are identified that indicate an imminent threat to homeland security, copies of materials maintained by CBP and determined to be privileged will be destroyed, except for any copy maintained in coordination with the CBP Associate/Assistant Chief Counsel office solely for purposes of complying with a litigation hold or other requirement of law.    

5.2.2    Other possibly sensitive information, such as medical records and work-related information carried by journalists, shall be handled in accordance with any applicable federal law  and CBP policy. Questions regarding the review of these materials shall be directed to the CBP Associate/Assistant Chief Counsel office, and this consultation shall be noted in appropriate CBP systems.    

5.2.3    Officers encountering business or commercial information in electronic devices shall treat such information as business confidential information and shall protect that information from unauthorized disclosure. Depending on the nature of the information presented, the Trade Secrets Act, the Privacy Act, and other laws, as well as CBP policies, may govern or restrict the handling of the information. Any questions regarding the handling of business or commercial information may be directed to the CBP Associate/Assistant Chief Counsel office or the CBP Privacy Officer, as appropriate.

5.2.4    Information that is determined to be protected by law as privileged or sensitive will only be shared with agencies or entities that have mechanisms in place to protect appropriately such information, and such information will only be shared in accordance with this Directive.

In short, you may be able to protect privileges and exemptions on your mobile devices; however, the safer course might be to use a “burner” phone while traveling abroad. And an even safer course would be - wipe any privileged material from the mobile device before leaving and reentering the United States.

Travel is hard enough – let us not make it any harder . . ..

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

The USDOI M-37050 Does Not Really Change a Thing

On December 22, 2017, the USDOI issued Memorandum M-37050. The USDOI now concludes that the incidental taking of migratory birds is no longer prohibited under the Migratory Bird Treaty Act (“MBTA”). This is a reversal of opinion from the prior interpretation that did prohibit the incidental taking of migratory birds, that is industrial or commercial activity that accidentally caused the death of a migratory bird. This is potentially a big development in the oil and gas industry.

While this revised interpretation may reduce MBTA liability, does it really change anything? Probably only the USDOI approach to enforcement. What M-37050 does is follow the interpretation of the MBTA that has been used several Court of Appeals (the 5th, 8th, and 9th Circuits). United States v. CITGO Petroleum Corporation, 801 F.3d 477 (5th Cir. 2015); Newton County Wildlife Association v. United States Forest Service, 113 F. 3d 110 (8th Cir. 1997); Seattle Audubon Society v. Evans, 952 F.2d 297,303 (9th Cir. 1991). Two Courts of Appeals (the 2nd and the 10th Circuits) take an opposing approach. United States v. FMC Corporation,‌ 572 F.2d 902 (2d Cir. 1978); United States v. Apollo Energies, Inc., 611 F.3d 679 (10th Cir. 2010).

Will those two Courts of Appeal fall in line? Not unless there is a prosecution within a court under the jurisdiction of the Second and Tenth Circuits. Under the current administration, that is unlikely to happen.

 More later.

 As always, feel free to contact me at walter.james@jamespllc.com

 WDJiii

A Major Change to the Migratory Bird Treaty Act

On December 22, 2017 the Department of the Interior (“DOI”) issued its revised interpretation of the Migratory Bird Treaty Act’s (“MBTA”) prohibition on the take of migratory birds.  Opinion M-37050 is the result of the DOI Solicitor’s Office review of the MBTA’s prohibition on take.  It is a complete reversal of Opinion M-37041 which had concluded that “the MBTA’s broad prohibition on taking and killing migratory birds by any means and in any manner includes incidental taking and killing.”  No longer the case. 

Opinion M-37050 concludes that “consistent with the text, history, and purpose of the MBTA, the statute’s prohibitions on pursuing, hunting, taking, capturing, killing, or attempting to do the same apply only to affirmative actions that have as their purpose the taking or killing of migratory birds, their nests, or their eggs.” (emphasis added).  Stated plainly, if the take of a migratory bird, its nest, or eggs that is incidental to an activity that is lawful, it does not violate the MBTA.  And that means that the MBTA’s criminal provisions do not apply either.

Opinion M-37050 impact industries that have wrestled with MBTA compliance, particularly those facing potential incidental take of migratory birds.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii

Trump Administration EPA to Focus Criminal Enforcement on Significant and Egregious Violators, Citing 1994 “Devaney Memorandum”

This is a guest post by Andrew Brought of Spencer Fane in Kansas City.

A high-ranking Environmental Protection Agency (EPA) enforcement official in the Trump Administration recently cited a 1994 memorandum by Earl Devaney, then Director of EPA’s Office of Criminal Enforcement, as presenting guiding principles to select cases for criminal enforcement of environmental violations. The January 12, 1994, memorandum, “Exercise of Enforcement Discretion,” is often referred to as the “Devaney Memorandum,” and it is available at this link: https://www.epa.gov/sites/production/files/documents/exercise.pdf  This may signal that criminal enforcement of environmental laws under the Trump Administration will be limited to situations in which there has been significant actual or threatened environmental harm and truly culpable conduct.

Earlier during prepared remarks the official said, “We will be enforcing environmental laws in the Trump Administration,” although at that time he was not specifically discussing criminal enforcement.

The EPA official’s reference to the Devaney Memorandum came during a continuing education event hosted by the American Bar Association Section of Environment, Energy, and Resources attended by the authors and in response to a question posed by co-author Jim Price.  In his question, Price noted that environmental enforcement cases can be, and frequently are, brought under either civil or criminal provisions based on largely the same facts, a position echoed by the EPA official.

The Devaney Memorandum notes that EPA is obligated to “instill confidence that EPA’s criminal program has the proper mechanisms in place to ensure the discriminate use of the powerful law enforcement authority entrusted to us.”  The Devaney Memorandum further states,

“The criminal provisions of the environmental laws are the most powerful enforcement tools available to EPA.  Congressional intent underlying environmental criminal provisions is unequivocal: criminal enforcement authority should target the most significant and egregious violators.”

The Devaney Memorandum states that criminal case selection will be guided by two general measures.  The first is the presence of actual harm or the threat of significant harm to human health or the environment.  The Devaney Memorandum sets out four factors that comprise this measure, including illegal discharges that have an identifiable and significant harmful impact. The Devaney Memorandum states that failure to report a discharge may be an additional factor favoring criminal investigation but that generally the failure to report, alone and without actual or threatened environmental harm, should not cause an investigation to be criminal instead of civil. 

Culpable conduct is the second general measure guiding criminal case selection.  The Devaney Memorandum cites five factors comprising this measure, including a history of repeated violations, deliberate misconduct, concealment or falsification of records, tampering with equipment, and operating without a permit.

The Devaney Memorandum concludes with these statements and admonition:

“EPA has a full range of enforcement tools available—administrative, civil-judicial, and criminal.  There is universal consensus that less flagrant violations with lesser environmental consequences should be addressed through administrative or civil monetary penalties and remedial orders, while the most serious environmental violations ought to be investigated criminally.  The challenge in practice is to correctly distinguish the latter cases from the former.” (Emphasis added.)

The authors agree and trust that a renewed focus on the factors set forth in the Devaney Memorandum will guide EPA to choose only the most significant and egregious violations for criminal enforcement of environmental laws.

More later.

As always, feel free to contact me at walter.james@jamespllc.com

WDJiii