Utilities

Top 6 at 6: Highlights of the Top Climate Change Stories in the First Half of 2013

June 30, 2013 21:01
by J. Wylie Donald
Another six months have passed and it is time for our semi-annual look at climate change and its intersection with the law.  Here are some highlights of the last six months: 1.  The Administration’s Focus.  After months of silence in the 2012 presidential campaign, President Obama rejuvenated his administration’s commitment to addressing climate change.  We heard in his inaugural address:   “We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms.”  He carried this forward in his State of the Union address less than a month later: “I urge this Congress to get together, pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago.  But if Congress won’t act soon to protect future generations, I will.  (Applause.)  I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”     And in a speech this past Tuesday the promises took another step toward reality when the President outlined his “climate action plan.”  Recognizing the logjam in Congress, the Administration's plan is based on authority the executive branch already has. The salient points include:  1) further restrictions on powerplant greenhouse gas emissions (notably addressing coal); 2) promotion of resilience and adaptation with respect to weather-related calamities; 3) additional permitting of renewable energy facilities on public lands; and 4) engagement in the international arena on climate change such as working out a global free trade agreement on clean energy technologies.   The goal is a reduction of U.S. greenhouse gas emissions by 17%.  The Wall Street Journal called these “sweeping climate policies.”  We will see; with no new authority, Gina McCarthy’s nomination to head EPA held up, and the bounty of natural gas unleashed by fracking, greenhouse gas reduction may be achieved by the market, see Leveraging Natural Gas to Reduce Greenhouse Gas Emissions,  not governmental efforts.   2. 400 PPM.  On May 9, Mauna Loa Observatory of NOAA’s Earth System Research Laboratory reported that the average weekly value of atmospheric carbon dioxide at the observatory had reached 400 ppm, a level unsurpassed in 3 million years.  The world collectively ignored the number, treating it more like an insignificant decimal, 0.0004, which it was (a decimal, not insignificant).  We don’t think anyone will dispute that there are three ways to interpret this number:  it’s bad, it’s good, it’s neither.  Climate scientists are unanimous that it’s bad.  There is nothing saying it’s good.  Which means the justification for not taking action on climate change is that the ever increasing levels, and the ever increasing rate of accumulation, of carbon dioxide in the atmosphere (see the graphs by the observatory), are of no consequence.  US Airways will probably side with the climate scientists - it canceled 18 flights as a result of the record-breaking temperatures in the southwest this past weekend.  As a footnote, we note that Mauna Loa’s number is an average, and is subject to refinement.  As it turned out, the 400 ppm number was refined a few weeks later to 399.89.   3.  Free Trade.  In 2009 Ontario enacted its Green Energy Act to promote renewable energy in the province.  One approach is the adoption of a feed-in tariff (mandatory above-market rates for electricity derived from renewable resources).  This had successfully been pioneered in Germany.  Ontario legislators also saw the opportunity to spur job growth by giving subsidies to businesses that sourced their wind turbines and solar panels in Ontario (i.e., “domestic content”). Japan jumped on this protectionism immediately and sought consultations with Canada under the General Agreement on Tariffs and Trade and the World Trade Organization. The consultations were ineffective and Japan requested a panel to hear the dispute concerning Ontario’s “domestic content requirements," with which renewable energy generators were required to comply "in the design and construction of electricity generation facilities in order to qualify for guaranteed prices” under the feed-in tariff program. Last December the panel ruled in favor of Japan on the domestic content requirements. Canada appealed and this May the appellate panel affirmed. Ontario's energy minister has confirmed that Ontario will abide by the WTO decision and revise its Green Energy Act.   We conclude that free trade remains colorblind. 4. Climate Change Liability Lawsuits.  For seven years now, the first wave of climate change liability lawsuits have roiled the legal waters.  It bears remembering that in October 2009, the plaintiffs in these cases rode the crest of the wave.  The Second Circuit had reversed the trial court’s dismissal in Connecticut v. American Electric Power (AEP), and the Fifth Circuit likewise overturned the Southern District of Mississippi’s dismissal of Comer v. Murphy Oil USA.  Plaintiffs had standing; the political question doctrine did not apply. Things have gone badly for the plaintiffs since.  All readers of this blog know of the Supreme Court’s decision in AEP, stifling the plaintiffs’ case under the doctrine of displacement.  This year two more decisions confirmed the Judicial Branch’s hostility to these claims.  Comer made it back to the Fifth Circuit, where dismissal was summarily affirmed on the doctrine of res judicata.  And the last of the original quadriga, Native Village of Kivalina v. ExxonMobil Corp., found its petition for certiorari denied in April,  thus leaving the Ninth Circuit’s affirmance of dismissal unchanged. The only reed left for the plaintiffs is the granting of a petition for certiorari in Comer, a prospect we deem unlikely, if only because the appeal would be based on a purely procedural question of little likelihood of being repeated and of little relevance to the larger climate change issues. 5.  Ursus Maritimus.  On March 1 the D.C. Circuit in In re Polar Bear Endangered Species Act Litigation  affirmed the district court’s dismissal of challenges to the Fish and Wildlife Service’s designation of the polar bear as threatened under the Endangered Species Act because “due to the effects of global climate change, the polar bear is likely to become an endangered species and face the threat of extinction within the foreseeable future.” The polar bear’s friends (environmental groups) sought to have the bear listed as “endangered.”  Ursus maritimus’s less-than-friends (the State of Alaska and hunting groups), urged that no listing was appropriate.  The standard in such reviews is relatively simple:  “Our principal responsibility here is to determine, in light of the record considered by the agency, whether the Listing Rule is a product of reasoned decisionmaking.”  The Court found that it was, holding specifically the the Listing Rule rests on a three-part thesis: the polar bear is dependent upon sea ice for its survival; sea ice is declining; and climatic changes have and will continue to dramatically reduce the extent and quality of Arctic sea ice to a degree sufficiently grave to jeopardize polar bear populations. See Listing Rule, 73 Fed. Reg. at 28,212. No part of this thesis is disputed and we find that FWS’s conclusion – that the polar bear is threatened within the meaning of the ESA – is reasonable and adequately supported by the record.” As arctic resource development progresses as the ice retreats, the polar bear's Endangered Species Act listing is sure to take on larger significance, both as a model for the preservation of other arctic species, and as a tool to block development. 6.  Compressed Natural Gas (CNG). On June 13 the Fifth Circuit affirmed the district court's decision in Association of Taxicab Operators USA v. City of Dallas. In the case the local taxicab organization challenged a city ordinance that allowed CNG-fueled taxicabs “head-of-the-line” privileges at Love Field in downtown Dallas. Plaintiff's theory was that section 209(a) of the Clean Air Act, which prohibits states and their political subdivisions from adopting emission standards for motor vehicles, preempted the ordinance either directly or by implication. The Fifth Circuit did not agree. Traditional police powers of the state were preserved to the state by section 209(d) of the Clean Air Act. More importantly, an ordinance granting head-of-the-line privileges, on its face did not set an emission standard, as required by the statute.  As to any implied preemption, the ordinance may have influenced taxicab operators to alter their behavior, but it did not compel them to do so. Less than 7% of Dallas's taxicabs served Love Field and the only place CNG cabs had head-of-the-line privileges was at Love Field; there were plenty of other places for gasoline powered cabs to pick up fares. Accordingly implied preemption did not apply either.  One of our themes in a world beset by climate change is that there will be winners and there will be losers. Little did taxicab operators know they would be both.

Carbon Dioxide | Carbon Emissions | Climate Change | Greenhouse Gases | Legislation | Regulation | Utilities | Year in Review

Fifth Circuit Knocks Out Climate Change Liability Lawsuit Again

May 15, 2013 21:10
by J. Wylie Donald
Res judicata is one of those phrases learned in law school that seemed of limited utility. How often is someone going to bring the same claim twice?  Callow law students know little of the world.  The doctrine is frequently needed and, as was learned in law school, it can be used to dispose of a claim, even if the prior decision "may have been wrong or rested on a legal principle subsequently overruled in another case."  Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981). On Tuesday, the Fifth Circuit applied the hoary doctrine to snuff out (again) the seven-year old climate change liability saga of Comer v. Murphy Oil USA.  Comer was filed immediately following Hurricane Katrina and asserted that a long list of energy companies were responsible for the increased destructiveness of the hurricane because of their emissions of greenhouse gases.  The trial court disagreed and dismissed the case on standing and political question grounds.  On appeal, however, the plaintiffs convinced an appellate panel of the Fifth Circuit  to reverse the trial court.  Defendants asked for rehearing en banc, which was granted, resulting in the vacating of the panel decision pursuant to court rule.  Then things got weird.  After the grant of en banc review, the en banc quorum then dissolved with an eighth recusal among the active judges.  With no quorum, the case could not be reviewed.  Because the panel decision was vacated, the trial court dismissal was valid. Plaintiffs chose not to appeal to the Supreme Court.  Instead they sought mandamus, which was denied.  Plaintiffs then decided to file their claim again, not only by the same plaintiffs on the same theories, but against the same defendants.  The trial court had no difficulty dismissing their claims a second time, relying on res judicata, but also on the statute of limitations, the political question doctrine, preemption, proximate cause and standing.  Another appeal was filed; this time the panel did not side with the plaintiffs.  Instead, it ignored all of the bases for dismissal articulated by the trial court and settled on only one:  res judicata. To apply, four elements must exist: (1) the parties are identical or in privity; (2) the judgment in the prior action was rendered by a court of competent jurisdiction; (3) the prior action was concluded by a final judgment on the merits; and (4) the same claim or cause of action was involved in both actions. Opinion at 7.  Only the third element was disputed.  The court held that the trial court's first judgment was a final judgment because, although the panel reversed, that decision was vacated and thus had no effect on the trial court's decision.  Nor did the decision to grant rehearing en banc, nor the Supreme Court's denial of the mandamus motion.  And the trial court's decision was on the merits, notwithstanding that it was a jurisdictional (standing and political question) determination.  Opinion at 10.  Accordingly, res judicata applied; the dismissal was affirmed. We expect that the precedential value of the court's decision will be limited.  However, its non-precedential value is huge.  A broad and expansive theory of climate change liability was asserted by well-funded and capable plaintiffs' counsel.  After a long journey it joined on the ash heap claims asserted by the State of California (California ex rel. Lockyer v. General Motors), claims by various attorneys general and public interest groups (Connecticut v. American Electric Power), and claims asserted by a Native American community (Kivalina v. ExxonMobil) (albeit nursing a petition for certiorari to the Supreme Court).  Petrochemical companies, automobile companies, coal companies and electric utilities are 4-0 on the climate change liability front, with no other cases out there.  The unanswered questions from Comer are the following:  Why didn't plaintiffs add new defendants?Why didn't plaintiffs assert state law nuisance claims in state court rather than pursue them in federal court?  Why didn't they appeal to the Supreme Court on the merits, rather than seek mandamus?  These questions are decisions on strategy, and we likely will never know. Last, however, and most importantly, where are the new theories of liability?  Bueller?  Bueller?  

Climate Change Litigation | Supreme Court | Utilities

Sunrise, Sunset - The Parable of the Two Solar Companies

November 7, 2012 19:27
by J. Wylie Donald
"A Rare Solar Success Story" trumpets the American version of The Wall Street Journal today in an article about LDK Solar, a Chinese solar wafer manufacturer.  We agree with "Solar" and "Story" but the rest of the headline does not match reality.  (In fact, the Asian version is a little less over-the-top:  "Despite Troubles, China's LDK Solar to Keep Humming.")     First, let's consider whether LDK Solar is rare.  As described in the article it has a $500 million government loan guarantee. That sounds like something we remember about Solyndra LLC. Second, it is embroiled in allegations about dumping and production overcapacity, which are attributes that beset all of the solar panel and component producers whether their subsidies are coming from Washington, Brussels or Beijing. Third, while it soared early, it is now struggling, as have many American and European solar  "darlings." Which segues nicely into the question of success. According to the article LDK Solar had a $609 million loss last year (down from a net profit a year earlier of almost $300 million) and its depositary shares have dropped 77%. For those with a visual bent, Barron's does a nice graphical presentation.   To stay afloat LDK Solar is renewing its loans, selling real estate and other assets, and accepting investment from state-owned funds.  The article concludes, "Analysts said LDK could fall into the arms of a larger, healthier company."  These are certainly not the terms we would use to describe a successful company. But every cloud has a silver lining, and the travails of LDK Solar and its brethren are a large part of the reason for the success of solar panel installers:  their raw materials, panels, are available at bargain basement prices. The current darling (number 10 on Fast Company's list of the 50 most innovative companies in the world) in this group is Solar City, which is imminently making its initial public offering to raise $200 million, although Superstorm Sandy has delayed that some.  What does Solar City do?  First and foremost, its people think.  They have thought deeply about how to build a successful business and reached a few unsurprising conclusions.  Consumers want to be "green" but do not want to be bothered with having to contact building inspectors, general contractors, panel manufacturers, lenders, warranty companies, and state and federal tax authorities; they want their solar contractor to handle it all.  Leasing to stable and economically secure individuals (i.e., not subprime borrowers) will generate a steady stream of revenue over the long-haul (typically 20 years).  Long-term maintenance contracts can do the same, and can also provide opportunities for continued marketing and sales to the consumer.  Tax credits, state rebates and leasing and maintenance revenue streams can be bundled together to form the asset base supporting an investment fund, which large institutional investors will invest in.  The investment fund can then be used to finance growth. If this sounds like a successful business model, it is (so far). Second, Solar City executes.  The foregoing ideas are the basis for its rocketing success in the last few years.  As stated in its S-1, It has raised almost $300 million dollars from private equity. Its revenues have grown year on year.  It has come to dominate the residential solar market.  It has just entered the commercial utility space with a 12 MW installation in Hawaii.  To sum it up, it is seeking "world domination."   Our point? Take heed of these two darlings, one now struggling, the other feasting on the struggler and its fellows.  Together they form a parable, not just for the solar market, but for the entire renewable energy space. We counsel our clients where government money is  ubiquitous, innovative technology rampant, competition cut-throat, and winners and losers can change overnight. The sun may rise and shine for our clients, but it also sets.  Our counsel should reflect that.

Renewable Energy | Solar Energy | Utilities

Clash of the (Electric Vehicle Charging Station) Titans: ECOtality v. NRG

May 27, 2012 21:29
by J. Wylie Donald
What do you get when the beneficiary of “the largest public/private federal transportation electrification grant provided by the U.S. Department of Energy” concludes that “one of the country’s largest power generation and retail electricity businesses” is not playing fair?  What you get is quite an interesting lawsuit filed in the California Court of Appeal.  See ECOtality, Inc. v. California Public Utilities Comm’n, et al., Verified Petition for Writ of Mandate (attached).  ECOtality, the project manager of The EV Project, filed suit last Friday seeking to upset a settlement NRG Energy, Inc. has entered into with the California Public Utilities Commission arising from the “California Energy Crisis” of 2000-01.  You didn’t think ECOtality even existed back then.  You would be wrong (it was formed in 1989), but you would be right in concluding that its present lawsuit has nothing to do with what NRG (actually its predecessor) did or didn’t do back in 2000.  The present lawsuit is all about who will dominate the electric vehicle infrastructure marketplace in California in 2012 and beyond. NRG is settling the PUC’s claim to resolve price-gouging allegations of nearly $1 billion.  Payment of $122,500,000, combined with an earlier payment of almost $300 million “captures significant value for California under circumstances where contentious and expensive litigation would otherwise have continued for many years and with uncertain results,” according to California PUC Commissioner Mike Florio.  ECOtality sees things differently.  “If the [settlement] Agreement stands, it will permit NRG, subsidized by the value of the California ratepayers’ released claims, to establish itself and its subsidiary company, eVgo … into a controlling market position for electric vehicle (“EV”) charging facilities in California. The consequence is that NRG will not only be permitted to pursue monopolistic pricing to the injury of California consumers, but also effectively destroy its competitors – including Petitioner ECOtality – in this nascent marketplace, utilizing a rate-payer subsidy.”  Petition at 4.  ECOtality charges the PUC failed to follow proper process, ignored legislative directives, acted ultra vires its authority and unlawfully failed to restore overcharges to the ratepayers.  Petition at 27-31. What are you to make of this?  On the one hand is NRG.  According to ECOtality, NRG is a colossus delivering over 2 gigawatts of power to over 2 million customers in 16 states.  Its subsidiary, eVgo, “created the nation’s first comprehensive, privately funded electric vehicle infrastructure of home charging stations and public fast charging stations, ensuring that EV drivers have complete confidence they will never run out of power on the go.” Petition ¶ 11.  NRG’s and eVgo’s websites confirm all this.  More specifically, for $89 per month on a three-year agreement, eVgo will install a home charging station and give you non-peak electricity to charge your car at home, and anytime at eVgo network stations.  But you can only do this in Dallas-Forth Worth and Houston at about 5 dozen built and planned stations.  eVgo isn’t operational anywhere else. On the other hand is every other business interested in electric vehicle infrastructure.  ECOtality’s Petition identifies a number of them, like Better Place, Car Charging Group, Inc., Coulomb Technologies, Aloha Systems, Incorporated, Tesla Motors, TechNet, City CarShare, and Evercharge, each of  “whose business includes participation, either presently, or in the future, in the California marketplace for electric vehicle charging services.“  Petition at 2.  And it includes ECOtality, whose residential charging operations in California include 1245 in the Bay Area, 729 in the San Diego area, and 418 in the Los Angeles area, and whose commercial facilities include 159 stations in the San Diego area (447 planned) and 177 in the Los Angeles area (214 planned).  Petition ¶ 6. ECOtality is also the data gatherer for the Department of Energy’s EV Project, which is collecting information on the use of electric cars in a half dozen states (California, Oregon, Washington, Arizona, Texas, and Tennessee, as well as the District of Columbia).  The EV Project numbers don’t reflect total regional or national sales or production.  But they do give some information on the penetration of electric cars in the market.   As of the end of March California users had logged over 12 million miles.  See Q1 2012 EV Project Report at 6 (attached).  Texas users trailed every other state, at 575,000 miles barely doubling the miles put on by District of Columbia drivers. So what bothers ECOtality about the NRG-PUC settlement?  Under the agreement, NRG is set to become a major player in California.  One aspect of the agreement is the payment of $20 million “cash consideration” to the PUC.  Another aspect is the construction and operation of 200 fast charging stations that will be available for use by the general public, at a cost of $50,500,000.  Then there is the development, funding and implementation of pilot programs for EV-related technology and EV car sharing. But all of that is nothing when compared with the massive involvement NRG is mandated to make in the California market as set out in the Joint Offer of Settlement:  “the installation of infrastructure to support ten-thousand privately-owned chargers at a total of one-thousand multi-family, workplace and public interest sites (e.g., public university).”  In the language of the settlement, NRG is providing 1000 Make-Ready Arrays, which will provide 10,000 Make-Ready Stubs, to which property owners can attach charging stations.  This is to cost $40 million over four years with minimum numbers of facilities specified in various areas.  NRG has discretion to complete the build-out both geographically and by site-type (e.g., multi-family, retail) in the manner most advantageous to it.  If NRG builds along the lines of the minimum distribution mandated by the settlement, that translates to 5500 chargers in Los Angeles, 2750 in San Francisco and 1000 in San Diego. NRG has exclusive rights to provide service to the Make-Ready Stub for 18 months after the stub is ready for operation. In other words, ECOtality’s market dominance in California will be challenged.  Specifically, “By giving NRG an 18 month head start, subsidized by ratepayers, the Agreement permits NRG to “cherry pick” 1,200 of the most favorable California real estate locations for [electric vehicle charging stations] in a manner that will not only saturate the market, but permanently disadvantage its competitors, including Petitioner, by relegating them to much less valuable secondary locations.”  Petition ¶ 40. Our take on all this is that this is all about timing.  Get there fustest with the mostest is poor English, out-of-context and ahistorical, but nevertheless apt. Stated differently, keep the other fellow from getting there with anything. When the cavalry is unavailable, try a lawsuit.  As the market for electric cars cranks up (ECOtality’s website reports 28 million miles driven so far in the EV Project), the difference between success and failure may come down to location, brand recognition, and market access.  The battle is joined on all three in California.  We will not be surprised by variations on this theme elsewhere.   20120525 ECOtality v California Public Utilities Commission et al, Verified Petition for Writ of Mandate.pdf (286.06 kb) Q1 2012 EV Project Report, ECOtality.pdf (8.31 mb)

Regulation | Sustainability | Utilities

Oral Argument is April 19 in American Electric Power v. Connecticut and in AES Corp. v. Steadfast Insurance Co.

April 5, 2011 21:09
by J. Wylie Donald
Where I grew up (outside of Boston) April 19 is of singular moment. On that day, over 200 years ago, the British marched from Boston to destroy the military stores in Concord. But Paul Revere and William Dawes got the word out first and the Minutemen gathered at the Old North Bridge, stood their ground and then chased the British back to Boston. The locals celebrate by "marching to Concord" every year to witness the reenactment. April 19 this year also has significance, but the action will not be "by the rude bridge that arched the flood."  Rather, readers of this blog will be focused on two Supreme Courts - one in Washington and the other in Richmond. On the docket?  Two climate change cases. In Washington, the U.S. Supreme Court will hear oral argument in American Electric Power v. Connecticut.  This case is the bellwether for climate change liability suits and will test whether public nuisance under federal common law provides a viable theory for shifting damages arising from climate change to carbon dioxide emitters. Almost four dozen amicus briefs have been filed and where the Court will land is anybody's guess. EPA is attempting to regulate carbon dioxide using the Clean Air Act but other lawsuits and Congress challenge that effort. Will that eviscerate the argument that carbon dioxide regulation has been committed to the political branches of the federal government?  Does the fact that the case was brought by state attorneys general prima facie establish that this case is all about a robust federalism?  We hope to have a better inkling on where the Court will land after we hear the oral argument. Across the Potomac and several miles down the road, the Virginia Supreme Court is hearing AES Corp. v. Steadfast Insurance Co. on the very same day.  (It seems too unlikely to be a coincidence.  Readers will remember that Stop the Beach Replenishment, Inc. was heard the same day the New Jersey Supreme Court took argument on City of Long Branch, both beach replenishment cases, see climatelawyers.com).  That case tests whether there will be insurance coverage under general liability policies for carbon dioxide liability. The insurer filed the case as a declaratory judgment action disclaiming coverage for one of the utilities sued in Native Village of Kivalina v. ExxonMobil Corp.  The trial court, in the briefest of opinions, held that because "no 'occurrence' as defined in the policies [was] alleged in the underlying Complaint," there was therefore no coverage. AES appealed directly to the Virginia Supreme Court, which granted certification.  Before the court are arguments about the scope of an "occurrence", but also over whether a pollution exclusion applies, even though the trial court rendered no opinion on that topic.  The implications of a decision are potentially colossal, especially if the U.S. Supreme Court permits Connecticut to move forward. Steadfast is the first climate change liability coverage suit and, to our knowledge, not a single climate change liability defendant has been defended by its insurer in any of the three damages cases (Comer v. Murphy Oil, California v. General Motors, Kivalina). Two hundred years ago on April 19th was fired the "shot heard round the world."  The metaphor is not perfect but this month on the same day similarly significant salvos will be set off in the climate change liability and coverage wars. Stay tuned. 20100205 Order for Summary Judgment for Steadfast against AES.pdf (120.02 kb)

Carbon Dioxide | Climate Change Litigation | Supreme Court | Utilities

Climate Change and the Supreme Court Part II: Certiorari Granted in Connecticut v. American Electric Power

December 6, 2010 07:35
by J. Wylie Donald
It doesn't take much insight to conclude that today's granting by the Supreme Court of the petition for certiorari in Connecticut v. American Electric Power could be the start of a whole new era in climate change liability lawsuits. If the Supreme Court comes down on the side of the plaintiff States, it may become open season on utilities, coal and petrochemical companies, automobile manufacturers, and anyone else a litigation-minded plaintiff wishes to mulct in damages for carbon dioxide emissions and climate change. Potential defendants need to take steps now to identify their insurance coverage and be prepared to give notice. The Supreme Court last looked at climate change in 2007 when it concluded in Massachusetts v. EPA, 549 U.S. 497 (2007), by a 5-4 decision, that the Clean Air Act required the USEPA to consider whether carbon dioxide and other greenhouse gases were air pollutants within the meaning of the Act. The issue this time is whether the courts should be imposing judicial remedies for injuries allegedly arising from the emission of carbon dioxide, an alleged nuisance. Few reading this blog will need an introduction to Connecticut v. American Electric Power. I won't go over it other than to remind readers that it was filed in New York federal court in 2004 by several states against a collection of carbon dioxide-emitting utilities and was then consolidated with similar cases filed by public interest groups. The basic allegation was that the utilities' carbon dioxide emissions constituted a public nuisance and the plaintiffs sought injunctive relief compelling the utilities to reduce their emissions. On motion, the trial court dismissed the case concluding that the political question doctrine applied because only the political branches (i.e., the legislative and executive arms of the government) could appropriately balance the array of environmental, economic and other issues presented. An appeal followed to the Second Circuit, which reversed and held that the political question doctrine does not preclude federal common law nuisance claims. Following denial of a petition for en banc review, the petition for certiorari was filed on August 2, followed shortly by an amicus curiae brief from the Obama administration. The federal government asserted that the Second Circuit's decision should be vacated because the government was developing regulations and that the courts should stay out. Of course Connecticut v. American Electric Power is not alone. Private and public plaintiffs have brought suit for alleged climate change losses arising in Mississippi, California and Alaska. Although all three cases have been dismissed, the appeal of one was withdrawn, the appellate panel in the second reversed the dismissal, but which was then vacated when the en banc court accepted review and then could not muster a quorum, and the third is pending before the Ninth Circuit. See Cal. v. Gen. Motors Corp., No. C06-05755, 2007 WL 2726871 (N.D. Cal. Sept. 17, 2007), appeal dismissed, No. 07-16908 (9th Cir. June 24, 2009); Comer v. Murphy Oil Co., 2007 WL 6942285 (S.D. Miss. Aug. 30, 2007), rev'd, 585 F.3d 855 (5th Cir. 2009), reh'g granted, 598 F.3d 208 (5th Cir.), appeal dismissed, 607 F.3d 1049 (5th Cir. 2010); Native Village of Kivalina v. ExxonMobil Corp., 663 F.Supp.2d 863 (N.D. Cal. 2009), appeal pending, No. 09-17490 (9th Cir. Nov. 5, 2009). Quite clearly, the last chapter on these types of lawsuits has not been written. Reading the tea leaves on Connecticut v. American Electric Power will be difficult. To grant a petition for certiorari, only four justices need to approve. With the retirement of Justices Stevens (author of Massachusetts v. EPA) and Souter (who joined in the opinion), and the recusal from Connecticut of Justice Sotomayor (who heard argument at the Second Circuit but did not sign the opinion), a 4-4 decision in Connecticut is certainly possible. That would leave the Second Circuit's decision intact without a Supreme Court decision (which might bode well for the appeal of Kivalina before the Ninth Circuit). IMPLICATIONS FOR A DECISION Emitters of carbon dioxide are hoping for a clean decision that puts the climate change liability genie back in the bottle and lays the theory of federal common law nuisance in its grave. But what if that does not occur? There is certainly a fair chance that the justices either affirm the theory, or, 4-4, do not reject it. In that case, plaintiffs' lawyers are very likely to be emboldened and bring other suits. Some target industries have already been identified. When the results of USEPA's greenhouse gas reporting rule are collated, other industries may find themselves in the crosshairs. The time to identify insurance coverage is not when half a dozen claims have been filed in jurisdictions across the nation demanding an answer within 30 days. Climate change defendants and potential defendants should take steps now to prepare for future claims, most notably because of the risk they may lose insurance coverage for these claims if they are not reported timely. Many will rely on notice to their current insurer and that is a good strategy, so far as it goes and only if that carrier agrees to coverage. But besides one's current policy, one should also be considering prior "occurrence-based" policies, which could be triggered based on allegations of injury-causing events occurring over time. It does not require much imagination to analogize the time periods over which, for example, glaciers have melted, snowpack has become depleted, erosion has increased, and water supplies have been drawn down to other drawn-out injuries that established the "continuous trigger" rule that attached multiple policies. Some states have a bright line rule for notice. If it is not given promptly, dismissal based on late notice is a likely result. Other states are more lenient and require prejudice to the insurer. New York until recently was a no-prejudice-to-the-insurer state. But the law changed in 2009 to require the insurer to show prejudice (or the insured to show no prejudice) - but it was not retroactive. Accordingly, insureds with policies subject to New York law (which is often the case due to a choice of law provision in the policy) prior to 2009 still need to give notice promptly. Even in those states that require prejudice to be shown, one cannot know how the case law on prejudice will evolve in the context of climate change; hence prompt notice is a good idea in other states as well. Notice here is not as easy as it may sound. Unlike Superfund cases where the (alleged) responsible entity is identified by the claimant and therefore can be identified to the insurance company, carbon dioxide emission liability can fall to any fossil-fuel fired plant owned by the corporate entity, including potentially those operated by subsidiaries. Accordingly, those subsidiaries' policies may need to be tracked down and placed on notice as well. Taking liberties with Ben Franklin's adage, an ounce of protection is worth a pound of cure. Should climate change claims get the green light from the Supreme Court, policyholders would be wise to have located all of their protection ahead of time.

Carbon Dioxide | Carbon Emissions | Climate Change | Climate Change Litigation | Insurance | Supreme Court | Utilities

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