I was once asked this by a friend.  “I’d like to buy a vacation home that would stay in my family for several generations.  You’re an environmental lawyer, where can I buy a vacation on or near a Jersey Shore beach that won’t be affected by climate change?”  My answer was simple.  “You probably can’t.  Think instead about a home on a hill in the Berkshires.”  Sometime later, I shared with him the remarks of a public official in Florida who noted that sea rise was cutting off some waterfront homes from the Intracoastal Waterway because their boats could no longer clear certain bridges and the town lacked the resources to raise them.  “Do you think that will affect the mortgageability of those properties?”

My friend thought that the financial impact of climate change was years off.  It’s not and, unlike the prior administration in Washington, the current administration knows that and is acting now to address climate change.  On May 20, 2021, President Biden signed the Executive Order on Climate-Related Financial Risk.  It recognizes that the “intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies …”  This administration wants the Federal government’s component departments, etc., to “account for and measure” climate change risk “by appropriately prioritizing Federal investments and conducting prudent fiscal management.”  The order also requires a Federal strategy regarding “financial needs associated with achieving net-zero greenhouse gas emissions for the U.S. economy no later than 2050 …”

Of course, the impact of this order on our society cannot be fully understood now.  However, a Federal mandate to determine the extent of climate-related financial risk, quantify it, and disseminate it publicly is going to affect financial institutions and their customers.  It is information that will be factored into lending decisions and therefore, into commercial and personal real estate acquisitions, even if a vacation home is in the Berkshires.

New York and New Jersey are just beginning to grapple with the regulatory controls that will be placed on the states’ budding cannabis industries. Questions arise as to how each state will regulate the industry from an environmental perspective. Over the last few weeks, I have presented blog posts discussing generally the kinds of issues that may come up. Continuing with that series on the cannabis environment, this blog post will briefly consider potential clean air regulations that may be relevant in the cannabis context.

Air Permits

It may come as a surprise to many industry entrants, but air permits are not just required for businesses with towering smokestacks. Under the New Jersey Air Pollution Control Act (“NJAPCA”) and the New York Environmental Conservation Law (“NYECL”), many smaller enterprises require air permits. For example, air permits are required to businesses employing certain kinds of engines for producing electricity (with the exception of certain emergency generators). In addition, boilers, furnaces, and certain kinds of venting equipment can all require air permits. As such, cannabis producers should anticipate the need to apply for and obtain these permits in order to comply with the federal Clean Air Act, State law, and local ordinances, particularly given the need to control odors in outdoor ambient air and to ensure that volatile organic compounds and the solvents used in processing are not emitted in excess of allowable levels.

Odor Control

This may not come as much of a surprise, but cannabis cultivation and processing creates odors. Cannabis plants emit strong-smelling volatile organic compounds (“VOCs”), including terpenes and a compound known as 321MBT, which are often at their strongest while the cannabis plant flowers and while the plant is being processed. Terpenes have been thought to be responsible for the “skunky” aroma commonly associated with marijuana, though recent research suggests that the culprit is actually 321MBT. While the release of those particular VOCs may not necessarily “contaminate” the air in the colloquial sense, it is important to understand that under the NJAPCA and NYECL, odors are a form of pollution subject to regulatory controls. In similar spirit, many of the states to have promulgated environmentally focused regulations on the cannabis industry require installation of odor mitigation systems. Indeed, some states require that plans for these systems be approved in advance by the appropriate State authority. Likewise, we are already seeing a trend among New Jersey municipalities requiring that cannabis establishments install odor mitigation equipment. For example, the City of Bayonne requires installation of “a ventilation system with carbon filters.” That requirement is typical in the states and municipalities to have addressed the issue. Fortunately for entrepreneurs thinking about entering the business, the technology is readily available and is already a well-established form of VOC filtration. In fact, carbon filtration is thought to be the best (and seems to be the most popular) form of VOC emission control for the cannabis industry. That said, there are emerging emission control techniques, which include installation of mineral filters, bio filters (such as wood chips), carbon scrubbing, and negative air pressure systems, as well as use of ultraviolet germicidal irradiation to attend to indoor air quality at cannabis producing facilities. A cannabis business will want to carefully consider the available options in light of state and local requirements in order to select the odor control mechanisms that will best protect the business and local air quality.

VOCs & Solvents

Cannabis producers should carefully consider not only the right odor control mechanism for their business and location, but also how to best manage their cannabinoid extraction practices. As noted above, VOC emissions tend to be at their highest during, among other times, the processing phase. And although odors are not necessarily contaminants for purposes of New York and New Jersey’s environmental laws, the VOCs that cause them may be, and the solvents used in the extraction process may be as well (such as, for example, hydrocarbon-based solvents). Producers will want to carefully evaluate their extraction practices to ensure that fugitive or accidental emissions of VOCs and solvents are minimized or avoided entirely. Cannabis producers will want to keep an especially close eye on how they handle, store, and dispose of solvents. Solvent-based contamination is a common problem in New York and New Jersey. And make no mistake – solvents are already strictly regulated in the environmental realm due, in part, to the sheer volume of solvent-related contaminated sites in each of those states. As such, industry groups recommend that cannabis producers carefully consider how to implement cannabinoid extraction practices in a manner that appropriately manages solvents, such as, for example, by employing closed-loop cannabinoid extraction techniques like condensers or cold traps. Some industry groups advise that a better alternative is to avoid hazardous solvents like butane and propane in favor of more eco-friendly options, like the use of supercritical carbon dioxide. No matter what practices a producer chooses to adopt for their cannabinoid extraction, it is very important that those practices be carefully managed to avoid problems down the road.

Compliance with federal, state and local clean air and odor control regulations present potential challenges for cannabis cultivators, and the potential consequences of noncompliance can suck the air out of a room for a cannabis cultivator or processor. Market entrants will want to carefully consider how these regulations will apply to their business and how best to adapt their cultivation and production practices in order to ensure that their business will not go up in smoke.

We call to your attention NJDEP’s recently proposed amendments to its air regulations which raise questions as to whether fumigation and/or pesticide application operations, such as in office buildings, are to be subject to the detailed requirements of air permitting. Commercial building owners should review these proposed rules with their pesticide and fumigation contractors. If applicable, these rules may require building owners and/or commercial pesticide applicators to obtain an air permit, meet strict reporting requirements, and even install stacks to vent the fumigants. The comment period for this proposal has been extended to June 1, 2021.

By way of background, on March 1, 2021, NJDEP published the proposed rule in the New Jersey Register. The impetus of this rule proposal appears to have been substances used in industrial fumigation operations, including warehouses and commodity storage facilities located in Newark, Elizabeth, and Camden. Specifically, NJDEP proposes to add certain fumigants and other air contaminants to the list of hazardous air pollutants. Regarding fumigation, the proposed rule would require permitting for any fumigation of a commodity or industrial structure that has the potential to emit at a rate greater than 0.1 pounds per hour (45.4 grams per hour), except for certain emergency fumigation operations.

However, the proposed rule appears to apply more broadly and can be read to apply even to commercial fumigation applications using any regulated pesticide or fumigant. Notwithstanding the listing of specific chemical compounds as toxic substances, the term “fumigant” is proposed to be generally defined as “a chemical registered with the EPA as a pesticide under the Federal Insecticide, Fungicide & Rodenticide Act (FIFRA). The proposed rule defines Group III toxics as “fumigants, including but not limited to” methyl bromide, sulfuryl fluoride, and phosphine. This definition appears to include all fumigants, not just the three specific fumigants of concern, as regulated Group III toxics. As proposed, Group III toxics if emitted at a rate of 45.4 grams per hour, are subject to air permitting requirements. Further, the subchapter governing hazardous air pollutants and toxins would require that emissions to the outdoor atmosphere would be authorized only through a vertical stack that extends above the highest point of the container, roofline, or structure. A health risk assessment for that operation would have to be performed in advance of any fumigation.

The language of the rule raises significant enough questions that it should be reviewed with your commercial pesticide or fumigation professional. Questions such as the emission rate of the pesticide or fumigant used, and its potential to emit into the outdoor atmosphere, should be asked. If there are comments or concerns about the proposal, they should be addressed to the NJDEP by June 1st using this link or via mail to:

Alice A. Previte, Esq.
ATTN: DEP Docket No. 02-21-01
NJ Department of Environmental Protection
Office of Legal Affairs
Mail Code 401-04L; PO Box 402
401 East State Street, 7th Floor
Trenton, NJ 08625-0402

Interested or potentially impacted stakeholders are encouraged to participate in the comment period and should consider evaluating its implications, if enacted in current form, with their advisors and contractors.

I recently blogged about the various kinds of environmental regulatory issues I anticipate will emerge in New York and New Jersey as each state’s cannabis industry blooms. In that post, which you can find here, I identified cannabis waste disposal as a complex environmental issue that each state will be expected to address as the industries develop. Cannabis cultivators generate significant amounts of organic and inorganic waste, which includes plant waste, growing media, and other agricultural material (not to mention hazardous wastes in the form of volatile organic compounds). In this post, I will dive a little deeper into the issue of cannabis plant waste disposal and discuss some of the possibilities.

50/50 Plant Waste Rule

The states leading the charge on recreational cannabis cultivation have generally addressed the issue of plant waste disposal and have by and large coalesced around the so-called 50/50 rule, whereby marijuana plant waste must be made unusable and unrecognizable, and then disposed of as solid waste. However, each cannabis waste generator must take the resulting mash and mix it with other solid waste such that each generator’s solid waste consists of no more than fifty percent cannabis waste. On its face, such a rule seems sensible, but critics point out that the 50/50 rule is flawed in that it forces organic wastes – which could otherwise be put to beneficial reuse – to be landfilled, which itself creates negative environmental impacts. Critics have also suggested that the 50/50 rule is transportation-centric, relying heavily on carbon-emitting waste disposal infrastructure and that the rule encourages cannabis businesses to produce unnecessary levels of non-cannabis solid waste in order to meet the fifty-percent threshold.

Composting and Anaerobic Digestion

Although less common than the 50/50 rule, states have been coming around to the idea of allowing businesses to dispose of marijuana plant waste outside of the solid waste stream. Massachusetts, for example, allows cannabis businesses to dispose of marijuana plant waste by mixing it with other organic matter, such as food waste, soil, mulch, manure, and growing media, and to then dispose of that waste at offsite composting or anaerobic digesting facilities. Alternatively, Massachusetts-based cannabis businesses are permitted to compost marijuana plant material on-site, though permissive on-site composting appears to be much more limited. Advocates for such methods point out that composting or anaerobic digestion of cannabis plant matter would result in effectively a complete diversion from landfilling the waste and ensure that the plant matter can be put to beneficial reuse.

Notably, these alternative means of disposal present workable options for New York and New Jersey. Both states have recently passed food waste recycling acts that will require certain businesses to dispose of food waste through authorized recycling facilities, which in both states, include off-site composting and/or anaerobic digestion. Permitting cannabis-waste generators to dispose of their plant waste in the same manner as food waste – and perhaps mixed with food waste, if necessary – would seemingly promote each state’s environmental policy goals underlying their respective food waste acts and provide cannabis-waste generators with an environmentally sound means to dispose of their plant matter.

New York and New Jersey are likely a long way away from fully hashing out how to handle marijuana plant waste, but as new developments arise, we will keep an eye out.

This week, there are two cases before the Supreme Court of the United States that environmental and energy attorneys and other industry stakeholders should be watching closely. The cases cover a broad range of concerns – including the CERCLA statute of limitation, eminent domain, sovereign immunity, and the 11th Amendment – and are as follows:

In Territory of Guam v United States (Case number 20-382) – Guam wants the U.S. Navy to contribute to a $160M landfill cleanup. In 2004, Guam and the United States reached a Consent Decree under the Clean Water Act over the contaminated Ordot Dump, which was leaching waste into nearby waterways. The former municipal dump/landfill had been owned by the U.S. Navy.  Guam filed suit under CERCLA to recover the $160M in costs it had incurred. The U.S Court of Appeals for the District of Columbia said the 2017 suit for contribution under CERCLA was too late as the 2004 Settlement started the three (3) year statute of limitations under Section 113 of CERCLA. Guam argued in its briefs that the 2004 Consent Decree made no reference to CERCLA and that the D.C Circuit incorrectly held that the three-year statute of limitations was triggered. Guam argues that it is seeking to recover costs under Section 107(a) of CERCLA, which provides for parties to recover remediation costs from other responsible parties within six years of the initiation of a remedial action. Guam argues that the “initiation of the remedial action began in 2013 after the landfill was closed and thus their contribution action is within the six-year statute of limitation provided in Section 107(a) of CERCLA.

This case is being closely watched because if the Supreme Court accepts the federal government’s argument, it could deter the future settlement of environmental CERCLA claims if the three-year time limit is found to apply in cases where parties are seeking contribution for remediation costs from other responsible parties.

In PennEast Pipeline Co. LLC v State of New Jersey et al. – (case number 19-1039), the developer of the $1B PennEast pipeline requested the US Supreme Court to overturn the Third Circuit’s prior holding the developer can’t seize the New Jersey owned land for the pipeline project. In a September 2019 decision, the U. S Court of Appeals for the Third Circuit held that a 1938 law called the Natural Gas Act (15 USCA 717(f)) doesn’t allow for the developer to condemn land controlled by New Jersey. The Federal Energy Regulatory Commission had granted the developer eminent domain authority to take the property. New Jersey argues that its 11th Amendment sovereign immunity protects it from condemnation suits by private companies. The developer also argued that the Third Circuit didn’t have jurisdiction to even consider the case. This jurisdictional issue will be one of the issues decided by the Supreme Court. New Jersey argues that the lower court had proper jurisdiction to conclude that the Constitution doesn’t allow private companies to sue under the NGA and, moreover, that the NGA doesn’t provide authority for companies to sue states under the NGA.

This case is being watched for a variety of reasons, including the federal government’s powers to condemn property under its eminent domain authority versus the state’s 11th Amendment sovereign immunity protections from federal interference.

The Appellate Division’s recent unpublished decision in Meyer v. Constantinou (April 16, 2021; Dkt. No. A-1793-18) affirmed the exclusion of an environmental expert report as a net opinion for ignoring key facts without sufficient reason. The decision also affirmed the trial court’s finding that dry cleaners are not abnormally dangerous and therefore not subject to strict liability.

The case involved a disputed source of solvent contamination. Specifically, a gas station/auto repair shop discovered PCE contamination in the soil near a leaking waste oil tank. PCE is a solvent used for dry-cleaning, auto repair, and many other things. The gas station’s LSRP attributed the PCE to the dry-cleaning facility located approximately six feet from the waste oil tank excavation. The gas station initiated an action against the dry cleaner on various theories of liability relating to the PCE contamination, amazingly failed to establish liability at trial, and appealed.

Expert Opinions Must Be Supported by Facts

One reason the gas station lost at trial is that its expert report was excluded as net opinion. Expert testimony is inadmissible if it is founded on speculation rather than factual evidence or data. The gas station’s expert report concluded that the dry-cleaner spilled the PCE based on a map showing the highest PCE concentrations near the dry-cleaner and decreasing concentrations towards the gas station. However, the PCE concentrations were more randomly distributed and the LSRP had to inexplicably ignore some samples to make that argument. The expert report also stated that the gas station did not use solvents and, therefore, the PCE must have come from the dry cleaners. That opinion ignored the fact that receipts produced in discovery established that the auto shop used spray cans of solvents. Failure to account for facts does not render an opinion inadmissible, so long as sufficient reasons are set forth to logically support the opinion. Here, the logical support was missing. The remaining conclusions in the report were merely assumptions regarding dry cleaning operations, wholly unsupported by facts or data. Accordingly, the report was excluded, dooming the gas station’s case.

In addition to reminding litigants that expert reports must be grounded in facts, the case also illustrates the risk of retaining your LSRP as a litigation expert. Credibility issues arise when experts defend their own questionable decisions. In this case, the LSRP ignored DEP’s repeated demands to conduct a preliminary assessment which could have helped eliminate the gas station as a potential source of contamination. The expert’s inability to address that and other aspects of the remediation supported the judge’s determination that the expert lacked credibility. An independent expert would have avoided that issue, and likely would have also taken a more critical eye to the LSRP’s prior data collection.

Dry Cleaning Is Not Abnormally Dangerous

The decision also affirmed the trial court’s determination that dry-cleaning is not abnormally dangerous. The harm caused by abnormally dangerous activities is subject to strict liability, which is liability arising without regard to fault. The gas station owners argued that dry-cleaning is abnormally dangerous, and therefore the business owner was personally liable for PCE contamination. The Appellate Division disagreed. In evaluating the six factors used to determine whether an activity is abnormally dangerous, the Court found that dry cleaning is common, useful, and appropriately placed in a strip mall. Somewhat confusingly, the last three factors (high degree of risk, likelihood of great harm, and inability to eliminate risk with reasonable care) were conflated into a finding that the likelihood of harm “was not great” because of precautions taken regarding PCE. By linking the application of strict liability to the particular manner in which the dry cleaner operated, the Court left the door open to fact development regarding future strict liability claims against dry cleaners.

With the distribution of vaccines to fight the COVID-19 pandemic underway, New Jersey is starting to see the light at the end of the tunnel.  At some point, the public health emergency will end, and the process of government will go back to normal.    Businesses and the regulated community, in general, need to start planning now for the resumption of the numerous environmental law and regulatory deadlines suspended during the pandemic.

Less than two months after declaring a public health emergency, on May 2, 2020, Governor Murphy issued Executive Order 136 which extended statutory deadlines governing various environmental laws.   Those extensions dealt with everything from the timeframes governing NJDEP review under certain statutes, such as the 90-Day Review Law, to extending deadlines for submitting reports required under the statute.   Following the Governor’s lead, the Commissioner of NJDEP followed suit by issuing a series of Administrative Orders, as well as temporary rule waivers and modifications allowing regulatory timeframes to be extended or, in some cases, suspended until after the public health emergency is lifted by the Governor.   Most recently, on March 1, 2021, Acting Commissioner LaTourette issued a Notice of Rulemaking/Modification/Suspension which extended submission deadlines under the Administrative Requirements for the Remediation of Contaminated Sites, the Technical Requirements for Site Remediation, and the Heating Oil Tank System Remediation Rules.

At some point, the Governor will declare that the public health emergency is over.  When that occurs, suspended deadlines governed by EO 136 will resume, or have a short window to resume.   Many of the rules that were administratively suspended or extended will resume their normal time clock.  It is not too early to begin evaluating the landscape of your regulatory compliance deadlines and to start planning to perform the work necessary to meet those deadlines once the emergency is lifted.   For example, any site remediation deadlines need to be evaluated with your site remediation professional to anticipate the work necessary and, more importantly, the time frame to complete that work, so that you are not in violation of the law when the emergency has ended.

This is particularly true for newly regulated activities required to be implemented during the pandemic.  For example, on January 21, 2020, Governor Murphy signed PL. 2019, c. 397, otherwise known as the “Dirty Dirt Law,” which required any business engaging in soil and fill recycling services without an A-901 license to submit a registration form no later than April 20, 2020, and a validly and administratively complete application for a soil and fill A-901 license no later than October 19, 2020.  All business that did not have a valid A-901 or registration was prohibited under the Dirty Dirt Law after July 20, 2020.   EO 136 extended these deadlines the length of the public health emergency plus 60 days.   NJDEP understandingly has not had time to adopt regulations implementing the Dirty Dirt Law, which was enacted less than two months before the public health emergency.  There are questions of the scope of this law which had been raised at the beginning of the pandemic which still need to be addressed by NJDEP.   It is unclear whether NJDEP will provide any of this clarity prior to the end of the pandemic.  However, it is clear that these deadlines will be reinstated at the end of the pandemic.  Those engaging in soil and fill recycling, which has significant policy implementation questions, should begin preparing now, and engaging with the NJDEP to make sure that the resolution of these policy considerations remains a priority with NJDEP prior to the deadlines in the statute resuming.

It is great news that the pandemic is on track to end.  However, you need to be aware that when this pandemic ends, your business may be up against environmental regulatory compliance deadlines very quickly.

In recent months, New York and New Jersey have both technically legalized the commercial cultivation and sale of recreational marijuana within each respective state. Along with this new legal landscape will come a flurry of regulations directing the means by and the manner in which such cultivation and sale may take place. Often overlooked in the public conversation about this new legal order are questions of environmental regulation of cannabis producers. Little is yet known about just what shape the regulations will take in New York and New Jersey. However, even though the path forward is unclear, it is not uncharted, and a review of common environmental issues and how other states have tackled them can provide insight as to the regulatory issues with which would-be cannabis producers can expect to grapple. This blog post will explore some of the types of environmental regulations that we expect producers and dispensaries in New York and New Jersey will need to abide by and other potential issues that may arise.

Waste Disposal

As with any product-oriented industry, cannabis cultivators can be expected to produce large amounts of solid waste. While it goes without saying that solid waste disposal will be an important part of the regulatory regime, disposal of cannabis waste is a potentially complex issue that will surely be addressed as each state begins proposing rules. We can expect that the solid waste rules will be similar to those of other states that have addressed the problem, which include requirements such as:

  • Cannabis products must be rendered unusable and unrecognizable prior to disposal;
  • Cannabis products must be mixed with other solid wastes such that the resulting waste is no more than fifty percent cannabis waste; and
  • Cultivators and dispensaries must keep records of their cannabis-product disposal.

Additionally, many cannabis producers use solvents, including volatile organic compounds (VOCs), to extract cannabinoid oils from plants. Those VOCs will also need to enter waste disposal streams, although we anticipate that those rules will mimic existing VOC-disposal rules in New York and New Jersey.

Moreover, cannabis cultivators can be expected to produce a significant amount of wastewater discharge, which will likely require permits, such as treatment works approvals, and will certainly need to comply with each state’s respective wastewater discharge standards. Indeed, that point comes into sharp focus because the industry will likely require the use of solvents, pesticides, and rodenticides regulated under state law and, potentially, FIFRA (although, given the current status of marijuana at the federal level, the applicability of federal statutory controls such as FIFRA is a question beyond this blog post).

Air Quality

Putting aside the complexity of waste-disposal issues, growers may also expect to face significant air-quality regulation. For example, states with a flowering cannabis industry have begun to regulate odors emanating from cultivators by requiring approval of HVAC schematics delineating airflow paths and specifications and, in some instances, installation of approved odor-control devices. In addition, the use of VOCs for oil extraction can be expected to necessitate air permitting. In addition, the mere operation of a cultivating facility may require equipment requiring air permits, such as boilers to the extent necessary to operate a greenhouse growing facility or emergency generators.

Soil and Water Contamination

Producers using VOCs for oil extraction will want to remember that VOCs are harmful substances for purposes of the various environmental statutes controlling soil and water contamination and remediation in New York and New Jersey. Accordingly, we expect that the same rules that apply across industries in those states will apply to this industry, and a cannabis producer will need to exercise caution in using and storing VOCs as part of its operations.

As noted above, it is not yet known with precision what form the environmental regulation of cannabis will take in New York and New Jersey, but as events unfold and regulations are promulgated, I will provide updates.

On Monday, March 29th, the Biden administration announced a plan that would greatly expand the use of offshore wind power along much of the East Coast.  The plan would designate an area between Long Island and New Jersey as a priority offshore wind zone.  The plan further sets a nationwide goal of installing 30,000 megawatts of offshore and wind turbines in coastal waters by 2030.  If successful, that amount of clean energy will be enough to power 10 million homes.

In order to meet that goal, the Biden plan would seek to accelerate permitting for wind projects off the Atlantic coast, as well as offer $3 billion in federal loan guarantees.  Consistent with the administration’s focus on improving infrastructure, the plan also includes upgrading the nation’s ports to support wind construction.  The Biden administration’s announcement dovetails with Governor Murphy’s goal of supplying 7,500 megawatts of offshore wind energy to the State by 2030.  The Biden administration proposal will also enhance the $200 million that Governor Murphy included in the State’s budget for the construction of an offshore wind port in Salem County.

This combination blows a much-needed breath of fresh air into an industry that has been struggling to set sail in the State.

Supplemental Environmental Projects (SEPs) are projects included in enforcement settlements that provide environmental or public health benefits related to the violations being resolved. SEPs have been used as an element of federal environmental settlements since the 1980s. Regulators like that SEPs encourage settlement and result in tangible environmental benefits. The regulated community likes the community goodwill associated with SEPs and the ability to offset potential fines by 80% of the estimated cost of the SEP.

However, SEPs have detractors and in March 2020 the Department of Justice issued a memo halting the use of SEPs. By way of explanation the memo restated legal arguments first raised against the use of SEPs in the 1980s. Specifically, that SEPs divert funds that would otherwise be collected by Treasury, in violation of the Miscellaneous Receipts Act (“MRA”). EPA Guidance has established criteria directly addressing SEP compliance with the MRA since 2002.

In response to the March 2020 memo, environmental plaintiffs filed an action in federal court seeking a judicial declaration that the memo was unlawful. DOJ responded by moving to dismiss while also issuing a clarifying memo purporting to distinguish the newly prohibited SEPs from the often indistinguishable and permissible equitable mitigation projects. Regardless, the federal action was rendered moot when both memos were rescinded by the Biden administration in February.

While the withdrawn DOJ memos prohibiting the use of SEPs are now inoperative, potential parties to settlements should be aware that a federal rule finalized in December 2020 prohibits settlement agreements requiring defendants to provide goods or services to third parties for SEPs (28 CFR 50.28), and that the rule stands in tension with portion of EPA’s 2015 SEP Guidance regarding third-party SEP recipients. The rule remains in effect while the Biden administration considers whether it should be withdrawn or revised.