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.

The State of New Jersey continues its support of revitalizing brownfields with the enactment of the New Jersey Economic Recovery Act of 2020, P.L. 2020, c. 156, which was signed into law by Governor Murphy on January 7, 2021 (the “Act”). The Act includes new programs, including a tax credit program entitled the Brownfields Redevelopment Incentive Program Act . On January 12, 2021, the New Jersey Economic Development Authority (“NJEDA”) Board of Directors approved the implementation of the NJEDA Brownfield Loan Program, which is part of the broader NJEDA Community Revitalization initiative. Both programs will cover many types of remediation costs but will entail a demonstration of a project financing gap, as well as compliance with Prevailing Wage and Affirmative Action requirements. Although the Brownfield Redevelopment Incentive Tax Credit program is still being developed, NJEDA is currently accepting loan applications from January 14 through April 13, 2021. Continue Reading New Brownfields Redevelopment Incentive Programs in New Jersey

On January 7, 2021, New Jersey Governor Murphy signed the New Jersey Economic Recovery Act of 2020. P.L. 2020 c. 156. Included within the statute is the Brownfields Redevelopment Incentive Program Act. This section of the law creates a tax incentive program for a redeveloper of a brownfield site to obtain a tax credit to close a “project finance gap” and provide needed financing for the remediation and redevelopment of a brownfield site. The program, which is administered by the New Jersey Economic Development Authority (“EDA”), is summarized below. Continue Reading What Real Estate Developers Need to Know About the 2020 New Jersey Brownfields Tax Credit

On June 29, 2020, the EPA issued a memo notifying applicable members of the regulated community that effective August 31, 2020, it is terminating the temporary policy suspending certain monitoring and reporting requirements.  

The controversial policy was originally put into place on March 26, 2020 to address issues related to compliance due to the COVID-19 pandemic.  However, the EPA left open the possibility that on a “state or national basis, in whole or in part, at any earlier time, taking into account changing conditions in a state or region of the country” the policy could be terminated prior to August 31.  However, if that were to happen, the EPA would provide at least seven days notification prior to doing so.

For additional information pertaining to the coronavirus outbreak, please visit CSG’s COVID-19 Resource Center.