Manufacturers, suppliers, retailers, and other entities in supply chains for consumer products sold in California might soon need to provide warnings regarding certain per- and polyfluoroalkyl substances (PFAS) in their products. California’s Office of Environmental Health Hazard Assessment (OEHHA) recently announced its intent to further regulate and study certain per- and polyfluoroalkyl substances under California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Proposition 65. Proposition 65 prohibits companies from knowingly exposing California consumers to chemicals “known to cause cancer or reproductive toxicity” (i.e., “listed chemicals”) in consumer products without first providing a “clear and reasonable warning.” (Although not the focus of this article, Proposition 65 also addresses occupational and environmental exposure to listed chemicals.)
Manufacturing facilities, industrial operations, and other businesses subject to environmental statutes and regulations will want to evaluate a new EPA document when considering whether and how to voluntarily disclose environmental violations to the federal government. EPA recently published a 22-page guidance document, dated January 2021, clarifying EPA’s Audit Policy. EPA’s Audit Policy consists of incentives the agency offers to companies that voluntarily discover their own violations of environmental laws and regulations and disclose the violations to EPA. When all of the nine eligibility conditions in the Audit Policy are met, the Audit Policy allows for up to complete elimination of the gravity-based portion of civil penalties for environmental non-compliance, and a recommendation of no criminal prosecution. (EPA penalties may also include amounts to address the economic benefit of non-compliance, which the Audit Policy does not address.) The Audit Policy itself is memorialized in Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, 65 Fed. Reg. 19618 (Apr. 11, 2000) (an update to the original 1995 document establishing the Audit Policy).
If your business sells or distributes products or devices by claiming that the products work against or kill COVID-19, beware that such claims are subject to regulatory oversight by a variety of governmental agencies, such as the Environmental Protection Agency, Federal Trade Commission, and the Food & Drug Administration. Unsuspecting companies in the sale and distribution of these products, such as disinfectants, sanitizers, or cleaners, must ensure their labels and marketing claims satisfy regulatory requirements.
On August 26, 2020, the U.S. Securities and Exchange Commission (SEC) announced significant changes to the disclosure requirements for publicly traded companies under Regulation S-K. Businesses that receive monetary sanctions from the EPA and other governmental authorities involving violations of environmental laws will want to carefully review the new Item 103 Legal Proceedings rules as it may substantially alter disclosure obligations.
Facility owners and operators with air permits will want to pay close attention to a recent Fifth Circuit ruling on a private citizen’s ability to seek penalties for/and defenses against alleged violations of the Clean Air Act. Following a bench trial, an appeal, and another bench re-trial, this decade-old case has again gone up to the appeals court and had the trial court’s judgment vacated and remanded, this time to decide the Plaintiffs’ standing to bring the case in the first place and to judge the viability of two key affirmative defenses. Environment Texas Citizen Lobby, Inc. v. Exxon Mobil Corp., 66 F.Supp.3d 875 (S.D. Tex. 2014), vacated and remanded, 824 F.3d 507 (5th Cir. 2016), on remand, No. H-10-4969, 2017 WL 2331679 (S.D. Tex. Apr. 26, 2017), vacated and remanded, slip op. No. 17-20545, 2020 WL 4345337 (5th Cir. Jul. 29, 2020), as revised (Aug. 3, 2020). According to the majority opinion, the panel gave both the lower court and the regulated community guidelines for when each CAA violation is “fairly traceable” to a plaintiff’s alleged injury to support standing under Article III of the U.S. Constitution. According to the concurrence, the Fifth Circuit’s standing precedents are “a mess” that are trending toward the unconstitutional elimination of “but-for” causation; a paradox that should be clarified by the full court en banc to stop a continuing loop of confusion.
Companies nationwide that sell foods containing the chemical acrylamide to California consumers may find their regulatory burden lightened in the future. On October 7, 2019, the California Chamber of Commerce (CalChamber) filed suit against the California Attorney General in the Eastern District of California to prevent the state from enforcing Proposition 65 warning requirements for foods containing acrylamide. CalChamber’s Complaint asks the court to declare that the Proposition 65 requirement of carcinogen warnings for foods containing acrylamide constitutes false and misleading compelled speech in violation of the First Amendment, arguing that acrylamide in food has not been shown to be a human carcinogen. The Complaint also seeks an order prohibiting the State of California and private citizen enforcers from enforcing Proposition 65 warning requirements for foods containing acrylamide.
All companies in supply chains for products sold in California need to be aware of the law known as California’s Proposition 65. This is especially true because significant changes to Proposition 65 requirements go into effect on August 30, 2018, increasing potential liability.
Recently, EPA issued an Interim OECA Guidance on EPA and state roles on managing enforcement and compliance assistance. See, Interim OECA Guidance on Enhancing Regional—State Planning and Communication on Compliance Assurance Work in Authorized States. While EPA is seeking to emphasize cooperative federalism in modifying the emphasis of the 1986 revised policy on state/EPA enforcement agreements, as provided in the first footnote of the Guidance, the policy issued on January 22, 2018, appears to make the states the primary enforcer of environmental laws and provides a secondary role for EPA in that regard.
A high-ranking Environmental Protection Agency (EPA) enforcement official in the Trump Administration recently cited a 1994 memorandum by Earl Devaney, then Director of EPA’s Office of Criminal Enforcement, as presenting guiding principles to select cases for criminal enforcement of environmental violations. The January 12, 1994, memorandum, “Exercise of Enforcement Discretion,” is often referred to as the “Devaney Memorandum,” and it is available at this link: https://www.epa.gov/sites/production/files/documents/exercise.pdf. This may signal that criminal enforcement of environmental laws under the Trump Administration will be limited to situations in which there has been significant actual or threatened environmental harm and truly culpable conduct.
On October 16, 2017, EPA Administrator Pruitt issued a directive, requiring EPA to immediately cease a practice known as “sue and settle,” in response to concerns that EPA has lately been defending against suits brought by environmental organizations with insufficient vigor. The “sue and settle” concept is not defined in relation to a specific political party or view of environmental protection. Rather, it is the concept that political parties in power sometimes half-heartedly defend against lawsuits, when the relief sought by such suits is actually favored by the party in power.