MERRILL.3 9/27/2005 3:54:02 PM

Global Warming as a Public Nuisance

Thomas W. Merrill*

Introduction...... 293 I. Standing ...... 294 A. Ordinary Standing Principles...... 295 B. Parens Patriae Standing...... 299 II. Federal Common Law...... 306 A. Does Federal Common Law Apply? ...... 309 B. The Standard for Determining Displacement of Federal Common Law...... 311 C. Application of the Displacement Standard to Climate Change ...... 316 III. Foreign Policy Preemption...... 319 IV. The Standard of Nuisance Liability...... 328 Conclusion...... 332

INTRODUCTION

On July 21, 2004, eight State Attorneys General and the City of New York brought suit in federal district court in the Southern District of New York, seeking to adjudicate the issue of global warming as a public nuisance. Six large electric power producers were named as defendants. The complaint filed in Connecticut v. American Electric Power Co.,1 as the action is styled, alleges that emissions of greenhouse gases from the defendants’ plants, in particular carbon dioxide (CO2), are contributing to global warming. Count I claims that these greenhouse gas emissions are

* Charles Keller Beekman Professor, Columbia Law School. An earlier version of this article was presented at the symposium, The Role of State Attorneys General in National Environmental Policy, at Columbia Law School, September 20, 2004, 30 COLUM. J. ENVTL. L. 351. The article could not have been brought to fruition without the able assistance of Thomas Richardson and Vivian Mills, or without the gentle but persistent prodding of all three of us by Kevin Meier Kertesz. 1. No. 04 Civ. 5669, 2004 WL 1685122 (S.D.N.Y. filed July 21, 2004); or No. 04- cv-05569- LAP, complaint filed (S.D.N.Y. July 21, 2004).

293 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

294 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 an actionable public nuisance governed by federal common law.2 This count, if it states a cause of action, should establish subject matter jurisdiction in the federal district court, based on the presence of a federal question.3 Count II pleads, apparently in the alternative, that the emissions are an actionable public nuisance under state nuisance law.4 Subject matter jurisdiction over this count is based on supplemental federal jurisdiction.5 Under both counts, the plaintiffs seek injunctive relief directing the defendants to abate their emissions of greenhouse gases; there is no demand for damages. The use of litigation to establish environmental policy is not new. It has featured prominently in the history of American public law, and has produced results that are mixed, or at least controversial.6 I leave for another day the question whether, as a policy matter, it is a good idea to ask the courts to resolve issues like global climate change. Rather, my focus here is on some of the challenging legal questions raised by the suit. In particular, I will discuss four questions: (1) whether State AGs have standing to bring such a suit; (2) whether such a suit is in fact governed by federal common law, as opposed to state common law; (3) whether the suit is impliedly preempted by the commitment of foreign policy to the political branches of the federal government; and (4) what substantive legal standard of nuisance liability should govern the suit. I will discuss some of the factors that either will or should bear on the resolution of these questions, and speculate a bit on the likely response by the courts.

I. STANDING

A critical threshold question raised by the suit is standing. There are some fairly ordinary standing issues here, as well as some more esoteric ones. I am more interested in the esoteric issues, but in order to get to those we must pass first through the more ordinary

2.Id. at 164. 3.See Illinois v. Milwaukee, 406 U.S. 91, 100, 105 (1972) (Milwaukee I). 4. Connecticut v. Am. Elec. Power Co., 2004 WL 1685122, 166–186. 5.Id at 36. 6. For case studies of the often unintended consequences of public law litigation, see, e.g., R. Shep Melnick, Regulation and the Courts: The Case of the Clean Air Act (1983); John M. Mendeloff, The Dilemma of Toxic Substance Regulation: How Overregulation Causes Underregulation at OSHA (1988). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 295 ones.

A. Ordinary Standing Principles Let us begin by assuming that ordinary standing principles – as developed by the Supreme Court in the context of civil litigation filed by private citizens – are fully applicable to this case. That is, assume the suit was brought not by state AGs, but by private citizens concerned about global warming, against the same six electric utility defendants. Such a suit would undoubtedly encounter a motion to dismiss on standing grounds. The motion would likely cite four reasons why such citizen-plaintiffs do not have standing to challenge the emission of greenhouse gases as a public nuisance: the citizens cannot establish that they have suffered injury in fact; they cannot show that any injury they have suffered has been caused by the defendants’ emissions; the relief they seek would not redress the injury of which they complain; and their suit asserts generalized grievances shared by all citizens. Consider first injury in fact. The complaint cites a number of injuries – to public health, coastal resources, water supplies, the Great Lakes, agriculture, ecosystems, forests, fisheries and wildlife, from wildfires, from catastrophic storms. Nearly all of these are injuries that the complaint alleges “will be caused”7 “are threatened,”8 “will increase”9 or are “likely to result”10 as a result of global warming. They are, in short, injuries that might happen in the future. There is, of course, no reason to ignore a problem, especially one that might be very serious, just because it might happen in the future. But the Supreme Court has held that federal courts can adjudicate only actual injuries,11 and concluded in Lujan v. Defenders of Wildlife12 that this means injuries that are either presently existing or “imminent.”13 Specifically, the Court in that case held that animal biologists could not challenge the destruction of habitats of animals they had studied in the past, because they could not show that they had plans to resume their studies in the

7. Connecticut v. Am. Elec. Power Co., 2004 WL 1685122, 110. 8.Id. at 116, 133, 134. 9.Id. at 106, 111, 113, 119, 120, 130, 131, 140, 141. 10.Id. at 122. 11. Allen v. Wright, 468 U.S. 737, 756 (1984). 12. 504 U.S. 555 (1992). 13.Id. at 560. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

296 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

near future.14 The utility defendants in my hypothesized citizens’ suit would almost certainly argue that the injuries apprehended to come about because of global warming are likewise insufficiently imminent to allow an Article III court to adjudicate the legality of global climate change. Those injuries have not yet materialized, may not materialize for many decades, and conceivably will not materialize at all.15 The Supreme Court has been far from consistent in its treatment of allegations of future injury.16 But there is a good chance the defendants would prevail on this point. The citizens in my hypothesized suit would undoubtedly try to take solace from a post-Lujan decision, Friends of Earth, Inc. v. Laidlaw Environmental Services, Inc.,17 in which the Court upheld the standing of citizen plaintiffs who had a “reasonable” apprehension that they might suffer injury from certain discharges of pollution.18 The “apprehension” in Friends of Earth, however, was of injuries that would directly flow from exposure to existing discharges that were plainly illegal under the permitting system of the Clean Water

14.Id. at 564. 15.See National Research Council, Committee on the Science of Climate Change, Climate Change Science: An Analysis of Some Key Questions, 1 (2001), available at http://books.nap.edu/html/climatechange/climatechange.pdf. (“Because there is considerable uncertainty in current understanding of how the climate system varies naturally and reacts to emissions of greenhouse gases and aerosols, current estimates of the magnitude of future warming should be regarded as tentative and subject to future adjustments (either upward or downward); See also, NASA Fact Sheet, The Greenhouse Effect, at http://www.gsfc.nasa.gov/gsfc/service/gallery/fact_sheets/earthsci/green.htm (June, 1993) (“there has been little increase [in temperature] in the last 50 years, which raises questions about whether we really have experienced the effect of increasing CO2. The pattern of changing global temperatures suggests that there may be other factors influencing climate. There is also the possibility that the sensitivity to greenhouse gases is less than what most climate models indicate. Scientists feel an increase of 1degree F ( 0.5 degrees C) in 140 years is not necessarily outside the range of natural climate variability.”). 16. Compare United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669 (1973) (organization of law students has standing to challenge rate order on the ground that it may produce greater litter in parks in the future), Duke Power Co. v. Carolina Envtl. Study Group Inc., 438 U.S. 59 (1978) (citizen group has standing to challenge cap on liability of nuclear power plant operators on ground that it may increase risk of a future reactor accident) , with Lujan v. National Wildlife Federation, 497 U.S. 871 (1990) (environmental group has no standing to challenge reclassification of land that may lead to future mining activity); Lyons v. Los Angeles, 461 U.S. 95 (1983) (arrestees subject to police choke hold have no standing to challenge department’s practices on the ground that they may be arrested again in the future). 17. 528 U.S. 167 (2000). 18.Id. at 183–85. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 297

Act.19 Such an “apprehension” has an objective basis in law and fact. Here, in contrast, the claim is of apprehension of future injury from discharges of CO2, the effects of which remain uncertain, and which are lawful under current regulatory law.20 Courts are unlikely to find actual or imminent injury quite so easily in this context. Causation poses a second standing problem. The Supreme Court has said that citizen-plaintiffs lack standing if they cannot show that the alleged injury of which they complain was caused by the illegality they seek redress. The defendants will argue that they are responsible for a small portion of the world’s greenhouse gas emissions, so small that it cannot fairly be said that they are “the cause” of global climate change. According to the data in the complaint, the power plants operated by the six defendants produce 10% of total U.S. CO2 emissions.21 It is estimated that the U.S. produces 25% of global greenhouse gases.22 So the entire operations of all six defendants are responsible at most for 2.5% of the world’s greenhouse gases. This makes it difficult to say that they are in any sense the cause of the problem. The citizens might respond that even if the defendants are only fractionally responsible for an indivisible harm that others are also creating, this should not insulate the defendants from accountability for the portion of harm that is in fact attributable to their conduct. For example, consider a suit by a group of insurance companies to recover the costs they have incurred from paying the medical expenses of smokers. Should the action be dismissed against a small tobacco company, such as Liggett & Meyers, because its products comprise only 2.5% of the market? At least in a suit for damages, where liability for an indivisible harm might be apportioned among multiple actors based on some formula (like market share),23 it is doubtful that a court would

19. 33 U.S.C. § 1342 (2000). 20. In fact, the Bush Administration has taken the position that EPA has no legal authority under the Clean Air Act to regulation emissions of greenhouse gases. See infra note 111. 21. Connecticut v. Am. Elec. Power Co., 2004 WL 1685122, 2. 22.See Environmental Information Administration, Greenhouse Gases, Climate Change, and Energy, at http://www.eia.doe.gov/oiaf/1605/ggccebro/chapter1.html (last modified April 2 2004) (“the U.S. produces about 25 percent of global carbon dioxide emissions from burning fossil fuels.”). 23. See, e.g., City of Philadelphia v. Lead Indus. Ass’n, Inc., 994 F.2d 112, 123–24 (3d Cir. 1993) (“Under the theory of market share liability, tortious manufacturers who produce a 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

298 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 dismiss the action for want of standing simply because of the defendant’s small market share. Perhaps in a suit seeking an injunction, relief would be denied in such a case on grounds of equity. But this goes to the conditions for awarding relief, not standing. So perhaps the citizens would escape dismissal of their suit on causation grounds. The third ground for objecting to standing – redressability – is related to but distinct from causation. The redressability requirement asks whether the relief sought by the plaintiffs is likely to cure the injury of which they complain.24 Here, I think the objection based on the defendant’s small share of global greenhouse gases poses a more serious problem, precisely because it focuses on the nexus between injury and relief rather than injury and conduct. Even if the defendants’ CO2 discharges were declared illegal and completely enjoined, it is most doubtful that this would end the injuries threatened to flow from global warming. Granting the injunction the plaintiffs seek – which would phase out the defendants’ emissions over time – would not even put a dent in the inexorable rise in world temperatures caused by the long-term accumulation of greenhouse gases. It would thus appear that the defendants would have a better chance of winning on redressability. A fourth standing problem in my hypothesized citizen suit would be that the plaintiffs are asserting a generalized grievance shared by all citizens.25 It is currently unclear whether the rule that generalized grievances do not confer standing is a part of the understanding of what “injury in fact” means, or whether it is simply a prudential limitation which can be waived by Congress.26 But even if this is a prudential limitation, a suit grounded in federal common law, almost by definition, is not one that benefits from a special statutory right of action enacted by Congress. So the generalized grievance limitation is fully applicable here. Most of the injuries alleged in the complaint – including threats from new diseases, violent storms, wildfires, and injury to ecosystems – implicate all members of society. The defendants

fungible identifiable product that injures the plaintiff are held liable in proportion to their respective market shares.”). 24.See Allen v. Wright, 468 U.S. 737, 753 n.19 (1984). 25. See, e.g., United States v. Richardson, 418 U.S. 166, 173-74 (1974). 26. Federal Election Com’n v. Akins, 524 U.S. 11, 20 (1998). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 299 would surely claim that these grievances are not particularized to individual plaintiffs, and hence run afoul of the prohibition on generalized grievances. Whether the defendants would prevail on this claim is uncertain. Dictum in a recent Supreme Court decision suggests that “a widespread mass tort” would not run afoul of the generalized grievances rule,27 and this arguably characterizes global warming. Moreover, the plaintiffs could argue that some of the injuries of which they complain, such as injuries to agriculture or coastal properties, apply to subsets of the population, and hence do not qualify as generalized grievances. So the argument based on generalized grievances would be less clearly a barrier to standing than the arguments based on injury in fact and redressability. Still, it would be a nontrivial problem for the hypothetical citizen plaintiffs, and might provide an independent basis for dismissing at least the majority of their claims. In short, if this were a citizens’ suit, the defendants would mount a substantial threshold defense based on standing. The ultimate resolution of this defense is uncertain, and would turn in significant part on the evidentiary support that the parties could muster through supporting affidavits or other testimony. But it is safe to say that the defense would be a serious one, with significant support in existing authority.

B. Parens Patriae Standing The more interesting question raised by Connecticut v. American Electric Power is whether these general standing limitations should apply in a parens patriae suit brought by state AGs based on public nuisance law. The Supreme Court’s restrictive standing law has been developed almost entirely in the context of citizen suits.28 The AGs will want to argue that these restrictions do not apply to actions brought by public officials seeking to vindicate the general public interest. Whether they are right is a complicated question that leads us into largely uncharted territory. Let us start with some basic propositions. The Court has never held that the body of standing rules developed in the context of

27. See id. at 24. 28.See, for example, the Court’s discussion of constitutional and prudential requirements of standing and the specific cases cited illustrating each requirement in Valley Forge Christian Coll. v. Americans United for Separation of Church and State, 454 U.S. 464, 471– 82 (1982). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

300 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 private actions applies ex proprio vigore to actions brought by public officials.29 Consider in this regard a criminal prosecution.30 In what sense can it be said that the government, in prosecuting a crime, is seeking to vindicate some injury in fact, or that a conviction will redress that injury, or that a crime (some crime at least, like victimless crime) is not a generalized grievance of all members of society? One could attempt to squeeze criminal prosecutions into the Court’s standing doctrine by declaring that the injury is to the government’s “sovereign interest” in enforcement of the law.31 But it is far more straightforward to revert to first principles, and just say that criminal trials brought by the government were a familiar part of the “judicial power” exercised by courts when the Constitution was established.32 In other words, criminal prosecutions fall squarely within the class of “cases and controversies of the sort traditionally amenable to and resolved by the judicial process.”33 The example of criminal prosecutions suggests that the “cases” and “controversies” that make up the judicial power conferred by Article III include not just private actions seeking vindication of private rights – which must satisfy the Court’s elaborate standing doctrine and other limits on justiciability – but also certain public actions brought by public authorities, which have never been thought to be restricted by such doctrines. The prosecution of crime is the paradigmatic example of such a public action by public officials. A U.S. Attorney authorized by law to bring a federal

29. Cf. Director, Office of Workers’ Compensation Programs v. Newport News Shipbuilding & Drydock Co., 514 U.S. 122, 133-34 (1995) (denying standing to Director of worker’s compensation board to seek judicial review of decision of Benefits Review Board, but stating in dictum that “Congress could have conferred standing on the Director without infringing Article III of the Constitution.”). 30.See Edward A. Harnett, The Standing of the United States: How Criminal Prosecutions Show that Standing Doctrine is Looking for Answers in All the Wrong Places, 97 Mich. L. Rev. 2239 (1999). 31. Cf. Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 771 (2000) (stating in dictum that violation of the law is an “injury to its sovereignty” sufficient to support “a criminal lawsuit by the Government”). 32. As Justice Frankfurter once put it, the question should be whether “judicial determination is consonant with what was, generally speaking, the business of the Colonial courts and the courts of Westminister when the Constitution was framed.” Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 150 (1951) (concurring opinion). 33. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102 (1998). On the historical roots of standing doctrine, see Ann Woolhandler & Caleb Nelson, Does History Defeat Standing Doctrine?, 102 Mich. L. Rev. 689 (2004). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 301 criminal prosecution has never been, nor should be, required to demonstrate that the United States has suffered injury in fact, or that the crime caused this injury, or that a conviction will redress such an injury, or that the crime is not a generalized grievance. Public nuisance suits brought by government officials are the civil analogue of criminal prosecutions. Public nuisance actions often apply to conduct that is also subject criminal prosecution, like maintaining a house of prostitution, or a gambling den, or blocking a public street or poisoning the public water supply.34 If the judicial power includes the ability to hear criminal actions brought by public officials without regard to whether standing requirements are satisfied, then there would seem to be little reason why the judicial power should not also extend to public nuisance actions brought by public officials seeking to vindicate public rights without regard to whether standing requirements are satisfied.35 The AGs therefore can argue that public nuisance actions brought by public officials, like public prosecutions of crimes, fall outside the area of concern about private citizen standing that has given rise to the Court’s restrictive standing jurisprudence. Here, however, two further complications potentially enter. One is the longstanding understanding that the Constitution prohibits federal courts from entertaining prosecutions based on common law crimes.36 This authority renders it doubtful that the U.S. Attorney General or any other federal officer can be said to have authority to bring an action in federal court based on the federal common law of public nuisance. The same considerations of separation of powers and federalism that counsel against recognition of federal common law crimes would also counsel against recognition of a federal common law of nuisance.37 This objection, however, arguably goes more to the legitimacy of the

34. W. Prosser, Law of Torts 583-585 (4th ed. 1971). 35. This helps explain why public nuisance suits brought by public officials, unlike such suits brought by private individuals, do not require any demonstration of “special injury.” See David R. Hodas, Private Actions for Public Nuisance: Common Law Citizen Suits for Relief from Environmental Harm, 16 Ecology L. Q. 883 (1989). The special injury requirement is the common law’s version of the modern law of standing for citizen suits. 36.See United States v. Hudson & Goodwin, 11 U.S. (7 Cranch) 32 (1812); United States v. Coolidge, 14 U.S. (1 Wheat.) 415 (1816). 37. For elaboration on the separation of powers and federalism objections to federal common law, see Thomas W. Merrill, The Common Law Power of Federal Courts, 52 U Chi. L. Rev. 1, 12-24 (1985). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

302 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 federal common law of nuisance (the topic of the next Part) than to the standing of federal officers to bring such actions in federal court. If federal common law crimes were permitted, there can be little doubt that federal officers would have standing to prosecute such crimes – without regard to whether the ordinary standing limitations developed in private action could be said to be satisfied.38 The second complication is whether the officers of one political sovereign can bring an action like a public nuisance suit in the courts of another sovereign. Historically speaking, it was understood that “the courts of no country will execute the penal laws of another.”39 This carried over to American federalism, in the form of the understanding that public actions brought by public officers must be brought in the courts of the sovereign in whose name the action is brought.40 Thus, federal criminal prosecutions are brought in federal courts, state criminal prosecutions are brought in state court; federal civil enforcement actions – forfeitures and the like – are brought in federal court, state civil enforcement actions in state court. Indeed, as a matter of historical practice, nearly all public nuisance actions brought by state officials like AGs have been brought in state court.41 Various functional justifications can be advanced in support of a general design principle requiring executive officials to assert their sovereign authority in their own court system, rather than in the courts of another sovereign. Accountability is one. Courts exercise broad discretionary powers in public actions like criminal prosecutions and public nuisance suits, and public officials, often elected, serve as gatekeepers in deciding whether to bring such actions. If public officials could bring these actions in the courts of another sovereign, the lines of accountability would be blurred. Expertise is another. Having one court system hear all public actions brought by the sovereign brings a measure of expertise and

38.See Larry W. Yackle, A Worthy Champion for Fourteenth Amendment Rights: The United States in Parens Patriae, 92 Nw. U.L. Rev. 111, 135-48 (1997). 39. Massachusetts v. Mellon, 262 U.S. 447, 481 (1923). 40. See generally, Ann Woolhandler & Michael G. Collins, State Standing, 81 Va. L. Rev. 387, 397-447 (1995). 41. See, e.g., Denise E. Antolini, Modernizing Public Nuisance: Solving the Paradox of the Special Injury Rule, 28 Ecology L.Q. 755, 889 n.664 (“typical public nuisance cases will be brought in state court”); Gwyn Goodson Timms, Statutorily Awarding Attorneys’ Fees in Environmental Nuisance Suits: Jump Starting the Public Watch Dog, 65 S. Cal. L. Rev. 1733, 1756 (1992) (“Public nuisance suits are usually brought in state court”). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 303

stability that would be lacking if public officials were allowed to switch back and forth among court systems in bringing public actions.42 For better or worse, however, it is almost certainly too late in the day to advance any general rule that public nuisance actions, like criminal actions, must always be brought in the courts of the sovereign that institutes the action. Beginning with Missouri v Illinois43 in 1901, the Supreme Court has on numerous occasions permitted state AGs to bring public nuisance actions directly in the Supreme Court under its original jurisdiction. These cases have typically involved public nuisances with transboundary effects, often some form of pollution emanating in State A that is alleged to cause harm in State B.44 The Court has analogized these suits to disputes between independent sovereign nations.45 Independent sovereign nations faced with such a transboundary public nuisance would have recourse to diplomacy or perhaps war to resolve their dispute. These remedies being foreclosed under the Constitution, the Court has said, the alternative is an original suit in the Supreme Court.46 The Court has more recently sought to restate the principle of the transboundary nuisance cases by referring to the standing of states to sue as parens patriae in federal court.47 Parens patriae, the

42. This is similar to a justification given for having all cases of a specific type brought before specialized courts set up to deal with those cases. See Richard B. Saphire, Shoring Up Article III: Legislative Court Doctrine in the Post CFTC v. Schor Era, 68 B.U.L. Rev. 85, 123 n.237 (1988) (“Congress has created specialized article III tribunals, like the Court of Claims, the Court of Customs and Patent Appeals, and the Court of International Trade, in part because of its concern for expertise.”). 43. 180 U.S. 208 (1901). 44. North Dakota v. Minnesota, 263 U.S. 365 (1923) (flooding); New York v. New Jersey, 256 U.S. 296 (1921) (water pollution); Georgia v. Tennessee Copper Co., 206 U.S. 230 (1907) (air pollution in Georgia caused by discharge of noxious gases from the defendant’s plant in Tennessee); Kansas v. Colorado, 185 U.S. 125 (1902) (diversion of water), Missouri v. Illinois, 180 U.S. 208 (1901) (sought to enjoin defendants from discharging sewage in such a way as to pollute the Mississippi river in Missouri). 45. Missouri v. Illinois, 180 U.S. 208, 241 (1901). 46.Id. at 241 (“If Missouri were an independent and sovereign state all must admit that she could seek a remedy by negotiation, and, that failing, by force. Diplomatic powers and the right to make war having been surrendered to the general government, it was to be expected that upon the latter would be devolved the duty of providing a remedy and that remedy, we think, is found in the constitutional provisions we are considering.”). 47. For an overview, see Kenneth Juan Figueroa, Note, Immigrants and the Civil Rights Regime: Parens Patriae Standing, Foreign Governments and Protection from Private Discrimination, 102 Colum. L. Rev. 408, 433-44 (2002). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

304 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Court has admitted, “is a judicial construct that does not lend itself to a simple or exact definition.”48 It does not refer to a State’s purely sovereign interests, such as the “power to create and enforce a legal code, both civil and criminal” or to demand “recognition from other sovereigns.”49 Nor does it refer to a State’s action as the legal representative of persons who are incapable of representing themselves.50 Nor does it refer to the State’s pursuit of “proprietary interests,” such as the ownership of property or the pursuit of business interests.51 Rather, it refers to the State’s assertion of “quasi-sovereign” interests.52 The Court has declined to give this vague term a precise definition, but has made clear that the State’s interest in protecting the health and wellbeing of its citizens from transboundary nuisances is the paradigm case of a quasi-sovereign interest that will support parens patriae standing. What the Court has not made clear is whether State AGs who bring parens patriae public nuisance suits in federal court are subject to the same standing rules as apply to citizen suits, or whether they are exempt from such limitations by analogy to public actions filed by public officers in the courts of their own sovereign. The Court’s leading decision on parens patrie standing seems to assume that such suits are subject to ordinary rules of standing, cautioning that such suits “must be sufficiently concrete to create an actual controversy between the State and the defendant” and must “survive the standing requirements of Article III.”53 But the issue has never been squarely decided. I suggest resolving the confusion over the standing requirements for parens patriae actions by adopting the following rule: Parens patriae suits should be exempt from the standing limitations that apply to citizen suits when public officers sue in the courts of their own sovereign, by analogy to the implied exemption from standing requirements for criminal prosecutions filed by public officers in their own courts. But when public officers bring parens patriae

48. Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 601 (1982). 49.Id. 50. As the Court has acknowledged, this was the common law definition of parens partiae. Id. at 600. 51.Id. at 601-02. 52.Id. 53.Id. at 602. Justice Brennan wrote a concurring opinion in Snapp in which he argued that “[a]t the very least, the prerogative of a State to bring suits in federal court should be commensurate with the ability of private organizations.” Id. at 611. Private organizations, of course, are subject to the standing rules that govern private citizen suits. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 305 actions in the courts of some other sovereign, they should be subject to the same Article III and prudential standing limitations that apply to suits by aggrieved citizens. This rule would seek to accommodate two principles otherwise in some tension with one another: first, the general design principle that public officers should ordinarily bring public actions in their own courts,54 and second, the widespread practice of allowing State AGs to sue as parens patriae in the federal courts, particularly when necessary to vindicate a State’s interest in protecting its citizens against transboundary pollution.55 The accommodation would mean, insofar as Article III is concerned, that the “judicial power” would be understood to extend to all public actions brought by authorized officers of the federal government, without regard to whether traditional standing limits are met. But the “judicial power” would extend to actions brought in federal court by state officials only if they satisfy the ordinary standing limitations that would apply to citizen suits. State officials could satisfy these limitations either by showing that the State itself has suffered some injury in fact from the challenged action, or by suing in a representational capacity and showing that the State’s citizens have suffered some injury in fact from the challenged action. This reconciliation has a neat and tidy quality to it, but encounters one rather substantial historical problem: There is no suggestion from the Supreme Court’s original jurisdiction cases adjudicating transboundary nuisance disputes – the paradigm for the modern parens patriae action – that the States bringing these suits were required to meet any particular standing burden in order to maintain the action.56 One could attempt to distinguish these cases on the grounds that today’s elaborate standing doctrine, requiring injury in fact, causation, redressability and so forth, is a

54. Missouri v. Illinois, 180 U.S. 208, 232 (1901) (“The rule that the courts of no country execute the penal laws of another applies not only to prosecutions and sentences for crimes and misdemeanors, but to all suits in favor of the state for the recovery of pecuniary penalties for any violation of statutes for the protection of its revenue, or other municipal laws, and to all judgments for such penalties.”). 55.See Kenneth Juan Figueroa, Note, Immigrants and the Civil Rights Regime: Parens Patriae Standing, Foreign Governments and the Protection from Private Discrimination, 102 Colum. L. Rev. 408, 433-44 (2002). 56.See North Dakota v. Minnesota, 263 U.S. 365 (1923); Wyoming v. Colorado, 259 U.S. 419 (1922); New York v. New Jersey, 256 U.S. 296 (1921); Kansas v. Colorado, 206 U.S. 46 (1907); Georgia v. Tennessee Copper Co., 206 U.S. 230 (1907); Kansas v. Colorado, 185 U.S. 125 (1902); Missouri v. Illinois, 180 U.S. 208 (1901). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

306 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 relatively recent development that postdates the decisions in these transboundary cases. Moreover, it is quite likely that if in fact one were to apply modern standing requirements to these transboundary suits, the States would have been able to establish standing in each of these cases. Still, the absence of any discussion in these cases that even sounds like the Court was considering a standing requirement57 makes it substantially more difficult to maintain that traditional standing notions should be turned on or off depending on whether public officers are suing in the courts of their own sovereign. If my reconciliation of the cases is nevertheless accepted, it would mean that the State AGs bringing Connecticut v. American Electric Power Co. would be subject to the same standing limitations that apply to private citizens suing in federal court. As the prior discussion suggests, that would mean their action runs a high degree of risk of being dismissed on standing grounds.

II. FEDERAL COMMON LAW

The second question I will consider is whether the AGs’ public nuisance claims can be brought under the federal common law of nuisance. Let me explain preliminarily why this issue is critical. The suit contains two counts, the first based on federal common law, the second on state common law. Federal common law and state common law are not cumulative causes of action, like pleading breach of contract and negligence in suit against a contractor. They are mutually exclusive. The public nuisance action is either governed by federal common law or by state common law, but not both. The Supreme Court said this explicitly in Milwaukee II, the leading case. The Court chastised Illinois (the plaintiff State) and the district court for saying that both federal and state nuisance law applied to the case and said: “If state law can be applied, there is no need for federal common law; if federal common law exists, it is because state law cannot be used.”58

57. Although the labels used in contemporary standing disputes is of recent origin, the concept that cases must be fit for judicial resolution is anything but new. See Thomas W. Merrill, Marbury v. Madison as the First Great Administrative Law Decision, 37 John Marshall L. Rev. 481, 489-92 (2004) (arguing that the first section of the Court’s opinion in Marbury v. Madison is devoted to what today we would call standing); Woolhander & Nelson, supra note 33. 58. City of Milwaukee v. Illinois, 451 U.S. 304, 314 n.7 (1981). This proposition is 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 307

The logic behind this is straightforward. “Federal common law” on any conception, applies when important federal interests would be frustrated by the application of state law.59 Federal common law is in effect a type of preemption of state law. When a court holds that a matter is governed by federal common law, state law is automatically preempted, and a federal rule of decision applies instead. Consequently, if the AG’s suit is governed by federal common law, their state law count is a nullity. However, if federal common law does not apply, because the federal common law has been displaced by the Clean Air Act,60 then the suit must be dismissed for want of jurisdiction. Jurisdiction over the federal common law count is based on the presence of a federal question – the federal common law. Jurisdiction over the state public nuisance count is based on supplemental jurisdiction. If the federal common law count is dismissed before trial, then there would no longer be any basis for jurisdiction over the state count. Both the Supreme Court and the Second Circuit have indicated that in these circumstances, the claim based on supplemental jurisdiction should be dismissed.61 Before getting into the details of the federal common law question, a little history is necessary to put this issue in context. As already noted, the Supreme Court from the turn of the twentieth century has adjudicated as part of its original jurisdiction suits brought by States challenging transboundary pollution. The first such case involved a suit by Missouri against Illinois for reversing

consistent with the later decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987), where the Court held that state nuisance law could be applied to transboundary water pollution. The action in International Paper was not brought by a sovereign state. Hence it would not fall within the original jurisdiction of the Supreme Court and would not have been subject to federal common law in the first place. Moreover, the holding that state nuisance law survives in the transboundary context was based on saving clauses in the Clean Water Act, preserving state nuisance actions from preemption. In effect, Congress, legislating in an area of exclusive federal competence, determined that the preservation of state common law was consistent with federal interests. The preservation of state common law here is thus analogous to a congressional determination overriding the dormant commerce clause and permitting state regulation of interstate commerce. See Prudential Ins Co. v. Benjamin, 328 U.S. 408, 426-27 (1946); Henry P. Monaghan, The Supreme Court, 1974 Term—Foreword: Constitutional Common Law, 89 Harv. L. Rev. 1, 3-10, 15-16 (1975). 59.See Merrill, supra note 37 (discussing conditions that legitimately justify creation of federal common law). 60. Clean Air Act, 42 U.S.C. §§ 7401-7671q (2005) 61. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988); Travelers Ins. Co. v. Keeling, 996 F.2d 1485, 1490 (2d Cir. 1993). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

308 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 the flow of the Chicago River and sending sewage down the Mississippi toward St. Louis.62 Other suits have involved air pollution along the Tennessee-Georgia border63 and garbage dumping and sewage dumping disputes between New York and New Jersey.64 The Supreme Court had to adopt some rule of decision to decide these cases. The Court presumed that it was inappropriate to adopt the law of either the source state or the affected state, since that would allow one of the litigants to adjust the rules so as to win the case.65 So the Court drew on the general law of nuisance without referring to the law of either state. Although the Court did not use the term federal common law, this was effectively what the Court fashioned and applied.66 In 1970, Illinois filed an original suit against Milwaukee, Wisconsin in the Supreme Court.67 Attorney General Scott sought an injunction against sewage overflows in Milwaukee, which were allegedly polluting the beaches and water supplies in Illinois.68 In a decision known as Milwaukee I, the Court confirmed that federal common law would govern such a suit.69 However, since this was not a State v. State suit where original jurisdiction is exclusive, but rather a State v. City suit where Supreme Court original jurisdiction is concurrent, the Court also decided that it would be better to have the action tried in the federal district court.70 So the Court remanded the case to be tried under the federal common law of nuisance.71 After an elaborate trial that imposed additional limits on

62. Missouri v. Illinois, 180 U.S. 208 (1901). 63. Georgia v. Tennessee Copper Co., 206 U.S. 230, 236-38 (1907). 64. New York v, New Jersey, 256 U.S. 296 (1921) (sewage discharged by New Jersey into upper New York Bay); New Jersey v. City of New York, 283 U.S. 473, 476-77 (1931) (garbage dumped by New York City outside of New York Harbor). 65.See Thomas W. Merrill, Golden Rules for Transboundary Pollution, 46 Duke L. J. 931, 933, 939-46 (1997). 66. The creation of federal common law in this context can be justified on the grounds of necessity. See Steven Smith, Courts, Creativity, and the Duty to Decide a Case, 1985 U. Ill. L. Rev. 573. The court has jurisdiction and must decide the dispute; Congress has supplied no cause of action; it would be improper to adopt the law or either of the litigating parties as a rule of decision; hence the court must make up a rule of decision for the case on its own. 67. Illinois v. City of Milwaukee, 406 U.S. 91, 99-108 (1972). 68.Id. at 93. 69.Id. at 99-100. 70.Id. at 93-98. 71.Id. at 108. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 309

Milwaukee sewage overflows,72 the case returned to the Supreme Court in 1981 and was reviewed again in a case called Milwaukee II.73 This time around, the Court held that the federal common law of water pollution had been displaced by comprehensive amendments to the Clean Water Act, adopted after the original suit was filed.74 In light of this history, three questions have to be resolved in deciding whether a federal common law cause of action exists in Connecticut v. American Electric Power: (1) Is a suit by States against sources in other States challenging the emission of greenhouse gases into the atmosphere the type of action that would be covered by federal common law, absent the Clean Air Act? (2) What is the standard for determining whether the Clean Air Act displaces federal common law? (3) Under this standard, would the federal common law be displaced in a suit challenging the emission of greenhouse gases?

A. Does Federal Common Law Apply? As to the first question – would the suit be governed by federal common law absent the Clean Air Act – I think the best answer is probably yes. Various arguments can be advanced for applying federal common law in transboundary pollution cases. The narrowest possible conception of the scope of federal common law in this context is what can be called the “original jurisdiction” theory. This theory posits that if the controversy is one that the Supreme Court could hear under its original jurisdiction, and if the Supreme Court would apply federal common law in such a case, then the action should be governed by federal common law whether it is adjudicated by the Supreme Court or by any other court, state or federal. The Supreme Court, as we have seen, applied a body of law we would now call federal common law in original actions brought by States challenging transboundary pollution.75 Once the Court determined that the cases were proper subjects for adjudication under its original jurisdiction, it had to apply some law. Congress presumably could legislate a standard to apply in such cases, but it

72. Illinois v. City of Milwaukee, 599 F.2d 151, 154-55 (7th Cir. 1979) (affirming in part the relief granted by the district court). 73. City of Milwaukee v. Illinois, 451 U.S. 304 (1981). 74.Id. 316-32. 75. See supra note 44. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

310 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 had not acted. The Court conceivably could adopt the law of one of the contesting States, but this would empower one the litigants to manipulate the rule of decision and so defeat the goal of impartial adjudication. Therefore, out of necessity, the Court was forced to apply federal common law. If the Supreme Court would apply federal common law in resolving such a case under its original jurisdiction, the argument would go, then the lower courts should also apply federal common law when asked to resolve such a case. This is to avoid the injustice (not to mention temptation to forum shopping) of allowing the law that applies to the controversy to vary in accordance with the forum that decides it.76 Federal common law should therefore apply whether the Court declines to exercise original jurisdiction and remands to a district court, or the parties do not ask the Court to exercise jurisdiction and go straight to district court. Under this original jurisdiction theory, if the Clean Air Act had never been adopted, federal common law would apply to the global warming suit. The Supreme Court has original but not exclusive jurisdiction over suits between a State and citizens of another State.77 Thus, if the Clean Air Act had never been enacted, Connecticut et al. could have sought leave to file their action as an original suit in the Supreme Court. Had they done so, federal common law would presumably apply. Given that federal common law would have applied to such a suit, the same law should apply to the action when brought in federal district court. There are other, broader conceptions of when federal common law of nuisance should apply. Some have argued that it should apply to any action where the source of pollution is in one state and the affected party in another.78 Others have argued that it should apply to any pollution of a resource that has important interstate or federal implications.79 These conceptions of the scope of the federal common law of nuisance are more problematic than the original jurisdiction theory. But it is unnecessary to consider them, since the instant dispute appears to qualify as one that would

76. On the need to apply the same law in private suits as in original jurisdiction suits, see Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 110 (1938); Cissna v. Tennessee, 246 U.S. 289, 295 (1918). 77. 28 U.S.C. § 1251(b)(3) (2005). 78. See, e.g., Committee for Consideration of Jones Falls Sewage System v. Train 539 F.2d 1006 (4th Cir. 1976). 79. See, e.g., Illinois v. Outboard Marine Corp., 680 F.2d 473 (7th Cir. 1982). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 311 be governed by federal common law under the narrowest conception of the scope of that law.

B. The Standard for Determining Displacement of Federal Common Law The Supreme Court has never addressed the question whether the federal common law of nuisance has been displaced in the context of interstate air pollution. The lower court decisions that have considered the question fairly uniformly conclude that the federal common law has been displaced in this context.80 Nevertheless, the issue is not foreclosed. The Second Circuit has held that the federal common law is displaced to the extent the Clean Air Act imposes a regulatory standard on a particular source and the plaintiff seeks to apply a more stringent standard.81 But the Second Circuit has left open the question whether the federal common law might survive with respect to a type of pollution not regulated under the Act.82 Unfortunately, Milwaukee II is ambiguous as to what the standard for displacement of federal common law should be. The dispute boils down to two different interpretations of that decision: did it adopt a “field displacement” theory, or did it adopt a “conflict displacement” theory?83 The defendants will argue that Milwaukee II adopts a theory of field displacement. On this reading, the question is whether Congress has legislated comprehensively on the subject of air pollution, with the result that it can be said that the federal legislation “occupies the field.” The AGs will want to argue that Milwaukee II endorses a conflict displacement theory. Here the relevant question would be whether Congress has provided an effective regulatory mechanism for dealing with greenhouse gas emissions, which mechanism provides a distinctly different remedy than would be available under the federal

80. See, e.g., United States v. Kin-Buc, Inc., 532 F. Supp. 699 (D.N.J. 1982) (holding that the Clean Air Act displaces federal common law nuisance claims arising from air pollution associated with operation of a waste disposal site); Reeger v. Mill Service, Inc., 593 F. Supp. 360 (D.C. Pa. 1984) (holding that the Clean Air Act displaces federal common law nuisance claims arising from air pollution related to operation of hazardous waste treatment facility). 81. New England Legal Foundation v. Costle, 666 F. 2d 30, 32-33 (2d Cir. 1981). 82.Id. at 32. 83. These of course are alternative standards for determining when federal law prrempts state law. I draw upon them here by analogy, in seeking to determine the standard for determining when federal statutory law displaces federal common law. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

312 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

common law.84 There is language in Milwaukee II to support either reading. On the one hand, the Court repeatedly stressed the comprehensive nature of the Clean Water Act amendments adopted after Milwaukee I, and suggested that this new, more comprehensive version of the Act occupied the field of federal regulation of interstate pollution, to the exclusion of the common law.85 On the other hand, there are passages that stress that the new legislation specifically addressed the problem that the federal common law remedy adopted by the lower courts was designed to rectify – sewage overflows from a point source of water pollution subject to the federal permitting process – implying that the federal common law remedy was displaced because it conflicted with these statutory mechanisms.86

84. A third approach, which straddles or obfuscates the distinction between field and conflict displacement, would be to ask whether Congress has “spoken to” to the specific subject of global climate change. Through diligent research one can discover that Congress has from time to time authorized the gathering of information about climate change, or studies of climate change. See, e.g., 42 U.S.C. § 7403(g) (authorizing EPA to develop “nonregulatory strategies” for several substances including CO2); 15 U.S.C. § 2901 (establishing “national climate program” to improve understanding of global warming); 15 U.S.C. § § 2931-38 (establishing 10-year research program for global climate issues). These nonregulatory responses, in my view, neither establish that Congress has occupied the field nor that Congress has provided an alternative remedial mechanism for dealing with global warming. They are arguably relevant in determining whether Congress has an “intent” to permit CO2 to be regulated as a criteria pollutant under the Clean Air Act. Cf. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000) (reviewing multiple nonregulatory enactments and information disclosure requirements to determine whether Congress intended to give FDA authority to regulate tobacco products as a “drug” or “device”). But they should not be used as a basis for determining whether federal common law has been displaced. 85. For example: “Congress . . . has occupied the field through the establishment of a comprehensive regulatory program supervised by an expert administrative agency.” City of Milwaukee v. Illinois, 451 U.S. 304, 317 (1981). “Congress’ intent in enacting the Amendments was clearly to establish an all-encompassing program of water pollution regulation. . . . The establishment of such a self-consciously comprehensive program by Congress, which certainly did not exist when Illinois v. Milwaukee was decided, strongly suggests that there is no room for courts to attempt to improve on that program with federal common law.” Id. at 318-19. 86. For example: “[T]he problem of effluent limitations has been thoroughly addressed through the administrative scheme established by Congress, as contemplated by Congress. This being so there is no basis for a federal court to impose more stringent limitations than those imposed under the regulatory regime by reference to federal common law, as the District Court did in this case. . . .[The sewage overflows] are point source discharges and, under the Act, are prohibited unless subject to a duly issued permit.” Id. at 320. See also id. at 326 (stating that Federal Courts may not use federal common law to impose more stringent standards “after permits have already been issued and permittees have been planning and 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 313

Each of the two theories has a plausible rationale. The rationale for field displacement might be that when Congress legislates comprehensively, its silence on an issue should be construed to mean that it left no gap to be filled with federal common law. Silence in the midst of comprehensiveness instead means that Congress intended to leave a subject unregulated, at least for the time being. Thus, absent some affirmative signal from Congress that courts should fill gaps with federal common law, comprehensive legislation should not be supplemented by federal common law. The rationale for the conflict displacement theory might be that when Congress legislates against the background understanding that federal common law applies to certain kinds of disputes, and if Congress does not specifically address that kind of dispute, it should be presumed that Congress intended the federal common law remedy to remain available. Public nuisance suits brought by AGs challenging transboundary air pollution were understood to be subject to federal common law before the Clean Air Act was adopted.87 Hence, the failure to regulate a particular type of transboundary pollution in the Air Act should be construed to mean Congress would have wanted federal common law to continue to apply. Which reading of Milwaukee II is better – field displacement or conflict displacement? This is a tough call, but for three reasons I would incline toward the field displacement reading being the one that courts are more likely to adopt. First, Milwaukee II emphasized that the presumption against preemption that applies when a court confronts a question about whether state law is preempted does not apply when the question is whether federal common law has been displaced by congressional legislation.88 Instead, something of the opposite presumption is appropriate: “‘[W]e start with the assumption’ that it is for Congress, not federal courts, to articulate the appropriate standards to be applied as a matter of federal law.”89 This shift in the default rule is justified by the fact that preemption of state law raises an issue of federalism: whether any branch of the federal operating in reliance on them.”). 87.See cases cited supra note 44. 88. Milwaukee II, 451 U.S. at 316. 89.Id. at 317. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

314 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 government is justified in supplanting state authority in a particular area. Displacement of federal common law raises the same issues of federalism, but also a separation of powers question, namely, whether the Article III courts are permitted to establish rules of decision in a particular area when Congress has not acted. Displacement therefore presents issues of constitutional structure that go beyond the issues implicated by preemption, and warrant a special presumption against judicial lawmaking.90 The field displacement theory is more consistent with this presumption against judicial lawmaking than is conflict displacement. Second, shortly after Milwaukee II, in the Sea Clammers decision, the Court restated its holding as follows: “[T]he federal common law of nuisance in the area of water pollution is entirely preempted by the more comprehensive scope of the [Federal Water Pollution Control Act].”91 This is just a line in a Supreme Court opinion. But lower courts are likely to pay attention to it. It sounds more like field displacement than conflict displacement to me. Third, the recent history of the Clean Air Act suggests that, insofar as multi-jurisdictional air pollution problems are concerned, some type of decisive congressional intervention is required before effective regulatory action will be taken against the problem. In other words, congressional silence means, as a practical matter, that the problem remains unregulated. Three episodes in particular are consistent with this generalization. The first involves acid rain. Acid rain was the great transboundary pollution controversy of the 1970s. Northeastern states were pitted against Midwestern states. Efforts were made to get EPA to list acid rain as a criteria pollutant, and to restrict emissions of precursor gases under the transboundary provisions of the Clean Air Act.92 All these efforts failed, largely because of EPA’s

90. The Constitution erects barriers to lawmaking by Congress in Article I, 7, which are bypassed whenever federal courts take it upon themselves to make law based on a claim of inherent authority. A rule permitting federal common law to coexist with enacted law would therefore present the prospect of “too much law” relative to the amount of federal lawmaking contemplated by the constitutional design. For further discussion, see Thomas W. Merrill, Rethinking Article I, Section 1: From Nondelegation to Exclusive Delegation, 104 Colum. L. Rev. 2097, 2145-47 (2004). 91. Middlesex County Sewerage Auth. v. Nat’l Sea Clammers Ass’n, 453 U.S. 1, 22 (1981) (emphasis added). 92. See, e.g., Thomas v. New York, 613 F.Supp. 1472 (D.D.C. 1985), rev’d, 802 F.2d 1443 (decision - which would have required EPA to issue SIP revision notices pursuant to Clean Air Act § 115, 42 U.S.C. § 7415, to reduce acid rain in Canada - reversed on procedural 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 315 reluctance to take on an issue that intensely divided the States without clear congressional guidance.93 Congress finally addressed the problem with a comprehensive new regulatory program in the 1990 Amendments – a program that was superimposed on top of the existing Clean Air Act mechanisms.94 The second episode involves depletion of the ozone layer of the atmosphere by CFCs and halogen gases. This was a truly global issue, since all agreed that the ozone layer was being attacked by gases emitted from sources all around the world. As with acid rain, the solution was not found by employing the existing provisions of the Clean Air Act. Instead, the United States entered into the Montreal Protocols,95 which called for rapid phaseout of CFCs and halogens, and Congress implemented the agreement by enacting a new regulatory program, again superimposed on the existing Clean Air Act mechanisms, to achieve this phaseout among domestic American sources.96 The third involves ground level ozone. A number of States along the eastern seaboard have complained bitterly for years that their ability to comply with National Ambient Air Quality Standards has been comprised by ground level ozone wafting in from upwind states to the west.97 Traditional mechanisms designed to provide for consultation over interstate effects in drafting State Implementations Plans did no good.98 Litigation did no good. Then, in the 1990 amendments, Congress specifically ordered that an interstate ozone transport region among the affected states be grounds). 93. See J. Wallace Malley, Acid Rain: A Decade of Footdragging May Be coming to an End, 91 W. VA. L. REV. 817, 823-37 (1989) (discussing EPA reluctance to act on acid rain issue and efforts to use Clean Air Act to control acid rain). 94. Clean Air Act Amendments of 1990, Pub. L. No. 101-549, §§ 401-416, 104 Stat. 2468 (1990) (codified as 42 U.S.C. §§ 7651-7651o (2005)). 95. Montreal Protocol on Substances that Deplete the Ozone Layer (Sept. 16, 1987), 26 I.L.M. 1541, 1550-51 (entered into force Jan. 1, 1989). 96. See 42 U.S.C. § 7671. 97. See, e.g., State of New Jersey, Dept. of Envtl. Prot. v. Environmental Protection Agency, 626 F.2d 1038, 1041-1042, (D.C. Cir. 1980) (New Jersey, Maine, Connecticut, Massachusetts, New York, Rhode Island, Vermont, the District of Columbia, and the City of New York challenged ozone non-attainment designations). 98.See New York v. EPA, 852 F.2d 574, 577-79 (approving EPA denial of eastern states’ Clean Air Act §126(b) petitions which claimed that out of state pollution sources were preventing NAAQS attainment; also approving EPA’s narrow construction of §126(b)). See also Geoffrey Wilcox, New England and the Challenge of Interstate Ozone Pollution under the Clean Air Act of 1990, 24 B. C. Envtl. Aff. L. Rev. 1, 13-26 (discussing the failure to control interstate ozone pollution under the 1970 and 1977 Clean Air Acts). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

316 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 established, and set deadlines for action. 99 Only then did we begin to see some movement toward tackling the problem of transboundary ozone. In short, the recent historical experience is that nothing is likely to get done about significant multijurisdictional air pollution problems until Congress directs that something be done about it. It does not follow, of course, that prior congressional action is a normative precondition of such action. One cannot simply derive an “ought” from an “is.” But my guess is that courts will be strongly motivated by pragmatics in trying to determine whether they should assume the role of first mover in the campaign against global warming. Recent history suggests that a congressional blessing is required before effective regulation of multijurisdictional pollution occurs. If courts understand this, they will naturally be drawn to the field displacement theory, which requires that Congress, rather than the courts, play the role of first mover in controversial multijurisdictional disputes.

C. Application of the Displacement Standard to Climate Change How should the displacement question be decided under these competing readings of Milwaukee II? If the field displacement theory is the better reading, as I have tentatively argued that it is, then I think the federal common law count in the instant suit is displaced. There is some suggestion in the case law that the Clean Air Act is less “comprehensive” than the Clean Water Act. Specifically, Judge Reinhardt, in a dissenting opinion in the Ninth Circuit, has opined that the Clean Air Act does not comprehensively regulate air pollution the same way the Clean Water Act does, because the Air Act does not impose federal emissions controls on all stationary sources of air pollution.100 Judge Reinhardt sometimes gets it right,101 but not this time. It is impossible to say that the Clean Air Act is less comprehensive than

99. Clean Air Act Amendments of 1990, Pub. L. No. 101-549, § 184, 104 Stat. 2448 (1990) (codified as 42 U.S.C. §7511c (2005)). 100. Nat’l Audubon Soc’y v. Dep’t of Water, 869 F.2d 1196, 1212-14 (9th Cir. 1989) (Reinhardt dissenting). 101. Although he is perhaps the judge most frequently reversed by the Supreme Court. REID ALAN COX, T. MARSHALL MANSON, SAM BATKINS, CENTER FOR INDIVIDUAL FREEDOM FOUNDATION, SUPREME SUPERVISION REQUIRED 14-16 (2004) (reporting that 53 decisions Judge Reinhardt participated in were reversed between 1994 and 2004), available at http://www.center forindividualfreedom.org/legal/ninth_study/ninth_circuit_study.pdf. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 317 the Water Act based on pages of legislation or volumes of regulations or economic activity affected or dollars of compliance costs.102 To be sure, the two acts have different regulatory strategies – the Clean Air Act focusing on air quality and the Clean Water Act on point sources – but I fail to see how this makes one “comprehensive” and the other not. Moreover, even if we grant the dubious premise that federal regulation of point sources is required for comprehensiveness, the Clean Air Act would have to be regarded as comprehensive, at least as applied to the sources operated by the defendants in the case under consideration. Under the 1970 version of the Clean Air Act, all these sources operate under permits issued by state agencies under federal guidelines, and the state plans are reviewed and approved by EPA.103 After the 1977 amendments, these sources must comply with federal new source review standards if they qualify as new or modified sources,104 and existing plants must comply with Reasonably Available Control Technology standards if they operate in areas out of compliance with National Ambient Air Standards.105 After the 1990 amendments, these sources must obtain federal permits authorizing emissions of SO2 and NOx if they are regulated under the Acid Rain title of the Act.106 So if field displacement is the test, the Clean Air Act occupies the field. On the other hand, if the conflict displacement reading of Milwaukee II is correct, then I think the federal common law count in the instant case is most likely not displaced. The superficial way of looking at the displacement question from this perspective would be as follows: The Clean Air Act does not mandate regulation of greenhouse gases; EPA has not elected to regulate greenhouse gases; therefore, there is no conflict between the Act and a federal district court judgment applying the federal common

102. The EPA estimates that Clean Air Act compliance costs were $523 billion between 1970 and 1990. BENEFITS AND COSTS OF THE CLEAN AIR ACT AND COSTS OF THE CLEAN AIR ACT, EPA, available at http://www.EPA.gov/air/sect812/design.html. A report commissioned by the EPA estimates the Clean Water Act compliance costs were between $77.6-96.1 billion for 1992-1997. GEORGE L. VAN HOUTVEN, SMITA B. BRUNNERMEIER, MARK C. BUCKLEY, RESEARCH TRIANGLE INSTITUTE, A RERTROSPECTIVE ASSESSMENT OF THE COSTS OF THE CLEAN WATER ACT 1972-1997 7-5 to 7-9 (Oct. 2000), available at www.epa.gov/ost/economics/costs.pdf. 103. See 42 U.S.C. § 7410 (2005). 104. See 42 U.S.C. § 7411 (2005). 105. 42 U.S.C. § 7502(c). 106. 42 U.S.C. §7651g. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

318 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 law of nuisance to order abatement of greenhouse gases. There is a possible response to this. The States might have a remedy against greenhouse gases under the Clean Air Act. They could petition EPA for a rulemaking to list CO2 as an air pollutant that causes or contributes “to air pollution which may reasonably be anticipated to endanger public health or welfare” under Section 108 of the Act.107 If EPA agrees, and lists CO2 under Section 108, then EPA would have a nondiscretionary duty to issue national ambient air quality standards for CO2 under Section 109.108 This in turn would require all 50 States and the federal government to revise their implementation plans to force sources to reduce emissions of CO2.109 Among the sources so affected would be the plants operated by the defendants in this case. So it would appear that the Act contains a mechanism that addresses greenhouse gases after all – at least potentially.110 Unfortunately for the defendants – and happily for the AGs – EPA may have foreclosed this line of argument. A legal opinion issued by EPA General Counsel Robert E. Fabricant on August 28, 2003, concludes that EPA does not have authority to regulate CO2 under the Clean Air Act because CO2 does not fall within the Act’s definition of an air pollutant.111 This legal opinion may be wrong.112 The Act is written so broadly that just about anything, including water vapor, is an air pollutant.113 But, the Fabricant Memo obviously allows the AGs to argue that any attempt to petition EPA

107. 42 U.S.C. § 7408. 108. 42 U.S.C. § 7409. 109. 42 U.S.C. § 7410. 110. Many of the same States that are plaintiffs in Connecticut v. American Electric Power Co. petitioned EPA to institute a rulemaking listing CO2 as a pollutant under the Clean Air Act. EPA rejected the petition. EPA, Notice of Denial of Petition for Rulemaking, 68 Fed. Reg. 52,922 (Sept. 8, 2003). The matter is now pending on judicial review. See Press Release, Office of New York Attorney General Eliot Spitzer, States, Cities, Environmental Groups Sue Bush Administration on Global Warming, Challenge EPA’s Refusal to Reduce Greenhouse Gas Pollution (Oct. 23, 2003), available at http://www.oag.state.ny.us/press/2003/oct/oct23a_03.html. 111. Memorandum from Robert E. Fabricant, EPA General Counsel, to Marianne L. Horinko, EPA Acting Administrator (Aug. 28, 2003), available at http://www.epa.gov/airlinks/co2 petitiongcmemo8-28.pdf. See also EPA, Notice of Denial of Petition for Rulemaking, 68 Fed. Reg. 52,922 (Sept. 8, 2003) (adopting Fabricant’s reasoning). 112.See Nicholle Winters, Note, Carbon Dioxide: A Pollutant in the Air, But is the EPA Correct that it is Not an “Air Pollutant”?, 104 Colum. L. Rev. 1996 (2004). 113.See 42 U.S.C. § 7602 (defining “air pollutant” in part to mean any “substance or matter which is emitted into or otherwise enters the ambient air.”). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 319 to list CO2 as a criteria pollutant would be futile, because the agency would be obliged to reject such a petition, given the opinion of its general counsel that CO2 is not an air pollutant. With the listing option blocked, the AGs truly have no remedy under the Clean Air Act. Hence there is no conflict between a federal common law judgment and the Air Act. Hence the federal common law is not displaced under a conflict displacement theory. But let us backtrack and summarize. I have suggested three principle conclusions: (1) federal common law would govern this suit but for the Clean Air Act; (2) the most likely standard for determining whether the Clean Air Act has displaced the federal common law is whether it occupies the field of air pollution regulation; (3) under this standard the Air Act is sufficiently comprehensive that a public nuisance suit based on emissions of gases from regulated stationary sources should be deemed to be displaced. So, as to my second question – whether the federal common law of nuisance applies in Connecticut v. American Electric Power Co.—the answer most likely is that it does not. If I am right, then the current suit should be dismissed, remitting the AGs to file their action in one or more state courts under state public nuisance law. Where, by the way, Supreme Court authority suggests they will have to apply the public nuisance law of the source state – not their own public nuisance law.114

III. FOREIGN POLICY PREEMPTION

Global warming is a phenomenon that potentially affects all nations. It will undoubtedly require concerted international effort if an effective solution is to be found. Such an international solution will require strenuous diplomatic efforts – the negotiation of treaties, creation of multilateral institutions, development of enforcement mechanisms. The third major issue raised by the AGs’ public nuisance action is whether such litigation will interfere with efforts by the federal government to forge a diplomatic solution to global warming, requiring that the suit be dismissed as inconsistent with the exclusive assignment of foreign policy functions to the political branches of the federal government.

114. International Paper Co. v. Ouellette, 479 U.S. 481, 497-98 (1987) (finding that, while Clean Water Act precluded Vermont from bringing suit under Vermont nuisance law, the CWA saving clause preserves claims pursuant to the nuisance law of the source state). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

320 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

No claim can be made that global warming litigation is prohibited by any treaty to which the United States is a party. Nor can it be claimed that the suit is barred by an executive agreement or even a statute of the United States.115 Instead, the claim must be that the suit is precluded by the theory of “dormant foreign affairs preemption”116 – the notion that certain types of litigation are foreclosed because they interfere with the conduct of foreign policy by the President of the United States. The argument, in capsule form, proceeds as follows. The United States has ratified the United Nations Framework Convention on Climate Change,117 in which it has committed to cooperate with other nations in seeking to develop collective solutions to global climate change. The United States subsequently helped negotiate, but then withdrew from, the Kyoto Protocol to this Convention.118 The principal ground for the withdrawal was concern that the Kyoto Protocol called for disproportionate reductions in greenhouse gas emissions from developed countries such as the United States, while demanding little or no sacrifice by developing countries.119 The stated foreign policy of the President, in the wake of the withdrawal from the Kyoto Protocol, is that the United States is seeking to develop alternative collective solutions to global warming that will distribute the burdens of collective action in a manner that is more equitable than Kyoto.120

115.See David R. Hodas, State Law Responses to Global Warming: Is It Constitutional to Think Globally and Act Locally?, 21 Pace Envtl. L. Rev. 53, 79 (2003). 116. American Insurance Assn. v. Garamendi, 539 U.S. 396, 411 (2003) (Ginsburg, J., dissenting). 117. United Nations Framework Convention on Climate Change, May 9, 1992, 31 I.L.M. 849 (1992). 118. Kyoto Protocol to the United Nations Framework Convention on Climate Change, Dec. 10, 1997, 37 I.L.M. 32. See also, Text of March 13, 2001 Letter from President Bush to Senators Hagel, Helms, Craig, and Roberts available at http://www.whitehouse.gov/news/releases/2001/03/ 20010314.html (last visited Mar. 30, 2005). 119. Text of March 13, 2001 Letter from President Bush to Senators Hagel, Helms, Craig, and Roberts available at http://www.whitehouse.gov/news/releases/2001/03/20010314.html (last visited Mar. 30, 2005) (“I oppose the Kyoto Protocol because it exempts 80 percent of the world, including major population centers such as China and India, from compliance, and would cause serious harm to the U.S. economy.”). 120. See generally, President Bush Discusses Global Climate Change June 11, 2001 available at http://www.whitehouse.gov/news/releases/2001/06/20010611-2.html (last visited Mar. 30, 2001) (“I am today committing the United States of America to work within the United Nations framework and elsewhere to develop with our friends and allies and nations throughout the world an effective and science-based response to the issue of global 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 321

In this context, the argument would run, any judgment by a United States court requiring that American firms reduce emissions of greenhouse gases would interfere with ongoing efforts by the President to negotiate a more equitable international framework for dealing with global warming. Such a judgment would require a unilateral reduction in emissions by the United States, and would therefore eliminate a “bargaining chip” that the United States can employ in negotiations with other nations. Moreover, such a judgment could embarrass the President by calling into question his position that the emissions reductions required by Kyoto represent a disproportionate burden that is unacceptable to the people of the United States. The argument that litigation can be preempted if it would undermine the position of the United States in international negotiations is not far-fetched. There are some sweeping statements in Supreme Court opinions to the effect that the federal government has exclusive authority to determine the foreign policy of the United States, and that the President “is the sole organ of the nation in its external relations.”121 This exclusivity unquestionably creates a zone of dormant foreign policy preemption that limits the range of activity of States AGs. There is no question, for example, that the State AGs would be prohibited from directly entering into negotiations with foreign nations in an attempt to establish reciprocal greenhouse gas emissions limitations.122 The leading decision that establishes the idea of dormant foreign affairs preemption is Zschernig v. Miller.123 The case involved an Oregon statute that conditioned the right of an alien to inherit property upon a finding by Oregon courts that the alien’s own

warming.”). 121. United States v. Curtiss-Wright Corp., 299 U.S. 304, 319 (1936), quoting John Marshall’s statement to the House of Representatives of March 7, 1800. See also Oetjen v. Central Leather Co., 246 U.S. 297, 302, 38 S.Ct. 309, 311 (1918) (“The conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative—’the political’—departments of the government, and the propriety of what may be done in the exercise of this political power is not subject to judicial inquiry or decision.”). 122. Such an effort might violate the Logan Act, adopted in 1799, 18 U.S.C. § 953. The Act prohibits any citizen of the United States, without authority from the United States, from entering into correspondence or intercourse with any foreign government “with intent to influence the measures of conduct of any foreign government. . .in relation to any disputes or controversies with the United States.” 123. 389 U.S. 429 (1968). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

322 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 country would grant equivalent rights to American citizens.124 The Court concluded that the statute had been applied so as to affect international relations “in a persistent and subtle way.”125 Specifically, Oregon courts had engaged in wide ranging factual inquiries into the behavior of government in foreign nations, including whether aliens under their law have enforceable rights, whether the so-called ‘rights’ are merely dispensations turning upon the whim or caprice of government officials, whether the representation of consuls, ambassadors, and other representatives of foreign nations is credible or made in good faith, whether there is in the actual administration in the particular foreign system of law any element of confiscation.126 The Court concluded that the purpose of these inquiries was to serve as an inducement to foreign nations to change their policies to conform more closely to a particular model of government. In effect, the Oregon courts were engaging in the conduct of foreign policy, which was entrusted solely to the federal government, and hence was preempted. The forbidden judicial inquiry in Zschernig is distinguishable from alleged interference posed by the global warming suit in terms of whose behavior the court is being asked to scrutinize. In Zschernig, state courts scrutinized the behavior of foreign actors, hoping to influence the behavior of foreign regimes. In the global warming suit, in contrast, the court is being asked to scrutinize the behavior of domestic American power generators. There is no attempt to affect the behavior of foreign regimes. The defendants will argue, however, that this is a distinction without a difference, because the global warming suit, if successful, would take away bargaining chips from the President in any future negotiation with foreign regimes over global warming. The notion that States may not impair foreign policy bargaining chips has been endorsed by the Supreme Court in two recent cases. In Crosby v. National Foreign Trade Council,127 the Court held that a Massachusetts statute which sought to cut off state purchases from firms doing business in Burma was preempted. Among the reasons cited in support of this conclusion was that the Massachusetts statute

124.Id. at 430. 125.Id. at 440. 126.Id. at 434. 127. 530 U.S. 363 (2000). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 323 reduced the value of the “bargaining chip[s]” the President had to offer in dealing with Burma under a federal program of economic sanctions.128 The fact that the state statute and the federal program shared the same goal did not preserve the state law from preemption, because the state statute interfered with the federal calibration “about the right degree of pressure to deploy.”129 As the Court observed, “the President’s maximum power to persuade rests on his capacity to bargain for the benefits of access to the entire national economy without exception for enclaves fenced off willy- nilly by inconsistent political tactics.”130 More recently, in American Insurance Assn. v. Garamendi,131 the Court again turned to the theme of interference with foreign policy bargaining chips. At issue was a California statute that required insurance companies doing business in that State to disclose a list of policies previously issued by affiliated companies to holocaust survivors.132 The executive branch objected to the statute as interfering with its efforts under executive agreements with European governments to establish special funds for payment of insurance claims to holocaust survivors.133 The Court held that the California statute was preempted, noting that under that law, “the President has less to offer and less economic and diplomatic leverage as a consequence.”134 As in Crosby, the statute was “an obstacle to the success of the National government’s chosen ‘calibration of force’ in dealing with the Europeans using a voluntary approach.” 135 Crosby and Garamendi provide the defendants with significant ammunition for a dormant foreign affairs preemption argument. Read for all they are worth, these decisions seem to say that when a matter is under active negotiation between the United States and one or more foreign nations, actions by individual States that would have the effect of reducing the bargaining leverage of the United States are preempted, because they interfere with the ability of the Nation to speak with one voice in matters of foreign affairs.

128.Id. at 377. 129.Id. at 380. 130.Id. at 381. 131. 539 U.S. 396 (2003). 132.Id. at 401. 133.Id. at 405-06. 134.Id. at 424 (internal quotation marks and citation omitted). 135.Id. at 425. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

324 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

The question then is whether there is any basis to conclude that the bargaining chip theory should not apply in the context of the global warming dispute. Three bases for distinction are likely to be advanced. First, the AGs can argue that the bargaining chip theory of Crosby and Garamendi rests on traditional preemption principles rather than dormant foreign policy preemption ala Zschernig. With respect to Crosby, this is clearly correct. Crosby rests on traditional statutory preemption grounds. Congress had enacted a statute providing for federal economic sanctions against Burma shortly after Massachusetts passed its legislation,136 and the Court held that the Massachusetts statute was preempted by this express federal enactment.137 The Court therefore did not reach the Zschernig question.138 In Garamendi, there was no federal legislation on which to hang a traditional preemption argument.139 Probably for this reason, the Court did invoke Zschernig as a source of authority for its decision. Nevertheless, the opinion shied away from characterizing its decision as resting on dormant foreign affairs preemption. Instead, it focused on the perceived conflicts between the state statute and specific federal executive agreements,140 suggesting that the state law was preempted by the executive agreements,141 not because of Zschernig’s dormant preemption thesis.142 The AGs can therefore argue that the bargaining chip argument applies only to cases involving traditional conflict

136. Crosby v. National Foreign Trade Council, 530 U.S. 363, 368 (2000). 137.Id. at 374 (“the state Act presents a sufficient obstacle to the full accomplishment of Congress’s objectives under the federal Act to find it preempted.”). 138.Id. at 374 (“Because our conclusion that the state Act conflicts with federal law is sufficient to affirm the judgment below, we decline to speak to field preemption as a separate issue . . . or the dormant Foreign Commerce Clause.”). 139. American Insurance Assn. v. Garamendi, 539 U.S. 396, 424 n.14 (2003). 140.Id. at 413 (“The principal argument for preemption made by petitioners and the United States as amicus curiae is that HVIRA interferes with foreign policy of the Executive Branch, as expressed principally in the executive agreements with Germany, Austria, and France.”). 141.Id. at 416 (“valid executive agreements are fit to preempt state law”); Id. at 417 (“claim of preemption [left] to rest on asserted interference with the foreign policy those [executive] agreements embody.”). 142.Id. at 419–20 (“It is a fair question whether respect for the executive foreign relations power requires a categorical choice between the contrasting theories of field and conflict preemption evident in the Zschernig opinions, but the question requires no answer here. For even on Justice Harlan’s view, the likelihood that state legislation will produce something more than incidental effect in conflict with express foreign policy of the National Government would require preemption of the state law.”) . 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 325 preemption by specific federal legislation, treaties, or executive orders, and does not extend to pure Zschernig preemption. Although the argument is technically consistent with the Court’s decisions, it is doubtful whether it will succeed. The Court’s recent foreign policy preemption cases seem less concerned with the specific legal authority for preemption than with the general proposition that States should not interfere with federal bargaining chips. The Court has preferred to avoid relying on Zschernig in developing this theory, because that case lacks a firm foundation in positive law, rendering its legitimacy somewhat suspect. 143 But as Garamendi suggests, the Court is probably willing to invoke Zschernig if there is no better source of authority to support a finding of preemption, provided it is convinced such an outcome is otherwise warranted to keep the States from meddling with federal negotiations.144 A second possible basis for distinction is the absence of a claim based on state law. The Zschernig doctrine is framed in terms of foreign policy being reserved uniquely to the federal government rather than the States.145 The AGs assert that their suit is grounded in a species of federal law – federal common law – not state law. If they prevail in their claim, the suit will proceed in federal court, not state court. Hence, the AGs can argue, there is no basis for concern with state court interference with federal foreign policy prerogatives. The defendants might argue in rebuttal that the focus on state law and state courts is something of an accident of history. The doctrine could have been framed more broadly – in terms of foreign policy being reserved to the political branches of the federal government, thereby precluding meddling with foreign policy bargaining chips by either federal or state courts. This alternative

143. Garamendi, 539 U.S. at 439–43 (Ginsburg, J., dissenting) (discussing reasons not to apply the Zschernig doctrine and noting that “courts step out of their proper role when they rely on no legislative or even executive text, but only on inference and implication, to preempt state laws on foreign affairs grounds.”). 144. Garamendi, 539 U.S. at 416–17 (“If the agreements here had expressly preempted laws like HVIRA, the issue would be straightforward . . . But . . . the agreements include no preemption clause, and so leave their claim of preemption to rest on asserted interference with the foreign policy those agreements embody. Reliance is placed on our decision in Zschernig.”). 145. Zschernig, 389 U.S. at 436 (referring to “foreign affairs and international relations” as “matters which the Constitution entrusts solely to the Federal Government”); id. at 441 (“If there are to be such restraints, they must be provided by the Federal Government.”). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

326 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

characterization makes sense, they could argue, given the Constitution’s explicit commitment of nearly all foreign policy issues either to the President or Congress,146 and the long tradition that speaks of the President as the “sole organ” of the Nation in dealing with foreign controversies.147 But the equation of federal and state courts for purposes of Zschernig preemption is not quite right. Article III of the Constitution contemplates that federal courts will exercise authority to decide cases “affecting ambassadors, other public ministers and consuls,” and controversies “between a State, or the citizens thereof, and foreign states, citizens or subjects.”148 So evidently the Framers envisioned the federal courts functioning as appropriate tribunals resolving certain disputes involving the Nation and foreign officials or nations.149 Even with respect to judicial examination and characterization of the behavior of foreign regimes – the type of inquiry Zschernig saw as being inappropriate for state courts – federal courts play a different role. The Act of State doctrine, which calls for courts to refrain from questioning official acts of foreign governments,150 is applied by federal courts with a significant degree of deference to the views of the State Department.151 But the Supreme Court has declined to give exclusive weight to executive views about when the doctrine should or should not apply, reserving to federal courts a significant degree of authority in exercising this delicate function.152 Moreover, who is going to decide questions about preemption in

146. See e.g., Oetjen v. Central Leather Co., 246 U.S. 297, 302 (1918) (“The conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative—’the political’—departments of the government”). 147.See United States v. Curtiss-Wright Corp., 299 U.S. 304, 319 (1936), quoting John Marshall’s statement to the House of Representatives of March 7, 1800. 148. U.S. Const., Art. III, § 2. 149.See Thomas H. Lee, The Supreme Court of the United States as Quasi-International Tribunal: Reclaiming The Court’s Original and Exclusive Jurisdiction Over Treaty-Based Suits by Foreign States Against States, 104 Colum. L. Rev. 1765 (2004). 150. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (“The act of state doctrine in its traditional formulation precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory”). 151. Republic of Austria v. Altmann, 541 U.S. 677, 124 S.Ct. 2240, 2255 (“should the State Department choose to express its opinion on the implications of exercising jurisdiction over particular petitioners in connection with their alleged conduct, that opinion might well be entitled to deference as the considered judgment of the Executive on a particular question of foreign policy.”); id. at 2255 n.23 (“the Executive’s views on questions within its area of expertise merit greater deference”). 152.See W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400 (1990). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 327 the foreign policy context – whether under the dormant foreign affairs doctrine or otherwise – if the federal courts are not available to make these judgments? We need federal courts to serve as umpires, deciding where the boundaries are between traditional state functions and exclusive federal foreign policy authority. If we decide that federal courts themselves lack decisional authority in matters that implicate foreign affairs, this could circle back and call into question their very authority to act as umpires. To be sure, there is a theoretical difference between deciding a case on the merits, under federal common law, and deciding whether state law is preempted. But as we saw in Part II, federal common law itself rests on a judgment about the need to preempt state law, so in practice the two are inter-tangled. Thus, although the matter is not entirely clear cut, there appears to be a sound basis for limiting Zschernig – at least in its full blown form – to judicial applications of state law. A third possible distinction is grounded in intuitions about territoriality. In each of the three decisions we have considered – Zschernig, Crosby, and Garamendi – some State was taking action designed to influence behavior outside the territorial sovereignty of the United States.153 This sort of undertaking is far afield from the traditional authority of the States. The AGs’ global warming suit, in contrast, seeks to influence behavior by electric utility companies inside the territorial sovereignty of the United States—an undertaking close to the core of the States’ traditional police powers. It is true that the AGs’ suit, if successful, would have some effect on the bargaining leverage of the President in negotiating with other nations over global warming. But if this were to become a ground for preempting traditional exercises of state police power within the territorial sovereignty of the United States, it is difficult to see what the limiting principle would be. Virtually any traditional police power concern could conceivably become the subject of negotiations over an international treaty. If the mere appearance of an issue on the international agenda would result in

153. Zschernig v. Miller, 389 U.S. 429 (1968) (Oregon statute provided for escheat unless certain requirements were met including establishment of reciprocal rights for United States citizens in the foreign country in question.); Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000) (Massachusetts law imposed economic sanctions on Burma.); American Insurance Assn. v. Garamendi, 539 U.S. 396 (2003) (California law provided regulatory sanctions to compel disclosure and payment on insurance policies for Holocaust survivors by European governments and companies.). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

328 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 automatic preemption of state authority under the dormant foreign affairs preemption, a good deal of the police powers of the States would become at risk. In sum, I think the dormant foreign policy preemption argument should fail. A suit brought by legal officers of American States against American defendants in an American court under a cause of action based on American common law is not preempted simply because a favorable outcome in the action might have reverberations or ramifications for the conduct of American foreign policy. The preemption argument should fail as long as the case remains grounded in federal common law, because the Zschernig doctrine is probably best understood as preempting only applications of state law. If the federal common law claim is displaced for the reasons given in Part II, and the case is not dismissed for want of subject matter jurisdiction, then the dormant foreign affairs preemption claim should still fail. This is because the suit seeks only to adjudicate action within the territorial sovereignty of the United States, and extending the dormant foreign affairs preemption to claims that fall in this context would have no obvious stopping point.

IV. THE STANDARD OF NUISANCE LIABILITY

Suppose we get by all these threshold issues about standing, which law applies, and foreign affairs preemption. How is the court actually going to decide this case? I am not concerned here so much with how the court is going to resolve the daunting scientific disputes about the probable magnitude of global warming, the probable welfare effects of climate change (some bad, some good), or the costs of different strategies to mitigate the welfare effects. These difficulties are Herculean, so much so that these they should be obvious to anyone. I am, rather, concerned with a more basic question: What is the legal standard that the court should apply in order to determine whether or not greenhouse gases emanating from one State create an actionable public nuisance in another State? The standard legal research techniques do not get us very far in answering this question. The Restatement (Second) of Torts defines a public nuisance as “an unreasonable interference with a right 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 329 common to the general public.”154 The key word here, obviously, is “unreasonable.” In circumstances where the defendants’ conduct is not “proscribed by a statute, ordinance or administrative regulation” – that is, in the circumstances presented by the AGs’ public nuisance suit – the Restatement says that conduct is unreasonable if it involves a “significant interference” with public health, safety, or convenience.155 This is not very helpful, since it is unclear how severe an interference must be to qualify as “significant,” and we are not told whether only harms are to be considered in determining significance or harms net of benefits. The comments cross reference to the discussion of unreasonableness in the context of a private nuisance.156 Here, the Restatement sets forth two tests. The primary test is a kind of judicial cost-benefit analysis that asks whether “the gravity of the harm outweighs the utility of the actor’s conduct.”157 A secondary test reflects a kind of strict liability, deeming conduct unreasonable when it causes harm that is “serious” or “severe” and compensation of all victims of the harm would be feasible.158 Again, “serious” and “severe” are not defined, and we are not told whether they are to be measured in isolation or net of benefits. In the end, the Restatement only frames the debate, rather than providing any guidance in resolving it. Nuisance law generally – of which public nuisance is a subpart – has long oscillated between a “trespass” mode of analysis and a “cost-benefit” mode of analysis.159 Under the trespass mode, courts assume that invasions of a certain type or degree of severity are automatically nuisances. Under the cost benefit mode, courts attempt to weigh the harm to the plaintiff against the benefits of the defendant’s conduct, in order to determine whether the challenged conduct should be deemed a nuisance. In Connecticut v. American Electric Power Co., it is predictable that the AGs will rely on cases and commentary from the trespass mode, while the defendants will invoke cases and commentary from the cost-benefit mode. This is not because the trespass mode inevitably

154. Restatement (Second) of Torts § 821B (1977). 155.Id. 156.Id. at § 821B cmt e. 157.Id. at § 826(a). 158.Id. at § 826(b); 829A. 159.See Henry E. Smith, Exclusion and Property Rules in the Law of Nuisance, 90 Va. L. Rev. 965 (2004). 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

330 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 produces pro-plaintiff results; under this approach, some invasions are deemed de minimus and result in no liability.160 Nor is it because the cost-benefit mode is inevitably pro-defendant; obviously, any conduct that creates external harms in excess of external benefits can be a nuisance under this approach. Rather, it is because the trespass approach assumes that nuisance law is about enforcing “rights,” which frames the inquiry in a way generally favorable to plaintiffs. The cost-benefit approach, in contrast, makes nuisance law seem more like a legislative or regulatory proceeding, which calls into question whether nuisance disputes should properly resolved by courts at all. In addition, the trespass model proceeds rapidly from the complaint to liability to relief, which is in the plaintiff’s interest, while the cost-benefit approach is likely to get bogged down in time-consuming discovery and evidentiary presentations, which may favor the defendant. Transboundary nuisance disputes offer a better way of determining the applicable standard of liability, which I have called the “golden rules” approach.161 Under this approach, the court would determine the standard of liability by drawing upon a unique feature of transboundary cases, which is that the contesting parties are not only plaintiff and defendant, but are also members of different political jurisdictions, each of which also functions as a regulator of pollution controversies. This feature allows a court to determine the applicable standard of liability by applying two golden rules: do unto other States as you do to your own citizens, and do not ask of other States what you do not ask of your own citizens.162 In effect, the AGs could invoke either the regulatory law of the States in which the defendant utilities operate or of their own jurisdictions as a source of standards for holding the defendants liable for greenhouse gas emissions. Similarly, the utility defendants could cite either the internal practices of the AGs States or of their own States as defenses to liability. There are a variety of justifications for using these golden rules to establish the standard of care for transboundary public nuisance disputes. I will mention only two.163 First, the golden rules cast the

160.See Richard A. Epstein, Nuisance Law: Corrective Justice and Its Utilitarian Constraints, 8 J. Legal Stud. 49 (1979) (defending trespass model but acknowledging defenses like live-and- let live and the locality rule that create exceptions to liability). 161.See Merrill, supra note 65. 162.Id. at 998. 163. For a more complete discussion, see Merrill, supra note 65 at 1011-13. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 331 court in a role it should be more comfortable playing. The court is asked to investigate existing legal norms and practices of the contesting parties and their home States in order to discover the most closely applicable rule of decision. In contrast, under the Restatement or either the trespass or cost-benefit model, the court is required in effect to “legislate” a rule, based on its subjective assessment of what is “reasonable,” or its perceptions of the parties’ “rights,” or its measurement of costs and benefits. The discovery mode of decisionmaking should be especially attractive to courts in highly controversial cases like the dispute over global warming. If the court has to legislate a rule, based on its own assessment of what is reasonable, or right, or consistent with the balance of benefits and costs, it risks being accused of activism and taking sides in a partisan controversy. But if the court can decide the case by invoking one or more norms that the contesting parties have agreed to impose on themselves, in their capacity as domestic regulators, then it seems as if the court is doing nothing more than requiring that States apply a principle of equal treatment or nondiscrimination in their treatment of other States. Second, the golden rules minimize the potential for using public nuisance suits for strategic cost-exporting. Transboundary pollution entails cost-exporting behavior. The source of the pollution internalizes most of the benefits from the pollution- generating activity, and exports some of the costs of the pollution to the affected jurisdiction. But the regulation of transboundary pollution can also entail cost-exporting behavior. If the pollution is abated, the source of the pollution incurs most of the costs of abatement, and the affected jurisdiction enjoys many of the benefits. This danger of engaging in cost-exporting can be minimized by adopting the decisional rules the contesting parties and their States have adopted for domestic pollution disputes. When faced with a pollution problem as a matter of internal governance, a State must consider both the benefits and the costs of abating the pollution. Thus, the norms the State has imposed on its own sources will reflect a more candid appraisal of the costs and benefits of regulation than can be obtained by litigating under a norm of reasonableness, rights, or cost-benefit analysis. The danger of cost-exporting behavior through litigation is also nontrivial concern in the context of AGs global warming suit. There is very little overlap between the plaintiff States and the 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

332 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

States in which the defendant utilities operate.164 The AGs are therefore in the position of asking electric utilities in other States to bear steep abatement costs that will produce benefits, in the form of reduced risk of future global warming, which will be enjoyed in large measure by plaintiffs’ citizens. The golden rules approach would head this off, by requiring that the AGs show that their own States impose similar abatement duties on their own utilities to minimize the risk of global warming, before they can demand that such measures be taken by utilities in other States. Under the golden rules approach to determine the standard of public nuisance liability, it seems relatively clear that the AGs would lose. Although a number of States have begun to take measures to encourage reductions in CO2 emissions,165 no State, as far as I am aware, has imposed mandatory reductions of CO2 emissions on its domestic electric utility industry, either as a matter of regulatory law or public nuisance liability, in order to reduce the risk of global climate change. Connecticut and the other plaintiff States are thus guilty of asking of other States what they do not ask of their own citizens. This is not a proper basis for establishing liability for transboundary pollution.

CONCLUSION

The attempt to litigate global warming as a public nuisance in Connecticut v. American Electric Power Co. presents a host of challenging legal issues, only some of which have been explored here.166 As with many suits that seek to achieve wide-ranging social and economic change, the plaintiffs must prevail against a variety of defenses in order to obtain relief; if the defendants succeed on only one, the plaintiffs are out of luck. My assessment of the issues suggests that, however novel or difficult each one may be when considered individually, the defendants are likely to find at least one winning defense somewhere along the line. Global warming is not going to be solved by public nuisance litigation. This only

164. Apparently, the overlap consists of only one power plant operated in Wisconsin, one of the plaintiff States. 165.See Hodas, supra note 115 for examples. 166. Some of the other issues include whether the defendants are subject to personal jurisdiction in the Southern District of New York, the standards for determining the admissibility of scientific evidence, the standards for determining proof of causation, and the type of relief that should appropriately be awarded if liability is established. 5. MERRILL.5.DOC 9/27/2005 3:54:02 PM

2005] Global Warming As A Public Nuisance 333 makes it more important to redouble our efforts to consider what form a realistic solution should take.

6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

The Role of State Attorneys General in National Environmental Policy

* WELCOME & GLOBAL WARMING PANEL, PART I

WELCOME

James Tierney, Director of the Attorney General Program at Columbia Law School It is my pleasure to be the first to welcome all of you to The Role of the State Attorneys General in National Environmental Policy. As you look around the room, you will see that we are joined by leading members of the attorney general, environmental, academic communities. You will also see students who make up classes here at Columbia that are relevant to both natural resources and attorneys general. You will also find the leadership of the Columbia Journal of Environmental Law who along with the Pew

* The symposium The Role of State Attorneys General in National Environmental Policy was held at Columbia Law School on September 20, 2004. After welcoming remarks by James Tierney, Dean David Schizer, and Vermont Attorney General Bill Sorrel, four moderated panels convened to discuss the role of state attorneys general in national environmental policy, focusing their discussions on a landmark lawsuit over global warming (twice), groundwater pollution, and natural resource damage claims. The discussion of the first two panels centered on the recently-filed suit of Connecticut v. American Electric Power Co., No. 04 Civ. 5669, 2004 WL 1685122 (S.D.N.Y. filed July 21, 2004) (also the topic of Professor Merrill’s article at 30 COLUM. J. ENVTL. L. 293), on which many of the panelists had been working. The participants in the first panel were:

Richard Blumenthal, Attorney General of Connecticut, Stephen Rowe, Attorney General of Maine, David Hawkins, Natural Defense Resource Council, Tom Gede, Executive Director of the Conference of Western Attorneys General, Peg Lautenschlager, Attorney General of Wisconsin (also moderator), Will Breiger, Assistant Attorney General of California, Bob Kinney, former Environmental Counsel, National Association of Attorneys General, Lee Paddock, Director of Environmental Legal Studies, Pace Law School, Jim Gulick, Senior Deputy Attorney General North Carolina, Peter Teague, Environmental Program Director, Nathan Cummings Foundation, Tom Miller, Attorney General of Iowa.

335 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

336 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Charitable Trust has done so much to make this all financially possible. Knowing the quality of the participants, I am completely confident that today will be a success. All of us must nonetheless participate in both the formal and informal discussions if we are to maximize our time together. It is now my job to introduce David Schizer, the new Dean of Columbia Law School, and Bill Sorrell, the Attorney General of Vermont and the President of the National Association of Attorneys General. While their more formal resumes are in your materials, I would be remiss if I did not thank them both for their support over these last months and for their attendance. David, who is also the Lucy G. Moses Professor of Law, is a graduate of both Yale College and Yale Law School. His professional area of study is taxation which he has taught here with both professionalism and, if you can believe it, humor. Bill, who has been the Attorney General of Vermont since 1998, is a graduate of Notre Dame and Cornell Law School and in 2003 was awarded the prestigious Kelley-Wyman Award by his colleagues which is given to the outstanding attorney general in the United States. David? Bill? Dean David Schizer Thanks, Jim. It does seem to me with the tax law that either you can laugh or you can cry. I know what I choose. But welcome to all of you. This is an exciting day at Columbia Law School. This promises to be an exciting day and I’m excited to be here. This is one of my favorite conferences because it highlights two strengths of the school: the first is that we care deeply about students. As many of you know, this is our second conference of attorneys general. One of our motivations is to encourage our students to consider a career in public service. So I’m excited to see so many public servants here. I’d like to say you can’t build an ivory tower in Manhattan because the skyscrapers block the school. The symposium highlights a second strength of our school: we like to focus on facts and institutions and this will help us make the world better. This raises nuances of questions: what level of government should address issues of public policy, and what should the role of courts be. Given how hard these questions are, I’m personally relieved I don’t have to answer them. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 337

We are fortunate to have a number of state attorneys generals, so let me turn the podium over. I strongly expect conversation will become more exciting when I stop speaking, but I do want to welcome you all. It’s exciting to have you here. Thanks. William Sorrel, Attorney General of Vermont I’m honored by my colleges to be serving the national attorneys general. No slight intended, but since I don’t think, with the exception of one of my assistants, there are any registered Vermont voters here. And since I understand this is closed to the media, my remarks will be brief. I’m hopeful that as a result of today’s proceedings, we will actually find out who was responsible for putting together Vice President Cheney’s energy plan. That was supposed to be a joke. I’m thankful for Columbia for putting this program together to show what we, as attorneys general do, and bringing academics to consider what we do, and what our roles should be in the laws that we use. This is of great value to us, whether you’re on the side of the equation that AG’s are political hacks and secondarily lawyers, that we’re all aspiring for some other office and we will use or abuse our authority to engage in legislation through litigation, and that we have no place to do the things we do – I hope we’ll hear some of that side of the equation. Or I’d love to hear that we’re officers of the Court who’ve chosen to be public interest lawyers, and we don’t like to lose, so we don’t take cases that are dead in water before they start. We’re independent elected officers who take our jobs seriously – we want to hear that side of the equation too. One of the things the Dean said is that this program not only helps us who are doing this kind of work right now but also inspires students from the law school to choose a public interest career. This is immensely rewarding work. If you want to look in the mirror and feel good about what you do, go into public interest law. With that, thank you to Columbia. I look forward to a very interesting day. Thank you all. James Tierney, Director of the Attorney General Program at Columbia Law School It is now my great pleasure to introduce Richard Blumenthal. Dick has been the Attorney General of Connecticut since 1990, and before that time he served as a State Senator and as the youngest U.S. Attorney in the nation. A graduate of Harvard College and Yale Law School where he was the editor of the Law Journal, Dick also clerked for United States Supreme Court Justice Harry 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

338 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Blackmun. Dick has been a leader among the attorneys general from his very first years in office. He was one of the very first to courageously bring action against the tobacco industry at a time when success seemed remote and has led numerous multitstate efforts. In 2002, Dick was awarded the prestigious Kelley-Wyman Award by his colleagues which is given to the outstanding attorney general in the United States. Dick?

PANEL

Richard Blumenthal, Attorney General of Connecticut Thank you, thank you very much Jim. And thank you for your leadership in making this day possible, and your leadership at Columbia and teaching. And really, my thanks to Columbia Dean Schizer and everyone from Columbia who has demonstrated such leadership in making this program possible. Since we are in New York and Jim and I were talking about New York governors, I was reminded of a story about Governor Smith, at Sing-Sing when he was addressing inmates, he had a standard beginning to say “my fellow Democrats,” but that wasn’t going to work, so he had a fallback line to say “my friends,” but he was not friend with the inmates, so that wasn’t going to work so well. And one last line, “I’m glad to see so many of you here.” I’m glad to see so many of you here. . .I think it demonstrates that role of state attorneys general in environmental policy. Since we are in New York, I want to give my personal and special thanks to the NY attorney general’s office. Elliot Spitzer is my colleague and friend has been a great leader in this effort. We’ve been allies in a number of actions with the states that are represented here this morning. What Bill said in opening, it runs through everything I have to say and a lot of what others will say. There are remarkable and really unique opportunities for Attorneys General as litigators, public interest lawyers, and in part it is increasing because of the astonishing abdication of power and its abandonment by the federal government. Much of what Attorneys General do today with the federal government’s failure to meet its responsibilities has provided wonderful opportunities and obligations for Attorneys General that have never and should never have existed before. I once attended a poetry reading, to show you my age, by Robert Frost himself, at the 92nd street Y. He said a poem begins with a 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 339 lump in the throat. And in a way, this lawsuit began with a lump in the throat, a gut feeling, emotion, that CO2 pollution and global warming were problems that needed to be addressed. They were urgent and immediate and needed some kind of action, and it wasn’t coming from the federal government. And it also began with a lump in the throat. David Hawkins and I were sitting having bagels, brainstorming about what could be done. This was 3 1/2 years ago, and we agreed that we would each think, explore, research about it. That’s exactly what we did in my office. I’m sure others were thinking along the same lines in other offices – I don’t mean to take credit for it. We were also interested in what Matt Pawa was doing. . .and I mention all this because often I’m asked about how this kind of litigation begins. Very often if begins with some informal contacts, private sector and public interest lawyers coming to attorneys general. We often receive a variety of ideas, some good some bad. We evaluate them and try to see whether they can be successful. In all this, I would stress the point Bill made: we have a lot of good ideas, but at the end of the day we can’t make new law. We have to go before the judges. I have argued in federal courts of appeals, the state Supreme Court, the federal Supreme Court, and I know that in the end of the day we win or lose on the law, and of course on the facts. We can’t make new law; we have to have legal principles that we have to evaluate very closely before we act. This lawsuit was developed two years ago. There were extensive meetings in Hartford and New York over that period. And I think that in all honestly, this is a lawsuit I wish we didn’t have to bring. First of all, I wish there weren’t the problems of carbon dioxide. Second, I wish the federal government had acted. There was a lot of indication that the federal government would take responsibility for this problem, yet it refused to do so. John Cannon wrote an opinion for the EPA that carbon dioxide was covered by the federal Clean Air Act, and should be regulated as a pollutant. That was included in a climate action report submitted by that administration to the United Nations. So we started a mandamus action in court to force the EPA to act. Robert Fabricant issued an opinion for the EPA saying carbon dioxide was not covered. We then began a second action asking that that view be struck down, reversed, and challenged that view. And that is still pending. . . .that brings us here today. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

340 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Our reason for going to court is supported now more than ever before by indisputable scientific evidence. Clearly, from the standpoint of my constituents, Connecticut citizens, much of the Northeast, the rest of the country, there is evidence that climate change is resulting from CO2, greenhouse gas emissions, that there are clear effects of that in estuaries disappearing, changes in forests, eroding shorelines, and all kinds of effects that we believe are directly attributable to changes that result in carbon dioxide. Our lawsuit spells out in detail why we think that is so. But it’s a problem of immediate concern and immediate economic costs to the people we represent. We had a theory in this lawsuit, which we have researched extensively: CO2 emissions from power plants around the country are a direct cause of those climate changes, and we have sued the 5 major emitters of CO2. These companies annually produce 650 tons of CO2 at plants in 20 states. Together they account for 10% of all the CO2 emissions in the country, about ¼ of the emissions from the US power sector, which accounts for 10% of the world’s carbon dioxide emission. We have not sued all of the sources of CO2, but they are major sources. This is based on federal and state nuisance law. We can sue any tortfeasor or joint tortfeasor for the kind of relief that we’re seeking here. The principles on which we’re suing are well established, I don’t need to go through all the cases on public nuisance common law, beginning with State of Georgia v. Tennessee Copper, from 1907. Sulfur dioxide pollution from those smelters was polluting Georgia, and it sued a plant in a neighboring state and won. Other states since then have reaffirmed those principles, which are generally strict liability; we are prepared to establish negligence or intent, but we can prevail on a SL theory. One of the key points is that we are seeking relief that includes no money damages. If you contemplate this lawsuit, you need to think tobacco without the money – we’re trying to change the way the industry does business. We’re not seeking millions of dollars. The relief we’re seeking is about as different as could be in the sense that we want not a penny from these defendants. We want them to do the things necessary to reduce their emissions by about 3% a year, whether it’s by new equipment or by operating more efficiently. We believe that goal is doable, realistic, affordable, and required by the law. So your question may be that even if the federal government isn’t 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 341 acting, shouldn’t federal law preempt the states? What right do you have as AG to deal with a national, and maybe global problem. States often fill a gap where the federal government refuses to act. The federal government has said it has no authority to act and that Congress has rejected efforts to cover this, given that CO2 is not an ambient air problem and thus not covered by the Clean Air Act. For a variety of reasons, the federal government has taken a position that there’s no federal law to deal with the problem. The preemption issue is far less troubling here than it was in tobacco. Many of the other defenses that were raised in the tobacco suit will be raised here, but I think they will be overcome – I think that we’re on very solid ground, no just in federal law but also in our state nuisance theory. Even if there were preemption, our state nuisance claims would be upheld, and for a variety of other reasons, I think the legal issues will be fairly straightforward for the court and the factual issues eventually will be resolved in our favor. There will undoubtedly be a battle of the experts on some issues, but many of the most important factual issues are no longer subject to legitimate scientific dispute. I think that we will be prepared to show the causal links between the plants, CO2 emissions, global warming, and the harm done to our states. Let me just close by saying that this problem is not going to go away – the litigation is not going to go away. We’re committed for the long term – we know we’re in for a fight. We knew we were in for a fight against the tobacco companies, and they had vowed never to lose and they had never lost. When we began the suit against the tobacco companies, nobody gave us a prayer. The reason why the tobacco companies finally came to the table is because we went to trial. Before trial, during discovery, evidence came to light that was so damaging, that they never wanted that evidence to be presented in trial state by state. In conclusion, we’re in the beginning of the same process, where I think discovery may be as important as any of these legal principles. The documents, the testimony will be extraordinarily revealing. And if we accomplish nothing else, and I think we will accomplish a lot, I believe we will re-affirm a fundamental principle of public nuisance law, that a polluter cannot evade liability by pointing to other polluters, no matter how many there may be. And along the way, the American people will learn a lot about the dangers and damage done by carbon dioxide pollution on global warming. The energy industry has a 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

342 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 responsibility—not the sole responsibility but the primary responsibility—to take reasonable steps to reduce their emissions. It will take perseverance and fortitude by state Attorneys General and their allies, such as the NRDC. It will take political fortitude and perseverance. I think tobacco demonstrates that we form alliances than are greater than the sum of the parts. When the Attorneys General are together they are a powerful force in the country. We have set a pattern that will ultimately allow us to prevail.

Stephen Rowe, Attorney General of Maine Thank you Peg.1 I’m the AG from Maine. I’m here with Jerry Reid, Assistant AG. We take environmental protection very seriously in the state of Maine. I’m here feeling a little badly because we’re not plaintiffs in this lawsuit. I have a lump in my throat because we’re not there. It’s something we wanted to do but just couldn’t. I agree with everything Dick Blumenthal said, and I’m outraged by the federal government’s refusal to list CO2 as a pollutant. In the state of Maine, we’re at the end of the nation’s tailpipe for pollutants. Most of the harmful pollutants that fall, 85% of the sulfur dioxide in Maine is from the South and Midwest. We are number one in the nation in adult asthma rates, and as of last year, we’re now number one for children, so when we talk about global warming and air pollution in general, we take it very seriously. This isn’t a partisan thing because Regan did not do the same thing in gutting the Clean Air Act. It bothers me greatly that we’re even here, as Attorneys General, having to discuss this about suing polluters. I think the EPA should be more active. I think global warming will have effects in Maine, on our 3,000 miles of coastline and in our forests: a relatively small increase in temperature could have our spruce wood forest being replaced by hardwoods. The lobster fishing industry is also of concern because warmer temperatures could allow shellfish diseases to migrate northward. And the insect born diseases migrate northward as well. So we’re very concerned. So why didn’t I join this effort? There were several reasons, basically logistical. We saw it as being resource intensive. It’s an interstate suit – we’re plaintiffs so once we pull the trigger, there’s work to be done. We have 7 lawyers in our air resource division,

1. Moderator comments omitted. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 343 and we’re involved with these other suits: against EPA for failure to list CO2; we’re also defending a lot of suits on the state level. The first priority is defensive litigation. The second priority is to lend support to our essential services. Another priority is the enforcement of state environmental laws. And then we can be plaintiffs in interstate suits. We saw large out of pocket expenses. I know there’s a parallel suit that NRDC is working on. Not only travel expenses, but expert witnesses fees – large costs. We couldn’t do it because the lack of people power. We’re trying to be aggressive in this area in other ways, I wanted you to know that. I think it’s a shame that we’re here, here we are trying to sue polluters who are polluting because the federal government is being inactive. We went to Whitment on new source review laws and on this issue too. That’s what going on here. You can see where my heart is, but you can also see we weren’t there and we wanted to be.

David Hawkins, Natural Defense Resource Council Well thanks very much. It’s nice to be back here at Columbia. I went to Columbia, when Mark Rudd and SDS were taking over the campus and I could have actually graduated without attending a single class my third year. I spent many hours over in that building, some of them awake. I’m delighted to be here to talk about activities on global warming and to get irresponsible behavior corrected, because that’s what this is about. The tradition of using the courts when other levels of government fail is a noble tradition in areas of environmental protection. In the 1980s when the government failed to do things to abate acid rain, NRDC worked with Attorneys General in the courts, had some success, but ultimately got policy change. We think the same progress will happen on global warming, and hopefully sooner than later. Everyone says you can’t do anything about the weather, but we can do something about the earth’s climate. It is not a mysterious thing, but a product of human behavior, a relatively small amount of companies. Two-thirds of the CO2 emissions in the US come from 2 sectors: electric power companies and automobiles. You can probably get the leaders of 90% of the emissions represented by those 2 sectors in this room. If those 2 sectors changed their behavior, we would be well on their way to solving our problems. We can enact laws and continue to push, but if those laws don’t get 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

344 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 enacted fast enough, we look around for other ways to change their behavior, and the courts are a noble way to do this. We think the behavior of those individuals running those companies is irresponsible. We think the law is clear that their activities are causing harm today and will accumulate in the future, and there is resource in the courts to get them to modify their behavior. Why the power sector? They’re responsible for 40% of CO2 emissions in the US and 30% of global CO2 emissions. One of the problems with the power sector is the long lifetime of its investments. There are still power plants selling electricity to the grid that was put online in 1939. The growth of power plants going forward is quite scary. Last year global CO2 emissions were about 24 billion tons of CO2. But equally important, last year companies made investments in new power plants. The lifetime emissions of the power plants were 28 billion tons, more than all sources of CO2 pollution in a year. So we made a commitment to lock ourselves into decades of emissions. To change that we have to change the investment practices. We have to say that these are risky investments, that it’s going to be something that you’re going to have to account for down the road. Between now and 2030, another $10 trillion will be invested globally in power plants. The lifetime emissions will be about 800 billion tons of CO2 (about 2/3 the total CO2 emitted globally by all sources in the last 250 years). This is what we’re going to lock ourselves into with the investments made in the next 25 years. The US is pivotal in terms of the global response to this issue, and the power sector is pivotal in determining how quickly the US policy will change in this issue. This is why we cannot sit by and try to erode the blocking power of the coalitions opposing legislation. The defendants in this case have contributed millions of dollars to oppose legislative action. As an industry, they have been a core opponent to control global warming. So we’re going to say no to them in continuing this behavior without being accountable. We are delighted to be working with the Attorneys General office and really delighted with Dick’s early leadership on this issue. We did have breakfast together and something did happen, because Dick went back and assigned a couple of his best staff to work on this and made contacts with other Attorneys General offices. A team was put together that kept working on this. There are going to be a lot of trees killed in this litigation. The papers will start being filed and a lot of challenges will be thrown up. The thing I 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 345 think most interesting about this case, even with the problems of proof we encounter, is that the problems of proof will disappear over time, but the CO2 emissions put up by these defendants will not – they will be here for millions of years. But we will notice and keep inventories of that. This lawsuit will start to force the notion of accumulating liability on corporate council. What they need to remember and to think about is that problems of proof will go away long before their CO2 emissions will go away. Regardless of how many appeals we go through, we’ve set into motion a way of thinking about this problem that will change corporate thinking on this issue. So we’re optimistic.

QUESTIONS

Tom Gede, Executive Director of the Conference of Western Attorneys General: Don’t you think that this will be very expensive and resource intensive? How much do you think this will cost, and when you consider fees and costs of litigation, what do you expect to get at the settlement table to compensate what it will cost? Dick Blumenthal, Attorney General of Connecticut: I’m sure there’s some here who have been asked what this is going to cost. That’s the worst question in the world, because you have no idea. And when I’m asked what any litigation will cost, I’m honest: we don’t know, in terms of experts, or infrastructure costs, but we’re doing this with our lawyers, we’re not hiring additional lawyers, so the cost will be cognizable year by year. And I think resources will be an issue, as they are always an issue – we have a budget every year – every one of us goes before the legislature with a budget. That’s what I meant by the perseverance and dedication it will take to continue with this. The important point here is that the scientific evidence will only increase. A month ago the administration came out with a report that in effect refuted what top environmental officials were saying. I think that kind of evidence will draw more states to this cause, as what happened with tobacco. And eventually it was all 50 states. So I think there will be accumulating resources and the number of states grows. I will make 2 points: someone like Steve Rowe, who has been a leader in his day, very credible and responsibly had to assess resources. His heart and his mind are in the right place, but in the end, as a small state, he had a practical decision. We all had these hard decisions to make. And in each state, the politics and resource 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

346 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 levels made the different decision. I am grateful and admire that decision. But I think that eventually we will amass more resources. I think other Attorneys General I have spoken to about this issue want very much to be a part of it, and I think that will gradually help deal with the resource issue. David Hawkins, Natural Resource Defense Council: This litigation will cost a lot of money and NRDC is prepared to raise as much money as needed to be effective. We spend several million dollars a year now on climate advocacy, and this litigation is an important part of this. We have a half million members who contribute and loyal support of foundations. As this case starts to attract attention as it moves forward, if the threat to carry it out successfully is the lack of resources, then we will be able to raise those resources. We’re determined not to be out-papered in this litigation. Peg Lautenschlager, Attorney General of Wisconsin: The scientific community is interesting. A lot of them are becoming radicalized because of the failure of the political system to do anything with this issue. They see the threat of global warming becoming larger and larger and we’ve seen scores of scientists willing to work for us on this litigation, maybe without fees at all.

Will Breiger, Assistant Attorney General of California: I’m curious. As a case like this adds a state or two there’s an incremental benefit on resources, but is there a political or legal advantage in a case brought by eight states or a case brought by 40, or some larger number? Dick Blumenthal, Attorney General of Connecticut: Well, we’d rather have 40 than eight, but we’re very grateful that California is part of this lawsuit, and of course, a big state like California or New York both have huge resources, so they’re very important. So I guess the answer is that we’re at good size right now because we have both the resources and decision-making capabilities. We’re also lucky because we’re in one court, and we’re in a good court – the SDNY. For tobacco, we were in 50 different states, 50 different courts, so we had to make sure one state wasn’t saying something that would hurt another state, so here the coordination problem is better. Iowa demonstrates the stake of the Midwest in this problem and shows that there’s not just one coast, but a national problem. So there are ways that additional states can help in this problem. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 347

Stephen Rowe, Attorney General of Maine: We probably had 70% of the Attorneys General funded, but only about 30% now. So I don’t have the discretion, and I think people ought to know that. There are practical issues with filing lawsuits that we don’t have the ability to carry through. As a plaintiff, there is going to be state specific discovery that as a state you have to deal with. We’re in a position we’re not happy to be in, but it was the right decision for us and I would do it again. But maybe we can make a different decision in a year.

Bob Kinney, former Environmental Counsel, National Association of Attorneys General: I had a question about what are the benefits that you hope to get – what kind of relief are you asking for from the defendants in this case so you can demonstrate that the nuisance that has been alleged here has been evaded? David Hawkins, Natural Resource Defense Council: We’re asking the defendants to cap their carbon dioxide emissions and then gradually reduce them over time. We are not seeking monetary damages, but a binding limit on carbon dioxide emissions. This will reduce the defendants’ contribution to the problem of global warming.

Lee Paddock, Director of Environmental Legal Studies, Pace Law School: In the consumer fraud field, there’s a history of Attorneys General doing multi-state legislation in some cross-state capacity. Do you see this experience as a benchmark for taking environmental issues into the multi state arena? Dick Blumenthal, Attorney General of Connecticut: In a way, again, it’s a little like tobacco. All of a sudden when 50 states joined the tobacco litigation people suddenly said, gee, the states are getting together, but in fact the states were doing multi-state litigation well before that. And we have been doing multi-state litigation in the environmental arena well before this litigation: acid rain and smog emissions are blown by prevailing winds to the Northeast. We as states have litigated one of those cases in the district court, we have settled one, and we’re on the verge of settling one. There are ongoing multi-state actions. So I think this combination of states, which I do believe will grow, I think is an indication that environmental is coming to the forefront as a cause for the attorneys general. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

348 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Jim Gulick, Senior Deputy Attorney General North Carolina: Is it clear to you, the technological solutions that the companies need to do, to reduce their emission, or do you expect them to figure this out? David Hawkins, Natural Resource Defense Council: There are a number of options to meet reduced emissions: using fuels without as much carbon in them, natural gas, as well as renewable energy which were a major activity of power companies prior to deregulation. These are very important method for providing energy services. No one values a kilowatt hour of energy; what we value is the service. If you find a way to efficiently provide those serves, you have satisfied the social need. Smarter homes, smarter factories, that would be a tremendous benefit. There are new technologies that are waiting for investors to pursue that use fossil fuels but do not emit greenhouse gases, but they’re not being pursued because they’re not market drivers, but if these companies are held responsible, those market drivers will be pursued. Those techniques are out there but are marginally more expensive and these power plants are very competitive, so even though prices shouldn’t change for customers, no company wants to raise rates for fear of losing customers to competitors. We think we have techniques that can be applied and we will pursue them. Peter Teague, Environmental Program Director, Nathan Cummings Foundation: There may be so much data that people feel overwhelmed and that there are no solutions. Will you be deliberate when you get this information out there, in framing it, so that the American people think there is a solution, and that this is not an overwhelming problem that can’t be dealt with? Dick Blumenthal, Attorney General of Connecticut: I’m not sure the American public feels overwhelmed by this problem or thinks there’s too much data. But I think framing the issue in a way that’s easily understandable and perceptible is important, making the links between the power plant emissions, insect born diseases, and asthma. My son has asthma and if I talking about this problem with my wife, beginning with that aspect of the issue, has impact beyond the numbers – that’s data that not easily absorbed or understood. There’s a challenge to making the scientific data real, so people see it as their problem, not just the AG’s problem or environment’s problem. We would be happy to accept any advice from you or anyone here. 6. GLOBAL WARMING I.4.DOC 9/27/2005 3:43:23 PM

2005] Symposium: Global Warming Panel I 349

Peg Lautenschlager, Attorney General of Wisconsin: Incremental, gradual change not easily perceived by the public, but articulating our concerns about greater problems in the future is a challenge that we should rise up to. Dick Blumenthal, Attorney General of Connecticut: In terms of the public perception battle that has already accompanied this litigation – the biggest threat will be the other side saying there will be economic costs, jobs costs, increasing electric rates – none of this will be true. But we will have to deal with it. . . Peg Lautenschlager, Attorney General of Wisconsin: It is an issue which we both take flack from our getting involved. But along that line, we said this is what we perceive to be the thing to do. Tom Miller, Attorney General of Iowa: We try to do the right thing and support and comfort each other. The underlying point is that trying to do the right thing, and trying to do it together and support each other, is a wonderful intangible. . . David Hawkins, Natural Resource Defense Council: It’s important to put out messages on solutions because there are solutions: right in this room you see high-efficiency light fixtures. In many rooms we don’t see these things, we see wasteful lamps using three times as much electricity and heat the room, so in the summer you need to air condition to get rid of the heat associated with the lighting. This is one wasted dollar on the lighting and one wasted dollar on the air conditioner to get rid of the heat from the lighting. This wastes money which doesn’t help anyone and the solutions than can be brought to bear aren’t those just in global warming, but also other problems such as energy dependence and refugees. Putting these solutions into place will help us with these other areas as well. There are solutions that will help on all of these areas. 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

The Role of State Attorneys General in National Environmental Policy

* GLOBAL WARMING PANEL, PART II

James Tierney, Director, National State Attorneys General Program: It is now my great honor to introduce Professor Thomas Merrill. Tom is considered one of the seminal thinkers in the area of the interplay between litigation and governmental regulation. Long a Professor at Northwestern Law School, Tom joined us at Columbia in the Fall of 2003 and immediately became an essential part of the faculty. Tom’s long record of academic accomplishment is found in the materials. He is a graduate of the University of Chicago and like General Blumenthal, clerked for United States Supreme Court Justice Harry Blackmun. Tom? Thomas Merrill, Professor of Law, Columbia Law School: I would like to thank you all for this second AG conference. The place was already buzzing after the last one and I am sure that we will get other interesting topics in the future too. I will not be taking about policy issues as I don’t have any background. I will talk

* The symposium The Role of State Attorneys General in National Environmental Policy was held at Columbia Law School on September 20, 2004. After welcoming remarks by James Tierney, Dean David Schizer, and Vermont Attorney General Bill Sorrel, four moderated panels convened to discuss the role of state attorneys general in national environmental policy, focusing their discussions on a landmark lawsuit over global warming (twice), groundwater pollution, and natural resource damage claims. The discussion of the first two panels centered on the recently-filed suit of Connecticut v. American Electric Power Co., No. 04 Civ. 5669, 2004 WL 1685122 (S.D.N.Y. filed July 21, 2004) (also the topic of Professor Merrill’s article at 30 COLUM. J. ENVTL. L. 293), on which many of the panelists had been working. The participants in the second panel were:

Thomas Merrill, Professor of Law, Columbia Law School, William Sorrell, Attorney General of Vermont (also moderator), D. Michael Grodhaus, Assistant Attorney General of Ohio, J Kevin Healy, Partner, Bryan Cave LLP, James Milkey, Assistant Attorney General of Massachusetts, Jeffrey Sachs, Director of the Columbia Earth Institute.

351 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

352 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 about the legal issues. Let me begin on behalf of all Environmental Law Professors. I would like to thank Richard Blumenthal and the other Attorneys General who brought this suit. Whatever else the suit eventually accomplishes, it provides ample material for environmental law examination questions for several years to come. Since creative exam questions are always in short supply, this is a real boon to my profession. There are so many interesting legal dimensions to this complaint that it is impossible to cover them all. Let me briefly list some of the issues I will not discuss (although the other panelists may want to take them on and I would be glad to field questions about them in the questions and answer period): One issue that I not going to address is whether the complaint alleges injury that satisfies traditional standing requirements; I will also not discuss whether the emission of greenhouse gases in one state that is alleged to contribute to global warming in another states a claim that falls within the scope of the federal common law of nuisance; I am not going to discuss whether the suit is preempted by the conferral of exclusive authority on the President and Congress over the conduct of U.S. foreign policy, given that the United States remains a party to the 1992 Framework Convention on Climate Change and the emissions challenged in the lawsuit could be the subject of future negotiated protocols restricting emissions of greenhouse gases; I am also not going to discuss what legal standard will be applied in determining whether causation has been established; I am further not going to discuss what legal standard should be applied in determining whether emissions of greenhouse gases constitutes a trans-boundary nuisance and whether the suit alleges a future nuisance, and if so what standard should apply in determining whether the court will enjoin a future nuisance; and lastly I am not going to discuss whether courts are competent, either in a technical sense or in the sense of political legitimacy, to adjudicate a suit like this one on the frontiers of both science and international politics. These are some of the issues I will not address. Instead I will consider two other issues raised by the lawsuit, which seem to me to be especially interesting, intricate, and challenging. The first is whether the Attorneys General will have to survive a motion to dismiss based on traditional standing requirements, or 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 353 whether they can somehow get around having to satisfy those requirements. As I noted at the outset, I am not going to discuss whether the suit satisfies traditional standing requirements, like injury in fact, redress ability and no generalized grievances. However, I am assuming that these traditional standing requirements would prove to be nettlesome, and hence that the Attorneys General would like to find some way to argue that they do not apply. Conversely, of course, the defendants will want to argue that they do apply. Now, it seems to me that the Attorneys General do have a general argument they can make as to why these traditional standing requirements ought not apply. The Supreme Court’s complex standing doctrine has been developed in suits brought by private parties – private attorneys general suing under citizen suit provisions. The Court has never suggested that public actions brought by duly appointed public officials representing the general public interest are subject to such limitations. For example, no one has suggested that U.S. Attorneys prosecuting individuals for criminal violations of environmental laws must show that the public suffered injury in fact, or that a conviction will redress some actual injury, or that the injury is not a generalized grievance shared by all members of society. The exception for public actions makes sense in terms of the ultimate rationale for standing limitations. Standing requirements are designed to confine Article III courts to the exercise of the “judicial power” as that has traditionally been understood. At the founding and at all times afterwards, the judicial power has been understood to include the adjudication of public actions like criminal prosecutions and public nuisance suits. So there is no basis for subjecting such public actions to standing requirements that apply to private litigants. So far so good. The defendants, however, can make a counter- argument, which might go like this. There is an implicit design principle running through our legal system that public actions should be brought in the public officer’s own courts. The clearest example, again, is criminal enforcement. U.S. Attorneys bring federal criminal prosecutions in federal courts; states attorneys bring state criminal prosecutions in state court. A public nuisance suit is the civil analogue of a criminal prosecution. Again, public nuisance actions are nearly always brought in the courts of the sovereign in whose name the suit is instituted, meaning, in state 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

354 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 court. The defendants can argue that this implicit design principle also forms part of the historical understanding about what is encompassed within the “judicial power.” The historical understanding, more precisely considered, has been the judicial power includes the power to hear public actions brought by officers of the sovereign government of which the court is a component part. But the judicial power has not been understood to include the power to hear public actions brought by officers of some other sovereignty. Now to be sure, state attorneys general file suits in federal court – antitrust actions for example. But the defendants could argue that this is unproblematic – as long as state attorneys general are required to show that they satisfy the same standing limitations that would apply to a private party filing an action in federal court. The only officers who get a pass on standing limitations in federal court are federal public officials. The defendants could also doctor up this historical argument with a more general argument about accountability. Public actions – like criminal prosecutions and public nuisance suits – seek to vindicate governmental interests of the greatest importance and sensitivity. It is important that these interests be considered by courts that are accountable in some important degree to the people and to the government of the sovereign bringing the action. If the action is brought in some other court system, accountability will inevitably be compromised to some degree. This counter-argument has considerable intuitive force, and may give the court pause. The Attorneys General are not without a sur- rebuttal, in the form of an argument grounded in a very narrow subset of public nuisance actions. Specifically, in a series of original jurisdiction cases starting with Missouri v. Illinois in 1900, the U.S. Supreme Court has permitted State Attorneys General to appear before it and argue that pollution originating in one State is causing a public nuisance in another State. Although the Court stopped hearing interstate pollution disputes under its original jurisdiction in the late 1960s, it continued for at least another decade thereafter to allow such suits to be brought in federal district court. At no time during this history was it suggested that there was something inappropriate about federal courts hearing public nuisance suits brought by State Attorneys General 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 355 challenging transboundary pollution. Indeed, at no time during this history was any suggestion made that State Attorneys General would have to satisfy standing limitations applicable to private litigants in order to bring such an action. This precedent, it seems to me, will cut strongly against the more general theoretical argument that it is inappropriate for federal courts to hear a public nuisance action brought by a state attorney general. The defendants will not necessarily be without further retort. They might argue that the suits in which state attorney general were allowed to proceed in federal court were ones in which traditional standing requirements clearly were satisfied. So there was no need to specify whether such requirements would or would not apply in such an action. But this characterization of the cases is debatable at best. In the absence of any language suggesting that standing requirements were applied in these cases, I think the attorneys general may have the upper hand on this particular issue. The second issue I will consider is whether the federal common law of nuisance, which forms the basis for the first count of the complaint, has been preempted by the Clean Air Act. I will not address the threshold issue of whether the emissions challenged in this case would be covered by the federal common law of nuisance absent the Clean Air Act. Let me explain preliminarily why this issue is critical. The suit contains two counts, the first based on federal common law, the second on state common law. Federal common law and state common law are not cumulative causes of action, like pleading breach of contract and negligence in suit against a contractor. They are mutually exclusive. The public nuisance action is either governed by federal common law or by state common law, but not both. The Supreme Court said this explicitly in Milwaukee II, the leading case. The Court chastised Illinois and the district court for saying that both federal and state nuisance law applied to a case and said: “If state law can be applied, there is no need for federal common law; if federal common law exists, it is because state law cannot be used.” The logic behind this is straightforward. “Federal common law” is in effect a type of preemption of state law. Federal common law, on any conception, applies when important federal interests would be frustrated by the application of state law. When a court holds 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

356 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 that a matter is governed by federal common law, state law is automatically preempted, and a federal rule of decision applies instead. Consequently, if the attorney general’s suit is governed by federal common law, their state law count is a nullity. Conversely, if federal common law does not apply, because the federal common law has been preempted by the Clean Air Act, then the suit must be dismissed for want of jurisdiction. Jurisdiction over the federal common law count is based on the presence of a federal question – the federal common law. Jurisdiction over the state public nuisance count is based on supplemental jurisdiction. If the federal common law count is dismissed before trial, then there would no longer be any basis for jurisdiction over the state count. Both the Supreme Court and the Second Circuit have indicated that in these circumstances, the claim based on supplemental jurisdiction should be dismissed. Before getting into the details of the preemption issue, at little history is necessary to put this issue in context. As already noted, the Supreme Court from time to time since the turn of the twentieth century has adjudicated interstate pollution disputes as part of its original jurisdiction. The first such case involved a suit by Missouri against Illinois for reversing the flow of the Chicago River and sending sewage down the Mississippi toward St. Louis. Other suits have involved air pollution along the Tennessee- Georgia border and garbage dumping and sewage dumping disputes between New York and New Jersey. The Supreme Court had to adopt some rule of decision to decide these cases. It was clearly inappropriate to adopt the law of either the source state or the affected state, since that would allow one of the litigants to adjust the rules so as to win the case. So the Court drew on the general law of nuisance without referring to the law of either state. Although the Court did not use the term federal common law, this was effectively what the Court adopted. In 1970, Illinois filed an original suit against Milwaukee, Wisconsin in the Supreme Court. Attorney General Scott sought an injunction against sewage overflows in Milwaukee, which were allegedly polluting the beaches and water supplies in Illinois. In a decision known as Milwaukee I, the Court confirmed that federal common law would govern such a suit. But since it was not a State v. State suit where original jurisdiction is mandatory, but rather a State v. City suit where Supreme Court original jurisdiction is 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 357 optional, the Court also decided that it would be better to have the action tried in the federal district court. So the Court remanded the case to be tried under the federal common law of nuisance. After an elaborate trial that imposed additional limits on Milwaukee sewage overflows, the case returned to the Supreme Court in 1981 and was reviewed again in a case called Milwaukee II. This time around, the Court held that the federal common law of water pollution had been eliminated by comprehensive amendments to the Clean Water Act adopted after the original suit was filed. The Supreme Court has never spoken about whether the federal common law of nuisance has been preempted in the context of interstate air pollution. The lower court decisions that have addressed the question fairly uniformly conclude that the federal common law has also been preempted in the air context. Nevertheless, the issue is not foreclosed. The Second Circuit has held that the federal common law is preempted to the extent that the Clean Air Act imposes a regulatory standard on a particular source and the plaintiff seeks to apply a more stringent standard. But the Second Circuit has left open the question whether the federal common law might survive with respect to a type of pollution not regulated under the Act. Unfortunately, Milwaukee II is ambiguous as to what the standard for preemption of federal common law should be. The dispute here is likely to boil down to two different readings of that decision. The defendants will argue that Milwaukee II adopts what amounts to a theory of field preemption; the Attorneys General will want to argue that Milwaukee II endorses what might be called a theory of conflict preemption. There is language in Milwaukee II to support either reading. On the one hand, the Court repeatedly stressed the comprehensive nature of the Clean Water Act amendments adopted after Milwaukee I, and suggesting that this new, more comprehensive version of the Act occupied the field of federal regulation of interstate pollution, to the exclusion of the common law. On the other hand, there are passages that stress that the new legislation specifically addressed the problem that the federal common law remedy adopted by the lower courts was designed to address — sewage overflows from a point source of water pollution subject to the federal permitting process—implying that the federal common 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

358 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 law remedy was preempted because it conflicted with these statutory mechanisms. Each of the two theories also has a plausible rationale. The rationale for field preemption might be that when Congress legislates comprehensively, its silence on an issue should not be construed to mean that Congress has left a gap to be filed with federal common law. Silence in the midst of comprehensiveness instead means that Congress intended to leave a subject unregulated, at least for the time being. Thus, absent some affirmative signal from Congress that courts should fill gaps with federal common law, comprehensive legislation should not be supplemented by federal common law. The rationale for the conflict preemption theory might be that when Congress legislates against the background understanding that federal common law applies to certain kinds of disputes, and if Congress has not specifically addressed a particular kind of dispute, it should be presumed that it intended the federal common law remedy to remain available. Litigation brought by Attorneys General challenging transboundary air pollution was understood to be subject to federal common law before the Clean Air Act was adopted. Hence, the failure to regulate a particular type of transboundary pollution in the Air Act should be construed to mean Congress would have wanted federal common law to continue to apply. How should the preemption question be decided under these competing readings of Milwaukee II? If the field preemption theory is the correct reading, then I think the federal common law count in the instant suit is preempted. There is some suggestion in the case law that the Clean Air Act is less “comprehensive” than the Clean Water Act. Specifically, Judge Reinhardt, in a dissenting opinion in the Ninth Circuit, has opined that the Clean Air Act does not comprehensively regulate air pollution the same way the Clean Water Act does, because the air act does not impose federal emissions controls on all stationary sources of air pollution. Now, Judge Reinhardt may be the most frequently reversed court of appeals judge in America, but occasionally he gets it right. Unfortunately, this is not one of those times. It is impossible to say that the Clean Air Act is less comprehensive than the Water Act based on pages of legislation or volumes of regulations or economic activity affected or dollars of compliance costs. To be 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 359 sure, the two acts have different regulatory strategies – the Clean Air Act focusing on air quality and the Clean Water Act on point sources – but I fail to see how this makes one “comprehensive” and the other not. Moreover, even if we grant the dubious premise that federal regulation of point sources is required for comprehensiveness, the Clean Air Act would have to be regarded as comprehensive, at least as applied to the sources operated by the defendants in these cases. Under the 1970 version of the Clean Air Act, all these sources operate under permits issued by state agencies under federal guidelines, and the state plans are reviewed and approved by EPA. After the 1977 amendments, these sources must comply with federal new source review standards if they qualify as new or modified sources, and existing plants must comply with Reasonably Available Control Technology standards if they operate in areas out of compliance with National Ambient Air Standards. After the 1990s amendments, these sources must obtain federal permits authorizing emissions of SO2 and NOx if they are regulated under the Acid Rain title of the Act. So if field preemption is the test, the Clean Air Act occupies the field. On the other hand, if the conflict preemption reading of Milwaukee II is correct, then I think the federal common law count in the instant case is most likely not preempted. The superficial way of looking at the preemption question from this perspective would be to say: the Clean Air Act does not currently regulate greenhouse gases, and EPA has chosen not to regulate greenhouse gases, therefore Congress has not spoken to the problem, therefore there is no conflict between the Act and a federal district court judgment by the federal common law to order abate greenhouse gases. But there is a possible response to this. The States might have a remedy against greenhouse gases under the Clean Air Act. They could petition EPA for a rulemaking to list CO2 as an air pollutant that causes or contributes “to air pollution which may reasonably be anticipated to endanger public health or welfare” under Section 108 of the Act. If EPA agrees, and lists CO2 under Section 108, then EPA would have a nondiscretionary duty to issue national ambient air quality standards for CO2 under Section 109. This in turn would require all 50 States and the federal government to revise their implementation plans to force sources to reduce emissions of CO2. Among the sources so affected would be the 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

360 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 plants operated by the defendants in this case. So it would appear that the Act contains a mechanism that addresses greenhouse gases after all – at least potentially. Unfortunately for the defendants, and happily for the Attorneys General, EPA may have foreclosed this line of argument. A legal opinion issued by EPA General Counsel Robert E. Fabricant on August 28, 2003, concludes that EPA does not have authority to regulate CO2 under the Clean Air Act because CO2 does not fall within the Act’s definition of an air pollutant. My view is that this legal opinion is wrong. The Act is written so broadly that just about anything, including water vapor, is an air pollutant. But, the Fabricant Memo obviously allows the Attorneys General to argue that any attempt to petition EPA to list CO2 as a criteria pollutant would be futile, because the agency would be obliged to reject such a petition, given the opinion of its general counsel that CO2 is not an air pollutant. With the listing option blocked, the Attorneys General truly have no remedy under the Clean Air Act. Hence there is no conflict between a federal common law judgment and the Air Act. Hence the federal common law is not preempted. The crucial question therefore is which reading of Milwaukee II is better – field preemption or conflict preemption? This is a tough call, but for three reasons I would incline toward the field preemption reading being the one courts are more likely to adopt. First, Milwaukee II emphasized that the presumption against preemption that applies when a court confronts a question about whether state law is preempted does not apply when the question is whether federal common law is preempted. Instead, something of the opposite presumption is appropriate: “ ‘[W]e start with the assumption’ that it is for Congress, not federal courts, to articulate the appropriate standards to be applied as a matter of federal law.” The field preemption theory is more consistent with this presumption in favor of preemption than is conflict preemption. Second, shortly after Milwaukee II, in the Sea Clammers decision, the Court restated its holding as follows: “the federal common law of nuisance in the area of water pollution is entirely preempted by the more comprehensive scope of the [Federal Water Pollution Control Act].” This is just a line in a Supreme Court opinion. But lower courts are likely to pay close attention to it. It sounds more like field preemption than conflict preemption to me. Third, the recent history of the Clean Air Act suggests that, insofar as 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 361 multijurisdictional air pollution problems are concerned, congressional silence means that the problem has remained unregulated until Congress has taken affirmative action. Three episodes in particular are consistent with this reading. The first involves acid rain. Acid rain was the great transboundary pollution controversy of the 1970s. Northeastern states were pitted against Midwestern states. Efforts were made to get EPA to list acid rain as a criteria pollutant, and to restrict emissions of precursor gases under the transboundary provisions of the Clean Air Act. All these efforts failed, largely because of EPA’s reluctance to take on an issue that intensely divided the States without clear congressional guidance. Congress finally addressed the problem with a comprehensive new regulatory program in the 1990 Amendments, a program that was superimposed on top of the existing Clean Air Act mechanisms. The second episode involves depletion of the ozone layer of the atmosphere by CFCs and halogen gases. This was a truly global issue, since all agreed that the ozone layer was being attacked by gases in the upper atmosphere emitted from sources all around the world. As with acid rain, the solution was not found by employing the existing provisions of the Clean Air Act. Instead, the United States entered into the Montreal Protocols, which called for rapid phaseout of CFCs and halogens, and Congress implemented the agreement by enacting a new regulatory program, again superimposed on the existing Clean Air Act mechanisms, to achieve this phaseout among domestic American sources. The third involves ground level ozone. A number of States along the eastern seaboard have complained bitterly for years that their ability to comply with National Ambient Air Quality Standards has been comprised by ground level ozone wafting in from downwind states to the west. Traditional mechanism designed to provide from consultation over interstate effects in drafting State Implementations Plans did no good. Litigation did no good. Then, in the 1990 amendments, Congress specifically ordered that an interstate ozone transport region among the affected states be established, and set deadlines for action. Only then did we begin to see some action on tackling the problem of transboundary ozone. These episodes of course present an is/ought dilemma. Even if the pattern has been that Congress must speak before anything gets 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

362 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 done about multijurisdictional air pollution problems, it does not follow that prior congressional action is a normative requirement. But my guess is that courts will be strongly motivated by pragmatics in trying to determine whether they should play the role of first mover, or should await the blessing of Congress. If recent history suggests that nothing will happen without a congressional blessing, court will be inclined to interpret that law in a disputed area as requiring a congressional blessing. So, as to my second issue – whether the federal common law of nuisance has been preempted by the Clean Air Act in the context of transboundary air pollution, my cautious answer is most like yes. If I am right, then the current suit will be dismissed, remitting the Attorneys General to file their action in one or more state courts under state public nuisance law. Where, by the way, Supreme Court authority suggests they will have to apply the public nuisance law of the source state – not their own public nuisance law. But that is another issue I do not have time to address today. William Sorrell, Attorney General of Vermont: Let’s hear the reactions from the panel. D. Michael Grodhaus, Assistant Attorney General of Ohio: On behalf of Ohio Attorney General Jim Petro, who could not be here today, I would like to thank you for giving me the opportunity to speak to you on this important issue. Attorney General Petro is always encouraging our staff to be bold, to “think outside the box.” So if he were here today, on the one hand he would have commended the Attorneys General who brought this suit for “thinking outside the box,” for taking a novel approach to tackle this problem. This suit definitely presents a new and novel way of addressing the problem of global warming. However, despite our admiration for the novel thinking that led to the filing of this suit, we do have some serious reservations about it. In short, we are concerned about the selective nature of this suit. By “selective,” we mean that in a suit that was portrayed as doing something serious about a big problem like global warming, it ends up being a suit against only eight companies in but one industry. Before I explain this further, let me describe what the Ohio Attorney General’s Office did since the press conference was held announcing the filing of this suit. As you can imagine, this suit was big news in Ohio. Two out of five defendant’s corporate 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 363 headquarters are located in Ohio. Further, a lot of raw materials involved in the production of electrical energy also come from Ohio. Within a day of the announcement, we received a letter from our State Senate asking that the Attorney General intervene in the suit on the plaintiffs’ side. As a result of that request, we carefully studied the complaint. We met with our Assistant Attorneys General who represent our state EPA and our state Public Utilities Commission. We also went through a lot of research from both environmental groups and utility trade associations on the issue of global warming and carbon dioxide. After getting all the information and sifting through it, we made a decision not to intervene on the plaintiffs’ side. (I should add that we also received a request asking us to intervene on defendants’ side, which we also declined to do.) In the end, our analysis of the factual issues related to this suit paralleled that of the Samuelson’s article that appeared in the Washington Post, though we do not necessarily agree with the rather harsh tone nor the motives ascribed to Attorneys General in that piece. However, we agreed with Samuelson’s math. If you start with a premise that the U.S. contributes 25% of the world CO2 emissions and these five defendants account for 10% of the U.S. total, then even if we shut down all these companies’ power plants tomorrow – which is far more drastic than the relief requested in this suit—we would realize only a temporary 2.5% reduction in world CO2 emissions. As Samuelson notes, that small reduction would be only temporary because worldwide CO2 emissions continue to grow by about 2% every year, mostly due to emissions from the still developing countries. So the rest of the world would soon eat up this small 2.5% reduction. Another concern we have with the selective nature of this lawsuit is that the case only deals with one industry – the electric utility industry. The suit does nothing to address the second leading cause of CO2 emissions in this country, the transportation industry. As part of our decision making on whether to intervene in this suit on the plaintiffs’ side, we spent a lot of time looking at air quality data on the U.S. EPA website. The EPA website has a chart of CO2 emissions by state and by source over the 11 year period 1990 through 2000. By looking at the EPA spreadsheet, we found that over this 11 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

364 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 period, electric utilities accounted for about 34.7% of U.S. CO2 emissions. Transportation sources accounted for about 31.9 %, only 2.8% less than the electric utility industry. If you look at the state-by-state information on the EPA web site, California, for example—one of the plaintiff states in this suit—emitted 2.9 billion metric tons of CO2 from transportation sources over that 11-year period, more than 3 times that of the Ohio transportation sector and about 75 % more than Ohio’s entire utility industry. In the year 2000 alone, transportation sources in California accounted for 85% more CO2 emissions than Ohio’s entire electric utility industry. Comparing all California and Ohio emission sources reveals that in 2000, California emitted 39% more CO2 than did Ohio. Based on this data, it would seem that the State of Ohio could use a similar common law nuisance theory to sue California for allowing so much CO2 from its transportation sector to be emitted into the atmosphere. However, we are not going to do that. The reason that we are not going to do that is because we believe that it is inappropriate for one state to use the court system to oppose a cost – in essence, an unvoted tax – on another state or another part of the country for something that is a national or global issue. If the plaintiff states succeed in this case, they will end up imposing an additional cost on the defendant utility companies that the companies undoubtedly would seek to pass on to their customers. I am one of those customers. I live in Columbus, Ohio, and my utility company is one of the defendants, AEP. Personally speaking, I would not mind paying a little more on my electric bill to help address environmental problems like global warming. But I would object to paying that premium if those of you here today from California, New York or any other of the plaintiff states are not paying it, too. If we are to impose additional costs on Americans to address national or global problems like this, then we should do so on a national scale, not on a state-by-state basis. The issue of global CO2 reduction is complex and involves many hard policy choices. For example, California recently enacted more stringent automobile CO2 emission policies, which is a great victory for the environment considering the huge amount of CO2 emissions from the transportation sector in California, as I mentioned earlier. The problem, however, is that experts estimate that this new emissions 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 365 standard will add about a thousand dollars on average to the purchase price of a new car in California, thereby placing further out of the reach the ability of lower income Californians to buy a new car. Another interesting policy choice that Samuelson notes in his Washington Post article is that we could eliminate many of these CO2 emissions problems by expanding the use of a technology that has been in use for years, is well known, and can supply us with electrical energy in the kinds of quantities that solar and wind power cannot. That technology is nuclear power. But how many environmental groups would be in favor of building 100 new nuclear power plants in this country? Because of the complex policy questions involved in reducing CO2 emissions, but still generating the energy this country needs to light our homes and business and drive our cars, this is inherently a political issue and should be a non-justiciable one. Precisely because of the hard policy choices that need to be made and the huge costs involved, the people’s elected representatives – the President and the Congress—should be the ones to deal with the issue of reducing CO2 emissions. Several bills have been and are pending in Congress that deal with climate change issues. It is our position that it is in that arena, not the judicial arena, that those who seek to reduce or regulate CO2 emissions should devote their attention and efforts. So while we commend our friends and colleagues in the eight state Attorneys General offices for trying something novel in this area, and while we look forward to continuing to work with them on many other issues of importance to the states and our citizens, in the end we in Ohio decided that this suit was an approach with which we respectfully disagree. William Sorrell, Attorney General of Vermont: We have a respectful disagreement with Ohio. They mentioned the acid rain suit. Just to give you an idea: sulfur dioxide causes acid rain. In 1998 all sources from within Vermont emitted a total of 8,000 tons of SO2. During the same year from just from one American Electric plant in Ohio, it was 156,000 tons of SO2 emitted. If Maine is the nation’s tailpipe, then Vermont is the muffler. J Kevin Healy, Partner, Bryan Cave LLP: When this case was filed, I was called by a reporter from the 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

366 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Bureau of National Affairs, who asked me to comment. I told the reporter that my immediate reaction to the filing of this case was that a lawsuit was inevitable. I felt this way because climate change has emerged as one of most pressing problems facing our society. When a problem so enormous arises and where no regulatory initiatives are developed to address it, something is going to give: there is going to be public nuisance lawsuit filed by somebody. If you look at the history of environmental law, public nuisance litigation is what it was all about, before the landmark legislation of the 1970s was enacted. One need only look at the allegations in the complaint in State of Connecticut v. AEP to get a feel for the enormity of the problem of climate change. The attorneys general are saying that there will be more heat waves, smog, death, asthma, sea levels rising, flooding, damage to water supplies, severe storms, disruption of ecology, and damage to agriculture and fisheries as a result of the problem. This is an amazing and a troubling document to read. More troubling is that the allegations are not crazy; they are in line with what a majority of scientists are now predicting. In fact, there is a consensus among scientists that climate change is a very significant and pressing problem and that human activity is at least one of the factors that are causing it. It is fair to say that there is not much happening on a federal level in dealing with climate change. The President has decided not to seek ratification of the Kyoto Protocol, and is not seeking to reduce greenhouse gases by means of a mandatory program. Rather, the administration has decided to pursue voluntary initiatives in order to address the issue. The US has been seeking to reduce greenhouse gas emissions on a voluntary basis for 10 years, and NRDC reports that CO2 emissions have increased during that period by 25%. According to NRDC, over that same time period emissions of sulfur dioxide—a regulated pollutant—decreased by 20 to 25%. However, it is EPA’s opinion that CO2 is not a regulated pollutant under the Clean Air Act. In a formal general counsel’s opinion, Robert Fabricant stated that there is no indication that Congress intended the EPA to regulate in this area—that climate change is a different issue than air pollution. The consequence of that position is that Congress did not intend the Clean Air Act to occupy the field, and that the federal common law with respect to climate change has not been preempted. 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 367

One other observation on the question of preemption: when Milwaukee II was decided, federal law did touch on water pollution, as the court in that case observed. The same is true here. The Clean Air Act as it currently reads and other federal laws are not silent on the issue of climate change—there are some provisions relating to research and voluntary initiatives. However, no comprehensive statute or regulatory scheme is in place. If the federal government is going to regulate greenhouse gas emissions, it will be through the enactment of an entirely new statute. This situation favors the AGs on the issue of preemption. But that does not mean that the States will necessarily prevail in this case because there is still the issue of what is a public nuisance. In order to win this case, the plaintiffs will have to show that there is harm to the general public, that the defendants’ conduct is contributing to that harm, and that such conduct is unreasonable. These first two elements aren’t going to be such a big deal. As Peter Lehner observed at a conference I participated in several months ago, the law is OK with uncertainties —plaintiffs only have to establish their case by a preponderance of the evidence. So I think that the issue will come down to whether the defendants’ conduct is unreasonable. I think that is fair to say that something unreasonable is going on with respect to climate change. As a societal issue, you could say that it is unreasonable not to respond vigorously to an issue that is as ominous as this one—but are these particular defendants acting in an unreasonable way? Let’s say that their emissions are in compliance with the law. David Hawkins said that some of the defendants are even taking steps voluntarily to reduce their greenhouse gas emissions. At the same time, their competitors are not doing much if anything to address the problem. Keep in mind that every company on earth, and even every person on earth is contributing to greenhouse gas emissions. I know, you will say that the defendants in this case are major contributors, that you have got to start somewhere, but does that make them legally liable for contributing to a public nuisance? When you think about it, if the Court gets to the question of unreasonable conduct, it will be a landmark case— a pronouncement from a federal court on what is and is not reasonable conduct with respect to climate change would be a very big deal. 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

368 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

The plaintiffs will hit another problem if this case gets that far: that of a federal judge trying to decide whether to exercise a power of equity by enjoining the defendants to take affirmative steps to reduce greenhouse gas emissions. For example, she is going to wonder if singling out these five defendants is fair, while their competitors are not required by any legal mandate to do anything to address the issue. In balancing equities, the Court will confront other problems. For example, the states bringing the lawsuit don’t themselves have mandatory programs for decreasing emissions. Moreover, burdens will be placed upon the defendants and their customers, by issuance of an injunction, and on the other side of the equation injunctive relief won’t do much to redress the harms being alleged by the plaintiffs. There is also a question of judicial resources; if the judge were to grant injunctive relief, she would be diving into a global issue of massive proportions. Is she going to want to get into this, going to want to oversee the implementation of the decree? I think there is going to be a very serious issue there. I wonder whether if this case proceeds to discovery, the parties are going to want to settle. A settlement at that stage might be a good thing for the defendants, because enormous amounts of money are going to be spent on climate change. Even though these plaintiffs are not seeking money damages, if the court finds that the defendants’ conduct is unreasonable under the circumstances that would not be a good thing for them. From the perspective of future risk, I would be uncomfortable, if I were a corporate counsel, to have a federal judge saying, after fact-finding, that my client’s conduct was unreasonable and contributing to the problem of climate change. In sum, from my perspective I believe that there is a potential for something good to come out of this case in the form of guidance for industry. The basic problem climate change poses to business leaders is uncertainty. It is like they see a train coming and don’t know what to do about it. For that reason, I think that a judicial guidance on what sort of conduct is reasonable or unreasonable under the circumstances would be a good thing. This lawsuit may also turn out to be one of the pressures that cause the federal government to take action to address this issue, by enacting a well reasoned and deliberate regulatory program.

7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

2005] Symposium: Global Warming Panel II 369

QUESTIONS

William Sorrell, Attorney General of Vermont: We are going to ask questions now. As moderator I am going to ask the first question. Professor, you did talk about what the lower courts are likely to do, but this might get to the Supreme Court. Given the issue of federal versus state’s rights, liberal versus conservative, and the position on powers of the states taken by the Rehnquist court, what do you think that the Supreme Court would do on these preemption issues? Tom Merrill, Professor of Law, Columbia Law School: I have very little doubt that the Supreme Court would find the federal common law preempted. I think that it is the clear message in Milwaukee II, which I think sort of marks the beginning of the time period where the modern court is skeptical of idea of federal common law. There is a case, Boil v. Universal Technologies, where Justice Scalia recognized federal common law in a case involving the military. He told later generations of clerks that he should not have given in to the temptation to protect military contractors in this way. He’s not going to be sympathetic to creating a right of action for the AG to go after utilities companies. James Milkey, Assistant Attorney General of Massachusetts: I find myself in an odd position. With due respect to the AG bringing suit, we chose not to be a part of the common law case. Massachusetts took the lead in the pending legislation under the Clean Air Act, and we do not expect to lose in reversing Fabricant opinion. In light of your views on the common law case, aren’t you on the wrong side of the CO2 case? D. Michael Grodhaus, Assistant Attorney General of Ohio: I can tell you that in terms of the case on the Fabricant opinion, there were other dynamics in terms of the state of Ohio that led us to make that decision. At times AG have freedom of action, at times you have clients whose views you wish to heed. And that’s all I want to say on that question.

Jeffrey Sachs, Director of the Columbia Earth Institute: I want to thank the law school and the AG for doing this. One of the things that I find as the head of the Earth Institute is that the huge amount of the debate in our country is about the facts, which is surprising. Some people read the Wall Street Journal and believe it. I was at a symposium that GE sponsored, “National Conference 7. GLOBAL WARMING II.4.DOC 9/27/2005 3:43:53 PM

370 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 on Utilities”, with the heads of the industry there. These were heavy hitters who knew their subject, technology, but I was amazed that they actually knew very little about the science of this issue. One head was surprised that I said that the science was clear on this issue. The fact is that most people that are opposed to this issue do not realize how strong the scientific consensus really is. While one can always find a few scattered voices, this is no longer a really scientific debate about the seriousness of what may lie ahead. So, I think that the public education role is extremely important. I find shocking statements by our elected representatives. The more the public learns about this, the easier it will be to confront these issues. I wanted to say a bit about the Earth Institute and describe one of our own attempts to contribute to public policy in this area. The Center for Climate Sciences, run by Professor Jenson, runs a big climate model, which has been documenting this for 20 years. It is a remarkable enterprise. The other is the Lamont-Dougherty Institute, and the basis message is that the Earth climate systems are highly nonlinear and unstable; that what we are doing could actually put us into a decades long abrupt climate change. If you have seen the movie, you know about the ocean conveyer belt. Let me say very briefly that if any of you would like scientific briefings, on behalf of my science colleagues, not only would we be delighted to help you, but I think this would be helpful to you. We are launching a roundtable, which is an attempt to bring global leaders together with the science. Even with people like CEOs of the utility companies, or of the auto companies, people with disparate interests, this could be very useful. My hope is that if you can put serious people in a room and not let them get away with nonsense, that we’ll be able to narrow the differences and find some kind of policy consensus on this. I would be delighted if in some way the attorneys general find a part of this conference relevant. We would be happy to bring some representation to your side in doing that. Thanks for doing this and for the chance to say hello. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

Regulation and Litigation: Complementary Tools for Environmental Protection

Thomas O. McGarity∗

Introduction ...... 371 I. Introduction to MTBE...... 373 A. Physical Characteristics...... 374 B. Health Effects ...... 376 C. The Leaking Underground Storage Tank Problem...... 378 D. Government Reaction to the MTBE Groundwater Crisis.....379 II. It’s Not Just About Predictability; It’s Also About Control...... 380 A. The MTBE Fuel Additive Waiver...... 382 B. The TSCA Testing Agreement ...... 383 C. The USTS Implementation Regulations...... 385 D. Conclusion ...... 388 III. It’s Not Just About Efficiency; It’s Also About Fairness...... 390 A. The TSCA Testing Agreement ...... 392 B. The Proposed TSCA Ban of MTBE...... 393 C. The USTS Implementation Regulations...... 394 D. Conclusion ...... 394 IV. It’s Not Just About Protection; It’s Also About Accountability395 A. Attack on Garrett and Moreau ...... 396 B. The Reformulated Gasoline Requirements...... 398 C. Conclusion...... 401 V. Conclusions...... 401

INTRODUCTION

To the surprise of most observers, the fate of the massive energy initiative that resulted from the closed-door deliberations of Vice

∗ W. James Kronzer Chair in Trial and Appellate Advocacy, University of Texas School of Law; President, Center for Progressive Reform. An earlier version of this article was presented at the symposium, The Role of State Attorneys General in National Environmental Policy, at Columbia Law School, September 20, 2004, 30 COLUM. J. ENVTL. L. 403.

371 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

372 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

President Cheney’s Energy Task Force turned in the summer of 2004 on how Congress decided to address the future of an obscure chemical known to the public as MTBE.1 The petroleum industry had used this controversial chemical for more than two decades to improve engine performance and to enhance air quality in heavily polluted areas of the country. Unfortunately, the expanded use of MTBE as a gasoline additive in the 1990s and the deteriorating state of America’s 60-year-old infrastructure of underground storage tank systems (USTS) for gasoline had combined to yield an MTBE groundwater crisis by the end of that decade. As several adversely affected states struggled to ban the use of MTBE in gasoline, municipal water districts and adversely affected private well owners across the country initiated litigation aimed at requiring petroleum companies to clean up contaminated aquifers and to compensate them for economic loss. The sticking point in the Omnibus Energy Bill was a provision, insisted upon by the House leadership, which would relieve the oil companies of all liability attributable to MTBE contamination.2 The willingness of powerful Republicans in the House to allow a tangential liability waiver to stand in the way of one of the most important legislative initiatives of a Republican President is strong testimony to the salience of tort reform as a political issue in the early twenty-first century. This Article will employ the MTBE experience as a vehicle for addressing the most recent claim of the tort reformers, very much visible in the congressional debates over the MTBE liability waiver, that plaintiffs’ attorneys and some state attorneys general are engaged in a broad effort to achieve undesirable “regulation through litigation.” Acknowledging that plaintiffs in institutional litigation of the sort filed by the State of New Hampshire against the major MTBE-using oil companies do frequently request relief that resembles requirements typically imposed by regulatory agencies, this Article will take the position that society badly needs both environmental regulation and tort law to protect citizens from companies engaged in risk-producing activities. Only through vigorous ex ante implementation and

1. Charles Babington, House Again Passes GOP Energy Measures, WASHINGTON POST, June 16, 2004, at A4 (House passes Energy Bill, but Senate opponents of MTBE provision in House Bill have the votes to prevent its enactment). For a description of the operations of the Cheney Energy Task Force, see ERIC ALTERMAN & MARK GREEN, THE BOOK ON BUSH (2004). 2. Energy Policy Act of 2003, H.R. 6, 108th Cong. § 1502(a) (2003). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 373 enforcement of environmental statutes and equally vigorous ex post tort litigation will citizens receive the critical protections that both the statutes and the common law are meant to provide. To counter the contention that frivolous institutional litigation is bad for business (and therefore bad for society) and to support my contention that lawsuits of the sort that the attorneys general have been filing are critical to a well-functioning society, I will make three broad claims. My first claim is that the debate over the respective roles of tort litigation and environmental regulation is not just about predictability; it is also about control. My second claim is that the debate is not just about efficiency; it is also about fairness. My final claim is that the debate is not just about protection; it is also about accountability. The history of MTBE provides a classic example of why, despite the existence of a highly developed and evolving federal regulatory regime, a robust state tort law regime is necessary to hold companies accountable for harms they cause and to fairly distribute the resulting losses. Tort law corrects for a regulatory system that is too easily controlled by the very interests that it is supposed to be controlling.

I. INTRODUCTION TO MTBE

On February 23, 1979, the Environmental Protection Agency (EPA) approved methyl tertiary-butyl ether (MTBE) as a replacement for tetraethyl lead, an anti-knock gasoline additive that EPA was attempting to phase out.3 On March 14, 1990, Chemical Week declared MTBE to be “the fastest-growing chemical in the world.”4 Later that year, Congress enacted the 1990 Amendments to the Clean Air Act that, among other things, required petroleum companies to market “reformulated gasoline” in certain “nonattainment” areas (which included most of the population of the United States).5 Because MTBE was the

3. Application for Methyl Tertiary Butyl Ether, Decision of the Administrator, 44 Fed. Reg. 12242 (Mar. 6, 1979) [hereinafter cited as MTBE Waiver]. 4. Dramatic Gains for MTBE, CHEMICAL WEEK, March 14, 1990, at 50 (quoting energy consultant DeWitt & Co). 5. MTBE Advance Notice of Intent, 65 Fed. Reg. 16094, 16096-97 (Mar. 24, 2000) (to be codified at 40 C.F.R. pt. 755). The 10 “severe” and above areas include Baltimore, Chicago, Hartford, Houston, Los Angeles, Milwaukee, New York, Philadelphia, Sacramento, and San Diego. In addition, 17 states and the District of Columbia voluntarily participate in the RFG program. Id. California has enacted separate, and somewhat more restrictive, requirements for “Phase II” reformulated gasoline. ARTURO KELLER, ET AL., HEALTH & ENVIRONMENTAL 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

374 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

petroleum industry’s additive of choice for meeting the reformulated gasoline requirement, the market for MTBE grew even more rapidly in the mid-1990s as the EPA implemented the new requirements.

A. Physical Characteristics Since the late 1970s, some refineries have blended MTBE into gasoline to replace tetra-ethyl lead for the purpose of enhancing octane and thereby prevent engine knocking and resulting performance loss.6 In the late 1980s, petroleum companies began to blend MTBE into gasoline to meet state and federal winter oxygenate requirements for a limited number of areas that have not attained the National Ambient Air Quality Standard (NAAQS) for carbon monoxide.7 Beginning in 1989, petroleum companies began to use MTBE in “reformulated” gasoline (RFG) to reduce emissions of volatile organic carbon compounds (VOCs) and oxides of nitrogen (NOx), two precursors of photochemical oxidants, a use that was reinforced when the 1990 amendments to the Federal Clean Air Act required petroleum marketers to sell RFG in the 10 large metropolitan areas with the most severe

ASSESSMENT OF MTBE: REPORT TO THE GOVERNOR AND LEGISLATURE OF THE STATE OF CALIFORNIA AS SPONSORED BY SB 521, Vol. 1, at 15 (1998), available at http://www2.bren.ucsb.edu/~keller/papers/Abstract14.pdf [hereinafter KELLER, ET. AL]. 6. MTBE Advance Notice of Intent, supra note 5, at 16097. Octane is a measure of gasoline’s resistance to uncontrolled combustion, which produces engine knock. Id. During the 1970s, tetraethyl lead was added to virtually all gasoline marketed in the U.S. to allow engines to use higher compression ratios and thereby conserve fuel without “knocking” when the highly compressed fuel exploded prematurely in the cylinder instead of burning evenly. Unleaded Petrol, THE ECONOMIST, Jan. 27, 1979, at 76. Because it is critical to the ability of automobiles to operate properly, this characteristic, referred to in the industry as “octane” rating, was and is in fact the primary performance characteristic considered by refiners in the production of gasoline. ENVIRONMENTAL PROTECTION AGENCY, ACHIEVING CLEAN AIR AND CLEAN WATER: THE REPORT OF THE BLUE RIBBON PANEL ON OXYGENATES IN GASOLINE (1999), at 27 n.36, available at http://www.epa.gov/oms/consumer/fuels/oxypanel/r99021.pdf [hereinafter EPA BLUE RIBBON PANEL REPORT]. 7. MTBE Advance Notice of Intent, supra note 5, at 16096. Oxygenates are organic molecules that contain oxygen. KELLER, ET. AL, at 11. They are typically alcohols or ethers. Id. The primary purpose for adding oxygenates to gasoline is to promote more efficient combustion under adverse conditions in the engine, such as cold starts or fuel-rich operations, when fuel would otherwise escape the engine unburned. Id. The extra oxygen in oxygenated fuels helps ensure that the engine produces carbon dioxide, instead of carbon monoxide, a toxic product of incomplete combustion. Id. In more recent years, MTBE has been replaced with ethanol in almost all of the winter oxygenate programs. MTBE Advance Notice of Intent, supra note 5, at 16097. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 375 summertime photochemical oxidant (ozone) levels.8 By 2000 more than 30 percent of the retail gasoline sold in the U.S. was reformulated, and about 87 percent of that gasoline contained MTBE.9 So long as it is confined to storage tanks and automobile gasoline tanks, MTBE is generally quite benign. If it leaks out of underground storage tanks into groundwater, however, MTBE can become an environmental nightmare. For example, after discovering MTBE in the wellfields that supplied 50 percent of the city’s drinking water, the City of Santa Monica, California had to close the wellfield and import drinking water from elsewhere.10 The United States Geological Survey (USGS) in 1999 reported a 27 percent incidence of MTBE-contaminated groundwater in urban areas where MTBE was used substantially.11 A 1999 EPA Blue Ribbon Panel reported that between 5 and 10 percent of community drinking water supplies in high MTBE use areas contained detectable amounts of MTBE.12 Noting that MTBE has been found in measurable levels in only 1.9 percent of the public water supply systems in California since the legislature required monitoring for MTBE,13 however, the petroleum industry takes the position that the magnitude of the groundwater contamination caused by MTBE from leaking USTS has been exceedingly modest. Because MTBE is very soluble in water, it travels much more rapidly in groundwater than do the other components of gasoline,

8. MTBE Advance Notice of Intent, supra note 5, at 16096-97. The 10 “severe” and above areas include Baltimore, Chicago, Hartford, Houston, Los Angeles, Milwaukee, New York, Philadelphia, Sacramento, and San Diego. In addition, 17 states and the District of Columbia voluntarily participate in the RFG program. Id. California has enacted separate, and somewhat more restrictive, requirements for “Phase II” reformulated gasoline. KELLER, ET. AL, at 11. 9. MTBE Advance Notice of Intent, supra note 5, at 16097. 10. MTBE Advance Notice of Intent, supra note 5, at 16098-99. See also MTBE Contamination in Groundwater: Identifying and Addressing the Problem, Hearing Before the House Subcommittee on Environment and Hazardous Materials of the Committee on Energy and Commerce, 107th Cong. 107-108, at 6 (2002) (testimony of John Stephenson, Director of Environmental Issues, U.S. Government Accounting Office) [hereinafter Stephenson Testimony], available at http://energycommerce.house.gov/107/ hearings/05212002Hearing566/Stephenson969.htm (noting that by 2001, Santa Monica had closed seven wells supplying more than 50 percent of the city’s water). 11. MTBE Advance Notice of Intent, supra note 5, at 16099. 12. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 1. 13. Cmtys. for a Better Env’t v. Unocal Corp., Declaration of H. James Reisinger in Support of Joint Defense Case in Chief, July 16, 2001, at 9-10. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

376 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

such as benzene toluene, ethylbenzene, and xylenes (BTEX).14 In addition, MTBE is more resistant to biodegradation than BTEX is.15 Consequently, MTBE is much more likely than BTEX to contaminate drinking water,16 and it is much more difficult to remove from contaminated groundwater than is BTEX.17 Because of these factors, MTBE releases into the environment “require much more aggressive management and remediation than do spills of conventional gasoline.”18 Thus, “risk-based corrective action,” an approach developed by EPA and the petroleum industry to remediate leaking UST sites through “monitored natural attenuation” and a minimum of actual cleanup, is generally not an appropriate approach to MTBE contaminated sites.19

B. Health Effects The health effect of most concern for MTBE is cancer. Although no human epidemiological data exists upon which to base an evaluation of MTBE’s carcinogenicity, MTBE is carcinogenic in mice and rats through both inhalation and dietary exposure.20 EPA has concluded that MTBE is a “possible” human carcinogen and has suggested that MTBE “be regarded as posing a potential carcinogenic hazard and risk to humans.”21 Not surprisingly,

14. MTBE Advance Notice of Intent, supra note 5, at 16097. 15.Id. 16. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 2 (“MTBE, due to its persistence and mobility in water, is more likely to contaminate ground and surface water than the other components of gasoline.”). 17. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 17 (panel concludes that “MTBE is more soluble, does not adsorb as readily to soil particles, biodegrades less rapidly, and thus moves more quickly than other components of gasoline”); KELLER, ET. AL, supra note 5, at 17 (“MTBE is quite persistent in the environment, and given its high solubility, its tendency to move as fast as the groundwater, and its tendency to not biodegrade as much as petroleum hydrocarbons, it is capable of contaminating water resources faster than any other gasoline component.”). 18. MTBE Advance Notice of Intent, supra note 5, at 16102. 19. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 51-52. 20. KELLER, ET. AL, supra note 5, at 24 (“substantial evidence from studies of chronic exposure by either oral or inhalation routes demonstrate that MTBE is carcinogenic in rats and mice”). See also EPA BLUE RIBBON PANEL REPORT, supra note 6, at 76. The mechanisms by which MTBE caused cancer in laboratory animals are not well-understood, although it is certainly possible that formaldehyde and TBA play a role. KELLER, ET. AL, supra note 5, at 25. MTBE moves rapidly into the bloodstream after inhalation exposure where it metabolizes into tertiary butyl alcohol (TBA) and formaldehyde, a known human carcinogen. Id. at 20. 21. MTBE Advance Notice of Intent, supra note 5, at 16098. EPA has not, however, attempted a quantitative estimate of MTBE’s “cancer potency,” because of “limitations in the 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 377 several investigators have “questioned the human relevance of rodent cancer results,” suggesting that MTBE’s mechanism of carcinogenisis is specific to rodent species and therefore not relevant to human beings.22 Perhaps the most striking aspect of the information available on health effects of MTBE more than twenty years after its introduction into gasoline on a broad-scale basis is its dearth. The extent to which MTBE is absorbed into the body via oral ingestion and the associated metabolic byproducts have not been studied in humans.23 Further research is needed on the extent to which animal studies on MTBE are “predictive for human cancer risk.”24 As of early 2000, not a single health effects study of MTBE ingestion in drinking water had been reported.25 Given this lack of information, EPA in May 2002 said that it could not establish a health-based drinking water standard for MTBE because of “uncertainties” in assessing MTBE’s health effects.26 More important than its health effects from a practical perspective is the fact that MTBE has an extremely unpleasant taste and odor.27 Some people are able to detect MTBE in drinking water at levels as low as 2 ppb.28 This very low threshold of tolerance for MTBE in drinking water is frequently cited by the petroleum industry as a virtue, because many consumers cannot tolerate drinking water contaminated at levels high enough to pose a large risk to their health.29 It is, however, a severe detriment for municipal drinking water providers faced with MTBE contamination. EPA has recommended that drinking water suppliers keep MTBE below 20-40 ppb based upon its taste and available data.” Id. Both the International Agency for Research on Cancer (IARC) and the National Institute for Environmental Health Sciences have thus far found insufficient data to classify MTBE one way or the other under their classification schemes. Id. at 16098; EPA BLUE RIBBON PANEL REPORT, supra note 6, at 77. 22. KELLER, ET. AL, supra note 5, at 25. 23.Id. at 21. 24.Id. at 25. 25. MTBE Advance Notice of Intent, supra note 5, at 16098; EPA BLUE RIBBON PANEL REPORT, supra note 6, at 77. EPA, the Health Effects Institute and the Chemical Industry Institute of Toxicology are all undertaking such studies. Id. at 77. 26. Stephenson Testimony, supra note 10, at 2. 27. MTBE Advance Notice of Intent, supra note 5, at 16097 (“turpentine-like”); KELLER, ET. AL, supra note 5, at 20 (“objectionable,” “bitter,” “solvent-like,” and “nauseating”); EPA BLUE RIBBON PANEL REPORT, supra note 6, at 77 (“turpentine-like”). 28. KELLER, ET. AL, supra note 5, at 20. 29. Stephenson Testimony, supra note 10, at 5. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

378 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

odor characteristics,30 but many states have either banned MTBE in gasoline or established drinking water standards at levels ranging from 5 to 70 ppb.31

C. The Leaking Underground Storage Tank Problem. The primary source of MTBE groundwater contamination is leaking USTs at service stations.32 In the early days, service station owners stored gasoline in “bare steel tanks” constructed of carbon steel with welded seams. Because carbon steel tanks quickly sprang leaks in corrosive soil environments, tank manufacturers in later years developed various coatings to be applied to the interior and exteriors of steel USTs.33 Since coated steel tanks could still leak, companies developed “cathodic protection” devices to neutralize underground electrical currents that contribute to corrosion.34 Owners can now eliminate the threat of corrosion altogether by using fiberglass reinforced plastic (FRP) tanks, but they are brittle and subject to breaking if improperly installed.35 As with steel tanks, private standard-setting entities have also suggested specifications for FRP tanks.36 The safest systems employ double- walled steel or FRP tanks with leak detection systems in the interstitial space.37

30.Id. at 5. 31.Id. at 7. 32. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 40. An underground storage tank system consists of a tank containing a liquid and the piping necessary for filling the tank, removing the liquid and allowing air to replace the removed liquid. Katherine S. Yagerman, Underground Storage Tanks: The Federal Program Matures, 21 Envtl. L. Rep. 10136 (1991). A modern single-walled underground storage tank system consists of a corrosion-resistant tank or tanks buried in an excavation that contains impervious walls and floor and has been backfilled with pea gravel or sand to separate the tank from naturally occurring soil. NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION, TECHNOLOGY FOR THE STORAGE OF HAZARDOUS LIQUIDS: A STATE-OF-THE-ART REVIEW (January 1983) [hereinafter cited as State-of-the-Art Review], at 41. 33. State-of-the-Art Review, supra note 32, at 50. 34.Id. at 50. 35.Id. at 52. 36.Id. at 52. 37.Id. at 54. The piping systems are just as important as the tanks themselves in preventing leaks. A piping system consists of pipe, valves, pumps and their associated connecting joints and fittings. Id. at 63. Piping systems can leak due to corrosion, physical breakage or loose connections caused by wear or poor installation. Piping systems must be capable of withstanding corrosive forces as well as the stresses caused by mechanical loading, hydraulic pressures from within, thermal expansion and contraction, and other forces that put stress on system components. Like tanks, pipes can be constructed from steel, coated 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 379

The nation began to experience a silent, but very real leaking USTs problem by the mid-1970s.38 After the problem grew to a crisis over the next decade, Congress enacted the Hazardous and Solid Waste Amendments of 1984 (HSWA) on November 9, 1984, requiring EPA to write regulations for new and existing USTs.39 EPA’s implementing regulations required owners to bring existing systems into compliance with EPA’s new requirements by 1998.40 The upgrade program had barely been completed, however, when EPA began to receive reports of releases from some upgraded systems due to “inadequate design, installation, maintenance, and/or operation.”41 In May 2002, the United States General Accounting Office (GAO) reported that USTs were continuing to leak throughout the country.42

D. Government Reaction to the MTBE Groundwater Crisis By the late 1990s, the MTBE problem had become an environmental disaster in California. In 1999, the Governor of California issued an Executive Order banning MTBE from California gasoline by the earliest possible date.43 EPA itself issued an Advance Notice of Proposed Rulemaking on March 24, 2000 soliciting public comments on whether it should ban or limit MTBE under the Toxic Substances Control Act (TSCA).44

steel, or plastic, and double-walled piping systems are the best way to prevent leaks from those systems. Id. 38. EXXON COMPANY, UNDERGROUND LEAK STUDY 1 (1973) [hereinafter Exxon Underground Leak Study], (reporting that the “subject of underground leaks at service stations” had become “one of growing concern to petroleum marketers”). 39. 42 U.S.C. § 6991, et seq. See Mary Thornton, Reagan Signs Bill Expanding EPA Authority, WASHINGTON POST, Nov. 10, 1984, at A4. 40.See text accompanying notes 80 - 94, infra. 41. EPA BLUE RIBBON PANEL REPORT, supra note 6, at 1. 42. Stephenson Testimony, supra note 10, at 1. 43. Governor Gray Davis, Executive Order D-5-99 (March 25, 1999), available at http://www.governor.ca.gov/state/govsite/gov_htmldisplay.jsp, via the “Press Room” and “Executive Orders” links (exact URL changes each session). After the federal EPA denied California’s request for a waiver from federal requirements for “reformulated gasoline,” however, Governor Davis had to postpone the order, and MTBE remains in California gasoline. See Press Release, “Statement by Governor Gray Davis on Bush Administration Denial of California Oxygenate Waiver Request” (June 12, 2001), available at http:///www.governor.ca.gov/state/govsite/gov_homepage.jsp, via the “Press Room” and “Press Releases” links. 44. Environmental Protection Agency, Methyl Tertiary Butyl Ether (MTBE); Advance Notice of Intent To Initiate Rulemaking Under the Toxic Substances Control Act To Eliminate or Limit the Use of MTBE as a Fuel Additive in Gasoline, 65 Fed. Reg. 16094 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

380 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Although the TSCA action remains on the Unified Federal Agenda,45 the Bush Administration has allowed it to languish there for four years. The continued shelving of this action remains the petroleum industry’s additive of choice for the reformulated gasoline program.46

II. IT’S NOT JUST ABOUT PREDICTABILITY; IT’S ALSO ABOUT CONTROL

In the debates over whether national standards should preempt tort actions under state common law, risk-producing companies and their allies in academia and the think tanks frequently stress the desirability of uniform national rules to provide the predictability necessary for long-term investment decisions.47 “We don’t care how stringently you regulate,” the argument goes, “just so long as the rules are the same for everyone and they are the same throughout the country” we will comply. Companies protest that they are not opposed to health, safety and environmental regulation. They just want a level playing field throughout the country.48

(March 24, 2000). 45. Environmental Protection Agency, Agenda of Regulatory and Deregulatory Actions, 69 Fed. Reg. 38153 (June 28, 2004). 46. Currently, California, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, New York, Ohio, South Dakota, and Washington have banned the use of MTBE in gasoline. See Energy Information Administration, Status and Impact of State MTBE Ban, at http://www.eia.doe.gov/oiaf/servicerpt/mtbeban/ (last visited Jan. 19, 2005). 47.See Elaine A. Welle, Freedom of Contract and the Securities Laws: Opting Out of Securities Regulation by Private Agreement, 56 WASH. & LEE L. REV. 519, 548-49 (1999) “Under a common law regime, it would be difficult for firms and investors to predict what the law requires. Parties will not know until long after the fact whether they have violated the law. As a result, some firms may incur significant expenses to reduce their potential exposure”); see also 149 CONG. REC. S15217, at S15224 (daily ed. Nov. 20, 2003) (statement of Sen. Cornyn) (“In other words, the Federal Government said: Please invest your money, Mr. Businessman. Please create this infrastructure to produce this reformulated gas additive that allows our air to be cleaner. We are not going to let that happen and then years later, when perhaps memories dim and when someone has another idea, to say: Yes, we have you. Now you are going to be liable for money damages because you have done what Congress and the EPA asked you to do.”) 48. The Bush Administration has recently taken this position in asserting that state common law claims are preempted by the Food, Drug and Cosmetics Act. See Statement of Interest of the United States of America, Murphree v. Pacesetter, Inc. et al., No. 005429-00-3 (Tenn. Circuit Ct. Dec. 12, 2003), cited and quoted in Horn v. Thoratec Corp., 376 F.3d 163, 171 n.13, 178 (3rd Cir. 2004). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 381

From a business perspective, this is an entirely plausible claim. It can be terribly inefficient to comply with fifty different labeling requirements for a single product. Anticipating what juries in fifty different states will determine is an adequate warning on a label can be even more enervating for a company serving a national market. I am, however, convinced that there is more to industry- backed attempts to use federal preemption to block state tort claims than a simple quest for predictability. When well-financed multinational corporations play the regulation game at the federal level, they care very much about how stringently the government regulates. I have studied and participated in many major environmental and occupational health rulemaking proceedings, and I have yet to observe an industry representative tell the agency that it should feel free to make the regulations as stringent as it likes so long as the rules are uniform across the country. I have also frequently observed that, as between the corporate interests and representatives of the potential victims of corporate misbehavior, the playing field is not especially level at the federal level. In my experience, the monetary resources and expertise available to the regulated industries in the typical EPA or OSHA rulemaking far exceed those available to public interest groups and even major labor unions. Especially during the past two decades, regulated entities and their trade associations have wielded sufficient power in Washington D.C. to ensure that the restrictions that federal regulatory agencies impose upon their products and activities are not especially stringent. It is by now universally acknowledged that health and environmental standard-setting is in most instances an exercise not so much in determining scientific facts as in applying predetermined regulatory policies to highly uncertain data through controversial modeling exercises.49 At the street level, companies and their consultants are frequently able to persuade the agencies to interpret the relevant data and select models in ways that minimize the risks posed by their products and activities. Regulatory agencies are policymaking entities that advance the

49.See Thomas O. McGarity & Wendy E. Wagner, Legal Aspects of the Regulatory Use of Environmental Modeling, 33 Env. L. Rept. 10751 (2003); Wendy E. Wagner, The Science Charade In Toxic Risk Regulation, 95 Colum. L. Rev. 1613, 1622-27 (1995); Thomas O. McGarity, Substantive and Procedural Discretion in Administrative Resolution of Science Policy Questions: Regulating Carcinogens in EPA and OSHA, 67 Geo. L.J. 729 (1979). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

382 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 policies of the President, and they are politically accountable both to the President and to the various congressional committees that oversee their activities and appropriate their funds. Judges and juries, by contrast, are supposed to be neutral decision makers operating in an institutional context that is consciously designed to be politically unaccountable. While corporate tort defendants typically have more resources to devote to litigation than the typical plaintiff, the practical impact of the resource disparity may not be as large in the context of litigation, especially when institutional actors like state attorneys general are involved. Companies understand that local judges and juries are less likely than congresspersons and regulatory agency heads to be swayed by large campaign contributions and behind-the-scenes lobbying. The debate is not just about predictability. It is also about the fact that corporate interests have a great deal more practical control over the federal regulatory process than they have over courts and juries. Several aspects of the MTBE regulatory experience help explain why powerful regulated entities like the petroleum industry prefer the comfortable environment of a regulatory proceeding to an uncomfortable and risky trial.

A. The MTBE Fuel Additive Waiver The 1977 Amendments to the Clean Air Act made it unlawful after March 31, 1977, to market a fuel for use in catalyst-equipped automobiles that was not substantially similar to the fuels used in the emissions certification process for those vehicles.50 EPA may waive that prohibition upon a demonstration that the emissions of the fuel do not “cause or contribute” to a failure of the catalytic converter.51 To protect public health, however, EPA has the burden of initiating a rulemaking process and demonstrating that the additive can not “reasonably be anticipated to endanger” public health.52 On February 23, 1979, EPA approved the Arco Petroleum Company’s waiver petition for MTBE as a gasoline additive based upon a finding that it would not adversely affect vehicle emissions or damage emission control devices.53 Because the waiver was

50. 42 U.S.C. § 7545(f)(1)(A). 51. 42 U.S.C. § 7545(f)(4). 52. 42 U.S.C. § 7545(c)(1). 53. Application for Methyl Tertiary Butyl Ether, Decision of the Administrator, 44 Fed. Reg. 12242 (1979) [hereinafter cited as MTBE Waiver]. See also, Green Light for Gasoline 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 383 mandatory for any new fuel that did not interfere with pollution control devices, the agency did not consider any possible adverse effects on air or groundwater quality when it granted the waiver. Moreover, EPA understandably did not initiate any action with respect to MTBE under its authority to protect the public health, because it had no information at the time on which to base an “endangerment” finding. Thus, MTBE entered the gasoline supply without any inquiry at the federal level into the potential adverse health and environmental consequences of that development.

B. The TSCA Testing Agreement EPA had authority under section 4 of the TSCA to order the manufacturer of a chemical substance to conduct specific health and environmental toxicity testing if EPA determined that sufficient testing was not already available and that the chemical might present an unreasonable risk to the environment or would be produced in substantial quantities and enter the environment in substantial quantities or give rise to significant human exposure.54 The statute also created an Interagency Testing Committee (ITC), composed of representatives of several federal agencies, to nominate for federally mandated testing chemicals that met this multi-faceted threshold test.55 Once a chemical appears on the ITC “priority list” of 50 chemicals, EPA must decide within one year whether to issue a rule ordering further testing.56 By the time that the ITC began its investigation of MTBE in 1985, it was already in heavy use, and the industry had already initiated its own health and environmental testing program for MTBE. In October, 1980, the American Petroleum Institute’s Toxicology Committee approved several core toxicology tests on inhalation exposure to MTBE as Phase I of a larger two-part project.57 The

Additive, CHEMICAL WEEK, March 7, 1979, at 18. 54. 15 U.S.C. § 2603(a)(1). 55. 15 U.S.C. § 2603(e)(1)(A). 56. 15 U.S.C. § 2603(e)(1)(B). 57. Minutes of the American Petroleum Institute Medicine and Biological Science Department Toxicology Committee Meeting of October 23, 1980, Exhibit 4 to Deposition of Randy N. Roth, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000), at 3. The tests were performed by Bio/Dynamics, Inc. and supervised by a private consultant, Tracor-Jitco, and included a metabolic disposition study, a 2-species teratology study and a single generation reproductive/fertility study. Later phases of the program were to include carcinogenisis and neurotoxicity studies among others, but they were never formally approved. Id. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

384 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 sponsoring companies, however, consistently balked at suggestions by the API Ad Hoc MTBE Toxicology Group that MTBE be tested in drinking water.58 When the Phase I studies were finished in mid- 1984, the industry concluded that the results were “rather unremarkable in terms of causing harm.”59 Instead of moving to Phase II (long-term carcinogenicity studies that might have involved groundwater exposure), the industry decided to see how EPA reacted to the Phase I tests. The API group hoped that the industry’s proactive effort would “preclude . . . an unnecessary test rule by EPA under TSCA.”60 The industry then launched a major effort to avoid an EPA rule requiring “time consuming and expensive” testing.61 On October 31, 1986, the ITC recommended that MTBE be tested for chronic inhalation toxicity, but made no mention of testing in drinking water.62 The industry responded that testing for chronic inhalation health effects was “not necessary,” because “worst case” exposures to MTBE from gasoline vapors were “well below the ‘no observable adverse effect level’ even when very conservative safety factors are applied.”63 The industry did not mention the possibility that chronic exposure might occur via ingestion of contaminated groundwater.64 On December 17, 1986, EPA hosted a “focus meeting” on MTBE at which most of the major industrial players gathered to discuss the possibility of arriving at an agreed upon consent order for performing additional testing on MTBE.65 No representatives of

58.Id. at 60 (industry did not conduct tests on MTBE in drinking water); American Petroleum Institute, Medicine and Biological Science Department, Toxicology, Minutes of Meeting of October 30, 1981, Exhibit 10 to Deposition of Randy N. Roth, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000), supra note 57, at 4 (recommendation that MTBE be tested in drinking water). 59. American Petroleum Institute, Post Completion Critique, August 12, 1984, Exhibit 20 to Deposition of Randy N. Roth, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000), at 3. 60.Id. at 2. 61. W.J. Kilmartin & J.M. DeJovine, Contact Report, undated ca: July 9, 1986, at 1. 62. Nineteenth Report of the Interagency Testing Committee to the Administrator; Receipt and Request for Comments Regarding Priority List of Chemicals, 51 Fed. Reg. 41417 (1986). 63. Letter to TSCA Public Information Office from S. A. Ridlon, dated December 12, 1984, Exhibit 5 to Deposition of Randy N. Roth, Cmtys for a Better Env’t v. Unocal Corp., June 6, 2000, at 1. 64.See Deposition of Randy N. Roth, Cmtys for a Better Env’t v. Unocal Corp., June 6, 2000, at 49. 65. Environmental Protection Agency, Minutes for the Public Focus Meeting For Methyl 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 385 environmental groups attended this or any of the subsequent focus meetings. At the meeting, EPA’s project manager noted that “an additional concern” identified by EPA’s Test Rules Development Branch was “contamination of ground water supplies by MTBE.”66 She related that more than 700,000 USTS were used for petroleum products and “about 30% of these tanks leak.”67 The industry representatives, however, insisted that there was no reason to require any additional testing of MTBE because there should be “very little cause for concern of health hazards with MTBE.”68 After more than a year of additional negotiations, during which the use of MTBE in gasoline steadily increased, EPA published notice of a Consent Order announcing a testing program to which EPA and five major oil companies had agreed.69 Although the companies agreed to conduct several long-term toxicity tests,70 they did not agree to conduct any environmental testing, and they agreed to very little in the way of toxicity testing of MTBE in drinking water.71

C. The USTS Implementation Regulations In early 1979, when EPA approved MTBE for gasoline, the national media had not yet focused on leaking USTS, and Congress had not yet given EPA any authority to regulate it.72 Yet by as early as 1973, the “subject of underground leaks at service stations” had become “one of growing concern to petroleum marketers.”73 In the

tert-Butyl Ether (MTBE), dated December 17, 1986, Exhibit 7 to Deposition of George Yogis, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000). 66.Id. 67.Id. A trade publication reported that EPA officials believed that groundwater contamination was “a major concern” for the agency. EPA Launches Probe of MTBE Potential Adverse Health Effects, ALCOHOL WEEK, Dec. 22, 1986, Exhibit 1 to Deposition of Samuel Heetrick, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000), Attachment 2. 68. EPA Launches Probe of MTBE Potential Adverse Health Effects, ALCOHOL WEEK, Dec. 22, 1986, Exhibit 1 to Deposition of Samuel Heetrick, Cmtys for a Better Env’t v. Unocal Corp. (June 6, 2000), Attachment 2. 69. Testing Consent Order on Methyl Tert-Butyl Ether and Response to the Interagency Testing Committee, 53 Fed. Reg. 10391 (March 31, 1988) [hereinafter cited as MTBE Testing Consent Order]. 70. MTBE Testing Consent Order, supra note 69. 71.Id. 72. Lawrence Mosher, A Host of Pollutants Threaten Drinking Water from Underground, THE NAT’L J., Aug. 16, 1980, at 1353. 73. Exxon Corporation, Underground Leak Prevention/Detection at Service Stations, dated April 30, 1979, at 1. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

386 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

mid-1970s, API created three task forces to address what was rapidly becoming a serious leaking USTS problem.74 As a result, some companies began replacing aged USTS as early as the late 1970s.75 As Congress began to react to public pressure to do something about the leaking USTS problem, API strongly resisted new legislation.76 API urged Congress simply to require EPA to promulgate “performance standards” based upon API’s “recommended practices.”77 EPA, on the other hand, was not a forceful advocate for a brand new regulatory program during the anti-regulatory years of the Reagan Administration, and the agency urged Congress to refrain from legislating until EPA had a “more refined idea” of how the problem should be addressed.78 Congress nevertheless enacted the Hazardous and Solid Waste Amendments of 1984 (HSWA) on November 9, 1984.79 Among other things, the statute required EPA to promulgate regulations for new and existing USTS establishing such technical requirements for leak detection and leak prevention “as may be necessary to protect human health and the environment.”80 On September 23, 1988, EPA published final regulations establishing technical requirements for USTS.81 Noting that the statute authorized EPA to “consider industry practices and

74.Id. at 1-2. The Leak Prevention Task Force was created to update tank installation procedures and develop a mathematical leak predictor model. Id. at 1. The Leak Detection Task Force was assigned the tasks of developing an implementation plan for inventory control procedures and conducting leak detector research. Id. at 2. The Leak Clean-Up Task Force was to update and publish clean-up procedures and develop the industry’s position on how to respond to “unknown source leaks.” Id. 75. Cmtys for a Better Env’t v. Unocal Corp., Exxon Corporation’s and Exxon Mobil Corporation’s Trial Brief, dated July 17, 2000, at 17. 76. Testimony of William O’Keefe, Vice-President, American Petroleum Institute before the Senate Committee on Environment and Public Works, March 1, 1984, at 1, 5. 77.Id. at 7. 78. STEFFEN W. PLEHN, UNDERGROUND TANKAGE THE LIABILITY OF LEAKS 37 (Petroleum Marketing Education Foundation 2d ed. 1986) (quoting Alvin Alm, Deputy Administrator, EPA). 79. 42 U.S.C. § 6991, et seq. See Mary Thornton, Reagan Signs Bill Expanding EPA Authority, WASH. POST, Nov. 10, 1984, at A4. 80. 42 U.S.C. § 6991b(c). The regulations were supposed to contain at least the following requirements: (1) maintenance of a leak detection system, an inventory control system together with tank testing, or a comparable release identification system; (2) maintenance of records for the leak detection, inventory control, or comparable system; (3) reporting of releases and corrective actions; (4) corrective actions; and (5) requirements for the closure of tanks to prevent future releases. RCRA § 9003(c), 42 U.S.C. § 6991b(c). 81. Underground Storage Tanks; Technical Requirements, 53 Fed. Reg. 37082 (Environmental Protection Agency, 1988) [hereinafter cited as Final USTS Rule]. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 387

consensus codes in developing appropriate UST regulations,”82 the agency explained that it had relied “as much as possible” on “familiar industry codes.”83 For new and replacement tanks, the final regulations required only protected single-walled tanks with release detection.84 The protection could come from cathodic protection of a lined steel tank or from fiberglass reinforced plastic construction.85 Although the agency agreed with commenters who suggested that “there will probably be more releases to the environment” from single-walled tanks than from double-walled tanks with interstitial monitoring, the more protective option was “not believed to be necessary to protect human health and the environment.”86 Double-walled systems entailed “greater capital and installation costs” that did not “justify” the environmental benefits, and the “current trends in industry” were in any event not in the direction of double-walled tanks.87 The regulations required a “gradual” upgrade or replacement of existing tanks over a period of 10 years.88 Instead of requiring upgrades to the new tank standards, however, EPA allowed owners to meet the upgrade requirements by lining the interiors of existing steel tanks in accordance with industry standards so long as the tanks were tested within the next ten years and at five year intervals thereafter.89 To meet the statutory leak detection

82.Id. at 37084. The agency did clarify what it meant by a “nationally recognized organization” from which codes would be acceptable. Id. at 37185. That term was defined to mean “a technical or professional organization that has issued standards formed by the consensus of its members.” Id. EPA preferred that the organization ensured the consideration of “all relevant viewpoints and interests, including those of consumers and future or existing and potential industry participants,” but it did not insist on that. Id. It listed API, the Petroleum Equipment Institute and the Steel Tank Institute as entities that were clearly nationally recognized organizations. Id. 83.Id. at 37095. On the nagging question of whether modified codes would become legally applicable as they were modified, thus effectively removing EPA’s discretion to define the law, the agency concluded that “the industry codes that are in effect at the date of publication of the final rule” were sufficiently protective of human health and the environment. Id. at 37185. The regulations did not require the use of future editions of the codes, but use of such codes by implementing agencies was “encouraged as the updated codes will probably provide for newer, more effective technologies and practices.” Id. The agency would not, however, allow the use of defunct codes that had been superseded by more recent codes because some of them “were 84.Id. at 37101. 85.Id. at 37125. 86.Id. at 37101. 87.Id. at 37102. 88.Id. at 37103. 89.Id. at 37131. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

388 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 requirements, the regulations allowed owners to choose from among six broad leak detection technologies, each of which was required to comply with “method-specific” performance standards.90 The petroleum industry was, not surprisingly, “comfortable with” the technical requirements, and it expressed relief that the regulations were so flexible.91 Environmental groups, on the other hand, strongly criticized EPA for not requiring new and replacement tanks to be double-walled.92 They also maintained that EPA gave the industry far too long to replace or upgrade steel tanks.93 A spokesperson for the Environmental Defense Fund complained that the regulations were designed to minimize the economic impact on the industry, not to protect human health and the environment.94 Perhaps because they did not want to delay EPA’s implementation of the regulations, however, the environmental groups declined to challenge them in court.

D. Conclusion It seems reasonably clear that the petroleum industry dominated the decisionmaking process for granting the MTBE waiver and for deciding how much testing should be done for MTBE’s environmental effects. Indeed, there is no evidence that public interest groups made their views known to the agency at either juncture. The potential adverse effects of MTBE on groundwater were mentioned (by EPA’s staff) during the TSCA testing negotiations, but EPA failed to order groundwater-related testing. That decision may be attributable to the absence of an environmental group at the bargaining table.95 The industry

90.Id. at 37142. 91. Angel Abcede, How Industry Views Impending Underground Tank Regulations; Petroleum Storage, NATIONAL PETROLEUM NEWS, July 1988, at 40. 92. Conrad B. MacKerron, EPA Lays Ground Rules for Tanks, CHEMICAL WEEK, Sept. 21, 1988, at 13. See also Philip Shabecoff, E.P.A. Issues New Rules on Underground Tanks, N.Y. TIMES, Sept. 14, 1988, at B6. 93.See id. 94. See id. 95. An environmental group would have been entitled to a seat at the table if it had asked for one. EPA during the early 1980s had been sued by NRDC for conducting “closed-door” negotiations over TSCA testing agreements. After the court agreed with NRDC, EPA agreed to craft procedures for such testing agreements that would make all such negotiations open to public participation. See Testing Consent Agreement Development for Chemical Substances; Public Meetings, 51 Fed. Reg. 41331 (1986). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 389 effectively persuaded EPA to adopt a “see no evil” policy, and MTBE-containing gasoline began to leak into aquifers. The industry was also heavily involved in EPA’s attempts to write standards for leaking underground storage tanks, and those regulations relied to an unprecedented extent on industry- promulgated standards. A few environmental groups did participate in these important and highly publicized proceedings, but they failed to persuade EPA during the waning years of the Reagan Administration that the environmental benefits of double- walled USTs “justified” the added costs. This outcome guaranteed that leaking would continue well into the next century. One lesson that the MTBE experience makes painfully clear is that society cannot rely exclusively upon the regulatory process to protect it from the future adverse environmental effects of decisions that regulated industries make today. Although regulatory agencies were created specifically for the purpose of protecting citizens from the long-term effects of short-term decisions, they face enormous pressures from the regulated industries to minimize today’s costs even at the expense of tomorrow’s environmental benefits. EPA’s regulatory response to the looming MTBE crisis provided all of the predictability that the industry desired, but it also reflected the substantial degree of control that the industry had over the regulatory process. Another lesson to take away from the MTBE experience is that potential victims cannot rely exclusively upon special interest groups to ensure that regulatory agencies reduce long-term environmental risks through the regulatory process. Even when they are invited to participate, nonprofit public interest groups are always spread very thinly, and it is impossible for them to keep up with every scientific development relevant to the regulations that they try to follow. They must focus on the issues they (and their funders) deem most important at the time. Unfortunately, MTBE in groundwater did not become one of those issues until the late 1990s, when MTBE began to show up in the groundwater of Santa Monica, California and other communities. Ironically, the most severely adversely affected interest in the MTBE story, that of the owners of water wells threatened with MTBE contamination, was not represented in any of these rulemaking efforts. Because they were unaware of the threat that MTBE posed to their interests when EPA was deciding whether to allow MTBE in gasoline, 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

390 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 whether to require additional testing and whether to require double-walled tanks and stringent leak detection, the national associations of municipal drinking water suppliers did not become involved in the regulation of gasoline additives and USTS until the late 1990s, long after many thousands of gallons of MTBE were already in the ground.

III. IT’S NOT JUST ABOUT EFFICIENCY; IT’S ALSO ABOUT FAIRNESS

Regulated industries and their allies in the think tanks argue that the government should not impose controls unless it can demonstrate that the benefits of such controls outweigh the costs.96 These arguments reached a fever pitch in the 104th Congress when the industry advocates pressed for the enactment of omnibus regulatory reform legislation that would have imposed a cost- benefit decision criterion on all health, safety and environmental regulation.97 Legislation of this sort was said to be necessary because the statutes that govern health, safety and environmental standard-setting generally do not subject regulation to a cost- benefit limitation. Instead, they typically require the regulated industries either to meet stringent health-based standards (which are sometimes insensitive to costs altogether) or to install the best available technologies to reduce health, safety and environmental risks. Thus far, advocates of environmental deregulation have been largely unsuccessful in persuading Congress to impose a cost- benefit decision criterion on health, safety and environmental regulation. They have been remarkably successful, however, in a more sophisticated sabotage of the implementation of those statutes by persuading Presidents to require agencies to engage in detailed cost-benefit analysis of regulations subject to centralized review in the Office of Management and Budget, a requirement that the Unfunded Mandates Reform Act of 1995 made mandatory

96.See ROBERT W. HAHN, REGULATORY REFORM: RISKS, COSTS, AND LIVES SAVED: GETTING BETTER RESULTS FROM REGULATION 21 (1996); Hearings Before the Senate Committee on Governmental Affairs, 104th Cong. (1995) (statement of Frederick L. Webber, Chemical Manufacturers Ass’n). 97.See Robert L. Glicksman & Stephen B. Chapman, Regulatory Reform and (Breach Of) the Contract With America: Improving Environmental Policy or Destroying Environmental Protection? 5 KAN. J.L. & PUB. POL’Y 9 (Winter 1996). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 391 for “major” federal regulations.98 Consequently, although the regulatory agencies are rarely required outright to choose an option that meets the cost-benefit test, they face strong pressures to select an option from among those that meet the cost-benefit test in the required analyses. The professed goal of cost-benefit analysis is regulatory results that are efficient in the sense that they maximize the resources available to society.99 The theoretical basis for allocative efficiency as a regulatory goal was provided decades ago by two economists, Nicholas Kaldor and John Hicks, who argued that a change is efficient if, at the end of the day, the winners win more than the losers lose. This is so because the change increases the net resources that are available to all human beings by the difference between the winners’ winnings and the losers’ losses. In theory, the winners could compensate the losers and everyone would come out ahead. While this efficiency-oriented view of regulation is attractive in theory, it becomes much less attractive in practice because nothing in the theory requires that the winners actually compensate the losers. A change is efficient if it results in an additional one million dollars in the pocket of Bill Gates and it takes $9,999 from 100 people with yearly incomes of $20,000. Without some explanation for how such a change would increase the welfare of everyone, a government-sanctioned change would probably appear highly inequitable to most “unsophisticated” observers. Even if the policy is better for society overall, why should the winners not be asked to compensate the losers? If the winners are blameworthy in bringing about the change or otherwise undeserving of the benefits derived, the case for mandated compensation is even stronger. Tort law can provide the vehicle through which such compensation can be required. This compensation function of the common law is entirely unrelated to regulatory law as currently practiced. Regulatory agencies do not require that persons injured by regulated products or activities be compensated for their losses, even when the conduct at issue violates specific legal requirements

98. Unfunded Mandates Reform Act of 1995, 2 U.S.C. § 1511 (2004). See generally, THOMAS O. MCGARITY, SIDNEY SHAPIRO & DAVID BOLLIER, SOPHISTICATED SABOTAGE: THE INTELLECTUAL GAMES USED TO SUBVERT RESPONSIBLE REGULATION (2004). 99.See A. MYRICK FREEMAN, III, ROBERT H. HAVEMAN, & ALLEN V. KNEESE, THE ECONOMICS OF ENVIRONMENTAL POLICY (1973); ALLEN V. KNEESE & CHARLES L. SCHULTZ, POLLUTION, PRICES, AND PUBLIC POLICY (1975). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

392 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 that the agencies have established. Tort law can, at the very least, reinforce the mandates of regulatory law by requiring compensation for losses attributable to violations of regulatory standards. It can, however, go beyond regulatory law to require compensation even when it cannot be shown that the product or activity is Kaldor-Hicks inefficient if safer alternatives, such as a simple warning, are available at a cost that is not grossly disproportionate to the cost of more “efficient” alternatives.

A. The TSCA Testing Agreement Although section 4 of TSCA,100 discussed above, arguably required a cost-benefit approach to determining whether MTBE might present an unreasonable risk to the environment, it did not require EPA to balance costs against benefits in ordering testing for high-volume chemicals such as MTBE.101 The extent to which efficiency considerations played a role in determining the amount of testing that EPA required of the petroleum industry in 1988 is difficult to determine, because the agency did not engage in a public rulemaking process under which it would have published an analysis of its requirements in the Federal Register. Instead, it negotiated a consent decree in informal meetings attended almost exclusively by representatives of the agency and the industry. In any event, it would have been very difficult in any event for the agency to prepare a formal cost-benefit analysis of testing requirements. Although the costs of various laboratory tests would have been fairly easy to calculate, determining the potential benefits of additional tests would have involved an exceedingly complex analytical exercise. It seems clear, however, that efficiency considerations played a fairly strong role in the relatively modest set of testing requirements that resulted from the EPA-industry negotiations. Industry was very concerned about the cost of additional testing, and it was strongly of the opinion that the existing information on MTBE did not suggest that additional testing was necessary. The EPA staff was apparently persuaded by these industry concerns to require no testing at all of MTBE in

100. 15 U.S.C. § 2603(a)(1)(2004). 101. The use of the word “unreasonable” in a statute typically connotes a congressional preference for cost-benefit balancing. See Thomas O. McGarity, Substantive and Procedural Discretion in Administrative Resolution of Science Policy Questions: Regulating Carcinogens in EPA and OSHA, 67 Geo. L.J. 729 (1979). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 393 human beings via the drinking water route of exposure.

B. The Proposed TSCA Ban of MTBE Under section 6 of TSCA, whenever EPA finds that the manufacture or use of a chemical substance presents an “unreasonable risk of injury to health or the environment,” it must issue a rule applying “one or more” of eight requirements “to the extent necessary to protect adequately against such risk, using the least burdensome requirements.”102 Section 6 is in fact one of the few environmental statutes that clearly requires EPA to apply a cost- benefit decision criterion in deciding how stringently to regulate. Indeed, EPA may adopt only the least stringent of those requirements for which the benefits outweigh the costs.103 In its March 2000 Advance Notice of Proposed Rulemaking, EPA announced that it was considering invoking this authority to bring about a complete or partial ban of MTBE in gasoline. The industry, of course, fiercely resisted this suggestion, arguing that the economic and air quality benefits of MTBE far exceeded its economic and water quality costs.104 EPA has taken no action whatsoever on this proposal during the ensuing four-and-a-half years. Given the huge hurdle that it will face in justifying a prospective ban under a statute that requires it to demonstrate in advance that the benefits of the ban would outweigh the costs, this lack of activity is not at all surprising. The industry would unquestionably challenge any such ban in the United States Court of Appeals for the Fifth Circuit, a court that effectively prevented EPA from banning asbestos, a chemical with a long history of adverse health effects, because the agency could not persuade the court that a ban would be economically efficient.105 Given the wealth of information on the adverse health effects of asbestos and the comparative dearth of information on the adverse economic and environmental effects of MTBE (due in part to the tentativeness of EPA’s 1988 testing requirements), it is hard to

102. 15 U.S.C. § 2605(a)(2004). 103. Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th Cir. 1991). 104. See, e.g., Letter to Docket OPPTS-62164 U.S. Environmental Protection Agency, OPPT Document Control Office from Edward Murphy, American Petroleum Institute (May 5, 2000). 105. For an extensive critique of the Corrosion Proof Fittings opinion, see Thomas O. McGarity, The Courts and the Ossification of Rulemaking: A Response to Professor Seidenfeld, 75 Tex. L. Rev. 525 (1997). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

394 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 imagine that a ban on MTBE would survive judicial review in that court.

C. The USTS Implementation Regulations Under RCRA, EPA was required to promulgate leak detection, prevention, and correction regulations “as may be necessary to protect human health and the environment.”106 That standard clearly required EPA to consider the health and environmental benefits of alternative technical standards because requirements with few benefits would not be “necessary.” Although the statute did not explicitly require EPA to balance costs against benefits in promulgating the regulations, the agency invoked efficiency considerations in its explanation for why it did not require more protective double-walled tank systems. The preamble to the final rules explained that double-walled systems entailed “greater capital and installation costs” that did not “justify” the environmental benefits.107 Thus, efficiency considerations helped ensure that the MTBE continued to flow into groundwater as new and replacement single-walled tanks predictably sprang undetected leaks.

D. Conclusion The Lake Tahoe lawsuit and the many pending lawsuits brought by municipalities for damage to municipal treatment systems have demonstrated that MTBE from leaking USTS has caused a great deal of damage. The industry has already paid more than one hundred million dollars in settlements, and, in the absence of legislation granting it relief from pending lawsuits, it could wind up paying out more than a billion dollars in judgments and settlements. None of this compensation would have been required by the regulatory system. More importantly, none of the damage that has given rise to the lawsuits demanding compensation was prevented by a regulatory system that at several critical junctures was dominated by efficiency concerns. Indeed, the existing regulatory regime proved incapable of regulating asbestos, a notoriously dangerous substance, even after tort litigation had resulted in the economic demise of several of its major producers. The winners of the regulatory decisionmaking process at the

106. RCRA § 9003(a), 42 U.S.C. § 6991b(a)(2004). 107. EPA, Final USTS Rule, supra note 81, at 37102. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 395 federal level were the regulated petroleum companies that received the benefits of reduced testing, lax UST regulations, and the continuing availability of MTBE. The losers were municipalities and individual landowners who suffered large economic losses. Even if we posit that EPA made the “right” decisions from the perspective of allocative efficiency, fairness considerations demand that the winners compensate the losers.

IV. IT’S NOT JUST ABOUT PROTECTION; IT’S ALSO ABOUT ACCOUNTABILITY

Congress created regulatory agencies like EPA to protect society from the risks posed by society’s products and activities. The regulated industries and their allies in the think tanks often argue that because federal regulatory agencies have the expertise to evaluate those risks and put them in the proper perspective they should have the exclusive authority to address those risks. State courts and juries, the argument continues, are wholly lacking in the technical expertise needed to make sound policy judgments about the social acceptability of the risks that their products and activities post to human health and the environment. Therefore, if a federal agency determines that a particular product or activity comes up to federally mandated protective standards, state juries should not be permitted to mandate more stringent requirements indirectly through tort actions. In short, juries should not be in the business of second-guessing the judgments of the expert regulatory agencies to which Congress has delegated the power to determine the social desirability of risky products and activities.108 In the area of environmental regulation, however, Congress seldom explicitly provides that the regulatory standard is the absolute maximum beyond which states are powerless to protect their citizens. Indeed, Congress frequently explicitly allows the states to require more than the federal minimum by way of state regulation or common law liability.109 Similarly, the Supreme Court has recognized a general presumption against federal preemption of state common law that recognizes the “historic primacy of state

108. Kimberly A. Pace, Recalibrating the Scales of Justice Through National Punitive Damage Reform, 46 AM. U. L. REV. 1573, 1635 (“The agencies that promulgate regulations are experts in their field and they know, better than judges or juries, what standards of safety are reasonable in a particular industry.”). 109. See, e.g., 33 U.S.C. § 1370; 42 U.S.C. § 7416. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

396 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 regulation of matters of health and safety.”110 This presumption against preemption makes a great deal of sense for many reasons. First, the regulatory process is an extraordinarily cumbersome process that is exceedingly easy to derail. For that reason, it is very difficult for agencies to update their rules rapidly enough keep up with scientific developments. This is especially true in the case of new products and activities where the regulatory action is necessarily based upon preliminary tests. Second, there is much evidence that companies are quite adept at manipulating the regulatory process to achieve the regulatory results that they desire.111 Much of this evidence of manipulation comes from tort litigation where inquisitive lawyers gain access to company documents through aggressive discovery. The agencies become aware of this manipulation long after the fact, if at all, because they rarely initiate equivalent investigations into industry underreporting and deception on their own. Tort litigation provides a unique vehicle for revealing corporate malfeasance and for holding companies accountable for misrepresenting or withholding from public view critical facts concerning the adverse health and environmental effects of their products and activities.

A. Attack on Garrett and Moreau In the early 1980s, leaking underground storage tanks became an especially significant issue in the state of Maine, because more than 95 percent of its population depended upon groundwater for its drinking water. In 1986, two employees of the Maine Department of Environmental Protection (DEP), Peter Garrett and Marcel Moreau, drafted a paper on the extent to which groundwater in Maine was becoming contaminated by MTBE.112 The paper reported their findings that MTBE moved faster and farther in groundwater than did the other constituents of gasoline and that it

110. Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996). 111.See Thomas O. McGarity, Beyond Buckman: Wrongful Manipulation of the Regulatory Process in the Law of Torts, 41 WASHBURN L. J. 549 (2002). See generally MICHAEL D. GREEN, BENDECTIN AND BIRTH DEFECTS (1996); DAN FAGIN & MARIANNE LAVELLE, TOXIC DECEPTION: HOW THE CHEMICAL INDUSTRY MANIPULATES SCIENCE, BENDS THE LAW, AND ENDANGERS YOUR HEALTH (1999). 112. Peter Garrett, Marcel Moreau & Jerry D. Lowry, Methyl tertiary Butyl Ether as a Ground Water Contaminant, draft paper to be published in Proceedings of Petroleum Hydrocarbons and Organic Chemicals in Ground Water Conference, NWWA-API (Nov. 1986); Exhibit 6a to Cmtys for a Better Env’t v. Unocal Corp., Deposition of Curtis Stanley (May 6, 1999), at 238. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 397 was more difficult to remediate.113 In the “policy” section of the paper, the authors recommended several options for addressing the MTBE groundwater problem, including the option of banning MTBE altogether. At the very least, it was clear that if MTBE possessed the characteristics that Garrett and Moreau attributed to it, then the industry was going to have to spend a lot more money remediating contaminated sites. Because Garrett had asked Arco Chemical Company, the primary domestic manufacturer of MTBE at the time, for information on MTBE’s physical characteristics as he was writing the paper, the industry was aware of the paper’s existence and of the authors’ broad conclusions long before its publication.114 In addition, several industry employees attended the conference on Petroleum Hydrocarbons and Organic Chemicals in Groundwater sponsored by API and the National Well Water Association in Houston where Garrett and Moreau first presented their results in a public forum.115 API thereafter decided to “try to prevent publication” of the paper in the proceedings of the meeting,116 and David Chen, an API employee who staffed API’s Groundwater Technical Task Force (GWTTF), wrote a letter to environmental researcher and consultant Jay Lehr to which he attached comments quite critical of the study.117 Arco also launched a major effort “to contain the potential ‘damage’ from this paper, and to develop short term and long term responses to the issues raised in the paper.”118 The “damage” to which Arco was referring was the possibility that government agencies would either ban MTBE or require petroleum marketers to use double-walled tanks for gasoline containing MTBE.119

113.Id. 114. Letter from William J. Kilmartin to Peter Garrett, dated August 26, 1986. 115.See Cmtys for a Better Env’t v. Unocal Corp., Deposition of Chris Winsor, at 249, 251; Cmtys for a Better Env’t v. Unocal Corp., Deposition of Curtis Stanley (5/6/99), at 64-67; Cmtys for a Better Env’t v. Unocal Corp., Deposition of Bruce Bauman, Cmtys for a Better Env’t v. Unocal Corp., at 17-18. 116. Handwritten notes of J. A. Del Pup, January 16, 1987, Exhibit 13 to Deposition of J. A. Del Pup, Cmtys for a Better Env’t v. Unocal Corp. See also Deposition of J. A. Del Pup, Cmtys for a Better Env’t v. Unocal Corp., at 128-29 (Del Pup identifies handwriting as his). 117. Letter from D. H. Chen to Jay Lehr, dated January 28, 1987, Exhibit 9 to Deposition of Eugene Mancini, Cmtys for a Better Env’t v. Unocal Corp., at 2. 118. Memorandum from George J. Yogis to J.S. White, dated March 31, 1987, Exhibit 10 to Deposition of William J. Kilmartin, Cmtys for a Better Env’t v. Unocal Corp., at 1. 119. Deposition of George Yogis, Cmtys for a Better Env’t v. Unocal Corp., at 77. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

398 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Through the API-affiliated Maine Petroleum Council, Arco learned that Garrett and Moreau did not speak for upper level policymakers at the Maine DEP.120 George Dominguez, the Executive Director of the Oxygenated Fuels Association MTBE Committee, presented a paper that, in the industry’s view, “refutes/clarifies” many of the Garrett/Moreau conclusions.121 API agreed to fund “several studies” that would examine some of the issues in the Garrett and Moreau paper.122 More importantly, Garrett and Moreau redrafted the paper to reflect the industry comments, and the “tone and technical content” of the redraft showed “a substantial improvement over last November’s paper” from the industry’s perspective.123 In at least one industry representative’s view, Arco and the OFA Committee had produced “sufficient technical data to minimize the potential for any adverse government regulation.”124 This industry prediction proved accurate as the federal government refrained from regulating MTBE and in fact took action through the Clean Air Act that had the predictable result of greatly expanding the use of MTBE throughout the country. The industry’s “damage control” efforts to minimize the impact of the Garrett and Moreau study did not come to light until damaged landowners and municipal water providers began in the late 1990s to file lawsuits, request relevant documents, and conduct depositions during which industry employees were obliged to testify under oath about their conduct during the 1980s.

B. The Reformulated Gasoline Requirements In the late 1980s, many governmental officials in California advocated replacing conventional gasoline with less-polluting “alternative” motor fuels such as methanol to solve that state’s serious air pollution problems and to help avoid future energy crises.125 Predicting that California might ultimately require drivers to use such alternative fuels, Arco created an internal task force

120.Supra note 118. 121.Id. 122.Id. 123.Id. at 3. 124.Id. 125. Cmtys for a Better Env’t v. Unocal Corp., Declaration of William S. Dickinson, dated June 29, 2001, at 2. 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 399 and charged it with developing a clean-burning gasoline product.126 The result of this effort was an MTBE/gasoline blend called “EC- 1,”127 which Arco began to market in Southern California in August 1989.128 Soon thereafter, Shell Oil Company launched a new “environmentally friendly” gasoline, an MTBE-blend called SU2000E, in California and eight other heavily polluted urban markets.129 By the end of the summer of 1990, the other major companies were, in the words of the head of EPA’s fuel regulation office, “to some extent tripping over themselves coming out with cleaner products,”130 and MTBE had become “the fastest-growing chemical in the world.”131 All of this took place without the impetus of the federal reformulated gasoline program, which had not yet been enacted. During the congressional debates over reformulated gasoline, the petroleum industry forcefully argued that Congress should not mandate any one fuel, which industry advertisements labeled “government gas,” but should instead let market forces (presumably as perceived by the petroleum industry) choose the best alternative fuel.132 The industry cited Arco’s voluntary development of EC-1 gasoline for the proposition that industry- developed reformulated gasoline was a preferable alternative to mandatory use of alternative fuels.133 The National Petroleum Refiners Association warned that any congressional mandate that had the effect of drastically changing the composition of fuel would require refiners to expend huge sums to retool their refineries.134 Finally, the industry argued that a national distribution system for

126.Id. at 3. 127.Id. at 4. 128. ARCO, SCRIPT FOR INTRODUCTION OF EC-1 GASOLINE, August 15, 1989. See also Amy Stevens, Arco to Sell Substitute for Leaded Gas, WASHINGTON POST, Aug. 16, 1989, at A2. 129. Michael Arndt, Shell Starts Selling a Cleaner Gas Here, CHICAGO TRIBUNE, April 12, 1990, at 1; Shell Introduces Unleaded ‘Gas’ With Lower Rvp In 10 U.S. Cities, PLATT’S OILGRAM NEWS, April 12, 1990, at 4. 130. Arndt, supra note 129. 131. Dramatic Gains for MTBE, CHEMICAL WEEK, March 14, 1990, at 50 (quoting energy consultant DeWitt & Co). 132. Thomas W. Lippman, Gasoline Formula Fuels Controversy, WASHINGTON POST, June 12, 1990, at D1; Sharon Begley, Keep Holding Your Breath, NEWSWEEK, June 4, 1990, at 68. 133. Henry A. Waxman, et al., Cars Fuels, and Clean Air: A Review of Title II of the Clean Air Act Amendments of 1990, 21 ENVTL. L. 1947, 1975 (1991). 134. Alternative Automotive Fuels: Hearings on H.R. 168, 1595, 2031, and 2052 Before the Subcomm. On Energy and Power of the Comm. On Energy and Commerce, 100th Cong. 315 (1987) (statement of Urvan Sternfels, president, National Petroleum Refiners Association). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

400 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 conventional gasoline already existed, and any congressional mandate for the widespread use of alternative fuels might well require a second extremely costly distribution system for those fuels.135 The statute that resulted required EPA to promulgate regulations establishing requirements for “reformulated” gasoline to be used in heavily polluted ozone nonattainment areas.136 Reformulated gasoline had to have an oxygen content of not less than 2.0 percent by weight, a benzene content of not more than 1.0 percent by volume, and no heavy metals.137 The statute did not allow EPA to specify how the industry went about meeting those performance- based standards. Thus, the industry was free to use MTBE or any other oxygenate or mix of gasoline constituents, so long as the final product met the standards. In the recent congressional debates over whether Congress should create a shield to protect the petroleum industry against tort liability for MTBE, the industry has taken a radically different position. It now argues that the MTBE in groundwater problem is attributable largely to the fact that EPA required it to use MTBE in reformulated gasoline.138 While it is true that the options available to the industry for meeting the Clean Air Act’s requirements for reformulated gasoline are limited, the fact that companies are able to sell reformulated gasoline in states that have banned MTBE demonstrates that those alternatives exist at a reasonable cost. The industry could have employed one or more of the non-MTBE alternatives from the outset. More importantly, the industry was rapidly moving toward “environmentally friendly” MTBE/gasoline blends prior to the enactment of the 1990 Clean Air Act amendments. The industry attempt to rewrite history during the recent Energy Bill debates is part of a larger attempt to avoid accountability for business decisions made independently of any federal regulatory requirements.

135. Air Pollution: Critics say Bush, Senate Backtrack on Alternative Fuels Section in Air Bill, 20 ENV. REP. 1816 (Mar. 2, 1990) (interview with Allen Kozinski, vice president for research and development at Amoco Oil Co.). 136. 42 U.S.C. § 7545(k)(1). 137. 42 U.S.C. § 7545(k)(2). 138. 149 Cong. Rec. S. 15335, 15339 (daily ed. Nov. 21, 2003) (statement of Sen. Campbell). 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

2005] Regulation and Litigation 401

C. Conclusion The litigation brought by municipalities and others produced the documents that made it clear that the companies were attempting to bend the relevant science to their own ends and that they were planning to rely heavily on MTBE for purposes of replacing lead in gasoline and meeting consumer demand for “environmentally friendly” gasoline regardless of the Clean Air Act requirements. EPA was unaware of the industry’s “damage control” efforts at the time that it was deciding whether to require additional MTBE testing, and both Congress and EPA remained unaware of those efforts during the time that they were enacting and implementing the 1990 amendments to the Clean Air Act. Indeed, it is clear that the public would never have become aware of those efforts in the absence of tort litigation aimed at compensating victims for economic loss suffered from leaking underground storage tanks. EPA would not have held the companies accountable for attempting to bend science and for making a bad choice in marketing “environmentally friendly” gasoline even had those activities come to light apart from tort litigation. EPA’s primary function is proactively to prevent health and environmental harm. The agency is not at all equipped to hold companies accountable for causing health and environmental harm after-the-fact. That is the function of tort law. In urging Congress to shield it from after- the-fact tort liability, the petroleum industry is seeking to create for itself the best of all possible worlds—a world in which it has a large degree of control over the information available to the relevant regulatory agency and in which it can avoid accountability for any untoward consequences of its actions by shifting the blame to that agency. This may be the best of all possible worlds for the industry, but it is not an especially desirable world for consumers and the environment.

V. CONCLUSIONS

The MTBE experience demonstrates that federal regulation and common law tort liability have complementary roles to play in protecting health, safety and the environment. Although the remedies sought and administered in such litigation are sometimes injunctive in nature, the claim that they are merely hidden attempts to impose regulation through litigation is wholly 8. MCGARITY.5.DOC 9/27/2005 3:54:26 PM

402 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 unsupported. Regulation can provide ex ante protections for consumers and the environment with allocatively efficient regulations that provide a degree of predictability for the regulated industries. State tort law allows a fair redistribution of resources from those who market dangerous products and engage in risky activities to those who are damaged when things predictably go astray, and it provides a vehicle for holding companies accountable for malfeasance in a forum that is less subject to control by those risk-producing industries. Both federal regulation and state common law are therefore critically necessary to a properly functioning modern economy. If we follow the advice of the Chamber of Commerce and some conservative think tanks and enact laws intended to discourage tort litigation, consumers and the public will be deprived of a critical source of protection and an essential vehicle for holding corporations accountable for their anti-social conduct.

9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

The Role of State Attorneys General in National Environmental Law Policy

* GROUNDWATER POLLUTION PANEL

Peter Heed, former Attorney General of New Hampshire Groundwater is a new, insidious type of pollution, distinct from surface water pollution and air pollution. This leads us to new approaches and new legal theories.

Thomas McGarity, W. James Kronzer Chair in Trial & Appellate Advocacy, University of Texas at Austin Law School It is in some ways odd that both Lisa Heinzerling and I are here today, since we are both scholars associated with the Center for Progressive Regulation, a group of progressive scholars working in the area of health, safety and environmental regulation. The reason that I’m surprised is that usually only one token left-of- center person is invited to speak at events like this, and only one of us would ordinarily be here.

* The symposium The Role of State Attorneys General in National Environmental Policy was held at Columbia Law School on September 20, 2004. After welcoming remarks by James Tierney, Dean David Schizer, and Vermont Attorney General Bill Sorrel, four moderated panels convened to discuss the role of state attorneys general in national environmental policy, focusing their discussions on a landmark lawsuit over global warming (twice), groundwater pollution, and natural resource damage claims. The discussion of the third panel centered on recent methyl tertiary-butyl ether (MTBE) litigation. For further discussion of Professor McGarity’s remarks, see his article at 30 COLUM. J. ENVTL. L. 371. The participants in the third panel were:

Thomas McGarity, W. James Kronzer Chair in Trial & Appellate Advocacy, University of Texas at Austin Law School, Peter Heed, former Attorney General of New Hampshire, Matt Pawa, Law Office of Matthew Pawa, P.C., Dan Becker, Sierra Club, Jennifer Patterson, Assistant Attorney General, New Hampshire, Lee Paddock, Pace University School of Law, David Mears, Sr. Assistant Attorney General, Ecology Division, Washington, Peter Lehner, Assistant Attorney General, New York.

403 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

404 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

I want to talk about MTBE. Rather than look at regulation exclusively, I want to use our experience as a vehicle for making a broader case that society needs both federal regulation and state tort law. The consumer protection movement had only begun in the 1970’s when trade associations and think tanks seized the mantle of reform and launched a “regulatory reform” movement. Recently the same companies, think tanks and trade associations have launched a similar “tort reform” movement. As the federal agencies have grown more or less moribund, one of the few progressive forces left today is a small group of state AG’s filing innovative suits. Opponents now criticize this as “regulation through litigation.” Congress came close to banning lawsuits based on MTBE litigation because industry was interested in protecting itself not just from the regulation but from the consequences of litigation as well. Despite claims by industry about frivolous lawsuits, my general contention is that such lawsuits are essential to a well-functioning society. I want to make three broad claims today, using MTBE as an example. It’s not just about predictability, but also about control It’s not just about efficiency, but also about fairness It’s not just about protection, but also about accountability On February 23, 1979, the EPA approved MTBE as a fuel additive to replace lead. Some suggested additional testing. MTBE was considered for testing under Toxic Substances Control Act, 15 U.S.C. § 2601, et seq., in mid-1980s. Although the fuel industry protested, it ultimately entered into a closed-door consent decree with the EPA that required some additional testing, but not with respect to the effects of oral ingestion of MTBE. On March 14, 1990, Chemical Week declared that the market for MTBE was the fastest-growing market for any chemical in the world. I mention March, because the Clean Air Act did not pass until December. It was used in gasoline in California and elsewhere as part of an initiative for environment-friendly gasoline. In December 1990, Congress enacted the Clean Air Act amendments, Pub. L. 101-549, 104 Stat. 2412 (1990), requiring cleaner gas, but not requiring MTBE as the additive. For example, gasoline could also be reformulated with ethanol, for example. The new requirements did not kick in until 1993-94. The 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 405 expanded use of MTBE combined with the deteriorating state of the sixty-year-old underground storage tank infrastructure to yield a groundwater pollution crisis. In 1999 the Governor of California issued an order banning MTBE at the earliest possible date. EPA also in 1999 issued an Advance Notice of Proposed Rulemaking in which it agreed to consider a ban of MTBE. The CA ban did go into effect, but the EPA proposal to ban MTBE under the Toxic Substances Control Act was withdrawn about a year and a half later. The Lake Tahoe litigation, and a settlement of similar litigation in Santa Monica led to a decline in demand for MTBE. In July 2002, a large Houston producer of MTBE filed for bankruptcy. Congress did address the underground storage tank problem in 1984, with a statute CITE added on to RCRA that required the EPA to promulgate regulation and replacement by 1998. But we’re still seeing leaking MTBE from filling stations that have gone through all the upgrades.

1. Not just predictability, but also control The industry argues: We’re not opposed to public health and safety rules, we just want uniform national rules and a level playing field. We don’t care what the rules are; just make them predictable. There is a grain of truth to the argument that predictability enhances overall efficiency. But when the major multinational corporations play the game at the federal level, they also care very much about the stringency of regulation, and they spend a lot of money to persuade the government to regulate as little as possible. The playing field is between the David Hawkins of the world and the big industry, with the industry having much greater representation than the potential victims. In the debates over the Clean Air Act in 1990, you didn’t see a single municipal water treatment district represented, because they didn’t know they were about to be hit with a major MTBE problem. They were busy, and they did not realize the implications of reformulated gasoline for them. The environmental groups were not involved the chemical debate because they were busy with other problems. There is a sense in which industry has maximum leverage at the federal level. This is not always the case. When an industry has more leverage in states, we start hearing about devolution of power 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

406 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 to the states. Courts and juries are neutral decision makers and are specifically designed not to be accountable in a political sense. Regulatory agencies are politically accountable. So the control, power, and influence, is just as important as predictability. The fuel additive waiver in 1979 could only be denied by EPA if MTBE was inconsistent the catalytic converters that had been installed in automobiles to reduce air emissions. As long as it was compatible with the catalytic converter it had to be allowed. The statutory vehicle for dealing with the hazards of MTBE was the Toxic Substance Control Act (TSCA). As I mentioned, this was an industry-dominated enterprise. It imposed some testing requirements but not many. The final attempt to control MTBE by perhaps banning it under TSCA began in the late 1990’s and ended in the early 2000’s without any action being taken. In 1984 Congress required EPA to promulgate underground storage tank implementing regulations in 18 months. This resulted in a very hurried rulemaking process. EPA published the regulations belatedly in 1988. They were to be based “as much as possible” on familiar industry-promulgated codes. In many instances, they specifically refer to American Petroleum Institute codes. The agency was in a hurry, and it simply grabbed the industry codes. What is really interesting is that some don’t even say the Code as of such-and-such a date, posing a major delegation problem. There is some discretion in the regulations – sometimes its says the API Code “or equivalent.” The underground storage tank regulations do not require double-walled storage tanks, so now we’re seeing leakage from the second generation of storage tanks. This is not surprising, given the history of the regulations.

2. Not just efficiency, but also fairness The industries and their allies in the think tanks argue that government should not be imposing regulations on the private sector unless there is a clear demonstration that the benefits outweigh the costs. Although not every environmental statute has a cost-benefit decision criterion, the Toxic Substance Control Act does. We also have had executive orders in place since the Ford Admininstration requiring the EPA to examine the costs and benefits of regulations. Why look at a cost-benefit analysis? We’re talking about allocative efficiency, Kaldor-Hicks efficiency. Kaldor and Hicks 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 407 were 1930’s economists, followers of Pareto. The Pareto criterion for good society was that a move from state A to state B is superior if in B if one person is better off and nobody is worse off. Overall, the pie is bigger. Kaldor-Hicks took that point and said that if that is the case, then a policy should be good if winners win more than losers lose, because the winners could compensate the losers so that everyone would be better off. So we reach a Pareto superior solution. There are more resources for everyone. But the kicker is that Kaldor- Hicks doesn’t require the payment from the winner to the loser. That’s what cost-benefit-based decisionmaking is all about. My response: it’s not just about efficiency, it’s also about fairness. At least make the compensation happen. Then maybe we’re a better society. Economists have nothing to say about distribution. This is what the lawsuits are about. The MTBE experience really bears this out. The Toxic Substances Control Act had a cost-benefit decision criterion. The EPA did not ban MTBE, and if it had tried to do so, the courts would no doubt have overturned the regulation. The last time EPA tried to ban a chemical (an innocuous substance called asbestos), the regulation was thrown out by the Fifth Circuit Court of Appeals. Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th Cir. 1991. It is therefore not hard to comprehend why EPA would not try to ban MTBE early in the game before a great deal was known about the substance. The underground storage tank statute had no cost-benefit criterion, but the EPA applied one anyhow. EPA declined to require double-walled tanks because the greater capital and installation cost was not justified by the environmental benefit. As a result, we still have an underground storage tank crisis in the United States.

3. Not just protection, but also accountability The first big dispositive motion in the current New York case involving hundreds of individual claims against the petroleum industry will be about preemption. The defendants are arguing that the Clean Air Act Amendments preempt state litigation on MTBE leaks from underground storage tanks because the regulation forced them to use MTBE. The industry argues that because regulatory agencies were invented to protect society, we do not need juries second-guessing the agencies. If the industry can 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

408 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 meet the federal standards, state juries should not be able to mandate more stringent requirements than the federal agencies have already put into place. The response to that industry argument is that typical environmental statutes actually only mandate “floor preemption” under which the state is free to regulate more stringently, but not less stringently than the federal government. The Supreme Court. has spoken about a presumption against preemption unless Congress has made it clear that it intends preemption in this particular instance. This makes a great deal of sense. The regulatory process is extremely cumbersome, easy to derail, and agency regulations rarely keep up with science. There is a lot of evidence that companies are adept at manipulating the regulatory process. I hope that the AG’s do what Atty. Gen. Humphrey did in the Minnesota tobacco litigation – make the documents publicly available. Don’t make a deal that seals them up and keeps them secret. They are of great interest to the general public. From the tobacco documents we learned that much of the malfeasance of the tobacco companies involved manipulating regulatory process. Evidence of manipulation usually comes from documents produced by trial lawyers or AG’s. The EPA does not subpoena documents from companies that are manipulating the agency’s decisionmaking process. They rarely know when they are being manipulated. In the case of MTBE, the first study demonstrating that MTBE moved faster in groundwater than other constituents of gasoline was undertaken by two employees of the Maine Department of Environmental Protection named Garrett & Moreau. Industry documents produced in the Lake Tahoe litigation demonstrate the enormous lengths that the petroleum companies went through to prevent this paper from being published. This is something we see all the time. We see it in lead, vinyl chloride and tobacco. Industry attempts to bend science. We see this in MTBE as well. We see it every time industry has a chemical additive problem. As I mentioned, another thing we have learned from the private litigation documents on MTBE was that the industry was moving towards a new MTBE-blend of gasoline called EC1, an environmentally-sensitive gasoline. The manufucturer began to market EC1 in 1989. The companies were falling over themselves to market environmental friendly gasoline. So the industry cannot 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 409 legitimately argue that they only used MTBE because the EPA forced them. The industry’s acknowledgement in March 1990 that the market for MTBE was the fastest growing market for a chemical in the world undermines its claim that the enactment of the 1990 Clean Air Act amendments in December 1990 forced them to use MTBE. In sum, litigation has a critical role to play in protecting health and the environment. This role is in addition to the role that EPA plays in protecting the environment through regulation. The remedies sought may sometimes be injunctive, but the claims that they are just regulation in disguise are unsupported. Tort litigation is an essential tool for holding companies accountable. Without it, consumers and the public will be deprived of a critical source of protection.

Peter Heed, former Attorney General of New Hampshire [Introducing Matthew Pawa]. I like to talk to juries. New Hampshire, we’re a little state with a huge problem: our groundwater is under attack by MTBE. Two things you need to know about MTBE 1) MTBE is bad. It’s fine in your gasoline, but you wouldn’t want any in your Poland Spring. I’ve tasted it, and believe me, it’s bad. It tastes so bad that you don’t want to drink it, and there are also health problems. 2) The only other thing you need to know about MTBE is that it gets out and you can’t keep it in. New Hampshire is underlain with bedrock, the underground aquifers are interconnected. Suddenly within the last several years we have noted an increasing proportion of our public and private water supplies, a huge proportion, particularly in the southern part of the state, we have noticed MTBE in the groundwater. As a result of that, on behalf of New Hampshire we brought a lawsuit aginst 22 of the oil companies. We haven’t been joined by anyone yet. These people are worried here about . . . We are not very popular with the oil companies but the defense bar loves me. I have become popular in New Hampshire, I am also popular in Iowa because of ethanol. This MTBE is really bad stuff, and the reason is that it gives rise to a new problem. In the old days, if gasoline spilled out, you were able to localize it and contain the spill, you were able to trace it and bring suit or regulatory enforcement to clean it up. None of this applies to MTBE. When MTBE gets out, it leaks from everywhere, 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

410 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 from old tanks but even from brand-new pipes, storage tanks, We in New Hampshire have been installing double-walled storage tanks, and guess what, the MTBE, not the gasoline, is getting out. The MTBE gets out somehow. They think it may have something to do with vapor. We cannot seem to contain MTBE. When it gets out, it hits the groundwater running and spreads like wildfire. We can’t trace it back to the source because it spreads so fast. You cannot isolate a leak, and as a result you can’t just go to one spiller. The problem has nothing to do with the negligence of the owner of the tanks – they might not even be negligent, they might have done everything right. Also, MTBE is not bio-degradable. Takes years to clean it up. Private well owner would have to pay $8-9,000 for the system, then $1000/year. Now when I refill my lawnmower, I’m careful – every little drop of gas in the grass can cause a problem. So in New Hampshire we decided to bring this action. We’ve used traditional theories of the state holding the water & land in trust, in parens patriae, for citizens. We can’t figure out what individual is responsible, what we’ve found out is that MTBE is simply a defective product. It is a case of first impression in terms of raising many legal issues. Matthew Pawa, Esq, Law Offices of Matthew F. Pawa, P.C Thank you very much, it is good to be with you today. Thanks especially to Jim Tierney and Columbia University Law School for bringing us here today. I am a private practitioner in Boston and most of the time I am working on global warming. When I am not doing that, I am working on the New Hampshire MTBE case. There is co-counsel from California, Vic Sher, and it wouldn’t be fair if I didn’t tell you he was doing the lion’s share of the work. So it is a collaborative effort with a number of lawyers on behalf of New Hampshire and I am privileged to be involved. It is helpful to think of MTBE litigation as having gone through three phases. Phase one involved a class action on behalf of well owners. They were either filed in federal court or filed in state court and removed and consolidated via multi-district litigation. Judge Scheindilin declined to certify the class and they went away. Phase two involved municipalities, water utility districts, and counties filing suit. This is still going on and there are more and more of them. At first, industry let those cases go on in state court and got nailed in the South Tahoe case. South Tahoe Public Utility Dist. 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 411 v. Atlantic Richfield Co., No. 999129 (Cal. Super. Ct. San Francisco Cty. April 15, 2002). There was a special jury verdict against the oil companies on product liability and a finding of malice that warranted punitive damages. After that, a number of other suits were filed by other public entities and the defendants started a strategy of removal to federal court. One ground for removal was that the EPA forced industries to put in MTBE and therefore they were federal agents. The second ground was that Texaco went into bankruptcy in about 1987 and was discharged from all its debts in 1988. Since some of the gasoline now in groundwater may have been sold by the defendants prior 1988, the argument is that the case against Chevron-Texaco (Texaco’s successor in interest), makes the entire case against all 22 oil companies removable to federal court on bankruptcy jurisdiction grounds. This strategy was successful – to date— as the district court has agreed with both grounds for removal. These cases have been consolidated again under Judge Scheindlin in the Southern District of New York. There are 170 plaintiffs, over 100 cases and, if you go on Thursday to the Southern District, it is essentially Bleak House. But that’s not the Judge or the litigants’ fault, as I will come to shortly Phase three began when Attorney General Heed jumped into MTBE litigation on behalf of New Hampshire. Also, there is quasi- state action in which the Sacramento County District Attorney has sued in the name of the people of California for a case dealing with pollution in the county. New Hampshire’s case and the people’s case from California were removed and consolidated. What is wrong with MTBE? First, it escapes from anything you put it into. Attorney General Heed has called it the Houdini of gas additives. Problem number two is that it travels very fast in the subsurface. Number three is that it has a foul taste and odor that can be tasted at one part per billion or less. Problem number four is that it is expensive and difficult to clean up. Here are some of the discovery documents. So this is in 1981, Arco and Shell realized that they were putting MTBE into essentially a sieve. According to Ben Thomas of Shell, 20% of underground storage tank leaks were leading to groundwater contamination. [The following are in response to discovery documents shown as slides.] MTBE Plume (4500 feet) compared with BTX plume(1200) 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

412 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 shows differential speed with which each travels. Shell Internal White Paper 1991: Shows that industry was aware of the differential speeds between MTBE and BTX for a long time. Exxon Memo 1995: Documents stating that MTBE is more soluble than other factors and constituents. It dissolves and separates into distinct plumes. MTBE is the most mobile of gas plumes. Comment: characteristics of MTBE were well known by industry. Exxon Memo 1984: document shows that MTBE will migrate farther when dissolved in groundwater and has a lower taste and odor threshold in comparison to other constituents. Also shows that MTBE cannot be removed by carbon absorption, which works for other gasoline spills. Comment: Even at low levels, you can taste it, and therefore it must be cleaned up. Exxon Internal Memo 1984: memo shows ethical and environmental concerns because MTBE is soluble in water. Comment: In 1984, they knew what the costs were going to be and they tried to foist it on the public. The lawsuit aims to foist it back. Exxon 1984 document: Shows that Exxon knew that the widespread use of MTBE has the potential of increasing contamination incidents from the then current level to over 300. Arco Chemical 1990 Memo: This memo was sent with MTBE to various purchasers stating that no extraordinary handling or safety precautions other than those used with any other gasoline were needed. Comment: This is a clearly misleading document. Deposition of Arco Business Manager: Business manager in his deposition shows that the EPA wanted methanol as a gas additive but the industry recommended MTBE. Comment: This goes against the industry argument that EPA made them use MTBE. Shell Memo: Creative Acronyms of MTBE MTBE most things biodegrade easier menace threating our bountiful environment major threat to better earnings movement towards bureaucratic entrenchment money to be extracted 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 413

MGMT towards a better environment [END EXHIBITS] In the South Tahoe verdict, the April 15, 2002, special jury verdict held that MTBE was defective because (1) the MTBE manufacturer and refiner defendants failed to warn, and (2) (with respect to the refiners ) because the environmental risks outweighed the benefits. The jury also found clear and convincing evidence that Shell and Lyondell acted with malice. This case resulted in 69 million dollars in total settlements. Of this, $25 million was from pre-trial settlements with Exxon, Arco, and Chevron despite the fact that they had no branded stations in South Tahoe. Finally, as we go into phase three there are hundreds of cases pending. One state has a case – New Hampshire, and the people of California via Sacramento County have also filed a case. I will finish with two observations. I think this will be an interesting application of the parens patriae doctrine and a great opportunity for academic exploration in law review articles. Also, coming back to my Bleak House observation about the proceedings in the Southern District, one classic view of the law is that it is a dispute resolution tool. As things are now, it is hard to see how that dispute will be resolved. The defendants have no incentive to settle any of those cases because they will get sued by other municipalities as MTBE moves through the subsurface and contaminates additional sources of drinking water. Phase three, I hope, will be more states getting involved to allow this case to go to a global settlement.

QUESTIONS

Participant: With MTBE contamination everywhere, what is the likelihood that we will see an asbestos-style mass bankruptcy and turn this into a bankruptcy case? Tom McGarity, University of Texas at Austin Law School: MTBE is not asbestos because there is not the same level of health effects. Many entities have an economic interest in groundwater and this is more manageable -- you can get your hands around it. I don’t think we will see big companies going bankrupt. Peter Heed, Former Attorney General of New Hampshire: It is only economic damage. Matt Pawa, Law Office of Matthew Pawa, P.C.: It has been estimated that the cleanup cost will be $29 billion. This is large but 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

414 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 nothing like asbestos. Lyondell, the manufacturer of MTBE, might be in a more precarious position. Tom McGarity, University of Texas at Austin Law School: The fact that it tastes so bad has been cited by the agency as a reason that MTBE is not going to lead to cancer. The taste will stop them from drinking it. Dan Becker, Sierra Club: One nice thing about the MTBE litigation is that it killed the Bush energy bill. It came down to two conservative New Hampshire senators’ votes, Gregg and Sununu. They killed the legislation. This is another example of the role that Attorney Generals can play that has environmental benefits. Jennifer Patterson, Assistant Attorney General, New Hampshire: Our website has a copy of the declaration that we filed to initiate the lawsuit (www.doj.state.nh.us). Lee Paddock, Pace University School of Law: This may be similar to Superfund’s effects on hazardous waste management. Maybe MTBE lawsuits and similar lawsuits in the future will raise the risk level for manufacturers so that this becomes part of the calculus of putting a new product on the market. Tom McGarity, University of Texas at Austin Law School: Yes, I think that is exactly right. MTBE was going to be replacing lead and it had a terrific future. The industry should have been doing more testing. My guess is that MTBE litigation should send the message to industry that they should learn more about their chemicals before putting them out there. One area that mystifies me is why the insurance companies are not putting more pressure on companies to do more testing and analysis before putting the products on the market. David Mears, Sr. Assistant Attorney General, Ecology Division, Washington: This is an issue of resources for states. Washington has its plate full. There are no resources for more litigation. Attorney Generals do not have a lot of institutional forums to coordinate multi-state actions. There is some of this, but Attorney Generals should ask whether we as a collective national institution should be investing more in coordination. Peter Heed, former Attorney General of New Hampshire: You hit the nail on the head. Once we dedicate resources, we cannot jump into something else. New Hampshire has only a few attorneys, which is why we associated with Pawa after a long selection process. New Hampshire associated with private lawyers, 9. GROUNDWATER.4.DOC 9/27/2005 3:58:37 PM

2005] Symposium: Groundwater Pollution Panel 415 but only after we agreed that the state maintained control. Peter Lehner, Assistant Attorney General, New York: This is the New York experience. New York banned MTBE. The manufacturers sued us and for three years we litigated preemption. Manufacturers lost the preemption challenge but it took years. It is remarkable, given the manufacturers’ potential liability, that they are still trying to force MTBE onto the public. Tom Merrill, Professor of Law, Columbia Law School: As a professor, the motions for removal sound frivolous. Matt Pawa, Law Office of Matthew Pawa, P.C.: Everyone was surprised that the judge accepted the removal motions. New Hampshire has right to appeal to the 2nd Circuit because of its sovereignty rights, but other plaintiffs do not. The 2nd Circuit can address the sovereign immunity and 11th Amendment issues. In any event, Judge Scheindlin has made it clear that she will exercise federal jurisdiction. There is a question hanging regarding what the 2nd Circuit will do. The appellate process has not begun yet. Terry Goddard, Attorney General of Arizona: We have self reporting. We demand that companies provide regular reports about incidents of suspected pollution. In Arizona, a major polluter lied about TCE, reporting 2 ppm when the actual concentration was 50,000 ppm. When challenged, they claimed that the original study was attorney/client privilege and could not be handed over. Is privilege a way for polluters to not disclose? Tom McGarity, University of Texas at Austin Law School: This is a fairly typical way to do things, but is not a valid claim. Shook Hardy and Bacon were all about this in the tobacco litigation. The companies ran all their studies through lawyers to claim privilege. Matt Pawa, Law Office of Matthew Pawa, P.C.: The crime fraud exception might apply. Participant: In MN, the special master handed down an 80 page finding that threw out the defense in most of the cases. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

Measuring Loss of Use Damages in Natural Resource Damage Actions

Allan Kanner* and Tibor Nagy**

Introduction 418 I. Taxonomy of Natural Resource Damages 419 II. Traditional Solutions to the problem of Nonmarket Damages 423 A. Pain and Suffering Damages 424 B. Special Damages in Nuisance Cases 425 C. Unique Goods 429 D. Privately Owned Natural Resources: Ornamental Trees 431 III. Federal Regulations and the Problem with CVM 433 A. Brief Overview of the Federal Damage Assessment Regulations 434 B. The Problem with CVM 436 IV. Measuring Natural Resource Damages in State Cases 438 V. Native American Losses 441 VI. Unjust Enrichment as an Alternative Measure of Damages 444 VII. Conclusion 448

* Partner, Allan Kanner & Associates, New Orleans, LA; Senior Lecturing Fellow, Duke Law School, and Adjunct Professor of Law, Tulane Law School, B.A., U. Pennsylvania, 1975; J.D., Harvard Law School, 1979. The ideas expressed in this article are the authors’ and do not reflect the views of any governmental or tribal clients. © Copyright Reserved ** Law clerk to the Honorable Melinda Harmon, United States District Court for the Southern District of Texas, 2003-05; J.D., Yale Law School, 2003; B.A., Dartmouth College, 2000. Mr. Nagy can be reached at [email protected]

417 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

418 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Come run the hidden pine trails of the forest Come taste the sunsweet berries of the earth Come revel in all the riches all around you 1 And for once never wonder what they’re worth

There will always be controversy where intangible losses have to be evaluated in monetary 2 terms.

INTRODUCTION

In order to remedy decades of contamination by hazardous substances, a number of states, most notably New Jersey, have begun to assert their role as trustees of their citizens’ natural resources and are seeking damages from the responsible parties. One challenge faced by trustees in these natural resource damage (“NRD”) actions is determining the appropriate measure of damages that should be paid by polluters to ensure that the public is adequately compensated for its loss.3 A large component of the damages to which the public is entitled from polluters is non- economic in nature, or what we might call “nonmarket damages.” In addition to the cost of restoring or replacing a contaminated stream, for example, trustees are entitled to seek compensation for the public’s loss of use of that stream during the potentially lengthy period of contamination. While the cost of the volume of water has a ready market equivalent, the public’s loss of enjoyment or loss of use of the stream does not. This Article responds to the increasingly frequent suggestion by polluters and conservative academics that because nonmarket damages, and loss of use damages in particular, are difficult to measure, the public should be deprived of such damages altogether. While we discuss federal NRD cases and the Contingent Valuation Method (“CVM”) for measuring nonmarket damages, our focus is on state cases by state trustees. We argue the

1. Judy Kuhn, Colors of the Wind, in POCAHONTAS (Walt Disney Pictures 1995). 2. NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION, PANEL REPORT ON CONTINGENT EVALUATION, 58 Fed.Reg. 4601, 4611 (1993) [hereinafter “NOAA Panel Report”]. 3. See Richard Stewart, et al., Evaluating the Present Natural Resource Damages Regime: The Lawyer’s Perspective, in NATURAL RESOURCE DAMAGES: A LEGAL, ECONOMIC, AND POLICY ANALYSIS 163 (Richard Stewart, ed., 1995) (noting that “the most daunting task facing trustees . . . is the determination of damages”). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 419 following: (1) the difficulty of measuring loss of use damages should not be an impediment to full recovery; (2) the law of all fifty states has well-established means of measuring nonmarket damages, such as the extremely common need to measure damages for pain and suffering; and (3) CVM is not an essential component of proving loss of use damages, nor should it be the focus of the debate concerning damages in NRD cases. Part II sets out a taxonomy of damages in NRD cases. Part III surveys several categories of cases in which American tort law has, for over a century, dealt with the problem of measuring nonmarket damages, namely in damages for pain and suffering. Part IV provides a brief overview of the federal response to the need to measure nonmarket damages in NRD cases - the CERCLA and OPA damage assessment regulations. Part IV argues that the real problem with CVM is practical and not theoretical: CVM surveys are inordinately expensive, unduly time-consuming, and allow defendants to prolong the final resolution of cases by shifting the focus from “polluter pays” to the various and sundry complaints about CVM. Part V outlines how states and courts can respond to the need to measure nonmarket damages in NRD cases without the use of CVM. In essence, we propose that nonmarket damages in NRD cases be measured in precisely the same way state courts have measured them in all other tort cases: by allowing juries to consider all of the available relevant and admissible evidence, in particular evidence of the damages actually suffered by the natural resources, and to render a verdict that brings a timely resolution to the case. Part VI highlights certain issues of valuation that are unique to NRD cases involving Native American tribes. Finally, Part VII discusses the use of unjust enrichment and restitution as an alternative remedy for compensating states for loss of use damages.

I. TAXONOMY OF NATURAL RESOURCE DAMAGES

The “natural resources” at issue in NRD cases are those that are under public ownership or control.4 This set of resources is

4. See Ohio v. United States Dep’t of the Interior, 880 F.2d 432, 459-60 (D.C. Cir. 1989) (ruling that CERCLA and the CWA do not permit recovery for injuries to lands and resources “under purely private ownership”). The statutory recovery provisions apply to lands not only owned by, but also under “control” of the trustee. This application significantly extends the scope of the NRD assessment regulations. See DEPARTMENT OF THE INTERIOR, NATURAL RESOURCE DAMAGE ASSESSMENTS, 56 Fed.Reg. 19,752, 19,761 (1991) (extending possible 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

420 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

essentially the “environment” that we refer to in our everyday legal, political and social debates, and it includes the common property and the public goods that the federal and state governments own or significantly manage. Federal trustees derive their authority from statutes such as CERCLA and OPA, while state trustees may seek NRD recoveries under state common law and, in many states, explicit statutory authority.5 State and federal trustees have stewardship over such natural resources as national parks and forests, fisheries, wild animals, navigable waters, groundwater, and even airspace.6 The first difficulty in natural resource damage valuation is determining the meaning of “value” itself and then determining which value characteristics of natural resources should be compensable. Typically, economists divide value in this context into two categories: “use values” and “nonuse values.”7 “Use value” is the value that is or could be derived from a natural resource by people’s actual use of it. As one authority put it, “as long as the individual uses her five senses to derive value from the environment, it has a use value.”8 Use value includes not only consumptive uses such as hunting and logging, but also non- consumptive uses such as bird watching and reading about others’ use of the resource.9 It is worth noting that the magnitude of non- consumptive use of natural resources considerably exceeds that of consumptive uses.10 “Loss of use” damages, therefore, are those

application of NRD liability to resources that are merely “managed” by the trustee). 5. See Frank B. Cross, Natural Resource Damage Valuation, 42 VAND. L. REV. 269, 277-78 (1989) (discussing sources of authority for federal and state NRD trustees). 6. CERCLA, for example, defines “natural resources” as “land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States . . . any State or local government . . ., or, if such resources are subject to a trust restriction on alienation, any member of an Indian tribe.” 42 U.S.C. § 9601(16) (2000). . . 7. See Jeffrey Dobbins, The Pain and Suffering of Environmental Loss: Using Contingent Valuation to Estimate Nonuse Damages, 43 DUKE L.J. 879, 898 (1994). The reader should note at the outset that commentators and authorities have not used the various terms discussed herein with perfect consistency. The definitions of these terms for the purpose of this Article are set forth in the text, but the reader should be aware that the terms may have a different meaning in other articles. 8. Id. 9. Id.; Steven Edwards, In Defense of Environmental Economics, 9 ENVTL. ETHICS. 73, 79 (1987). 10. See Cross, supra note 5, at, 281; W.W. Shaw, Problems in Wildlife Valuation in Natural Resource Management, in VALUATION OF WILDLAND RESOURCE BENEFITS 221, 225 (G. Peterson & A. Randall eds., 1984). For example, studies have shown that Americans spent 478 million 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 421

damages that compensate the public for all of the use value lost during the period of time the natural resource in question is contaminated or otherwise injured, including consumptive and non-consumptive uses.11 The use value of public resources may approximate the market value for the same (or substantially the same) privately owned resource. Use values and loss of use damages are thus not always difficult to price. For example, a forest may be used as lumber, or fish may be used as food, and courts have used the established market prices for these goods when assessing damages in NRD cases.12 The common law, however, does not use market value as the exclusive measure of natural resource damages. In many tort cases involving privately owned natural resources, for example, a court is more likely to use the cost of restoration or repair as a measure of damages.13 Similarly, in the federal context, “Congress established a distinct preference for restoration cost as the measure

days engaged in sport hunting in 1975, but 1.6 billion days participating in wildlife observation. Id. 11. In December 1997, for example, a California jury awarded “loss of use” damages of $12 million and State Water Code damages of $5.3 million to the State and several local governments for injury resulting from a 400,000 gallon oil spill. People of the State of California ex rel. Dept. of Fish & Game, et al. v. American Trading Transp. Co, et al., Case No. 64 63 39 (Super. Ct. Orange County, Dec. 9, 1997). In cases involving the National Park system, the Park System Resource Act explicitly defines “damages” to natural resources as the combined compensation for restoration and the value for loss of use. 16 U.S.C. § 19jj(b)(1)(A) (2000). 12. See, e.g., Chevron Oil Co. v. Snellgrove, 253 Miss. 356, 367, 175 So. 2d 471, 475 (1965) (using market value for timber); Nash & Windfohr v. Edens, 109 S.W.2d 496, 500 (Tex. Ct. App. 1937) (using market value for damaged strawberry plants); State Dep’t of Fisheries v. Gillette, 27 Wash. App. 815, 824, 621 P.2d 764, 768 (1980) (using market value of fish in hatchery). 13. See Akins v. Williams Communications, Inc., 116 Wash.App. 1021, 2003 WL 1521999 at *3 (Ct. App. Mar. 25, 2003) (“Damages for a temporary invasion or trespass are the cost of restoration and the loss of use.”); Van Wyk v. Public Service Co. of Colorado, 996 P.2d 193, 197 (Colo. App., 1999) (“Damages available on trespass and nuisance claims can include not only diminution of market value or costs of restoration and loss of use of the property, but also discomfort and annoyance to the property owner as the occupant.”) (emphasis added); Board of Educ. v. Kentucky Dept. of Highways, 528 S.W.2d 657, 659 (Ky. 1975) (“The cost of restoration or repair, where feasible, always has been the measure of damages in tort cases for damage to structures on realty.”); RESTATEMENT (SECOND) OF TORTS § 929, “”(stating, “[i]f one is entitled to a judgment for harm to land resulting from a past invasion . . . damages include compensation for (a) . . . the cost of restoration that has been or may be reasonably incurred, (b) the loss of use of the land, and (c) discomfort and annoyance to him as an occupant.”). The Supreme Court has cautioned against making a “fetish” of market value, “since it may not be the best measure of value in some cases.” United States v. Cors, 337 U.S. 325, 332 (1949) (involving “just compensation” valuation of a ship taken by the government). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

422 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 of recovery in natural resource damage cases.”14 Restoration costs, of course, may be significantly higher than the market valuation for a damaged natural resource.15 Furthermore, while market valuation may approximate some elements of consumptive use values, there is no serious debate about the fact that market valuation fails to account for all components of most public resources’ use values, especially their non-consumptive use values. In rejecting the initial DOI regulations governing NRD assessments, for example, the D.C. Circuit specifically based its holding on the fact that “resources have values that are not fully captured by the market system.”16 As one authority put it, “[t]he social value of the famous Lone Cypress of Monterey Peninsula cannot be reduced to its price as lumber.”17 In addition to use values, natural resources also have “nonuse values.” The essence of nonuse value is what is known as “existence value.”18 Existence value is defined as “[t]he worth of natural resources beyond their use value.”19 As one authority describes it, existence value has three distinct subparts: First, humans may place their own ‘option value’ on the preservation of natural resources. While I have never visited Yosemite National Park, I might want to do so someday and, therefore, I value its preservation. Retaining the option of future use intuitively has an economic importance. Second, humans may obtain ‘vicarious value’ from natural resources. Even if I never intend to visit Yosemite National Park, I may still value its preservation. The knowledge that a given natural environment is protected is valuable to some Americans, and vicarious appreciation of nature, therefore, has a demonstrable economic value. Third, preservation of natural resources may have ‘intertemporal value.’ Even if I have no interest in visiting Yosemite National Park, I may want my offspring or their descendants to have the chance to see the park. The ability to bequeath natural resources to future generations also may have

14. Ohio v. United States Dept. of the Interior, 880 F.2d 432, 459 (D.C. Cir. 1989). 15. Even where restoration is an option, however, loss of use damages must also be assessed, as they are separate and distinct from restoration costs. Trustees have a fiduciary obligation to capture the state’s loss of use damages from the period of contamination up until the time restoration is completed. Where restoration can only be partially achieved, additional loss of use damages will be incurred. 16. Ohio v. United States Dept. of the Interior, 880 F.2d 432,463 (D.C. Cir. 1989). 17. Frank B. Cross, Natural Resource Damage Valuation, 42 VAND. L. REV. 269, 308 (1989). 18. See Jeffrey Dobbins, The Pain and Suffering of Environmental Loss: Using Contingent Valuation to Estimate Nonuse Damages, 43 DUKE L.J. 879, 902 (1994) (noting that “existence value” is the “quintessential nonuse value” and its “major element”). 19. Frank B. Cross, Natural Resource Damage Valuation, 42 VAND. L. REV. 269, 285 (1989). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 423

measurable monetary value.20 Put simply, the strongest argument for including existence values in natural resource damages is that they indubitably exist.21 As the D.C. Circuit put it, “Option and existence values may represent ‘passive’ use, but they nonetheless reflect utility derived by humans from a resource, and thus, prima facie, ought to be included in a damage assessment.”22 The most typical method for measuring nonuse values, at least in the federal context, is CVM.23

II. TRADITIONAL SOLUTIONS TO THE PROBLEM OF NONMARKET DAMAGES

Values that are not traded in a market system, whether they relate to natural resource damages or other tort damages, can be difficult and costly to price. By definition, people are not accustomed to assigning dollar values to nonmarket goods, and thus, the technical difficulty of the price estimation is compounded by the problem of unfamiliarity. Furthermore, because many of these values manifest themselves only as emotions or intellectual conclusions, there may be no way to use revealed preferences or other objective data to assess the relative accuracy of the fact-finders’ estimated price. Nevertheless, the American tort system has for over a century regularly assessed the value of nonmarket damages suffered by plaintiffs. The reason the courts of all fifty states have made the fundamental decision to allow for recovery of such damages reflects a fundamental sense of fairness and justice: “[C]ontinued adherence to a rule of damages which allows recovery only for a decrease in market value would result in awarding the plaintiff only nominal damages even though the court is convinced that the injury is substantial.”24 Further, from an economic perspective, a

20. Id. at 285-86. 21. See id. at 286 (discussing undeniable existence of nonuse value components of natural resources); Alan Randall & George L. Peterson, Valuation of Wildland Benefits: An Overview, in VALUATION OF WILDLAND RESOURCE BENEFITS 38 (George L. Peterson & Alan Randall eds. 1984). 22. Ohio v. United States Dept. of the Interior, 880 F.2d 432, 464 (D.C. Cir. 1989). 23. Several commentators assert that CVM is the only method by which nonuse values can be measured. See, e.g., Jeffrey Dobbins, The Pain and Suffering of Environmental Loss: Using Contingent Valuation to Estimate Nonuse Damages, 43 DUKE L.J. 879, 918 (1994) (noting that CVM is “the only way of explicitly measuring nonuse values”). DOI, however, specifically recognizes that CVM is only one, nonexclusive method for measuring nonuse values. See 43 C.F.R. § 11.83 (2004) and infra Part IV.B. 24. 2A STUART M. SPEISER, CHARLES F. KRAUSE, & ALFRED W. GANS, AMERICAN LAW OF 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

424 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 complete damage award promotes efficiency by deterring undesirable behavior and leveling the playing field among complying and non-complying firms in the marketplace.25 Judges and juries convert a host of non-pecuniary, nonmarket losses into dollars amounts on a daily basis in American courts. They do so without the use of CVM, and, despite the criticism launched against the American tort system by industry groups and conservative academics, there is no indication that they will stop doing so any time soon. In this Part we survey four types of cases in which nonmarket losses are priced by juries, despite an inevitable amount of uncertainty: pain and suffering damages; special damages in nuisance cases; damages to unique goods; and damages to privately owned natural resources, in particular ornamental trees. Each category illustrates the well-established ability of juries to price nonmarket losses without the aid of broad-based surveys like CVM.

A. Pain and Suffering Damages The leading example of juries pricing nonmarket losses in the American tort system is the practice of awarding damages for pain and suffering in personal injury cases. The pain and suffering portion of a tort judgment is typically the largest part of the judgment,26 and “[e]ach year in the United States, the cumulative awards for pain and suffering run into the hundreds of millions, and perhaps billions, of dollars.”27 There is, however, no market for pain and suffering from which dollar figures can be derived. Thus, as one authority put it, there is “almost no standard for measuring

TORTS § 8:31, at 25-26 (2003). 25. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 143 (2d ed. 1977) (“The association of negligence with purely compensatory damages has promoted the erroneous impression that liability for negligence is intended solely as a device for compensation. Its economic function is different; it is to deter uneconomical accidents.”); see also e.g., Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521 (1992) (“The obligation to pay compensation can be, indeed is designed to be, a potent method of governing conduct and controlling policy.”); In re Exxon Valdez, 270 F.3d 1215, 1244 (9th Cir. 2001) (Whether . . . compensatory damages . . . deter bad future acts depends on whether [they] greatly exceed the expense of avoiding such accidents, not whether the amounts are compensatory or punitive.”). 26. W. Kip Viscusi, Pain and Suffering in Product Liability Cases: Systematic Compensation or Capricious Awards?, 8 INT’L REV. L. & ECON.’ 203, 203 (1988). 27. See Jeffrey Dobbins, The Pain and Suffering of Environmental Loss: Using Contingent Valuation to Estimate Nonuse Damages, 43 DUKE L.J. 879, 889 (1994). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 425 pain and suffering damages, or even a conception of those damages or what they represent.”28 Rather than deprive personal injury plaintiffs of any sort of recovery or attempt to adopt some sort of artificial scale of damages, courts throughout the country allow juries to award damages for pain and suffering, preferring some final method of assessing the damages to a complete deprivation of a compensatory award. Jurors are given broad discretion in fixing an appropriate award for pain and suffering.29 They are expected to arrive at an appropriate measure of damages by using their “background and experience”30 and their “enlightened conscience.”31 They are asked to consider the “severity and duration” of any pain and suffering,32 as well as expert testimony assessing the victim’s experience.33 In addition, their “observation and assessment of the plaintiff at trial . . . may be a significant factor affecting the award upward or downward,” though this factor “is unlikely to be assessed in any source to which a court would look in attempting to determine comparability.”34 Ultimately, however, “[i]t is impossible to know all of the factors that led a jury or judge to make a particular award for pain and suffering in a particular case.”35 The jury is acknowledged to be an ultimate arbiter of the issue, providing a final resolution to a difficult and uncertain question.

B. Special Damages in Nuisance Cases The majority of states also allow plaintiffs to recover nonmarket

28. See 2 DAN B. DOBBS, LAW OF REMEDIES: DAMAGES-EQUITY-RESTITUTION 383 (2d ed. 1993); see also Steel v. Bemis, 431 A.2d 113, 116 (N.H.1981) (noting that “[n]o one to our knowledge has been able to devise a formula by which compensation for pain and suffering can be determined with precision”). 29. See, e.g., 3 E. Devitt, C. Blackmar & M. Wolff, Federal Jury Practice and Instructions § 85.02 (1987 & Supp.2000); Fifth Circuit Pattern Jury Instructions (Civil) §§ 15.4 & 15.2 (1999) (instructing the jury that it “must use sound discretion in fixing an award of damages”). 30. Ballard v. Uribe, 715 P.2d 624, 631 (Cal.1986). 31. New Mexico Supreme Court, Uniform Jury Instructions, Civil § 18.7 (1980); see also G. Douthwaite, Jury Instructions on Damages in Tort Actions 274 (1981). 32. Bujol v. Enterjy Services, Inc., 833 So.2d 947, 982 (La.App. 1 Cir. 8/14/02). 33. Smith v. Ingersoll-Rand Co., 214 F.3d 1235 (10th Cir. 2000) (affirming jury award of $7,000,000 for pain and suffering and loss of enjoyment of life and holding that expert testimony of forensic economist defining hedonic damages and offering opinion on economic value of plaintiff’s loss of enjoyment of life was admissible). 34. Deloughery v. City of Chicago, 2004 WL 1125897 at * 5 (N.D. Ill. May 20, 2004). 35. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

426 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 damages for injuries caused by pollution and other nuisances.36 In most jurisdictions, owners or occupants of real estate “can recover in nuisance actions for sickness or injury to [their] health as an element of damages in addition to, or separate from, damages recoverable in respect of an injury to property or its use.”37 These special damages in nuisance cases are considered to be of particular social significance,38 and thus, courts award them to plaintiffs despite their nonmarket nature. As with pain and suffering damages, courts leave the measure of special damages in nuisance actions to “the sound discretion of the jury.”39 One of the clearest expressions of the necessity and propriety of allowing juries to assess special damages in nuisance cases is found in Gavigan v. Atlantic Refining Co.,40 a turn-of-the-century opinion by the Pennsylvania Supreme Court. The defendant in Gavigan “purchased lots and erected tanks and warehouses for the storage of carbon oil and gasoline” on lots adjoining Gavigan’s home and land.41 Gavigan complained that the odor from the oil and gasoline “made the occupation of his house extremely uncomfortable” and “injuriously affected” his health.42 He also alleged that “waste oil was permitted to percolate through the earth into the ditches and sewers, saturating the soil near the house, thereby aggravating his annoyance from the proximity of the oil tanks and storage warehouse.”43 Gavigan brought suit for damages, and the trial court submitted the nuisance claim to the jury. The jury returned a

36. See Nuisance as Entitling Owner or Occupant of Real Estate to Recover Damages for Personal Inconvenience, Discomfort, Annoyance, Anguish, or Sickness, Distinct from, or in Addition to, Damages for Depreciation for in Value of Property or Its Use, 25 A.L.R. 5th 568 § 2(a) (“Thus, it is the rule in most jurisdictions that in addition to depreciation in the market or rental or usable value of the realty, the plaintiff may recover the damages he himself suffers from deprivation of the comfortable enjoyment of his property, and the inconvenience and discomfort suffered by himself and his family, or other affected persons.”); see also 58 Am Jurisprudence 2d, Nuisances § 295. 37. Nuisance as Entitling Owner or Occupant of Real Estate to Recover Damages for Personal Inconvenience, Discomfort, Annoyance, Anguish, or Sickness, Distinct from, or in Addition to, Damages for Depreciation for in Value of Property or Its Use, 25 A.L.R. 5th 568 § 2(a). 38. See Restatement 2d of Torts § 821D cmt. b (“Freedom from discomfort and annoyance while using land is often as important to a person as freedom from physical interruption with his use or freedom from detrimental change in the physical condition of the land itself”). 39. Wheat v. Freeman Coal Mining Corp., 319 N.E.2d 290, 299 (Ill. App. 1974); see also Nitram Chemicals, Inc. v. Parker, 200 So.2d 220, 228 (Fla.App. 1967) (collecting cases). 40. 40 A. 834 (Pa. 1898). 41. Id. at 834. 42. Id. 43. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 427 verdict for Gavigan and awarded him $1286 in damages.44 On appeal, the refining company specifically complained about the adequacy of the charge to the jury concerning damages. Affirming the verdict, the Gavigan court stated: The court said to the jury more than once that the plaintiff must have shown an actual substantial injury, either to the use of the property, or to his health or physical comfort . . . [the court further instructed that] in considering injury to the reasonable use of the property, and the effect upon his health, and his actual physical discomfort, they must use their best judgment and soundest discretion in deciding what amount the plaintiff was entitled to, if anything. In a different class of cases we have held more than once that such a meager instruction on the measure of damages is inadequate, but, owing to the peculiar nature of the injury here complained of, we do not well see that the instruction could have been more specific. According to the testimony of plaintiff, often he had been made sick by the odors, and could not eat his meals; often, in the summer, he could not sleep because of the offensive smells, and would close the windows; then he could not sleep because of the heat; then he would go to his work, and suffer all day because of a sleepless night and an insufficient breakfast because of nausea; he and his family could not sit on the porch in the evening, because of the offensive odor. It would be impossible to lay down any rule to guide the jury in their estimate of damages for such injury. They are like unto the damages which the law allows for the pain and suffering from personal injury caused by negligence, – wholly within the sound discretion of the jury. With proper caution, the court thus left the matter to them, and their verdict does not indicate that they exceeded the limits of sound discretion.45 Thus, the court recognized that Gavigan had suffered significant harm, that the damages caused by the polluter were impossible to measure with precision, and that the appropriate thing to do was leave the difficult task of measuring the damages to the sound discretion of a jury. The rule expressed in Gavigan has been consistently adopted and followed by the courts of other states.46 In Wheat v. Freeman Coal

44. Id. at 835. 45. Id. (emphasis added). 46. See Nuisance as Entitling Owner or Occupant of Real Estate to Recover Damages for Personal Inconvenience, Discomfort, Annoyance, Anguish, or Sickness, Distinct from, or in Addition to, Damages for Depreciation for in Value of Property or Its Use, 25 A.L.R. 5th 568 § 2(a) (1994) (“Thus, it is the rule in most jurisdictions that in addition to depreciation in the market or rental or usable value of the realty, the plaintiff may recover the damages he himself suffers from deprivation of the comfortable enjoyment of his property, and the inconvenience and discomfort suffered by himself and his family, or other affected persons.”). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

428 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Mining Corp.,47 for example, a husband and wife who lived on a forty-acre popcorn farm brought a suit for damages against a neighboring coal mine. The Wheats complained that the operations of defendant’s mine “caused large amounts of coal dust and smoke” to come onto their property; “that the smoke and dust were constant, heavy and annoying, prohibiting them from doing their work at home or from opening their windows; that the dust interfered with their water supply and infested their food, clothing and furniture; and that the dust damaged the exterior of their house, causing it to blacken.”48 The trial judge submitted plaintiffs’ nuisance claim to a jury, and the jury returned a verdict for the Wheats in the amount of $12,000. On appeal, the defendant objected to the adequacy of the evidence supporting the award of damages, and specifically “object[ed] to the exclusion of its evidence regarding the value of plaintiffs’ premises.”49 In affirming the verdict, the appellate court stated: The measure of damages for nuisance is not the fair market value of plaintiffs’ land, but rather the damages are measured by the discomfort and the deprivation of the healthful use and comforts of the plaintiffs’ home. There is no fixed rule as to damages in such an action. The amount awarded must be left to the sound discretion of the jury in view of the facts of a particular case. Market value is not the proper measure of damages in such an action.50 Similarly, in French v. Ralph E. Moore, Inc.,51 the Supreme Court of Montana affirmed a jury verdict awarding substantial nonmarket damages to plaintiffs arising from gasoline contamination and pollution of their restaurant and family home. The Frenches claimed that the defendant negligently installed gasoline tanks at its service station across the road from their property and that, as a result, gasoline leaks and vapors invaded their land, restaurant and home. The Frenches were forced to close their restaurant and, in addition, suffered severe physical injuries and emotional distress. The trial court instructed the jury that they could award damages for “pain, discomfort, fears, anxiety, annoyance, inconvenience, and other mental, physical, and emotional distress.”52 The jury

47. 319 N.E.2d 290 (Ill. App. 1974). 48. Id. at 293. 49. Id. at 297. 50. Id. (internal citations omitted). 51. 661 P.2d 844 (Mont. 1983). 52. Id. at 847. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 429 awarded $40,000 to Mr. French and $150,000 to Mrs. French. In affirming the award the state supreme court stated: “A precise measuring rod for the amount of damages in a case involving physical or mental damages does not exist ...... Each case must, of necessity, depend on its own peculiar facts.”53 Numerous other cases allow for the recovery of special damages in nuisance actions and specifically allow for juries to measure such damages.54

C. Unique Goods Courts have also allowed plaintiffs to recover compensatory awards determined by juries in tort actions involving damages to personal property. Where the property at issue has a ready market value, proof of the value of the plaintiff’s loss is straightforward, and no disputes concerning appropriate evidence or a jury’s ability to properly assess the damages exist. Where, however, the item of personal property damaged or destroyed has no market value, the loss suffered by the plaintiff may still be great. Plaintiffs have sought recovery, for example, for the loss or destruction of family photographs, specially designed machines, portraits, and manuscripts, among other things.55 Despite the difficulty of measuring these damages, “[i]n by far the larger group of cases substantial recovery is allowed for tortious injuries to property interests which do not have a market value.”56 As with pain and suffering awards, courts have generally proceeded by allowing jurors to hear all relevant evidence bearing on the appropriate measure of the item’s value, and then

53. Id. at 848-49. 54. See, e.g., Bolin v Cessna Aircraft Co., 759 F Supp 692 (D. Kan. 1991) [DOESN’T STAND FOR THIS PROPOSITION] (applying Kansas law and allowing landowners to recover damages for annoyance, discomfort and emotional distress caused by defendant’s contamination of plaintiff’s groundwater); Burns v Jaquays Mining Corp., 752 P.2d 28 (Ariz. App. 1987) (allowing plaintiffs to recover for inconvenience, discomfort, and annoyance caused by defendant’s operation of asbestos mill and in particular by blowing of tailings piles into plaintiff’s land); see generally Nuisance as Entitling Owner or Occupant of Real Estate to Recover Damages for Personal Inconvenience, Discomfort, Annoyance, Anguish, or Sickness, Distinct from, or in Addition to, Damages for Depreciation for in Value of Property or Its Use, 25 A.L.R. 5th 568, and cases collected therein. 55. 2A S. Speiser, C. Krause, & A. Gans, AMERICAN LAW OF TORTS § 8:31, p. 25 (2003); see, e.g., Lack v. Anderson, 27 So.2d 653 (La. Ct. App. 2d Cir. 1946) (photograph); Austin v. Millspaugh & Co., 43 So. 305 (Miss. 1907) (draftsman’s plans); Louisville & N.R. Co. v. Stewart, 29 So. 394 (Miss. 1901) (portraits); Bishop v. East Ohio Gas Co., 56 N.E.2d 164 (Ohio 1944) (bacterial cultures). 56. 2A S. Speiser, C. Krause, & A. Gans, AMERICAN LAW OF TORTS § 8:31, p. 27 (2003). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

430 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 entrusting the jury to make the ultimate determination of damages. Jurors, for example, might consider evidence of the original cost of the item, including the value of the materials and labor involved in its production;57 the cost of reproduction or replacement;58 the cost of repair, if possible;59 testimony from the plaintiff herself, expressing an opinion as to the value of the property before it was lost or destroyed;60 and expert testimony.61 Based on such evidence, the damages rule most frequently adopted by courts in these cases is to have the jury determine either (1) the “actual” or “intrinsic” value of the item or (2) the diminution in “value to the owner.”62 Courts allow this type of determination of damages because to do otherwise “would result in awarding the plaintiff only nominal damages even though the court is convinced that the injury is substantial.”63 One of the clearest expressions of this general rule is found in Story Parchment Co. v. Paterson Parchment Paper Co.64 The plaintiff in Story Parchment sued the defendant for damages arising from a conspiracy to monopolize the vegetable parchment market. The plaintiff obtained a substantial jury verdict, but the court of appeals reversed, concluding, inter alia, that the jury’s verdict “was based upon mere speculation and conjecture.”65 The Supreme Court reversed, specifically rejecting the appellate court’s conclusion about the required degree of precision in assessing damages: . . .It is true that there was uncertainty as to the extent of the damage, but there was none as to the fact of damage; and there is a clear distinction between the measure of proof necessary to establish the fact that petitioner had sustained some damage and the measure of proof necessary to enable the jury to fix the amount. The rule which precludes the recovery of uncertain damages applies to such as are not the certain result of the wrong, not to those damages which

57. See, e.g., Palin v. General Const. Co., 47 Wash. 2d 246 (1955); Redwine v. Fitzhugh, 329 P.2d 257 (Wyo. 1958) (unmatured crops). 58. Wood v. Cunard S.S. Co., 192 F. 293 (2d Cir. 1911); Kearns v. Sparks, 296 S.W.2d 731 (Ky. 1956). 59. Wisconsin Telephone Co. v. Reynolds, 2 Wis. 2d 649 (1958) (underground telephone cable). 60. Zenier v. Spokane Intern. R. Co., 78 Idaho 196 (1956). 61. La Bourgogne, 144 F. 781 (2d Cir. 1906). 62. 2A S. Speiser, C. Krause, & A. Gans, supra note 24, at 26. 63. Id. 64. 282 U.S. 555 (1931). 65. Id. at 561. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 431

are definitely attributable to the wrong and only uncertain in respect of their amount... Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise.66 State courts have relied on the reasoning in Story Parchment in tort cases where a precise assessment of damages is impossible. The state appellate court in Matter of Rothko’s Estate,67 for example, affirmed an assessment of damages in a case involving certain paintings by a famous artist, despite the fact that it was “impossible to appraise the value of the unreturned works of art with an absolute certainty.”68 The court, citing Story Parchment, reasoned as follows: [S]o long as the figure arrived at had a reasonable basis of computation and was not merely speculative, possible or imaginary, the Surrogate had the right to resort to reasonable conjectures and probable estimates and to make the best approximation possible through the exercise of good judgment and common sense in arriving at that amount. This is particularly so where the conduct of wrongdoers has rendered it difficult to ascertain the damages suffered with the precision otherwise possible.69

D. Privately Owned Natural Resources: Ornamental Trees Courts have also routinely allowed juries to assess nonmarket and non-pecuniary damages in cases involving real property, including privately owned natural resources. Perhaps the most useful analogy to the NRD context is the line of cases awarding nonmarket damages to plaintiffs for the loss or destruction of ornamental trees. These cases specifically allow the plaintiffs to recover both

66. Id. at 562-63. 67. 43 N.Y.2d 305 (1977). 68. Id. at 323. 69. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

432 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 use values and nonuse values of the trees, such as damages for the deprivation of the convenience, comfort and enjoyment of the land with the trees on it70 and damages for injury to trees that aesthetically enhanced the appearance of the plaintiff’s land.71 Because “there is no fixed rule for measuring damages” in these cases,72 state courts have had to specifically address the proper approach to take in order to achieve a just result. The emerging consensus is one of a call for “flexibility” in order to ensure “full compensation to the owner.”73 In one of the leading opinions involving ornamental trees, for example, the Supreme Court of Minnesota reversed the trial court’s decision to direct a verdict for defendants because the plaintiffs had failed to prove a diminution in value of their land and sought only the cost of replacement of the trees.74 The court concluded as follows: We are in accord with the authorities cited and remand for a trial on the issues of liability and damages. As we have previously indicated, the jury may properly consider both the cost of restoration and the before- and after- value of the land itself. In instances where the cost of replacement is unreasonable or excessive in relation to the damage to the land itself, the court will, in its discretion, allow the jury to consider more than one measure of damages in order to permit flexibility and achieve a just and reasonable result.75 Similarly, in Huber v. Serpico, a timber trespass case involving fifty trees, a New Jersey appellate court held that the plaintiff’s recovery was not limited the diminution in the market value of the land. Because of the trees’ “peculiar value to the owner” the court held that restoration costs were an appropriate award.76 The court stated: The major thrust of defendants’ argument on appeal, however, is that

70. See, e.g., Ragland v. Clarson, 259 So.2d 757 (Fla. Dist. Ct. App. 1st Dist. 1972). 71. See, e.g., Williams v. Hanover Ins. Co. of New York, 351 So.2d 858 (La. Ct. App. 2d Cir. 1977). 72. 2A S. Speiser, C. Krause, & A. Gans, AMERICAN LAW OF TORTS § 8:38, p. 114 (2003). 73. Huber v. Serpico, 71 N.J. Super. 329, 346 (1962); see also Heninger v. Dunn, 101 Cal. App. 3d. 858 (1st Dist. 1980); Ragland v. Clarson, 259 So.2d 757 (Fla. Dist. Ct. App. 1st Dist. 1972); Williams v. Hanover Ins. Co. of New York, 351 So.2d 858 (La. Ct. App. 2d Cir. 1977); Rector, Wardens and Vestry of St. Christopher’s Episcopal Church v. C.S. McCrossan, Inc., 306 Minn. 143 (1975). 74. Rector, Wardens and Vestry of St. Christopher’s Episcopal Church v. C.S. McCrossan, Inc., 306 Minn. 143 (1975). 75. Id. at 150. 76. Huber v. Serpico, 71 N.J. Super. 329, 343-345 (1962). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 433

the jury should not have been allowed to consider any evidence of value which would permit a verdict in excess of the diminution of value of the realty after the cutting... Sound principle and persuasive authority support the allowance to an aggrieved landowner of the fair cost of restoring his land to a reasonable approximation of its former condition, without necessary limitation to the diminution in the market value of the land, where a trespasser has destroyed shade or ornamental trees or shrubbery having peculiar value to the owner.77 After surveying the extant case law, the court, echoing the rule espoused by the Supreme Court in Story Parchment, concluded that “in this area the cardinal principles are flexibility of approach and full compensation to the owner, within the overall limitation of reasonableness.”78

III. FEDERAL REGULATIONS AND THE PROBLEM WITH CVM

In addition to state statutory and common law authority, state trustees may bring NRD claims under federal law.79 DOI and NOAA have promulgated regulations implementing the NRD provisions of CERCLA and OPA, respectively. While limitations on federal NRD claims make state law claims more attractive for most trustees, a review of the federal NRD assessment regulations is useful because it illustrates the potential pitfalls trustees will face even in state cases if states and state courts do not properly approach the assessment of nonmarket damages. The federal regulations acknowledge both the importance of nonmarket damages and the difficulty of measuring them. Rather than providing an efficient mechanism for recovery, however, the federal regulations have allowed resource-draining debate about a single damage assessment methodology, CVM, to stymie trustees’ prosecution of their federal claims.

77. Id. at 343, 345. 78. Id. at 346. 79. CERCLA explicitly states that it does no preempt state claims. 42 U.S.C. § 9614(a) (1982) (providing that ‘[n]othing in this chapter shall be construed or interpreted as preempting any State from imposing any additional liability or requirements with respect to the release of hazardous substances within such State’). Of course, government plaintiffs may recover only once for any given damage to natural resources. Superfund provides that a ‘person who receives compensation for removal costs or damages or claims pursuant to any other Federal or State law shall be precluded from receiving compensation for the same removal costs or damages or claims as provided in this chapter.’ Id. § 9614(b). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

434 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

A. Brief Overview of the Federal Damage Assessment Regulations Under both CERCLA and OPA, responsible parties are liable for “damages for injury to, destruction of, or loss of” natural resources.80 These damages may be used to fund the restoration, rehabilitation, or replacement of natural resources, or for the acquisition of equivalent natural resources.81 Both statutes contain provisions governing the nature of NRD assessment. CERCLA explicitly requires that “[t]he measure of damages . . . shall not be limited by the sums which can be used to restore or replace such resources.”82 Courts addressing the nature of losses compensable under this section have specifically held that aesthetic and existence values are among the recoverable losses.83 Similarly, OPA provides that the measure of natural resource damages is: (A) the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources; (B) the diminution in value of those natural resources pending restoration; plus (C) the reasonable cost of assessing those damages.84 Both CERCLA and OPA require the promulgation of NRD assessment methods by federal agencies.85 While the OPA regulations are relatively unexceptional, merely delegating the responsibility for the promulgation to NOAA,86 the CERCLA

80. 42 U.S.C. § 9607(a)(1)-(4)(C) (1988) (CERCLA); 33 U.S.C. § 2702(b)(2)(A) (Supp. IV 1992) (OPA). The OPA permits recovery for damages for the “loss of use of” natural resources, but the legislative history indicates that this language does not necessarily limit recovery to “use values.” See S. Rep. No. 94, 101st Cong., 1st Sess. 15 (1990), reprinted in 1990 U.S.C.C.A.N. 722, 736-37 (providing, for example, that the value of sea otters is more than the value of their pelts). 81. See 42 U.S.C. § 9607(f)(1) (mentioning all but “rehabilitation” under CERCLA); 33 U.S.C. § 2706(c)(1)(C) (Supp. IV 1992) (under the OPA). 82. 42 U.S.C. § 9607(f)(1); see also id. § 9651(c)(2). 83. See Ohio v. United States Dep’t of the Interior, 880 F.2d 432, 463-64 (D.C. Cir. 1989); In re Acushnet River & New Bedford Harbor Proceedings, 716 F. Supp. 676, 686 (D.Mass.1989) (considering aesthetic values). The court in Acushnet also noted the possibility that “‘’”‘existence’ and ‘intrinsic’ values attributable to natural resources” may be diminished and implied that such values may be a basis for recovery. Id. at 686 n. 15; cf. Idaho v. Southern Refrigerated Transp., No. 88-1279, 1991 WL 22479, at *18-19 (D. Idaho Jan. 24, 1991) (rejecting CV evidence of existence value in this case, although “not mean[ing] to suggest that the steelhead had no existence value”). 84. 33 U.S.C. § 2706(d)(1). 85. See 42 U.S.C. §§ 9651(c)(1)-(2); 33 U.S.C. § 2706(e)(1). 86. 33 U.S.C. § 2706(e)(1) (also requiring NOAA to consult with the EPA and the Fish and Wildlife Service). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 435 regulations are quite detailed. CERCLA requires the regulations to include “type A” procedures for “simplified assessments requiring minimal field observation” and alternative “type B” protocols “for conducting assessments in individual cases to determine the type and extent of short- and long-term injury, destruction, or loss.”87 Type B methods, which presently govern the use of CV, were intended to “identify the best available procedures to determine such damages, including both direct and indirect injury, destruction, or loss and . . . take into consideration factors including, but not limited to, replacement value, use value, and ability of the ecosystem or resource to recover.”88 Finally, under both the OPA and CERCLA, trustees need not use the recommended methodology to assess NRDs, but those who do enjoy a “rebuttable presumption” that their estimate of damages is correct.89 In the leading case addressing federal NRD assessment regulations, Ohio v. United States Department of the Interior,90 several states, environmental organizations, and industry representatives challenged DOI’s initial regulations as unreasonable interpretations of CERCLA. At issue in the case were the regulatory presumptions that governed the appropriate measure of damages (restoration or diminished use), the types of values that should be considered in that measurement (use or nonuse), and the methodologies that should be used to estimate those values (market price or CV, for example). The first presumption with respect to the measure of damages required that the trustee select the lesser of (1) restoration or replacement costs or (2) diminution of use values as the basis for the injury.91 The Ohio court struck down this provision as improperly ignoring congressional intent that the basic measure of NRDs be restoration value: Our reading of the complex of relevant provisions concerning damages under CERCLA convinces us that Congress established a

87. 42 U.S.C. § 9651(c)(2). 88. Id.; See also Ohio v. United States Dep’t of the Interior, 880 F.2d 432, 464 (D.C. Cir. 1989) (noting that this language “is expressly not limited to use value; if anything, the language implies that DOI is to include in its regulations other factors in addition to use value”); id. at 478 (sustaining CV as a “best available procedure”). 89. 42 U.S.C. § 9607(f)(2)(C) (applying rebuttable presumption to uses of developed methodology in both CERCLA and the CWA); 33 U.S.C. § 2706(e)(2) (OPA). 90. 91. Natural Resource Damage Assessments, 43 C.F.R. § 11.35(b)(2) (1989). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

436 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

distinct preference for restoration cost as the measure of recovery in natural resource damage cases. This is not to say that DOI may not establish some class of cases where other considerations—i.e., infeasibility of restoration or grossly disproportionate cost to use value—warrant a different standard. We hold the “lesser of” rule based on comparing costs alone, however, to be an invalid determinant of whether or not to deviate from Congress’ preference.92 The second and third presumptions were contained within the hierarchy of assessment models outlined in § 11.83(c) of the rules. Under this hierarchy, the best means of estimating losses was to rely on the market price of use values. Nonuse values and nonmarket methods of valuation like CV were permitted only when the more preferred method or value was impossible to use. The Ohio court struck down this “hierarchy of use values.”93 The court noted that “resources have values that are not fully captured by the market system,” and the requirement that only market value be used to assess those values departed from that view.94 Permitting nonmarket methods to be used only when the resource’s use values are not ascertainable was unduly restrictive because having market value does not preclude the resource from also having nonmarket value.95 The court found that neither the statute nor congressional intent permitted this hierarchy of assessment favoring use values.96 Notably, the court upheld the DOI regulations governing the use of CV as reasonably representing the “best available procedure.”97 Specifically, the court found DOI’s decision to include CV in the NRD assessment methodologies to be “intelligent” and “cautious,”98 “reasonable and consistent with congressional intent,”99 and fairly representing the “best available procedure.”100

B. The Problem with CVM The federal NRD assessment regulations and the CERCLA regulations in particular, very pointedly reflect the significance of

92. 880 F.2d at 459. 93. Id. at 462-63 94. Id. 95. Id. 96. Id. 97. Id. at 476-78. 98. Id. at 476. 99. Id. at 477. 100. Id. at 478. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 437 nonmarket damages. As the Ohio court put it, “resources have values that are not fully captured by the market system,” and the federal NRD assessment regulations have to be formulated to capture those values. The problem, of course, is how to measure those values. As noted above, the Ohio court approved DOI’s inclusion of CVM as a method for measuring nonuse values.101 Further, under DOI’s current type B assessment procedures, CVM remains a method for measuring both nonuse and use values: (vii) Contingent valuation methodology—(A) The contingent valuation methodology includes all techniques that set up hypothetical markets to elicit an individual’s economic valuation of a natural resource. This methodology can determine use values and explicitly determine option and existence values. This methodology may be used to determine lost use values of injured natural resources. (B) The use of the contingent valuation methodology to explicitly estimate option and existence values should be used only if the authorized official determines that no use values can be determined.102 Several commentators have opined that CVM is the “only method available” for measuring nonuse values.103 Even if one accepts CVM in theory, however, in practice it has unquestionably been a failure. There is an extensive literature criticizing the accuracy of CVM, the major points being the following: • inevitable bias among respondents, so that certain resources will be over- or under-valued • respondents’ general lack of familiarity with the natural resources in question, so that responses are unduly speculative • failure of most respondents to properly take budgeting into account in their responses (i.e., taking into account what other spending they would be willing to forgo in order to spend on the value present in the CV questions), so that the real willing to pay (WTP) is actually less than reported

101. Id. at 463. 102. 43 C.F.R. § 11.83(c)(2)(vii). 103. Jeffrey Dobbins, The Pain and Suffering of Environmental Loss: Using Contingent Valuation to Estimate Nonuse Damages, 43 DUKE L.J. 879, 919 (1994); see also Note, “Ask a Silly Question . . .”: Contingent Valuation of Natural Resource Damages, 105 HARV. L. REV. 1981, 1981 (1992) (“currently the only technique that can measure nonuse values is the contingent valuation method”). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

438 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

• “embedding problems” in most CV surveys, which occur when respondents place nearly identical values on what seem to be very different levels of environmental loss • the tendency of CV to result in inordinately large values104 Our concern in this Article is not with examining CVM in detail and attempting to fine tune and fix it. Nor do we think it is helpful, as some commentators have done, to simply say that CVM is all we’ve got so we should just make do.105 Rather, we think it’s clear that it is time for trustees and courts to utilize an alternative to CVM. In what appears to be the only published decision in which a court had to squarely address the admissibility of CV surveys, Idaho v. Southern Refrigerated Transp.,106 the court, though recognizing that the natural resource at issue had a positive existence value, found that “it would be conjecture and speculation to allow damages based on [plaintiff’s CV] study.”107 While the lack of published decisions makes definitive generalizations difficult,108 there have been a number of actions settled out of court involving contingent valuation, and there is clearly a consensus among practitioners that CVM is of questionable utility at best. Our proposed alternative follows.

IV. MEASURING NATURAL RESOURCE DAMAGES IN STATE CASES

Contingent Valuation is neither necessary nor, in light of the federal experience, even likely to prove helpful to trustees asserting state law claims for natural resource damages. Rather, trustees and courts should look to the states’ shared experience in dealing with the measurement of other socially significant nonmarket damages, such as damages for pain and suffering. Juries can competently assess nonmarket damages in NRD cases, including lost use damages, by considering all available evidence in the cases (i.e.,

104. See Dobbins, supra note 103, at 921-35; Frank B. Cross, Natural Resource Damage Valuation, 42 VAND.L.REV. 269, 314-19 (1989). 105. See, e.g., Miriam Montesinos, It May Be Silly, But It’s an Answer: The Need to Accept Contingent Valuation Methodology in Natural Resource Damage Assessments, 26 ECOLOGY L.Q. 48 (1999). 106. No. 88-1279, 1991 WL 22479 (D. Idaho Jan. 24, 1991). 107. Id. at *19. 108. See John Loomis & Peter Anderson, Idaho v. Southern Refrigerated, in Kevin Ward & John Duffield, NATURAL RESOURCE DAMAGES: LAW AND ECONOMICS 389-90 (1992) (noting that “[t]here continue to be very few cases involving nonmarket valuation which have actually been ruled on by the courts as opposed to settled out of court.”) 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 439 apart from Contingent Valuation surveys), especially evidence of the particular injuries suffered by the natural resources at issue. As in cases involving privately owned natural resources, the “cardinal principles” in NRD cases should be “flexibility of approach and full compensation to the owner.”109 As an initial matter, the notion that CVM is the “only method available”110 for measuring nonuse values must be dispelled at the outset. If this were true, then CVM would also be the “only method available” for measuring pain and suffering damages, damages to unique goods, and damages to ornamental trees. To say that CVM is the only method available for measuring nonmarket natural resource damages is to say that it is the only method available for measuring all nonmarket damages. As discussed above, the courts and the common law of all fifty states disagree. Even DOI, furthermore, disagrees with that notion, as the CERCLA damage assessment regulations make clear. Section 11.83(c)(2) lists three methods for indirectly measuring nonmarket natural resource damages besides CVM: travel cost methodology, hedonic pricing methodology, and unit value methodology.111 Furthermore, section 11.83(c)(3) specifically allows trustees to devise other methodologies for computing damages: (3) Other valuation methodologies. Other valuation methodologies that measure compensable value in accordance with the public’s WTP, in a cost-effective manner, are acceptable methodologies to determine compensable value under this part. NRD trustees in state actions should be allowed to prove nonmarket damages in accordance with the common law principles which both state and federal courts have adopted in situations in which perfect precision in measuring damages is impossible. There is no principled reason to insist on a different standard for measuring damages to natural resources as compared to pain and suffering damages. Natural resource damages are, indeed, the pain and suffering damages of the environment. The rule which state courts have applied to ornamental tree cases should apply with equal force to state NRD cases: “in this area the cardinal principles are flexibility of approach and full compensation to the owner,

109. Huber v. Serpico, 71 N.J. Super. 329, 346 (1962). 110. See, e.g., Dobbins, supra note 104.“ . . .”“” 111. 43 C.F.R. § 11.83(c)(2). 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

440 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 within the overall limitation of reasonableness.”112 Indeed, the legislative history of CERCLA indicates that Congress intended common law principles to govern the assessment of damages even in federal NRD cases.113 How, exactly, can nonmarket natural resource damages be measured without CVM? Assume a state trustee is bringing an NRD action involving a contaminated stream and is seeking damages for (1) restoration or replacement costs and (2) loss of use damages. The restoration and replacement costs can be precisely determined by market pricing.114 The loss of use damages, however, will not have a ready market valuation, since, for example, the value of the states’ citizens’ recreational use of the stream cannot easily be monetized. In this situation, the following evidence should provide a sufficient basis for a jury to determine the amount of damages the state is entitled to receive for lost use: 1. evidence concerning the condition of the stream prior to the release(s), including the stream’s location and its environs; 2. evidence concerning the nature and extent of the release; 3. evidence concerning the effect of the release on the stream, including expert testimony; 4. evidence concerning the effect of the release on people’s use of the stream for recreational and other purposes, both in theory and in practice, including expert testimony; 5. testimony by the trustee (i.e., some designated representative of the state’s environmental agency) concerning the significance of the natural resource (here, the stream) to the state’s citizens and the release’s effect on the state’s use and enjoyment of the resource

This evidence will not give the jury a set of monetary figures from which to deduce some final result. It will, rather, give them a description of physical facts which they must then translate into a

112. Huber, 71 N.J. Super. at 346. 113. The significance of common-law precedent is indicated by Senator Alan Simpson’s floor discussion of Superfund, in which he called for the use of “traditional legal rules for calculating damages” to natural resources. 126. CONG. REC. S158008 (daily ed. Nov. 24, 1980). 114. Private firms, for example, currently supply reconstructive services and can thus provide market pricing. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 441 dollar amount. That, of course, is precisely what a jury would do in assessing pain and suffering damages, and the five categories of evidence above are precisely analogous to the types of evidence a jury would see in a personal injury case: 1. evidence concerning the condition of the plaintiff prior to the injury; 2. evidence concerning the nature and extent of the injury; 3. evidence concerning the effect of the injury on the plaintiff (i.e., how long and severely she suffered, what types of scars and etc. were inflicted), including expert testimony; 4. evidence concerning the effect of plaintiff’s injuries on her spouse and other family members, such as loss of support and consortium; 5. testimony by the plaintiff herself concerning the extent of her injuries115 Recognizing both the impossibility of market pricing for pain and suffering damages and the social significance of compensating victims, American courts have relied on such non-monetary evidence to assess pain and suffering damages for over a century.116 The same impossibility of market pricing and social significance exists in NRD cases, and courts can and should use analogous evidence to measure nonmarket natural resource damages.

V. NATIVE AMERICAN LOSSES

As noted above, use values and nonuse values, primarily existence values, are two significant components of natural resource damages. Regardless of the valuation method used, any court addressing natural resource damages to Native American lands will have to take into account the significant cultural and religious values Native Americans attach to natural resources. While difficult to quantify, Native Americans have traditionally attached unique and significant use values and existence values to natural resources which make the measure of damages in cases involving tribal lands significantly greater than in other cases. The unique relationship tribal peoples have with their lands has

115. See supra Part III.A. 116. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

442 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 been well documented.117 While there are numerous beliefs and practices among Native American peoples,118 and generalizations about particular cultures ought to be avoided, there are common threads. “One such thread is the sacredness of specific places in the religions of almost all Indian peoples.”119 As one authority explained: Native American religions are difficult to understand within the doctrinal confines of the major religions of the Western World. In contrast to Western religions, Indian religions do not have a body of sacred literature comparable to the Bible, the Koran, or the Torah. Nor do many Indian religions center around belief in a single, omnipotent Deity . . . One aspect of traditional Indian religions which has proven particularly difficult for non-Indians to grasp is the connection between worship and place. Native American religions are inextricably tied to the land. They exist in relation to, and dictate conduct within, a geographic place. The overwhelming majority of indigenous American religions cannot be practiced on certain days, inside designated buildings, or through purely intellectual exertions. Rather, the religion - and culture - of most indigenous Americans cannot be divorced from well-defined relationships with specific lands. Under Native American teleology, peoples are placed on the Earth in precisely the proper places; each tribe must live symbiotically with the other creatures, the plants, the rocks and soil, the air and water, and the spirits or gods that share those places. The Native American relationship with the land goes beyond reverence to symbiotic equality: Just as each place on Earth has its own unique mix of humans and other living beings, each has its own unique operating instructions and rituals.120 Native Americans also tend to value other natural resources, such as animals, differently than people espousing traditional Western values: Christianity counsels that humans are superior to all other creatures on Earth, and the Christian calling may encompass an assumption of control and dominion over the earth and living creatures . . . . In comparison, in Native American religions, human beings are not

117. See, e.g., HANDBOOK OF AMERICAN INDIAN RELIGIOUS FREEDOM (Christopher Vecsey, ed., 1991); CHRISTOPHER VECSEY, IMAGINE OURSELVES RICHLY (1988); JOSEPH EPES BROWN, SPIRITUAL LEGACY OF THE AMERICAN INDIAN (1982); ÅKE HULTKRANTZ, THE RELIGIONS OF THE AMERICAN INDIANS (1979); VINA DELORIA, GOD IS RED (1973). 118. See CHRISTOPHER VECSEY, Prologue to HANDBOOK OF AMERICAN INDIAN RELIGIOUS FREEDOM, supra note 117, at 12 (discussing the existence of hundreds of different Native American languages and religious practices). 119. Robert Charles Ward, The Spirits Will Leave: Preventing the Desecration and Destruction of Native American Sacred Sites on Federal Land, 19 Ecology L.Q. 795, 798 n.5. 120. Id. at 798-800. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 443

considered superior to other creatures or the natural world. Under tribal creation theories, the animals were created first and helped create the land. Thus, humans may be seen as owing their creation to animals, which have a closeness to the Great Spirit. Additionally, animals may be considered superior to humans beings, because they are better adapted to their environment than humans in that they need no clothes to survive and are better equipped to obtain their food. Thus, there is a stark contrast between Native American and Christian attitudes toward nature and the environment. Christian teachings discuss the environment as a commodity to be used and controlled, whereas Native Americans see the world as a place of gods, spirits, and living beings. Under tribal religions, all of creation, whether animated or not (plants, streams, and mountains), have their own spirits and potential for life, and Native Americans pray through these spirits in much the same way that Christians pray to God through Christ and the saints. Animals and the natural world are seen as providing a link between humans and the Great Spirit.121 Native Americans thus have a fundamentally different conception and appreciation of natural resources than non-tribal peoples. This difference will necessarily manifest itself in the use values and existence values that Native Americans assign to their natural resources. A Christian who enjoys hiking in a forest and knowing that his children will be able to someday enjoy visiting that same forest will necessarily ascribe different–and arguably lesser–use values and existence values to that forest than would a Native American who considers the forest to be a sacred site and who hunts and prays there. Furthermore, use values and existence values may be the only values that the Native American ascribes to the natural resources associated with the forest, since he may literally have no meaningful conception of commodifying the trees and other resources and assigning market values to them.122 A court attempting to assess natural resource damages in a case involving tribal lands will have no choice but to address the quantification of these values. This quantification is no easy task. Indeed, it seems clear that, as with pain and suffering damages and special damages in nuisance cases, “a precise measuring rod” for these damages simply “does

121. Anastasia Winslow, Sacred Standards: Honoring the Establishment Clause in Protecting Native American Sacred Sites, 38 Ariz. L. Rev. 1291, 1297-98 (1996). 122. See HANDBOOK OF AMERICAN INDIAN RELIGIOUS FREEDOM, supra note 117, at 21. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

444 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 not exist.”123 In this scenario federal common law, which applies in tribal NRD actions,124 directly addresses what a court should do: Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise.125 Thus, the court should attempt the best approximation of the damages under the circumstances. In this case, as in the other contexts discussed in this Article, courts should do what the common law has traditionally done when faced with nonmarket damages: allow the jury to hear all relevant evidence and leave the ultimate, necessarily approximate valuation to “the sound discretion of the jury.”126 Indeed, this is precisely what federal courts do when faced with the similarly difficult quantification of damages for constitutional torts.127

VI. UNJUST ENRICHMENT AS AN ALTERNATIVE MEASURE OF 128 DAMAGES

A fundamental principle of law and economics is that compensatory damages serve not only to compensate victims but also to deter undesirable behavior.129 Polluters must be made to

123. French v. Ralph E. Moore, Inc., 661 P.2d 844, 848 (Mont. 1983). 124. Unlike state trustees, tribal trustees must principally rely on federal causes of action in NRD cases. 125. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562-63 (1931). 126. Wheat v. Freeman Coal Mining Corp., 319 N.E.2d 290, 297 (Ill. App. 1974). 127. See, e.g., Scott v. Ross, 140 F.3d 1275 (9th Cir. 1998) (affirming jury’s verdict awarding $875,000 in compensatory damages in action involving claim of conspiracy to deprive plaintiff of his religious freedom). 128. Professor Kanner has discussed the use of unjust enrichment claims in NRD actions at greater length in a separate article. See Allan Kanner, Unjust Enrichment in Environmental Law (forthcoming). 129. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 143 (2d ed. 1977) (“The association of negligence with purely compensatory damages has promoted the erroneous impression that liability for negligence is intended solely as a device for compensation. Its economic function is different; it is to deter uneconomical accidents.”); see also e.g., Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521 (1992) (“The obligation to pay compensation can be, 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 445 pay sufficiently high damages so that it becomes economically inefficient for them to continue polluting. In particular, when fashioning an appropriate remedy courts must take into account the economic benefit polluters derive from not paying for the proper disposal of hazardous substances.130 Trustees bringing state law claims in NRD actions may recover this economic benefit by asserting claims based on theories of unjust enrichment. Unjust enrichment “is an equitable principle mandating that one shall not be permitted to unjustly enrich oneself at the expense of another or to receive property or benefits without making compensation for them.”131 Unjust enrichment entitles the plaintiff to restitution of the ill-gotten gains, and thus specifically “permits the recovery of that amount the defendant has been unjustly enriched at the expense of the plaintiff.”132 As the leading authority on unjust enrichment and restitution has noted, “when restitution is appropriate at all, this principle by which the plaintiff’s entitlements are identified with the defendant’s gains may provide the plaintiff with a remedy far superior to any other.”133 In particular, this is because restitution allows for “the possibility of making a monetary recovery when the plaintiff cannot prove the amount of actual damages.”134 Unjust enrichment and restitution are thus particularly appropriate for use in NRD cases. A polluter who dumps hazardous substances onto the state’s land or into its waters not only contaminates those natural resources but also derives the substantial benefit of cost savings from not having to pay for the indeed is designed to be, a potent method of governing conduct and controlling policy.”) (quoting San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 247 (1959)); In re Exxon Valdez, 270 F.3d 1215, 1244 (9th Cir. 2001) (“Whether . . . compensatory damages . . . [deter] bad future acts depends on whether [they] greatly [exceed] the expense of avoiding such accidents, not whether the amounts are compensatory or punitive”). 130. See, e.g., United States v. Mun. Auth., 929 F. Supp. 800, 806 (M.D. Pa., 1996), aff’d 150 F.3d 259 (3rd Cir. 1998) (noting, in Clean Water Act action, that the “goal of deterrence requires that a penalty have two components. First, it must encompass the economic benefit of noncompliance to ensure that the violator does not profit from its violation of the law. Second, the penalty must include a punitive component in the form of a sum in addition to economic benefit which accounts for the degree of seriousness and/or willfulness of the violations”). 131. Credit Bureau Enterprises, Inc. v. Pelo, 608 N.W.2d 20, 25 (Iowa 2000) (quoting W. Branch State Bank v. Gates, 477 N.W.2d 848, 851-52 (Iowa 1991)). 132. Ellis v. Smith Grading and Paving, Inc., 294 S.C. 470, 473 (Ct. App. 1988). 133. DAN B. DOBBS, LAW OF REMEDIES: DAMAGES-EQUITY-RESTITUTION § 4.1 (2d ed. 1993). 134. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

446 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 proper disposal of the waste. As the Court in Branch v. Mobil Oil Corp.135 put it: “Unjust enrichment can occur when a defendant uses something belonging to the Plaintiff in such a way as to effectuate some kind of savings which results in or amounts to a business profit . . . Defendants used Plaintiffs’ property to dispose of pollutants and saved the expenses of otherwise collecting and disposing of same.”136 Thus, where trustees assert claims for restoration or replacement costs as well as for loss of use damages, courts may elect to use restitution of the polluters’ cost-savings as an alternative to measuring and assessing the various components of the state’s loss of use damages. As noted above, the cost of restoration or replacement of the damaged natural resources will typically have a ready market valuation. While the common law would certainly allow juries to measure states’ loss of use damages, as discussed throughout this Article, courts, relying on the principle of unjust enrichment, could instead award trustees the economic cost savings polluters incurred by not disposing of the hazardous substances at issue from the time of contamination until the time of restoration or replacement, which would have a ready market valuation. Conceptually, trustees could seek this restitutionary remedy either by directly asserting a claim for unjust enrichment, where the state law allows, or by seeking restitution as the most appropriate remedy for trespass. The use of trespass claims is particularly appropriate because damages for trespass, like statutory damages for NRD, include “the cost of restoration and the loss of use.”137

135. 778 F. Supp. 35 (W.D. Okla. 1991). 136. Id. at 35-36; see also United States v. Healy Tibbitts Const. Co., 607 F. Supp. 540, 542-43 (N.D. Cal. 1985) (“The portrait of a polluter indifferently standing idle while its oil spill is neutralized at public expense—and thereafter spiritedly disavowing any responsibility for recompensing the United States—offers as compelling an example of unjust enrichment as has lately been brought before the Court.”); Evans v. City of Johnstown, 410 N.Y.S.2d 199, 206- 07 (N.Y.Sup.1978) (holding that plaintiff could proceed on claim for unjust enrichment against municipalities for money saved by not properly disposing of waste materials); Cassinos v. Union Oil Co., 18 Cal.Rptr.2d 574 (Cal. Ct. App.1993) (noting that fair market cost to dispose of injected wastewater at available sites in area during pertinent period was reasonable quasi-contractual measure of damages for adjacent property owner’s trespass through injection of off-site wastewater into plaintiff’s adjacent property, damaging mineral estate). 137. Akins v. Williams Communications, Inc., 116 Wash. App. 1021, 2003 WL 1521999 at *3 (Wash. Ct. App. Mar. 25, 2003); see also Van Wyk v. Public Service Co. of Colorado, 996 P.2d 193, 197 (Colo. Ct. App. 1999) (“Damages available on trespass and nuisance claims can include not only diminution of market value or costs of restoration and loss of use of the property, but also 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

2005] Loss of Use Damages 447

A classic illustration of awarding restitution of profits or gains obtained for trespass to land is illustrated by the famous “Kentucky cave case,” Edwards v. Lee’s Adm’r.138 Edwards concerned a cave that contained visibly wondrous onyx deposits and that proved to be a successful tourist attraction. The entrance to the cave and most of the cave itself were on Edwards’ land, and he eventually made substantial profits by selling admission to the cave. About one third of the cave, however, turned out to be on Lee’s land, and Lee brought suit in trespass. The trial court held that Lee was entitled to a proportional share of the net profits from the operation of the cave, and Edwards appealed. The court of appeals, affirming the trial court in all substantial respects, considered the case to be sui generis, and thus stated that it would resort to “fundamental principles and analogies.”139 The principle analogy the court made was to trade name and trade secrets cases, in which the persons who tortiously use the protected names or secrets are “under a duty of restitution for the value of the benefit thereby received.”140 After surveying other similar common law actions, the court concluded as follows: [W]e are led inevitably to the conclusion that the measure of recovery in this case must be the benefits, or net profits, received by the appellants from the use of the property of the appellees. The philosophy of all these decisions is that a wrongdoer shall not be permitted to make a profit from his own wrong.141 Thus, a state court faced with a similarly sui generis scenario in which a trustee in an NRD action is seeking both restoration costs and loss of use damages under both statutory and common law claims has several options. The court could, as discussed at length above, award the market value of the restoration costs and allow the jury to assess the nonmarket loss of use damages. Alternatively, where the trustee has specifically asserted a claim for trespass and /

discomfort and annoyance to the property owner as the occupant.”) (emphasis added); RESTATEMENT (SECOND) OF TORTS § 929, “”(stating, that “[i]f one is entitled to a judgment for harm to land resulting from a past invasion . . . damages include compensation for (a) . . . the cost of restoration that has been or may be reasonably incurred, (b) the loss of use of the land, and (c) discomfort and annoyance to him as an occupant.”). 138. 96 S.W.2d 1028 (Ky. 1936). 139. Id. at 1030. 140. Id. at 1032 (quoting the RESTATEMENT OF RESTITUTION & UNJUST ENRICHMENT § 136) (1936). 141. Id. 10. KANNERNAGY.5.DOC 9/27/2005 4:06:45 PM

448 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 or unjust enrichment, the court should still award the market value of the restoration costs, but now it has a second option for the loss of use damages. Rather than having a jury measure the loss of use damages, the court, relying on the type of reasoning used by the court in Edwards v. Lee’s Adm’r, could award the trustee the cost savings the polluter incurred by improperly disposing of its waste in the state’s natural resources. This alternative, based on the well- established principle of unjust enrichment, would save judicial resources by simplifying the quantification of damages and would directly comport with the deterrence rationale of tort law by eliminating precisely the incentive the polluter had to pollute in the first place.

VII. CONCLUSION

As one authority has noted, measuring natural resource damages is “the most daunting task facing trustees.”142 Indeed, the difficulty in measuring these damages no doubt explains, at least in part, the general lack of enforcement on the part of trustees with respect to claims for natural resource damages. There is no need, however, for either trustees or courts to wrangle with the vagaries of CV surveys or other “alternative methods” of assessing natural resource damages. Particularly in state law actions, trustees and courts alike should look to the common law’s traditional method of measuring nonmarket damages for a solution: allowing juries to assess them. Alternatively, courts can use the doctrine of unjust enrichment to order polluters to disgorge their ill-gotten savings in lieu of assessing loss of use damages. This alternative has the additional advantages of being cheaper than measuring loss of use damages and of being targeted directly at deterring future acts of pollution. In sum, the common law provides ready remedies for trustees to effectively and efficiently pursue claims for natural resource damages.

142. Richard Stewart, et al., Evaluating the Present Natural Resource Damages Regime: The Lawyer’s Perspective, in NATURAL RESOURCE DAMAGES: A LEGAL, ECONOMIC, AND POLICY ANALYSIS 163 (Richard Stewart ed., 1995). 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

The Role of State Attorneys General in National Environmental Policy

* NATURAL RESOURCE DAMAGES PANEL

Mike McGrath, Attorney General of Montana Thank you very much, Ellen. I just want to join others in thanking you [Ellen Chapnick] and Jim Tierney and Columbia Law School for putting this together. I think this has been an exceptional day. And I think that the order of these topics has been set up quite well. It’s appropriate that we finish up with NRD or what is known as natural resource damages. These are situations where there is an intricate relationship between the state and the Federal governments. We do look for damages; they are suits for money. As the introductory notes indicate, there are oftentimes mixed results in terms of NRD. I assume we’ll talk about that quite a bit and that Lisa [Heinzerling] will address that. A lot of these companies end up in bankruptcy, which poses significant problems as we move along. One of the things I’ll say by way of introduction is that these cases have been spawned by CERCLA, which was adopted in 1980. CERCLA requires a fairly intimate relationship between the federal

* The symposium The Role of State Attorneys General in National Environmental Policy was held at Columbia Law School on September 20, 2004. After welcoming remarks by James Tierney, Dean David Schizer, and Vermont Attorney General Bill Sorrel, four moderated panels convened to discuss the role of state attorneys general in national environmental policy, focusing their discussions on a landmark lawsuit over global warming (twice), groundwater pollution, and natural resource damage claims. The participants in the fourth panel were:

Mike McGrath, Attorney General of Montana (also moderator), Lisa Heinzerling, Professor of Law, Georgetown University Law Center Gordon Johnson, Deputy Bureau Chief, Environmental Protection Bureau, Office of New York Attorney General Tom Gede, Executive Director, Conference of Western Attorneys General David Mears, Sr. Assistant Attorney General, Ecology Division, Washington Vicki Peters, Assistant Attorney General, Colorado

449 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

450 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 government, especially the EPA, and state governments. Sometimes that can be a pretty tricky relationship; while the EPA can order a cleanup or remediation, if you will, the states’ role under NRD is a little more complicated and we have a significantly higher burden of proof to obtain damages. Here to tell us all about it is our first panelist, Lisa Heinzerling, from Georgetown University. Just a couple of important notes. Lisa served as Assistant Attorney General in the state of Massachusetts, was given the faculty teaching award at Georgetown last year, and has recently published a book on this, among other environmental topics. We also have Gordon Johnson. Gordon is with the New York Attorney General’s Office and has been involved with environmental issues for many years. He graduated from Oberlin and New York University School of Law. And then you’re going to have me. I don’t teach. And I didn’t clerk for anybody, either. But I did work for years in the underground mines of Butte, Montana. So I am uniquely qualified to talk on this topic. Lisa Heinzerling, Professor of Law, Georgetown University Law Center This is my favorite group of public officials—partly because I worked for a state Attorney General and partly because you have an opportunity to do good in the public interest. That’s sometimes underestimated by members of the public and the academy. If you really believe in federalism, states really are laboratories of democracy in a way. You can experiment with different ways of doing things. The idea that there are 50 of you who can sue in the public interest makes my heart sing. When I went to work in the attorney general office in Massachusetts, my husband and I were relocating and I was considering working on environmental issues. I asked Richard Stewart where should I work in Boston. He said, “No question, the attorney general’s office. It’s run like a public interest law firm. They take good work and they take important work.” And he was absolutely right. And that’s what made it tolerable for me to take a pay cut to work at the state attorney general’s office. And that was a pay cut from a public interest job. And that was a pay cut from a clerkship. I think I may be the only person in my law school class who took two pay cuts after an already low-paying job. But for 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 451 many students, I completely recommend going to work for the state attorney general’s office. There are many of you and you may have different points of views, but there are special opportunities to do good even within this range of difference. We have heard some about the breach or the gap caused by the federal government leaving the field in recent years. I would just add a parenthetical to that point – it becomes even more important for you to do all do your work well and to do it aggressively when the federal government has left the field. But even when the federal government is involved, they can’t do it all. If anyone leaves the conference thinking that they don’t have to do anything if the federal government steps in, I just want to say that that’s mistaken. States have unique opportunities to experiment in ways the federal government can’t. I’ve been struck by how much we’ve talked today about the interactions between common law and statutes. We are in a moment in our legal history in this country where statutes and common law are interacting in a new, interesting, and exciting way. In fact, in a class I teach, I call this phenomenon “the new public law.” There is a synergy between statutes and common law that is new and innovative. For example, think about tobacco litigation. There, plaintiffs are recovering for expenditures under statutes. But the liability also depends on common law tort. Again, a kind of synergy exists between statutes and the common law. We’re in a moment where I think it’s very worthwhile to think creatively, not just about how to block one kind of legal regime using another (such as the preemption we were talking about, using federal statutes to block common law) but also to think about whether there is a way for the two to speak to each other, federal statutes and common law, in a way that is protective of the environment. Let me say a few words about the common law and statutes in terms of natural resource damages. In common law, of course the attorneys general have authority under quite venerable common law doctrines, to sue to protect or to restore natural resources. Public trust doctrine and public nuisance, we’ve heard a little bit about today. The idea is that you have a special status representing the sovereign to sue to protect natural resources. Under the public trust doctrine (I understand it’s been more aspirational than not), the state is not only entrusted but obligated to protect natural resources. The extent varies from state to state, 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

452 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 but the basic idea is that there exists the obligation on the part of the states to protect natural resources within state boundaries. I’m sure you’ve heard it before, but I’m going to say it again. The doctrine dates from Roman times, described the following way in the time of the Emperor Justinian: “By the laws of nature, these things are common to mankind: the air, running water, the sea, and consequently the shores of the sea.” It’s a wonderful idea that these things are held in trust, for the public, by the government. The notion is still with us today. Thus, some of the work that you might do as attorneys general is not based on a newfangled cause of action, but based on a venerable cause of action under public trust doctrine. Obviously this doctrine has some modern resonance in the notion of sustainable development. There are resources that are held in common; if they’re hurt, we’re all hurt. Another common law doctrine is public nuisance and we’ve also heard about that today. Under public nuisance, here, again, the state has a special opportunity to protect natural resources. Unlike private individuals, states don’t have to have specific harm. Private citizens have to show their specific harm. The state doesn’t have that burden. Here’s a doctrine that appears tailor-made for public officials trying to protect environmental resources. Here’s another venerable property doctrine that’s enjoying something of a renaissance. Let me give you an example under a quite different context: handgun litigation. In this litigation, the allegation is that manufacturers’ advertising is such that handguns end up in the hands of criminals. The idea, ruthlessly simplified, is that people have the right to go about without fear – undue fear – and that the gun manufacturers have taken that away. And that has survived motions to dismiss in numerous different places. So we have a quite ancient doctrine that appears to apply just in neighbor-flooding- your-land cases and that has been taken into a very modern context and used to shift whole practices of whole industries. For some, it’s a terrible moment, but for others like me, it’s an exciting moment for the development of common law. Even doctrines that come to us from a long time ago have been reshaped to meet modern needs. To me, common law has always evolved. That’s one of the best things about public nuisance. Think about it with respect to 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 453 natural resources. Imagine if we think about resources being destroyed or degraded all the time. One of the reasons people forget about natural resources as a political issue is that environmental degradation is so entrenched that we forget to complain. We should be able to swim in the Potomac, in the Hudson, fish in all the rivers and lakes in the states. Many people take it for granted that we’re going to write off those rivers and streams and it’s inevitable that there are going to be problems. I’m asking you to be more creative and insistent about it. I always say to my students that if they want to do something radical, they should wrap it in an old doctrine. “Nothing new here, judge!” It’s the same with public nuisance – old ideas wrapped up in radical new possibilities. Now I’ll talk a little about statutes. The kind of doctrines I’m talking about also find a home in statutes. The Federal Clean Water Act has a provision, section 311, that allows damage payments for harms to natural resources. It’s an interesting section in the statute, since the statute otherwise operates on a different model, using technology-based standards for polluting entities and cleaning up our resources that way. This part of the act allows compensatory damages for natural resources when they’re damaged by oil. It was a foot in the door for CERCLA, or the Superfund law. There the liability provision was modeled on the Federal Clean Water Act section 311. I’m told that it also comes from a California law that allowed damages for losses. The basic idea is very simple. If you damage natural resources through hazardous waste contamination, then not only do you have to clean up those wastes under the cleanup program, but you may also have to pay money to restore those resources to baseline, pre- contamination conditions. It’s not that this is such a huge departure from what the statutes like the Clean Water Act already did; these statutes are already ambitious and aggressive and stringent, but the idea is different enough to merit notice. Not only are we going to make you do it better in the future, but we’re also going to make you clean up what you did the past. With regard to natural resource damages, we again see elements of the statute and common law come together in a way that is either nightmarish or wonderful, depending on your point of view. You take the extreme elements of common law—joint and several 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

454 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 liability, strict liability, retroactive application—and put it all together in one statute, and then take away all the defenses that you would normally have under common law, and that gives you Superfund. It’s a thing of beauty. I think it’s why everyone loves to hate that law. It’s an amalgamation of common law, with its compensation-favoring elements, and removals of defenses that you get with some statutes. The natural damages provision is notable because it holds this promise of saying not only are we going to do things differently in the future, but we’re going to fix things we’ve done in the past. Philosophically as well as practically, that’s a wonderful opportunity for public-spirited officials. We would like to put this river or lake back the way it was, as best we can. It’s very aspirational and a very different model from the usual environmental statutes. Now, I think that when the natural resource damages provision and Superfund were first passed, this was like guaranteed full employment for environmental law professors. There were so many questions about interpretations and valuations. They preoccupied us for some time and still do. Early on, Gordon Johnson argued a major case called “State of Ohio,” in which the court struck down Reagan-era rules that basically favored the cheapest remedy possible and presumptively favored market value as way of measuring natural resources. Why does that matter? You can imagine that many natural resources do have a dollar value that you can easily identify. For example, fish: fish can be caught for fish dinners. Those fish dinners have a price. But you might also say that when an ecosystem is damaged, there are things other than the market value that are destroyed. Gordon Johnson is going to talk about other creative ways to look at traditional natural resource damages. But under the natural resources damages provisions, there are also ways to look at damages that don’t rely on market value. Contingent valuation was brought in as basically a fancy opinion poll. “How much would you spend to prevent another Exxon Valdez spill?” The numbers you can get in some surveys can be phenomenally large. In the book Mike McGrath mentioned, the one I wrote with Frank Ackerman about cost-benefit analysis, we call the Exxon Valdez “the ship that launched a thousand surveys.” Economists descended on Alaska and tried to determine what 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 455 had been lost when the spill happened. It’s not just the commercial fishermen that cared, but a lot of people around the country had an opinion about that spill. There are a lot of clunky economic terms that try to capture the value that represents the loss of natural resources. Option value: You don’t use the resources, but you want to preserve the option of going there. “I haven’t been to the south rim of the Grand Canyon, but I want the option of visiting there someday.” Bequest value: I would like my kids to be able to go to a clean Prince William Sound. Existence value: It’s worth something to me to know that the tigers aren’t extinct. I think this is all part of the fundamental reason we protect natural resources in the first place. These aren’t captured by market surveys. Economists want to figure out other means to measure these values. And that’s what those surveys are about. I don’t want to talk much longer, because it’s been a long day. But I do want to mention this issue with respect to natural resources. The answer that you get to “what is this resource worth?” is very much dependent on who owns the resources in the hypothetical question. It turns out that in survey after survey after survey, people who are asked, “How much would you be willing to pay to avoid another Exxon Valdez spill?” give one answer. Asked “How much would you be willing to accept, in money, to allow another spill like that to happen?”, they give a different answer. And it’s systematically a much larger number in the second case. In one case, you’re the buyer of natural resource protection. In the second, you’re the seller of natural resource protection. How much will you insist on getting to sell that pristine resource? The federal government in their regulations on natural resource damages discussing valuation say, “We don’t want you to use that second method – the method in which the people are asked as sellers of the resources – because the numbers will be unrealistically high.” The question I have is how do they know that they’re unrealistically high? When the question is “How much are the resources worth,” they must have some platonic resource value in mind that they can measure against the survey results to know that these numbers are unrealistically high. The resources you may be trying to restore under NRD – under the Clean Water Act and Superfund—they belong to you and to the people of your states. So properly, the surveys should be asking, 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

456 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

“How much would you be willing to accept to sell those resources so they can be degraded, destroyed, ruined, and so forth?” That’s the proper way to frame those questions. When you frame them that way, you get huge numbers. You also get people who aren’t willing to sell. Economists may not believe it, but there are actually people who don’t have a price. The answer in many, many surveys, across contexts—environmental issues, health law, and human life—is, “I don’t care what you guys pay me. I will not sell.” I think what they’re worried about partly is being complicit in a great environmental harm. It’s an incredibly wonderful human impulse. If I were an economist, I wouldn’t make it my first job to rid human nature of that impulse. Yet those numbers are thrown out as so-called protest votes, because surely, surely, everyone has a price. I think you’ll be on better ground if you use the willingness-to- pay method. Economists like it. The government likes it. Courts like it. I think you’ll do better in litigation if you use that. But you might get uneasy. Uncertain. Uncomfortable. Because if you’re using any kind of survey like this, you’ll get rained on. People will say, “Those numbers are all too high.” I want you to be comfortable. Confident. The question you’ll be asking in litigation—”how much would you pay”—is a number that will get you lower numbers than you should be getting. I’m saying this as a matter of reassurance. The bottom line is that I’d like you to think creatively about all these possibilities: public trust, public nuisance, natural resources provisions. And above all, the possibility that in some parts of the country, we may find it’s not acceptable to be unable to swim in the rivers of our cities, fish in those rivers, those lakes. . . These legal strategies are a way of getting there. Mike McGrath, Attorney General of Montana That was excellent. Thank you, Lisa. My role is to talk about a practical situation in the state of Montana that will put a lot of these conceptual issues addressed by Lisa into a different focus, I think. As I mentioned, I’m the state attorney general of Montana, and I grew up in Butte, Montana. If you look closely there, you can see the old family homestead (shows slide of factory). For a long time, a hundred years or more – Butte, Montana, was known as the richest hill on earth. A very large supply of copper 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 457 was mined out of this area. When the Industrial Age came about and the world started using electricity, copper became a very valuable commodity and Butte became a valuable site. While in college I worked in a mine called the High Ore. It was a very deep mine that went down 3900 feet. The High Ore’s purpose was to serve as a pumping center for all the operations on the Butte hill. We had to pump groundwater – millions of gallons of groundwater—out of the earth. At that time, it was dumped into a creek called Silver Bow Creek. The groundwater was highly contaminated. Those of us who worked there would go through a pair of blue jeans in a few weeks. You wore heavy slickers and rubberized equipment. It’s a long story that I won’t go into, but I once left a shovel in an abandoned ditch. A year later, I pulled the shovel out of this ditch that was filled with water and the shovel itself was almost entirely gone. It’s not MBTE, but it was nasty stuff that was pumped out of the mines and dumped into the Clark Fork River. That was done for about 100 years. One other thing by way of introduction: There were hundreds of mining claims consolidated into one massive trust called the Anaconda Company, which was eventually acquired by our friends Arco. Arco operated the mines for several years. They were closed in the 1980s. The pumps were shut down and the smelter was also closed in the ‘80s. (Shows a map of the Clark Fork River, Anaconda, and Butte) To put this in perspective, we’re talking about the streams in the head waters of the Clark Fork River – which extends here about 150 miles. The Clark Fork River is named after William A. Clark, one of the Lewis and Clark folks. The drainage of the Clark Fork is about 24,000 square miles, which is substantial in terms of Montana. It’s about 1/6 of our total size - a significant piece of geography. At the confluence of the Clark Fork and the Blackfoot Rivers, a dam was built called Milltown Dam. The dam was built about 1908. That’s a picture of the Milltown Dam as it existed in 1908. We’ll talk about that later. As you might guess, there was a substantial amount of injury that occurred over that 100 year period. Included are: Groundwater injuries, both in the Butte and Anaconda areas. Significant portions of groundwater is not fit for drinking in those areas today. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

458 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

Aquatic injuries, in both Silver Bow creek and the Clark Fork. Injury to water quality, fish, insects, and stream sediments. Terrestrial injury – in the uplands, along Silver Bow creek, and the Opportunity ponds, which includes injury to soil, vegetation, and wildlife habitat. In the 1950s, “the company” started an open pit mining operation. The idea was to become more economical and efficient, and do away with the underground mining operation. They developed what is known as the Berkeley Pit. This photo was taken in 1992, after the pumps had been closed for 12 years. The pit is gaining water at a rate of 2 feet a month. When this photo was taken, 12 years ago, it was 900 feet deep. It’s substantially deeper than that now and continuing to rise up the sides of that pit. This is the view of Silver Bow creek -a demonstration of the kind of mine tailing and injuries we’re talking about. Again, all of these are mine tailings; all of this is downstream from the mining operations. This is the beginning of Clark Fork River. Same thing. You can see the slickins here, as well as the damage done to this entire area. As you might guess, the injury to fish is substantial. In Anaconda, metals – heavy metals – were dispersed from the stack over a 100 square mile area. There’s substantial terrestrial damage from the smelter operations. As you might guess, that has affected wildlife habitat in a significant way. This is an area known as the Opportunity ponds. It is about 5 square miles. This stuff is 25 feet deep. It contains 170 million cubic yards of metal-laden tailings. The groundwater in this area will remain contaminated for thousands of years. This is a view of a mountainous area known as Mount Haggin, about 7 miles from the stack. This is what Mount Haggin looked like when I was a youngster. There are no trees to speak of on Mount Haggin. It’s pretty much been denuded in all of that area. Incredibly, some trees are beginning to grow back now. CERCLA , the superfund act ,was enacted by Congress in 1980. Montana passed a similar statute, also in the early ‘80s. The State of Montana filed this lawsuit against ARCO in 1983. For any of you law students who were hoping for a quick fix to these problems, think again. This suit has been going on for a long time. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 459

It was filed in federal court, making claims under both state and federal law. Between 1991 and 1994, the state created a natural resource damages (NRD) program and started doing assessments. Many of the issues that had to be addressed as far as assessments are issues Lisa talked about. That report was issued in 1995. The trial began in 1997 and in 1998 there was a partial settlement. Under CERCLA, there are a couple of ways to proceed. Remediation is the primary responsibility of the federal government and EPA. They do indeed proceed, and the state has some authority in that area. And then there’s what Professor Heinzerling talked about in terms of restoration. That, primarily, is a role that falls to the state. In our state, the suit was brought on behalf of the people of Montana; the governor brings the suit as trustee for the people of the state. The objective of the lawsuit is to restore those natural resources to a baseline condition, the condition that existed had the hazardous waste not occurred in the first place. Secondarily, the goal is to compensate the people of the state for the lost use of the resources. So we’re talking about resources that are owned or controlled by the state that were injured by the release of the hazardous substances and we’re talking about lost services. There are two types of damages: 1.restoration costs: the cost to restore the Clark Fork and Warm Springs creek and areas surrounding the river; and 2.sufficient consideration to compensate for the public’s lost use of those areas. The kinds of natural resources lost include recreational value. So, Lisa, in Montana, a state of about 900,000 people, there are 220,000 people with hunting licenses and 383,000 with fishing licenses. That includes both resident and nonresident. This is a big deal in my part of the world! People expect to be able to fish in our rivers. As I mentioned, in 1990 the NRD program was created by the state. One of the points I want to emphasize is that our program is run by state employees. I am particularly proud that state employees have handled the litigation. Rob is here. Rob Collins is the director of the program. He’s been with us for many years. If you have any hard questions, ask him. We’ve used lots of state hydrologists, economists, what have you, 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

460 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 but we’ve also had to have a considerable number of consultants. In 1995, there was an assessment. We filed a claim that included $342 million in restoration costs and $410 million in compensable damages. And of course we asked for attorney’s fees. So, in total, we have $764 million. The case went to trial in 1997. As you might guess, it’s very complicated litigation. The case was divided into 7 different segments; four went to trial: liability, aquatics, terrestrial, and groundwater. They each went to trial separately. There were roughly 200 depositions taken and 70 days in court. The damages issue was not tried. We eventually entered into a consent decree and partial settlement. Arco paid $215 million in damages to the state of Montana, plus interest. Note, it was only a partial settlement. Remaining claims are left. The groundwater in the Butte area that is not usable remains to be resolved. The Clark Fork River, which I showed as 150 river miles, has not yet been resolved. And the Anaconda uplands, where the stack is, has not been resolved. Roughly, our claims for those remaining areas are about $200 million. (shows a slide) Just to orient you to where we are, this dam, Milltown Dam, was built at the confluence of the Blackfoot and the Clark Fork rivers, just outside of Missoula. The Big Blackfoot is famous. If you’re fan of Norman Maclean’s great book, A River Runs Through It, you will know that he wrote about this river. And, you may recall that Robert Redford made a great movie based on the book, also called A River Runs Through It. You can see on the right where the Blackfoot runs. Down lower is where the Clark Fork runs. The dam was built for power. It was built in the early 1900s and was used for lumber mills in the area and also for power in the mining operations, which are 120 miles away. Over time, there has been lots of stuff that has come downstream and settled behind this dam. The EPA estimates there are 6.6 million cubic yards of heavy metal, toxic sediments behind the Milltown dam. Today, it produces minimal power – about 3 megawatts—and it’s owned by a separate company— what was formerly the Montana Power Company and is now the Northwest Energy Company, our major supplier of electricity. Northwest Energy is now in bankruptcy. That has led to some interesting situations. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 461

As you might guess, it is the state’s position that if you’re going to have a proper restoration procedure, Milltown dam needs to be removed. That has been the state’s position for a while. It now is also the position of the EPA. We have been involved in very substantial negotiations with the owner of the dam, Northwestern, as well as the principal party responsible under CERCLA, Arco, for removal of the 6.6 million cubic yards of sediment. The federal government, state government, and tribal governments that have an interest in the water rights are involved. We are very, very close to a formal consent decree that will include the removal of the Milltown dam. That will be a substantial development, frankly unprecedented in scope as far as what’s happened in this area of the law. We have a restoration plan. One of the critical factors, as mentioned earlier, is the relationship between the state and the federal government, particularly with EPA. EPA has primary responsibility of remediation and cleanup, but not for restoration. They can dredge it out and clean it up, but we still have this restoration issue. From an economic point of view, it makes sense to handle those two issues together: if you can clean up the 6.6 million cubic yards of waste and at the same time remove the dam and restore the river, it’s more economical to do that. Working together is the best solution, but it’s also the most challenging. In any event, we’re getting close. What we’re going to do, just briefly, is draw down the water and divert the channel, excavate a substantial amount of the sediment, but also leave a substantial amount in place, and then restore the channel. Our long- term goal is to return this entire area to a naturally functioning, healthy river. My hope is that Brad Pitt and I can go fishing together, maybe with Bill Sorrell, in a couple of years. That’s our goal and I think we’ll get there. Gordon Johnson, Deputy Bureau Chief, Environmental Protection Bureau, Office of New York Attorney General Well, Kevin Healy began his presentation this morning with, “Great, I’m the last person presenting before lunch.” Comparatively, as the last presenter of the day, I think Kevin was in a good position. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

462 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

But the good thing about being last is that the law students now are beginning to wake up, because it’s getting near the time that classes are over and it’s time to wake up and have fun. Now is my time to thank Columbia Law School and remind the law students that the New York Attorney General’s Office has an externship for credit with Columbia in the spring. During that externship, you learn what the attorney general’s role is and what an AG’s office really does. I urge you to come work for us. You’ll learn a lot, and of course, you do have to sign a nondisclosure agreement. But you should learn a lot and we very much look forward to having you in our externship program. Today I’m going to be talking about ways to more easily collect money in compensation for natural resource damages – NRD. I’m also going to touch briefly on what injuries you can recover money for and how to calculate those damages. NRD is a very fascinating example of how the role of the AG changes over time, partly with regard to interaction with federal authorities. You’ve heard today about some big lawsuits: global warming, Clark Fork. One thing that has always bothered me and other people in this field is that you have these little spills where pollutants get out and cause incremental damage. And while there may be some clean up, nobody collects money from the spillers because the money to be collected is really small. Lawsuits involve a lot of money and time on the part of the AG’s office. It’s often too much of a bother to file these small lawsuits. After the Valdez spill, Congress got around to revising Section 311 of the Clean Water Act. Until 1990, it provided the major federal basis for recovering from oil spills. When the Department of the Interior first proposed regulations regarding the assessment of damages, Congress watched ensuing litigation and learned some lessons from the way the federal government positioned itself those lawsuits brought by the Ohio and New York AG’s. Congress became well aware of the positions that executive agencies took regarding the NRD provisions in CERCLA when promulgating regulations, and was not pleased. As a result, when Congress modified the Clean Water Act and passed the Oil Pollution Act of 1990 [33 U.S.C. §§ 2701 et seq.], Congress made sure that damage provisions and measure of damages would be very clear, so it would be clear what state and 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 463 federal trustees could recover. The NRD provision in OPA became a very broad and expansive remedy. One of the very important things that AG’s do in the policy areas is lobbying for those changes and corrections in statutes. In fact, Congressional staff asked Attorneys General’s staff for help writing committee reports so that provisions on NRD that would be included the legislation would not later get distorted by oil companies that might have excessive influence on executive agencies writing regulations. It’s very exciting to read paragraphs that you helped to draft in committee reports. You know you’ll have that legislative history that will be so useful later when bringing law suits and construing the intent of Congress. Section 2702(a) of OPA provides that a vessel or a facility from which oil is discharged into or upon navigable waters or adjoining shorelines is liable for damages and recovery costs. So if an oil spill causes damage to a navigable river, lake, coastline, so on and so forth, a state, usually acting through its Attorney General, we can recover by using the NRD provisions of OPA. The statute says we can recover two kinds of costs. One is response costs – the costs of cleaning up and responding. What’s particularly interesting is that the response costs that can be collected are those allowed by state law as well as those allowed by federal law, even if the state law allows recovery of greater damages than the federal law standing alone, and thus is a very broad remedy. In reality, you can enforce your state law in federal court. Most states have an oil spill statute that they really like, often that they like more than the federal law, and OPA provides a federal forum for its enforcement. Under OPA, you can recover NRD—defined by OPA as damages for injury or destruction, and the loss of the use of natural resources, including reasonable costs of assessing damages—all recoverable by state natural resource trustees. I just want to remind states that other damages also are collectable: - Real and personal property damages. So if the state owns a park along a river and there’s oil on the river and shoreline causing damage to the park property, the state can collect damages for injuries to that park. - Revenue loss. If you have a beach you charge a fee to use and the public can’t use the beach, you can get lost revenue damages for the days the beach was closed. - Cost of increased public services. You can also recover damages 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

464 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 to cover the cost of additional public services resulting from an oil spill. For example, additional services during removal activities— including the costs of fire protection, and for the mitigation of safety hazards and health hazards—are recoverable. But since this panel is on NRD, that’s what I’m going to talk about now. Under OPA, it is explicit that with respect to the cost of restoring, rehabilitating, and replacing equivalent natural resources, you can recover diminution in value of resources resulting from an oil spill, and the cost of assessing those damages. This is a wonderful statute for state as well as federal natural resource trustees because it provides a broad and very available remedy. I wish it applied to more than navigable waters. As a consequence, we states have to be careful that the federal government doesn’t narrow the definition of “navigable waters” through restrictive readings of the Clean Water Act by the Army Corps of Engineers. How valuable OPA can be became clear to us in New York after an unusual oil spill in 1992. The spill occurred off the south coast of Long Island, off Long Beach, which is a small city on Long Island, just beyond Queens. There was a party boat called the Lady Edna, a good-sized boat which takes a whole lot of fishermen out to fish off the side of the boat. There was something wrong with this boat and it was being towed to drydock for repairs. Something happened and it sank. From the tanks, diesel fuel leaked and started moving toward the shore. The fuel never made it to shore— it broke up and evaporated. Long Beach is a big beach community, and this happened on a nice summer beach day. The oil evaporated and the winds were blowing inland. And people started getting sick from the smell of the oil. As a result, the city closed the beach and a bunch of the lifeguards went to the hospital complaining of nausea and the like. There was no solvent owner of this boat after it sank—it was owned by a corporation which had no real assets except the boat now underwater, and no pollution coverage under its insurance. While there was typical liability insurance coverage, the insurance had a pollution exclusion to coverage. Unlike an oil tanker, there was no insurance covering oil spills. Sections 2712 and 2713 of OPA established an oil pollution fund. The statute allows the Coast Guard to pay uncompensated claims by persons injured by spills. In 1994, because we could not collect 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 465 damages from the Lady Edna’s owner, we applied for compensation for Long Beach’s costs for emergency services and for lost revenues resulting from the beach closure. The Coast Guard paid us off almost immediately, within a couple of months. But we also made a claim for NRD. That it didn’t pay and the Coast Guard said it didn’t have to even consider paying NRD under the statute. We sued in New York v. Oil Spill Liability Trust. In 1996, we settled the case with the Coast Guard essentially agreeing we were absolutely right. Now the Coast Guard does pay NRD claims. Why was the case settled? Number one, we were right on the law. But one other reason has to do with the role of the AG. The New York office of the AG had a very good, excellent, relationship—and we still do—with many of the DOJ lawyers who handle NRD cases and oil spill cases. And that office knew we had some expertise in the area and the DOJ lawyers took our case quite seriously, which allowed us to sit down and talk about it. We also worked closely with the National Oceanic and Atmospheric Administration (NOAA) and that agency is very interested in NRD because it acts as a federal natural resource trustee for navigable waters. That agency saw the advantages to states of being able to get money from a fund to restore natural resources, and because we had worked closely with NOAA on other oil spill cases, we knew who to talk to and how to encourage NOAA’s interest in our litigation. Both NOAA and DOJ saw that we were right, from a both legal point of view and a policy point of view. Again, this is an example of how state AG’s can push and pull the federal agencies to make changes and advances in environmental law. We have done that over the years, working with different agencies through different administrations. We do it through lobbying, by bringing lawsuits, through developing our expertise, through presenting witnesses at hearings, and then just working closely with federal agencies to bring them along. I note that this can be a two-way street. When we have an AG that’s not terribly interested in the subject, the federal agencies will sometimes bring the AG’s along. How can you make some money for your state in the oil spill area? In the material we’ve distributed, I’ve included a whole series of guidelines from the Coast Guard’s National Pollution Funds Center. It explains how to make a claim under the fund and when 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

466 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2 the Coast Guard will pay you off. You can use – actually, you have to use—that money you collect as natural resource damages for restoration of natural resources. Remember that the fund center is run by the Coast Guard, which means that it’s basically a military operation. So there are no shortcuts, there are no lawyers, and you have to salute all the time. They have a checklist and you have to comply with every item on the checklist. The paperwork can drive you crazy! After we won the lawsuit, we applied for funds in 1997, and we just got paid last year. Although we eventually did have our NRD claim paid by the Coast Guard, we had a big fight over regulations and how to read them. While we think the regulations were absolutely clear, the personnel we were dealing with had a different opinion, so finally, we said, “We’ll follow your checklist.” My advice to you is to follow the procedures. Work with the personnel. I hate to say this, but sometimes it’s easier to do what those with the money want than to insist on what’s right and in accordance with law. But at least you’ll get your money. I think the biggest problem in collecting money for NRD can be working with your state agency that does the cleanup work and acts as the natural resource trustee for purposes of making NRD claims. What is needed is a program and procedures to provide the necessary information on a regular basis so claims can be made to the Coast Guard fund. So far, only two states besides New York have made claims that I’m aware of: Florida, which has collected several million, and California, which has collected a million dollars. Florida is really a shining example. In the last two minutes, I want to talk about the type of NRD claims that are recoverable. You heard about the Lady Edna claim, based on oil contaminating the air and which led to the closure of the beach. The beach closure was a natural resource damage that the state suffered. It is a neat example of how an oil spill not reaching the shore still can cause damages. Using the Department of the Interior model on beach closure, we were easily able to calculate our damages. We spent less than one day calculating the damages. We spent so little time that we didn’t even seek compensation time for the assessment of the damages, because it was less than 8 hours of work by a scientist in my office who plugged some facts about the 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 467 length of the affected beach, how long the beach closure lasted, and some other data into a computer model that generated the damage figure. One of the documents in the materials we passed out is the Montauk Oil Transportation Corp. decision regarding an exploding barge in the harbor in New York City. It closed the harbor for 8 days because oil spewed out of the barge as it burned. Shipping couldn’t use parts of the harbor because of oil floating on the water. We concluded that we had suffered a typical natural resource injury to the natural resources of the harbor—oil washing ashore and hurting vegetation and wetlands. We didn’t have that much in damages that we could collect, because Exxon had a pipeline that had leaked and severely oiled plants and wetlands in the same harbor areas a couple of months earlier. Everything was already dead when the barge exploded. We did reach a $12 million NRD settlement with Exxon later. But with Montauk, we did have a natural resource damage beyond the typical biological and ecological injuries—the loss of use of the waterway. How do you figure out what the loss of the waterway is worth? The way we calculated those damages was to calculate how much money people are willing to spend to use that waterway. We calculated the amount of shipping that goes through the waterway, how much it costs to build five different classes of boats, and then we calculated per-day capital costs that someone who owns a boat incurs and added the operating costs for different classes of boats. There are all these magazines, like Oil Shipping News and other magazines, that lay out all this information. We were able to figure out how much it costs to operate tugs, smaller tankers, and freighters. And then we were looked at past traffic patterns to see exactly what the likely traffic would have been for the days of closure. Using all that information, we calculated how much money people were spending to use that harbor. And we said: that’s how much the harbor is worth. We got a number around $1 million. The court agreed with us that it was a legitimate way to calculate the cost. And so the parties settled. How would you figure out how much an endangered species is worth? What’s the value of a piping plover or a snail darter? Piping plovers might be worth 69 cents per pound if you eat them, but since they only weigh 6 ounces, there isn’t much damage calculated that way. A dozen die and you get $10 of damages. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

468 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

We figured that we could do a contingent valuation survey—a complicated survey to show what people will pay to prevent such injuries to natural resources—but that would cost over $1 million to perform. So, we concluded that a legitimate measurement of the value of endangered species is how much the public spends through government programs to protect them. We added up costs that state and federal governments spend on protecting piping plovers. Here in the New York/New Jersey area we have 100 pairs of them, say, and we spend perhaps $200,000 a year to protect them; divide that by 100 and that gives the value of a piping plover. We have used that calculation when we have oil spills that affect piping plovers. The money we collect is used to protect these piping plovers during mating season so their numbers will increase. As Lisa pointed out, there are a number of ways for us to be creative and that’s what we really need to do. I think the most important thing that we can do as states is to collect money in these smaller spills. If we find that we can’t find out who is responsible for these claims, we can collect from the federal government, which has lots of money in these funds. We can use that money to restore natural resources. In these other cases, there are all sorts of ways to value natural resources. You can use creative and innovative ideas to calculate and set your damages. When you make your claim with the pollution fund center, after a little fighting and cajoling, they will, I think, come around and agree with you. And you’ll be able to collect money which you can use to restore these resources, which we as the AG office think we should be doing.

QUESTIONS

Mike McGrath, Attorney General of Montana I’ve been told we have time for some questions. Tom Gede, Executive Director, Conference of Western Attorneys General Mike, how can $200 million be enough to restore all that land that has heavy metals? And the lake that was 25 feet of tailings? Mike McGrath, Attorney General of Montana They’ve already paid $215 million. We’re talking about a lot of different breaches. Removal of the dam was about $100 million in construction, primarily paid by Arco but also Northwest and a little 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 469 bit by us, based on the settlement. Our remaining claims are roughly $220 million. We’ll see as that develops. We’re not going to be able to. . .well, a lot of it is replacement value. For example, you’re not going to restore water systems in Butte. There are no underground aquifers, so we have to pipe it in. It’s the same in Anaconda. Some of it is replacement costs. And you know, when you’re talking about those numbers, what’s a few million here or a few million there? David Mears, Sr. Assistant Attorney General, Ecology Division, Washington A comment: We’ve been treated to a case where we threatened to bring the state of Washington against the US Department of Energy, for contamination caused by a Hanford facility. Our primary goal as the Department of Energy considers remedies: how much of Hanford will it clean up? We want them to be thinking of the check they have to write to the state at the end of the cleanup. We want them to minimize it. As they’ve been thinking of leaving large amounts of radioactive waste at the end of the day: that check will be higher. But as we’re thinking down the line about spending the money, once we develop a way to valuate that massive amount for Hanford, how do we use that money for restoration? As much as anything, it’s a public relations issue. Since the federal government is a responsible party, and the fund is taxpayer dollars, what is the appropriate use of that money? Mike McGrath, Attorney General of Montana An excellent question and long topic I won’t address right now. The question is, “How do you manage the dollars?” We have a restoration fund; part of the money we had went to clean up of Silver Bow creek. Part of it is invested. We’re just spending the interest. We request local agencies to annually submit proposals to us for restoration projects. We’re in the process of restoring the entire waterline system of Butte and Anaconda, but we’re also doing related projects. A greenway has been funded, and there are lots of studies for plant replacement—what’s going to grow there and what won’t grow there? As trustees, we take it very seriously how to spend the dollars and use the restoration fund. We’re going relatively slow on that. That’s a significant question, and it’ll take awhile for that to get resolved. 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

470 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 30:2

We’re doing a lot of restoration to the creek and the river. And that’s the goal. I think we’ll succeed. Gordon Johnson, Deputy Bureau Chief, Environmental Protection Bureau, Office of New York Attorney General In the oil spill area, you have to develop a restoration plan that sets out how you can spend recoveries of damages for a spill, but you can have a regional restoration plan to address general types of damages from oil spills in, say, New York harbor. Then you can use recoveries from different spills to implement that regional plan, which for instance will say that recoveries should be spent to buy up wetlands and replant them. As we get money from recoveries, we apply it for those purposes and we work together with the state, New York City, and New Jersey to buy up lands, protect them and expand parks and provide recreational activities. We’re using money as laid out in the regional restoration plan, in accordance with regulations. Vicki Peters, Assistant Attorney General, Colorado You mentioned that under OPA, any monies recovered go to replacement. The same is true for CERCLA. Several years ago, we were in the same place with the NRD program as at the beginning of CERCLA. We were at loggerheads, and the defense community didn’t want to move and thought the law was unfair. To a large extent we’re still there, although we’re making progress. My perception is that one of the things we can do and has been done to move past that obstacle is to lessen the emphasis on economic valuation of the natural resource that has been injured. In my experience, there’s a visceral reaction to willingness to pay, much less willingness to accept, and since the money has to go to restoration anyway, if you can sit down and just start talking about projects. . . Hard cases are solved by good projects. When we were first talking about this, a lot of the environmental groups were saying, “You’re ripping off the public. You have to get absolutely as much money as this is worth!” But early on, settled cases were for round figures: $1 million, $1.5, $1.8, and we couldn’t do what we really liked to do because it’s not enough money. You’ve had so much experience. If you’ve been involved in that evolution, can you talk about that? Also, I think it’s important, Gordon, that somebody say something about statute of limitations. I don’t want anyone to think, “Whenever we get around to it, we’ll 11. NATURAL RESOURCE DAMAGES.4.DOC 9/27/2005 4:05:22 PM

2005] Symposium: Natural Resource Damages Panel 471 file some NRD suits.” Mike McGrath, Attorney General of Montana You’ll have to talk about that. Let’s briefly talk about the projects. Removal of the dam is a good example of that. Northwest Energy owns the dam. A lot of different entities are involved in this process for a number of different reasons. They don’t have CERCLA liability, but Northwest has to put investment because the dam is falling down. EPA has unresolved claims against Arco that will get tossed into the removal of the dam. Once you start focusing on a project, a lot of entities say, “That makes sense. Let’s do this.” And things move along. It’s fairly amazing to me how rapidly things have moved since we’ve decided we wanted the dam removed. Gordon Johnson, Deputy Bureau Chief, Environmental Protection Bureau, Office of New York Attorney General As to the NRD the statue of limitations, the best source on statute limitations is Vicki Peters’s article in NAAG National Environmental Enforcement Journal entitled, “Has the ‘Sleeping Giant’ Been Caught Napping?” in the July 2000 issue that you can get from NAAG. Vicki Peters, Assistant Attorney General, Colorado I forgot about that! I swear, I did! Gordon Johnson, Deputy Bureau Chief, Environmental Protection Bureau, Office of New York Attorney General Under OPA, there’s a delightful statute of limitations: the case resurrects itself when you perform a natural resource assessment. After you do your assessment, you have 3 years to sue, even if the assessment was performed years after the release of oil causing damages. The details of the statute of limitations in OPA are included in the written materials in the national pollution fund center guidelines. That statute of limitations is pretty good. Vicki is fundamentally right about how to settle cases: good projects will lead to good settlements. If you come up with projects that sound reasonable and have a reasonable cost, they allow the companies to say, “Look what good things we’re doing,” and you’re much more likely to settle. This also lets you avoid debates about theoretical issues. Link the restoration projects to the injuries and then put a reasonable amount of money towards the projects. That’s one of the ways you can really move forward in settling these cases.