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ENVIRONMENTAL LAW
Environmental law consists of federal, state, and local laws designed to protect human health.
Some industries have long been regulated, but more often real estate developers, insurance and
I. OVERVIEW OF ENVIRONMENTAL LAWS
A. Common-Law Nuisance.
B. Environmental Statutes and Regulations. Federal and state statutes authorize
three general areas of regulation:
1. Discharge of Pollutants into the air, water, or ground.
C. Natural Resources Laws contribute to the protection of natural resources.
II. ADMINISTRATION OF ENVIRONMENTAL LAWS.
A. The Environmental Protection Agency (EPA) administers all federal laws except
National Environmental Policy Act.
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CASE 15.1 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008). In 2000,
acting pursuant to Section 112 of the Clean Air Act, the EPA
concluded that it was “appropriate and necessary” to regulate
mercury emissions from coal- and oil-fired electric utility steam
generating units (EGUs) because they could “cause, or contribute
to, an increase in mortality or an increase in serious irreversible or
incapacitating reversible illness.”11 When mercury drops out of
the air, it accumulates in rivers and streams and is stored in the
tissues of fish. If pregnant women or children eat the fish, the
delisted the EGUs and acted in an arbitrary and capricious manner
when it reversed its determination that regulation of the EGUs’
release of mercury was appropriate and necessary. What result?
HELD: The delisting rules and cap-and-trade rules were
invalidated.
A. Federal and State Regulation of Greenhouse Gases. In Massachusetts v. EPA, the
Supreme Court confirmed the EPA’s authority to regulate carbon dioxide and
CASE 15.2 American Electric Power Co. v. Connecticut, 131 S.Ct. 2527
(2011). Multiple states and land trusts brought suit against AEP
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law. Plaintiffs sought injunctive relief requiring defendants to cap
their CO2 emissions. Issue was whether the Clean Air Act
whether a claim was available under state tort law.
IV. THE CLEAN WATER ACT (CWA) seeks to eliminate the discharge of pollutants into the
navigable waters of the United States, waters used in interstate commerce, and freshwater
wetlands that are adjacent to all other covered waterways.
A. National Pollutant Discharge Elimination System (NPDES) requires permits for
the discharge of pollutants from any point source to navigable waters.
V. THE RESOURCE CONSERVATION AND RECOVERY ACT (RCRA) governs the
management of hazardous wastes by identifying and listing hazardous wastes, and setting
standards for the construction and operation of hazardous-waste treatment, storage, and
disposal facilities.
A. Cradle-to-Grave Responsibility. RCRA imposes “cradle–to–grave” responsibility
on generators of hazardous waste, by requiring detailed federal permitting and
VI. THE FEDERAL SUPERFUND LAW (CERCLA) authorizes the federal government to
investigate and take remedial action in response to a release or threatened release of
hazardous substances to the environment. CERCLA established the Hazardous Substance
Superfund to finance federal response activity.
A. Strict Liability. CERCLA imposes strict liability for “responsible persons,” even
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1. Owner or Operator at the Time of Disposal.
D. Liability of Affiliated Companies and Piercing the Corporate Veil. There are two
bases for liability: (i) owner of a subsidiary whose corporate veil has been
pierced, and (ii) an operator of the facility.
1. Derivative Liability as an Owner.
F. Liability of Lenders and Fiduciaries. Lenders can be liable if they foreclose on a
contaminated property, as it gives the lender ownership of the land.
G. Defenses. There are four CERCLA Defenses to Liability: (a) release of
hazardous substances was caused by an act of God (e.g., natural disaster); (b) an
act of war; (c) the act or omission of a third party; (d) purchaser of brownfields.
1. Third-Party or Innocent Landowner Defense: defendant must show that
the true responsible third party was not an employee and had no
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H. Retroactive Application. In United States v. Olin, owners can be held liable for
CASE 15.3 Pakootas v. Teck Cominco Metals, Ltd., 2004 U.S. Dist. LEXIS
23041 (E.D. Wash. Nov. 8, 2004). Native American plaintiffs
sued to enforce EPA regulations against TCM, a Canadian
VI. ENVIRONMENTAL JUSTICE considers how incinerators, dumps, factories, and other
sources of pollution affect poor and minority communities.
VII. ENFORCEMENT ACTIVITIES AND SANCTIONS FOR NONCOMPLIANCE.
A. Agency Inspections. Agencies have broad powers to conduct on-site inspections
of plant facilities, collect samples, and execute search warrants if criminal activity
is suspected. Violations may be subject to civil or criminal enforcement actions.
B. Administration and Civil Enforcement Actions. Government offices are given
latitude to enforce environmental laws. The first violation may result in a
CASE 15.4 United States v. Hansen, 262 F.3d 1217 (11th Cir. 2001).
Christian Hansen founded the Hanlin Group. Through a subsidiary
LCP, Hanlin purchased a chemical plant in Brunswick, Georgia
where hazardous materials had been dumped. LCP constructed a
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D. Self-Reporting Requirements. There are penalties for filing false reports, but the
EPA may reduce or eliminate fines for civil or administrative violations by
E. EPA Incentives for Self-Policing.
VIII. MANAGEMENT OF ENVIRONMENTAL COMPLIANCE. Knowledgeable corporate
officials recognize the need to develop policies to ensure legal compliance and practices
to promote a safe environment.
A. Corporate Policy should encompass stringent measures and require every
employee to comply with environmental laws.
C. Record Keeping, Accounting, and Disclosure. Companies must comply with
federal (EPA and SEC) disclosure and reporting requirements.
D. Periodic Environmental Audits measure compliance with occupational health and
safety requirements; federal, state, and local environmental laws and regulations.
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G. Long-Term Strategies and the Importance of Being Proactive. The best
THE RESPONSIBLE MANAGER: TEACHING SUGGESTIONS
1. Discuss with your class how a company’s earnings may be affected by the costs of
compliance with environmental laws.
2. Discuss what factors a manager should consider when evaluating a company for purposes
3. Why is the third-party defense important?
4. Should the U.S. participate in the Kyoto Climate Protocol? What issues should the
responsible manager consider regarding the Kyoto protocol? Sustainable development