ESG Disclosure Simplification Act Passes Committee But Will Fail

On September 20, 2019, the Financial Services Committee in the U.S. House of Representatives passed H.R. 4329, the ESG Disclosure Simplification Act of 2019.

The bill would require all public companies to disclose “environmental, social, and governance [ESG] metrics” as material information about the company. Although there is little if any chance that the bill will become law given the current politics in Washington, DC, the bill’s passage in the House Committee highlights that issues of ESG disclosures continuing to be pressing.

H.R. 4329 would require every public company to disclose to shareholders “a clear description of the views of the issuer about the link between ESG metrics and the long-term business strategy of the issuer.”

The Bill if enacted would also create a new permanent Sustainable Finance Advisory Committee that must within 180 days of first meeting submit to the SEC “recommendations about what ESG metrics” the SEC should require be disclosed. But again, there is no realistic scenario under which this becomes law.

However, issues of ESG live on. Governments in Europe have been pushing businesses to make ESG disclosures for years. There is no similar push in the U.S., except for this and similar legislation; all rightly doomed to fail. On this side of the ocean, a small but vocal number of investors evaluate their stock portfolios by matters that include ESG metrics. That private, non governmental response to the fact that many American investors actually believe issues of “energy and the environment” are among the top priorities, takes up a lot of virtual space in social media, and is a positive.

Numbers are difficult to quantify but one of the world’s largest investment banks, based in Europe, has said that by 2020 it expects half of assets managed by investment companies to have expressed ESG considerations. That number, on a global basis, seems overly optimistic.

The broad lack of widespread public disclosures, utter lack of standardized metrics, and complete lack of enforceable goals makes it difficult accept that ESG metrics will be widely considered in in the U.S. Without any of those three, much, if not most, of the ESG information in the market is at best misinformation. And such creates potential liability for companies making ESG disclosures; if not also some silly results, including maybe the most ridiculed, when last year a major U.S. real estate company very publicly announced its principal ESG “environmental initiative” banning meat from its offices and expense accounts.

In the realm of securities disclosures it is often not enough to be correct. In a year when ‘redefining motherhood’ is in and ‘redefining masculinity’ is out, setting priorities not to mention articulating solutions, is fraught with risk.

This law firm regularly advises public companies about environmental and sustainability including matters that may be subject to the company’s disclosure obligations including annual reports on form 10-K, as well as matters of ESG reporting.

The failure of H.R.4329, the ESG Disclosure Simplification Act of 2019, is not only all but certain, but is not a bad thing.

This is an instance where the marketplace should control and not Congress. More and additional government regulation, micromanaging this discreet set of metrics that may not be material suitable for public disclosure will only stifle and limit good business practices that result in environmental progress. Capitalism has and will drive progress. If public companies determine that investors desire ESG disclosures, management will evaluate the risk and respond.

That market driven decision making will not only drive ESG disclosures, which can be a good thing, and also fuel an underlying environmental stewardship of the planet made possible by today’s technological advances enabled by capitalism, .. all in a positive way that no new law could accomplish.

We can save the planet with capitalism.

LEED Offers Companies a Response to Declining Bird Populations

Condor in the Cordillera Huaywuash, Peru

In response to a much publicized new study on North American bird populations that appeared in the journal Science last month, we received a significant number of inquiries from businesses about what an appropriate response might be from a responsible company?

The study found “cumulative loss of nearly three billion birds since 1970, across most North American biomes, signals a pervasive and ongoing avifaunal crisis.” Since 1970, the researchers estimated, the North American bird population had declined by roughly 29%. The study was published with its own hashtag #BringBirdsBack that was successful in garnering a large public reaction on social media and otherwise to “an overlooked biodiversity crisis.”

So, what is an ethically oriented response for a company?

We have suggested for some businesses an ideal response can be voluntary compliance with the LEED v4.1 Bird collision deterrence credit that aims to “reduce bird injury and mortality from in-flight collisions with buildings.”

The U.S. Green Building Council’s LEED green building rating system is widely accepted and while LEED certification certainly has its advantages, our advice is that a very good response can be to enact company practices complying with this single LEED credit. The credit publicly available at the USGBC website, has three requirements:

There are new v4.1 versions of the credit for new construction as well as existing building. 1. For new construction, companies should develop a building façade to make the building and site structures visible as physical barriers to birds (.. yes, including ‘bird safe glass’). 2. For all buildings, including existing structures, limit the duration of interior and exterior lighting. Exterior building fixtures that are not necessary for safety, building entrances, and circulation can be automatically shut off from midnight until 6 a.m. The credits allow for manual override capability for after hour use. And 3., the credit requires a three year monitoring plan to identify and document locations where repeated bird strikes occur such that potential design solutions can be implemented. The credit language is here.

Utilizing a third party created LEED credit (although in this instance originally drafted by the American Bird Conservancy) can provide a credible response mitigating risk of criticism for greenwashing, that can be touted in corporate sustainability claims including in ESG reporting (yes, public companies are including bird safe policies in public reporting). Be aware LEED water use reduction credits are frequently used to articulate potable water reduction requirements.

But there are issues with allowing public sentiment reacting to the environmental issue of the minute to dictate corporate, or for that matter public, policy.

A 2014 study, conducted by scientists from the Smithsonian Institution and the Fish and Wildlife Service, estimated that between 365 million and 988 million birds are killed in the United States every year as a result of building collisions. But that study concluded that building collisions, driven by the increased use of glass building facades, are second to cats as the greatest threat to birds. But banning housecats does not make a good business response.

It is suggested that green building programs, like LEED, encourage using natural light to reduce energy use and encourage green views, result in the use of more glass as a building skin. And windows are no friends to birds as we all know from the popular old Windex television ad. Moreover, in a published report, the Urban Green Council, a chapter of the USGBC indicates “today, almost all large, complex buildings make the same trade off:  they add more glass (leading to an energy penalty), and make up for it with superior mechanical systems.” In response to that collateral damage of the environmental kind. USGBC now awards up to one point on its LEED scale for the adoption of bird collision deterrence mitigation.

So yes, it is an unintended consequence of LEED green building that creates the solution to this environmental issue of the day.

But there is no nationwide repository of bird casualties or injuries, so estimating the scope of this is difficult. It is widely perceived that building collisions, and particularly collisions with windows, are a major threat to birds, with estimates swinging widely. A recent literature search published in The Condor, based on 23 studies, estimates that between 365 and 988 million birds are killed annually by window collisions in the U.S., with roughly 56% of mortality at buildings 4 to 11 stories, 44% at buildings 1 to 3 stories, and less than 1% at skyscrapers. But keep into in mind there are only about 21,000 buildings 12 stories or higher in the U.S. versus over 123 million 1 to 3 story buildings, so statistically only 24 birds might perish each year at any one skyscraper (and that number is likely artificially high because only a small percentage of those skyscrapers are located in bird flyways).

How many birds can actually be saved by a building implementing the LEED credit is debatable but remember the task is an ethically oriented response for the large number of businesses that contacted our office this month, reacting to the overwhelming public outcry on social media and otherwise to the 3 billion birds that vanished.

However, on a personal note I spent most of August trekking and climbing across the Cordillera Huaywuash in Peru, where I saw nearly a hundred Andean condors (.. including the condor in the photo above), one of the bird types that have flourished, according to the journal Science study, increasing in population by more than 200%, in the Americas since the 1970s.

Greenbuild – The Target Rich Environment for Green People

I am often asked, “how can I expand my green building business?” And I have offered the same response for more than a decade – attend the Greenbuild International Conference and Expo (.. yes, you will have to talk with people while you are there).

This year Greenbuild is in Atlanta from November 19 thru 22 with some of the best original programming on “disaster prep” (.. more than food prep).

Greenbuild has become much more than only “green building” as sustainability has become woven into the fabric of business, the conference has evolved into the watering hole for leaders across the entire environmental industrial complex.

I do not claim any particular knowledge or skill in business marketing. But Greenbuild has been a prime source of new clients for my environmental law practice focusing on sustainability and green building law practice (.. okay, this blog is actually our number one source of new clients, but Greenbuild is second)!

I have attended a lot of Greenbuilds. Actually my first U.S. Green Building Council “Green Building Conference” (.. yes, pre Greenbuild) held in conjunction with the National Institute of Standards in Gaithersburg, Maryland in 1994 had only 450 people in attendance. While attendance in recent years is off a bit from the huge Greenbuild the first time the conference was in Boston in 2008, with 27,995 attendees (.. that was a party!), last year the 15,373 attendees in Chicago dwarfed the first Greenbuild in 2002 when a mere 4,189 people gathered in Austin.

Those 15,373 attendees last year were from 91 countries, despite the internationalization of LEED and several worldwide Greenbuild expos across the globe.

Greenbuild attracts all types of wild things across the environmental industrial complex; not just owners of green buildings. Last year 35% of those in Chicago were from architecture or engineering firms, 22% were developers or builders, 7% were utilities, and 8% were manufacturers, not to mention the very large numbers of professionals offering services and consulting, including, yes, a respectable assemblage of real estate attorneys.

And Greenbuild is sustainable. My favorite factoid reported by Informa Exhibitions (.. USGBC sold Greenbuild some years ago) is that each participant produced 5.1 lbs. of waste; of which more than 86% was diverted. And if that number does not excite you, Informa tracked and reported the alternative fact that total water footprint of the event was 5,537,275 gallons.

Last year there were 350 exhibitors on the 100,000 square feet Expo Floor. It is all but impossible not to encounter new vendors and innovative suppliers and this year with two happy hour events on the Expo Floor that will be “the place” to connect with colleagues and network with complete strangers. Educational activities abound with more than 200 formal sessions.

Those 2018 demographics are proof that Greenbuild is the largest green building gathering each year and unquestionably the par excellence opportunity for business development among “green people.”

Greenbuild 2019 in Atlanta will be “the” target rich environment for green people this year. It is your chance to not only rub elbows with USGBC CEO Mahesh Ramanujam, the man to know, but also the thousands of others who make a living in the environmental industrial complex.

It is just over 58 days until this once a year excelsior (.. Stan Lee’s battle cry) opportunity to enlarge your green building business.

For those who will complain that this blog post is shameless promotion, that may be true, but it is also correct that Greenbuild has been a prime source of new clients for my environmental law practice for more than a decade! LEED is still ground zero for green building. It has become all but a spiritual movement, with more than 98,000 registered and certified projects participating in LEED across 167 countries and territories. Every day, 2.6 million square feet of building space certifies to LEED.  I won’t promise attending will be a quest for self discovery or that you will meet your next spouse among one of the more than 14,000 individual USGBC members, but if you want to benefit from that business volume and be in the room with more sustainable business leaders than will gather any of place or time this year, you need to be at Greenbuild.

As a reader of my blog, if you email me before Greenbuild, I will gladly buy you a cup of coffee or other libation at an Atlanta watering hole. I made a similar offer in past years and had a great time meeting a lot of very fun people for drinks. I hope to see you in Atlanta in November.

EPA Rolls Back Proposed “Waters of the United States” Definition

Last Thursday the EPA and Department of the Army announced that the agencies are repealing a 2015 rule that had proposed to expand the definition of “waters of the United States” under the Clean Water Act.

Despite claims from some activists that “the sky is falling” with this change in environmental regulation, the real impact will be little more than the acorn that fell on Chicken Little’s head, because the agencies are at the same time recodifying the longstanding and accepted regulatory definition of waters of the United States that existed prior to the June 29, 2015 rule (that sought to expand what is “navigable water”). To be clear what is being repealed was a proposed rule that never went into effect.

With this final repeal, the agencies will implement the pre 2015 regulations, which are currently in place in more than half of the states (i.e., there are some states, tribal and local governments with their own definitions of jurisdictional waters). This September 12, 2019 final rule takes effect 60 days after publication in the Federal Register.

In announcing the final rule, in advance of it being published, the agencies described that they are repealing the 2015 rule for four principal reasons:

First, the agencies conclude that the 2015 rule did not respect the legal limits on the scope of the agencies’ authority under the Clean Water Act as intended by Congress. Second, the agencies conclude that in promulgating the 2015 rule the agencies failed to adequately consider and accord due weight to the policy of the Congress in Clean Water Act section 101(b) to “recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution” and “to plan the development and use . . . of land and water resources.” 33 U.S.C. 1251(b). Third, the agencies repeal the 2015 rule to avoid interpretations of the Clean Water Act that push the envelope of their constitutional and statutory authority absent a clear statement from Congress authorizing the encroachments of federal jurisdiction over traditional State land-use planning authority. Lastly, the agencies conclude that the 2015 rule’s distance-based limitations suffered from certain procedural errors and a lack of adequate record support.

With this final rule, the regulations defining the scope of federal Clean Water Act jurisdiction will be those portions of the federal law as it existed before the amendments promulgated in the 2015 rule, being the 1986 regulatory definition at 40 CFR 230.3(s).

The 2015 rule “clarifying” the scope of “waters of the United States” was a politicization of science that would have resulted in tens of millions of new acres of privately owned land being removed from productive use and placed under the jurisdiction of the federal government.

For those uninitiated in the moving target clarifying what are “navigable waters of the United States,” defining where those waterways begin and end has since the enactment of the 1899 Rivers and Harbors Act been the subject of disputes between the federal government and land owners (predating the modern environmental movement).

There has been perversion of what are “waters of the United States.” From the 1970s through the 1990s, federal courts as well as the agencies interpreted an expanded bigger moving upstream scope of Clean Water Act jurisdiction as necessary to and consistent with the Act’s goals of protecting water quality. Supreme Court decisions in 2001 and 2006 held that the scope of navigable waters must be interpreted more narrowly. The justices in the Rapanos v. United States, 547 U.S. 715 (2006) decision were clear the agencies exceeded their authority but split on how this was to be accomplished. The agencies have been working since the Supreme Court decisions to provide clarification and predictability in the procedures used to identify waters that are, and are not, covered by the Clean Water Act. The 2015 Rule, and this new rulemaking effort, reflect the agencies’ efforts (.. under very different political times) to provide that needed certainty and predictability.

This was a signature issue for the President in the 2016 election. This current action follows the February 28, 2017, Presidential Executive Order on “Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the ‘Waters of the United States’ Rule.” The Order states that it is in the national interest to ensure that navigable waters are kept free from pollution, while at the same time promoting economic growth, minimizing regulatory uncertainty, and showing due regard for the roles of Congress and the states under the Constitution. It also directs the EPA and the Army to review the existing Clean Water Rule for consistency with these priorities and publish for notice and comment a proposed rule rescinding or revising the rule, as appropriate and consistent with the law. Further, the Order directs the agencies to consider interpreting the term “navigable waters,” in a manner consistent with the opinion of Justice Antonin Scalia in Rapanos.

It has been over 40 years since the Cuyahoga River caught fire spurring the 1972 passage of the Clean Water Act. The law was intended to target big, point source pollution like sewage leaks and oil spills, and the continuing efforts to use a definition of navigable water from the 1899 Rivers and Harbors Act to describe the scope of the Clean Water Act, not only does not well serve the potable water issues of the day, and are not only junk science, but silly talk.

This is a positive step toward what is properly “navigable waters of the United States” and maybe best characterized as back to the future, in it will no doubt be challenged in the courts and is a long way from being final.

Read the prepublication version of this final rule.

Radon Caused More Than 21,000 Deaths Last Year

Radon causes more than 21,000 lung cancer deaths in the U.S. every year. Despite that it is totally preventable, radon is the number one lung cancer killer in nonsmokers.

Radon is widely described as the primary source of indoor and household air pollution in the U.S.

High radon levels are found in every state. Levels can vary widely, even from home to home in the same neighborhood.

Radon is a noble gas that comes from the natural breakdown of uranium, phosphate and a number of common minerals in soil and water and gets into the air you breathe. Radon typically moves up through the ground to the air above and into your home through cracks and other holes in the foundation. Radon can also enter your home through well water. Your home can accumulate radon inside.

Nearly one out of every 15 residences in the U.S. is estimated by EPA to have an elevated radon level of 4 picocuries per liter, or pCi/L, or higher. 4 pCi/L is the EPA action level for radon, but there is no (minimum mandatory) federal cleanup standard or the like because this inorganic compound is naturally occurring.

There is no real question that radon causes cancer. There is genuine dispute about at what level radon is carcinogenic. The science is clear at high levels, but low dose radon risk assessment gets a bit fuzzy?

EPA recommends, if you are buying a home have it tested for radon. A satisfactory radon test should be a contingency in every contract of sale.

For a new home, ask if radon-resistant construction features were used and if the home has been tested.

There is no known safe level for exposure to radon, but EPA recommends you fix a home if the radon level is 4 pCi/L or more. Be aware that the World Health Organization recommends countries adopt a reference level for radon at 2.7 pCi/L, significantly below EPA’s 4 pCi/L. Again, all of this is not without controversy. There are other cost benefit studies that EPA has reviewed questioning evidence of limiting exposure below 8 picocuries?

There is no doubt there is radiation risk even at low levels. Radon levels less than 4 pCi/L still pose a human health risk, and in many cases, may be reduced at very modest cost for testing and fixing the home.

This more “the sun” than “a black hole.”

Simple and inexpensive retrofits have been shown to reduce radon levels on average by 50% in houses. The techniques may also lower levels of other soil gases and decrease moisture problems.

First you may wish to find out if you are buying a home in a high radon area. The EPA’s map of radon zones shows which areas have the greatest potential for elevated indoor radon readings.

Radon mitigation features can be easily and inexpensively installed with common building practices and materials. The techniques may vary for different foundations and site requirements, but the basic elements are:

Gas Permeable Layer. This layer is placed beneath the slab or flooring system in new construction to allow the soil gas to move freely underneath the house. In many cases, the material used is a 4 inch layer of clean gravel. This gas-permeable layer is used only in homes with basement and slab-on-grade foundations; it is not used in homes with crawlspace foundations.

Plastic Sheeting. Plastic sheeting seams sealed is placed on top of the gas permeable layer and under the slab to help prevent the soil gas from entering the home. In crawlspaces, the sheeting is placed over the crawlspace floor.

Sealing and Caulking. All below-grade openings in the concrete foundation floor are sealed in existing homes to reduce soil gas entry into the home.

Vent Pipe. The preferred retro fit for an existing home is a 3 inch gas tight or PVC pipe installed from the gas permeable layer through the house to the roof to safely vent radon and other soil gases above the house.

Curiously, existing green building certification systems (e.g., LEED, Green Globes, IgCC, etc.), almost to the one, while purporting to give gravitas to indoor air quality, do not adequately make provision for matters of radon, despite the inorganic compounds recognition as “the” primary source of indoor air pollution. And there are very few, if any, mandatory radon laws across the U.S.

You cannot see, smell, or taste radon. But according to the EPA, radon causes about 21,000 lung cancer deaths per year; deaths that are 100% preventable. Testing is the only way to find out your home’s radon levels. EPA and the Surgeon General recommend testing all homes for radon.

State Law Trumps on Location of Solar Panels

There will be a brief hiatus in regular blog posts during the month of August. I am in Peru walking slowly up the very big hill that is Siula Grande (.. in lieu of blog posts, read the book or watch the movie, “Touching The Void” about the first guys to summit this mountain).

“Here comes the sun, and I say, It’s all right” is how a new decision on solar energy generating stations by Maryland’s highest court begins, quoting The Beatles song, “Here Comes the Sun.”

This case is instructive beyond Maryland’s borders because it involves the intersection of states’ efforts to promote solar energy generation as part of its renewable energy policies, and county governments’ local planning and zoning prerogatives. The Maryland Court of Appeals found state environmental law preempts local zoning authority with respect to solar energy generating stations.

Perennial Solar, LLC filed an application in September, 2015 and was successful in obtaining a zoning special exception and variance to construct a solar panel farm on two contiguous rural agricultural properties totaling 86 acres.

While a petition for judicial review, filed by opponents of the solar generating station, was pending, Perennial filed a motion for pre appeal determination challenging the subject matter jurisdiction of the Circuit Court for Washington County on the ground of state law preemption by implication. After a hearing, the circuit court granted Perennial’s motion, holding that local zoning authority is preempted by state environmental law.

Washington County and the aggrieved landowners appealed the decision of the circuit court to the Court of Special Appeals. In a reported opinion, the intermediate appellate court applied Maryland case law outlining the applicable factors when considering the doctrine of implied preemption. Perennial Solar, 239 Md. App. 380. The Court of Special Appeals noted that “preemption by implication occurs when a local law ‘deals with an area in which the [General Assembly] has acted with such force that an intent by the State to occupy the entire field must be implied.’” Id. at 386

This appeal to Maryland’s highest court followed. That court has frequently explained that Maryland state law may preempt local law in one of three ways: (1) preemption by conflict; (2) express preemption; or (3) implied preemption.

In the instance, the state statute, Public Utility § 7-701, et seq., was originally enacted in 2004 to facilitate the State’s transition to renewable energy sources. That statute has been amended and altered several times, including to create and increase Maryland’s renewable portfolio standard.

Some who question this decision point out that the statute does not even define solar “generating station,” so how could it preempt such a solar panel installation?

But the Court in this 7 – 0 decision, applying the principles of implied preemption to PU § 7-207, found it is clear that the legislature intended to vest final authority with the State Public Service Commission for the siting and location of generating stations requiring a Certificate of Public Convenience and Necessity from that State body. The Court expressly held, the statute manifests the general legislative purpose to create an all-compassing statutory scheme of solar energy regulation.

Interesting the most important analysis of whether the General Assembly has acted with such a force in this field that local zoning authority over generating systems is impliedly preempted, is buried in the dicta in this 38 page opinion considering a secondary factor, that during the 2019 legislative session, the General Assembly once again considered this very matter. Specifically, the legislature considered H.B. 1227/S.B. 997, which would have amended PU § 7-207(e) to require that the PSC receive from local government “a written statement that the proposed generating station conforms with all applicable county or municipal zoning land use requirements” before the PSC could issue a CPCN for a solar photovoltaic system or wind system. Recognizing that HB 1227 would alter the PSC’s preemptive authority, the Fiscal and Policy Note associated with HB 1227 stated that “[i]n practical terms, the bill establishes local preemption authority for the siting of solar and wind facilities in the State.” Id. Notably, had HB 1227 been enacted, local zoning approval would have been required as a condition precedent to PSC approval and local zoning would have preempted the PSC’s approval on matters related to the siting or location of solar facilities. But with this appeal pending, HB 1227 was defeated in the 2019 session.

Despite being relegated to dicta in the opinion, that recent legislative history was arguably the most significant fact in terms of preemption analysis and the Court could have relied upon it. With full knowledge of this pending case, the legislature could have changed the law and it did not.

In context, this is the same legislature that some years ago made it the law that All Solar Panels are Pervious in Maryland, for the purposes of zoning, construction and stormwater; in a Solomonic public policy balancing act between water quality and energy, where the importance of onsite renewable energy won out.

It is clear that the high court reached the right legal conclusion, but the larger issue is that many see this as a bad law and terrible public policy? This is not the same as location of a utility scale power plant or transmission lines that benefit the greater public good. Onsite alternative energy generation and distributed small generation systems not only do not offer the same overwhelming good benefit, but often have unintended consequences when small power generating systems litter yards, small and large across the country, that impact quality of life. Many are surprised that the legislature did not act in the 2019 session to correct this questionable energy public policy that usurps the near 100 year old historical convention of local land use control.

Environmentalists are concerned that this very broad articulation of preemption went far further than was necessary to reach this result and will result in unintended consequences, including that a county pesticide ban in Montgomery County, Maryland will, by this rationale, be overturned when the case is heard by this court.

This state environmental law that trumps local zoning law is a horrible example of government choosing winners and losers in sources of power generation. It is more than just the state putting it thumb on the scale when the court, which has policy making authority as the highest court in the state, backed bad energy policy.

All of that observed, there is no doubt that existing PU § 7-207 preempts by implication local zoning authority approval for the siting and location of solar generating stations which require a certification from the state PSC. And the 38 page decision in Board of County Commissioners of Washington County v. Perennial Solar, LLC, the first opinion authored by Judge Brynja M. Booth since she joined the court in April, is an excellent treatise not only on preemption, but also renewable energy siting.

Here comes the sun across Maryland.

Cannabis Manufacturer Charged with RCRA but No CDS Violations

In a criminal case that says significantly more about the prosecution than the indictment on its face, the Federal government is prosecuting a leading cannabis industry manufacturer and distributor for criminal transportation of hazardous waste.

The Resource Conservation and Recovery Act (“RCRA”) was enacted in 1976 to ensure that all hazardous waste generated in the United States was managed in a manner that would minimize the threat to human health and the environment.

The U.S. Environmental Protection Agency established a cradle to grave tracking system for tracking hazardous waste under RCRA. EPA regulations require generators of hazardous waste to prepare a hazardous waste manifest to transport hazardous waste from their site. A hazardous waste manifest is a form used for identifying the quantity, composition, and the origin, routing, and destination of hazardous waste during its transportation from the point of generation to the point of disposal, treatment, or storage. The manifest form is in triplicate, and is to be signed by the generator, transporter and disposal site, as the waste progresses throughout its journey. When the waste reaches its final destination, a copy of the completed manifest is to be sent to both the generator and the regulatory authorities to demonstrate that the waste was properly managed.

Wellgreens, that self describes as the California cannabis industry’s leading contract manufacturer and distributor, is among other matters, engaged in the business of extracting oils from cannabis at a location on Trade Street in San Diego, California. As part of the manufacturing process, a Federal True Bill dated June 27, 2019 alleges that Wellgreens generated various wastes, including 55 gallon drums of waste ethanol. The waste ethanol generated by Wellgreens was a federally regulated hazardous waste that exhibited the characteristic of ignitability, because it had a flashpoint of less than 140 degrees Fahrenheit.

Wellgreens and its principals are charged in concert with other defendants, beginning as November of 2017 and continuing up to and including on or about June 8, 2018,

As a method and means of the conspiracy, the defendants telephoned R. U. (deceased), a refuse hauler not licensed to transport hazardous waste, and requested that he come to their facility to remove waste, including drums of spent ethanol. Defendants paid R.U. and his assistants in cash for the disposal of the drums, in an amount approximately half the cost of lawful disposal. No invoices, manifests, receipts or other paperwork associated with these transactions was prepared by any party.”

The Indictment continues to allege in great particularity,

“On or about December 26, 2017, defendant Nadia Malloian rented a Penske truck used to conceal drums of waste ethanol from inspectors. ..

On or about January 30, 2018, in response to a request for information about the disposal of the hazardous waste generated at the facility, defendant Lunar Loussia sent an email stating “I’ll handle today.” .. On or about February 7, 2018, co-conspirators transported 3 drums of waste ethanol from the Wellgreens facility on Trade Street in San Diego and dumped them at Hill Street in El Cajon, without a hazardous waste manifest. On or about February 13, 2019, co-conspirators transported 10 drums of waste ethanol from the Wellgreens facility on Trade Street in San Diego and dumped them at the intersection of California state routes 52 and 125, without a hazardous waste manifest.”

The facts averred on the face of the Indictment allege an illegal transportation of hazardous waste that might not make this criminal prosecution noteworthy, but that it involves the manufacturer and distributor of cannabis and the government has not charged a violation of the Controlled Substances Act or other Federal drug laws.

U.S. Attorney General William Barr said on April 19, 2019, the Department of Justice is “operating under my general guidance that I’m accepting the Cole Memorandum for now, but I’ve generally left it up to the U.S. Attorneys in each state to determine what the best approach is.” The Cole Memorandum is a 2013 policy that deprioritized the enforcement of federal marijuana laws in states where marijuana had been legalized. Barr’s pronouncement was a reversal of the January 4, 2018, determination by then Attorney General Jeff Sessions rescinding the Cole Memorandum.

United States v. WellgreensCA, Inc., et al, in the United States District Court for the Southern District of California, case no. 19 CR 2439WQH, is significant beyond being a criminal prosecution of a RCRA violation because it may be the first public application of the current Trump Administration policy on Federal cannabis prosecution in states with legal cannabis.

USGBC Wants You to Comment on the Next Version of LEED

The U. S. Green Building Council is looking for the future of LEED and has officially opened a call for feedback and ideas for the next version of LEED.

This is an opportunity for anyone and everyone to influence the next version of the most widely used green building rating system in the world.

With more than 98,000 projects participating in LEED across 167 countries and more than 2.6 million square feet certified LEED every day, there are other ways to construct a green building, but LEED is not only the globally recognized symbol of sustainable achievement, but also the thought leader moving the market.

This is your chance to be more than a cog in the environmental industrial complex, but to be a member of the community unveiling technological fixes influencing where the market is moving. As Melissa Baker, senior VP for LEED Technical Core at USGBC, describes it,

“Now that LEED v4.1 is out and has been positively received by the community, we are exploring how we can strengthen LEED v4.1 and also plan what’s next for the rating system. We are working to ensure that LEED remains a global leadership standard, and we know that as we evolve LEED, industry feedback and support are critical.”

And lest there be any question about organizational commitment, Mahesh Ramanujam, president & CEO at USGBC, said last week, “we are excited to engage the market again to solicit ideas, proposals and feedback for improving LEED v4.1 and future versions of LEED.”

Whether you are someone who sees LEED v4 as the rating system killing the goose that laid the golden eggs or who sees LEED 4.1 as the best thing since sliced bread, this is your opportunity to be heard by Melissa Baker and her team that are charged with writing the next version of LEED.

The nature of the comments will largely influence whether the next iteration is LEED v4.2 (.. an update) or v5 (.. a whole new version).

Having LEED change through a continuous improvement process, as opposed to announcing periodic releases (e.g., triennial versions aligned with the I Codes or the like), is viewed widely as negative across the real estate industries (.. if you feel differently, you could comment on process), given that LEED 4.1 is still in BETA and has not been balloted by the members, some of these new comments could well find themselves quickly incorporated in v4.1. Continuous improvement, including through the use of Pilot credits is looked upon by most disapprovingly, because of the years long process of planning, designing and funding a building; moreover, that many Pilot credits are advocated by pecuniary interests that are not disclosed.

There is no time frame yet for this next version of LEED.

But if there are two issues that LEED v4 and v4.1 have been criticized for not going far enough to address, and will almost certainly find their way into the next generation rating system, it is social equity and matters of occupant health.

This may also be an ideal time to comment given the 2017 announcement that the technical content “in the 2018 IgCC powered by 189.1,” .. could become the foundation of LEED certification. “USGBC will undertake an analysis of the measures from the model green code and compare them to LEED requirements.” Given that there is little, if any, science to support the ASHRAE 189.1 standard development, some question if this collaboration articulates the technology that can help LEED produce our way out of our environmental predicament.

Additionally, public comment is a chance for the silent majority to quell the small group of vocal extremists, many who are the apocalyptic environmentalists that carried the day with LEED v4, resulting in a rating system that today does not have the market acceptance that a both more balanced and rooted in science and technology approach would.

There will no doubt continue to be ‘give and take’ between those who want to measure performance against those who want a design and construction standard that is complete at use and occupancy. Some have advocated for a greater emphasis on and differentiation with existing buildings and Arc.

Maybe you are one who believes the greenest building is an existing building and that a way to accelerate building reuse is to fix the (.. little achieved) LEED brownfields credit. I offered that constructive criticism in a recent blog post. This is your chance.

But the vexing substantive issues that face the environmental industrial complex about the next version of LEED are more akin to the current debate that finds canned tuna ‘out’ and lab grown tuna ‘in’.

So, take a few minutes, now, and provide USGBC with some feedback and ideas for the next version of LEED at https://new.usgbc.org/leed-v41#join.

Additionally, there will be a special “Future of LEED” session at Greenbuild in Atlanta on November 19 -22, which will review feedback to date and allow comment.

Many see diametrically opposed views on the environment shaping different visions for the future of LEED. In recent years, USGBC has moved toward a belief that we are using more than our planet has to give and we must drastically cut back and use less energy, water and …  That view overtook the longstanding precept by the founders of USGBC that LEED was a science based engineered solution to the environmental problems of the day. Your insightful analysis in that debate is an essential addition to the urgent conversation that will not only be had at USGBC, but also about how mankind will fare on our increasingly crowded Earth.

Net Zero Lawsuit Filed Against Home Builder

A lawsuit has been commenced in Maryland alleging that two net zero homes are not.

The facts are gleaned from a review of the court pleadings and are instructive for everyone buying or selling a green building. The complaint alleges the defendant home builder and subcontractors represented “that their new homes would be “net zero” energy efficient however neither of the homes has been close to net-zero as represented.” The two homes

have solar panels installed in addition to the geothermal HVAC systems, .. Despite this, both homes’ BGE energy reports show the .. [homes] are using more kWh’s than their neighbors without energy efficient technology.”

The complaint avers multiple causes of action from breach of contract to fraudulent misrepresentation and negligent misrepresentation to violation of the Maryland Consumer Protection Act. However, maybe tellingly, no contracts are attached to the complaint?

The two newly built in 2016 homes are neighboring and two of the husband and wife plaintiffs are sisters.

The defendant home builder is registered with the Maryland Home Builder Registration Unit. Members of the LLC homebuilder are also sued as are subcontractor and vendor entities and their members. Again, no contracts are appended to the complaint nor expressly cited in the averments, so it is worthy of note that subcontractors and vendors do not have to register under the Maryland homebuilder act. And there does not appear to be a valid legal theory even articulated to pierce the corporate veil and find liability in individual LLC members.

The complaint says, “after Plaintiffs moved into their respective homes and had their families living in the homes, in or around, June 2016 it was discovered that the HVAC systems for both homes were deficient and defective and not installed or performing in the manner represented.”

It is difficult to evaluate the breach of contract claims without the contracts, but the cause of action that appears most spurious is the fraud claim, “Defendants’ representations that they were experts in net-zero” energy efficient home and that following their specifications and utilizing their preferred contractors and suppliers would result in Plaintiffs’ homes being “net-zero” energy efficient were false representations of material facts.”

The only claim that appears it could have legs based on the four corners of the pleadings is the Maryland Consumer Protection Act count because that law has such a low burden of proof where a plaintiff does not have to prove a breach of contract or fraud or even negligent misrepresentation, but only that there was a “..  misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers ..”

All of that observed from the complaint, the defendant homebuilder website clearly advertises, according to the U.S. Department of Energy “As a Zero Energy Ready Home Partner, High Performance Homes offers homes that are so energy efficient, most of their annual energy consumption can be offset with renewable energy.”

Its website makes clear that the builder is selling certain homes as U.S. Department of Energy of Energy, Zero Energy Ready Home certified, others as National Green Building Standard certified, and others as having achieved Energy Star certification; .. and there is no allegation in the lawsuit that the homes do not so qualify or are not otherwise so certified ..

The website goes on puffing, “every homeowner can have the home of their dreams without the dread of colossal energy bills.”

The initial pleadings may not tell the whole story, and although that the case is scheduled for a jury trial in January 2020, the complaint appears to fail to state a claim upon which relief can be granted which cries out for a preliminary motion to dismiss.

Despite that this is not a Captain Marvel versus Captain America moment, in large measure because there is so little green building litigation, these disputes and differences are instructive in that a consumer is displeased with a “net zero” home and apparently confused about what it purchased. It is lacking that nothing in the pleadings discusses how the consumer is occupying or using the home. However, the very low burden of proof in state consumer protection laws across the country (i.e., a statement by a merchant that had the effect of misleading a consumer) makes net zero home building particularly vulnerable to claims, otherwise valid or not; and has concomitantly triggered renewed discussion about the high risk of making green building claims to consumers (i.e., residential home buyers).

The case is Jeremy Simons et ux, et al v. High Performance Homes, LLC, et al in the Circuit Court for Carroll County, Maryland case no C-06-CV-19-00162. Watch this blog for how the case resolves, .. Note, this firm does not represent any of the parties nor did the parties or counsel participate in this blog post.

Brownfield Laws can Save Green Building and the Planet

It is widely accepted that the greenest building is one already built. So, why then on the 20th anniversary of many state brownfield programs, is there so little correlation between green buildings and brownfields?

Green building ratings systems, standards and codes expend a great deal of verbiage on aims reducing embodied carbon, including the currently in vogue whole building life cycle assessments in complicated, expensive and risky environmental product declarations and the like, but green building programs have all but totally failed to accelerate the reuse of already built structures.

A brownfield is a property, the expansion, redevelopment, or reuse of which may be complicated by the presence, potential presence or perceived presence, of a hazardous substance. It is estimated that there are more than 450,000 brownfield sites across the U.S. impacted by an actual presence of hazardous substances and many times that number with a potential or perceived presence.  Cleaning up and reinvesting in these buildings not only increases local tax bases, facilitates job growth, utilizes existing infrastructure, takes development pressures off of undeveloped land, but also has the potential to dramatically improve and protect the planet, by reducing embedded carbon associated with the range of greenhouse gas emissions arising from the construction of a new building.

Those who feign concern about climate change will know the manufacture of building materials reportedly makes up 11% of total greenhouse gas emissions.

But, only 6% of LEED new construction projects have achieved the Brownfield Redevelopment credit (i.e., 594 of 9670 certified projects achieved the NC-2009 SSc3)!

Moreover, there is another very real and present reason that brownfield laws should be accessed.

There are generally only two ways in which environmental liability for existing contamination can be extinguished for a prospective existing building owner, who would otherwise become responsible for that contamination upon acquisition of the property. The first (and commonly utilized) approach requires that the purchaser demonstrate that it has exercised due care prior to taking title to the property by complying with the federal standards for conducting “all appropriate inquiries” (.. obtaining a Phase I Environmental Site Assessment without any recognized environmental conditions). This bona fide prospective purchaser approach is authorized by federal law.

The second approach, which has now existed in many states for 20 years, but remains little utilized, is for the purchaser to submit an application to a state brownfield program (e.g., the Maryland Voluntary Cleanup Program) seeking “inculpable person” status. Most state programs describe an inculpable person as “a person who has no prior or current ownership interest in the property at the time of application and has not caused or contributed to contamination at a property.” State laws provide government liability releases not only to an inculpable person, but also to lenders and successors in interest in the real estate; making this approach the preferred path for many properties, including those buildings in particular that are not eligible after conducting a Phase I Environmental Site Assessment (i.e., the Assessment reveals a recognized environmental condition on the property).

There is no doubt, the more buildings soon to be conveyed would be advantaged by being entered into a state brownfield program.

As green building programs look to be relevant in an era of diminishing market share, the next versions of those rating systems, standards and codes would do well to accentuate and a make a priority of giving credit for brownfield program participation. Given the large stock of existing buildings in North America (and the relevantly modest number of new commercial buildings constructed each year), such might not only save a green building program, but also preserve our way of life on this planet.

This blog post was the syllabus for a talk I recently presented to real estate professionals on the 20th anniversary of state brownfield programs.

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