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.

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.

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.

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.

Maryland Reverting to Certifiable In Lieu of Certified Green Building

In response to an act of the Maryland legislature in 2018, the state is proposing a watershed revamp of its current mandatory green building requirements for new public school buildings.

The public is being invited to comment on the proposal.

Existing State Finance and Procurement Section 4-809(f) was amended adding new section (6), providing in relevant part,

the Maryland Green Building Council shall: .. (6) Develop guidelines for new public school buildings to achieve the equivalent of the current version of .. LEED Silver rating or a comparable rating system or building code .. without requiring an independent certification that the buildings have achieved the required standards.”

The crux of the new statute is that new public school buildings (from pre k through 12 to university dormitories and community college classrooms) need no longer be third party certified as a green building such as LEED, Green Globes or the like.

Note, there is another compliance path where building could be built to comply with the 2012 International Green Construction Code, (however, no public buildings in Maryland have ever accomplished that alternative compliance path because it is suggested as amended by the state that green code is unbuildable, but that will be remedied by what is proposed here when local government adopted versions of the IgCC may be utilized for new public school building in that local jurisdiction).

The Maryland Green Building Council, a government body not affiliated with the USGBC, sought input over the past year in implementing the law from the public and stakeholders, including input from local education agencies responsible for most school construction in the state.

The Maryland Green Building Council is proposing “guidelines” that creatively provide 3 alternative means by which an agency erecting such a new public school building may comply with State Finance and Procurement Section 4-809(f)(6):

  1. The Maryland Green Building Council finds that third party certification of high performance building is the ideal and advantageous in most, if not all, instances. New public school buildings pursuing third party certification (e.g., LEED Silver Certification by Green Business Certification Inc.) is preferable and should be given a priority and otherwise advantaged over those buildings not pursuing such a certification.
  2. Or in the alternative, the Maryland Green Building Council finds a third party opinion (i.e., by an appropriate professional such as an architect, engineer, green building consultant, attorney, etc.) that a high performance building is certifiable under an appropriate green building rating system, is desirable and in compliance with this law.
  3. Or in the alternative, that new public school building is designed and constructed to any of the following green building standards, rating systems or codes (without requiring an independent certification that the building has achieved the required standard), is suitable and in compliance with this law.

In a modernization from what once was a LEED only system, the Maryland Green Building Council is pushing green building forward with a transformation to a current version of any of:

LEED Silver

Green Globes Two Globes

National Green Building Standard – ICC 700 Silver level

International Green Construction Code

Living Building Challenge

Collaborative for High Performance Schools CHPS Criteria

FITWELL Two Stars

WELL Building Standard

However, it is not clear that all of those standards will be part of the finally approved guidelines. But by now utilizing “an appropriate and current version” of each, this proposal seeks to transform a now out of date (.. and thus not currently possible to comply with) Maryland regulatory program, making it current, including LEED version 2020 ready.

To those knowledgeable it is déjà vu all over again, where Maryland’s 2004 green building enactment only mandated that public funded building be “certifiable,” not certified while also contemplating the use of multiple green building systems.

Recognizing that no two buildings are homogenized, two different waivers processes are proposed; one for pre K thru 12 school building and the other for all other public school building.

While no agency or group will likely oppose implementation of these already widely vetted guidelines, there are no doubt individual ecco zealots who will find fault (.. with anything as not being green enough) or small minded Luddites resisting progress in high performance building, and risk killing the goose that laid the Golden eggs such that without the implementing guidelines required by the legislature, Maryland will have no enforceable public building green building law.

Despite that the law does not require action by other than the Maryland Green Building Council, (.. appreciate that with hundreds of Millions of dollars of new public school building, annually, politics weighs heavily and this legislation was vetoed by the Governor which veto was overridden by the legislature), the assistant Attorney General assigned to the Department of General Services opined that approval by the Secretaries of General Services and Budget & Management is required.

The complete draft proposal is here. Although the final version will likely be narrower in scope and breadth.

Comments are being accepted online through June 18, 2019 at https://forms.gle/T3Umpmm4gAF74FBo8. Or you can comment in person at a public meeting of the Maryland Green Building Council on June 19 at 10:00 a.m., after which the public body vote in open session on a final version of the guidelines and will seek approval, by the two Secretaries, of those mandatory guidelines that will be foundation of future high performance building in the state and a guidepost for the nation.

EPA Cancels Pesticide Registrations to Save the Bees

In a rare move, the EPA issued product cancellation orders for certain pesticides effective May 20, 2019. The pesticides contain neonicotinoids that, despite their widespread use have become controversial when laboratory studies reported a link between neonicotinoids and declining bee populations, although a link has not been replicated in field studies.

Neonicotinoids are compounds in insecticides chemically related to nicotine. The name literally means “new nicotine-like insecticides.”

Neonicotinoids pesticides first reached the market in the 1990s and today are the most widely used class of insecticide in the world. For example, more than 80% of corn in the U.S. is reported treated with neonicotinoids seed.

In 2013 several beekeepers and public interest organizations filed suit in the U.S. District Court for the Northern District of California alleging that EPA had improperly denied a petition to suspend products containing clothianidin and that EPA’s registration of certain clothianidin and thiamethoxam products violated certain registration requirements of federal law.

The parties settled the case. As part of the dismissal, the defendant intervenors Syngenta, Bayer and Valent (whose insecticides contain clothianidin and thiamethoxam) agreed to request that EPA voluntarily cancel 12 specific products that contain either clothianidin or thiamethoxam.

Section 6(f)(1) of the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136d(f)(1)) provides that a registrant of a pesticide product may at any time request that any of its pesticide registrations be canceled or amended to terminate one or more uses. Such requests were made.

Bayer did note that its two products targeted by this EPA action are not sold in the U.S. This is a global issue and the EU and Canada have moved to protect pollinator populations.

Of note, the companies may continue to sell and distribute existing stocks of products (.. which are reported to be significant) until May 20, 2020, which is 1 year after the publication of the Cancellation Order.

The settlement of the case also requires EPA in coming years to analyze the impacts of neonicotinoids pesticides on endangered species, but it is suggested in a cart and horse problem that is looking for the science to justify this ban after the fact?

Unaffected by the settlement is a similar problem that arguably exists for monarch butterflies which population has dropped precipitously.

It is not in dispute that there has been a significant collapse of honeybee hives in recent years, but there is no scientific consensus as to the cause. President Obama was criticized when a central element of that Administration’s initiative to promote honeybee and other pollinator health was installing a beehive of the South lawn of the White House. President Trump has been criticized that this is regulation through litigation despite, EPA Ends Perverse Practice of “Sue and Settle” even though this action was published in the Federal Register.

But it is not clear that banning these 12 insecticides will have any efficacy for honeybees It will no doubt lead to disruption at U.S. farms and increase the costs of food production.

This regulation through settling litigation, banning legal products without a finding of even a scintilla of scientific evidence by a court or government agency, is no better than Montgomery County, Maryland’s local government pesticide ban, and is bad environmental public policy.

GSA Reviews more than 100 Green Building Systems and Selects 5

Section 436(h) of the Energy Independence and Security Act of 2007 requires the General Services Administration’s Office of Federal High-Performance Buildings to complete a review of high performance building certification systems every 5 years. After the review, GSA recommends to the Secretary of Energy the building certification systems most likely to encourage a comprehensive approach to certification of high-performance buildings.

The last review, in 2012, shook the green building industrial complex to its foundations, when it not only recommended LEED (that had previously been the sole option), but also recommended Green Globes.

GSA is now undertaking the next 5 year review and last week released a draft report of its recommendations. This is not simply a “laurel versus yanny” debate because there a hundreds of millions of construction dollars at stake.

GSA researched the U.S. market and identified more than 100 whole building certification systems. The screening next identified 6 systems that likely met the government’s requirements for its own building (one system, Earth Advantage, declined to participate):

BOMA BEST Sustainable Buildings, version 3.0

BREEAM In-Use USA, version 2016

Green Globes, version 2013

LEED, version 4.0

Living Building Challenge, version 3.1

GSA invited those system owners to complete a survey, which asked for information on the technical components of the certification system that address federal high performance building requirements and industry best practice, as well as the processes by which the system was created. GSA evaluated the effectiveness and conformance based on specific building requirements found in:

The Green Building Certification Systems Requirement for New Federal Buildings and Major Renovations of Federal Buildings Final DOE Rule,

EISA, and

The 2016 Guiding Principles for Sustainable Federal Buildings.

GSA, actually a third party consultant engaged by an unrelated government agency whose work was vetted by yet another consultant, evaluated 39 criteria for new construction and building interior systems and 36 criteria for existing buildings systems. The GSA report concludes,

While each system reviewed for this report addresses the primary criteria that define high-performance buildings, no single system fully ensures conformance with all the federal requirements. Each system offers a unique framework and approach to achieving building certification, but all the systems generally agree on the aspects of building design, construction, operation, and maintenance that lead to high-performing commercial office buildings.

Specifically, the GSA report finds that for “new construction and major renovation” LEED BD+C and Green Globes NC score identically, both slightly ahead of the score for LBC.

For “existing building” certification systems the GSA report scores all well ranking in descending order LEED O&M, Green Globes EB, LBC EB, BREEAM, and BOMA.

And for “building interior” the report ranks LBC Interiors best followed by LEED ID+C and then Green Globes Interiors.

Of course there is no requirement that federal agencies use green building certification systems, although agencies may choose to do so to support conformance with federal high performance building requirements in statutes and executive orders, as well as the Guiding Principles for Sustainable Federal Buildings. However, the use of building certification systems has advantages for federal agencies and it can be anticipated that the list of recommended building certification systems in 2019 will include all those reviewed. The trend nationally is for government to branch out from the days of old LEED only, allowing any of a variety of green building programs, as Maryland is expected to do next month.

All of that observed, the efficacy of this report may be short lived. There is serious discussion in several Executive Branch departments to next year eliminate most if not all of the high performance building requirements from the best practices and guidance issued by GSA for application federal government wide.

Recycled Restaurant Waste Cooking Oil Can Trigger Insurance Pollution Exclusion

In a case having broad implications given the wide mandatory recycling of restaurant waste cooking oil across the country, in a decision filed on April 29, 2019, a federal appeals court held that contaminated recycled fat could trigger the “pollution exclusion” in an insurance policy.

In Restaurant Recycling, LLC v. Employer Mutual Casualty Company,

Restaurant Recycling purchased used fat, like waste cooking oil from restaurants in mandatory commercial organics recycling programs and the like, and then processed and resold the substances to pork and poultry producers for blending with other ingredients in their animal feed.

From July to September 2014, Restaurant Recycling delivered several loads of its blended fats to New Fashion Pork. These fat products were contaminated with two substances, lasalocid and lascadoil. Lasalocid, a chemical agent, “is not generally recognized as safe and is known to cause deaths in horses, turkeys, and swine.” Lascadoil, a byproduct in the manufacture of lasalocid, “is not approved for consumption in humans or in animals and is not generally recognized as safe.” Lascadoil is an industrial waste product whose only approved use is as biofuel.

New Fashion Pork sued Restaurant Recycling for delivering defective shipments of recycled fat, which New Fashion Pork uses as an ingredient in its swine feed. Restaurant Recycling, in turn, sued Employer Mutual Casualty Company, seeking a declaratory judgment that the insurer had a duty to defend and indemnify Restaurant Recycling. Employer Mutual moved for judgment on the pleadings, citing a total pollution exclusion in its general commercial insurance policy that limited coverage in the case of property damage arising from dispersal of pollutants. Fatal to its case, Restaurant Recycling conceded that lascadoil is a “pollutant” such that these actions were within the scope of their insurance policy’s pollution exclusion.

The district court granted the motion, and Restaurant Recycling appealed. The Eighth Circuit concluded that the total pollution exclusion applies and affirmed the judgment.

This case highlights one of the real world implications of the use recycled products, mandatory and otherwise, which are widely blended with other ingredients before being reintroduced into the stream of commerce.

Maryland Appellate Court Upholds Local Government Pesticide Ban

Last week the Maryland Court of Special Appeals, the state’s intermediate appellate court, overturned an earlier circuit court decision, reinstating a Montgomery County ordinance significantly restricting pesticide use throughout the County.

In October 2015, the Montgomery County Council enacted Bill No. 52-14 becoming the first major jurisdiction in the country to enact such a ban. Among its other provisions, the bill amended the Montgomery County Code to ban certain pesticide use on private and County owned property. Most pertinent to the challenge of the ordinance is that is specifies only “Listed pesticide[s]” may be applied to (1) lawns, (2) playgrounds, (3) mulched recreation areas, (4) children’s facilities, or (5) the grounds of a children’s facility when those areas are located on “County-owned property and private property.”

Pesticides are not simply bug spray or better yet not limited to household insect repellants, but is also not only substances used to destroy insects, but include insecticides, herbicides, rodenticides, bactericides, fungicides and larvicides.

“Listed” permitted pesticides are defined to mean only pesticides that are recommended by the National Organic Standards Board or designated as “minimum risk pesticides” under FIFRA.

It is widely accepted that a local government attempting to ban a legal substance is wrong. This anti-pesticide law has been analogized to anti-vaxxers as based on junk science. And lest one be confused, this ban has nothing to do with pollinator habitat or the like.

And it does purportedly allow very limited exceptions to the restrictions, for example if a pesticide is applied pursuant to an exception concerning “imminent threats to human health or preventing significant economic damage” the person applying the pesticide must inform the County of each application.

In an August 2017 written opinion, the circuit court had concluded that the County ordinance was preempted by State law, both by implication and by conflict: “[t]he County’s Ordinance flouts decades of State primacy in ensuring safe and proper pesticide use, undermines the State’s system of comprehensive and uniform product approval and regulation, and prohibits products and conduct that have been affirmatively approved and licensed by the State.” The circuit court issued a declaratory judgment that Bill No. 52-14 was unlawful and preempted by Maryland law, and ordered that the bill “as it regards the use of pesticides on private property, shall not take effect, and [Appellees] are entitled to permanent injunctive relief from the enforcement of these sections.” The County’s appeal followed.

Pesticides have been used by man for more than 4500 years beginning in Samaria, but not now in Montgomery County. A May 2, 2019 opinion that begins “From 1958-1962, Rachel Carson wrote Silent Spring .. Carson’s examination of the health impacts of DDT and other pesticides galvanized the public ..” and footnotes Upton Sinclair’s The Jungle, reinstates the County legislated ban, explaining the Court of Special Appeal’s reasoning, including ..

The opinion lists factors supporting the appellate court’s conclusion against preemption including: “repeated failures to preempt, a lack of comprehensiveness along the lines of FIFRA, no pervasive scheme of administrative regulation, no conflict through frustration of purpose, and General Assembly recognition of local regulation of pesticides. Together, these factors point in one direction: the State has not prohibited local governments from regulating pesticides in the manner addressed by the County. Accordingly, we conclude that the citizens of Montgomery County are not powerless to restrict the use of certain toxins that have long been recognized as ‘economic poisons’ and which pose risks to the public health and environment.”

The issues before the court were about how state law did not preempt local law, but critics of this decision that cites as authority Silent Spring and The Jungle, see a highly charged political issue putting people at risk when pesticides are banned that control pests and diseases including mosquitoes and ticks. Montgomery County, Maryland v. Complete Lawn Care, Inc., et al, may or may not be good law, ( .. however the court’s analysis of preemption is not consistent with this same appellate court’s decision last November in Board of County Commissioners of Washington County, et al. v. Perennial Solar, LLC, a case currently before Maryland highest court the Court of Appeals, where the intermediate appellate Court found counties are impliedly preempted in the solar arena), but allowing one county to ban pesticides puts people at risk, from Zika fever, Lyme’s disease and much more, beyond that jurisdiction’s borders and is bad environmental public policy. Moreover, the judiciary should not advance junk science, even if it is popularized by the local legislative branch.

There are alternatives to this ban. Montgomery County has long had a mandatory green building law and the local government could incentivize LEED Integrated Pest Management Plans that minimize pest problems and exposure to pesticide.

Ideally, the Maryland Court of Appeals will grant certiorari and correct this wrong, protecting the residents of Montgomery County and beyond from a local legislative body by not allowing pesticide to be banned.

Maryland Bans Polystyrene and Enacts 31 other New Environmental Laws

The Maryland General Assembly, the state’s legislative body meets in regular session for 90 days each year beginning the second Wednesday in January to act on more than 2,500 pieces of legislation.

On sine die, when the legislature adjourned at midnight on the 90th day, on April 8, 2019, a total of 864 bills and 2 resolutions passed both chambers. The Governor has until May 28, the 30th day after presentment to sign or veto bills.

This post is a review of key environmental bills passed this session. Maryland has been described as having more pages of environmental statutes and regulations on a per capita basis than any other state. The 32 new laws compiled below add to that regulatory scheme. Savvy players in the environmental industrial complex will find business opportunities to lead and profit in environmental matters, including opportunities advantaged by these newly enacted laws.

Expanded Polystyrene Ban

The Maryland General Assembly enacted the first statewide ban of expanded polystyrene foam. Beginning July 1, 2020, Senate Bill 285/House Bill 109 (both passed) prohibit a person from selling or offering for sale in the state an “expanded polystyrene food service product” and a “food service business,” which includes specified businesses, institutional cafeterias, or schools from selling or providing food or beverages in an expanded polystyrene food service product.

Although foam coffee cups and plates are often referred to as “Styrofoam®,” that terminology is incorrect. Styrofoam is actually a registered trademark of Dow Chemical Company and is a brand generally used in industrial settings for building materials and pipe insulation. Styrofoam is not used in the food service industry for coffee cups, coolers, or packaging materials, which are generally made of expanded polystyrene.

The Maryland Department of the Environment (MDE) may adopt regulations to implement the bills. MDE may grant to a food service business or school a waiver from the bills’ prohibition for up to one year if MDE determines that compliance would present an undue hardship or a practical difficulty that is not generally applicable to other food service businesses or schools in similar circumstances. A unit of county government must enforce the bill’s prohibitions and may impose a penalty of up to $250 on a person or food service business that violates the bill’s prohibitions. However, the monetary penalty may only be imposed if the unit of county government first issues a written notice of violation and the violation is not corrected within three months of the written notice.

Solid Waste Management

In an effort to promote solid waste diversion through a combination of recycling, composting, landfilling, energy recovery, and exporting for disposal or recycling, House Bill 510 (passed) prohibits an owner or operator of a refuse disposal system from accepting loads of separately collected yard waste or food waste for final disposal unless the owner or operator provides for the “organics recycling” of the yard or food waste. “Organics recycling” means any process in which organic materials are collected, separated, or processed and returned to the marketplace in the form of raw materials or products, and includes anaerobic digestion and composting.

In Maryland, state law does not address carryout bags provided by retail establishments. However, local jurisdictions with general taxing powers (e.g., Baltimore City, Baltimore County, and Montgomery County) have the authority to levy a bag fee on disposable plastic carryout bags that are clogging waterways, harming wildlife, and consuming valuable landfill space to discourage the use of disposable bags or to promote bag recycling. House Bill 1166 (passed) authorizes Howard County to impose, by law, such a fee. The fee may not exceed five cents for each disposable bag used.

Recycling

Maryland law sets mandatory recycling rates for state government and local jurisdictions, as well as a voluntary statewide recycling goal of 60% by 2020. Each county (including Baltimore City) must prepare a recycling plan that addresses how the jurisdiction will achieve its mandatory recycling rate. Senate Bill 370 (passed) requires that each county recycling plan address the collection and recycling of recyclable materials from specified large office buildings by October 1, 2020. Additionally, by October 1, 2021, the owner of a building that has at least 150,000 square feet of office space must provide recycling receptacles for the collection of recyclable materials and for the removal of specified materials deposited into the recycling receptacles so that the materials can be further recycled.

Climate Change and Renewable Energy

The Transportation and Climate Initiative of the Northeast and Mid-Atlantic States is a regional collaboration that seeks to improve transportation, develop the clean energy economy, and reduce carbon emissions from the transportation sector. There are 13 participating jurisdictions, and Maryland has been an active participant in TCI since its inception in 2010. Senate Bill 249/House Bill 277 (both passed) authorize the Governor to include the State as a full participant in any regional governmental initiative, agreement, or compact that limits or reduces GHG emissions from the transportation sector. However, the State may only withdraw from such an initiative, agreement, or compact with statutory approval from the General Assembly.

Zero-emission Vehicles

In Maryland, over 640,000 public school students receive transportation services. In total, local school systems use over 7,200 school vehicles for student transportation services. In an effort to reduce GHG in the State, House Bill 1255 (passed) establishes the Zero-Emission Vehicle School Bus Transition Grant Program within MDE, and the Zero-Emission Vehicle School Bus Transition Fund to provide funding for the program. A “zero-emission” vehicle is any vehicle that is determined by the Secretary of Transportation to be of a type that does not produce any tailpipe or evaporative emissions and has not been altered from the manufacturer’s original specifications. The purpose of the program is to provide grants to local boards of education (and entities that contract with local boards to provide transportation services) to purchase school buses that are zero-emission vehicles; install electric vehicle infrastructure for charging school buses that are zero-emission vehicles; and, fund pilot programs to experiment with a transition to school buses that are zero-emission vehicles.

Clean Energy Jobs

Maryland’s Renewable Portfolio Standard was enacted in 2004 to facilitate a transition to renewable sources of energy. Electric companies (utilities) and other electricity suppliers must submit renewable energy credits equal to a percentage specified in statute each year or else pay an alternative compliance payment equivalent to their shortfall. Senate Bill 516 (passed) increases the RPS from 25% by 2020 to 50% by 2030 and makes other related changes. The bill requires at least 1,200 megawatts of additional offshore wind generating capacity to begin operating not later than 2030 and increases the carve-out for solar energy to 5.5% in 2019, with further annual increases until it reaches 14.5% in 2030. The expired Tier 2 source of RPS, large hydropower, is reestablished for two years through 2020. And a total of up to $15 million is transferred from the Strategic Energy Investment Fund for specified purposes, including workforce development and investment in clean energy industries.

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