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Could Mexico’s Mid-Term Elections Signal a Return to Energy and Environmental Policy Rationality?

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After a disappointing showing in Mexico’s recent mid-term elections, President Andrés Manuel López Obrador (commonly referred to as AMLO) and his party (i.e., Movimiento Regeneratión National or MORENA, commonly referred to as Morena) will face greater hurdles to unwinding “la Reforma Energética” (2013 Energy Reforms), the energy policy reforms adopted by the then-ruling party, the Partido Revolucionario Institucional (PRI).

Notwithstanding the unfavorable outcome for Morena, shortly after the election AMLO vowed to continue his efforts aimed at shifting Mexico back towards energy nationalism and prioritization of fossil fuels; goals at the heart of AMLO’s campaigning for Morena leading up to the mid-term elections. Although retaining a majority in the Chamber of Deputies and gaining some new state governors, Morena lost its supermajority and, as a result, very likely also lost the opportunity to implement constitutional changes to reverse the 2013 Energy Reforms and achieve its goal of a nationalized energy sector in Mexico.

Many observers predict AMLO and Morena will have significant difficulty achieving their objectives of renationalizing and energy self-sufficiency, given the low likelihood of obtaining the required support from the PRI or other opposition parties for the constitutional amendments necessary to reverse the 2013 Energy Reforms. Indeed, some go so far as to assert that AMLO’s attempts to roll back the 2013 Energy Reforms violate the US-Mexico-Canada Free Trade Agreement (USMCA) by favoring domestic companies and undermining Mexico’s ability to meet international environmental and climate treaty obligations. Given these criticisms, it’s also questionable whether Morena can count on support from its ruling coalition partner, the Ecological Green Party of Mexico (Partido Verde Ecologista de México, often referred to as PVE or Verde).

As described in our 2019 update following AMLO’s inauguration, the 2013 Energy Reforms significantly liberalized Mexico’s energy policy, authorizing private and foreign investment in the oil and gas and electricity sectors. The reforms also facilitated a shift to cleaner, less expensive renewable energy sources, such as wind and solar, considered critical to Mexico’s ability to meet its domestic and international climate and environmental goals and commitments.

Prior to the 2013 Energy Reforms, Mexico’s energy market was nationalized, with virtually all hydrocarbon and electricity production controlled by Petróleos Mexicanos (PEMEX) (oil and gas) and Comisión Federal de Electricidad (CFE) (electricity), with very limited opportunity for private investment. During his election campaign, AMLO and his advisors were highly critical of the PRI’s 2013 Energy Reforms. With roots in rural southern Mexico and representing the populist Morena party, AMLO expressed concerns with privatization and its asserted impacts to indigenous communities.

Following his December 2018 inauguration, AMLO and his newly appointed ministers announced aggressive measures to reassess the 2013 Energy Reforms, including a temporary cessation of the hydrocarbon bid rounds (which continues today), criticism of gas capacity contracts viewed as burdensome on CFE, substantial investment in PEMEX refinery expansions (which has occurred and continues), and reconsideration of private energy sector investment (which has occurred). Not surprisingly, these developments have raised significant concern from Mexican and international observers.

Many commercial parties and policy analysts have condemned AMLO’s policy pronouncements and actions, predicting adverse consequences on the Mexican economy and global energy markets. Based on experience in other jurisdictions and on Mexico’s historical operations, technology, condition of its infrastructure and financial results in the energy sector, this criticism generally is considered well-founded. Others have suggested that, given the steady decline of PEMEX’s oil and gas production, the shortage of domestic expertise and capital necessary to resuscitate Mexico’s energy infrastructure, together with AMLO’s competing campaign promises to fund rural social programs, the only pragmatic policy response available to AMLO’s administration is an ultimate acceptance of the 2013 Energy Reforms. Indeed, there have been signs of movement in that direction, such as AMLO’s attempts to reassure private investors, including a softening of his demand that foreign investors renegotiate gas supply contracts obligating CFE to pay for unused pipeline capacity.

In recent months, however, additional concerns have arisen as AMLO and Morena stepped up their regressive policy rhetoric. One source estimates projects valued over US$35 billion are delayed by permitting impediments resulting from the government’s recent policy reversals; the same source reports private companies have filed over 250 petitions seeking injunctions to clear the permitting logjam. Legislation enacted by Morena also favored CFE and PEMEX over foreign investors, among other things changing dispatch rules to prioritize electricity generated by CFE (largely from coal and gas) over cleaner, cheaper electricity from private companies.

Some analysts have opined that the hydrocarbons industry has fared better than the electricity sector in AMLO’s march toward nationalization of Mexico’s energy industry. These observers suggest this may result from hesitancy by AMLO to risk the consequences of taking on the powerful petroleum industry, and also may result from PEMEX’s very significant debt burden – approximately US$120 billion and growing. PEMEX needs private investment and the technical “know-how” of US and international oil and gas companies.

Among other recent developments, however, the Mexican government’s recent actions in respect of the Talos Energy/PEMEX Zama field joint ownership suggest that AMLO may not yet be ready to concede his nationalism goals for the oil and gas industry. Just this past July, Mexico’s Ministry of Energy (SENER) unexpectedly notified Talos that PEMEX will operate the Zama oilfied (700 billion barrels), which Talos, a pioneer private operator in Mexico, had been instrumental in discovering. as a related matter, Talos and PEMEX are in disagreement about their Zama field joint ownership percentages.

Other indictors include PEMEX’s recent agreement to purchase Shell’s (its joint venture partner) 50% interest in the Deer Park refinery (Houston, Texas), which will result in PEMEX becoming the refinery’s sole owner, and PEMEX’s pressing ahead with the construction of a new refinery at Dos Bocas (Tabasco, Mexico). The latter project in particular has been central to AMLO’s goal of energy self-sufficiency, notwithstanding significant construction cost overruns and the project’s location on an environmentally “protected” site. Even beyond the Dos Boas project, Morena’s legislation during the AMLO administration has been widely criticized for its adverse environmental and climate impact as well as its significant chill on foreign investment. In the electricity sector, for example, the legislation spurred a wave of litigation and was enjoined by the Mexican courts pending resolution of appeals on constitutional grounds to Mexico’s Supreme Court.

But despite Morena’s reduced influence following the June 2021 mid-term elections, AMLO recently doubled-down, announcing plans to seek constitutional amendments. On the other hand, some analysts view his recent announcement of a split of approximately 54% and 46%, respectively, between CFE’s allowed capacity to generate and distribute electricity and that of the private sector as a possible recognition by AMLO that compromise between the rights of the government and of the private sector to participate is necessary in order to achieve any significant change from the 2013 Energy Reforms.

Policy pronouncements and political rhetoric aside, as a practical matter it is important to recognize that constitutional amendments will face an uphill battle given Morena failed to maintain its super-majority in the lower house following the mid-term elections. While Morena and Mexico’s Green party (Verde) together hold a simple majority in both houses and hold a majority of the country’s state governor seats, any constitutional amendments will require approval by two-thirds of the members of both chambers, plus approval by a simple majority of the states.  This appears a daunting challenge given fierce opposition by the PRI and its allies, and questions surrounding the strength of Verde’s support for AMLO’s regressive energy agenda – which emphasizes a return to fossil fuel dependency at the cost of environmental and climate policy objectives.

As noted, some observers also assert Morena’s nationalistic policies infringe the USMCA. Indeed, a bipartisan group of Texas Congressional representatives recently urged US President Biden to pressure AMLO to back-off Morena’s reforms, which the US lawmakers view as favoring domestic companies to the detriment of foreign investors. International and domestic environmental communities also have raised concerns that Morena’s populist agenda significantly undermines the country’s ability to meet its environmental and climate commitments. Consistent with the trend toward enhanced focus on the environment, climate and sustainable development in international investment agreements, the USMCA also includes an Environmental Chapter requiring mutual satisfaction of designated multilateral environmental agreements or treaties (MEAs), although the U.N. Framework Convention on Climate Change and Paris Agreement are not specifically included in the USMCA’s list of binding MEAs.

Despite the widespread criticism, many observers expect AMLO will continue his attack on the 2013 Energy Reforms in an attempt to rally his rural progressive base and taint the opposition. Even if ultimately unsuccessful, the political uncertainty engendered by Morena’s regressive energy policy initiatives already have put a palpable, unfortunate chill on foreign investment. Nonetheless, although AMLO’s nationalistic rhetoric currently appears unwavering, his government is under increasing political pressure to moderate its policies from private investors, the international environmental community, the Mexican courts and shifting electoral sands.

This trend of growing resistance to AMLO’s agenda is evidenced by, among other things, Morena’s poor results in Mexico’s mid-term elections, followed by the disappointing turnout for AMLO’s recent referendum asking the public whether former Mexican Presidents should be brought to justice for their illegal acts. Turnout for the referendum was estimated at less than 10% by some reports, a potential sign of wavering support for at least some of AMLO’s objectives. Mexico also could soon find itself the target of sanctions from its trading partners, including the US and Canada, and potential arbitration claims alleging violation of “fair and equitable treatment” standards under the USMCA and other free trade agreements to which Mexico is a signatory.

Thus, in the face of growing criticism and eroding domestic legislative influence, some business and policy analysts are again predicting that AMLO may have little choice but to moderate his rhetoric if current judicial challenges go against Morena as anticipated. Others predict a continuing mantra critical of the 2013 Energy Reforms in an effort to firm up AMLO’s progressive political constituency during the march up to the next presidential election. In light of the growing disruption to Mexico’s economy, global energy markets and the country’s climate and environment commitments, combined with an apparent newfound recognition by AMLO that compromise may be necessary to achieve energy reform (albeit developing at a glacial pace), however, there is increasing reason to hope that the former camp will be proven correct.

Article By

P. Scott Burton
Doris Rodríguez
Mark J. Thurber
Hunton Andrews Kurth

Virginia Pipeline Ruling Could Have a Significant Impact on the Fight for Environmental Justice

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A dispute over the proposed extension of a natural gas pipeline project lies at the forefront of this fight.

The Lambert compressor station, a natural gas facility in rural Virginia, if approved, would extend the 303-mile Mountain Valley pipeline project by 75 miles into North Carolina. Opponents of the project argue that the proposed expansion would adversely impact the health of low-income and majority African-American residents of Banister District in Pittsylvania County, Virginia. These arguments are being made in front of the Virginia Air Pollution Control Board in an effort to obtain a denial of a key approval being sought by the developers of the project.

Analysts believe that a denial would be a big step in the fight for environmental justice. This begs the question: what is environmental justice? According to the U.S. Environmental Protection Agency, environmental justice is the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies.[1]

Political, legal and societal pressures are creating debates around pipeline projects throughout the country, the most notable of them being the Keystone XL oil conduit to the Atlantic Coast. Developers are revising or, in some cases, abandoning mature natural gas projects due to these pressures and strong advocacy and activism in favor of environmental justice. Recently, for example, the developers of the Byhalia Connection crude oil pipeline in Memphis walked away from the project due to upheaval over the proposed project’s disparagingly adverse impact on African-American neighborhoods.[2] Grassroots activism, voices as powerful as the President’s[3] and as well-respected as George Thurston’s, a New York University expert on the health effects caused by air pollution, have made clear to natural gas pipeline developers that environmental justice is to be taken seriously.

These efforts have not only spurred cancellations or terminations of significant energy projects. They have also led to the creation of projects, ventures and initiatives that further environmental justice, especially in the renewable energy sector. Earlier this month, for instance, Microsoft announced a partnership with Volt Energy, a national minority-owned solar development firm, pursuant to which Volt will supply Microsoft with 250 MW of utility-scale solar energy. Volt and Microsoft both pledged to invest a portion of the revenue derived from this partnership in underserved minority communities.[4]

Virginia’s Air Pollution Control Board has a big decision to make. Last year, the 4th U.S. Circuit Court of Appeals ruled that a different project, the Atlantic Coast pipeline project, could not go ahead[5]. The Court held that this same Board had failed to carefully account for the disproportionate harm of the project to surrounding residents.[6] The Board now has to decide: will the Lambert project live or will the possibly emerging trend in favor of environmental justice see the project suffer the same fate of some other pipeline projects of recent times? This case could prove to be a bellwether in the larger national environmental justice debate.

Article By

Weston Adams, III
Lawrence L. Ostema
Franco Furmanski
Nelson Mullins

Washington Joins Chorus of States with Major Environmental Justice Laws

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Washington State has joined a growing number of states that have adopted keystone environmental justice laws. On May 17, 2021, Governor Jay Inslee signed the Healthy Environment for All (HEAL) Act, E2SSB 5141, into law.

The new law recognizes that many communities experience disproportionately greater environmental health impacts as a result of multiple social, economic, and environmental stressors. Its principal objectives are to reduce and eliminate these disparities and to “remedy the effects of past disparate treatment of overburdened communities and vulnerable populations.” The law builds on recommendations in a 2020 report prepared by a state-funded environmental justice task force.[1] Over the next several years, the legislation will inject environmental justice considerations into state administrative agency actions. These considerations are likely to affect a range of agency activities and initiatives from grant programs and rulemaking to project approvals and enforcement cases.[2] 

Key Takeaways

Several state agencies, including the Department of Ecology, will be required by the law to:

  • Adopt environmental justice principles into their strategic planning and budgeting and funding decisions.
  • Develop and implement a community engagement plan with a focus on empowering overburdened communities and vulnerable populations, and on considering them in agency decision-making.
  • Consult with Indian tribes on decisions affecting tribal rights and lands and when carrying out certain agency environmental justice obligations.
  • Develop metrics and reports for tracking progress toward environmental justice goals.[3] 

For members of the regulated community, the most salient aspect of the law likely will be environmental justice assessment requirements. By July 1, 2023, covered state agencies must develop a process for conducting environmental justice assessments for “significant agency actions.” Based on these assessments, the agencies must seek “to reduce or eliminate the environmental harms and maximize the environmental benefits created by the significant agency action on overburdened communities and vulnerable populations” to the extent “feasible and consistent with the underlying statute being implemented.” Even if the law does not expand agency authority, these assessments are likely to influence regulatory requirements and, ultimately, how the agencies administer and enforce their programs.

Environmental Justice, Overburdened Communities, and Other Critical Concepts

At the heart of the law are several foundational concepts with which environmental attorneys and their clients should become familiar. The first, naturally, is “environmental justice,” defined as:

the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, rules, and policies. Environmental justice includes addressing disproportionate environmental and health impacts in all laws, rules, and policies with environmental impacts by prioritizing vulnerable populations and overburdened communities, the equitable distribution of resources and benefits, and eliminating harm.

Although derived in part from an EPA definition that addresses the procedural aspects of environmental regulation, the state’s definition incorporates outcome-based components.

The law also includes other definitions to assist with identifying relevant environmental benefits and harms, as well as the communities experiencing the disproportionate environmental and health burdens that the law seeks to remedy. For example, “overburdened communities” are “a geographic area where vulnerable populations face combined, multiple environmental harms and health impacts, and includes, but is not limited to, highly impacted communities ….”

A critical piece of the state’s environmental justice program will be an “environmental health disparities map,” which the Department of Health is charged with maintaining.[4] The map must use up-to-date information and data to identify “cumulative environmental health impacts and overburdened communities.” The map is likely to play a primary role in efforts to implement the state’s environmental justice initiatives by identifying relevant communities and impacts.[5]

Environmental Justice Assessments

The scope, methods, and applicability of agency environmental justice assessments for significant agency actions will be shaped over the next several years by each agency, an interagency workgroup, and a soon-to-be established environmental justice council.[6] A “significant agency action” is defined broadly as an “action that may cause environmental harm or may affect the equitable distribution of environmental benefits to an overburdened community or a vulnerable population.” As a starting point, the law identifies certain rulemaking, large capital and transportation projects, and agency legislation requests as significant agency actions. But, after considering guidance from the environmental justice council and interagency workgroup, agencies can define additional agency actions that would trigger environmental justice assessments.

Similarly, the content of the environmental justice assessments will be clarified through agency action over the next couple of years. As a baseline, the law requires the assessments to:

  • “Where applicable, utilize cumulative environmental health impact analysis … that considers the effects of the proposed action.”
  • Identify “overburdened communities and vulnerable populations who are expected to be affected … and the potential environmental and health impacts.”
  • Identify impacts to tribal rights and resources.
  • Consider community input and describe how environmental justice communities may become involved in the development of the action.
  • Identify “options … to reduce, mitigate, or eliminate identified probable impacts on overburdened communities and vulnerable populations, or provide a justification” for not addressing those impacts.

The law reigns in the potential scope of environmental justice assessments by specifying that they should resemble the familiar State Environmental Policy Act checklists that agencies use to evaluate environmental impacts for countless projects. The law also states that the checklist is not intended to be “a comprehensive or an exhaustive examination of all potential impacts” and does not require “novel quantitative or economic analysis” of the proposed agency action.

Pending the outcome of the assessments, agencies then must attempt to minimize or avoid “environmental harm” and “maximize the environmental benefits” for “overburdened communities and vulnerable populations.” The law specifies several “methods” that the agencies must consider “consistent with agency authority, mission, and mandates,” including, among others:

  • Eliminating “disparate impact of environmental harms.”
  • Reducing cumulative health impacts.
  • Providing for “equitable participation and meaningful engagement” of impacted communities in the development of the agency action.
  • “Prioritizing equitable distribution of resources and benefits.”
  • Providing “positive workforce and job outcomes.”
  • “Modifying substantive regulatory or policy requirements.”

The law contemplates that “other mitigation techniques” will be developed by the agencies as well based on input from a range of sources, such as the environmental justice council and “representatives of overburdened communities and vulnerable populations.”

The environmental justice assessment process also will provide grounds for challenging agency actions.  Future agency determinations about what constitutes a significant agency action will be particularly important in determining the extent to which these challenges are premised on environmental justice issues.

Conclusion

The Healthy Environment for All Act will spur additional action to address environmental justice issues in Washington. To date, state agencies have incorporated some environmental justice principles into programmatic planning and funding decisions. The new law will shape agency actions across a spectrum of areas. During the legislative process, the potentially more far-reaching mandates of earlier bill versions were watered down. However, as agencies take steps to implement the law over the next several years, members of the regulated community – particularly, those that interact with the Department of Ecology – should anticipate that environmental justice principles will increasingly affect general regulatory requirements and are likely to play a more substantial role in facility-specific enforcement, permitting, and compliance issues. Businesses located in overburdened communities and/or vulnerable populations, in particular, should be prepared to track implementation efforts to determine proactively how environmental justice factors could affect their operations.

[1] The Environmental Justice Task Force was required to provide a report to the Governor and the legislature by October 31, 2020, with recommendations for incorporating environmental justice principles into state agency actions. The task force was funded through a budget proviso for the Department of Health in ESB 1109.

[2] In addition to the HEAL Act, the Washington State legislature recently passed E2SSB 5126, a greenhouse gas “cap and invest” law, which includes significant environmental justice provisions. The environmental justice provisions in that legislation will be evaluated in a separate news alert.

[3] State agencies that are not required to comply with the environmental justice law may choose to do so.

[4] The Department of Health has already developed an initial version of the map. It incorporates measures such as diesel emissions, ozone, and proximity to hazardous waste sites and their relationship to communities experiencing higher rates of poverty and certain health issues, like cardiovascular disease.

[5] By November 2022, the Washington State Institute for Public Policy, a non-partisan public research group, must evaluate the “measures and methods” in the environmental health disparities map and issue a report on its findings.

[6] The environmental justice council will have several non-binding functions: providing a public forum for hearing and learning about environmental justice concerns; and developing guidance on agency environmental justice implementation, environmental justice assessments, and health disparities mapping; evaluating agency progress in applying guidance from the council; and developing recommendations for additional legislative action to address environmental justice issues. The advisory council will include 14 members appointed by the Governor. The interagency workgroup will offer technical assistance and information-sharing services to advance agency implementation and evaluation of the environmental justice requirements and will share information about specific agency functions and activities to support the council’s guidance and assessment responsibilities.

Article by

Stacey Sublett Halliday
Julius M. Redd
Allyn L. Stern
Augustus E. Winkes
Beveridge & Diamond PC

Environmental Justice and Why You Should Care

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“Environmental Justice” is the concept that all people – regardless of race, color, national origin, or income – should receive fair treatment and have meaningful involvement with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. Environmental justice has been discussed in concept since President Clinton issued an Executive Order on the subject in the mid-1990s, but until recently that concept has rarely been translated into any real-world impact. Now, the Biden Administration has signaled an intention to implement principles of Environmental Justice across a wide swath of federal actions. Recent developments, including a decision by the Fourth Circuit and action taken by the City of Chicago in response to a request from the Environmental Protection Agency (“EPA”) Administrator Michael Regan, suggest that Environmental Justice will in fact be a central focus for environmental engagement going forward.

In January, President Biden issued an Executive Order that created the White House Environmental Justice Interagency Council (the “Council”). The Council is notable because it expands the purview of Environmental Justice concerns beyond just EPA. The Council includes the Attorney General and the Secretaries of Agriculture, Commerce, Defense, Energy, Health and Human Services, Housing and Urban Development, Interior, Labor, and Transportation. Previously, EPA spearheaded the oversight and incorporation of Environmental Justice into its agency actions only. The expanded scope of oversight and enforcement of Environmental Justice metrics beyond just EPA suggests that we will now see Environmental Justice principles implemented in projects, initiatives, and enforcement actions across all of these federal agencies. The Executive Order directs the Council to develop “a strategy to address current and historic environmental injustice,” to develop clear performance metrics for federal agencies to ensure accountability, and to publish performance scorecards on its implementation publically.

Perhaps even more relevant, acting chief of EPA’s enforcement office, Lawrence Starfield, recently issued an internal memorandum directing EPA regulators to increase oversight of locations in areas that raise Environmental Justice concerns.

Both developments harken an increased focus on Environmental Justice with real world impacts to facility management, ongoing remediation and enforcement matters, and risk management in merger and acquisition due diligence.

Environmental Justice Metrics

In employing Environmental Justice principles, agencies are to measure a specific population’s exposure to pollution.1 This can be measured by analyzing factors such as proximity to emission sources, any unique exposure pathways, any physical infrastructure that may exacerbate the issue (such as housing conditions or water infrastructure), and/or the potential for multiple or cumulative exposures across these various factors. In addition, Environmental Justice principles include allowing a meaningful opportunity for communities to participate in decisions that will affect their environment and/or health. Whether an agency provided a meaningful opportunity to participate can be measured by the distribution, frequency, and translation of notices relating to the decision in question, and the mechanisms for providing and incorporating public comment(s) into the final decision. Moreover, federal agencies must consider Environmental Justice in any National Environmental Policy Act (“NEPA”) analysis. EPA developed the EJSCREEN tool to show where current Environmental Justice communities are located. We note that the Biden Administration recently announced that it will be developing a new Climate and Economic Justice Screening Tool to identify additional communities threatened by the cumulative impacts of the multiple stresses of climate change, economic and racial inequality, and multi-source environmental pollution.

Implications for Industry

The new emphasis on Environmental Justice signals that facility owners and operators can expect and should anticipate a number of changes in the coming months related to enhanced regulatory scrutiny of certain sites, changes in enforcement and enforcement terms, increased facility inspections from governmental agencies, and an increased demand for monitoring, notification, and community engagement. In addition, companies can expect increased scrutiny during or before notice and comment on federal projects, infrastructure projects, or major construction, including permitting decisions, which could result in potential delays. Parties engaged in ongoing or anticipated cleanups can also expect increased scrutiny on final cleanup remedies at cleanup sites, which could result in more notice and comment opportunities and, again, potential delays and increased costs.

Enhanced Scrutiny

The key takeaway from the Biden Administration’s Environmental Justice initiatives is that the federal government will pay much closer attention to locations where Environmental Justice is a concern. For example, it may be more difficult to obtain siting permits or apply for or renew environmental permits including air permits and wastewater permits. Moreover, transactions involving locations in Environmental Justice communities may include additional terms that account for the risks of purchasing, developing, or operating on a site that will be scrutinized by EPA and the DOJ, not to mention all of the other agencies involved in the Council. Companies considering transactions or developments that involve owning or operating a facility should consider adding Environmental Justice concerns to their diligence reviews.

Enforcement

The Biden Administration’s focus on Environmental Justice also includes directing the Department of Justice (“DOJ”) to enforce violations that impact disadvantaged communities more vigorously. President Biden issued a Plan to Secure Environmental Justice and Equitable Economic Opportunity in which the President directs that cases of environmental pollution be pursued to the “fullest extent permitted by law.” The Plan also stated that President Biden will pursue additional legislation to hold corporate executives personally accountable for violations of environmental law, including the possibility of incarceration. The DOJ’s Office of Environmental Justice will coordinate with state attorneys general to focus on protecting disadvantaged communities.

In addition, the Starfield memo states that a “critical goal” of EPA’s enforcement program going forward will be to obtain injunctive relief that remediates pollution and addresses past harm to communities. This is critically important because it signals that agencies will not only look to make facilities compliant with stricter standards going forward, but they will also seek to hold companies accountable for past practices as well. As a result, paying attention to Environmental Justice concerns that may be applicable during M&A diligence may well help mitigate risk.

Increased Facility Inspections

Starfield’s directive further notes that facilities in “overburdened communities” should be subjected to increased inspections. Since the Council includes a number of agencies, facility owners and operators can expect that, in addition to inspections from EPA, inspections related to other federal agencies such as Health and Human Services or the Department of Labor may now include Environmental Justice considerations. The regulated community may want to update its facility compliance and prepare responsible personnel for the likelihood of ramped-up inspections. Moreover, companies intending to acquire or dispose of assets or businesses should not wait until a transaction to review and understand the risks attendant to Environmental Justice in the near future.

Community Engagement, Monitoring, and Notification

President Biden’s Executive Order mandates new monitoring for frontline and fenceline communities, which are areas immediately adjacent to a facility that are impacted by the noise, odors, chemical emissions, traffic, and/or parking related to a facility. President Biden also directed EPA to create a community notification program, which will require that industries producing hazardous and toxic chemicals engage directly with the community where they are located to ensure residents have real-time knowledge of any toxic release. This program will also incorporate community engagement in any remediation plans related to toxic releases. Further, Starfield’s directive states that agencies should engage with environmental justice communities about the facilities that are near them, what types of pollution are in the area, and what enforcement activities are underway.

Permitting

A recent federal court decision and a request sent by EPA Administrator Michael Regan may provide insight regarding how Environmental Justice concerns will affect project permitting. In Friends of Buckingham v. State Air Pollution Control Bd., 947 F.3d 68 (4th Cir. 2020), the Court of Appeals for the Fourth Circuit remanded a minor source construction permit issued by the State of Virginia authorizing construction of a compressor station for the proposed Atlantic Coast Pipeline. The Fourth Circuit held that the state’s determination that emissions would comply with applicable ambient air quality standards was insufficient in light of the Environmental Justice community located in the project area, and that the state should have assessed the risk of the project’s emissions to the specific community adjacent to the project.

More recently, on May 7th, 2021, Chicago Mayor Lori Lightfoot directed the Chicago Department of Public Health to suspend consideration of an application to expand a metal recycling plant on the city’s Southeast Side. Mayor Lightfoot’s action occurred after EPA Administrator Regan sent a letter to the City, recommending that review of the permit be suspended until a Health Impact Analysis (“HIA”) could be prepared and shared with the public, and offering the City assistance from Region 5 in gathering information necessary to prepare that HIA.

More than a Catchphrase

In sum, companies with facilities located in Environmental Justice communities should expect heightened scrutiny under the Environmental Justice initiatives set forth by the new Administration moving forward, and any company that owns or operates a facility should pay particular attention to Environmental Justice metrics. Companies might consider incorporating Environmental Justice metrics into existing facility compliance reviews as well as future planning and diligence related to potential acquisitions, divestitures, or facility expansion plans.

Article by;

Hillary N. Vedvig
Gary S. Rovner
Foley & Lardner LLP

New Environmental, Natural Resources and Energy Law Firm

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Former Jara del Favero and Transelec lawyers, Dino Pruzzo, Javier Ruscica and Francisco Brotfeld, have decided to join forces and launch a new law firm entitled Pruzzo Ruscica Brotfeld Abogados, which will focus on environment, natural resources and energy matters.

Pruzzo has extensive experience in environmental law and natural resources, administrative and regulatory law, maritime concessions and port infrastructure. He advises to a wide variety of clients on the assessment, development and modification of investment projects in the System Service of Environmental Impact Assessment. A graduate of Universidad los Andes, he holds a master’s degree in regulatory law from Pontificia Universidad Católica de Chile.

Ruscica has focused his expertise in administrative sanctioning procedures filed with the superintendency of the environment and other agencies within the administration. He advises clients from several areas in the assessment and modification of environmental projects of maritime concessions; as well as in exploration and exploitation processes related to mining concessions and grant of easement rights, among others. A graduate of Universidad de los Andes, he holds a master’s degree in mining and water law from Universidad Finis Terrae.

Brotfeld has broad experience in corporate matters, including capital markets within areas involving bond issues in both national and international markets. He has centered his practice in the power transmission market. A graduate of Universidad de los Andes, he holds a master’s degree in regulation from Universidad Adolfo Ibañez.

The firm’s main practice areas are energy and regulation, environment, mining, water and desalination, corporate law and M&A, infrastructure, maritime concessions, public and administrative law, forestry and agro-industry.

“Constant changes and evolution in the areas of practice that we develop will bring about different needs for clients. The challenge is staying ahead of those changes to become active partners in the generation of value within the activities undertaken by our clients,” Ruscica explained.