Massachusetts Environmental Developments

First Circuit Court of Appeals Clarifies Limited Deference to Surface Transportation Board Views on Railroad Preemption

In two companion decisions released in October 2015, the U.S. Court of Appeals, First Circuit, considered the extent to which federal preemption of state and local laws applies to railroad operations involving the construction and operation of a proposed propane transload and storage, and a constructed wood pellet transload and production facility. See Grosso v. Surface Transportation Board, 2015 WL 6108060; and Padgett v. Surface Transportation Board, 2015 WL 6108047.

Questions relating to the extent of rail preemption have received substantial attention in the northeast in recent years due to questions that arise about the business operations of primarily short-line railroads which compete with nonrailroad businesses in ancillary activities conducted at rail yards, in some cases without obtaining state and local environmental and zoning permits.

In recent cases, Grafton & Upton Railroad Company (G&U), a short line railroad, proposed to build a propane transload and storage facility in Grafton, Massachusetts and a wood pellet transload and processing facility in Upton, Massachusetts, both adjacent to its rail line, without state or local environmental or zoning approvals.

Under the Interstate Commerce Commission Termination Act (ICCTA), the federal Surface Transportation Board (STB) has exclusive jurisdiction over activities that constitute “transportation by a rail carrier,” and state laws governing the regulation of rail transportation are preempted. 49 U.S.C. §10501.

Upton Wood Pellet Facility – Grosso v. STB

Several neighbors to a rail yard operated by G&U petitioned the STB to institute a declaratory order proceeding in order to challenge the construction and operation of a wood pellet transload and processing facility that G&U constructed at a railyard in the Town of Upton. G&U had convinced the Town’s Selectmen that its activities were preempted by ICCTA and that the Town’s zoning bylaws, therefore, did not apply, including special permit requirements and height limits. The petitioners argued that the facility was engaged in manufacturing and was therefore not “transportation by rail carrier” and also that the company that G&U hired to operate the facility was not a rail carrier and the facility was therefore not entitled to preemption.

The STB commenced a proceeding but denied the petitioners the right to conduct discovery on the question of G&U’s status. The STB then issued a declaratory order finding that the activities conducted at the facility were “transportation” and not manufacturing and that the use of a non-rail carrier operator was not a sham to avoid state and local rules.

The petitioners appealed the decision to the First Circuit Court of Appeals. The first issue in contention was the extent of deference that the Court was required to give to the STB’s decision on preemption. The STB, the U.S. Department of Justice and G&U all argued that the Court must provide substantial deference under the Supreme Court’s seminal agency deference decision, Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984). This is a critical argument because, under the Chevron standard, federal courts will offer substantial deference to an agency to interpret a statutory or regulatory language when the language is not clear and the interpretation falls within the area of expertise of the agency. Court decisions in cases involving agency discretion are often determined on the question of whether Chevron deference is required.

Here, the Court emphatically refused to apply Chevron deference, indicating that such deference is not appropriate for STB determinations on preemption. Instead, in contravention of the arguments provided, the Court applied a much lesser form of deference, known as Skidmore deference, which merely allows the Court to defer to the agency’s determination if the Court finds the interpretation provided by the agency to be persuasive. This leaves the Court with far more discretion than if Chevron deference were to apply. And indeed the decision, in this case, is a direct result of the application of this lower deference standard.

Turning to the primary substantive issue in the case, the Court then evaluated whether the activities to be conducted at the facility constituted traditional transloading or went beyond and constituted manufacturing. In its evaluation, the Court several times referred to STB precedent on transloading in the case of New England Transrail, STB Finance Docket No. 34797 (STB June 29, 2007). Ultimately, after weighing the facts, and pointedly by not applying Chevron deference, the Court determined that the STB had not focused on a critical question – whether certain activities involving vacuuming, screening, bagging and palletizing wood pellets facilitated the physical movement of property and therefore constituted “transportation”. Instead, the Court found that the STB had incorrectly focused on the cost efficiency of conducting these activities at the rail facility. In the Court’s view, this “would result in a vast regulatory gap in which state and local regulation would be eliminated simply because the facilities were economically connected to rail transportation.”

Using the STB’s New England Transrail decision as guidance, the Court explained that the STB had, in that case, conducted the appropriate analysis, and had found that some activities – in that case, the shredding of construction debris at a transload facility – would not be preempted because those activities were not necessary for the loading process and therefore were not properly considered “transportation” activities. In the Upton matter, the Court found that there had been no STB finding that the various vacuuming, screening, bagging and palletizing activities facilitated the transloading process. For this reason, the Court remanded the case to the STB to make this determination.

Grafton Propane Facility – Padgett v. STB

This case arose from a cease and desist order issued by the Town of Grafton in an attempt to force G&U to comply with its local permitting requirements when it began construction of a propane transload facility at its railyard. The Town issued the order and then filed a complaint in state trial court seeking an injunction. The state court enjoined further construction and directed G&U to file a petition with the STB.

Prior to filing its STB petition, G&U restructured its project by terminating its contracts with private parties to finance, construct and operate the facility. G&U then filed its petition with the STB, and the STB opened a declaratory order proceeding and issued a decision, concluding that G&U would hire staff with the necessary expertise to operate the facility on its own, that the construction and operation of the facility - as reconfigured - did constitute transportation by rail carrier, and that the state permitting requirements and local zoning ordinances were therefore preempted. The STB also found that state fire safety and construction codes were not preempted as long as they were applied in a nondiscriminatory manner.

The Town appealed the STB decision to the First Circuit Court of Appeals, on the basis of several arguments, none of which the Court found persuasive.

First, the Court found no merit to the argument that state law was preempted by ICCTA but local law was not. While the statute only identifies state law in its preemption language, courts have consistently held that the language is interpreted to include local law, and the First Circuit quickly dispensed with that issue.

Second, the Court found no basis to question the STB’s finding that the facility would be operated by G&U rather than a private party. The Court indicated that it would typically defer to an agency’s findings of fact and that the facts stated by the STB established a basis on which the agency could conclude that G&U would operate the facility in the future.

Third, the Court refused to consider a new argument by the Town that it had not raised with the STB during the declaratory order proceeding, on the basis that the failure to raise an argument with an agency constitutes a waiver of that argument upon judicial review of the agency’s final action. Therefore, the Court did not consider the Town’s belated challenge to preemption on the basis that preemption would not apply to health and safety regulations. There is case law that supports the proposition asserted by the Town, and the facts of the case suggest that this would have been an interesting question for the Court to evaluate, but it was not considered due to the Town’s late introduction of the issue.

Conclusion

Questions of when state and local law apply to activities at rail yards and along rail lines, and which laws may apply under certain circumstances, continue to draw attention and in some cases raise controversy. This is a fascinating area, and the status of the law remains somewhat unsettled. As a result, the scope of ICCTA preemption continues to evolve through litigation, on a case by case basis.

Auto and Appliance Shredding and Recycling Companies Settle with Mass AG over Allegations of Air, Hazardous Waste, and Mercury Management Violations

Two shredding and metals recycling companies recently settled a complaint brought by the Massachusetts Attorney General (Mass AG) and the Massachusetts Department of Environmental Protection (MassDEP) for alleged violations of the laws and rules governing air emissions, hazardous and solid waste, and mercury management. The companies settling with the government, Prolerized New England Company, LLC (PNE) and Metals Recycling, LLC (Metals Recycling), both doing business as Schnitzer Northeast, operate three Massachusetts facilities located in Attleboro, Everett and Worcester.

The Consent Judgment was approved by the Superior Court on September 24, 2015, and incorporates a civil penalty assessment of up to $900,000, two Supplemental Environmental Projects, installation of best available control technology (BACT), sampling requirements for shredder residue destined for use as landfill cover material, and a control plan for particulate matter (PM).

The Mass AG and MassDEP alleged a panoply of violations at the Massachusetts facilities, including that PNE and Metals Recycling:

• improperly stored hazardous waste.
• Improperly handled and disposed of mercury-containing components by failing to obtain proof that mercury-added vehicle switches were removed from vehicles prior to shredding.
• Failed to register as a major source of air pollution prior to installing and using a shredder.
• Failed to properly manage shredder residue, samples of which from one facility allegedly showed levels of lead and PCBs over permissible limits.
• Improperly handled asbestos
• Failed to control particulate matter (PM) and VOC emissions from the shredder.

The Consent Judgment requires an upfront civil penalty payment of $450,000, with the remaining $450,000 to be incrementally suspended upon PNE’s achieving specified compliance milestones. With this settlement, Mass AG and MassDEP continue their efforts to use enforcement cases to fund specific projects that are languishing without public funds. As part of the settlement, PNE and Metals Recycling also agreed to complete a Tire Pile Removal project at a cost of $300,000, removing accumulated waste tires at three locations in Middleton, Massachusetts, and a Mercury reduction project at a cost of $50,000, providing funding for the Product Stewardship Institute to help improve the handling of mercury-containing consumer products.

The Consent Judgment’s compliance requirements are significant. PNE must submit a detailed Particulate Matter Control Plan to the MassDEP, identifying in detail all sources of PM-generating activities at the company’s Everett facility and describing the PM control measures to be implemented to control and mitigate PM emissions. The Plan must address the remediation of “dust nuisance conditions” at the facility, including a schedule specifying the actions and targeted completion dates of each action.

Further, PNE must submit to MassDEP an air permit application for the shredder, including installation of the following BACT emissions control technologies:

• A pollutant capture system enclosing the shredder.
• A regenerative thermal oxidizer, with a temperature monitoring system, to control VOC emissions (98% destruction efficiency).
• A wet scrubber to control acid gases (98% destruction efficiency).
• A PM pre-treatment device and wet scrubber for PM emissions (99% destruction efficiency).
• A temporary continuing emissions monitoring system for VOCs during source testing. 
• Agas flow monitoring system.
• A data recording system.

Finally, the Consent Judgment imposes stricter testing and sampling protocols than previously required for shredder residue destined for use as landfill cover material. The sampling plan requires bi-monthly sampling for lead, cadmium, and mercury, total PCBs, and Total Petroleum Hydrocarbons and annual sampling of a larger range of metals.

These settlements continue a long history of compliance and enforcement negotiations with the metal shredding sector in Massachusetts, which began with the original conditional declassification of shredder residue and consent orders issued by MassDEP in 1989.

MassDEP Agrees to Settlements with Financial Institutions to Resolve Alleged Violations of Massachusetts Environmental Laws at Bank Owned Properties

The Massachusetts Department of Environmental Protection (MassDEP) recently entered into consent orders with two financial institutions to resolve alleged Massachusetts environmental law violations occurring at two bank-owned properties.

Long Beach Mortgage Loan Trust entered into a consent order in September 2015 with MassDEP to resolve Massachusetts Wetland Protection Act violations that allegedly occurred at a lender-owned property in Haverhill. In April 2012, MassDEP executed a consent order with the owner (at that time) of the property for unauthorized filling and alterations made to 10,000 square feet of bordering vegetated wetlands, and for unauthorized activity in the buffer zone; that order required full restoration. Long Beach took ownership of the property by foreclosure in July 2013 prior to any restoration work being done. Long Beach agreed to restore all of the altered area, including re-vegetation, by June 30, 2016, and to pay a $105,000 penalty, of which $30,000 will be paid immediately and $75,000 will be suspended provided a wetlands scientist submits documentation demonstrating the restored area has been maintained for five consecutive growing seasons through October 31, 2020.

In October 2015, Wells Fargo Bank, N.A. entered into a consent order with MassDEP to resolve allegations of noncompliance associated with a release of heating oil in the basement of a two-family house located in Fitchburg, Massachusetts. MassDEP found that the bank failed to take timely action to address the release, and failed to submit to MassDEP the required documentation addressing the spill, in violation of Massachusetts oil and hazardous materials cleanup regulations. MassDEP was first notified of the release in December 2013 by the Fitchburg Board of Health but was unable to successfully make contact with Wells Fargo. MassDEP initiated a state-funded cleanup of the oil spill and issued a written request to Wells Fargo to provide notification and acknowledge continuation of cleanup actions at the site. However, according to MassDEP, Wells Fargo failed to perform response actions as required, to submit the required documentation, and to respond to a subsequent written notice of noncompliance.

Wells Fargo agreed to pay a $38,190 penalty, to perform all necessary cleanup actions, to establish a point of contact for environmental matters within the Commonwealth and to provide that person’s contact information to all of its real estate brokers for its properties within the Commonwealth, including providing the brokers with instructions in the event of a future release of oil or hazardous materials.

These consent orders are a good reminder to financial institutions to identify and evaluate actual and potential environmental liabilities before purchasing or foreclosing on a property and to conduct routine inspections of their properties to identify potential hazards and to implement appropriate measures to minimize those hazards.

Massachusetts Supreme Judicial Court to Hear Appeal of Challenge to MassDEP’s Implementation of Global Warming Solutions Act

In April of 2015, we reported on an interesting Massachusetts Superior Court decision, Kain v. MassDEP, upholding the actions to date of the Massachusetts Department of Environmental Protection (MassDEP) under the Global Warming Solutions Act to enact regulations establishing declining annual emission limits for greenhouse gases (GHG). As we discussed at that time, MassDEP’s actions were challenged as inadequate, and the trial court upheld the agency’s steps to date, in the process granting an unusual amount of deference to MassDEP in rendering its decision. In October of 2015, the Massachusetts Supreme Judicial Court agreed to hear a challenge to the trial court’s decision brought by the Conservation Law Foundation (CLF).

In a press release, CLF claims that MassDEP has failed to implement the GHG reduction requirements in the Global Warming Solutions Act. By filing its appeal, CLF seeks to force MassDEP to issue regulations that will accomplish a steady pace of specific declining GHG emission limits on a broad category of emissions sources in Massachusetts in order to achieve a 25% GHG emission reduction by 2020 and an 80% GHG emission reduction by 2050, as mandated by the Act. At the trial court level, the MassDEP and the state Attorney General’s office had argued that the Act’s GHG reduction provisions were merely “aspirational” and were not directives.

This appeal raises two fascinating issues. First, the Trial Court conducted a truncated review of the statute for purposes of establishing to what extent it would defer to the agency’s position and seemed to default to a conclusion that it must defer to MassDEP on its interpretation of the Act. This seemingly ignored substantial administrative law and statutory construction precedent and provided the foundation on which the Court upheld MassDEP’s actions. It will be interesting to see how the Supreme Judicial Court addresses the statutory construction question, and whether it is willing to agree that MassDEP is in fact entitled to substantial deference. All the more interesting, this review occurs at the same time when the similar federal statutory construction framework is being questioned in a series of cases, with many observers speculating that the U.S. Supreme Court is moving towards changing the established precedent and limiting the amount of discretion that is customarily afforded to federal agencies, most notably the U.S. Environmental Protection Agency.

Second, there is the substantive question of what the Global Warming Solutions Act actually requires of MassDEP, and how comprehensive its GHG reduction rules must be. The Plaintiffs argued to the Trial Court that the Act was very specific, imposing a mandate on MassDEP to establish rules that adopt declining annual aggregate GHG limits (and not merely reduction targets) on GHG sources or categories of sources. MassDEP argued that the Act only imposed “aspirational” or “target” emissions goals. The Trial Court sided mostly with MassDEP, holding that the Act provided general guidance, leaving much to the discretion of MassDEP and that the regulatory actions MassDEP had adopted to date were reasonable and not an abuse of its discretion. To the Trial Court, MassDEP had “substantially satisfied” the requirements of the Act, and that was sufficient.

Whether the Supreme Judicial Court will agree that MassDEP has substantial discretion in this area is not yet known, If the Trial Court’s position is upheld on appeal, MassDEP’s incremental approach to adopting GHG controls will continue. If the Trial Court’s position is overturned, it is likely that MassDEP will be ordered to adopt regulations that contain more aggressive annual GHG reduction limits. This will certainly be a very interesting case to watch as it continues to unfold.

Updates on the Site Cleanup Program in Massachusetts: TCE, LNAPL, and More

The Massachusetts Department of Environmental Protection (MassDEP) has been updating its policy and guidance to address improvements in scientific understanding as well as its experience in addressing site contaminants. As we previously reported, significant changes to the Massachusetts site cleanup regulations, known locally as the Massachusetts Contingency Plan (MCP), became effective June 20, 2014. These changes substantially revised numeric standards and closure requirements and modified the assessment and remediation of sites with vapor intrusion, historic fill, and light nonaqueous phase liquid (LNAPL). Today, we provide an update on recent activities.

TCE Sites

Trichloroethylene or TCE is a volatile organic compound that at some sites seeps from soil or groundwater into the air of overlying buildings. This is referred to as vapor intrusion. The 2014 changes to the MCP made the site closure standard more strict for sites with TCE in groundwater to address concerns regarding vapor intrusion. In addition, the MCP amendments substantially changed the approach to vapor intrusion sites placing greater emphasis on indoor air testing, among other things. Guidance regarding these changes is still being drafted by MassDEP.

But what of the sites with TCE in groundwater that were closed prior to the recent changes to the MCP? MassDEP discussed this question at the October 22, 2015, Waste Site Cleanup Advisory Committee meeting. MassDEP indicated that a fairly large number of sites (at least 700) have been closed out under previous versions of the MCP that allowed site closure under a less strict standard. Further, MassDEP indicated that some of these sites may pose an “imminent hazard” because the existing science on the toxicology of TCE indicates that TCE can cause harm to a fetus in utero over a fairly short time frame and at low concentrations in indoor air.

While it is not clear today how MassDEP is going to evaluate these sites and on what timeframe, it is clear that MassDEP believes that some number of these sites must be reopened to address a current public health risk, and MassDEP will be evaluating closed TCE sites to identify which must be reopened.

LNAPL Guidance

On November 1, 2015, MassDEP issued a second public review draft of its proposed LNAPL guidance entitled: “Light Nonaqueous Phase Liquid and the MCP: Guidance for Site Assessment and Closure.” The first public review draft was issued in July 2014 and its informal public comment period ended October 20, 2014. Over 100 pages of comments from seven individuals or organizations were submitted to MassDEP.

Based on our review of the revised draft, the essential elements have not changed, but the guidance has been rewritten to provide a clearer and more developed description of the underlying science, how specific lines of evidence can be utilized to develop a site-specific conceptual site model, and how to use these lines of evidence to comply with the MCP. The guidance continues to provide as an option for petroleum sites a simplified approach that is presumptively compliant with the MCP.

MassDEP has opened an informal public comment period on the revised LNAPL guidance that ends on December 18, 2015.

Other MCP Guidance

Since the MCP was revised in June 2014, MassDEP has been developing guidance materials to assist with implementation. These include the Greener Cleanups Guidance, which has been finalized, and the LNAPL guidance, discussed above. In addition, MassDEP hopes to finalize policies on notices of activity and use limitations and vapor intrusion during the fall of 2015 and plans to issue draft guidance on historic fill for informal public comment during the fall of 2015.

Massachusetts Land Use Developments

Affordable Housing Permit Revoked by Massachusetts Appeals Court

In a recent ruling sure to embolden municipalities seeking to block affordable housing projects, the Massachusetts Appeals Court revoked the approval of a Comprehensive Permit issued under the Anti-Snob Zoning Act, G.L. c.40B, §§ 20–23(Act) on the grounds that the local board of appeals erred in waiving certain waste disposal limitations in a local bylaw where there was evidence that the proposed project’s waste disposal system would have caused elevated nitrogen levels in the private wells on the abutting properties. Reynolds v. Zoning Board of Appeals of Stow, 88 Mass. App. Ct. 339 (2015).

Affordable Housing in Stow

The Town of Stow and the region, in general, have a need for affordable elderly housing. Stow’s subsidized housing stock is roughly six percent of its total housing stock. Stow Elderly Housing Corporation (SEHC) is a nonprofit owner, operator, and developer of affordable housing. In 1983, SEHC obtained a Comprehensive Permit from the Stow Zoning Board of Appeals (Board) to construct Plantation Apartments I (Plantation I), a 55-unit low-income senior apartment complex. More recently, SEHC sought and received a Comprehensive Permit for “Plantation II,” 37 units of low and moderate income elderly housing on a two-acre parcel (locus) in a residential zoning district. Eighty percent of the locus is also situated in the local water resource overlay protection district (WRPD) intended “to protect, preserve and maintain the existing and potential groundwater supply and groundwater recharge areas within the town…”

The plaintiff, whose home abuts the locus, appealed the Board’s Plantation II decision to the Superior Court (Trial Court). His property and those of his neighbors are served by private drinking water wells and private septic systems located on their properties. 

Comprehensive Permit for the Project

The Board, in granting the Comprehensive Permit, approved of the project being serviced by a private, on-site sewage disposal system located in the WRPD. This was made possible by the grant of waivers by the Board from local regulations governing sewage disposal in the WRPD. Stow’s regulations, which are more stringent than those of the Massachusetts Department of Environmental Protection’s (DEP), prohibit uses generating “on-site sewage disposal exceeding 110 gallons per day per 10,000 square feet of lot area.”

On appeal from the Board’s decision, the Trial Court found that the proposed project will generate, on a daily basis, six times the level of sewage and other wastewater allowed in the WRPD under the local regulation. On the strength of the plaintiff’s evidence, the Trial Court also found it “more likely than not” that the project will cause excessive nitrogen levels at the neighboring drinking water wells. Nonetheless, the Trial Court concluded, the Comprehensive Permit was properly granted since the sewage disposal system will meet all applicable State regulations, which do not, in these circumstances, require proof that adjacent wells will not have elevated nitrogen levels as a result.

Noncompliance with State Regulation Dooms Waiver of Local Regulation

Turning to the Board's decision to waive the local regulation, the Appeals Court assumed for purposes of its decision that the DEP’s more restrictive limitations on discharges for septic systems in nitrogen sensitive areas did not apply to the locus and went on to address the question whether it was reasonable for the Board to waive the local bylaw provision. As is often the case under c. 40B, the Board relied on the proposition that because the waste disposal system will comply with DEP regulations, it was lawful to issue the Comprehensive Permit. The Trial Court agreed. After acknowledging that “in many instances, a condition that requires the developer to meet State waste removal system standards is sufficient to protect local concerns,” the Reynolds Court cautioned that this “is not necessarily the end of the inquiry.” Citing earlier c. 40B case law, the Court “made clear that it was open to the board to justify denying an application for a comprehensive permit by identifying a health or other local concern that supports the denial, is not adequately addressed by compliance with State standards, and outweighs the regional housing need.”

In Reynolds, the plaintiff not only demonstrated that the project violated the local bylaw, but also presented evidence and persuaded the Trial Court that “it is more likely than not” that the project will cause excessive nitrogen levels at the plaintiff's neighbor's well. For his part, SEHC's expert testified that he did not investigate whether the proposed system would result in elevated nitrogen in the groundwater reaching abutting wells. Instead, he relied on the presumption that if a septic system is designed in conformance with State standards, the facility is presumed to protect public health.

The Court found this argument fatally flawed where the plaintiff had presented evidence rebutting any such presumption. In other words, “The judge's finding that the system would contaminate the groundwater such that unacceptable levels of nitrogen would reach an abutter's well demonstrates that compliance with the State standards… are insufficient to protect the groundwater from being contaminated by the proposed project.” Thus, the plaintiff has identified a local health issue – maintenance of clean groundwater servicing local private wells – not adequately protected by compliance with a State standard.

Weighing the local concern of elevated nitrogen levels in the groundwater reaching an abutter's well, against the local need for affordable housing, the Court noted it was unaware of any instance of a project approval that would cause nitrogen levels or other contaminants in a neighboring private well to exceed DEP recommendations. The Court concluded that, “When faced with evidence that one or more adjacent private wells will have elevated nitrogen levels and there is no public water source in the area and no proposal to provide the abutter with clean water, it is unreasonable to conclude that the local need for affordable housing outweighs the health concerns of existing abutters. In these circumstances, the board's waiver of the bylaw provision limiting the flow into waste disposal systems within the WRPD was unreasonable.” 

The Comprehensive Permit was revoked and, as of this writing, an application for further appellate review is pending before the Massachusetts Supreme Judicial Court.

Beveridge & Diamond's Municipal and State Governments industry group helps municipalities navigate the various federal and state regulations that govern their operations. We help guide municipalities through complex project development and permitting processes, interactions with the federal government, and environmental and natural resource litigation. For more information, please contact the authors.