South Coast Air Quality Mgmt. Dist. v. FERC

Sep 9: In the U.S. Court of Appeals, Ninth Circuit, Case No. 08-72265. This case involves the interstate natural gas pipeline system as regulated by the Federal Energy Regulatory Commission (FERC); the varying quality of natural gas as measured by the Wobbe Index (WI); and the resulting air pollution from burning varying qualities of natural gas.

 

    In general, FERC issued an order approving a project, which authorized the construction of new facilities to allow for the northward flow of gas by North Baja Pipeline, LLC. The order confirmed FERC's earlier environmental review and adopted twenty-one enumerated environmental conditions relating to the construction of the pipeline and its continued transport of gas. FERC also required that the North Baja pipeline only deliver gas that meets the strictest gas quality standards imposed by state regulatory agencies on downstream end-users and pipelines, which, in light of California's gas standards, meant that the North Baja gas could not exceed a WI level of 1385. FERC found that compliance with these standards "should not result in a material increase in air pollutant emissions and, therefore, should not result in material changes in air quality in the Basin."

 

    South Coast Air Quality Management District (South Coast) argued for a maximum WI of 1360 in California, however, FERC observed that "[t]he record contains no analysis or evidence showing a material change in air quality impacts as a result of the consumption of natural gas with a WI of 1385 . . . compared to that of [South Coast's] proposed WI limit of 1360." South Coast, acting alone, filed a Request for Rehearing of FERC's Order. FERC denied the request and South Coast filed the instant petition for review with the Appeals Court.

 

    The Appeals Court ruled in part, ". . . while South Coast correctly states that the gas quality of the North Baja gas 'would be up to a 1385 Wobbe Index,' this number does not take into account any blending or conditioning of gases that may occur in either the North Baja pipeline itself or the California pipeline system, nor does it reflect the WI of gas in the Basin at the time it is actually burned. Indeed, because the actual WI of the North Baja gas by the time it reaches the Basin is unknown at this time, the expected NOx emissions and resulting environmental harm that may occur are equally unknown. Again, even South Coast acknowledged this uncertainty during its challenge to the CPUC proceedings. Consequently, the emissions that may result from the consumptive burning of North Baja gas are not reasonably foreseeable within the definition provided by the EPA's regulations.

 

    "Because the CAA does not require that FERC attempt to 'leverage its legal authority to influence or control' state air quality issues, and because there remains substantial uncertainty regarding the eventual burning of North Baja gas, FERC is not obligated to perform a full conformity determination regarding such burning under the CAA. South Coast's petition for review is denied."

 

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Chevron Corp. v. 3TM International, Inc.

Sep 8: In the U.S. Court of Appeals, Fifth Circuit, Case No. 10-20389. The case is appealed from the Southern District of Texas (Houston Division) and involves a group of Ecuadorian citizens (the plaintiffs) who have sued Chevron Corporation in Ecuador appeal from the district court's order allowing Chevron to depose their consultant, 3TM.

 

    In 2003, the plaintiffs sued Chevron in Ecuador, seeking to hold Chevron liable as the successor to Texaco Petroleum Company. The plaintiffs allege that Texaco polluted the Ecuadorian Amazon Rainforest over the course of several decades while engaging in oil extraction in the region. The appeal arises out of the plaintiffs' Ecuadorian lawsuit against Chevron. Specifically, it concerns Richard Stalin Cabrera Vega (Cabrera), an individual appointed by the Ecuadorian court to serve as a neutral expert in the Ecuadorian proceedings. In 2008, Cabrera released a report recommending that Chevron be held liable for $27.3 billion in damages, but the Ecuadorian court has yet to render a judgment against Chevron.

 

    Despite Cabrera's professed impartiality, Chevron claims that Cabrera actually worked closely with the plaintiffs to produce his report, much of which Chevron alleges was secretly ghostwritten by the plaintiffs' U.S. consultants. Chevron filed a § 1782(a) application seeking discovery from 3TM, an environmental consultancy firm in Houston. The plaintiffs' consultant Stratus retained 3TM to assist the plaintiffs in mediation and settlement discussions with Chevron in 2007, and Chevron alleges that 3TM and Stratus produced a report that Cabrera integrated into his report, without disclosing his reliance on it. After the plaintiffs intervened to quash Chevron's subpoena of 3TM, the district court ordered 3TM to submit to limited discovery.

 

    The court concluded that discovery was appropriate based on the Intel factors that the Supreme Court has directed courts to consider in reviewing requests for discovery in aid of foreign proceedings. See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). The court also found that although some of the documents and information sought by Chevron could be protected under various privileges, this protection would have been waived by the provision of any documents to Cabrera.

 

    The Appeals Court affirmed the district court's order requiring 3TM to submit to a foundational deposition, and remanded the case for further proceedings consistent with the opinion and said, ". . .the district court did not err in ordering a foundational deposition, despite the lack of definite evidence of a waiver. Although we approve of the course chosen by the district court, we believe the terms that the court set for the deposition should be further refined. As already explained, the court ordered that 3TM's deposition be limited to 'whether 3TM collaborated with Cabrera' and 'the extent to which 3TM recognizes its work in the Cabrera report.' However, the district court did not clearly specify the level of similarity between the Cabrera report and 3TM work product necessary to show that a waiver of immunity from discovery occurred. Depending on 3TM's interpretation of the district court's order, it could conceivably 'recognize' material in the Cabrera report as its own that actually has another provenance. As such, for remand, we stress that similarities between the Cabrera report and 3TM work product are only relevant to the extent that they collectively show that Cabrera more likely than not incorporated 3TM work product into his report. We also note that if disputes between the parties persist after the foundational deposition, the district court may review the Cabrera report and any relevant 3TM work product in camera to help it determine whether a waiver occurred."

 

    Access the complete opinion (click here).

Scottsdale Insurance Co. v. Universal Crop Protection

Sep 8: In the U.S. Court of Appeals, Eighth Circuit, Case No. 09-1774, appealed from the District of Minnesota. Scottsdale Insurance Company (Scottsdale) issued a general commercial liability insurance policy for the benefit of Universal Crop Protection Alliance, LLC (UCPA). The policy contained a pollution exclusion. In 2007, scores of Arkansas farmers sued UCPA, alleging one of UCPA's herbicides destroyed their cotton crops. Scottsdale then brought the instant declaratory judgment action against UCPA, seeking a ruling that the pollution exclusion relieved Scottsdale of any obligation to defend or indemnify UCPA. Scottsdale moved for summary judgment, which the district court granted. UCPA appealed, arguing the district court lacked jurisdiction and construed the pollution exclusion too broadly. The Appeals Court affirmed the district court decision.

 

    The Appeals Court said, "The Policy's pollution exclusion is broad and unambiguously relieves Scottsdale of any obligation to defend or indemnify UCPA from the cotton farmers' claims -- under either the off target drift or relofting theories of migration. . . Neither theory 'arguably' falls outside the scope of the exclusion. . . The Policy plainly excludes coverage for 'property damage which would not have occurred . . . but for the . . . migration . . . of pollutants, defining pollutants in relevant part as including any solid, liquid, gaseous or thermal . . . contaminant, including . . . . chemicals. Again, the cotton farmers' relofting theory is concerned only with the migration of a chemical, i.e., 2,4-D. This is not a case in which the plaintiffs in the underlying litigation have made vague allegations that might permit a construction arguably falling outside of the governing pollution exclusion." [internal quotations omitted].

 

    Access the complete opinion (click here).