June 15, 2016
FOCUS...on the South Carolina Chapter
 

By in-house counsel, for in-house counsel.®


Chapter News
President Chris Greene
President's Letter
Chris Greene, President

The mid-point of 2016 is fast approaching and, like many of you, I like to use the middle of a year to take some personal reflection as to how the year is going for me, both personally and professionally.   As I am sure you will all agree (and contrary to what some think), our dockets as in-house counsel are just as hectic (and very often even more so) than the dockets of our pals who live their lives in .2 increments.   Along this same theme of reflection, I wanted to just say out loud how happy and excited I am in what our Chapter has been able to accomplish so far this year.   The wide variety of program offerings so far this year have been fantastic and I hope that all of you are taking full advantage of these offerings as a benefit of your membership in ACC.   Reflecting a bit more, this busy year started in January with a very productive Board retreat in Asheville. 

This was followed in February by a well-attended CLE opportunity, focusing on cyber liability and held simultaneously in Columbia and Greenville.    March brought to us a super nice social event, a chance to watch USC and Furman play baseball.  Now what could say springtime more than that?  Next, April brought with it the Chapter’s first ever professional development training, which received very positive feedback.   Also happening in April was the always popular CLE and BMW Driving Experience event.   That brings us to June, and the recent inaugural joint event between our Chapter and the Charlotte ACC Chapter.  I hope those of you who were able to attend this event, held at the National Whitewater Center, had plenty of fun, stayed dry, learned a little bit and were able to meet new friends.  

A sincere thanks to the following sponsoring firms who made the first part of the year (with these wonderful social and educational events) a big success:  Womble Carlyle Sandridge & Rice LLP, Moore and Van Allen PLLC, Nelson Mullins Riley & Scarborough LLP, Turner Padget, Jackson Lewis, PC,  and Ogletree, Deakins, Nash Smoak & Stewart, PC.

As we look to what the rest of this year holds for us as a Chapter, I hope to see all of you at our Mid-Year Meeting in Charleston this Friday.  The event promises a variety of interesting continuing legal education opportunities and you can earn up to 4 hours of CLE credit too.   More importantly, the Mid-Year Meeting gives you the chance to network with other members, as well as several very important, long time sponsors of our Chapter.  A special thanks to our Mid-Year Meeting sponsoring firms: Haynsworth Sinkler Boyd, PA, K&L Gates LLP, Bowman and Brooke LLP, McNair Law Firm, PA, and Parker Poe.  I hope to see you all down there for a fun, productive time in Charleston.    

As for the rest of the year and what is to come, please stay tuned for more exciting social and educational offerings at the Chapter level.  Also, please consider attending the ACC Annual Meeting, this year held in San Francisco, CA on October 16-19, 2016.  Without question, I believe the annual meeting is the best value in corporate legal education.  You can earn your full year CLE requirements while there and meet with literally thousands of your peers and legal service providers during three days of intensive programming on current legal issues. 

In closing, a reminder that we, as the Chapter Leadership, welcome the support and participation of anyone committed to helping us make this Chapter better, so please let us know of your interest in being more involved.   Thanks to everyone for your continued support.   Now get back to work…..!

Return to Top
Last Chance to Register for the ACC SC Midyear Meeting

Please join us for the 2016 ACC SC Midyear Meeting at the Francis Marion Hotel in Charleston June 17, 2016. 
 

Agenda:
11:30 am-12:15 pm          
Registration & Lunch

12:20 pm                          
Welcome & Announcements

12:30-1:15 pm
Additional Insured Coverage: Achieving Your Intended Risk Allocation
Jennifer H. Thiem, K&L Gates

1:15-2:00 pm
Federal Defend Trade Secrets Act of 2016
Steve Matthews, Haynsworth Sinkler Boyd

2:00-2:45 pm 
Using Arbitration to Your Advantage
Henry W. "Hal" Frampton IV, McNair Law Firm

2:45-3:00 pm
Break

3:00-3:45 pm
Takata in the News: What Does This Mean for You & Your Company?
Joel Smith and Courtney Shytle, Bowman & Brooke, LLP

3:45-4:30 pm
Energy Issues & Trends
Ashley Cooper,  Parker Poe & Chad Burgess, SCANA

4:30-5:30 pm                  
Cocktail Reception

Click here to register (password is accsc).

Return to Top
Wanted: Volunteer and Leadership Positions

The ACC SC is looking for candidates to fill volunteer and leadership positions. Click here to complete our online application. For more information, please contact Annie Wilson at awilson@capconsc.com, 803-252-1087 or John Marshall Mosser at  JohnMarshall.Mosser@elliottdavis.com.

Return to Top
2016 ACC Get A Member Campaign

During the campaign period, May 15 - September 30, 2016, when you recruit a new member to join ACC, you will be entered into a monthly drawing to win a $200 gift card.

As an added bonus, members you recruit during the campaign will also be entered into a monthly drawing to win a $100 gift card! You will be eligible to enter the drawing every month that you recruit a new member.

Please see below for details!

RECRUITING A NEW MEMBER IS EASY. JUST FOLLOW THESE THREE STEPS:

You are the best spokesperson for the value of ACC, and the most effective way to engage new members is to tell your colleagues how ACC makes a difference in your practice.

  1. Identify an in-house colleague (in your office or at another company) who is not a member of ACC.
  2. Show your enthusiasm (it's contagious) with a first-hand account of how your ACC membership has been a great investment in your professional career.
  3. Ask your colleague to sign up online or download the application, and list your name on the sponsor line. This is important so we can give you credit for your efforts!

REWARDS

The campaign period is May 15, 2016 to September 30, 2016. For every new member you recruit, you will be entered into a drawing to win a $200 gift card. Each new member recruited during the campaign will also be entered into a drawing to win a $100 gift card.


RULES

Eligibility

Only ACC members in good standing are eligible to participate in this campaign.

Campaign Period

All applications must be received between May 15, 2016, 6:00 a.m. ET and September 30, 2016, 10:00 p.m. ET.

How to Enter

To receive credit for each new member or reinstated member, individuals must submit an application online for via email or postal mail, with the sponsor's name in the appropriate section of the membership application. No exceptions.

A new or reinstated member will be credited to the sponsor when the candidate's application is approved according to the ACC membership eligibility requirements.

Return to Top
Reception Honoring Chief Judge Lockemy


Return to Top
Katie Ramseur
Congratulations to our 2016 ACC SC Law Student Award Recipient, Katie Ramseur

"I am deeply honored to receive this award from the ACC SC. I am excited to embark on a career in business law, and this award has been a wonderful start to that.”

Hometown: Charlotte, NC

Educational background: B.S., Davidson College 2013 (psychology major)

Future Plans: Katie will begin her career as a law clerk to the Honorable Gregory P. McGuire on the North Carolina Business Court in Raleigh, NC. In October 2017, she will begin as a first year associate at Womble Carlyle Sandridge & Rice in Charlotte, NC.

Return to Top
Ogletree Deakins sponsored ACC SC and ACC Charlotte Joint Event Recap

Members of the ACC South Carolina Chapter and ACC Charlotte Chapter came together for a joint event sponsored by Ogletree Deakins. South Carolina Chapter members traveled together by bus to the US National Whitewater Center in Charlotte, NC and enjoyed a day of fun and fellowship with our neighboring chapter. 

Thank you Ogletree Deakins for a great event!

 

   

Return to Top
Featured Articles
Lucas Asper
Wages and Trade Secrets and Gender, Oh My: The Circus of Employment Law Changes in May 2016
Lucas Asper, Olgetree Deakins

In the middle of an election year in which regulatory action was expected to be king, the Department of Labor (DOL) and Department of Health and Human Services (DHHS) have not disappointed, finalizing broad-sweeping regulations on wages and nondiscrimination in benefits that will have a significant impact for years to come.  Not to be outdone, Congress passed a key piece of legislation that strengthens employer rights in protecting trade secrets.  This article briefly summarizes each of these developments as well as employer strategies in responding thereto.

A.               Federal Defend Trade Secrets Act of 2016 (DTSA)

On April 28, 2016, Congress passed the DTSA after unsuccessfully advancing similar legislation in 2014 and 2015.  President Obama signed the DTSA into law on May 11, 2016, to be effective immediately.  The DTSA is modeled largely on the Uniform Trade Secret Act, a version of which every state (including South Carolina) other than New York and Massachusetts has enacted.  However, there are several key distinctions between the DTSA and the UTSA:

  • Employers are now able to file a private right of action for trade secret misappropriation in Federal Court.  This alone is a tremendous development for employers, particularly as the Federal Courts develop a body of case law interpreting and applying the DTSA.
  • The definition of “trade secret” under the DTSA is arguably narrower than under the UTSA.  The UTSA covers all information that “derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.”  Conversely, the DTSA is limited to “financial, business, scientific, technical, economic, or engineering information” that derives independent economic value for the same reasons.
  • Unlike the UTSA, the DTSA allows for ex parte orders to “seize property necessary to prevent the propagation or dissemination of the trade secrets [at issue].”  However, the DTSA instructs Courts to order ex parte seizure only “in extraordinary circumstances” and upon a showing of “specific facts” justifying the seizure and “describ[ing] with reasonable particularity the matter to be seized.”  An employer seeking such an order must also be able to attest, under oath, why an injunction would be insufficient under the circumstances.  To discourage the misuse of this remedy, the DTSA includes various procedural safeguards, including a mechanism for a prompt hearing (typically within seven days) on any seizure, and the possibility of a monetary award in favor of a “person who suffers damage by reason of a wrongful or excessive seizure.”
  • The DTSA contains an immunity provision mandating that individuals “shall not be held criminally or civilly liable under any Federal or State trade secret law” for disclosing a trade secret (A) in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (B) in a filing that is made under seal in a lawsuit or other proceeding. 
  • The DTSA also requires that employers notify employees about the above immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”  If an employer fails to comply with this notice requirement, the employer cannot recover exemplary damages or attorneys’ fees under the DTSA from an employee who did not receive such notice.  Fortunately, the DTSA makes clear that the notice requirement applies only to “contracts and agreements that are entered into or updated after the date of enactment of” the DTSA.
  • In addition to the immunity provision, the DTSA further provides that any individual who files a lawsuit “for retaliation by an employer for reporting a suspected violation of law” may disclose trade secrets to his or her attorneys and/or use trade secret information in the court proceedings as long as the individual “(A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”

The key action item that employers should implement immediately in light of the DTSA is the review and revision of all contracts and agreements “that govern[] the use of a trade secret or other confidential information,” to incorporate the DTSA immunity notice in all such agreements moving forward.  While the DTSA does not specifically address policies or procedures that similarly govern the use of trade secrets and confidential information, a conservative approach would involve incorporating the DTSA immunity notice into all such documents.  Taking these actions will not guarantee the recovery of exemplary damages or attorneys’ fees—which requires a showing of willful and malicious misappropriation—but it will guarantee that such a recovery remains possible under the DTSA.

B.                DOL’s Final FLSA Part 541 Regulations Updating the Salary Basis Test

The salary basis test for most of the “white collar” exemptions under the FLSA has remained consistent since 2004—an employee must earn at least $455 per week on a salary basis to preserve the exempt status.  On June 30, 2015, the DOL issued proposed regulations modifying this element of the exemption analysis, and released the final regulations on May 18, 2016.  While the final regulations are substantially similar to the proposed regulations, the final regulations included several noteworthy modifications:

  • Effective December 1, 2016, the salary threshold to qualify for the executive, administrative, and professional exemptions will more than double, from $23,660 per year to $47,476 per year.  While there was some speculation that the final regulations would take effect sixty days after issuance, the DOL extended that period to six months, giving employers additional time to plan and prepare for implementation of the regulations.
  • The salary threshold will be adjusted automatically every three years—beginning on January 1, 2020—and will be tied to the 40th percentile of all salaried employees in the lowest-wage Census region (currently the South).
  • Employers may use nondiscretionary bonus and incentive payments (including commissions) to satisfy up to 10% of the salary threshold, provided the employer makes such payments on a quarterly or more frequent basis.  The regulations also allow employers to make a “catch-up” payment at the end of a quarter—to be paid by the end of the following payroll period—to make up any shortfall in the nondiscretionary 10% portion of the salary amount.
  • The new minimum compensation for an employee to qualify for the highly-compensated employee exemption is $134,004 per year, of which at least $913 per week must be in the form of a salary.  Like the salary threshold for the other exemptions, the DOL will automatically adjust this figure every three years (beginning on January 1, 2020) to make the amount equal to the 90th percentile of all full-time salaried workers in the nation.
  • The final regulations did not include any changes to the duties tests for any of the exemptions. 

Between now and December 1, 2016, employers must develop a strategy for and implement the organizational changes necessary to ensure compliance with the DOL’s final regulations (assuming there are no successful challenges to the implementation of the regulations).  Action items employers should consider during this period include the following:

  • Increase salaries to the new threshold.  This is obviously necessary for all employees for whom an employer wants to preserve the exemption.  Employers should consider the timing of such increases and ensure clear communication to affected employees (e.g., if an employee will receive a compensation increase in November 2016 to meet the new threshold, but will not receive an increase in early-2017 in conjunction with a regularly-scheduled performance review).  Employers should further analyze whether to require employees receiving such an increase to execute agreements including protective covenants, as the increase can likely serve as sufficient consideration to support such agreements.
  • Analyze positions for satisfaction of the applicable duties test.  While the final regulations did not include any changes to the duties tests, the analysis of positions currently below the new salary threshold should include a close consideration of whether those positions satisfy the applicable duties test.  If the position does not satisfy the duties test (or if satisfaction of the test is unclear), that may weigh heavily on whether to increase the employee’s salary or simply convert the employee to non-exempt.
  • Update and revise job descriptions and job titles.  Employers will likely face situations in which some employees in a certain job are already above the new salary threshold, while other employees in the same job are below the new threshold.  One option for employers is to revise the applicable job descriptions and job titles to reflect experience in the position (e.g., Widget Maker and Senior Widget Maker), which may lead employees to more easily understand why some of them remain exempt and others are converted to non-exempt.
  • Ensure newly non-exempt employees understand the importance of and comply with timekeeping requirements.  Previously exempt employees have likely been operating for some period of time without having to “punch a clock.”  As those employees are converted to non-exempt employees, compliance with timekeeping requirements will become critical to avoid violations of FLSA recordkeeping requirements.  Accordingly, employers should ensure that all employees transitioning from exempt to non-exempt receive training on the organization’s timekeeping practices and procedures, and the absolute importance of complying with those practices and procedures. 
  • Communicate, communicate, communicate.  There will inevitably be a large number of questions and likely some degree of discord as employers (1) raise certain employees’ salaries while not raising others, (2) convert certain employees to non-exempt while maintaining the exempt status of similarly-situated employees, and (3) take other actions in preparation for the final regulations becoming effective.  To avoid such confusion and/or discord leading to legal headaches, employers should ensure they are clearly communicating with employees regarding the changes being made and the reasons for the changes.  While employees may not always be satisfied with the explanation, an explanation from the employer is almost universally better than an explanation the employee generates on his own. 

C.                Final Regulations on Nondiscrimination in Health Programs and Activities  

In a slightly less publicized manner, the DHHS published final regulations on Nondiscrimination in Health Programs and Activities on May 18, 2016.  The DHHS regulations apply to all “covered entities,” which include (1) all health programs and activities that receive federal financial assistance through DHHS, (2) all health programs and activities administered by DHHS, and (3) all health programs and activities administered by entities established under Title I of the ACA.

Consistent with the trend occurring throughout federal agencies over the past several years, one focus of the DHHS’s final regulations involves broadening the definition of “sex” to include gender identity, gender expression, and transgender status.  In this regard, the final regulations provide:

A covered entity shall provide individuals equal access to its health programs or activities without discrimination on the basis of sex; and a covered entity shall treat individuals consistent with their gender identity, except that a covered entity may not deny or limit health services that are ordinarily or exclusively available to individuals of one sex, to a transgender individual based on the fact that the individual’s sex assigned at birth, gender identity, or gender otherwise recorded is different from the one to which such health services are ordinarily or exclusively available.

Similarly, the final regulations expressly prohibit covered entities from (1) denying or limiting coverage or coverage of a claim, or imposing additional cost sharing or other limitations or restrictions on coverage, for any health services that are ordinarily or exclusively available to individuals of one sex, to a transgender individual based on the fact that an individual’s sex assigned at birth, gender identity, or gender otherwise recorded is different from the one to which such health services are ordinarily or exclusively available; (2) having or maintaining a categorical coverage exclusion or limitation for all health services related to gender transition; and (3) otherwise denying or limiting coverage or coverage of a claim, or imposing additional cost sharing or other limitations or restrictions on coverage, for specific health services related to gender transition if such action results in discrimination against a transgender individual.

If an employer, its insurance provider, or its third-party benefits administrator qualifies as a covered entity, the employer needs to conduct a detailed review of its health plan to ensure compliance with the final regulations, which take effect on July 18, 2016.  Significantly, the Equal Employment Opportunity Commission—even before publication of these regulations—has taken the position that employers discriminate on the basis of sex by refusing to provide coverage for gender transition-related health services in certain circumstances.  Accordingly, employers should be proactive in analyzing and addressing this issue.


Lucas Asper is an attorney in the Ogletree Deakins’ Greenville, South Carolina office. Lucas represents management in all aspects of labor and employment law, including federal and state litigation, preventive employment and labor law advice, drafting employment policies, procedures, and contracts, and training on positive employee relations and other aspects of labor and employment law. Ogletree Deakins is one of the largest labor and employment firms, representing management in all types of employment-related legal matters.

Return to Top
J. Ashley Cooper
Energy Policy: A Balancing Act
J. Ashley Cooper, Parker Poe

Developing a portfolio of energy resources that is reliable, affordable, and environmentally responsible is complex and laden with competing interests.  Energy policy impacts our national and state economies, as well as our own personal finances.  In South Carolina and around the country, the statutory and regulatory framework for supporting renewable energy development has played a major role in developing renewable energy while balancing the competing interests.

The Public Utility Regulatory Policies Act of 1978 (“PURPA”) was implemented 38 years ago in response to the oil crises to encourage, among other things:

  1. The conservation of electric energy,
  2. Increased efficiency in the use of facilities and resources by electric utilities,
  3. Equitable retail rates for electric consumers,
  4. Expeditious development of hydroelectric potential at existing small dams, and
  5. The conservation of natural gas while ensuring that rates to natural gas consumers are equitable.

One of the ways regulators set out to accomplish these goals was through the establishment of a new class of generating facilities which would receive special rate and regulatory treatment.  Generating facilities in this group are known as qualifying facilities (“QFs”) and fall into two categories: qualifying small power production facilities and qualifying cogeneration facilities.

A cogeneration facility is a generating facility that sequentially produces electricity and useful thermal energy from the resulting heat.  For example, in addition to producing electricity, cogeneration facilities can produce steam and hot water for use in industrial processes at paper mills, refineries, and manufacturing facilities and for heating and cooling industrial, university and other buildings. In order to be considered a qualifying cogeneration facility, a facility must meet all of the requirements of 18 C.F.R. §§ 292.203(b) and 292.205 for operation, efficiency and use of energy output, and be certified as a QF pursuant to 18 C.F.R. § 292.207. There is no size limitation for qualifying cogeneration facilities.

A cogeneration, or combined heat and power, facility provides efficiency, cost reduction and reliability benefits to the host.  Efficiency is increased, because the heat resulting from burning natural gas or another fuel to create electricity is used to generate thermal energy rather than simply being discharged.  This use of waste heat also reduces the host’s total cost of generating electricity and thermal energy.  Finally, the on-site generating facility can increase reliability by giving the host a source of electricity if the supply from the grid is interrupted by a storm or other cause.  In the typical QF structure in a regulated jurisdiction, the host will own and operate the cogeneration facility.  One relatively new structure that does not require the facility to qualify as a QF involves the electric utility owning and operating the electric generating equipment, delivering the electricity to its grid, and using the waste heat to produce steam for the university or industrial customer.

A small power production facility is a generating facility of 80 megawatts (“MW”) or less whose primary energy source is renewable (hydro, wind or solar), biomass, waste, or geothermal resources. There are some limited exceptions to the 80 MW size limit that apply to certain facilities certified prior to 1995 and designated under section 3(17)(E) of the Federal Power Act (“FPA”) (16 U.S.C. § 796(17)(E)), which have no size limitation. In order to be considered a qualifying small power production facility, a facility must meet all of the requirements of 18 C.F.R. §§ 292.203(a) , 292.203(c) and 292.204 for size and fuel use, and be certified as a QF pursuant to 18 C.F.R. § 292.207.

Section 210 of PURPA contains the significant “mandatory purchase obligation,” which requires all electric utilities to purchase any energy and capacity made available by a QF, subject to certain exceptions, described below.  Whereas electric utilities have the discretion to enter into power purchase agreements with traditional, non-QF independent power producers to purchase their output, PURPA requires electric utilities to purchase power from QFs.  The rate the utility pays for the power must not exceed the incremental cost to the electric utility of alternative electric energy (known as the “avoided cost” rate).  The avoided cost rate is set by the state public utility commissions (in South Carolina, the Public Service Commission of South Carolina), but federal regulation requires that the avoided cost rate must be just and reasonable to the ratepayers of the utility, in the public interest, and must not discriminate against cogenerators or small power producers. 

PURPA’s mandatory purchase obligation has been a major factor promoting  development across the country of independently-owned renewable generating facilities.  For example, an independent developer may utilize the framework of PURPA to develop a renewable energy facility and require a utility to purchase the power at the utility’s avoided cost rate.  In such a scenario, the renewable energy facility has a steady payment stream under a power purchase agreement with the utility and may be able to leverage certain federal and, where applicable, state production tax credits to make such projects more economical.  Large industrial customers with significant energy requirements have historically used on-site generation to reduce their power needs and carbon footprint by, for example, putting rooftop solar on buildings, developing renewable facilities on their property, or utilizing efficiencies available through cogeneration, all of which directly power the customer’s operations.  However, such industrial customers have also used PURPA to sell directly to the utility the entire output of a renewable energy facility developed (or caused to be developed) by the industrial customer.  In such a situation, the customer remains a customer of the utility and receives its energy directly from the utility.  However, the industrial company develops or causes to be developed a renewable energy facility that produces energy approximating its consumption.

In the ten years leading up to the Energy Policy Act of 2005, Congress debated whether to repeal PURPA altogether, or to revise it, in part because of increasing competition in wholesale electric markets as well as some retail electric markets.  One of the exceptions to Section 210 of PURPA, created by the Energy Policy Act of 2005, removes the mandatory purchase requirement upon a finding by the Federal Energy Regulatory Commission (“FERC”) that there is a sufficiently competitive market for the QF to sell its power.  FERC has promulgated a number of orders that interpret the new PURPA section 210(m)(1), the most comprehensive of which was Order No. 688, New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities, Order No. 688, FERC Stats. & Regs. ¶ 31,233 (2006), order on reh’g, Order No. 688-A, FERC Stats. & Regs. ¶ 31,250 (2007), aff’d sub nom. Am. Forest & Paper Ass’n v. FERC, 550 F.3d 1179 (D.C. Cir. 2008), which established, in part, that except for certain rebuttable presumptions, QFs that are interconnected with certain markets (Midwest Independent Transmission System Operator, Inc. (Midwest ISO), PJM Interconnection, L.L.C. (PJM), ISO New England, Inc. (ISO-NE), and New York Independent System Operator (NYISO)) have nondiscriminatory access to those markets such that the mandatory purchase obligation is removed pursuant to PURPA section 210(m)(1). 

Debate is ongoing at FERC and on Capitol Hill regarding the applicability and need for PURPA going forward.  Some interests believe PURPA is working and want it to be maintained “as is” while others believe PURPA needs to be reviewed to address the influx of renewable energy.  Areas such as the Pacific Northwest and the Southwest, which have experienced immense renewable energy development in the past ten to 15 years, are calling for lawmakers to update PURPA to further restrict or repeal the mandatory purchase obligation.  These geographic areas, like the southeast, are not part of the markets that receive a rebuttable presumption under the current mandatory purchase obligation exception.  This debate is occurring at both the state level (legislature and regulatory commissions) and at the federal level.

From a South Carolina perspective, Act 236, the Distributed Energy Resources Program Act, has spurred the development of renewable energy on many fronts.  Act 236 requires two percent of an electric utility’s retail peak demand to come from renewable energy resources by 2021.  Half of this two percent requirement (or one percent of retail peak demand) must come from renewable energy facilities that are between one MW and ten MW in size (“Utility Scale Solar”).  The remaining half of the two percent requirement must be met by renewable energy facilities that are less than one MW in size with a quarter of the remaining one percent (0.25%) being from renewable energy generation that is 20 kilowatts (“kW”) or less (“Customer Scale Solar”). 

PURPA and Act 236 intersect as utilities plan their compliance with the Utility Scale Solar requirement.  To the extent that utilities purchase power from QFs in order to meet this requirement, such power purchase agreements would be driven by PURPA’s requirements.  For example, since the adoption of Act 236, South Carolina Electric & Gas (“SCE&G”) has entered into 23 power purchase agreements pursuant to PURPA for a total of just under 300 MW of solar power. 

Act 236 has also contributed toward the development of energy diversity through smaller renewable energy facilities at the commercial and residential level.  Through Act 236, the investor-owned utilities in South Carolina offer certain incentives to customers who wish to install solar facilities at their homes or businesses.  For example, SCE&G has developed a Performance Based Incentive of four cents per kilowatt hour for residential customers who install solar facilities of not more than 20 kW.  For non-residential customers, SCE&G offers a Bill Credit Agreement incentive that allows SCE&G to credit all of a customer’s solar electricity production directly on that customer’s utility bill based on the size of the system.  Duke Energy (“Duke”) offers up-front rebates of $1.00 per watt for residential customers that install generating systems no greater than 20 kW and non-residential customers that install generating systems no greater than one MW.  The amount of the rebate is subject to change based on the amount of solar installed under this incentive.

SCE&G and Duke also offer programs known as “Shared Solar” or “Community Solar” that allow certain customers to purchase solar panels in a solar farm and receive a corresponding pro rata share of the energy output via a credit on their monthly utility bills.  SCE&G will begin offering this program in the Fall of 2016 and Duke plans to offer the program in 2017.

To better encourage customer participation in these small scale renewable programs, Act 236 required revisions to South Carolina’s net energy metering standards.  Net energy metering, or NEM, allows customers who generate their own electricity to be compensated for excess power generated and fed back onto the grid.  As a result of the recent revisions pursuant to Act 236, customers that install solar panels prior to 2021 will receive the full retail value for electricity sent to the grid.  Additionally, a greater pool of customers may participate in NEM as the size limit of eligible systems has been increased from 100 kW to one MW. 

The challenges of meeting our energy needs in affordable, reliable, and environmentally-friendly ways will be on-going for certain.  The adoption of Act 236 illustrates that there is no single solution to achieving the goal of expanding renewable energy in our state.  Customers, both large and small, require different options in order to allow various customers access to renewable energy opportunities.  Similarly, utility companies need flexibility in the ways in which they may meet renewable energy mandates, in an economic manner all while ensuring reliability.  There are no simple solutions to addressing these competing needs.  However, in South Carolina we have seen leadership that produced a balanced, thoughtful approach to a difficult issue.

 

Ashley Cooper is a partner in the Charleston office. He has experience as an in-house regulatory attorney and Chief Compliance Officer for an electric utility. He has an active practice before the Federal Energy Regulatory Commission and advises clients on FERC jurisdictional matters, including: Section 203 merger (asset acquisition and divestiture) projects, Open Access Transmission Tariff administration, maintaining an effective and efficient compliance program, conducting compliance and OATT related training, preparing and defending clients during FERC and NERC audits and investigations, interconnection and transmission service requests and agreements, and Order 1000 transmission planning processes. Practices & Industries Mr. Cooper works with include: Energy & Utilities, Government & Public Policy, Litigation and Renewable Energy.

Return to Top
Perrin Dargan, Elizabeth Elliott, Barry Hartman, Christopher Jaros
An Air of Change in CERCLA Liability? Pakootas V. Teck Cominco and CERCLA's Federal Permit Shield
Barry Hartman, Perrin Dargan, Christopher Jaros, and Elizabeth Elliott, K&L Gates

I.                  Introduction

A case recently argued before the Ninth Circuit, Pakootas v. Teck Cominco Metals, Ltd., 9th Cir., No. 15-35228, could pave the way for a new theory of liability for parties who release air emissions during the course of industrial or other operations.  Specifically, on review before the Ninth Circuit is a district court decision holding that parties who release air emissions can be liable under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) if those substances later settle on another party’s property.  The district court’s decision was the first of its kind -- we are aware of no prior reported decision holding that CERCLA could be used to assert claims related to hazardous substances released into the air as emissions -- and a decision by the Ninth Circuit affirming the district court’s decision could open the door to a variety of new claims against those who release air emissions that contain even minute levels of hazardous substances.

II.               Background

ThePakootas case was originally filed in 2004, and included a number of claims relating to Teck Cominco Metals, Ltd.’s (“Teck”) alleged discharge of solid and liquid hazardous substances from its Canadian smelter into the Columbia River.  Plaintiffs alleged that those hazardous substances traveled downriver into the United States and settled at what is now referred to as the Upper Colombia River Site (the “UCR Site”) in Washington.  Many of the claims were resolved early in the litigation; however, in 2013 the plaintiffs sought leave to amend their complaint to add an additional CERCLA claim.  Specifically, plaintiffs asserted that Teck’s release of hazardous substances in air emissions in Canada that later settled in the United States made Teck an “arranger” under CERCLA, and thus liable for any contamination that eventually settled onto land and water at the UCR site.  Teck moved to strike or dismiss the new allegations on the basis that emissions to the air are not actionable under CERCLA.  In a decision that was the first of its kind, the district court denied the motion, finding instead that “[s]o long as [Teck’s] hazardous substances were disposed of ‘into or on any land or water’ of the UCR Site - whether via the Columbia River or by air - [Teck] is potentially liable as an ‘arranger’ under CERCLA.”

Shortly after the lower court’s decision in Pakootas, the Ninth Circuit decided a separate but similar case, Center for Community Action & Environmental Justice v. BNSF Railway Co.,[1] in which the Ninth Circuit found that releases directly to the air did not create liability under the Resource Conservation and Recovery Act (“RCRA”), which also regulates the disposal of hazardous substances when they are wastes.[2]  Based upon what it believed to be an inconsistency between the two opinions, Teck sought interlocutory appeal of the district court’s order denying its motion to strike, arguing that because CERCLA adopts RCRA’s definition of a “disposal,” the Ninth Circuit’s opinion inCenter for Community Action is controlling law with respect to the question of whether air emissions constitute a “disposal” under CERCLA.  The district court certified the order for interlocutory appeal, and it is now before the Ninth Circuit.

III.            Issue Before the Court and Oral Argument

The sole question facing the Ninth Circuit is whether the release of air emissions that later settle on another’s property constitutes “disposal” under CERCLA.  At oral argument, the three-judge panel focused on whether the Center for Community Action decision was controlling on the issue and, if not, how the Pakootas decision could be distinguished.  As expected, Teck took the position that the Center for Community Action decision creates a bright-line rule with respect to whether air emissions can constitute disposal under RCRA and CERCLA.  Specifically, Teck argued that only where “solid waste is first placed on land or water” can it be considered disposal under CERCLA or RCRA, and thus there could be no liability under CERCLA for hazardous substances first released into the air.  In contrast, plaintiffs tried to distinguish the Pakootas case from Center for Community Action, arguing that structural distinctions between RCRA and CERCLA require that the statutes be read differently, and that it was appropriate to allow liability under CERCLA for air emissions regardless of whether such liability exists under RCRA.  The Department of Justice (“DOJ”) appeared as a friend of the court and sided with the plaintiffs, arguing that Congress intended to include liability for air emissions in CERCLA.  Of note, one judge on the panel asked why the court, if otherwise unable to reach a decision, should not just take the federal government’s position as the “tie-breaker.”

IV.            Potential Implications - Effect of the Federal Permit Shield

Although the Ninth Circuit argument centered on varying interpretations of CERCLA, both the parties and the panel addressed the potential impacts of the decision and the interplay between CERCLA and the Clean Air Act, including with respect to the federal permit shield.  As background, the federal permit shield provisions of CERCLA provide that costs incurred remediating hazardous substances released in accordance with a federal permit may only be recoverable in accordance with the provisions of the permitting statute, not CERCLA.[3]  As relevant to the Pakootas case, the shield would exempt emitters from liability under CERCLA for remediation costs resulting from “any emission into the air subject to a permit or control regulation under” various sections of the Clean Air Act.[4]  Thus, to the extent a party’s emissions are released into the air in compliance with a valid Clean Air Act permit, if substances in those emissions later settle on another’s property, the property owner would be prohibited from seeking cleanup costs related to those settled substances under CERCLA.

At oral argument, plaintiffs asserted that the existence of the federal permit shield in CERCLA, and CERCLA’s specific reference to emissions released under the Clean Air Act, demonstrates Congress’ intent to regulate at least some air emissions under CERCLA.  In addition, plaintiffs argued that the federal permit shield would protect the regulated industry from increased liability for air emissions under CERCLA, and that regulated entities would be largely unaffected by a decision in favor of the district court.  At first blush, it appears that the federal permit shield would, in fact, provide broad protections for certain categories of emitters if the Ninth Circuit were to affirm the lower court’s decision.  However, upon further review, informal guidance released by EPA has arguably narrowed the scope of the defense.  Indeed, the fact that DOJ has asserted a position on behalf of plaintiffs in this case suggests that EPA plans to use CERCLA to expand its authority to regulate air emissions under the Clean Air Act.

Although it is not clear whether or how the courts or EPA will define the contours of the federal permit shield in this context, or EPA’s non-binding interpretations related thereto, amicus briefs submitted to the Ninth Circuit highlight several key grey areas that may lead to litigation going forward. 

First, under current EPA guidance, an emission may be “federally permitted” only if it is actually compliant with Clean Air Act regulations and permits, not merely “subject to” regulations and permits as the statute states.  Therefore, if a party’s emissions exceed limits set forth in a permit by only a small amount, that party could arguably be liable for response costs at any location at which the release later comes to be located.  By contrast, under the Clean Air Act, even if EPA chose to seek penalties for such a minor violation, such penalties would be subject to strict limits. See 42 U.S.C. § 7413(d)(1).  Second, EPA guidance states that federally permitted releases shielded from liability under CERCLA include only releases of those substances specifically identified in a Clean Air Act regulation or permit.  Under this interpretation, where a party’s emissions include a constituent that is not identified in the permit or otherwise regulated by the Clean Air Act, even if that party’s emissions (including the unregulated substance) are in full compliance with the permit and other regulatory requirements, that party could arguably be liable under CERCLA if the constituent later settles on property elsewhere and results in the incurrence of costs recoverable under CERCLA.  Finally, it is important to note that the federally permitted release defense is an affirmative one, meaning that a party seeking to fend off allegations under CERCLA has the burden to demonstrate that the releases were, in fact, permitted.  Under any of these scenarios, industrial facilities could find themselves being sued by parties at clean up sites resulting from emissions that, prior to Pakootas, may not have been considered a risk. 

Of course, emitters would have a variety of defenses available to them to protect themselves from the types of claims described above, including that any plaintiff would be required to demonstrate that the particular defendant’s emissions resulted in the deposition of hazardous substances on their property, and that such substances are present in an amount sufficient to require a clean up action.  Finally, because such litigation can be both costly and time consuming, plaintiffs may be cautious to test the boundaries of potential liability where a particular emitter’s contribution at a site could be demonstrated to be non-consequential.

Conclusion

The Ninth Circuit is not expected to render a decision for several months, and when it does it likely will not be the end of the Pakootas litigation; even if the Ninth Circuit affirms the district court’s opinion, the district court must still consider each of the other elements required under CERCLA to establish liability.  However, should the Ninth Circuit affirm the district court’s opinion, those who release air emissions will need to pay close attention to ensuring permit compliance, and consider putting in place new mechanisms to decrease risk of CERCLA claims stemming from air emissions.



[1] 764 F.3d 1019 (9th Cir. 2014).

[2] Id. at 1024.

[3] 42 U.S.C. § 9607(j).

[4] 42 U.S.C. 9601(10)(H).

 

Barry represents clients in industries including maritime, energy, pharmaceuticals, healthcare, recycling, chemicals, manufacturing, and real estate. He represents companies and individuals in criminal and civil investigations, trials, and appeals primarily involving complex federal regulatory programs, with an emphasis on environmental matters, and advises clients on compliance with those programs.

Perrin practices in the areas of environmental law, toxic tort, construction law, and commercial litigation. His environmental practice includes permitting industrial and manufacturing facilities, representation of clients in the acquisition, sale, and redevelopment of contaminated property, general and coastal zone land use, wetlands issues, and general environmental compliance and litigation. He has served as outside counsel to the South Carolina Department of Health and Environmental Control on CERCLA litigation matters and as outside counsel to the South Carolina Coastal Council (former SC DHEC Office of Coastal Resource Management), including in connection with the landmark case of Lucas v. South Carolina Coastal Council.

Chris’ practice focuses on litigation and environmental law. He has an active litigation practice in both federal and state court, and he regularly advises clients regarding enforcement and compliance with federal and state environmental statutes and regulatory regimes, including CERCLA, the Clean Air Act and the Clean Water Act.

Liz focuses her practice on transactional corporate and securities matters in a number of different sectors, including the energy and maritime sectors. She routinely assists clients in preparing and reviewing commercial agreements, selection and formation of business entities and drafting company minutes and resolutions. In addition, she advises clients regarding enforcement and compliance with state and federal environmental statutes and regulatory regimes, including CERCLA and the Clean Water Act.

Return to Top
left corner
In This Issue
right corner
Chapter News
President's Letter
Last Chance to Register for the ACC SC Midyear Meeting
Wanted: Volunteer and Leadership Positions
2016 ACC Get A Member Campaign
Reception Honoring Chief Judge Lockemy
Congratulations to our 2016 ACC SC Law Student Award Recipient, Katie Ramseur
Ogletree Deakins sponsored ACC SC and ACC Charlotte Joint Event Recap
Featured Articles
Wages and Trade Secrets and Gender, Oh My: The Circus of Employment Law Changes in May 2016
Energy Policy: A Balancing Act
An Air of Change in CERCLA Liability? Pakootas V. Teck Cominco and CERCLA's Federal Permit Shield
Sidebar Bottom
Spacer
left corner
Newsletter Tools
right corner
Search Past Issues
Print-Friendly Issue
Forward to a Friend
Subscribe to This Newsletter
Subscribe via RSS
Sidebar Bottom
Spacer
left corner
ACC-SC Quick Links
right corner
•  Upcoming Events
•  2016 Sponsors
•  Chapter Leadership
•  Job Postings
•  Membership Directory
Sidebar Bottom
Spacer
ACC-SC Chapter Office
Annie Wilson, Administrator
PO Box 1763
Columbia, SC 29202
(803) 252-1087