The Nickel Report

Last week, the Fifth Circuit found that Lloyd’s syndicates may not subrogate against an additional insured and may not force that additional insured to arbitration. Lloyd’s Syndicate 457 v. FloaTEC, LLC, No. 17-20550 (5th Cir. Apr. 17, 2019).

The case arose out of an oil platform in the Gulf of Mexico called Big Foot, owned and operated by Chevron. Chevron contracted with FloaTEC to engineer steel tendons to moor Big Foot to the ocean floor. The contract between Chevron and FloaTEC contained an arbitration provision.

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Over the past several decades, significant tension has developed between the federal role in overseeing and authorizing certain types of energy infrastructure projects and states' roles in regulating water quality under the cooperative federalism structure of the Clean Water Act (CWA or the Act). This tension has played itself out in various contexts, but the most pronounced in recent years has been the battle over CWA Section 401 water quality certifications for energy infrastructure projects, in particular interstate natural gas pipelines.

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On Wednesday, April 10, President Trump signed an Executive Order (EO), titled Promoting Energy Infrastructure and Economic Growth, that requires the US Environmental Protection Agency (EPA) and other federal agencies to undertake a series of regulatory actions to clarify the Clean Water Act (CWA) § 401 water quality certification (WQC) process. CWA § 401 provides states with the opportunity to evaluate the potential water quality impacts from discharges of proposed projects by certifying whether the discharge will comply with applicable water quality standards. States can waive this requirement, and if they do not act within “a reasonable period of time (which shall not exceed one year) after receipt” of a request for certification, waiver is automatic. 33 U.S.C. § 1341(a). A handful of states have relied on this process to thwart the development of energy infrastructure projects, either by denying certification due to concerns unrelated to water quality (such as opposition to hydraulic fracturing, climate change concerns, etc.) or by ignoring the statutory time period to reach a determination.

State environmental regulators are beginning to develop plans designed to meet more stringent air quality standards under the Clean Air Act (CAA), including standards to protect against unhealthful levels of ground-level ozone. In doing so, many states are looking more closely at a factor that contributes to their air quality problems but that they lack any authority to address: the phenomenon of air pollution carried by prevailing winds into their jurisdictions from emission sources located not only outside their own state borders but outside the US itself. The issue of international contributions to air quality concerns has gained currency in part due to the many challenges states face in meeting the stringent nationwide air quality standards for ground-level ozone that the US Environmental Protection Agency (EPA) adopted in 2015.

Everyone can agree that environmental assessments should be based on the best science. The “best” science, however, is an ever-advancing standard. Despite budget uncertainties and other hurdles, EPA scientists often pioneer new methods of assessment capable of detecting smaller and smaller increments of environmental impact. Although it may take years for EPA to develop and demonstrate a new method, stakeholders may benefit from paying attention to the development process and seeking opportunities to participate in it.