If so, and you own property on which tenants engage in certain regulated activities, you should consider consulting a specialist for a little preventive care – legal, not medical. Controlling the activities of these tenants can draw enforcement against the property owner when the tenants’ operations raise environmental compliance issues, as a recent federal case illustrates.
The case involved a sportfishing group that sued an industrial park owner for Clean Water Act (“CWA”) violations caused by discharges of polluted storm water. The fact that any pollutants in the storm water were put there by the tenants did not protect the landlord. The court held that “owners and/or operators who have sufficient control over a facility can be held liable under the CWA even if they do not themselves perform the industrial activities that create the pollutants in the storm water discharge.” Here, the landlord owned and controlled the storm water drainage system from which the pollutants were released.
Operations requiring storm water permits are not uncommon, and can include transportation, food processing, and recycling businesses, as well as construction activities. The requirement can also apply to other operations on a case-by-case basis.
Moreover, this potential enforcement trap for landlords goes beyond CWA concerns. Owners who exert control over their tenants’ waste management practices may also risk enforcement. In recent years, retail outlets like hardware stores, pharmacies, and even groceries have been targeted by hazardous waste enforcement actions. This is because many common products like drain cleaners, over-the-counter drugs, and hand sanitizers can be considered hazardous wastes under certain circumstances.
Thus, a tenant’s business may not necessarily raise a red flag. Landlords should consider how monitoring protocols or proper lease provisions could provide protection from the environmental afflictions of their tenants, and save the expense of a pound of cure.
John recently had an extensive article published in The Water Report (see link below). He also spoke at CSU on June 13th on the Waters of the United States rulemaking at the 2017 Universities Council on Water Resources/National Institutes for Water Resources Annual Conference. Way to go John!
Kolanz, John A. “Clean Water Act Rule: Review of the Clean Water Act Jurisdictional Rule Considerations for Moving Forward .” The Water Report 160 (2017): 1-31. Www.NEBC.com. Web. 15 June 2017.
Against the backdrop of the Trump Administration’s determined deregulatory efforts, the Tenth Circuit Court of Appeals (which covers Colorado) recently affirmed substantial federal authority to regulate activity on private lands. While the Court delivered its opinion in the context of the Endangered Species Act (“ESA” or “Act”), the case has broader implications for environmental regulation in general.
Congress passed the modern day ESA in 1973, with barely a dissenting vote. The Act’s main goal is to conserve threatened and endangered species along with their supporting ecosystems. The ESA quickly gained a reputation as one of the most powerful environmental laws ever enacted when it stopped a massive and nearly-completed federal water project in its tracks to save a newly-discovered diminutive fish (snail darter) that is unsuitable for rod and reel. (Congress eventually had to pass special legislation to allow completion of that project – the Tellico Dam.)
The Act can likewise affect private actions. Once a species is “listed,” the Act’s keystone provision prohibits the “take” of that species without a permit or other authorization. While “take” includes killing, the prohibition encompasses a much broader range of actions, such as harassing, harming, pursuing, or capturing. It can even include significant habitat modification or degradation.
With respect to some species, this broad prohibition can complicate routine land management activities. Such was the case with the Utah Prairie Dog (“UPD”), a listed species that lives only in Utah, and mostly on non-federal land.
People for the Ethical Treatment of Property Owners (“PETPO”) is a group of over 200 private landowners and other entities who say that regulation of the UPD has prevented them from building homes and starting small businesses. PETPO challenged the authority of the United States government to regulate the take of UPDs on private land.
The United States Constitution delineates Congress’s powers. Those not granted to Congress are reserved to the states or the people. The Constitution’s Commerce Clause authorizes Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Congress relied on this authority to pass the ESA and other environmental laws.
PETPO argued that the Commerce Clause does not authorize Congress to regulate the take on non-federal land of a purely intrastate species that does not itself substantially affect interstate commerce. The Circuit Court, however, declined PETPO’s invitation to evaluate the prohibited activity in isolation, and instead considered its place in the ESA as a whole.
The Court determined that Congress had a rational basis to believe that regulating the take of the UPD is essential to the Act’s broader regulatory scheme. The Court found this broader scheme to substantially affect interstate commerce, and therefore upheld the federal government’s authority to protect the UPD.
To hold otherwise, the Court said, would leave a “gaping hole” in the ESA, since almost 70% of species listed under the Act exist solely within one state. The Court further explained that excising a specific activity governed within a larger statutory scheme would subject Congress’s Commerce Clause authority to “death by 1000 cuts.” This would call into question the validity of the ESA itself, as well as other environmental laws.
The result in this case was not really surprising. Every other Federal Circuit Court that has considered the issue has upheld the federal government’s authority to protect purely intrastate species under the Act.
That is not to say that the UPD should rest comfortably in its burrow. The stringency of the Act itself has long generated calls for legislative relief. Today’s political climate may make such efforts more likely.
Perhaps more importantly, since the mid-1990s the United States Supreme Court has showed renewed interest in reassessing Congress’s Commerce Clause power. Landmark opinions in 1995 and 2000 began to curb a power that some legal scholars had begun to regard as virtually limitless.
The Trump Administration’s deregulatory effort envisions a stronger state role in environmental regulation. This effort will undoubtedly encourage further legal challenges, and one – perhaps the UPD case – will eventually find its way to the Supreme Court. When that happens, the makeup of the Court will play a significant role in the outcome.
The Supreme Court’s conservative justices show a decided preference for stricter limits on Congress’s Commerce Clause power. Depending on the case and the makeup of the Supreme Court at that time, the resulting decision could profoundly and forever change the structure of environmental regulation in this country.
John Kolanz is a partner with Otis, Bedingfield and Peters, LLC in Loveland. He focuses on environmental and natural resource matters and can be reached at 970-663-7300 or JKolanz@nocoattorneys.com.
A version of this article was recently published in BizWest. Please see the following link:
“The time to repair the roof
is when the sun is shining.”
-John F. Kennedy
You entered into a pretty basic commercial deal, and decided to do things properly and get it drawn up by an attorney. You’ve now received a ‘draft’ from the attorney and it’s long. It was a simple deal. Why are there so many terms? Why is it several pages in length? The answer lies in risk-shifting, or preparing for the rain.
Contracts are generally signed in good times, when the sun is shining. The parties typically have high expectations of the success of the agreement and may not consider what happens if and when things don’t go as planned. However, it is important to prepare for the bad times, to formulate terms that consider risks that may arise after the contract is signed. There are many ways a contract can be drafted to guard against the rain – two of the more common ones are representations and warranties and indemnity provisions.
Representations and Warranties
A representation is simply a statement of fact upon which another party is expected to rely, while a warranty is a party’s assurance as to a particular fact coupled with an implied indemnification obligation if that fact is false. Representations and warranties are generally used to allocate risk by (1) apportioning exposure to potential losses and shifting risk from the recipient to the maker; (2) creating a direct claim against the maker if representations and warranties are inaccurate; and (3) serving as a basis for the parties’ indemnification rights.
An indemnification clause is a promise to protect and defend another in the event a particular set of circumstances leads to a loss suffered by another party. Indemnity provisions are the primary vehicle by which parties typically shift or apportion risk in a contract. Indemnity provisions may include any, or all, of three obligations to (1) indemnify, (2) defend, and (3) hold harmless the other party. A well-drafted indemnification provision allows parties to customize their risk allocation by shifting the burden of loss and compensating an indemnified party for risks it did not assume and expenses that may not be recoverable under common law, like attorneys’ fees.
Having an attorney draft or review your contract before signing is recommended. It is imperative that you understand the potential consequences of the risk-shifting provisions in any contract. By carefully drafting and negotiating a contract before execution, during the good times, you can best protect yourself or your company from the inevitable rain.
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