Brad A. Molotsky – Sustainability, Resiliency and Risk Mitigation

September 24, 2023 by Brad A. Molotsky

New ASHRAE Standard 241 for Indoor Air Quality – increasing exterior fresh air or purifying existing indoor air!

The American Society of Heating, Refrigeration and Air Conditioning (ASHRAE) approved for publication of its highly anticipated airborne infection risk mitigation standard for buildings. For those not overly into HVAC, ASHRAE is the governing society responsible for developing building design as well as energy efficiency standards and guidelines for building

The new standard that was enacted, ASHRAE Standard 241, Control of Infectious Aerosols, establishes minimum requirements to reduce the risk of disease transmission by exposure to infectious aerosols in new buildings, existing buildings, and major renovations.

Infectious aerosols are tiny, exhaled particles that can carry disease-causing pathogens and are so small that they can remain in the air for long periods of time and be inhaled. As a building’s HVAC system is designed to recirculate and recondition air, the circulation of pathogens via the air is what the standard is focusing on. Use of this standard is designed to reduce exposure to SARS-COV-2 virus, which causes COVID-19, influenza viruses and other pathogens that cause major personal and economic damage every year.

According to ASHRAE, Standard 241 provides requirements for many aspects of air system design, installation, operation, and maintenance.

Important aspects of the new standard include:

Infection Risk Management Mode – Requirements of Standard 241 apply during an infection risk management mode (IRMM) that applies during identified periods of elevated risk of disease transmission. AHJs (Authorities Having Jurisdiction) can determine when the enhanced protections of Standard 241 will be required, but its use can also be at the discretion of the owner/operator at other times, for example, during influenza season. This aspect of Standard 241 introduces the concept of resilience – ability to respond to extreme circumstances outside normal conditions – into the realm of indoor air quality control design and operation.
Requirements for Equivalent Clean Airflow Rate – Other indoor air quality standards, including ASHRAE Standards 62.1, 62.2, specify outdoor airflow rate and filtration requirements to control normal indoor air contaminants. Historically, air flow rates and clean air from the outdoor air was intended to introduce cleaner air from the outside in order to keep the air in the building mixed with outdoor clean air. Standard 241 breaks new ground by setting requirements for equivalent clean airflow rate, the flow rate of pathogen free air flow into occupied areas of a building that would have the same effect as the total of outdoor air, filtration of indoor air, and air disinfection by technologies such as germicidal ultraviolet light. This approach allows the user of the standard flexibility to select combinations of technologies to comply with the standard that best satisfy their economic constraints and energy use goals.
Requirements for Use of Filtration and Air Cleaning Technology – Dilution of indoor air contaminants by ventilation with outdoor air can be an energy intensive and expensive way to control indoor air quality. Standard 241 provides extensive requirements for use of filtration and air cleaning to effectively and safely achieve meet equivalent clean airflow requirements efficiently and cost effectively. These include testing requirements to establish performance and to demonstrate that operation does not degrade indoor air quality in other ways, for example by elevating ozone levels.
Planning and Commissioning – Standard 241 provides assessment and planning requirements culminating in the development of a building readiness plan, a concept carried over from the work of the ASHRAE Epidemic Task Force. It also describes procedures for commissioning systems to determine their installed performance.
“Standard 241 represents a significant step forward in prioritizing indoor air quality,” said 2022-23 ASHRAE President Farooq Mehboob, Fellow ASHRAE. “By implementing the requirements outlined in this standard, we can improve the health, well-being and productivity of building occupants. This standard empowers building owners, operators and professionals to take proactive measures in safeguarding indoor environments. It’s an essential tool for creating healthier indoor environments and promoting sustainable practices.”

The Standard 241 committee will continue and work on improving sections of the standard adding additional requirements, clarifying requirements and developing tools to help the public use the standard. Industry and consumer-friendly resources such as courses, podcasts, factsheets and information events will be introduced in the future.

Green Sprouts. The likely impact to existing and new buildings from this new Standard will require more external air to be brought into the building (i.e., more exterior exchanges of air) or better cleaning of the existing air in the building. Purification of existing air in buildings has not been an area where many building owners have historically focused. The ability to use either or both methods (i.e., more outdoor air intake or purification of the indoor air) to help reduce the spread of disease will surely become the topic of conversation amongst property managers and engineers and will result in return on investment decisions at the property level to determine what works better and what costs more – increasing outdoor airflow and the need to condition that air or purifying that which is already in the building.

Given that COVID-19 is not likely to go away any time soon, Standard 241 which is going to drive technological investments in existing and new buildings and which provides alternative paths to address better air quality in our existing and new building stock should significantly help reduce the spread of disease within the built environment. Tenants should be watching carefully to see how their landlords’ intend to address this key issue and who is paying for it and how.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Joseph West, Sharon Caffrey, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

August 17, 2023 by Brad A. Molotsky

Plastic Bag Bans – A New Jersey Update

By way of an update to our April 27, 2023 Blog post regarding plastic bag and straw bans, we thought it a good time to circle back to what is going in New Jersey (other state updates will follow).

The relevant NJ plastic bag ban bill can be found at https://dep.nj.gov/wp-content/uploads/plastic-ban-law/docs/plastic-bag-law-c117.pdf

Per a press release issued earlier this week, the New Jersey Business Action Center is reminding small restaurants and stores of their need to comply with the recent plastic and paper carryout bag ban before local health departments conduct inspections of their facilities.

Under state law, retail stores, grocery stores and food service businesses may NOT provide or sell single-use plastic carryout bags and polystyrene foam food service products (i.e., styrofoam). Single-use paper carryout bags are allowed to be provided or sold, except by grocery stores equal to or larger than 2,500 SF, which may only provide or sell reusable carryout bags.

The state maintains an online vendor list where businesses affected by the ban can find alternative carryout products.

According to the New Jersey Plastics Council’s annual report, released in May 2023, approximately 5.5 billion single-use plastic bags and 110 million single-use paper bags were eliminated from entering the waste stream and environment by the supermarket sector alone from May 2022, the effective date of the law through the end of 2022.

Parting Shot – While there was the normal outrage at the ban being enacted in the first place, and that the plastic bag ban would cause massive inconvenience and potential loss of jobs, the reality on the ground is that other than minor inconvenience, constituents quickly learned to bring bags with them and that they could and would survive in a non-styrofoam providing environment. While 5.5 billion single use bags might not seem like much to some, in this author’s view, it is a big step in positive direction where people take greater interest in where their waste is going and whether the waste can be reused for another purpose.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

August 10, 2023 by Brad A. Molotsky

Seattle – Not Just for Starbucks These Days – Mayor Proposes Greenhouse Gas Reduction Legislation

Seattle Mayor Bruce Harrell recently proposed legislation that would require the city’s large commercial and multifamily buildings to reduce greenhouse gas emissions (“GhG”) over the next several decades and achieve net-zero emissions by 2050.

Per the City’s press release, the standards were nearly 2 years in the making, are expected to reduce annual commercial building greenhouse gas emissions by 27% compared with 2008 levels,

According to the EPA and multiple studies, the built environment (i.e., buildings) are a large contributor to GhG emissions nationwide, and in Seattle, contributes more than 33% of the city’s total GhG emissions.

Seattle is one of a growing list of cities (including Boston who announced this policy 2 weeks ago) — and more recently, some states (e.g., Washington) — that require many new buildings to be all-electric. While these policies will likely reduce consumption of fossil fuels in many cases, they do not address existing buildings that use gas, oil and fossil fuels to provide heat, hot water and chiller water.

During 2023, more and more states and municipalities are developing building performance standards that aim to reduce buildings’ carbon footprint by requiring them to meet certain standards. These more recent standards focus on greenhouse gas emissions rather than just energy usage.

Seattle’s proposed new standard is, per Construction Dive, the product of nearly 2 years of meetings, open houses, webinars, advisory group and specialized task force sessions. Not surprisingly, not all constituents were happy with pushback during the development of these standards coming from environmental groups that want more and faster emission reductions and from real estate and business groups that believe that standards are far too reaching.

All told, according to the Seattle Office of Sustainability and Environment, the new standards will cover approximately 4,100 buildings in Seattle, including about 1,885 multifamily buildings and 1,650 nonresidential buildings that are mostly downtown and in dense neighborhoods. Like many of the other cities adopting these type of GhG emissions based standards (see, e.g., New York City with Local Law 97), the proposal offers several pathways for buildings to comply with the standards; owners who do not comply would be fined.

It is believe by the City Administration that the new standard will help Seattle secure federal funding and incentives. Seattle City Council is expected to review and likely implement the legislation in their fall session.

Parting Shot – Seattle is part of a growing list of cities and States that are looking to reduce energy consumption in its building stock by way of focusing on fossil fuel consumption and GhG emissions by requiring monitoring, measuring and reporting by larger buildings, and, if standards set by the applicable governing body have been exceeded, the owner of the building (and thereafter, likely the tenants under their leases) will be subject to a fine until they correct their exceedance. Carrots have been offered in the past as incentives, these types of ordinances are much more of the stick approach.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 17, 2023 by Brad A. Molotsky

The SEC and its continued focus and enforcement of “Greenwashing” by Alek Smolij

The U.S. Securities and Exchange Commission (SEC) has positioned itself as one of the United States’ leading government regulators on environmental, social, and governance (ESG) issues and in 2023 has continued a pattern of active enforcement actions focusing on their perceived view of ESG misconduct.

The underpinning of these actions has its roots in various places, including those that occurred on March 4, 2021, when the SEC announced the creation of a “Climate and ESG Task Force” in its Division of Enforcement, to focus on ESG-related gaps and misstatements in disclosures by publicly-traded companies, mutual funds, and other investment vehicles.

One of the SEC’s main enforcement focuses is “greenwashing,” a term that describes when a publicly-traded company, mutual fund, or other public investment vehicle makes a misleading claim about its ESG policies or credentials. For instance, some mutual funds may market themselves as an “environmentally-friendly” energy fund but have a relatively small amount of investor funds invested in renewable energy sources. Critics of the current regulation regime have asserted that many investment vehicles mislead investors with terms like “green,” “carbon-neutral,” and “environmentally-friendly.” These broad terms, critics say, are not adequately defined and may convince investors to direct their money to funds that the investors believe align with ESG values when the funds themselves are not actually evaluating whether their investments are in line with such values.

In late March 2022, the SEC’s Division of Examinations used the term “greenwashing” in its 2022 Examination Priorities to describe certain activities that the SEC would be paying particular attention to in the coming months The SEC noted that it would focus on whether public investment vehicles are “overstating or misrepresenting the ESG factors considered or incorporated into portfolio selection (e.g., greenwashing), such as in their performance advertising and marketing.”

The SEC proposed new greenwashing-focused rules in 2022 that would strengthen the Division of Enforcement’s ability to fight against misleading ESG disclosures. In August 2022, after a public comment period, the SEC’s commissioners voted 3-to-1 to move forward with proposed climate disclosure ESG-focused rules. These rules focus on both publicly-traded companies and investment advisors and funds. Under these climate disclosure rules (expected to be made final in April, 2023), publicly-traded companies are required to include certain climate-related disclosures in their public filings. Further, these rules will require investment advisors and funds who associate their investments with ESG to provide specific disclosures about how they pursue ESG strategies in their investments.

While these rules are still pending and have not yet been finalized, the Division of Enforcement has continued its focus on greenwashing enforcement efforts without even having the benefit of these proposed rules.

The SEC has publicly announced various settlements in the banking space and in the manufacturing space involving tens of millions of dollars in agreed-upon penalties in multiple enforcement actions focused on greenwashing. These actions have focused on SEC investigations of internal policies governing mutual funds and investment strategies branded as ESG investments.

The ESG task force has also investigated and charged companies whom the SEC found were not adequately disclosing environmental-related risks. The SEC has, for instance, settled a charge with a mining company related to failure to disclose the financial risks of mercury contamination of a river located near a Brazilian mine.

Through these actions, the SEC has indicated that it will target companies whose policies do not adequately ensure that these investment products align with stated goals of investing in ESG-focused products. Further, the SEC is keeping a close eye on required disclosures by public companies as these disclosures relate to ESG risks and issues that companies may be required to communicate to investors. The SEC undertook these enforcement efforts under existing securities laws and regulations without final passage of the proposed ESG-focused climate disclosure rules mentioned above.

Clearly, the SEC is not waiting for final climate disclosure rules to hone in on greenwashing practices, and the proposed climate disclosure rules will only strengthen the SEC’s ability to engage in similar investigations and enforcement actions.

The Division of Examination’s 2023 Examination Priorities do not explicitly use the term “greenwashing,” but they indicate that the SEC will continue to focus on enforcement actions against companies that engage in this practice. The 2023 Priorities state that the SEC will examine “whether ESG products are appropriately labeled and whether recommendations of such products for retail investors are made in investors’ best interests.” This language indicates that greenwashing-focused enforcement is clearly still a priority for the SEC, especially when paired with the SEC’s proposed new rules requiring ESG climate disclosures.

The SEC’s focus on greenwashing means that organizations associating themselves or their investments with ESG objectives should assess whether their actions line up with their stated ESG efforts and whether their disclosure matches what their records show and whether they are measurable, verifiable and provable statistics and data. Regular auditing of ESG programs, company disclosure, ESG reporting and comprehensive ESG strategy planning could help avoid a costly SEC enforcement action.

Note, we have also published on the Federal Drug Administrations renewed focus on “Greenwashing” in an early post on our blog where we documented the renewed FDA focus in the area of cosmetics and other products and issued additional guidance on greenwashing in the context of utilization of words such as “natural”, “free (of)”, “eco-friendly”, “Cruelty Free”, “renewable” and “sustainable”.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Alek Smolij (the author), Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

April 4, 2023 by Brad A. Molotsky

The Biden Administration and the ESG Investment Rule Congressional Veto

In late March, 2023, President Biden issued the first veto of his Administration. The veto overturned a Republican led measure that was seeking to overturn a Department of Labor retirement plan rule.

Pretty wonky stuff you say?

The Republican measure was designed to overturn a Labor Department rule that would allow (note the word allow, NOT mandate) retirement plan managers to consider climate change in making their investment decisions.

Sounds like some double speak there doesn’t it? The Department of Labor rule was enacted to “permit” investment managers to consider climate change in making decisions. The rules did NOT require this consideration, rather, it permitted it at the discretion of the investment manager.

Congress (in a House vote of 216-204 mostly along party lines and a Senate vote of 50-46 with Democratic Senators Manchin and Tester voting with their Republican colleagues,) voted to overturn the Department of Labor Rule – effectively saying, investment managers should NOT be permitted to consider what some view as relevant information in making an informed decision (e.g., if an area floods daily, should one invest in an asset located there or instead invest where there is not a flooding risk; alternatively, if an area is prone to forest fire risk vs. an area that is not prone to this type of risk, should a manager be able to consider this if they think it relevant?).

The Administration took issue with the overturned Labor Department rule and opted to veto the Congressional restriction on being able to consider climate change in investment manager decisions. Again, as noted above, the Labor Department Rule does NOT require every or any investment manager to consider climate change in their investment decisions, instead it enables these managers to choose how they view climate change, and if they believe climate change to be a relevant factor in making an investment decision, to take it into account when making their decision.

This is likely the first of many such skirmishes to come on the ESG front and its use as a tool or a hammer, depending on your perspective, in making decisions.

Parting Thoughts – if you are an investor looking to deploy your investment dollars, the question is whether you think your investment advisor should be able to (without being required to) take into account climate factors when making investment suggestions to you or not. How and whether resiliency, climate factors, resource allocation and applicable risk mitigation is permitted or mandated into future investment decisions are some of the areas where it is highly likely that additional political party skirmishes will occur.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how this DOE funding prize might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan, Jeff Hamera, Nanette Heide, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

April 3, 2023April 3, 2023 by Rebecca Green

ESG and the Growing Interplay with Class Action Lawsuits

The plaintiffs’ class action bar is exceedingly innovative and in constant pursuit of “the next big then” insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance – known as “ESG” – each of the verticals within ESG are surely are topics on the mind of leading plaintiffs’ class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. This blog post reviews the current landscape of litigation risks, and underscores how good corporate compliance programs and corporate citizenship are prerequisites to minimizing risk.

The Class Action Context:

In 2022, the plaintiffs’ class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review https://blogs.duanemorris.com/classactiondefense/2023/01/04/it-is-here-the-duane-morris-class-action-review-2023/, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights.

As “success begets success’ in this litigation space, the plaintiffs’ bar is loaded for bear in 2023, and focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk.

The ESG Context

Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or “CSR”), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial.

In recent years, ESG programs have become more extensive and more deeply integrated with companies’ core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value.

As ESG programs become larger and more integrated into a company’s business, so do the risks of attracting attention from regulators and private litigants.

And The Lawsuits Begin From All Quarters:

While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space.

Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling https://blogs.duanemorris.com/classactiondefense/2023/01/30/delaware-says-corporate-officers-are-now-subject-to-a-duty-of-oversight-in-the-workplace-harassment-context/ in In Re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs’ bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment.

Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC’s proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for “greenwashing” claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company’s general statements about its commitment to sustainability.

State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false advertising and other misleading marketing statements. The plaintiffs’ bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face “reverse discrimination” claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements.

Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged contributions to climate change or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ.

Implications For Corporate America:

The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG progams will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels.

Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one’s exposure.

Duane Morris has an active Class Action Team to help organizations respond to the ever increasing need to be proactive to these types of risks. For more information or if you have any questions about this post, please contact Gerald (Jerry) L. Maatman, Jennifer Riley or the attorney in the firm whom you are regularly in contact with. We also have ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. For more information or if you have any questions about this post, please contact Brad A. Molotsky, David Amerikaner, Sheila Rafferty-Wiggins, Alice Shanahan, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley, or the attorney in the firm with whom you are regularly in contact.

August 31, 2022 by Brad A. Molotsky

EPA proposes to Designate 2 new PFAS and PFOS Chemicals as Hazardous Substances!

Earlier this week on August 25, 2022, the U.S. Environmental Protection Agency (EPA) took a significant step under Administrator Regan’s PFAS Strategic Roadmap in an effort to protect people and communities from the health risks posed by certain PFAS, also known as “forever chemicals.”

EPA is proposing to designate two of the most widely used per- and polyfluoroalkyl substances (PFAS) as “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as “Superfund.”

The proposal applies to perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), including their salts and structural isomers, and, according to EPA’s press release, is based on significant evidence that PFOA and PFOS may present a substantial danger to human health or welfare or the environment. According to various reports, PFOA and PFOS can accumulate and persist in the human body for long periods of time and evidence from laboratory animal and human epidemiology studies indicates that exposure to PFOA and/or PFOS may lead to cancer, reproductive, developmental, cardiovascular, liver, and immunological effects.

If finalized, the rulemaking would trigger reporting of PFOA and PFOS releases, providing the EPA with improved data and the option to require cleanups and recover cleanup costs to protect public health and encourage better waste management.

EPA is also focused on holding responsible those who have manufactured and released significant amounts of PFOA and PFOS into the environment. In its press release, the EPA announces that they will use enforcement discretion and other approaches to ensure fairness for minor parties who may have been inadvertently impacted by the contamination. EPA is also doing further outreach and engagement to hear from impacted communities, wastewater utilities, businesses, farmers and other parties during the consideration of the proposed rule.

If this designation is finalized, releases of PFOA and PFOS that meet or exceed the reportable quantity would have to be reported to the National Response Center, state or Tribal emergency response commissions, and the local or Tribal emergency planning committees.

EPA stated that they anticipate that a final rule would encourage better waste management and treatment practices by facilities handling PFOA or PFOS. The reporting of a release could potentially accelerate privately financed cleanups and mitigate potential adverse impacts to human health and the environment.
Additionally, the proposed rule would, in certain circumstances, facilitate making the polluter pay by allowing EPA to seek to recover cleanup costs from a potentially responsible party or to require such a party to conduct the cleanup. In addition, federal entities that transfer or sell their property will be required to provide a notice about the storage, release, or disposal of PFOA or PFOS on the property and a covenant (commitment in the deed) warranting that it has cleaned up any resulting contamination or will do so in the future, if necessary, as required under CERCLA 120(h).

EPA will be publishing the Notice of Proposed Rulemaking in the Federal Register in the next several weeks. Upon publication, there will be a 60-day public comment period.

As a subsequent step, EPA anticipates issuing an Advance Notice of Proposed Rulemaking after the close of the comment period on its proposal to seek public comment on designating other PFAS chemicals as CERCLA hazardous substances.

EPA has taken a number of recent actions on PFAS including:

• Releasing drinking water health advisories for 4 PFAS – using the best available science to attempt to address PFAS pollution, protect public health, and provide critical information quickly and transparently;

• Making available $1 billion in grant funding through President Biden’s Bipartisan Infrastructure Law;

• Issuing the first Toxic Substances Control Act PFAS test order under the National PFAS Testing Strategy;

• Adding five PFAS Regional Screening and Removal Management Levels that EPA uses to help determine if cleanup is needed;

• Publishing draft aquatic life water quality criteria for PFOA and PFOS;

• Issuing a memo to address PFAS in Clean Water Act permitting;

• Publishing a new draft total adsorbable fluorine wastewater method; and

• Issuing the 5th Unregulated Contaminant Monitoring Rule to improve EPA’s understanding of the frequency that 29 PFAS are found in the nation’s drinking water systems and at what levels and preparing to propose a PFAS National Drinking Water Regulation by the end of 2022.

Food For Thought – while some argue that the EPA has gone to far in their regulatory rule making, others view these proposed designations as a big step in the appropriate direction to regulate and capture critical data on the location of PFAS and PFOS so that these chemicals can be trapped and then eliminated from our water system and our sewage systems. Many reports now exists which indicate the negative impact of PFAS and PFOS on the human body. Wherever you come out on this topic, taking steps to reduce our own exposure and our children’s exposure to PFAS and PFOS and to focus on entrapment and non-hazardous destruction of these impactful chemicals is continuing to be the focus of many within the industry. New and improved technology for breaking down PFAS and PFOS into its constituent parts in a non-off gassing, safe manner are a very near future event and can be done.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how these new PFAS and PFOS rules might apply to you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Alice Shanahan Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ansley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

August 17, 2022 by Brad A. Molotsky

ESG – What is included the Inflation Reduction Act?

Earlier this week the President signed into law the Inflation Reduction Act. Without pontificating on its virtues or short comings, here is how the Inflation Reduction Act breaks down by the numbers:

HEALTH CARE:

Cutting Prescription Drug Cost

As estimated by the office of Management and Budget:

5-7 million Medicare beneficiaries could see their prescription drug costs reduced because of the provision allowing Medicare to negotiate prescription drug costs;

50 million Americans with Medicare Part D will have their costs at the pharmacy capped at $2,000 per year, directly benefiting about 1.4 million beneficiaries each year;

3.3 million Medicare beneficiaries with diabetes will benefit from a guarantee that their insulin costs are capped at $35 for a month’s supply.

Lowering Health Care Costs – per the White House:

13 million Americans will continue to save an average of $800 per year on health insurance premiums under Obama Care;

3 million more Americans will be eligible for health insurance; and

The current uninsured rate is at an all-time low of 8%.

CLEAN ENERGY:

Lowering Energy Costs

$14,000 in direct consumer rebates for families to buy heat pumps and other energy efficient home appliances;

a 30% tax credit for solar on roofs program, saving families and estimated $9,000 over the life of the system or at least $300 per year;

Up to $7,500 in tax credits for new electric vehicles and $4,000 for used electric vehicles, helping families save $950 per year – noting there are requirements that various parts of the car be made in America which at this time is not part of the supply chain;

The Administration has stated that their goal in the IRA is to power homes, businesses, and communities with much more clean energy by 2030, including adding:

950 million solar panels;
120,000 wind turbines;
2,300 grid-scale battery plants;
Advance cost-saving clean energy projects at rural electric cooperatives serving 42 million people;
Strengthen climate resilience and protect nearly 2 million acres of national forests; and
Creating millions of good-paying jobs making clean energy in America.
Reducing Harmful Pollution

The hope is that through these actions, the IRA will help reduce greenhouse gas emissions by about 1 gigaton in 2030, or a billion metric tons – 10 times more climate impact than any other single piece of legislation ever enacted.

Moreover, the Administration is incenting carbon capture technology in order to deploy clean energy and reduce particle pollution from fossil fuels to avoid up to 3,900 premature deaths and up to 100,000 asthma attacks annually by 2030.

Fuel For Thought – while some argue that the IRA is too expensive and that carbon reduction goals are not necessary, others view these steps as a good step but not nearly enough to reduce green house gas emissions as set forth in the Paris Accord by 2030. Wherever you come out on this topic, taking steps to reduce our own personal greenhouse gas impact are within our own power. As such, if you don’t believe that humankind contributes to green house gas impacts and global warming then try doing something to help your own personal reduction to support those that really believe this is a serious issue. Your own reduction cannot hurt and it just might help if we all engage and look to help.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how the Inflation Reduction Act might apply with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Nanette Heide, Joel Ephross, Jolie-Anne Ainsley, Robert Montejo, Seth Cooley or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

July 1, 2022 by Brad A. Molotsky

Financing: C-Pace for Multi-Family Residential Projects Finally Approved in PA

A new day dawns in Pennsylvania for mixed use residential rental projects and C-PACE financing. C-PACE stands for Commercial Property Assessed Clean Energy Financing and has now been approved in over 28 states in the US,

C-PACE financing provides borrowers with a low-cost, long term financing option that typically supplements senior financing from traditional banks and can act to reduce required equity needed for a given project.

Terms of C-PACE vary by state but many C-PACE lenders will provide funds for up to 30 years, at approximately 5.25% for approximately 25-30% of the total project cost. As such, C-PACE financing is only slightly more expensive than conventional debt and has a much longer term, and is much cheaper than traditional real estate transaction equity.

C-PACE allows existing and new properties to improve their infrastructure, reduce operating expenses and thereby increase overall value. Eligible improvements typically include energy efficiency, renewable energy, seismic and storm water measures and are typically available for office, industrial, mixed use and hotel projects.

Prior to the passage of SB 635 earlier this week, PA’s C-PACE program did not allow for residential rental mixed use projects to participate. Due to the hard work of many constituents, the legislature amended their statute to now permit mixed use rental residential to qualify as a “qualifying commercial property.”

C-PACE acts as on-bill financing for the cost of applicable approved improvements. Costs are assessed much like a sewer easement or real property tax bill on the borrowers bill. C-PACE loans cannot be accelerated in the event of a default which works to protect the senior lender to the project from being outbid at a foreclosure. C-PACE lenders are willing to lend funds to projects despite this limitation as they have a first priority lien status for outstanding amounts then due and when a project continues to receive energy the bill will include the C-PACE charge – i.e., the C-PACE lender may have to wait a bit to get paid but they will be paid so long as the property is receiving and being billed for energy.

The focus of the C-PACE program is to enable energy and water efficiency upgrades at properties, as well as resiliency improvements, water conservation and renewable energy projects.

Fuel For Thought – once the Bill is signed by Governor Wolf and goes into effect in approximately 60 days, one of the hottest property types in Pennsylvania (i.e., multi family rental residential) will qualify for C-PACE on a go forward basis and will likely see a marked uptake in the amount of C-PACE lending in the Pennsylvania arena. New Jersey has also approved C-PACE lending but regulations have not been published by the NJEDA since passage of C-PACE in 2021 (stay tuned on that front),

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on your Sustainability and ESG planning and initiatives. We would be happy to discussion your proposed project and how C-PACE might apply with you. For more information or if you have any questions about this post, please contact Brad A. Molotsky, Jeff Hamera, Nanette Heide, Joel Ephross, Robert Montejos or David Amerikaner or the attorney in the firm with whom you in regular contact or the attorney in the firm with whom you are regularly in contact.

December 19, 2021 by Brad A. Molotsky

ESG: – New York City Council Passes a Natural Gas Ban for New Buildings

Last week, New York City’s city council approved a ban on natural gas as a fuel source in newly constructed buildings.

Per reporting from NPR, nearly 40% of carbon emissions in the country — and more than 50% of New York City’s emissions — come from buildings.

The new natural gas ban in newly constructed buildings, by a vote of 40-7, applies to buildings that are up to 7-stories in height by the end of 2023; buildings that are taller than 7-stories have until 2027 to comply.

The bill contains several exceptions, including hospitals, laundromats and crematoriums.

As noted by NPR, the legislation also requires that the Mayor’s Office of Long-Term Planning and Sustainability conduct 2 long term studies. The first will examine the use of heat pump technology and the second is a study on the impact of the new bill on the city’s electrical grid.

Not surprising there has been massive pushback from the natural gas industry against these type of natural gas bans. This pushback, however, has not stopped cities around the country from proceeding with various types of natural gas ban efforts. By way of example, at least 42 cities in California have acted to limit natural gas in new buildings, and Salt Lake City, Utah and Denver, Colorado have also made plans to move toward required electrification in buildings.

Moreover, in Ithaca, New York, the city committed to ending the use of natural gas in all buildings — not just new ones.

Passing this type of natural gas ban for new buildings in New York City, the largest city in the country, marks a significant move for other cities trying to move similar legislation to attempt to cut down carbon emissions in the fight against climate change, joining cities like San Jose and San Francisco that have made similar commitments to reduce emissions.

The efforts to ban natural gas in new buildings in New York City is also being considered on a state wide basis in the New York Senate and House. Senator Brian Kavanagh (D) and Assembly Member Emily Gallagher (D) are working on legislation that would require any buildings constructed in New York after 2023 to be entirely powered by electricity. If their legislation passes, New York would become the first state to ban natural gas in new buildings on a state-wide level.

Triple Bottom Line – By passing this type of natural gas ban in new buildings, focusing on buildings as one of the largest emitters of green house gases, New York has provided other cities with a leader to attempt to follow if they are so inclined. As noted, California has been attempting this type of ban on a city by city basis and has passed 42 such bans throughout the state. If New York state follows the NYC lead it will become the first state to enact such a ban and would mark a bit of a watershed moment in the fight against greenhouse gas emissions showing that buildings can indeed be constructed in this manner if reduced emissions are one of the key goals attempting to be achieved by the builder/owner or the legislature.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. For more information, or if you have any questions about this post, please contact Brad A. Molotsky, Nanette Heide, Seth Cooley, David Amerikaner, Jolie-Anne Ansley, Hari Kumar or the attorney in the firm with whom you are regularly in contact.