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Companies Asking EPA for ‘Act of God’ Extensions Due to Virus (1)

March 20, 2020, 5:46 PMUpdated: March 20, 2020, 6:31 PM

Companies and municipalities want the EPA and state regulators to invoke the “act of God” provisions of their settlement agreements in the wake of the new coronavirus pandemic, industry lawyers say.

“It’s not a question of, ‘Will it happen?’ It is happening across the country,” said Brian Israel, head of the environmental practice group at Arnold & Porter Kaye Scholer LLP. “Companies [are] asking either the EPA or other agencies, whoever is the relevant supervising agency, now—today—for some relief in the schedule for achieving those requirements.”

Force majeure provisions free a contract’s parties from obligations in the event of an unforeseeable circumstance, such as an earthquake, a flood, or even a key employee’s inability to file a report because of illness. The provisions are commonly included in settlement agreements with the Environmental Protection Agency.

The EPA is “aware of the potential impact the threat of Covid-19 may have on facility operations. EPA will evaluate requests to invoke force majeure or extension provisions of enforcement agreements on a case-by-case basis,” an agency spokesperson said, referring to the disease caused by coronavirus.

Requests Being Filed

Israel, a former trial attorney at the Justice Department’s environmental enforcement section during the Clinton administration, said his firm is already seeing companies requesting relief, for example, from having to perform groundwater monitoring because they can’t get people to perform the tests.

Other examples include companies that have to do public outreach as part of their settlements, provide training to employees who now aren’t coming to work, or process samples in labs that are now closed, Israel said.

Erika Powers, chair of the environmental department at Barnes & Thornburg LLP, said her firm is getting queries about force majeure exemptions not only from clients but also from vendors and contractors serving those clients.

The firm is now advising clients on legal avenues they should pursue “to protect them, and risk of penalties during this time period,” Fredric Andes, a partner at Barnes & Thornburg, said.

“I think if the IRS can extend the tax deadline date by two months, then EPA should be granting legitimate force majeure requests,” said Patrick Traylor, a partner with Vinson & Elkins LLP and former EPA deputy assistant administrator for enforcement and compliance assurance.

Proactive Notification

Andes and Powers are urging their clients to be proactive in notifying the EPA and relevant agencies that they’ll be unable to comply on time, and that they should ensure the notice specifies exactly which obligations they can’t meet.

The deadline for notification can vary anywhere from 72 hours to 14 days after a company realizes it won’t be able to meet its obligations.

Andes cautioned about relying on the word of federal and state agencies that pledge no penalties for compliance delays. “Make sure you document everything. Let the agencies know well in advance so they don’t penalize you later,” he said.

The big question, Andes said, is “how much detail do you provide? We don’t know. Everyone is having issues with coronavirus. But you just can’t say, ‘Because of coronavirus, my deadlines are gone.’ Say you are having coronavirus issues and explain why.”

Traylor said it’s “absolutely critical” that companies facing potential force majeure-related delays start documenting everything now, at least internally. Otherwise, companies will have a harder time defending themselves against claims in the future that they were operating unlawfully, he said.

The EPA didn’t respond to questions about whether it is developing guidance on handling force majeure requests, saying it doesn’t comment on enforcement matters.

EPA Likely to Agree

Jeff Holmstead, the EPA’s assistant administrator for air and radiation during the George W. Bush administration, predicted that the agency will be more willing than usual to grant force majeure extensions, due to the extent of the nationwide self-quarantine measures.

“Where there is a good reason, EPA is likely to agree, and this is a good thing,” Holmstead, now a partner with Bracewell LLP, said.

Ordinarily, the agency sets a high bar for entities to prove they’ve been affected by an act of God, according to Israel. A business must provide evidence that it made good-faith efforts to comply with its consent agreement or settlement, but was blocked from doing so for reasons out of its control.

“By and large, that’s not going to be that difficult to meet in this case, depending upon the activity,” Israel said. “This is a truly unforeseen event,” with the national emergency and everyone told to stay home, he said.

Christine Todd Whitman, the former New Jersey governor who led the EPA under the George W. Bush administration, also said she thinks the agency should be open to granting force majeure exemptions.

If companies don’t ask for force majeure and comply with consent decrees, they risk exposing themselves to injury and even wrongful death liabilities, said Thomas Lorenzen, former assistant chief of the Justice Department’s environment and natural resources division who’s now a partner at Crowell & Morning LLP.

When force majeure requests are granted, agencies typically negotiate an extension and schedule a date to review how things have developed, Israel said. But the longer the national self-quarantine lasts, the less willing the EPA will be to grant continued extensions, he said.

“I would not advise clients to anticipate that you’ll be able to get a second extension,” Israel said.

Some Fear Abuse

David Baron, managing attorney at environmental law firm Earthjustice, said there should be no blanket extensions of clean air, clean water, and other health compliance deadlines.

“These deadlines, after all, are meant to protect people from dangerous health threats from pollution—threats that are major concerns in addition to Covid-19,” Baron said. “The burden needs to be on the industry seeking relief to show that inability to comply in a specific case is due to Covid-19, not failure of the industry to timely install or maintain required pollution controls.”

But Whitman said she doubted that companies will try to abuse their force majeure clauses during the coronavirus crisis.

“There may be some outliers that would try something like that, but this is a national crisis,” Whitman said. “I don’t see anybody even thinking that far ahead. Maybe they would eventually, but not now.”

(Updates with Patrick Traylor comments in 9th and 14th paragraphs.)

To contact the reporters on this story: Stephen Lee in Washington at stephenlee@bloombergenvironment.com; Amena H. Saiyid in Washington at asaiyid@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Anna Yukhananov at ayukhananov@bloombergenvironment.com

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