Got (rbst-free) Milk - The Sixth Circuit Overturns Ohio's Milk Labeling Restrictions

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1 Ecology Law Quarterly Volume 38 Issue 2 Article 12 March 2011 Got (rbst-free) Milk - The Sixth Circuit Overturns Ohio's Milk Labeling Restrictions Sam Wheeler Follow this and additional works at: Recommended Citation Sam Wheeler, Got (rbst-free) Milk - The Sixth Circuit Overturns Ohio's Milk Labeling Restrictions, 38 Ecology L. Q. 571 (2011). Link to publisher version (DOI) This Article is brought to you for free and open access by the Law Journals and Related Materials at Berkeley Law Scholarship Repository. It has been accepted for inclusion in Ecology Law Quarterly by an authorized administrator of Berkeley Law Scholarship Repository. For more information, please contact jcera@law.berkeley.edu.

2 Got (rbst-free) Milk? The Sixth Circuit Overturns Ohio's Milk Labeling Restrictions INTRODUCTION Over the past several decades, the United States has increasingly grown genetically engineered crops.' As genetically modified food becomes more common, so too have controversies over "Frankenfood." 2 One recent controversy, played out in International Dairy Foods Ass'n v. Boggs,' concerns not only the usual environmental and health issues, but also constitutional free speech issues, related to genetically modified milk. In Boggs, the International Dairy Foods Association and the Organic Trade Association (collectively "Processors") 4 claimed that regulations imposed by the Ohio Department of Agriculture violated their First Amendment rights and the dormant Commerce Clause.' The regulations at issue prohibited dairy processors from stating that their milk products do not contain recombinant bovine somatotropin (rbst), a genetically engineered artificial hormone given to cows to increase milk production,' and required dairy processors to include a disclaimer when making claims that no rbst was used in the production of their milk.' The Sixth Circuit 2011 Regents of the University of California. 1. See Adoption of Genetically Engineered Crops in the U.S., U.S. DEP'T OF AGRIC., ECON. RESEARCH SERV., (last updated July 1, 2010). For example, genetically engineered soybeans comprise over 90 percent of soybeans grown in the United States. Id. 2. See Olga Manda, Controversy Rages over 'GM' Food Aid, AFR. RENEWAL, Feb. 2003, at 5, available at Genetically Modified Foods and Organisms, HUMAN GENOME PROJECT INFO., Human Genome/elsi/gmfood.shtml (last modified Nov. 5, 2008). See generally Stella G. Uzogara, The Impact of Genetic Modification of Human Foods in the 21st Century: A Review, 18 BIOTECHNOLOGY ADVANCES 179 (2000). 3. Int'l Dairy Foods Ass'n v. Boggs (Boggs II), 622 F.3d 628 (6th Cir. 2010). 4. Int'l Dairy Foods Ass'n v. Boggs (Boggs 1), Nos. 2:08-CV-628 & 2:08-CV-629, 2009 WL , at *20 (S.D. Ohio Apr. 2, 2009), aff'd in part andrev'd in part, 622 F.3d 628 (6th Cir. 2010). 5. Id. at *4. 6. Boggs II, 622 F.3d at 632. Recombinant bovine somatotropin (rbst) is also known as recombinant bovine growth hormone (rbgh). Id. When combined with naturally occurring bovine somatotropin (bst), rbst can increase milk production by 10 percent. Id. 7. Boggs I, 2009 WL , at *

3 572 ECOLOGY LAW QUARTERLY [Vol. 38:571 struck down the regulations' in a victory for both the environment' and the free market, giving consumers the freedom to choose whether to drink milk that contains artificial hormones, and enabling the market to reward dairy processors meeting the growing demand for rbst-free milk. I. BACKGROUND In 1993, the Food and Drug Administration (FDA) approved the use of rbst in cows."o The FDA concluded that rbst was safe for cows, and milk from rbst-treated cows was safe for human consumption." Furthermore, the FDA found no significant difference between milk from rbst- and non-rbsttreated cows, 12 and noted there is currently no test available distinguishing between bst (bovine somatotropin, a naturally occurring hormone) and rbst in milk.13 While the use of rbst in dairy production has been allowed in the United States since the FDA's approval, such use has been banned in many countries, including Australia,1 4 New Zealand," Japan,1 6 Canada," and the European Union." Recognizing some consumers may prefer milk from cows not treated with rbst, the FDA permitted dairy processors to label their products as such, so long as any such statements were "truthful and not misleading." 9 The FDA issued an interim guidance document 20 proposing guidelines for two types of 8. Boggs 1, 622 F.3d at See, e.g., Press Release, Ctr. for Food Safety, Federal Court Strikes Down Ohio Ban on rbgh- Free Labels on Dairy Products (Sept. 30, 2010), Charles Margulis, Ohio Victory! Court Rules GMO Milk Is Inferior to Natural Milk, GENERATION GREEN: BLOG OF THE CTR. FOR ENVTL. HEALTH (Oct. 4, 2010), Boggs 11, 622 F.3d at Id. But see Int'l Dairy Foods Ass'n v. Amestoy, 92 F.3d 67, 78 (2d Cir. 1996) (Leval, J., dissenting) ("[C]ows injected with [rbst] are at an increased risk for: various reproductive disorders, 'clinical mastitis [udder infections] (visibly abnormal milk),' 'digestive disorders such as indigestion, bloat, and diarrhea,' 'enlarged hocks and lesions,' and 'swellings' that may be permanent." (quoting warning label of Posilac, Monsanto's brand of rbst)). 12. Boggs II, 622 F.3d at Interim Guidance on the Voluntary Labeling of Milk and Milk Products from Cows That Have Not Been Treated with Recombinant Bovine Somatotropin, 59 Fed. Reg. 6279, 6280 (Feb. 10, 1994). 14. FOOD STANDARDS AUSTL. N.Z., A RISK PROFILE OF DAIRY PRODUCTS IN AUSTRALIA 92 (2006), srcfiles/p296%2odairy/o2oppps%20far%2oattach% 202%20FINAL%20-%20mr.pdf. 15. Id. 16. Id. 17. Recombinant Bovine Somatotropin (rbst), HEALTH CANADA, (last modified Oct. 1, 2004). 18. Council Decision 1999/879, 1999 O.J. (L 331) 71 (EC). 19. Boggs H1, 622 F.3d 628, 633 (6th Cir. 2010); Interim Guidance on the Voluntary Labeling of Milk and Milk Products from Cows That Have Not Been Treated with Recombinant Bovine Somatotropin, 59 Fed. Reg. 6279, 6280 (Feb. 10, 1994). 20. Interim Guidance, 59 Fed. Reg. at 6279.

4 2011] IN BRIEF 573 claims: composition claims, referring to the final composition of the milk or milk product (such as "rbst free"); and production claims, referring to the manner in which the product is produced (such as "from cows not treated with rbst"). 21 The FDA noted composition claims had the strong potential to mislead consumers because either they might be false, 22 or they could imply that milk from rbst-treated cows was less safe even though the FDA had determined that "there was no significant difference between milk from treated and untreated cows." 23 Accordingly, the FDA favored production claims over composition claims. 24 Even then, it worried that, without proper context, such claims could also mislead consumers.' Consequently, the FDA encouraged producers to include a disclaimer, for example, that "[n]o significant difference has been shown between milk derived from rbst-treated and non-rbst-treated cows." 26 Consumer demand for milk from non-rbst-treated cows has grown since the issuance of the FDA guidance. 27 In response to this increased demand, many International Dairy Foods Association members procure milk only from producers that do not use rbst.' In response to advertising by several Processor members stating that they did not use milk from cows treated with rbst, 29 the governor of Ohio (the State) issued an executive order directing the Ohio Department of Agriculture (ODA) to propose regulations "defin[ing] what constitutes false and misleading labels on milk and milk products." The ODA rule (the Rule) prohibited composition claims entirely and required production claims to be accompanied by a contiguous additional disclaimer that the "FDA has determined that no significant difference has been shown between milk derived from rbst-supplemented and non-rbst-supplemented cows." Boggs II, 622 F.3d at For example, while milk can be "rbst-free," it cannot be "bst-free" because bst is a naturally occurring hormone in milk. Id 23. Id.; Interim Guidance, 59 Fed. Reg. at Interim Guidance, 59 Fed. Reg. at Id. 26. Id. Furthermore, because there is currently no test distinguishing between bst and rbst, the FDA recommended states require producers to maintain records and make them available for inspection to substantiate their claims. Id. 27. Boggs II, 622 F.3d at Id. This association is a trade organization representing approximately 85 percent of dairy producers and manufacturers of dairy products, including milk, cheese, and frozen desserts. Id. at 632. In addition, OTA members who label their products "organic" cannot, by law, use milk from cows treated with rbst. Id; see infra note Boggs II, 622 F.3d at Id. (quoting Ohio Governor Exec. Order S (Feb. 7, 2008), available at docs/news/2008/newsadmn_020708_rbstorder.pdf). 31. These contiguous disclaimers were required to be "in the same label panel, in exactly the same font, style, case, and color and at least half the size (but no smaller than seven point font) as the foregoing representation." OHIO ADMIN. CODE 901: (2008).

5 574 ECOLOGY LAW QUARTERLY [Vol. 38:571 The Processors 32 initiated lawsuits against the State, alleging that the Rule was unconstitutional because it violated their First Amendment rights." After the district court granted summary judgment in favor of the State, 34 the Processors appealed to the Sixth Circuit. II. SIXTH CIRCUIT DECISION In a unanimous decision, the Sixth Circuit held that the Rule infringed on the Processors' First Amendment rights, reversing the district court's grant of summary judgment. 36 A. First Amendment Challenge to the Ban on Composition Claims Noting that commercial speech is afforded fewer First Amendment protections than noncommercial speech, the court evaluated the ban on composition claims under the four-part test set out in Central Hudson." First, the court concluded that the Processors' composition claims were not inherently misleading because, contrary to the FDA's assertions, there is a compositional difference between milk from treated versus untreated cows. 3 8 The court noted that milk from rbst-treated cows contained elevated levels of insulin-like growth factor 1, a hormone that in high levels has been linked to 32. The OTA represents companies spanning the organic food industry, including dairy production. Boggs II, 622 F.3d at 632. Several members of the OTA are certified organic dairy producers and thus must comply with the Organic Foods Production Act, which forbids the use of artificial hormones, antibiotics, and pesticides in dairy products. Id. 33. Id. at 634. In addition to the First Amendment claim, the Processors also alleged that the Rule was unconstitutional because it violated the dormant Commerce Clause, was unconstitutionally vague, and was preempted by the Organic Foods Production Act, 7 U.S.C Id The district court consolidated the Processors' two cases into a single lawsuit. Id. 34. Id. The court granted summary judgment in favor of the State on all counts except for the Processors' First Amendment claim against the restrictions on production claims, where it granted partial summary judgment. Id. 35. Id at 635. The Processors contested only the district court's ruling on their First Amendment and dormant Commerce Clause claims. Id 36. Id. at , 643. The court held that the Rule did not violate the dormant Commerce Clause because it did not affect interstate commerce extraterritorially, did not favor in-state interests at the expense of out-of-state interests, and did not lack a rational basis to believe that the Rule's benefit outweighed any burden it imposed, affirming the district court's grant of summary judgment in favor of the State on the Processors' dormant Commerce Clause claim. Id. at 648, Id. at [A] court first determines whether the speech concerns unlawful activity or is misleading. If a court finds in the affirmative on either prong, the speech is not entitled to First Amendment protection, and the analysis ends. But if the court finds that the speech is entitled to First Amendment protection, it then makes three additional inquiries: (1) whether the asserted governmental interest is substantial, (2) whether the regulation directly advances that interest, and (3) whether the regulation is more extensive than necessary to serve the asserted interest. Id. at 636 (citations omitted) (citing Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 566 (1980)). 38. Id. at

6 2011] INBRIEF 575 several types of cancers. 39 Furthermore, rbst induces unnatural milk production during a cow's "negative energy phase," during which milk produced is of a lower quality due to its increased fat content, lower levels of proteins, 40 and higher levels of somatic cell counts (pus 41 ), which makes the milk turn sour more quickly. 42 Next, the State did have a substantial interest in preventing the use of false or misleading labeling. 43 However, the Rule did not directly advance the State's interest, and was more extensive than necessary to serve that interest.4 A disclaimer would sufficiently mitigate possible consumer confusion from a composition claim because together the composition claim and disclaimer would indicate a difference between milk from treated versus untreated cows without being deceptive. 45 As the ban on composition claims failed the Central Hudson test, the Sixth Circuit held it unconstitutional on First Amendment grounds.' B. First Amendment Challenge to the Disclosure Requirement for Production Claims In evaluating the Rule's restriction on production claims, the court used the more lenient Zauderer standard, rather than the stricter Central Hudson standard, because Zauderer applies to disclosure requirements that regulate potentially misleading commercial speech, whereas Central Hudson applies to outright prohibitions on speech. 47 The court found that the Rule's disclosure requirement for production claims was reasonably related to the State's interest 39. Id. at Id. at See April Fulton, Court OKs Hormone-Free Label on Dairy Products in Ohio, NAT'L PUB. RADIO (Oct. 1, 2010, 4:31 PM), Boggs II, 622 F.3d at 637. The court also noted the inability to discover rbst in milk is not necessarily because rbst is absent. Rather, it is because scientists have yet to create a test to detect it. Id 43. Id at Id at Id 46. Id at Id. at "Under Zauderer, the [r]ule's disclosure requirement for production claims must be 'reasonably related to the State's interest in preventing deception of consumers' and cannot be 'unjustified or unduly burdensome."' Id. at 642 (quoting Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, 651 (1985)). Commercial speech is essentially subject to intermediate scrutiny as outlined in Central Hudson. ERWIN CHEMERINSKY, CONSTITUTIONAL LAW: PRINCIPLES AND POLICIES 1090 (3d ed. 2006). Compelled noncommercial speech is subject to strict scrutiny. STEVEN G. BRODY & BRUCE E.H. JOHNSON, ADVERTISING & COMMERCIAL SPEECH: A FIRST AMENDMENT GUIDE 12:1 (6th ed. 2010). However, there is no "clear guidance" when considering compelled commercial speech. Id But see Boggs II, 622 F.3d at 641 ("The speech rights of advertisers, in contrast, are of less value; specifically, their 'constitutionally protected interest in not providing the required factual information is minimal."' (internal quotation marks omitted) (quoting Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct. 1324, 1339 (2010) (citing Zauderer, 471 U.S. at 651))); see also Milavetz, 130 S. Ct. at 1343 (Thomas, J., concurring) (suggesting that compelled speech should be evaluated under strict scrutiny, regardless of whether it is commercial or noncommercial).

7 576 ECOLOGYLA W QUARTERLY [Vol. 38:571 in preventing consumer deception. 48 However, there was no rational basis for requiring contiguous production claim disclaimers, since there was only a "paucity of evidence," based on anecdotes and assertions, militating against the use of asterisks or other methods of linking noncontiguous disclaimers. 49 As a result, the court held the Rule violated the Zauderer test and was unconstitutional on First Amendment grounds.so III. ANALYSIS In proposing the ban on composition claims, the State was concerned that such labels could be false and misleading." As noted by the district court, "[e]ven if truthful, speech can still be misleading if its implication is misleading." 52 Additionally, popular culture has recognized that truthful statements about the composition of food for marketing purposes can nonetheless be misleading." But while states have a valid interest in protecting consumers from misleading statements,' Ohio's regulations went too far. As the Sixth Circuit pointed out, because there is a difference between milk that contains rbst and milk that does not contain rbst, composition claims like "rbst-free" are not inherently misleading.s 5 In such circumstances, "the preferred remedy is more disclosure, rather than less." 56 Furthermore, it was not surprising, considering the widespread usage of disclaimers throughout the country, that the court upheld the requirement that disclaimers accompany production claims." However, the court's reasoning in striking down the ban on composition claims appears to rest substantially, if not entirely, on its finding of a compositional difference between milk from treated versus untreated cows. 59 This directly contradicts the FDA's assertion that there is "no significant difference between milk from treated and untreated cows." If the court found that there was no compositional difference, then it would be forced to find that composition claims were misleading. As such, the "speech 48. Boggs II, 622 F.3d at Id. at See id. 51. See id. at Boggs 1, 2009 WL , at * See, e.g., Randall Munroe, Free, XKCD (Sept. 25, 2009), Boggs II, 622 F.3d at Id at Id at 636 (quoting Bates v. State Bar of Ariz., 433 U.S. 350 (1977)). 57. See, e.g., ALASKA STAT (2010); VT. STAT. ANN. tit. 6, 2762 (2010); Wis. ADMIN. CODE ATCP (2010). 58. Boggs II, 622 F.3d at See id. at Id. at 637; Interim Guidance on the Voluntary Labeling of Milk and Milk Products from Cows That Have Not Been Treated with Recombinant Bovine Somatotropin, 59 Fed. Reg. 6279, 6280 (Feb. 10, 1994).

8 2011] INBRIEF 577 [would not be] entitled to First Amendment protection," thus ending the Central Hudson analysis at the first step. 61 Finally, Boggs has major implications for genetically engineered food labeling, since the FDA lacks the authority to mandate labeling of products that are produced differently but do not differ materially in composition. 62 For example, in 2010, the FDA began holding public meetings on the possible approval of AquAdvantage salmon, a salmon genetically engineered for use as food. 6 ' The AquAdvantage salmon grows twice as fast as other salmon and consumes 25 percent less feed.' The FDA has determined that "there are no material differences in food from [AquAdvantage] salmon and other Atlantic salmon." 65 However, test results show that AquAdvantage salmon contain nearly 40 percent higher levels of insulin-like growth factor 1 compared to regular salmon.' Using the reasoning from Boggs, a court could rule that there is a compositional difference between AquAdvantage salmon and conventional salmon, contravening the FDA's finding. Future marketers might then be able to claim that their salmon is "GMO-free." This may also give the FDA the authority needed to mandate labeling of genetically engineered salmon. 61. Boggs II, 622 F.3d at 636. This result would mirror International Dairy Foods Ass'n v. Amestoy, a Second Circuit case striking down Vermont's requirement (rather than prohibition) of a statement differentiating between milk from rbst-treated cows and untreated cows. 92 F.3d 67 (2d Cir. 1996). The decision in Amestoy rested strongly on the Second Circuit's conclusion, following the FDA's findings, that there was no significant difference between milk from treated and untreated cows. See id. at More specifically, the court accepted the FDA's finding that rbst "has no appreciable effect on the composition of milk produced by treated cows," and concluded that Vermont "plain[ly]... could not justify the statute on the basis of 'real' harms." Id. at 73. The fact that the Sixth Circuit found otherwise, however, suggests that Amestoy should have come out differently. The Second Circuit noted that "[a]bsent... some indication that this information [disclosing whether the milk came from rbsttreated cows] bears on a reasonable concern for human health or safety or some other sufficiently substantial governmental concern, the manufacturers cannot be compelled to disclose it." Id. at U.S. FOOD & DRUG ADMIN., BACKGROUND DOCUMENT: PUBLIC HEARING ON THE LABELING OF FOOD MADE FROM THE AQUADVANTAGE SALMON 4 (2010), available at downloads/food/labelingnutrition/foodlabelingguidanceregulatorylnformation/topic- SpecificLabelinglnformation/UCM pdf; see Stauber v. Shalala, 895 F. Supp (W.D. Wis. 1995). 63. U.S. FOOD & DRUG ADMIN., PUBLIC MEETINGS ON GENETICALLY ENGINEERED ATLANTIC SALMON (2010), 2010 WL Andrew Zajac, FDA Advisors to Vote on Genetically Engineered Salmon, L.A. TIMES (Sept. 18, 2010), CNTR. FOR VETERINARY MED., U.S. FOOD & DRUG ADMIN., BRIEFING PACKET FOR AQUADVANTAGE SALMON VETERINARY MEDICINE ADVISORY COMMITTEE 109 (2010), available at AdvisoryCommittee/UCM pdf. 66. Id. at 68; see Meredith Melnick, "Frankenfish" May Soon Be Spawning: Is Genetically Modified Salmon Safe?, TIME (Sept. 19, 2010), We welcome responses to this In Brief. If you are interested in submitting a response for our online companion journal, Ecology Law Currents, please contact ecologylawcurrents@boalt.org. Responses to articles may be viewed at our website,

9 578 ECOLOGYLAW QUARTERLY [Vol. 38:571 CONCLUSION The court's decision on production claim requirements is not particularly groundbreaking, but with the potential that consumers could soon be eating genetically engineered animals in addition to genetically engineered plants, its determination that there is a difference between milk from rbst-treated cows versus non-rbst-treated cows may have major ramifications for labeling genetically engineered food in the future. In the meantime, the court has preserved for consumers the right to know what the milk they drink contains or does not contain, and the freedom to support those dairy producers accordingly. Tony Au

10 South Coast Air Quality Management District v. Federal Energy Regulatory Commission: Ninth Circuit Holds Reliance on Problematic State Agency Standard Satisfies NEPA INTRODUCTION South Coast Air Quality Management District v. Federal Energy Regulatory Commission held that the Federal Energy Regulatory Commission could use a problematic state natural gas quality standard to satisfy environmental review under the National Environmental Policy Act. 1 South Coast involved the Ninth Circuit review of a Federal Energy Regulatory Commission order approving the expansion of an interstate natural gas pipeline. 2 The expansion would enable the consumption of foreign-sourced liquefied natural gas in California's South Coast Air Basin, 3 which would likely increase nitrogen oxide emissions in the South Coast Air Basin. 4 The court held that the Federal Energy Regulatory Commission's reliance on the natural gas quality standards set forth by the California Public Utilities Commission was reasonable, as the California Public Utilities Commission has jurisdiction over the final intrastate pipeline segment that ultimately would introduce the foreign-sourced liquefied natural gas into the South Coast Air Basin. 5 This rigid jurisdictional argument directly frustrates an enumerated purpose of the National Environmental Policy Act: to produce relevant environmental analysis "before decisions are made and before actions are taken." Regents of the University of California. 1. S. Coast Air Quality Mgmt. Dist. v. Fed. Energy Regulatory Comm'n (S. Coast), 621 F.3d 1085, 1096 (9th Cir. 2010). 2. Id. at Id. 4. STEVEN WEISSMAN, ALJ, RULEMAKING NO , PROPOSED DECISION RE POLICIES AND RULES TO ENSURE RELIABLE, LONG-TERM SUPPLIES OF NATURAL GAS (2006). 5. See S. Coast, 621 F.3d at 1091, C.F.R (b) (2010). NEPA outlines a set of procedures that requires agencies to prepare a detailed environmental impact statement for major federal actions that significantly affect the environment. 42 U.S.C. 4332(C) (2006). 579

11 580 ECOLOGY LAW QUARTERLY [Vol. 38:579 I. BACKGROUND A. The Setting in Calfornia California has an air-pollution problem related to its consumption of natural gas. 7 The combustion of any natural gas releases several pollutants, including nitrogen oxide (NOx), 8 a chemical precursor of ozone and particulate matter, two federally regulated air pollutants. 9 But not all natural gas is created equal. Natural gas varies based on hydrocarbon composition, resulting in different levels of NOx emissions upon combustion. 10 The changing gas-supply profile, due in part to increasing liquefied natural gas (LNG) imports, prompted the industry to define "interchangeability" indices for natural gas compositions." An industry group recommended the Wobbe Index (WI) as the most robust. 12 The WI was relevant in South Coast Air Quality Management District v. Federal Energy Regulatory Commission (South Coast) because NOx emissions and WI values are closely related: NOx emissions tend to rise as the WI value of a given quantity of natural gas increases. 13 The five-year historical average WI value of natural gas burned in the South Coast Air Basin (Basin) is The WI values of foreign-sourced LNG are generally higher, 15 with the WI values of some supplies in excess of The California Public Utilities Commission's (CPUC) WI maximum allowable value of 1385 would provide regulatory certainty to LNG developers looking to introduce LNG into the 7. See, e.g., NAT'L RESEARCH COUNCIL, AIR QUALITY MANAGEMENT IN THE UNITED STATES 40 (2004). The Basin struggles to a greater degree than other urban areas to meet federal standards for several pollutants, including ozone and particulate matter. S. COAST AIR QUALITY MGMT. DIST., FINAL 2007 AIR QUALITY MANAGEMENT PLAN 2-4 (2007). 8. See generally Paulina Jaramillo et al., Comparative Life-Cycle Air Emissions of Coal, Domestic Natural Gas, LNG, and SNG for Electricity Generation, 41 ENVTL. SCI. & TECH (2007) (listing the greenhouse gas, SOx, and NOx life-cycle emissions of electricity generated by the combustion of various fuels). 9. S. Coast, 621 F.3d at NATURAL GAS COUNCIL (NGC) INTERCHANGEABILITY WORK GROUP, WHITE PAPER ON NATURAL GAS INTERCHANGEABILITY AND NON-COMBUSTION END USE 4-5, 12 (2005) [hereinafter NGC WHITE PAPER]. 11. Id. at 2-3. "Interchangeability" is defined as "the ability to substitute one gaseous fuel for another in a combustion application without materially changing operational safety, efficiency, performance, or materially increasing air pollutant emissions." Id. at 2 (emphasis added). 12. Id. at S. Coast, 621 F.3d at Id. 15. Id. 16. NAT'L ASS'N OF STATE REGULATORY COMM'RS, LIQUEFIED NATURAL GAS: AN OVERVIEW OF THE ISSUES FOR STATE PUBLIC UTILITY COMMISSIONS 14 (2005).

12 2011]1 IN BRIEF 581 Basin. 17 However, this regulatory certainty would likely lead to increased NOx emissions. 18 B. The Statutes South Coast involved issues related to the National Environmental Policy Act (NEPA),1 9 the Natural Gas Act, 20 and the Clean Air Act. 21 However, the dispute in South Coast primarily centered on the obligations of the Federal Energy Regulatory Commission (FERC) under NEPA. NEPA itself does not mandate particular results, but simply outlines a set of "action-forcing" 22 procedures that require agencies to take a "hard look" at environmental consequences of a proposed action. 23 One of NEPA's purposes is to ensure that the federal agency has detailed information concerning environmental impacts of the proposed action. 24 It requires the agency to prepare a detailed environmental impact statement (EIS) for "major federal actions significantly affecting the quality of the human environment." 25 The action-forcing mechanism, the EIS, is where the rubber meets the road by ensuring "public officials make decisions that are based on [an] understanding of environmental consequences." 26 C. The Pipeline South Coast concerned North Baja Pipeline, LLC's (North Baja) application to modify its pipeline, as submitted to FERC. 27 North Baja operates a nearly eighty-mile interstate natural gas pipeline that extends from Arizona, through southeastern California, to a point on the international border between Arizona and Mexico. 28 The pipeline supplies natural gas from the United States to Mexico, where it connects with a Sempra Energy pipeline Re Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas, 252 Pub. Util. Rep. 4th (PUR) 1, at 72 (Cal. Pub. Utils. Comm'n, Sept. 21, 2006) (final order) [hereinafter CPUC Final Order]. 18. See id at See 42 U.S.C (2006). 20. See 15 U.S.C. 717 (2006) See 42 U.S.C (2006). 40 C.F.R (2010). 23. Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350 (1989); see also James J. Hoecker, The NEPA Mandate and Federal Regulation of the Natural Gas Industry, 13 ENERGY L.J. 265, 265 (1992) ("NEPA is more procedural than prophylactic."). 24. S. Coast, 621 F.3d 1085, 1092 (9th Cir. 2010) U.S.C. 4332(C) (2006) C.F.R (c) (2010). The EIS provides a discussion of significant environmental impacts and reasonable alternatives that minimize adverse impacts or enhance the quality of the human environment. 40 C.F.R (2010). 27. S. Coast, 621 F.3d at Id. 29. Id.; North Baja Pipeline, 121 FERC 61,010, 61,032 (2007).

13 582 ECOLOGY LAW QUARTERLY [Vol. 38:579 In February 2006, North Baja filed an application with FERC to expand the pipeline in order to allow the importation of LNG from Mexico into the United States. 30 As part of the expansion, an interconnection was proposed from the pipeline to an existing Southern California Gas Company (SoCalGas) compressor station located in Riverside County, California. 31 The SoCalGas interconnection would enable consumption of foreign-sourced LNG in the Basin. 32 In June 2007, FERC and other agencies issued a final EIS for the project. 33 The final EIS did not analyze any air-quality impacts resulting from the consumption of foreign-sourced LNG supplied by the pipeline. 34 Instead, FERC points to the fact that any LNG introduced into California by the pipeline would necessarily meet CPUC's natural gas quality standard. 35 The South Coast Air Quality Management District (the District) 36 intervened in November 2006 on grounds related to the purported inadequacy of the final EIS.37 In October 2007, FERC authorized the expansion as requested by North Baja. 38 II. ANALYSIS A. South Coast Held Reliance on CPUC's WI Maximum Value to Satisfy NEPA Was Reasonable The District contended that, because of the purported nexus between FERC approval of the pipeline and consumption of foreign-sourced LNG in the Basin, 39 FERC should have analyzed the air-quality impact resulting from consumption of foreign-sourced LNG supplied by the pipeline. 40 The District argued that FERC's reliance on the fact that CPUC's WI maximum value of 30. North Baja Pipeline, 121 FERC 161,010,61, Id 161, n Id. T 61,045 n.75. However, not all natural gas delivered to the SoCalGas interconnection would necessarily flow to the Basin. See id 33. See Notice of Availability, 72 Fed. Reg. 33,221 (June 15, 2007). 34. North Baja Pipeline, 121 FERC 61,010, 61, Id 61, The District is the California state governmental body charged with regulating air pollution in the South Coast Air Basin, which includes Orange County and the non-desert portions of Los Angeles, Riverside, and San Bernardino Counties. See CAL. HEALTH & SAFETY CODE (West 2010). 37. North Baja Pipeline, 121 FERC 161,010, 61, Id.161, Id. 161, S. Coast, 621 F.3d 1085, 1093 (9th Cir. 2010). The court apparently believed that "[FERC] had considered [the emissions impact of the consumption of foreign-sourced LNG supplied by the Pipeline] in its 250-page EIS." Id. However, FERC admitted it did not consider this particular impact in its EIS, instead relying on the fact that the CPUC's WI maximum value of 1385 necessarily would apply. North Baja Pipeline, 121 FERC 161,073, 61,613.

14 2011] IN BRIEF would be the upper limit could not substitute for FERC's own emissions analysis. 4 1 The District alleged that this analytical limitation violated NEPA. 42 The South Coast court rejected the District's arguments and upheld the EIS. 43 The court framed its opinion around the creation of FERC's jurisdiction," interpreted narrowly to extend only to those areas outside of state regulatory reach. 45 Notably, the Hinshaw Amendment 46 to the Natural Gas Act explicitly removes intrastate pipelines, such as the SoCalGas interconnection, from the purview of FERC. 47 Therefore, the court found that state agencies should regulate "all aspects related to the direct consumption of gas"-here, the state agency is the CPUC. 48 In consideration of these historic limits on FERC's authority, the court held that NEPA cannot compel FERC to analyze anything outside of its jurisdictional limits. 49 Generally, nor can NEPA be used to indirectly expand the limits on FERC's authority. 50 Given the CPUC's authority over quality standards related to the direct consumption of natural gas, the court found FERC's reliance on the CPUC's standard reasonable "even if CPUC's conclusions were somehow incorrect." 5 1 B. South Coast in Light of the Underlying CPUC Proceeding The CPUC proceeding investigated, among other things, the revision of California natural gas quality standards. 52 The CPUC adopted the revision without environmental impact review and based on a thin evidentiary record. The administrative law judge (ALJ) who oversaw the CPUC proceeding found that the California Environmental Quality Act, 53 the state-level counterpart of 41. Reply Brief for Petitioner at 2, S. Coast, 621 F.3d 1085, No (9th Cir. Jan. 21, 2009) (opining that FERC cannot "outsource its legal obligation to prepare a complete environmental analysis"). 42. S. Coast, 621 F.3d at The District also alleged violations of Natural Gas Act and Clean Air Act. Id. 43. Id at See id. at Mich. Consol. Gas Co. v. Panhandle E. Pipe Line Co., 887 F.2d 1295, 1299 (6th Cir. 1989). 46. The Hinshaw Amendment exempts pipelines that receive natural gas from facilities that are within or at the boundary of a state, if all gas is ultimately consumed within the state and subject to that state's regulatory commission. Monica Berry, Liquefied Natural Gas Import Terminals: Jurisdiction Over Siting, Construction, and Operation in the Context of Commerce Clause Jurisprudence, 26 ENERGY L.J. 135, 139 (2005) (citing 15 U.S.C. 717(c) (2000)). 47. S. Coast, 621 F.3d at 1091 (citing Gen. Motors Corp. v. Tracy, 519 U.S. 278, 284 n.3 (1997)). FERC can consider a matter beyond its jurisdiction if there would otherwise be a regulatory gap, but not if Congress reserved jurisdiction within another agency. Altamont Gas Transmission Co. v. Fed. Energy Regulatory Comm'n, 92 F.3d 1239, 1248 (D.C. Cir. 1996). 48. S. Coast, 621 F.3d at Id 50. See Natural Res. Def. Council v. EPA, 822 F.3d 104, 129 (D.C. Cir. 1987). 51. S. Coast, 621 F.3d at 1096 (emphasis added). 52. CPUC Final Order, supra note 17, at CAL. PUB. RES. CODE (West 2010).

15 584 ECOLOGY LAW QUARTERLY [Vol. 38:579 NEPA, 54 compelled environmental review of the revision. 55 The five politically appointed commissioners of the CPUC overruled the ALJ and ordered that environmental review of the revision was not needed. 56 The District's judicial challenge to this order was unsuccessful. 57 Instead of relying on environmental review, the CPUC relied on the interim recommendations from a white paper by members of the Natural Gas Council (NGC), an industry trade group, 58 to establish the WI maximum value of The NGC white paper made no effort to conceal a litany of largely unaddressed concerns related to increasing the WI maximum value, including non-compliance with emission requirements. 60 Even an industry respondent in the CPUC proceeding conceded "the record [was] notable for its lack of the solid empirical data." 6 1 The details surrounding the paper's creation further calls into question whether the CPUC should have relied on the recommendations outlined in a single industry white paper. A self-selected group of industry participants drafted the NGC white paper, and did not state which participants endorsed the interim recommendations. 62 Some of the same industry participants who authored the NGC white paper had much at stake in the FERC and CPUC proceedings. SoCalGas was a respondent in the CPUC proceeding 63 and was the real party in interest to the proposed interconnection with the pipeline.m Sempra Energy was the real party interest to a pipeline in Mexico that connects with the pipeline. 65 And, Sempra Energy owns SoCalGas. 66 That the same industry participants were authors of 54. S. Coast, 621 F.3d 1085, 1094(9th Cir. 2010) 55. WEISSMAN, supra note 4, at Reply Brief for Petitioner at 13 n.1, S. Coast, 621 F.3d 1085, No (9th Cir. Jan. 21, 2009); see CPUC Final Order, supra note 17, at 75. In response, the California attorney general submitted an amicus curiae brief urging the CPUC to reconsider its decision and conduct an environmental review. Brief for California Attorney General Bill Lockyer as Amicus Curiae Supporting Rehearing Requestor, Re Policies and Rules to Ensure Reliable, Long-term Supplies of Natural Gas, Rulemaking No (Cal. Pub. Utils. Comm'n Oct. 27, 2006). 57. See S. Coast Air Quality Mgmt. Dist. v. Cal. Pub. Utils. Comm'n, No. Sl51156, 2008 Cal. LEXIS 8866 (Cal. July 16, 2008). 58. The NGC is "an organization made up of the representatives of the trade associations of the different sectors of the natural gas industry." Provisions Governing Natural Gas Quality and Interchangeability in Interstate Natural Gas Pipeline Company Tariffs, 115 FERC 161,325, 62,158 n.17 (June 15, 2006) (statement of policy). 59. CPUC Final Order, supra note 17, at NGC WHITE PAPER, supra note 10, at 19. Other unaddressed concerns outlined in the NGC white paper include increased soot formation, damage to end-use equipment, and data limitations related to end-use equipment and natural gas supplies. Id. at WEISSMAN, supra note 4, at (emphasis added). 62. See NGC WHITE PAPER, supra note 10, at Re Policies and Rules to Ensure Reliable, Long-Term Supplies of Natural Gas, 230 Pub. Util. Rep. 4th (PUR) 1, at 3 (Cal. Pub. Utils. Comm'n, Jan. 22, 2004). 64. See S. Coast, 621 F.3d 1085, 1089 (9th Cir. 2010). 65. See North Baja Pipeline, L.L.C, 121 FERC 61,010, 61,032 (2007). 66. SEMPRA ENERGY, ANNUAL REPORT 3 (2009).

16 2011] IN BRIEF 585 the NGC white paper and stakeholders to the CPUC and FERC proceedings suggest a captured regulatory process. C. Reconciling South Coast with the Policies and Purposes ofnepa The holding in South Coast is unsettling given that the policy motivations supporting further environmental review are consistent and clear. NEPA is "our basic national charter for protection of the environment," 67 and expresses a determination by Congress that "procrastination on environmental concerns is no longer acceptable." 68 NEPA itself requires that environmental review occur sooner rather than later, and before "any irreversible and irretrievable commitments of resources." 69 Federal agency decisions "to act now and deal with the environmental consequences later... [are] plainly inconsistent with the broad mandate of NEPA." 70 Therefore, it is difficult to reconcile the holding in South Coast with the spirit of NEPA. CONCLUSION By not requiring further examination under NEPA, South Coast highlighted a squandered opportunity to analyze previously unaddressed environmental concerns, such as poorly understood end-use emissions from foreign-sourced LNG. The court's holding on jurisdictional grounds is inconsistent with NEPA's unambiguous language and clear congressional intent to encourage environmental review as early as possible. Alexander J. Bandza C.F.R (a) (2010). 68. Found. for N. Am. Wild Sheep v. U.S. Dep't of Agric., 681 F.2d 1172, 1181 (9th Cir. 1982). In the CPUC proceeding, the District argued that the approval of the revision without environmental review would be to proceed in this procrastinating fashion. WEISSMAN, supra note 4, at ("The District argues that in essence, the... proposal is to act now and respond to the consequences later. For example, the testimony indicated that SoCalGas would follow a 'rollout' approach that would largely rely on responding to difficulties encountered by sources after the introduction of [foreign-sourced LNG with high WI values]."). 69. See 42 U.S.C. 4332(C)(v) (2010); 40 C.F.R (b). 70. Found.forN.Am. Wild Sheep., 681 F.2dat We welcome responses to this In Brief. If you are interested in submitting a response for our online companion journal, Ecology Law Currents, please contact ecologylawcurrents@boalt.org. Responses to articles may be viewed at our website,

17 586 ECOLOGY LAW QUARTERLY [Vol. 38:579

18 Takings Claims and Uniform Wind Farm Siting Regulations: Establishing a Limited Property Interest to Minimize Conflict INTRODUCTION The Seventh Circuit's decision in Muscarello v. Ogle County Board of Commissioners addressed the relatively novel question of whether a property owner has any protectable property interest in the zoning restrictions applied to an abutting property, which in this case were removed to allow construction of a wind farm. 1 As the court plainly stated, "[t]he core of Muscarello's claims is an allegation that Ogle County violated the Fourteenth Amendment... through a violation of the Fifth Amendment's Takings Clause." 2 The conflict in Muscarello represents opposition to wind farm development generally. "Nonparticipating" property-owners see wind farms as nuisances. They face off against zoning boards who allow them to lease the land to wind farm developers and the "participating" property-owners who lease their agricultural land to wind farm developers. 3 To mitigate the harm suffered by non-participants and to simultaneously decrease litigation, states should consider creating a limited version of the property right that Muscarello denies. Such a limited property right would build a market, which would encourage parties to settle privately, thereby decreasing litigation, and increasing community satisfaction. The statewide uniform wind farm siting rules recently adopted in Wisconsin, although almost immediately suspended, 4 attempted to do so in a reasonable manner. Copyright D 2011 Regents of the University of California. 1. Muscarello v. Ogle Cnty. Bd. of Comm'rs, 610 F.3d 416, 423, 418 (7th Cir. 2010), cert. denied, 131 S. Ct (2011). 2. Id. at 421; see also id at 419 (explaining that "[a]t the core of [Muscarello's] substantive allegations is an assertion that the county has condoned an impermissible taking of her property"). 3. See, e.g., Mike Wiser, Lawsuits Prolong Delay for Supporters of Wind Farms, ROCKFORD REG. STAR (Feb. 18, 2010, 9:46 PM), 4. WIS. ADMIN. CODE PSC (2011), suspended by J. COMM. REVIEW OF ADMIN. RULES, REPORT TO THE LEGISLATURE: ADMINISTRATIVE CODE PSC 128, 2011 LRB-1438/1, 2011 SB- 50 (Wis. 2011), available at 1/data/fe/SB-50ar.pdf (handing governance of wind farm siting back to local authorities temporarily, and noting pendent bills LRB 1483/1 and LRB 587

19 588 ECOLOGY LAW QUARTERLY [Vol. 38:587 I. MUSCARELLO In 2003, the Board of Commissioners of Ogle County, Illinois enacted a change in the county zoning ordinances creating "special use" permits 5 for wind energy systems. 6 These permits essentially provided a way out of zoning restrictions for wind farms. 7 Baileyville Wind Farms, LLC, a subsidiary of Navitas Energy, 8 successfully applied for a special use permit. 9 The Board simultaneously adopted a "Home Sellers Property Value Protection Plan" (Protection Plan) to compensate residential property owners if, at the time of sale, their property value suffered because of nearby turbines. 10 Patricia Muscarello's property was agricultural," so she was ineligible for compensation under the Protection Plan. 12 Muscarello filed suit against Baileyville alleging fifteen separate harms resulting from the issuance of the special use permit.1 3 She asked the court to enjoin Baileyville from constructing the windmills and to revoke its special use permit,1 4 basing her argument primarily on a takings theory.1 5 The Seventh Circuit dismissed Muscarello's suit. The court first held, relying on Loretto v. Teleprompter Manhattan CA TV Corp., that there was no per se taking because there was no physical invasion.1 6 It then dismissed Muscarello's regulatory takings claim, relying on the per se rule established in Lucas v. South Carolina Coastal Council, because the special use permit did not deprive her of "all 1756/1, which would permanently remove the rules and require the Public Service Commission to submit a new clearinghouse rule within six months after passage). 5. See 55 ILL. COMP. STAT. 5 / (2008) (authorizing counties to issue special use permits). 6. Muscarello, 610 F.3d at See 55 ILL. COMP. STAT. 5 / (2008) (authorizing counties to issue permits for "public and quasi-public uses affecting the public interest; uses that have a unique, special, or unusual impact upon the use or enjoyment of neighboring property; and uses that affect planned development"). 8. Muscarello, 610 F.3d at Id. at Id. at Response Brief of Plaintiff at 6, 9, Muscarello, 610 F.3d 416 (7th Cir. June 24, 2010) (No. 3:06-CV-50017), 2008 WL Muscarello, 610 F.3d at Id. at Id. at Id. at Id. (citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 427 (1982)). The court skeptically dismissed Muscarello's nuisance and takings claims, holding that it was "difficult to see" how these claims could be supported where "[o]bviously the permit did not march onto Muscarello's land, nor, as far as this record shows, did any of the defendants." Id. at 425. The Court in Loretto established that a "permanent physical occupation" of private property was a per se taking under the Fifth Amendment, and also that this was not the only way to establish a taking. Loretto, 458 U.S. at 426. A hypothetical argument could be made that there was a taking anyway-either temporary, or nonphysical-but because there was no evidence that even that much has occurred yet, the Muscarello Court did not address it. Muscarello, 610 F.3d at

20 2011] INBRIEF 589 economically beneficial or productive use of land". 17 As with per se takings, there are ways to establish regulatory takings outside the Lucas framework, but the court did not address these. 18 The court decided that accepting Muscarello's novel regulatory taking claim would "turn land-use law on its head." 19 First, the zoning restriction did not apply to plaintiff s property but instead that of her neighbors. 20 Second, the zoning restriction concerned a decrease in the restrictions on use. 2 1 In contrast, takings cases normally involve an increase in the restrictions on the plaintiffs own property. 22 II. ANALYSIS The Seventh Circuit's decision reflects sound and relatively uncontroversial property law doctrine. Had the court recognized Muscarello's taking claim, it would have needed to recognize a property interest in an abutting property. 23 As the Supreme Court long ago recognized, "[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." 24 Without changes to zoning districts, the natural evolution of a city would lead 17. Muscarello, 610 F.3d at 421 (citing Lucas v. S.C. Coastal Council, 505 U.S (1992)). In Lucas, the Supreme Court addressed whether the state of South Carolina's new statute restricting coastal property uses to prevent erosion constituted a taking where it completely prevented the plaintiff from developing his beachfront lot. Lucas, 505 U.S. at The Court held that deprivation of "all economically beneficial or productive use of land" is always a taking. Id. at The court somewhat oversimplified the takings analysis by assessing only the per se rules established by Loretto, holding that any physical invasion is a taking, and Lucas, holding that any complete denial of economic or productive use is a taking. Muscarello, 610 F.3d at 421. The Lucas Court did not rule out other types of takings, which the Muscarello court could have addressed. See Lucas, 505 U.S. at (explaining that Supreme Court precedent recognizes "at least two discrete categories of regulatory action as compensable without case-specific inquiry into the public interest advanced in support of the restraint," (emphasis added) and further that, outside of categorical takings situations, regulatory takings are found by "essentially ad hoc, factual inquiries"); see also Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, (1978); Pa. Coal Co. v. Mahon, 260 U.S. 393, (1922); Robert Meltz, Takings Law Today: A Primer for the Perplexed, 34 ECOLOGY L.Q. 307, (2007). 19. Muscarello, 610 F.3d at Id. at Id. The Seventh Circuit had to reach to Second Circuit precedent to find a case even addressing the issue. Id. (citing Gagliardi v. Vill. of Pawling, 18 F.3d 188, (2d Cir. 1994)). The court found numerous additional grounds on which to deny Muscarello's claims, but this rationale was central. Id at See Meltz, supra note 18, at 321 (explaining that "a government action increasing or decreasing the allowed uses on A's parcel, causing harm to neighbor B, usually gives B no taking claim"). 23. Muscarello, 610 F.3d at Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978) (quoting Pa. Coal Co. v. Mahon, 260 U.S. 393, 413 (1922)). This sentiment in Mahon also featured prominently in Lucas, appearing both in the opinion, 505 U.S. at 1018, and in Justice Stevens's dissent. 505 U.S. at (Stevens, J., dissenting).