Environmental Justice Update: Chicago Forcing Facility Relocation to Environmental Justice Area Puts Federal HUD Funding at Issue

Using non-environmental statutes to force change in the environmental arena grants the executive branch significant leverage against regulated businesses directly and indirectly through the communities where they operate. A final finding (Finding) issued by the US Department of Housing & Urban Development (HUD) regarding the City of Chicago’s efforts to move a recycling facility from a wealthy, majority white neighborhood to a community which had been previously classified as “environmentally overburdened” illustrates how leveraging non-environmental statutes can work in practice, as well as some big-picture lessons related to EJ and related equity issues.

The Finding resulted from an investigation HUD began in response to a complaint filed by a group of non-governmental organizations including the Southeast Environmental Task Force, the South East Side Coalition to Ban Petcoke, and people for Community recovery alleging that Chicago had discriminated on the basis of race and national origin in violation of HUD regulations and federal civil rights laws by “causing and facilitating the relocation of a large metal recycling facility” from a majority White neighborhood to a majority Black and Hispanic neighborhood and through a broader policy of “constraining industrial and other polluting land uses” to similar neighborhoods. The Finding — if left unaddressed — implicates future HUD funding. HUD-administered Community Development Block Grants issued to Chicago averaged $76 million per year between 2016 and 2021 and the total HUD contribution to the 2021 Chicago city budget totaled $375 million.

Factual Background. The Finding stems from the relocation of a large metal recycling facility from Chicago’s predominantly white Lincoln Park neighborhood to the city’s southeast side where the population is 83 percent black and Hispanic.

In 2016, the City of Chicago began meeting with the facility’s owners to discuss relocating the facility after years of constant complaints from Lincoln Park residents about problems with noise, debris, toxic emissions, and noxious fumes. The Finding portrays the City as having “an unusually active role in facilitating the relocation” including “coordinating with” the facility operator to “ensure” that the alderwoman from southeast Chicago was “on board and won’t be an issue.”

In 2018, relocation of the facility was publicly announced, and an agreement with the City of Chicago was negotiated to support the move in September 2019. By December 2020, the construction of the new facility was largely completed and the old facility was shut down. The facility owner testified that “absent the City’s pressure” the company would not “have ‘capitulated’ and disturbed a profitable business” located in Lincoln Park.

Between March 2019 and September 2020, Chicago city agencies issued six regulatory permits necessary for the facility’s relocation, and in September 2019, the Illinois Environmental Protection Agency (IEPA) granted an additional permit. In May 2021, however, US Environmental Protection Agency (EPA) strongly recommended that Chicago re-assess the final environmental impact of the new site before issuing a final permit, and in February 2022, the City of Chicago completed this reassessment and denied the permit. The facility owner has appealed this denial.

Legal Overview. The Finding is based on Title VI of the Civil Rights Act of 1964 and on HUD regulations.

Title VI mandates that “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” Section 109 mandates that “No person in the United States shall on the ground of race, color, [or] national origin, … be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded [under the Housing and Community Development Act of 1974].”

HUD’s regulations specifically prohibit funding recipients from discriminating when siting facilities. The regulations provide that, when determining the site of facilities, recipients may not make selections “with the purpose or effect” of either discriminating on the basis of “race, color, or national origin” or of “defeating or substantially impairing” the objectives of federal civil rights laws. HUD grant recipients may not provide or restrict access to “facilities, services, financial aid, or other benefits” on the basis of race, color, or national origin, and may not use “criteria or methods of administration that have the effect of subjecting persons to discrimination because of their race, color, or national origin.” Additionally, recipients have “an obligation to take reasonable action to … overcome the consequences of … prior discriminatory practice … and to accomplish” the purpose of federal civil rights laws.

The Finding concludes that Chicago violated HUD regulations in various ways including by relocating the facility - with its attendant harms - from an 80 percent white neighborhood to a neighborhood that was 83 percent Black and Hispanic and known to already bear “disproportionate environmental burdens”; by motivating the facility to move to relocate to address neighborhood concerns in Lincoln Park, without paying similar attention to concerns in southeast Chicago; by failing to address how relocating the facility would affect an already overburdened community; and for generally failing to provide any justification for the disparity between Chicago’s “fervor” for relocating the facility with how it discounted the concerns of residents in southeast Chicago. Accordingly, Chicago violated Title VI of the federal civil rights laws and relevant HUD regulations.

EJ Lessons from the Finding

While the actions of HUD may seem like they have little to do with EPA, the Finding is consistent with the Biden Administration’s repeated commitment to use all available tools to advance EJ issues. Last year, EPA stated in its 2022-2026 Strategic Plan that it intended to enhance use of the Civil Rights Act of 1964 to “embed environmental justice and civil rights in the Agency’s core work” and to “strengthen civil rights enforcement in communities overburdened by pollution.” (See here). This goal was echoed again in EPA’s draft EJ guidance which issued in June. (See here). Similarly, the US Department of Justice had indicated that it would “make strategic use of all available legal tools to address environmental justice concerns” as part of its EJ enforcement strategy. (See here).

Three major takeaways from the Finding:

• First, when the federal government is motivated to shape behavior, it has significant ability to do so through its spending. The Supreme Court’s recent West Virginia v. EPA decision (summarized here) emphasized limits on federal regulatory power and generated skepticism that the Biden Administration could fulfill many of its ambitious goals in the environmental space. But, as the Supreme Court made clear this year related to COVID issues (see our discussion here), the federal government still has broad power to use spending to shape behavior even if the executive’s ability to promulgate regulations might be hamstrung by federal courts. Considering the Chicago 2021 city budget included total HUD-related funding amounting to $375 million, this Finding will likely shape future behavior in Chicago.
• Second, the Biden Administration’s concerns about environmental equity were not window-dressing. EPA’s Equity Action Plan — released this spring — stresses the need for government decision makers to engage with communities to achieve equitable outcomes in the environmental space, including for historically overburdened communities. Similarly, it emphasizes that agencies should use resources provided by federal civil rights laws to address EJ issues and that a “whole of government” approach was required to address long-standing concerns.
  
  In the Finding, one can see all of these principles in action. The Findings note that southeast Chicago already contained both of Chicago’s Superfund sites and that, as of 2017, 77 percent of toxic releases in Chicago occurred in this area. IEPA had recognized southeast Chicago as an “area of environmental justice concern” and the Chicago Department of Public Health had identified the area as being “the most burdened by pollution in negative health effects in 2016, 2020, and 2022.” Finally, the Finding echoes community concerns, noting that one resident indicated that “Our community will remain stagnant if it isn’t improved and revitalized like the North Side. We don’t need another polluting industry or another eyesore … Time and time again the city tries to bully us and stick us with everything the rest of Chicago doesn’t want.”
  
  The Finding highlights the disparity throughout the decision-making process between the Chicago’s responsiveness to Lincoln Park community complaints and the city’s complete lack of concern for the impact of the relocation on southeast Chicago. Particularly, the Finding notes that Chicago made no efforts to secure enhanced environmental protections from the operator which would mitigate somewhat new environmental issues in southeast Chicago or even to evaluate whether enhanced environmental controls in Lincoln Park could address community concerns dating back to when the facility operated there.
• Third, changes in federal administration can have far-reaching effects on relocation and permitting issues. The Finding recounts close coordination between Chicago and the facility operator in planning the relocation over a period of nearly five years, during which the facility operator closed its Lincoln Park location and completed construction on a new facility in southeast Chicago. Nevertheless, only a few months after President Biden’s inauguration, EPA requested Chicago revisit the decision that the facility was never allowed to open. The facility operator is pursuing a nine-figure lawsuit against the city to recover its costs.

Members of our firm’s environmental group are keeping a close eye on environmental justice issues. If you have questions about how environmental justice issues could affect your business or community, please reach out to any member of the Firm’s environmental group.