Posted on March 30, 2017
On November 28, 2016, EPA released its somewhat euphemistically titled “Hazardous Waste Generator Improvement Rule” (81 Fed. Reg. 85732) which, in a whopping 97 pages of miniscule federal register text, revises the structure, and in some cases the substance of the rules that apply to generators of hazardous waste under RCRA. I have no space in a blog to detail the substantive changes, tweaks and repositioning to Parts 257, 260, 261, 262, 263, 264, 265, 268, 270 and 279, but I will mention some highlights. This is, of course, a major rule, but it is also an important rule in that it sensibly addresses a wide range of longstanding problems in both the organization and substance of the regulatory provisions that govern the conduct of entities that generate hazardous waste.
The largely needed and helpful changes made by the rule include (1) subtle modifications to the definitions of the three generator categories, (2) refinement of how accumulation of both hazardous waste and acutely hazardous waste is treated, (3) adding a definition of “central accumulation area, (4) adding a requirement that partial reclamation facilities and recyclers who receive manifested hazardous waste submit biennial reports, (5) and a substantial reorganization of § 262.10 by deleting and re-numbering several of its subsections while amending them in the process. In addition, EPA added new requirements for making hazardous waste determinations, attempts to define what “generator knowledge” means in connection with testing, changes certain recordkeeping requirements, and requires small quantity and large quantity generators to identify waste codes associated with their waste. The rule specifies procedures for counting hazardous waste, revises the mixture rule, amends the marking and labeling requirements by adding very specific requirements, adds not insubstantial new requirements for the use of satellite accumulation areas (my favorite sub-amendment is EPA’s effort to define the term “three days”), adds new closure requirements, revises the conditions for exemption from various requirements for all three generator categories, imposes a new “re-notification requirement” to obtaining an ID number, modifies the criteria for episodic generation events, and imposes new requirements for emergency planning,
There are other changes, a few of them, well, mystifying. My favorite is what appears to be a meaningless nomenclature change. From November 19, 1980 until November, 2016, if you generated 100 kg or less of hazardous waste or 1 kg or less of acutely hazardous waste you were called a “Conditionally Exempt Small Quantity Generator”. After the effective date of the ‘Generator Improvement Rule” you are now called a “Very Small Quantity Generator”. EPA’s explanation for this change is truly wonderful - EPA felt that the term “conditionally exempt small quantity generator” was confusing because “all three categories of generators are conditionally exempt” from certain requirements. 82. Fed. Reg. 85740. Gee, I was never confused nor, to my knowledge, were any of my generator clients. I was also amused that EPA felt it necessary to try to define the term “three days” in connection with a provision pertaining to satellite accumulation.
Overall, however, this is a major, beneficial, rule. So what is the point of the heading to this blog? In the required boilerplate at the end of the preamble prior to the twenty-five pages of the actual rule, EPA concludes, as it must, that it is not required to subject the rule to scrutiny under the Congressional Review Act because the action is “not a major rule” as defined by 5 U.S.C. 804(2). The Congressional Review Act? Hmmm. Is that all? No. In order to push this clearly beneficial rule out the door, not only did EPA employees have to generate 69 pages of notice-and-comment verbiage, but, in addition, also the Agency had to (a) submit the rule to OMB per Executive Orders 12866 and 13563 because though not “major”, it is a “significant regulatory action” in that it “may raise novel legal or policy issues arising out of legal mandates”, (b) satisfy the Paperwork Reduction Act by demonstrating that the rule is necessary, (c) satisfy the Regulatory Flexibility Act by demonstrating that the rule will not have a significant economic impact on small entities, and, in addition, also demonstrate that (d) it does not contain an unfunded mandate in violation of the Unfunded Mandates Reform Act, (e) it does not have “federalism implications” per Executive Oder 13132, (f) it does not have sufficient “tribal implications” to trigger review per EO 13175, (g) it does not present a disproportionate risk to children per EO 13045, (h) it does not significantly affect energy supply, distribution or use per EO 13211, (i) it does have environmental justice implications per EO 12898, and (j) it does not involve technology transfer.
Just think of the number of employee hours it took for EPA to make these largely sensible modifications to the RCRA generator requirements. If Mr. Pruitt gets his wish to shrink EPA staff by 30% how is the Agency going to get anything accomplished?
Posted on December 19, 2016
I’m not sure – but, here’s a thought.
As we all know, or should know, it’s fall, and college football in the South rules the weekends. Alabama is still the consensus No. 1 in all the polls, including the College Football Playoff (CFP) poll, the only one that truly counts after mid-season – neither the AP Top 25 nor the Coach’s poll will have a bearing on the contestants vying for the chance to play for the final trophy.
Strangely enough, even prior to the kickoff of the first college football game, our forefathers chose to establish the first Tuesday in November every four years as the day we face off in a more important college contest, that of the electoral college. At a college football game where 95% of the attendees (or more depending upon the stadium), a/k/a, fanatics, or fans, are in favor of one contestant, and the outcome is measured by points scored in favor of the winner of any given game, the CFP poll ultimately determines, by some seemingly independent process, the four “best” teams in the country who will compete for the ultimate prize, the National Football Championship.
Now, to the Electoral College, which is also believed by some to be totally disconnected from the popular vote of the participants and by others as totally complimentary of the popular vote. Here, the concept of the Electoral College was, by many accounts, crafted to achieve a balance of the demographics of the Country and to minimize the likelihood that the urban areas, or the aristocracy, alone, depending upon which version one reads, could determine who ultimately leads the strongest nation in the world. At best, while potentially, or actually in more than one instance, the Electoral College “Trumps” the popular vote just like the CFP trumps the AP-25 and Coach’s polls. Meaning, it doesn’t matter who the media or the college coaches think are the best four teams in the Country, or that 3 million more voters think the President should be, the CFP and the Electoral College will ultimately decide.
Like it or not, that’s just the way it is.
Posted on July 5, 2016
Administrative lawyers, especially environmental lawyers, are well familiar with the doctrine of Chevron deference as applied to agency interpretations of statutes. In the 1984 Clean Air Act case of Chevron U.S.A. Inc. v. Natural Resources Defense Council, the U.S. Supreme Court announced a 2-step approach: (1) the court must determine whether Congress has directly spoken to the precise question at issue and, if so, that ends the matter—the Court, as well the agency, must give effect to that intent; and (2) if not, the court must defer to the agency’s interpretation if it is “reasonable,” the presumption being that Congress intended to leave its resolution to the agency. In a more recent Clean Air Act case, Michigan v. EPA, the Court, although determining EPA acted unreasonably in failing to consider costs in its regulation of hazardous air pollutants from power plants, applied the Chevron doctrine, but Justice Thomas, in his concurring opinion, challenged the doctrine’s legal underpinnings, causing some to question the continued vitality of the doctrine. In Encino Motorcars v, Navarro, decided on June 20, 2016, the Supreme Court, although deciding that the agency’s interpretation was not entitled to deference, provided assurance that the Chevron doctrine is alive and well.
The case involved the issue of whether service advisors at car dealerships were exempt from overtime pay under the Fair Labor Standards Act. In 2008, the Department of Labor had proposed a rule confirming a long-standing practice that they were exempt, but in its final rulemaking--in 2011--it reversed course, without explanation. The Court of Appeals for the Ninth Circuit had applied Chevron deference in upholding the rule, but the Supreme Court reversed. It held that, although the Department could change its policy, its interpretation was not entitled to Chevron deference because it did not provide a reasoned explanation for doing so. The Court therefore remanded to the Ninth Circuit to determine the rule’s validity in the first instance. In her concurring opinion, Justice Ginsburg, joined by Justice Sotomayor, noted: “’[U]nexplained inconsistency’ in agency policy is ‘a reason for holding an interpretation to be an arbitrary and capricious change from agency practice.’” In his dissent, Justice Thomas, joined by Justice Alito, agreed with the majority--that the Court “need not wade into the murky waters of Chevron deference,” but disagreed that the Court should have reversed and argued that the rule change was simply invalid.
So, Chevron deference lives, but it does not apply to unexplained rule changes.
Posted on November 13, 2014
So the new Congress will be controlled by the GOP. The House and Senate will consider various bills to rein in EPA authority. Here’s one relatively modest suggestion for congressional consideration: amend CERCLA to limit EPA’s authority to recover oversight costs.
How many of us in the private sector have been in meetings with EPA where EPA had more technical people in attendance than the PRPs who were performing the remedy? How many of us have had clients receive oversight cost bills where the total amount of the oversight costs approached the amount spent on actually performing the remedy? How many us have had oversight requests that have turned response actions into research projects? All of this for a program that EPA’s own analyses always show to be at the bottom of the barrel when it comes to actual risks to the public.
Here’s the proposal. I’m not suggesting that EPA have no authority to recover oversight costs. Just limit it to 10% of the response costs incurred to actually design and implement the remedy. Make it 15% if you want to be generous.
Mitch McConnell, are you listening?
Posted on January 21, 2014
The EPA Audit Policy, “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” adopted in 1995, 60 Fed. Reg. 66,706 (Dec. 22, 1995), amended at 65 Fed. Reg. 19,618 (Apr. 11, 2000), was targeted by EPA for abandonment in 2012. Perhaps in response to resounding objections by industry and outside counsel, EPA has not yet dismantled this cherished avenue toward forgiveness.
For counsel productively utilizing the EPA’s Audit Policy, EPA’s announcement that it intended to abandon the Audit Policy, particularly in the context of Next Generation Enforcement and budgetary cutbacks in “boots on the ground” inspections, created significant concern that industry would be caught in a communication and policy void that would lead to more punitive yet unnecessary enforcement proceedings. While EPA has removed the possibility of e-reporting per its Audit policy electronic disclosure website, EPA has maintained regulated entities’ ability to utilize the Audit Policy by directly reporting to regional Audit Policy staff. See EPA’s Audit Policy website here. Hopefully, EPA will continue to recognize the many benefits resulting from continued support of the Audit Policy, particularly in the context of more remote enforcement strategies, fewer “boots on the ground” and heavier reliance on state enforcement resources.
Audit policy – History
In response to developing state audit privilege legislation, EPA developed an interim policy addressing the scope of “privilege” allowed for voluntary environmental audits and their findings. 60 Fed. Reg. 66,709 (March 31, 1995). Seeking to avoid litigation regarding the scope of privileged environmental audit findings, EPA’s interim policy offered incentives to conduct voluntary audits where the findings were disclosed and promptly corrected. EPA issued its final Audit Policy in 1995, with the specific purpose of enhancing protection of public health and the environment by encouraging regulated entities to voluntarily discover, disclose, correct and prevent violations of Federal enforcement law. The benefits offered by EPA’s 1995 final Audit Policy included reductions in the amount of civil penalties, possible elimination of gravity-based penalties, and a determination not to recommend criminal prosecution of disclosing entities. EPA’s adoption of the 1995 Audit Policy followed five days of dialogue, hosted by ABA’s SEER (then SONREEL) with representatives from regulated industry, states and public interest organizations which identified options for strengthening the former interim policy and included changes reflecting insight gained through this ABA dialogue, over 300 comments received and EPA’s practical experience in implementing the interim policy. Since its adoption, EPA has issued several guidance documents, including EPA’s Audit Policy Interpretive Guidance (January 1997), Audit Policy; Frequently Asked Questions (2007); and EPA’s Audit Policy: Tailored Incentives for New Owners, 73 Fed. Reg. 44, 991 (Aug. 1, 2008), all available here.
Enforcement budgetary constraints
In the face of fierce political opposition and severe budgetary cutbacks, EPA issued public statements regarding areas where resources would be cut back or eliminated. Specifically, on April 30, 2012, EPA’s OECA issued its “National Program Manager (NPM) Guidance” to EPA’s regional offices proposing to spend no resources processing self-disclosures under the Audit Policy beginning with EPA’s 2013 Fiscal Year. In the NPM Guidance, EPA stated its position that internal compliance reviews had become more widely adopted by the regulated community as part of good management, that most violations disclosed under the Policy were not in the highest priority enforcement areas for protecting human health and the environment, and that EPA could reduce its investment in the program to a limited national presence without undermining the incentives for regulated entities to do internal compliance reviews to find and correct violations with potentially a modified Audit Policy that is self-implementing. See the FY2013 OECA NPM Guidance (Publication Number – Final: 305R12001) available here.
With the issuance of the April 2012 NPM Guidance came a strong response by regulated entities. Members of the national environmental bar, including individual practitioners, the American College of Environmental Lawyers and the Corporate Environmental Enforcement Council, reached out to the EPA and requested discussion, urging EPA to retain the Audit Policy. See e.g., related ACOEL blog postings available here, and CEEC letter to Cynthia Giles, Assistant Administrative, EPA OECA (Feb. 8, 2013), available here.
Common arguments defending the continued implementation of the Audit Policy include the fact that the Audit Policy serves as the basis for a continued culture of compliance even in landscape of dynamic changes to industry and regulation, quantifiable benefits in achieving compliance, as well as serving as a consistent baseline for states adopting their own audit policies.
EPA’s Promotion of Next Generation Enforcement
In 2012, EPA began promoting its Next Generation Compliance initiative. See Next Generation Compliance article from Environmental Forum, republished here. With EPA’s NGC, EPA is seeking to streamline federal enforcement oversight with regulations adopting “built-in” compliance, advanced pollution monitoring, electronic reporting, increased transparency and innovative enforcement strategies. EPA’s examples of “built-in” compliance include standards for manufacturers of mobile sources and air pollution control equipment, where compliance with standards are certified initially by the manufacturer, rather than relying initially on post-installation field testing. Following installation of air pollution control equipment, EPA’s approach would utilize advanced pollution monitoring to evaluate compliance of operating air pollution control equipment. Advanced pollution monitoring would also include fence-line monitoring and remote sensing techniques including infrared cameras. Examples of electronic reporting include NPDES Electronic Reporting, see 78 Fed. Reg. 46006 (July 30, 2013) (proposed rule), and EPA’s Toxic Release Inventory electronic reporting data based, TRI-MEweb, available here. With electronic reporting, greater electronic availability of data allows greater transparency of reported data. Finally, innovative enforcement strategies build on advanced monitoring, electronic reporting and third-party verification, coupled with industry sector approaches, including industry wide recognition and notification of noncompliance, followed by set compliance deadlines and, if necessary, enforcement.
EPA’s Reduced Enforcement Goals for 2014-2018
On November 19, 2013, EPA published its Draft 2014-2018 Strategic Plan, with public comment ending on January 3, 2014. 78 Fed. Reg. 69412 (Nov. 19, 2013). Comparing EPA’s proposed 2014-2018 enforcement goals to its 2011-2015 enforcement goals shows that EPA intends to significantly cut back on the number of inspections as well as many other enforcement goals. Specifically, EPA is reducing its 5-year cumulative inspection and evaluation goal from 105,000 inspections to 70,000 inspections. EPA expects to initiate fewer civil judicial and administrative enforcement cases, setting its initiation goal at 11,600 compared to an earlier 19,500, and conclude fewer cases, 10,000 compared to an earlier 19,000. Compare Draft FY 2014-2018 EPA Strategic Plan, available here, to FY 2011-2015 EPA Strategic Plan, available here.
Implications of NGC and Reduction in Inspections
EPA’s Next Generation Compliance approaches, coupled with significantly reduced inspections, may seem like a relief to some. However, EPA’s NGC emphasizes remote monitoring methods and automatic electronic reporting. In other words, data will be reported electronically, potentially without the necessary context required for a full compliance evaluation. However, numbers alone do not allow a conclusive compliance determination. Reliance on mere data without the context achieved with an in-person inspection raises risks that enforcement actions, albeit reduced in number, may be allowed to proceed despite facts that mitigate against taking such action. Of course, this risk varies depending upon the regulatory program and may be less significant where delegated states maintain sufficient budgets for inspections. However, this concern remains magnified where qualitative data, such as, for example, fence-line monitoring and use of remote infrared cameras, may be relied upon in the Clean Air Act enforcement context to create a presumption of noncompliance, potentially collected in a manner that is divorced from actual quantitative point-source emission data and permitted parametric operating conditions which facilities rely on to demonstrate ongoing compliance. While regulated entities maintain documentation demonstrating ongoing compliance, the threat remains that such NGC techniques could mire entities in unnecessary enforcement actions where an in-person inspection could preempt such proceedings.
In this uncertain enforcement environment, regulated entities will likely want to continue to directly rely on the assurance provided by EPA’s Audit Policy, as well as state audit policies adopted pursuant to, and maintained consistent with, EPA’s Audit Policy and the policies and principles therein.
As of January 2014, EPA continues to allow regulated entities to avail themselves of EPA’s Audit Policy by reporting to named regional EPA Audit Policy staff. Hopefully, EPA’s dismantling of its electronic Audit Policy reporting program constitutes sufficient savings to allow EPA’s regional offices to continue accepting Audit Policy disclosures.
Posted on June 20, 2013
Enacted in May 2009, New Jersey’s “Site Remediation Reform Act”, N.J.S.A. 58:10C-1, et seq. (“SRRA” or “Act”) was heralded by the State’s Department of Environmental Protection (“NJDEP”) as a “new world order” for the State’s site remediation regulation. Four years later, its imposition remains a “work in progress”.
Belatedly following Massachusetts’ lead, the Act largely privatized site remediation by placing most decisions, including the ultimate provision of final remediation approval, in the hands of state-licensed professionals, called “Licensed Site Remediation Professionals” (“LSRPs”). It replaced NJDEP’s former “command and control” approval process, which tended toward extreme micro-management of each case. Instead, LSRPs are supposed to use their professional judgment in effecting remediation.
Interestingly, much of the impetus for the SRRA came chiefly from the Government, compelled by its enormous backlog of unresolved cases: it was not unusual for remedial reports to languish on NJDEP desks, awaiting action, for years. Moreover, NJDEP had little or no knowledge of many sites on its “known contaminated site list” which numbered anywhere from 10,000 to 15,000 (the fact that that number was unclear was itself troublesome). Indeed, one of the precipitating causes of the Act was a vapor intrusion case in which it was belatedly discovered, in 2006, that a child day care center had been built, and was operating, on a site which formerly housed a thermometer factory. This site should have been (but was not) cleaned up under the State’s ISRA law when the factory closed in 1994. The site had been classified as one of “low” concern, so it was not inspected by NJDEP until twelve years after such closure. The discovery of these circumstances caused public consternation, followed by litigation and, ultimately, legislation.
Although the environmental consultant community enthusiastically welcomed the new law (almost immediately dubbed the “environmental consultant right to work act”), individual LSRPs continue to have difficulty weaning themselves away from the “security blanket” of prior department approval of their actions. These fears are understandably heightened by the statutorily enjoined random audit of at least ten percent of LSRPs annually by the LSRP Licensing Board and the Department’s separate ability to audit final remediation approvals, (called “Response Action Outcomes”, or “RAOs”), for up to three years after issuance.
Partly in response to the LSRPs’ expressed need for some certainty, NJDEP has been steadily adding to the scope and detail of various technical guidance documents, the most recent one of which is its “Vapor Intrusion Technical Guidance (Version 3.1)" issued in March of this year. At 184 pages, with appendices, this guidance (“VI Guidance”) is nearly twice as long as the next-largest NJDEP “guidance document” and far longer than similar VI guidance issued by authorities in neighboring states. Indeed, its length is nearly that of OSWER’s External “Review Draft” “Final Guidance for Assessing and Mitigating the Vapor Intrusion Pathway from Subsurface Sources to Indoor Air”, whose issuance it preceded by about a month. Predictably, the two documents do not exactly mesh seamlessly.
The prescriptive nature of the VI Guidance is equal to its heft and seemingly contrary to the Act’s proclaimed conferring of discretionary judgment upon LSRPs. More troublesome is the fact that the various detailed dictates to LSRPs in the VI Guidance have been translated into a welter of forms that must be filed by the LSRP at various points in the VI remedial process. These new forms –which are apt to change with some frequency – are all “machine readable” and, in light of the draw-down of experienced NJDEP personnel caused by government cutbacks and natural attrition, are increasingly reviewed by machines, rather than experienced personnel, at least in the first instance. This seems likely to produce an exaltation of form over substance that does little to foster actual remediation. Moreover, departures from the VI Guidance must be supported by the LSRP’s explanation of rationale under a pre-SRRA regulation entitled “Variance from Technical Requirements”. Few such “variances” were ever permitted under this regulation in the past. The fact that such “departures” may be substantively reviewed by NJDEP only after the final RAO is issued and, if denied, would result in the RAO’s invalidation, creates an added “chilling effect” on an LSRP’s consideration of any such deviation, however warranted. And, while NJDEP personnel continue to be available to LSRPs for consultation and advice, it is unclear what effect, if any, reliance on such advice would have in any subsequent audit of an RAO.
It may be that the VI Guidance is sui generis and that its overly doctrinaire approach will not be followed by NJDEP in other areas of remediation. If not, the “new world order” of the SRRA may morph into something that looks very much like NJDEP’s “ancien regime”. Or maybe I just have a case of the vapors.
Posted on June 10, 2013
I believe in governmental environmental regulation. We have a complicated world and it is not surprising that many activities, including those generating greenhouse gases, cause negative externalities. At the same time, however, I have spent more than 25 years representing regulated entities in negotiations with government regulators and it is impossible to do such work without obtaining an appreciation for the very significant costs that bureaucracies impose.
With all due respect – cue the upcoming diss – to my many friends in government, the absence of market discipline or the ability to fire nonpolitical bureaucrats often leads to street level bureaucrats operating under a law of their own devising. Moreover, if a complex economy causes externalities requiring regulation, that same complexity should cause regulators to pause before imposing or revising complicated regulatory regimes. Unintended consequences abound.
The genesis of these musings was the confluence of a number of otherwise unrelated recent regulatory developments. The most significant was headline in the Daily Environment Report earlier this week noting that “EPA [is] Still Unable to Provide Time Frame For Revising Definition of Solid Waste Rule.” RCRA is the perfect example. No one can really quarrel with the need for hazardous waste regulation, in order to prevent the creation of more Superfund sites. However, if we’re still fighting over the definition of something as basic as solid waste more than 30 years after the inception of the program and EPA’s most recent efforts to update the definition remain fruitless after about five years of effort, then we have to acknowledge some serious implementation problems where the rubber is trying to hit the road.
I’ll also provide two recent examples from my home state of Massachusetts. MassDEP has been engaged in a serious regulatory reform effort, which has earned deserved praise. However, as NAIOP has recently noted in comments on the draft proposal to revise the Massachusetts Contingency Plan, MassDEP’s proposed Active Existing Pathway Elimination Measure Permit is “so cumbersome that it is not clear that a PRP or redeveloper would want to seek such a permit.” This calls to mind MassDEP’s reclaimed water regulations, which were intended to encourage water reuse, but are so cumbersome that no one is applying for the permits.
Thus, the final caution. The MassDEP example is extremely common – and extremely troubling. Regulator gets great idea for innovative program. Prior to implementation, concerns are raised about what happens if…. More effort is put into avoiding the perceived downsides than in actually making the program work. Program ends up being worse than nothing.
I believe in environmental regulation, but…
Posted on May 7, 2013
The confluence of aggressive new EPA regulations targeted at coal-fired power plants and low natural gas prices has made the decommissioning of older coal-fired plants substantially more likely in the coming years. Decommissioning a plant does not occur within a specific regulatory framework. In many cases, unless there is a suspected public health threat, potential environmental conditions at the plant do not have to be reported to government agencies. For that reason environmental remediation of a plant site is often addressed in the property sale and redevelopment process.
But the shut down and decommissioning of power plants nonetheless has significant regulatory implications, and the reality is that analysis of regulatory obligations and advance planning, including a proactive strategy for interacting with agencies and other stakeholders, is essential. Understanding obligations requires review of existing permits and the underlying regulatory landscape. And that landscape may shift under your feet – for example, new regulations for coal combustion residuals on the horizon may implicate the closure of certain waste management units.
The regulatory landscape may also provide opportunities to maximize value. There are a wide variety of emission credit programs that vary by jurisdiction. Identifying and capturing emission credits brings value to the table. Similarly, water rights, to the extent they are marketable in a particular jurisdiction, could be a source of revenue.
On the practical front, laying out a smooth decommissioning path through careful planning may help avoid stoking the fire of agency, local or public ire. The agency may have a formal role to play depending on the permit conditions or applicable regulations, but there may also be extensive agency oversight exercised through pursuit of enforcement actions. Particularly where community interest is high, local, state or federal agencies may have a heightened interest and enforcement provides them an avenue for involvement in the site that might not otherwise exist. So it is important to recognize the key stakeholders early and to understand how their interest may translate to pressure on an agency to leverage any violations.
If the site is one with good redevelopment potential, finding and working with a credible and savvy purchaser may keep the focus on the end game and allow for appropriate risk-based standards to be deployed against a more concrete vision for the future of the site. Once there is a well-developed understanding of the regulatory obligations associated with the particular plant and the overall objective for the site after decommissioning, it may be the moment to reach out to the state and federal agencies, and perhaps key stakeholders, with early, accurate and contextualized information.
Because there is not a standard regulatory framework to apply, experience over the coming years as plants come offline will be telling – it is that experience that will provide useful frameworks for up front, comprehensive analysis and strategic outreach for a smooth path through decommissioning.
Posted on March 21, 2013
The EPA issued its long-awaited CISWI Rule in the Federal Register on February 7, 2013. 78 FR 9112. The final rule, entitled “Commercial and Industrial Solid Waste Incineration Units; Reconsideration and Final Amendments; Non-Hazardous Secondary Materials That Are Solid Waste,” contains the provisions in EPA’s 2011 rule, vacated in January 2012, that EPA agreed to reconsider. The 2011 final rule in turn superseded EPA’s 2000 CISWI rule. The new CISWI Rule amends 40 CFR part 60 subparts CCCC and DDDD and part 241. The amendments to 40 CFR part 60 subpart DDDD, along with certain incorporations by reference, were effective on the promulgation date; amendments to part 60 subpart CCCC are effective August 7, 2013, and those to 40 CFR part 241 are effective April 8, 2013.
In response to both the court’s vacatur of a Notice of Delay issued in 2011 and the numerous petitions for reconsideration and comments submitted by the regulated community and the public, the final rule includes three subcategories of ERUs (energy recovery units) and two subcategories for waste-burning kilns based on design-type differences, with separate carbon monoxide (CO) limits for the latter. Certain limits were also revised based on comments regarding the CO span methodology and on incorporation of additional data. The rule establishes stack testing and continuous monitoring requirements and allows for the use of continuous emissions monitoring systems (CEMS), setting levels based on a 3 hour block or 30-day rolling average (depending on the parameter and subcategory of CISWI).
The rule addresses and preserves a source’s choice to cease or start combusting solid waste at any time due to market conditions or other reasons, and to switch from one set of applicable emission standards to another pursuant to CAA section 112, thereby amending the original "once in always in" approach reflected in the earlier versions of this rule. This in turn will provide an incentive to the regulated community to continue operating incinerators.
The deadline for compliance with the CISWI Rule by existing sources depends primarily on when the state implementation plan incorporating the final rule is approved, with such approval required no later than five years after the February 7, 2013 Federal Register publication date. The effective date for new source compliance is August 7, 2013 or the date of startup, whichever date is later. New sources are defined as sources that began construction on or after June 4, 2010, or commenced reconstruction or modification after August 7, 2013.
Posted on March 7, 2013
One of the many controversies surrounding hydraulic fracturing involves the protection of trade secrets in an evolving regulatory environment hungry for more information about every aspect of operations. Regulators, litigants and the public press for disclosure of the composition of hydraulic fracturing fluids while manufacturers and operators resist full disclosure to protect proprietary formulas believed to be valuable secrets.
In a pre-rulemaking decision draft of hydraulic fracturing regulations released on December 18, 2012, California addressed the tension between protecting trade secrets and the public's right to obtain information under California's Public Records Act ("Act"). Under the draft regulations, operators are not required to disclose the chemical composition of hydraulic fracturing fluid prior to drilling. After fracking, operators must disclose the chemicals in their fracturing fluid by chemical family and by percent of the fluid. Disclosure of precise chemicals and formulas is not required. Operators must also provide contact information for the person or entity that possesses the information withheld as a trade secret.
The California draft regulations reflect a national trend. Alaska, however, bucks this trend with draft regulations released in December which require full disclosure of each fluid additive type by chemical name, CAS registry number and concentration. The issue is far from resolved and we can certainly expect more regulation and litigation.
Posted on February 19, 2013
Oil and gas development has traditionally been regulated by the states, and the majority of the states with viable shale reserves have adopted laws or regulations that directly address hydraulic fracturing. However, several local governments have responded to concerns over potential health and environmental impacts by banning hydraulic fracturing within their jurisdictions. To date, local bans have been enacted in Colorado, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, and West Virginia. In several cases these local bans have been challenged as being preempted by comprehensive state regulation of oil and gas development. While there is very little appellate case law addressing the legality of local bans, two preemption cases are currently on appeal in New York. Norse Energy Corp. USA v. Town of Dryden, No. 2012-1015 (N.Y. App. Div.); Cooperstown Holstein Corp. v. Town of Middlefield, No. 2012-1010 (N.Y. App. Div.). In each case, the local trial court upheld a local ban on hydraulic fracturing, finding that preemption language in the state’s Oil, Gas, and Solution Mining Law (“OGSML”) did not apply to local land use regulations.
Appellant natural gas developers rely primarily on the OGSML’s preemption provision, arguing that its broad language was intended to preempt all local ordinances and regulations related to oil and gas development unless they are directed toward local roads or real property taxes. They also emphasize the broad scope of DEC’s oil and gas regulations which go beyond regulating how oil and gas development is conducted and also address spacing requirements and other limitations on where oil and gas development can occur. Thus, they assert that any local ordinance that limits where hydraulic fracturing can occur is superseded by the OGSML. The natural gas developers also argue that under implied preemption principles and New York’s constitutional limits on home rule authority, local governments cannot prohibit hydraulic fracturing because such regulations are in direct conflict with the OGSML’s provisions that dictate where oil and gas development can occur. Finally, the natural gas developers argue that the trial court’s reliance on supersedure provisions from other statutes was misplaced due to key differences in the language of the supersedure provisions as well as the relatively broader scope of DEC’s regulatory authority under the OGSML.
In contrast, the towns of Dryden and Middlefield assert that local prohibitions on hydraulic fracturing can be harmonized with the OGSML and its preemption provision. They argue that the local bans on hydraulic fracturing were not enacted for the purpose of regulating natural gas development, but instead are part of comprehensive land use plans designed to protect the public health, safety, and general welfare of the local community. Because the purpose of the prohibitions are not to “regulate” natural gas development, the towns contend that the prohibitions are not subject to the OGSML’s preemption provision. Instead, they argue that such local bans can be harmonized with the OGSML by limiting the OGSML’s well spacing and setback provisions to those areas where oil and gas development is otherwise permitted. Further, the towns argue that the trial court properly relied on earlier cases interpreting the supersedure provisions of the Mined Lands Reclamation Law (“MLRL”). The towns assert that the supersedure provisions in the MLRL and OGSML are substantially similar and, therefore, should be given similar effect. Thus, the towns assert that the prior cases that upheld local ordinances banning mining practices that were subject to regulation under the MLRL are binding precedent here.
Oral argument has been scheduled for March 21, 2013 and a final decision is not expected for several months, at the earliest. However, these cases will be closely watched in other jurisdictions where local bans on hydraulic fracturing have been enacted and where additional litigation is expected. Given the diversity among state laws addressing both home rule authority and oil and gas development, the legality of local bans on hydraulic fracturing is likely to remain a hotly debated issue for several years to come, particularly as oil and gas development using hydraulic fracturing continues to expand to new shale reserves around the country.
Posted on January 7, 2013
Environmental practitioners and their clients have benefitted greatly from the EPA’s historic implementation of the EPA Audit Policy. Thus, the level of concern that has been expressed by environmental practitioners in response to EPA’s statements that the Audit Policy may not live through 2013 is not surprising. For background, see Linda Bochert’s posting, “Dear EPA: please don’t abandon your Audit Policy!”, and FY2013 OECA National Program Manager Guidance.
EPA has discussed the basis for its proposal to abandon the Audit Policy in terms of perceived decreasing utility, which creates difficulty in justifying the expense of implementation. The explanation goes something like this: with the maturity of the environmental programs, regulated industry knows that it needs to comply by now, thus the incentives provided by the Audit Policy are no longer necessary. Also, along with industry outgrowing the original purpose of the Policy, the cost of implementing the policy does not justify its continued implementation in this era of shrinking budgets, particularly given the relatively minor noncompliance events reported pursuant to the Audit Policy.
Has EPA really considered the entire calculus? And, assuming one buys into the external benefits provided by the continued implementation of the Audit Policy, given what’s at stake, isn’t it worth developing options for implementation that don’t impose the same level of staff investment?
Many believe that the Audit Policy has served a purpose far greater than the mere forgiveness of the gravity component of the reported noncompliance events. For many years, the EPA Audit Policy has provided regulated entities with a mechanism to conduct compliance audits with confidence that noncompliance issues can be corrected without fear of punitive enforcement action. The Audit Policy continues to serve this purpose, despite the maturity of the environmental programs, because the nature of regulated entities and industry sectors is so dynamic. Regulated entities are in a constant state of change, as are many EPA programs at any one time. EPA’s assertion that the EPA’s Audit Policy is no longer needed contemplates regulated entities and applicable regulations as static and monolithic bodies and does not recognize the constant state of change across industry sectors and within individual entities, particularly in response to new and modified regulations. Industry sectors also vary in their inherent levels of sophistication and adaptability to changing regulatory requirements, depending in large part upon the degree to which the industry has been pervasively regulated in the past. New regulations across an industry sector upset the equilibrium and demand new management models and compliance approaches, requiring a period of education, acquisition of staff, operational and cultural adaptation to the new requirements. Adaptation within industry sectors can be slowed when immediate demands are placed on sector resources for all entities in that sector simultaneously such as occurs with new industry sector-wide regulation, prioritizing rapid reaction to new regulation over comprehensive proactive compliance. In this regulatory environment, the Audit Policy continues to serve the same purpose as it always has, to encourage a culture of compliance in the dynamic landscape in which regulated entities operate.
To read more and provide your own input on how you believe EPA should approach the future of the EPA Audit Policy, click here.
Posted on December 12, 2012
The regulation of vapor intrusion is becoming more prevalent on both the federal and state level. In addition, although not strictly required as part of a Phase I ESA under ASTM 05 and AAI, many consultants take the position that this issue must be addressed at this first level of environmental due diligence.
One of the troubling issues at the state level is whether background concentrations should be taken into account in the establishment of indoor air quality standards. Many household products and building materials contain or release VOCs. However, not all states take background concentrations into account in the regulation of vapor intrusion.
EPA is expected to release its own vapor intrusion guidelines shortly. EPA appears to acknowledge the importance of background data in the process of formulating its guidelines. It remains to be seen whether such guidelines will impose stricter standards than those on the state level.
Posted on December 11, 2012
The song “Cool Water” was written and recorded in 1936 by Bob Nolan, an original member of the Sons of the Pioneers along with Len Slye, better known by his film name, Roy Rogers. “Cool Water” could be the theme song for Texas and other water-short western states. The Texas Water Development Board recently compiled “Water for Texas 2012 State Water Plan”. Quite simply, Texas does not have enough water to meet its current needs, much less its future needs, during periods of serious drought conditions. Texas is searching for cool, clear water.
Texas continues to grow. According to the Plan, the population of Texas is expected to increase 82 percent between 2010 and 2060, from 25.4 million to 46.3 million. Water needs are projected to increase by 22 percent, from 18 million acre-feet per year to 22 million acre feet per year in 2060. At the same time as water demand is rising, existing water supplies are diminishing by almost 2 million acre feet per year. Where will the additional water supplies be found to meet the identified needs?
The State Water Plan includes recommended water management strategies developed by regional planning groups, which include: conservation, drought management, conjunctive use of surface and groundwater, surface water reservoirs, aquifer storage, groundwater development, water reuse, desalination plants. In addition to addressing surface and groundwater water rights, water planners and users will need to confront the environmental implications of these strategies. What are the environmental regulatory constraints and impediments?
The implications and potential conflicts are far-reaching. We can all anticipate the obvious regulatory hurdles, contested procedures and property rights obstacles that projects to develop new surface reservoirs will confront. But what of other strategies like water conservation and reuse? Proposing water conservation (e.g. increased cooling water cycles) and reuse (e.g. use of treated municipal wastewater effluent) at a natural-gas fired power plant may threaten surface water quality as the total dissolved solids to be discharged are concentrated through these strategies. Also, what kinds of measures and alternatives under other environmental regulatory programs (e.g. Endangered Species Act) will need to be considered as these strategies are proposed?
The history of Texas is growth. To do nothing to meet its increasing water needs would result in staggering economic losses. Texas met the challenge after the drought of record in the 1950s. Texas will do it again! The question is: “how happy will the trails be?”
Posted on November 30, 2012
This past September, in United States v. Louisiana Generating, EPA won a ruling regarding what type of projects fall within the routine maintenance, repair or replacement exception from the rule that facility modifications are subject to PSD/NSR requirements. The decision is thorough in that it carefully reviews the so-called “WEPCO Factors” – the nature, extent, purpose, frequency, and cost of the work, and applied them to the work at issue in this case, i.e., reheater replacements.
Notwithstanding the thoroughness of the court’s analysis, I don’t find it completely convincing. As the court acknowledged, while all of the WEPCO factors are relevant, the crux of the issue is whether, in order to qualify for the exception, maintenance work must be routine for the units at issue, or only routine in the industry. In other words, should the question be whether all similar generating units at some point in their life undergo reheater replacement, or whether each individual unit in question must undergo reheater replacement multiple times in order for such work to be considered routine.
Personally, I think that the former is probably the better interpretation. Of course, as the decision discussed, since the regulations are not crystal-clear, EPA has significant discretion in interpreting its own regulations, and EPA takes the position that maintenance work must be routine with respect to individual units to qualify for the exception. End of story, no? No. The problem is that EPA does not have discretion to change its interpretation whenever it feels like doing so. In 1992, EPA stated, in a preamble to NSR regulation revisions, that
EPA is today clarifying that the determination of whether the repair or replacement of a particular item of equipment is “routine” under the NSR regulations, while made on a case-by-case basis, must be based on the evaluation of whether that type of equipment has been repaired or replaced by sources within the relevant industrial category.
The court in Louisiana Generating acknowledged that this language favored Louisiana Generating’s position that one must look to whether a maintenance activity is routine in the industry, rather than routine with respect to the individual units in question. However, the court then did not discuss this issue in evaluating the WEPCO factors, and separately found that no reasonable jury could conclude that the project was routine.
I don’t think that this issue is going to be finally resolved at least until a number of appellate courts have had an opportunity to review it and I could imagine it ultimately making its way to the Supreme Court.
As I have previously noted, while I tend to side with the defendants in these cases, I think that the larger point is that these types of arguments are borderline silly. More than anything else, they illustrate that the entire NSR/PSD program is fundamentally flawed. Instead of such outdated technology-based regulation, power plant emissions should be regulated pursuant to trading programs that allow needed emissions reductions to be attained in the most cost-effective way possible. I still dream of a grand bargain which would lower emissions limits, utilize trading to attain them, and completely eliminate the NSR/PSD program. Where is the radical center in Congress when one needs it?
Posted on November 16, 2012
Massachusetts’ ambitious plan to address greenhouse gas emissions on a state-wide basis attracted private money last month to measure its success and costs. Boston-based Barr Foundation’s grant of $230,000 will establish a “performance management tool” to track and measure the success of initiatives undertaken under Massachusetts’ Global Warming Solutions Act (“GWSA”). Supporters expect it to “serve as a national and regional model that other states can adopt to analyze” their own greenhouse gas reduction efforts. The GWSA, enacted in 2008, requires extremely ambitious reductions in greenhouse gas emissions within Massachusetts in the coming decades: an 80% emissions reduction goal by 2050 and 10-25% by 2020 from a 1990 emissions baseline The act directed the Secretary of Energy and Environmental Affairs to set the 2020 reductions and adopt a plan for achieving them.
The planning and regulatory documents issued since enactment recognize that the success of a single state’s effort to address the causes of climate change cannot be measured by the impact of its own reductions in greenhouse gas emissions in effecting changes in the global climate. The effect will simply be too small to measure. Instead, the state’s plan touts the beneficial effects of spurring economic development through the encouragement of green energy and other high tech businesses, the reduction of localized pollution, and the stabilization of energy prices. The success of the program in “bending the curve” of rising greenhouse gas emissions, however, rests entirely on its ability to serve as an example to other political entities – states mainly but, ultimately, geopolitical entities through broader global participation.
In December 2010, the Secretary of Energy and Environmental Affairs released the Massachusetts Clean Energy and Climate Plan for 2020 setting the reduction target at 25% below 1990 baseline. The Executive Summary summarizes reductions anticipated from existing and expected programs (table at page 6). Policies relating to Buildings (9.8% or more than one third of the 25% reduction), Electricity (7.7%) and Transportation (7.6%) account for the vast majority of the reductions. Within each sector, reductions are characterized as either “Existing Policy” (e.g., Federal and California vehicle efficiency and GHC standards – 2.6% reduction), “Expanded Policy” (e.g., advanced building energy codes – 1.6% reduction), or “New Policy” (e.g., Green DOT, the Massachusetts’ transportation agencies fulfillment of their sustainability commitment – 1.2% reduction). The Barr Foundation’s grant will help create the “dashboard” that presumably will take into account the likelihood of adoption of new programs or the expansion of existing ones and the ultimate efficacy of any of the programs, as it tracks the progress of the Massachusetts program.
Efforts to track the success of the Massachusetts program will build on the work done by MassINC, a Boston-based “independent think tank” that earlier this year released a book-length report titled “Rising to the Challenge/Assessing the Massachusetts Response to Climate Change.” This very thoughtful work looks specifically at Massachusetts’ progress to date and likely future success in emission reductions in various sectors; it provides useful capsule descriptions of other state’s programs and of regional and foreign initiatives. And it discusses the crucial issue of the economic costs and benefits of the program, as that will be a prime determinant of the program’s ability to be a role model for other jurisdictions.
The MassINC report recognizes that data on the subject of economic costs and benefits are subject to extremely complex and differing interpretations. The report notes there is general agreement in Massachusetts that “it is desirable to reduce greenhouse gases and develop clean energy [,] it is more difficult to reach consensus when the subject turns to the cost of addressing climate change ….” Id. at 75. Nonetheless, a convincing explanation of the specific costs and benefits of various courses of action is a necessary component of any successful program because the ultimate effectiveness of a state’s program rests on its attractiveness as a model for other jurisdictions – including those with different views of the appropriate tradeoffs between environmental protection and economic development.
Posted on November 16, 2012
Sunday’s New York Times had an op-ed piece by Cass Sunstein, recently departed head of the Office of Information and Regulatory Affairs, advocating for sensible measures to address global climate change. Sunstein’s argument is that
"Economists of diverse viewpoints concur that if the international community entered into a sensible agreement to reduce greenhouse gas emissions, the economic benefits would greatly outweigh the costs."
I don’t disagree with anything he says; I only wonder whether anyone is paying attention. On one hand, while Sunstein notes that President Obama supports cost-benefit analysis, Democrats in Congress – and many environmentalists – have long been skeptical, treating environmental questions as moral issues that should not be subject to something as crass as cost-benefit analysis.
Republicans used to support cost-benefit analysis. Indeed, Sunstein opens the op-ed with a discussion of the Reagan administration’s support of the Montreal Protocol on ozone-depleting chemicals. However, for the past ten years or so, Republicans have abandoned cost-benefit analysis for something much simpler – cost analysis. Today, if regulations cost too much – whatever that means – then they are “job-killers” and thus bad, even if the benefits exceed costs, sometimes by several multiples.
Maybe four years at MIT brainwashed me into blind acceptance of quantitative analysis, but this stuff doesn’t seem that hard to me. It is profoundly depressing that a significant number of environmentalists look only to the benefits of environmental regulation, while a similar percentage of conservatives now only look at its costs.
Somehow, we’ve got to get the twain to meet.
Posted on October 8, 2012
The full import of the pivotal American Electric Power Co., Inc. v. Connecticut, 131 S. Ct. 2527 (2011), decision holding that federal common law claims for injunctive relief were displaced by federal regulation of GHGs under the CAA remain to be decided. The Ninth Circuit Court of Appeals has now upheld the dismissal of a federal nuisance action filed in 2008 against Exxon Mobil et al., seeking damages for flooding attributable to climate change. Native Village of Kivalina v. Exxon-Mobil Corp., No. 09-17490 (Sept. 21, 2012). Damage estimates approached $400 million. The suit was dismissed by the District Court in 2009 on the grounds the regulation of greenhouse gases was a legislative matter rather than a judicial controversy and for lack of standing.
The Supreme Court in AEP held only that the plaintiff was not entitled to injunctive relief. Relying on AEP, the Ninth Circuit held that the federal Clean Air Act displaces climate change-related federal common law public nuisance claims for both injunctive relief and damages. In a concurring opinion, Judge Pro wrote that he would have dismissed for lack of standing as the plaintiff had failed to prove its injuries were directly attributable to the defendants.
In AEP, the Supreme Court held that the CAA would bar state common law nuisance claims if such claims were preempted, but the Court did not decide if the CAA in fact preempted state common law nuisance claims. In Kivalina, the district court dismissed the state common law nuisance claims without prejudice. The Ninth Circuit did not rule on the validity of these claims. Since the plaintiff’s state common law claims are undisturbed by this decision, it remains to be seen whether Kivalina or other will pursue such claims.
Posted on September 19, 2012
In his blog post of August 27, Rob Brubaker reported on three cases in which the courts refused to grant deference to EPA decisions under the agency’s Clean Air Act authority. EPA has fared a bit better in two recent Clean Water Act cases.
In Upper Blackstone Water Pollution Abatement District v. EPA case, the issue was whether EPA properly issued a stringent NPDES permit renewal to a sanitary district to control excessive nitrogen and phosphorus loading. The First Circuit Court of Appeals rejected the district’s argument that EPA should have waited until the district could complete its modeling effort, even though the model did not seem close to ready, and that EPA did not apply the best science. The court declined to conduct a de novo review of EPA’s scientific analysis, limiting its inquiry to whether EPA followed the appropriate administrative process, based its decision on record evidence and clearly articulated its reasoning. So long as the criteria imposed are within the “zone of reasonableness”, the court will not strike it down.
Interestingly, the Upper Blackstone court also rejected the district’s argument that the new permit is improper because even with stricter criteria, it would not be sufficient to correct the eutrophication problem in the watershed. The court set that aside, noting that the CWA contemplates multiple sources of contamination and no one party is responsible for cleaning up the river.
The Upper Blackstone case is consistent with the U. S. District Court’s decision in the Northwest Environmental Advocates v. EPA, which I discussed in my March 23 post. In the latter case, the court upheld EPA’s approval of Oregon’s numeric temperature standards, deferring to the EPA’s scientific expertise. It took issue with the narrative Natural Conditions Criteria because it was so broad that the court concluded it supplanted numeric standards. The court left the door open for the Oregon Department of Environmental Quality to rewrite the narrative standard for EPA review, based on the agencies’ own review of the science and a good explanation in support of the standard.
It appears the theme running through three Clean Air Act cases cited in the Brubaker post is that the reviewing court found no authority supporting EPA’s action, or that EPA’s interpretation defied the plain meaning of the statute. In the Clean Water Act cases, EPA overreaching on the Upper Blackstone permit or approval of Oregon water quality standards was not at issue. The focus instead was on whether EPA demonstrated it properly considered the best science available under the authority it had, and then explained how it got to its decision. In that context, EPA and state regulatory agencies will win more than they lose.
Posted on September 18, 2012
By Pam Giblin and Amber MacIver, Baker Botts L.L.P.
The regulatory landscape for the offshore oil and gas industry has been subject to rapid change in the two years following the Macondo Incident in the Gulf of Mexico.1 Two primary themes have emerged in the new and revised regulations: (1) increased agency oversight, and (2) requirements for third party certification. The regulations are relatively recent, but operators can expect to feel the impacts over the next year.
Increase Agency Involvement
The Mineral Management Service (MMS) oversaw many of the revenue collection, leasing, permitting and enforcement functions for the offshore industry prior to the Macondo Incident. Following that event, the MMS was restructured into separate agencies in part to enable increased agency involvement and oversight.2 The three new agencies are:
(i) the Bureau of Ocean Energy Management (BOEM), which has the leasing functions;
(ii) the Bureau of Safety and Environmental Enforcement (BSEE), which has responsibilities for permitting and enforcement; and
(iii) the Office of Natural Resources Revenue (ONRR), which has revenue collection.
The new agencies, and in particular BSEE and ONRR, have demonstrated a trend of increased agency involvement. With respect to the ONRR, in just the past year, it has issued penalties that represent an increase in excess of three times the previous yearly average under MMS.3 This increased enforcement is a trend we expect to continue.
BSEE’s increased oversight is seen in the numerous regulations it has issued in the past two years. Many of those new rules require additional agency intervention in offshore oil and gas operations. For example, Section 250.456(j) of the Drilling Safety Rule requires that before an operator may switch from heavy to light drilling fluid, the operator must receive approval from BSEE. The Workplace Safety on Safety and Environmental Management Systems (SEMS) rule requires operators to submit their self-audit plans to BSEE for review, BSEE may make changes to the plan, and it has the option to participate in the audit.4 In addition to formal changes in the regulations, both the former director of BSEE and the current director have indicated a potential shift in enforcement policy that would add contractors to the scope of BSEE’s enforcement actions, contrary to former MMS policy, further expanding the agency’s oversight of the industry. We have not seen an example of this yet, but would expect that contractors could see enforcement in the near future.
These changes, among others, illustrate a trend of increased agency oversight of the offshore oil and gas industry. It is a trend we expect to see continue at least during the next year.
Third Party Certification
BSEE has issued new regulations and amended others, adding dozens of new rules and requirements for offshore oil and gas operations. The trend that runs through many of these changes is a requirement for certification by a third party. For example, the Drilling Safety Rule requires that operators have a professional engineer independently certify that the casing and cementing program is appropriate for the purpose for which it is intended under expected wellbore pressure.5 Although the current SEMS rule allows for self-audits to be conducted either by designated qualified personnel (DQP) or third party auditors, the proposed SEMS II rule would eliminate the option to use DQP, requiring all self-audits to be performed by independent third party auditors.6
The likely outcome of the changes that result from these two overarching themes, increased agency involvement and third party certification, is additional enforcement and red tape. Operators may face difficulty in scheduling operations when they have to rely on outside parties to certify their work or agency approval to make changes. Enforcement actions are likely to increase as agency oversight increases. Operations that have not been subject to scrutiny in the past are likely to face additional hurdles and possibly enforcement under the new regulations. Offshore oil and gas operators need to closely follow the evolving regulatory scheme to stay in compliance with the rules and avoid costly enforcement actions.
1The “Macondo Incident” refers to the April 20, 2010 explosion from the Deepwater Horizon drilling rig, in the Macondo prospect, Mississippi Canyon Block 252.
2See DOI Secretarial Order No. 3299 (May 19, 2010) (issued in May 2010 and gave the Assistant Secretary- Land and Minerals Management and the Assistant Secretary -- Policy, Management and Budget 30 days to develop a schedule to implement the Order).
3See, e.g. ONRR Press Release, April 30, 2012, http://www.onrr.gov/about/pdfdocs/20120430.pdf, last visited July 9, 2012 ($1.9 million civil penalty against Cabot alleging inaccurate records); ONRR Press Release, March 29, 2012, http://www.onrr.gov/about/pdfdocs/20120329.pdf, last visited July 9, 2012 ($1.7 million civil penalty against Merrion for late royalty payments); ONRR Press Release, July 11, 2012, http://www.onrr.gov/about/pdfdocs/20120711.pdf, last visited August 30, 2012 ($1.2 million civil penalty against QEP resources for maintenance of inaccurate reports).
430 C.F.R. § 250.1920(b).
530 C.F.R. §§ 250.418(h), 250.420(a)(6).
676 Fed. Reg. 56683 (Sept. 14, 2011).
Posted on September 17, 2012
Companies who wrestle with whether their various air pollution-emitting operations must be grouped together for Title V permitting purposes have received some assistance from a recent Sixth Circuit opinion. In Summit Petroleum Corporation v. U.S. EPA, 2012 FED App. 0248P (6th Cir.), the court curtailed EPA’s expansive interpretation of a “single source” under the Clean Air Act.
By rule, operations belong to a single source if they: (1) possess the same SIC codes; (2) are located on contiguous or adjacent land; and (3) are under common control. See 40 C.F.R. § 52.21(b)(5), (6). In addition, by policy, EPA has expanded the definition of “single source” to include not only the facilities that meet these three criteria, but also those facilities that provide support to an adjacent central operation. See Preamble to the August 7, 1980 final Prevention of Significant Deterioration (PSD) regulations, 45 FR 52676; Preamble to Revised Part 51 and Part 70, Draft, February 18, 1998. And, EPA has taken a “functional” approach to the term “adjacent,” such that these support facilities need not even physically adjoin the main facility. For example, EPA considered two aluminum smelter facilities adjacent, despite their 3.4 mile separation, due to the extensive truck traffic between the two properties. See Letter from Steven C. Riva, U.S. EPA, to Robert Lenney, Alcoa Inc., Mar. 9, 2009. See also Letter from Pamela Blakely, U.S. EPA, to Don Sutton, Illinois EPA, re: General Dynamics, Ordinance & Tactical Systems, Inc., Mar. 14, 2006 (several plants considered a single source, despite their 8-mile separation, because they met a “common sense notion of a plant”).
Therefore, when EPA recently considered whether Summit Petroleum Corporation’s gas wells and associated flares should be considered a single source with its gas sweetening plant, EPA did not find it dispositive that several of the wells were located over a mile from the plant and were separated by other intervening properties. Instead, EPA noted that the wells and the plant were highly interdependent and under Summit’s common ownership. As a result, the wells and plant met the “common sense” notion of a single facility. See Letter from Cheryl Newton, U.S. EPA, to Scott Huber, Summit Petroleum Corporation, Oct. 18, 2010.
Summit challenged EPA’s single source determination, and the Sixth Circuit vacated that determination in Summit Petroleum Corporation v. U.S. EPA. The court found it “unreasonable and contrary to the plain meaning of the term ‘adjacent’” that EPA equated “functional relatedness” with “physical adjacency.” Id., at *2. The court ordered EPA to use instead the “ordinary, i.e., physical and geographical” meaning of the word “adjacent.” Id.
This decision will affect long-standing EPA policy and practice in making single source determinations. As the Director of EPA’s Region VIII Air Program noted, there is “no evidence that any EPA office has ever attempted to indicate a specific distance for ‘adjacent’ on anything other than a case-by-case basis.” See Letter from Richard Long, U.S. EPA, to Lynn Menlove, Utah Division of Air Quality, “Response to Request for Guidance in Defining Adjacent with Respect to Source Aggregation,” May 21, 1998, citing 45 Fed. Reg. 52,676, 52,695 (August 7, 1980) (“EPA is unable to say precisely at this point how far apart activities must be in order to be treated separately. The Agency can answer that question only through case-by-case determinations.”). Therefore, companies with “functional” single-source determinations should consider whether the recent Sixth Circuit decision could impact their status under the Title V program.
Posted on August 3, 2012
In February 2010, the U.S. Securities and Exchange Commission (“SEC”) issued interpretive guidance that clarified corporate disclosure obligations regarding climate change-related risks and opportunities. While the guidance didn’t create any new legal requirements, it indicated that climate-related issues can have a material impact on companies that requires appropriate disclosure. It also offered examples of the ways in which companies may be impacted, including from regulations, international accords, litigation, and physical impacts from water quality and quantity issues.
A recent Ceres report, “Physical Risks from Climate Change: A Guide for Companies and Investors in Disclosure and Management of Climate Impacts,” released in May 2012, highlights the economic impacts of extreme weather events on companies and their supply chains in seven key sectors.
More than two years after the release of this guidance, what is the state of corporate disclosure on climate change issues? Two recent reports by Ceres examined climate-related disclosure in multiple sectors.
“Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings,” released June 18, 2012, examined corporate disclosure on a key climate-related issue—water risks—to see what impact the interpretive guidance had on disclosure practices. The report analyzes changes in water risk disclosure by more than 80 companies in eight water-intensive sectors: beverages, chemicals, electric power, food, homebuilding, mining, oil and gas, and semiconductors. It found that significantly more companies are disclosing exposure to water risk in 2011 compared to 2009, with a focus on physical risk. For example, 87 percent of companies surveyed now report physical risk exposure versus 76 percent in 2009, with the biggest increases coming from the oil and gas sector. There was also a meaningful increase in the number of companies connecting water issues to climate change as part of a long-term trend.
The report recommends, however, that companies make further efforts to include quantitative data and performance targets in financial filings to clarify how they are actually responding to these water-related risks. Without this level of specificity, as well as more information on water management systems, it remains difficult for investors to incorporate these factors into their decision-making.
Another new Ceres report, “Sustainable Extraction? An Analysis of SEC Disclosure by Major Oil & Gas Companies on Climate Risk and Deepwater Drilling Risk,” released August 2, 2012, examines climate change disclosure in one carbon-intensive industry: oil and gas. The report examined the financial filings that ten of the world’s largest oil and gas companies filed in 2011, a year after the interpretive guidance was issued. While six of the ten companies provided fair disclosure on efforts to manage their own greenhouse gas emissions, the disclosures reviewed in the report were generally disappointing. Particularly on regulatory risks—both direct and indirect—the level of specificity, comprehensiveness, and quality of analysis varied widely across the ten companies’ filings, showing a clear need for further attention and due diligence on material climate risks.
Climate change is a complicated issue for companies to address in their financial filings, particularly with emerging and shifting regulatory regimes and the complexity of modeling the physical impacts of a changing climate. Good climate disclosure that meets the requirements of the SEC guidance and is useful to investors requires the collaboration of a company’s senior legal, environmental, financial and operational managers and advisors. The above-referenced Ceres reports provide a window into the current state of climate-related disclosure and offer recommendations for companies to improve how they address their climate-related risks.
Posted on July 18, 2012
Yesterday, in American Petroleum Institute v. EPA, the D.C. Circuit Court of Appeals affirmed EPA’s revisions to the National Ambient Air Quality Standard for NOx. The revisions adopted, for the first time, an hourly NAAQS for NOx, in addition to the annual standard.
API made a number of assertions that EPA had been arbitrary and capricious in its review of the scientific evidence concerning potential short-term impacts. The most important were EPA’s reliance, in part, on a study which had not been the subject of peer review, and EPA's alleged failure to consider a study suggesting that short-term impacts had not been demonstrated.
The Court rejected both complaints. With respect to the first, API asserted that EPA violated its own requirements when it relied on an internal analysis that had not been peer-reviewed. The Court’s response was short, but certainly not sweet:
Perhaps the API should have had its brief peer-reviewed. In quoting the EPA’s Review Plan, the API omits the first and most relevant word of the following sentence: “Generally, only information that has undergone scientific peer review … will be considered.” Of course, “generally” here indicates the practice in question will not invariably be followed. A bad start for the petitioners.
To which I can only say, ouch. Significantly, the Court noted that EPA did have its internal analysis reviewed by the Clean Air Scientific Advisory Committee, and it stated that review by CASAC qualifies as peer review.
Regarding the second claim, the Court concluded that EPA had considered the skeptical study. Moreover, EPA gave reasons why it rejected the conclusions of the study. This was enough for the Court.
I have previously pointed out that the Court’s review of EPA’s NAAQS in recent years has pretty much made the CASAC the final arbiter of the validity of EPA NAAQS promulgations. If EPA’s decision is supported by CASAC’s review – as it was here – EPA’s NAAQS will be affirmed. If, on the other hand, as was the case with EPA’s PM2.5 NAAQS, EPA promulgates an NAAQS that ignores CASAC advice, EPA’s standard is not likely to survive judicial review.
Yesterday’s decision only confirms this analysis. CASAC did not merely review the one paper that API had challenged; it proposed a short-term standard that was similar to and certainly consistent with the standard that EPA ultimately adopted. I’m not sure that Congress meant to delegate to CASAC the determination whether NAAQS adopted by EPA are arbitrary and capricious, but I think that that is where we are today.
To which API can only say, ouch.
Posted on July 10, 2012
"And I wonder, still I wonder, who'll stop the rain."
Creedence Clearwater Revival
As environmental issues go, stormwater regulation is not a high priority for many environmental practitioners. Maybe it should be, because EPA seems to be obsessed by it. In the last year, among other things, EPA has:
• Issued a new construction general permit to regulate stormwater discharges (and got involved in litigation that forced it to withdraw the regulations regarding a numeric effluent limit);
• Developed a template designed to help builders write their stormwater control plans;
• Filed a Notice of Intent to revise the stormwater regulations to exempt discharges from logging roads; and
• Created an action plan to address stormwater runoff in the Chesapeake Bay watershed (over some objection).
On the litigation front, cases involving stormwater compliance have been popular. Of the five environmental cases from the Ninth Circuit that sought (and have been granted) review by the U.S. Supreme Court for the next term, three of them relate to stormwater regulation.
For residential and commercial developers, stormwater regulations have been expensive to address, but 20 years of practice have allowed many of them to adapt to the existing requirements. EPA's attempt to introduce numeric effluent limits in the new permit caused a few moments of panic until EPA was forced to withdraw them.
However, a change was made in the permit that has gone unnoticed and has the potential to impact the cost of construction. The new requirements for stormwater discharges at construction sites can be found at 40 C.F.R. Part 450. At Section 450.21, there are requirements relating to “effluent limitations reflecting the best available practicable technology available.” Buried in this section is a fairly innocuous provision that simply requires the developer and builder to, “unless infeasible, preserve topsoil.”
The reason to preserve topsoil at construction sites is two-fold. First, it has more organic material than denser soils so it allows faster growth of vegetation which, in turn, works to slow down the runoff of stormwater from a site. Second, it acts like a sponge to soak up the rain before it is allowed to run into a gully or ditch and, eventually, to a stream or river. For development of a construction site, however, topsoil has a serious drawback – it's in the way. Topsoil does not provide a solid enough base for roads or buildings and, therefore, the developer frequently finds it necessary to scrape the property of all topsoil before installing any streets, driveways or permanent structures.
While I cannot speak to the rest of the country, in the Midwest, this typically means that the topsoil is removed and is often not replaced, but is used for berms around the site. Respreading it is too costly and would usually affect the final grade of the development. Rather, when it comes time to put vegetative cover on the open areas, sod (with its own layer of topsoil) is used. The new permit requirement will change that practice. The definitional problem that will need to be addressed by every state is the meaning of "preserve" as used in the permit.
Perhaps the term means that areas of a development that are not going to have a structure or street should not have the topsoil removed. As a practical matter, that would be impossible. Virtually every development site of any size requires grading to even the slopes and to account for drainage. The term might mean that whatever topsoil was in existence prior to the disturbance of the site, would need to be returned to the site. As a practical matter, this would be difficult to do. Some areas of a site might have a few inches of topsoil, while other areas might have several feet. Grading in anticipation of replacing the topsoil with what was preexisting would, at least arguably, be infeasible.
As the NPDES Permit for each state comes up for renewal, the issue of how to comply with this requirement will need to be addressed. The permits could simply incorporate the language into the terms of the revised permit, but this would provide virtually no guidance to developers or, more importantly, to the MS4 cities that will be called upon to enforce the requirement.
In Iowa, the General Permit for Construction Sites will need to be updated on October 1, 2012. The Iowa Department of Natural Resources has spent considerable time pondering this problem and has come up with a solution. The IDNR has decided to create, in essence, a safe harbor for compliance. The proposed rule provides that disturbed areas that will not have streets, driveways or structures located on them will require a minimum of four inches of topsoil (which can include the topsoil found in the sod). This amount of topsoil fits well with other building requirements and is a significant sponge for purposes of soaking up rainwater. There is an exception to the four inch requirement for those sites which did not have four inches of topsoil prior to disturbance. If a developer believes that the site has less than four inches of topsoil, he/she can complete a soil survey prior to disturbing any soils and, if the topsoil is less than four inches at any given location, the developer is only required to return that amount of topsoil at the conclusion of the development.
The Iowa solution is far from ideal. While it has the advantage of providing certainty, it does so at what may be a very steep cost. Estimates have not yet been made on the additional cost of returning topsoil to each lot, but there will certainly be added expenses that will add to home ownership costs at a time that the industry needs to be finding ways to reduce costs. On the other hand, it is preferable to an undefined requirement that a developer “preserve topsoil unless infeasible,” which simply invites litigation.
Over the course of the next twenty-four to thirty-six months, virtually every state will need to address this issue. If EPA chooses to make stormwater compliance a priority, and there is every indication that it will, the new permits will result in a significant change in the way developments are built and priced. Adding these costs to help reduce what amounts to less than 1% of the surface water contamination problem is questionable, but it's here. Since we're not going to stop the rain, or the EPA, I would suggest that we need to help our state regulatory agencies come up with a reasonable, and workable, solution.
Posted on June 29, 2012
The body of caselaw rejecting climate change tort claims seeking judicially-imposed restrictions on greenhouse gas emissions, which I reviewed in a prior post on January 3, 2012, continues to grow. That post predicted that (i) none of these suits were likely to succeed, given the U.S. Supreme Court’s holding last year in Connecticut et al. v. American Electric Power Co. et al. (“AEP”) that common law “nuisance” claims seeking such restrictions are displaced by the Clean Air Act, but nevertheless (ii) plaintiffs would continue to repackage and pursue the claims in different courts under different common law labels. Both predications have proved accurate.
Two of the cases summarized in that post, Comer et al. v. Murphy Oil USA et al. and Alec L. et al. v. Jackson et al., have since been dismissed by the presiding district courts. In Comer, where a group of Mississippi landowners sued scores of national electric utilities and other companies for damages caused by Hurricane Katrina, claiming that the defendants’ greenhouse gas emissions constituted a common law “nuisance,” the court held that the claims were preempted by the Clean Air Act and, further, that they presented non-justiciable political questions and plaintiffs lacked standing. In Alec L., where a group of plaintiffs sued several federal agencies under the “public trust” doctrine, seeking an order mandating greenhouse gas regulations, the court likewise held that the claims could not be recognized as a matter of federal law and, in any event, would be displaced by the Clean Air Act. A third case, Native Village of Kivalina v. ExxonMobil Corp. et al., remains pending before the Ninth Circuit, following the district court’s dismissal of the complaint on grounds that the “nuisance” claims were non-justiciable and plaintiffs lacked standing.
In addition, “public trust” claims have now been filed in nearly all fifty states. Some of these take the form, like Alec L., of common law tort litigation, with non-profit groups and individuals suing state officials and agencies in state courts, seeking injunctive orders directing the promulgation of greenhouse gas regulations. Several of these cases have already been dismissed, including in Alaska and Oregon (both on political question and justiciability grounds); none has proceeded past the pleading stage. Other claims take the form of administrative petitions, asking the relevant state agencies to issue greenhouse has regulations. Many of these petitions, in more than 30 states so far, have already been denied; none has been granted.
The unanimous rejection of these claims should presumably, at some time, begin to deter the filing of further climate change litigation. But that tipping point does not seem yet to have occurred. At least for the immediate future, it appears likely that plaintiffs will continue to use – and, to many minds, distort – the common law tort system to pursue the political goal of greenhouse gas regulation.