Pulling the Plug on Greenhouse Gas Emissions

Posted on June 12, 2014 by Robert Wyman

Buoyed by favorable recent Supreme Court and DC Circuit decisions recognizing EPA’s broad discretion under the Clean Air Act, on Monday, June 2, EPA scaled new heights of legal adventurism by proposing the Clean Power Plan, a greenhouse gas reduction program for the power sector that would compel states to implement supply- and demand-side energy strategies.  EPA projects that its proposal would achieve approximately a 30% reduction from 2005 levels by 2030.

EPA’s action is under section 111(d) of the Clean Air Act, a little-utilized section that authorizes EPA to set emission guidelines for states to regulate listed source categories whose emissions are not regulated under either the Act’s criteria pollutant program under section 108 or the hazardous air pollutant program of section 112.  The College recently prepared an excellent overview of section 111 authority for the Environmental Council of the States (ECOS).

Certain aspects of EPA’s proposal are worth noting.  First, in stark contrast to prior stationary source rules, EPA seeks to harness the entire energy system, not just efforts at individual sources.  The bulk of the proposed emission reductions will come not from the minor expected heat rate improvements at individual electric generating units (EGUs)(EPA’s first “building block”), but from directing states to increase generation at natural gas plants and renewables while reducing electricity demand.  Three of EPA’s four “building blocks”  thus address emission reductions that are outside the control of EGUs, the listed source category.  Consistent with this approach, EPA proposes a portfolio enforcement approach by which states would be authorized to oblige entities other than the affected source for the reductions in building blocks two through four.  The proposal calls for an overall state energy plan, not just for implementing emission reduction opportunities available to individual sources.

Second, the proposal does not establish common performance standards, but sets highly-variable standards for each state based on EPA’s assessment of the state’s individual capacity to reduce emissions under each of the four building blocks.  EPA clearly listened to state pre-proposal input regarding material differences in each state’s EGU portfolio, its capacity to harness wind and solar generating technologies and other state differences.

Although the proposal’s projected benefits reflect an estimated 30% emission reduction from 2005 levels, EPA actually uses 2012 as the baseline for measuring a state’s starting carbon intensity.  Because EPA sets each state’s interim and future carbon intensity targets based on the state’s capacity for reducing, shifting or avoiding EGU emissions, it is not surprising that the proposal does not provide any state with early action credit in the traditional sense.  Some states are further along on their individual progress lines, but as currently designed the proposal does not allow any state to monetize its early reductions nor to avoid future progress based on its prior actions.  This means that some states will be expected to do more than others for the foreseeable future.  And, unless a true early action mechanism is included in EPA’s final rule, some states, such as California, may continue to incur net energy costs higher than their neighbors.

Several commenters have noted the material legal risk that EPA takes with this proposal.  Among the many expected challenges will be that EPA cannot regulate EGUs under section 111(d) because the House version of that section precludes such regulation if the source category already has been listed under section 112.  The proposal also could be challenged for including in the “best system of emission reduction” (BSER) emission reductions outside the control of the source and for obliging the state and entities other than EGUs to achieve such reductions.  EPA argues in its proposal that it can require states to consider any measure that has the effect of reducing EGU emissions (i.e., an “effects” or “ends” test), but some will argue that section 111 only allows EPA to require those emission reduction options (i.e., “means”) available to the EGU itself.

Should EPA fail to finalize one or both of its section 111(b) new and modified/reconstructed unit proposals, then it may be challenged for a failure to finalize the prerequisite 111(b) rule.  Other challenges could relate to an alleged failure properly to subcategorize facilities and for stepping beyond its emission reduction role to, in essence, regulate a state’s energy policy.

EPA has left some important design issues unresolved.  EPA strongly encourages interstate cooperation, including the use of emissions trading, but it leaves the actual shape of such linkages undefined.  Similarly unresolved is the question of how states can interact if they act alone.  Given the regional nature of power markets and the fact that emission reductions occurring in one state often result from investment (on either the supply or demand side) in another, states and companies will need to know the ground rules for adjudicating potentially-conflicting claims for state plan credit and company compliance credit.  EPA seeks comment on these and other critical issues.

For those interested, a more substantive analysis of the proposal can be found here.

EPA Meets Regional Uniformity Requirement – the Hard Way

Posted on June 3, 2014 by Robert Wyman

On Friday, in a case argued by my colleague, Greg Garre and briefed by Leslie Ritts, the D.C. Circuit decided a closely watched case construing the EPA’s “regional uniformity” requirement under the Clean Air Act (CAA.)  The court declared the agency’s directive to regional offices outside the Sixth Circuit to ignore a 2012 Sixth Circuit decision interpreting the CAA’s “single source” requirements as inconsistent with EPA’s uniformity requirement. The decision brings to light an important component of the CAA’s nationwide scheme.

Under the CAA, any “major source” of pollution is subject to certain heightened requirements.  EPA regulations provide that multiple pollutant-emitting activities will be considered together for purposes of the “major source” analysis if they are—among other things—“adjacent.”  But EPA has, in recent years at least, given “adjacent” an expansive and atextual meaning, concluding that even facilities separated by considerable physical distance should be deemed “adjacent” as long as they are “functionally interrelated.” 

In 2012, the Sixth Circuit in Summit Petroleum Corp. v. EPA held that EPA’s interpretation was “unreasonable and contrary to the plain meaning of the term ‘adjacent.’”  The EPA opted not to seek Supreme Court review of the Sixth Circuit’s ruling.  A few months after the Summit decision, however, EPA circulated a directive to the Regional Air Directors informing them that the agency would abide by the Sixth Circuit’s decision within the Sixth Circuit, but that “[o]utside the [Sixth] Circuit, at this time, the EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions.”

The National Environmental Development Association’s Clean Air Project (NEDA/CAP), an industry group, filed a petition for review in the D.C. Circuit, challenging the EPA’s “Summit Directive” as contrary to the statute and EPA’s own regulations.  NEDA/CAP explained that EPA’s Directive would impermissibly place NEDA/CAP members operating outside of the Sixth Circuit at a competitive disadvantage, subject to a more onerous permitting regime than their peers operating within the Sixth Circuit’s jurisdiction.  That disparity between regions, NEDA/CAP explained, was inconsistent with the CAA’s requirement that EPA assure “uniformity in the criteria, procedures, and policies applied by the various regions,” 42 U. S. C. § 7601(a)(2), as well as EPA regulations that similarly require inter-regional uniformity.

On Friday, the D.C. Circuit issued a decision agreeing with NEDA/CAP in National Environmental Development Association’s Clean Air Project v. EPA. Rejecting EPA arguments that the policy could only be challenged in the context of a discrete stationary source permit application, the Court held that NEDA/CAP’s blanket challenge to the EPA’s creation of two different permitting regimes across the country could be challenged today because of the competitive disadvantages it created for companies operating in different parts of the country.  

On the merits, the Court concluded that maintaining a standard in the Sixth Circuit different from the one applied elsewhere in the country was inconsistent with the agency’s regulatory commitment to national uniformity.  The Court recognized that an agency is ordinarily free, under the doctrine of “intercircuit nonacquiescence,” to refuse to follow a circuit court’s holding outside that court’s jurisdiction.  Here, however, the Court held that EPA’s own regulations required it to “respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.”  Finding that the agency’s “current regulations preclude EPA’s inter-circuit nonacquiescence in this instance,” the Court vacated the directive.

The decision is noteworthy in a number of respects.  Not only does the decision roundly reject EPA’s threshold objections to NEDA/CAP’s petition (standing, finality, and ripeness), but it appears to represent the first time a court has applied EPA’s uniformity regulations to invalidate a rule.  The decision therefore puts a light on an important component of the CAA’s nationwide enforcement scheme—the “regional uniformity” requirement.    

Beware the Specter of Debarment

Posted on May 8, 2014 by Tom Sansonetti

Debarment is the process whereby the federal government can permanently prevent a company from doing business with the federal government or suspend a company from doing business with the federal government for a period of years.  The debarment process has been available for decades to the United States to be used against companies or persons whom the government believes are untrustworthy. For instance, removal from EPA’s list of violating facilities requires agency evaluation of corporate attitude. But the Obama Administration has broadened the scope of the process to potentially ensnare many an unsuspecting entity.

The debarment process as it currently exists has resulted in the following scenarios:

A. An oil company in the Rocky Mountain region settled a regulatory violation with the Department of the Interior’s Bureau of Land Management and as part of the agreement paid a substantial seven figure fine and adopted new procedures designed to prevent a reoccurrence of the violation and a two-year period of probation.  Imagine the surprise of the company’s managers and in-house lawyers when eighteen months after the settlement was executed, they received a Notice of Debarment for a three-year period preventing the use of their federal leases requiring new permits.

B. A wind farm owner that was convicted for killing bald eagles discovered that the company could not sell future electricity production to a federal facility.

C. An oil and gas company that pleaded guilty to a Clean Water Act spill faced debarment from being able to bid on federal oil and gas leases for five years.

Companies or persons found to be in violation of civil or criminal statutes or departmental regulations are subject to debarment.  While in egregious cases debarments can be perpetual, most debarments are for a period of three to nine years.  Debarments do not affect a company’s current government contracts, but do affect renewals of those contracts or the need for new permits on federal lands.  The debarments are company-wide.  Consequently, the above-mentioned wind farm owner also could not sell its electricity produced from its coal fired power plants to federal facilities.

Debarment proceedings are administered by the various Offices of Debarment, located within each cabinet department, with the closest responsibility for enforcing the law that was violated.  Thus, the Department of the Interior’s Office of Debarment (staffed by the Inspector General’s personnel) handles violations of fish and wildlife, public lands and Indian law.  Environmental Protection Agency lawyers in the grants and debarment program handle debarment proceedings authorized by Section 508 of the Clean Water Act or Section 306 of the Clean Air Act.

Upon the entry of a federal court judgment or consent decree a representative of the Department of Justice, often an Assistant United States Attorney, forwards the document to the appropriate cabinet department’s Office of Debarment.  The government deems debarment proceedings to be separate from the underlying litigation.  Agreements to avoid debarment may not be a condition of any plea bargain or consent decree.  Adverse outcomes after executive branch debarment hearings may be appealed to a federal district court under deferential Administrative Procedures Act standards. 

What's Up with Ethanol Prices?

Posted on April 30, 2014 by Eileen Millett

Ethanol prices appear to be on the rise.  Weather and an increase in exports appear to be responsible for the uptick. The reason for the reported jump in ethanol prices has to do with turbulent winter weather and increasing United States (U.S.) exports, largely to Brazil.  Ethanol has wide usage in both countries.  The Renewable Fuels Association reported that for 2011, the U.S. and Brazil accounted for 87% of the world’s ethanol fuel production.  Some U.S. ethanol plants have stopped production in part because of droughts that have ravaged much of the nation’s crops and pushed commodity prices so high that ethanol has become too expensive to produce. 

Bioethanol produced from fermentation of carbohydrates in sweet and starchy crops like sugar cane and corn,  has gained in popularity as concerns about energy security and rising oil prices have become more acute.  Ethanol fuel, an alcohol derivative, is a renewable motor fuel that is used as a biofuel additive for gasoline.  Most cars in the U.S. today run on blends of up to 10% ethanol.  Today’s typical fuel pump blend, E10, is 10% ethanol and 90% gasoline.  Backed by government subsidies and mandates, ethanol plants rose in the Corn Belt, generating a new market for crops and billions of dollars in revenue for producers of this corn based fuel blend.  Generally, oil companies have opposed using higher concentrations of ethanol, and have tried to get Congress to change federal rules so that we use less ethanol.   

The U.S. EPA (EPA) has not been immune to the ethanol crunch crisis.  Last November, EPA proposed slashing the corn ethanol mandate to 13.01 billion gallons this year, down from 14.4 billion gallon requirement outlined by federal statute.  After already proposing to reduce the corn ethanol mandate, this year, on March 27, in a congressional hearing, U.S. EPA Administrator, Gina McCarthy defended the proposal, citing “infrastructure challenges and the inability at this point to achieve the levels of ethanol that are in the law.”   The U.S. EPA is the agency charged with the responsibility for developing and implementing regulations to ensure that fuel contains a minimum amount of renewable fuel.  Together with many stakeholders, EPA developed the Renewable Fuel Standard (RFS) program, and in 2005, the Energy Policy Act (EPAct) created the first RFS program. The program established the first renewable fuel volume mandate in the United States. 

The RFS program sets forth a phase-in for renewable fuel volumes beginning with 9 billion gallons in 2008 and ending at 36 billion gallons in 2022.  As required under EPAct, the original RFS program (RFS1) required 7.5 billion gallons of renewable- fuel to be blended into gasoline by 2012.  The EPA proposed reduction in the mandate would have significantly affected this year’s corn demand.  In October 2013, the Renewable Fuels Association reported that the proposed 1.4 billion gallon reduction in the ethanol mandate would reduce corn demand by 500 million bushels, and result in a reduction in corn prices.  

However, with the recent rise in corn prices, there is speculation that U.S. EPA could be reversing course.  If U.S. EPA backtracks on its plans there could be more drift in corn prices.  Ethanol prices are not merely dependent on what action U.S. EPA choses to undertake.  On the federal level, the United States Department of Agriculture (USDA) conducts a large amount of research regarding ethanol production in the United States. Much of this research is targeted toward the effect of ethanol production on domestic food markets.  So the oil industry, food companies and livestock sector will all be strong voices to determine what’s up with ethanol prices.  As yet, there is no final rule from U.S. EPA.  

Is the NSR Enforcement Initiative Dead Yet? Injunctive Relief Claims Dismissed Against U.S. Steel

Posted on April 29, 2014 by Seth Jaffe

On April 18, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.

Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:

"Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)"

Judge Simon seems to have felt more compelled than persuaded.

"Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.

So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here."

One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.

Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.

 

Navigating “Navigable” Waters

Posted on April 21, 2014 by Earl Phillips

Whether a wetland or modest stream is subject to Clean Water Act regulation as a “navigable water” of the United States (navigable in law) remains a muddy question. In Rapanos v. United States, the Supreme Court established a two-part test for determining CWA jurisdiction: the body of water must be “relatively permanent” and it must be adjacent (have a continuous surface connection) to navigable waters. Justice Kennedy’s concurring opinion says waters or wetlands sharing a “significant nexus” with traditionally navigable waters are subject to CWA jurisdiction.

In 2011, the EPA and Army Corps of Engineers (ACOE) released draft guidance on “waters of the United States” which expanded the waters over which the agencies planned to assert CWA jurisdiction, compared to pre-Rapanos. Then, in September 2013, the EPA’s Science Advisory Board released a draft scientific report, “Connectivity of Streams and Wetlands to Downstream Waters,” for public comment, stating that the final version of the report would be the basis for a joint EPA and ACOE rule on CWA jurisdiction.  On March 25, 2014, the two agencies released a proposed rule stating that all tributaries of traditional navigable waters and interstate waters, and adjacent water bodies, are automatically jurisdictional because they share a “significant nexus” with navigable waters. The proposed rule appears to assert default jurisdiction over many seasonal and rain-dependent streams and wetlands near rivers and streams, provided they are “tributaries.” Beyond this, the proposed rule states that jurisdiction over other types of waters with more uncertain connections to downstream waters—such as unidirectional waters, non-adjacent wetlands, and other waters outside of flood zones and riparian areas—will be evaluated on a case-by-case basis. The official version of the proposed rule was published in the Federal Register yesterday with public comments due in ninety days.

Parties understandably confused can petition for case-specific jurisdictional determinations. While a decision on such a petition may be definitive, courts have refused to allow judicial review of such decisions because they are not “final decisions” under the Administrative Procedure Act. In Belle Co., LLC v. U.S. Army Corps of Engineers, a federal district court noted that jurisdictional determinations do not impose any new or additional legal rights or obligations, but merely remind the party of existing duties under the CWA. By contrast, the Supreme Court determined in Sackett v. EPA that compliance orders issued by the ACOE or EPA following or flowing from jurisdictional determinations are subject to judicial review. 

Adding to the challenge of navigating these uncertain legal waters, many states and municipalities have expanded their statutory definitions of “waters” (e.g. artificial features and groundwater) and “wetlands” (e.g. soil types and buffers) to increase the breadth and depth of state and local regulation. So, update your navigational charts and prepare for some challenging sailing! 

D.C. Circuit Affirms EPA’s Utility Air Toxics Rule: An “Appropriate” Rule Need Not Be Justified By Cost-Benefit Analysis

Posted on April 17, 2014 by Seth Jaffe
On April 15th, the D.C. Circuit Court of Appeals affirmed EPA’s rule setting limits for emissions of mercury and other air toxics from fossil-fuel-fired electric steam generating units.  The focus of the decision – and the issue on which Judge Kavanaugh dissented – was whether EPA was required to consider the costs that would be imposed by the rule.  EPA said no and the majority agreed.

Section 112(n) of the Clean Air Act required EPA to perform a study of the health hazards related to hazardous emissions from EGUs prior to regulating them.  How was EPA to utilize the results of the study?

"The Administrator shall regulate [EGUs] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph."

The industry petitioners and Judge Kavanaugh took the position that Congress’s use of the word “appropriate” evidenced an intent to require EPA to consider costs.  To Judge Kavanaugh, “that’s just common sense and sound government practice.”  However, persuasive Judge Kavanaugh may be as a matter of policy, the majority was not persuaded that the law requires a consideration of cost.

As the majority noted, nothing in section 112(n) requires that EPA consider cost.  Indeed, the word “cost” is not mentioned in section 112(n).  Moreover, Congress required EPA to make the “appropriate and necessary” determination based on a study of health impacts, not a study of costs.  Finally, as EPA and the majority noted, the Supreme Court, in Whitman v. American Trucking Ass’ns, cautioned against finding authority – let alone a mandate – to consider costs in ambiguous provisions of the CAA, given that there are sections of the Act which do address costs.

I’m with Judge Kavanaugh as a matter of policy (though it’s worth noting that EPA in fact did a cost-benefit analysis and found that the benefits of the rule substantially outweigh its costs).  On the law, however, the dissent seems pretty much a case of ipse dixit.  When the rule was promulgated, I said that I would be “stunned” if the rule was not upheld on judicial review. Notwithstanding the dissent, I’d be equally stunned if the Supreme Court flips this decision.  I don’t think that there’s anything here warranting Supreme Court review.

ACOEL Members Assist ECOS On Clean Air Act Issues

Posted on April 15, 2014 by Theodore Garrett

This week, the Environmental Council of the States (ECOS)  publicly announced a memorandum prepared by ACOEL members concerning important issues arising under the Clean Air Act.  In May 2013 ACOEL entered into a Memorandum of Understanding with ECOS to facilitate a relationship pursuant to which members of ACOEL will provide assistance on issues of interest to ECOS. 

In accord with the President’s June 2013 Climate Action Plan, EPA announced plans to use existing Clean Air Act Section 111 authority to develop greenhouse gas emissions (GHG) standards for new and existing sources.  Thereafter, ECOS contacted ACOEL and requested an extensive and neutral review of the history and background of section 111(d) of the Act.  A diverse group of ACOEL members from academia, private law firms, and public interest groups volunteered and produced the attached comprehensive memorandum, which was well received by ECOS.  This week, ECOS made the memorandum publicly available. 

In announcing the memorandum, Dick Pedersen, the President of ECOS and Director of the Oregon Department of Environmental Quality, thanked the members of ACOEL for their significant time and effort in preparing the memorandum, and added that ECOS looks forward to working with ACOEL in the future.  ACOEL hopes that this memorandum will serve as a valuable resource in connection with EPA’s anticipated rulemaking efforts in this area.

ACOEL: Memorandum for ECOS Concerning Clean Air Act 111(d) Issues pdf

The Trains Don’t Wait... GHG Permits Leaving the Station

Posted on March 24, 2014 by Catherine R. McCabe

While the world waits for the Supreme Court to decide whether EPA can regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act, EPA and state permitting authorities have moved ahead to issue GHG permits. Some of those permits are encountering legal challenges. The Sierra Club and citizen activists are challenging permits issued by EPA Regions as insufficiently stringent, and urging EPA to use its Prevention of Significant Deterioration (PSD) permitting authority to require greater use of solar energy and carbon capture and sequestration (CCS) at new facilities.

So far, EPA’s Environmental Appeals Board has rejected two citizen challenges to GHG PSD permits issued by EPA Regions. On March 14, 2014, the Board denied the Sierra Club’s petition for review of a GHG permit issued by Region 6 for a new natural gas-fired power plant in Harlingen, Texas. In re La Paloma Energy Center, LLC. (Those of you who follow events in Texas will recall that EPA is currently running the GHG permitting program in that state, but has proposed to approve the state’s application to assume responsibility for that program.) The Board rejected Sierra Club’s arguments that the permit’s GHG emission limits were not stringent enough to meet BACT standards and that Region 6 should have required La Paloma to consider adding a solar energy component to its power plant. The Board cautioned, however, that there is no “automatic BACT off-ramp” for solar energy alternatives, and emphasized that permitting authorities must consider suggestions for adding solar energy components at new facilities on a case-specific basis.

In 2012 the Board rejected similar arguments by citizen activists who urged Region 9 to use its PSD permitting authority to require a new hybrid (gas-solar) power plant in California to reduce GHG emissions by increasing its planned solar generation capacity. In re City of Palmdale. The proposed plant was to be fueled primarily by natural gas, with a modest (10%) solar power component to satisfy California renewable energy requirements. The decisions in both City of Palmdale and La Paloma relied heavily on the Regions’ findings that there was insufficient space at the project sites to accommodate the solar power generation capacity that the petitioners were advocating. 

The Palmdale decision also upheld Region 9’s rejection of CCS as a BACT requirement for that facility based on cost considerations. The estimated annual cost of CCS would have been twice the project cost (annualized over 20 years) in that case. Sierra Club has renewed the debate over the affordability of CCS in a new PSD permit appeal that is currently pending before the Board. In re ExxonMobil Chemical Company Baytown Olefins Plant. Region 6 rejected the CCS option in this case based on a finding that the cost would be disproportionately high. Stay tuned for a Board decision in the next few months . . . 

*Any views expressed herein are the views of the author and do not necessarily reflect the views of the U.S. Environmental Protection Agency or the United States.

A CASE OF THE VAPORS: When the Fog Clears, Will the New ASTM Standard for Phase I Environmental Site Inspections Trigger Significant Litigation Over Vapor Intrusion?

Posted on March 12, 2014 by John Manard

Among other changes, the new standard now defines “migration” to include the movement of vapor in the subsurface. That change makes it more clear that the environmental professional conducting a Phase I must, when identifying releases and threatened releases, evaluate the potential for vapors to migrate from contaminated subsurface soils and ground water into the indoor air of buildings on the surface.

While many lawyers and environmental professionals believed the old standard already required an evaluation of the potential for vapor intrusion, there was no consensus, and there are many Phase I reports out there that do not evaluate that potential. Because treatment of vapor intrusion under the old standard was a topic of genuine dispute among practitioners, you might think we could accept this clarification and move on. Not so.

The USEPA rolled a grenade into the tent when, in its preamble to the final rule sanctioning E1527-13, it stated that it “. . . wishes to be clear that, in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting all appropriate inquires.” (78 Federal Register 79319 (December 30, 2013).

The USEPA’s clarification has prompted some discussion in the blogosphere about potential malpractice claims against environmental professionals who failed to address relevant vapor intrusion issues in past Phase I reports. Closely related is the question of whether landowners currently relying on one of CERCLA’s landowner liability protections may be at risk due to the inadequacy of their consultant’s work. These are legitimate concerns and only time will tell if theoretic liability leads to actual liability and litigation.

However, it does not appear that the sky is falling and there are reasons to suggest that a landside of litigation over this issue is unlikely. While litigation can be expected under the right (very limited) fact pattern, the following factors should alleviate concerns about widespread litigation:

  • While the aggregate Phase I universe is vast, the portion of that universe affected by the vapor intrusion issue is very limited; involving only circumstances where subsurface contamination is known or suspected.
  • Even when genuine vapor intrusion questions exist, a cause of action for malpractice requires damages. Simple receipt of a substandard Phase I report is not enough. The recipient of the report must experience damages related to the failure to address vapor intrusion. I see two such scenarios:
    • A landowner faces liability for remediation of a vapor intrusion problem, and does not qualify for liability protection under CERCLA because the Phase I failed to evaluate the threat of vapor intrusion.
    • A landowner discovers that a vapor intrusion problem reduces the value of its property, after relying on a Phase I that did not evaluate the threat of vapor intrusion.
  • In the former situation, case law demonstrates that courts are reluctant to deny CERCLA liability protection to landowners who reasonably rely on an environmental professional’s Phase I report to satisfy AAI. Reliance on an environmental professional would seem particularly reasonable and appropriate regarding a technical issue such as whether or not an assessment should evaluate the threat of vapor intrusion. If landowner liability is improbable, the specter of derivative Phase I malpractice claims is also diminished. 
  • Concerning the latter (reduced property value) scenario, most Phase I reports are conducted in order to satisfy AAI and qualify for landowner liability protection. While use of the ASTM standard is not limited to that task, the standard directs the environmental professional to assume, absent other direction from the user, that satisfaction of AAI is the user’s purpose. If the user obtains the liability protection it bargained for, can it maintain a malpractice action? The answer to that question will depend upon the facts of each case, but I suspect that the user will face an uphill battle.
  • Only after paring down potential vapor intrusion disputes to those involving actual relevant damages do we reach the substantive malpractice question of whether or not the failure to address vapor intrusion in a Phase I is a breach of a professional standard of care. 

The answer to that breach of standard question is beyond the scope of this note and will require a descent into the bowels of the ASTM standard. I suggest that the USEPA’s proclamation is not dispositive because it addresses compliance with its own AAI requirement, not compliance with the ASTM standard guiding the environmental professional; a distinction that may make a difference.

For transactions in the pipeline when the December 31, 2013 final rule was promulgated, most will not be affected because they do not present the particular facts and circumstances (i.e., subsurface contamination) triggering a vapor intrusion assessment. In those transactions where vapor intrusion is an issue, however, it is key that AAI be completed prior to the acquisition of property. For pending transactions, deficient Phase I assessments should be revised or supplemented to address vapor intrusion potential. If the property has already changed hands, the new owner’s claim to any of the CERCLA landowner liability protections will be at risk. 

How great a risk? Time will tell. But it is clear that good faith arguments that vapor intrusion need not be part of new Phase 1 assessments are no longer tenable.

Inverting the Inversions – Utah and the PM2.5 NAAQS

Posted on February 18, 2014 by James Holtkamp

The valleys and mountains of the Great Basin hold cold air in when a high pressure parks itself overhead, with the result that the valleys with significant populations, primarily the 100+ mile Wasatch Front, are subject to a wintertime PM2.5 grunge that builds up until the next storm front moves in to clear it out.

Although Salt Lake City and other parts of the state are in compliance with the annual PM2.5 NAAQS, exceedances of the 24-hour NAAQS have been recorded during inversion periods since 2006, when EPA lowered that standard from 65 μg/m3 to 35 μg/m3. As a result, Utah is going through an arduous PM2.5 state implementation plan (SIP) revision process to address the PM2.5 nonattainment.

Because we can’t change the topography around here or install fans large enough to blow air out of the valleys, the state must seek reductions in emissions that contribute to the wintertime PM2.5 exceedances. Nearly three-fifths of those emissions are from car and truck emissions. About thirty percent of the contributing emissions are from area sources and wood-burning fireplaces and stoves. And the rest of the emissions –only about a tenth of the PM2.5 precursor and direct emissions – are contributed by large industrial sources in the airshed.

The proposed SIP seeks some reductions from the large industrial sources, which must be retrofit not with RACT but with the equivalent of BACT, notwithstanding hundreds of millions of dollars of pollution control improvements already installed over the last decade. The rest of the PM2.5 emissions to be reduced during inversions must come primarily from mobile source and area emissions.  

The modeling underlying the SIP shows that attainment will barely be reached by the 2019 attainment date. But, with the D.C. Circuit throwing out the PM2.5 implementation rule a year ago and requiring EPA to promulgate a new one under more restrictive provisions of the CAA and the predictable citizen’s suits, who knows if attainment can be achieved short of literally turning out the lights and leaving town.

The Utah Legislature is in session and legislators are falling over each other trying to show that they care about cleaner air. However, there is not much state legislators can do, given that the emissions and fuel standards for mobile sources are set by the federal government (with states having the option of adopting California standards under certain circumstances). So, the state is squeezed between the Wasatch Mountains on the one side and the Clean Air Act on the other. It might be easier to cart off the mountains than to bring the Clean Air Act requirements into alignment with the real world.

EPA Inches Closer to a More Stringent Ozone Standard: When Will It Actually See the Light of Day?

Posted on February 11, 2014 by Seth Jaffe

Last week, EPA released its second external review draft of an updated Policy Assessment on the national ambient air quality standard for ozone. It also released updated draft risk and exposure assessments. To no one’s surprise, the new drafts confirm support for lowering the ozone NAAQS from 75 ppb to a range of 60 ppb to 70 ppb.

Why is this not a surprise?  Because, as I noted some time ago, the prior draft policy assessment also supported a NAAQS in the range of 60 ppb to 70 ppb. Moreover, the Clean Air Science Advisory Committee weighed in on the prior draft, supporting a standard in the 60 ppb to 70 ppb range. In fact, before getting cold feet, CASAC had indicated that the data would support a standard below 60 ppb.

Courts’ deference to CASAC determinations on these issues is pretty well established. It seems clear that EPA has to lower the NAAQS to at most 70 ppb in order to survive judicial review. It’s not even obvious that 70 ppb would stick, though that will be clearer after CASAC has reviewed this most recent draft Policy Assessment.

The other significant question is when EPA will actually issue the new standard. After all, EPA was prepared to issue a new standard in 2011 or early 2012, when the White House put the proverbial kibosh on EPA’s plans. Will EPA somehow manage to delay issuance of the new standard until after the November elections? Now that the Super Bowl is over, I think that the Vegas bookies are putting their money on after.

A SWING AND A MISS -- The First Reported Challenge to Water Quality Trading is Dismissed for Lack of Standing

Posted on January 24, 2014 by Allan Gates

EPA has touted water quality trading for more than a decade as a viable tool for combating water pollution, particularly pollution due to excess nutrients and sediment.  But the Clean Water Act contains no express authority for water quality trading or offsets, and some environmental groups view trading as a “license to pollute” that violates the Clean Water Act’s promise to eliminate the discharge of pollutants into waters of the United States.

Last month a federal district court issued a final ruling in the first reported challenge to the legality of water quality trading.  The court dismissed the action without reaching the legality of water quality trading.   Instead, the court held that the plaintiff environmental groups (Food and Water Watch and Friends of the Earth) lacked standing and that EPA’s  “authorization” of trading in the Chesapeake Bay TMDL was not a final agency action.  Food and Water Watch v. EPA, No. 1:12-cv-01639 (D.D.C. decided December 13, 2013).

Although the court’s decision did not address the substantive legality of water quality trading, the case still presents four interesting aspects that may prove instructive on what to expect in future challenges.

First, environmental groups split over the question of joining the challenge to water quality trading.  It is widely rumored that Food and Water Watch actively solicited support from environmental groups involved in Chesapeake Bay issue but met with stiff resistance. It appears that the other environmental groups’ support for the Chesapeake Bay TMDL overrode any interest they might otherwise have had in supporting a challenge to the legality of water quality trading.

Second, the defense of water quality trading made for strange bedfellows.  Three parties intervened as defendants.  One was a group representing municipal point source dischargers who support the Chesapeake Bay TMDL (National Association of Clean Water Agencies).  Two were non point source groups who are actively challenging the legality of the Chesapeake Bay TMDL in another case (American Farm Bureau and National Association of Home Builders).  The non-point source representatives argued that the trading component of the Bay TMDL would be important and valuable to their members if their challenge to the validity of the Bay TMDL in the other case was unsuccessful.

Third, the court’s decision on standing, ripeness, and the question of final agency action suggests it may be difficult to litigate the basic legality of water quality trading until a program is fully established and permits allowing credit for trades are issued.  EPA argued successfully that no actual or imminent injury to the plaintiffs was caused by the Chesapeake Bay TMDL’s express reference to trading as a means for meeting the waste load allocations.  According to this argument, the TMDL did not compel any trades; it simply acknowledged that states in the Chesapeake Bay watershed might use trading as a tool in developing permits that implement the TMDL.  Carrying this argument to its logical conclusion, one could envision the possibility that there would be no basis for private party standing to challenge the legality of a trading program until after a stream has been listed as impaired, a TMDL has been performed, a trading program has been established, and permits have been issued allowing credits for trades within the program.  Litigating the legality of water quality trading at such a late stage would presumably face a significant task in unwinding the momentum of such a fully developed administrative structure.

Fourth, given the success of EPA’s standing and ripeness arguments, it seems unlikely that there will be any definitive judicial ruling on the legality of water quality trading any time soon.  The partisan division in Congress makes clarifying legislative action even less likely.  As a consequence, EPA’s success in defending against the Food and Water Watch lawsuit may have the ironic result of postponing the day when states and permit holders will have a clear and definitive answer regarding the basic legality of water quality trading.

Embraceable You – Throwing your Arms Around the New ASTM Phase I Standard, Approved by USEPA

Posted on January 23, 2014 by Kenneth Gray

As 2013 drew to a close, USEPA amended its All Appropriate Inquiries Rule (AAI Rule) and anticipates that purchasers and environmental professionals will “embrace” the recently published ASTM International E1527–13 "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process," commonly referred to as the “ASTM Phase I Standard.”  Although the Agency had initially indicated the old flame of the ASTM E1527-05 standard was just as attractive, the final AAI Rule makes clear that USEPA considers the 2013 standard to have many new charms and recommends its use.  Further, the Agency has indicated that the old standard is absolutely replaceable -- and plans a rulemaking to remove the 2005 standard, perhaps as early as this spring.

USEPA warns that the regulated community should not be naughty.  The Agency will keep an eye on the new relationship and threatens that if the regulated community doesn’t get sweet on the new standard (if it is not being “widely adopted”), then USEPA may further modify the AAI rule to explicitly require activities under the updated standard.  

The Agency believes the ASTM E1527–13 improves upon the E1527–05 standard and reflects evolving best practices and the level of rigor that will afford prospective property owners necessary information when making property transaction decisions and meeting continuing obligations under the CERCLA liability protections.  In particular, the new ASTM E1527–13 standard enhances the previous standard with regard to the delineation of historical releases or recognized environmental conditions at a property.  It also makes important revisions to the standard practice to clarify that all appropriate inquires and Phase I environmental site assessments must include, within the scope of the investigation, an assessment of the real or potential occurrence of vapor migration and vapor releases on, at, in or to the subject property.

USEPA, perhaps inadvertently, couldn’t let go without complimenting “the ex” – and may have created some litigation issues.  The Agency went out of its way to opine that the prior standard already called for identification of vapor release issues and vapor migration issues.  There has been some legitimate debate on whether the ASTM E1527-05 standard was clear on that point.  Some attorneys anticipate additional malpractice litigation against environmental professionals where vapor issues weren’t adequately addressed in Phase I assessments issued between 2005 and 2014 that claimed to comply with the standard. 

Apologies to the Gershwins and Nat King Cole, but I expect the ASTM E1527-13 is entirely embraceable – to the extent that environmental professionals are able to follow detailed consensus standards written by a team of engineers and lawyers.  Many environmental lawyers have concluded that even in late 2013, most ASTM Phase I Standard site assessments that purported to meet the ASTM standards failed to measure up. 

Where are we now? EPA's Audit Policy, Next Generation Compliance and Budgetary Implications

Posted on January 21, 2014 by Mary Ellen Ternes

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.

Conclusion

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. 

A Card Laid Is A Card Played: EPA Is Subject To Sackett Review Even After Withdrawing An Enforcement Order

Posted on December 19, 2013 by Theodore Garrett

In Sackett v. EPA, the Supreme Court held that pre-enforcement review is available to challenge an order concluding that parties had violated the Clean Water Act by filling a wetland without a permit.  Practitioners have wondered whether, in response to Sackett, EPA would take steps to avoid review, such as by issuing warning letters instead of orders.  In a recent case, EPA employed another tactic.  EPA withdrew an enforcement order, hoping thereby to avoid judicial review under Sackett by claiming that the case was now moot.  Not so fast, a court in West Virginia concluded, EPA’s position is still reviewable.    Alt v. EPA, 2013 WL 5744778 (N.D. W.Va. No. 2:12–CV–42, Oct. 23, 2013), available here

In the Alt case, EPA issued an enforcement order against Lois Alt, the owner of a poultry farm, on the grounds that Alt failed to obtain a Clean Water permit for storm water discharges that allegedly contained manure.  Alt filed suit in U.S. District Court in West Virginia challenging the EPA order based on the Supreme Court’s Sackett decision.  The American Farm Bureau intervened because of concern over EPA’s position on agricultural storm water.  

Subsequently, EPA withdrew the order against Alt, nominally because Alt had taken steps to remedy environmental harm -- or did EPA foresee an unhappy ending in court?  In any event, EPA filed a motion to dismiss the lawsuit as moot.  Alt opposed EPA’s motion to dismiss, arguing that EPA would likely resume its unlawful conduct after the case is dismissed.  The district court denied the motion on the grounds that EPA had not changed its underlying position concerning whether the discharges were agricultural storm water exempt from permit requirements.  The district court noted that EPA reserved the possibility of reissuing the order if there was a significant change in the poultry farm’s operations, and the intervenors showed that EPA’s alleged assertion of authority can be expected to continue.  In short, EPA’s position was reviewable even though the order that provoked the lawsuit had been withdrawn  by EPA.  As Jimmy Reed said in his classic blues song, “You can run, but you can’t hide.”

If that wasn’t enough to ruin EPA’s day, the court went on to reach the merits of EPA’s position concerning the need for a NPDES permit and granted summary judgment for Alt.  The court held that no permit was required because the discharges were exempt as “agricultural storm water discharges.”  The court rejected EPA’s argument that the discharges did not have an agricultural purpose, concluding that the poultry operation was agricultural, that the incidental manure was related to the raising of poultry, and that the runoff from the farm was storm water caused by precipitation.

The Alt decision is significant both for its review of an EPA position underlying an order that had been withdrawn and for its decision concerning the agricultural storm water exemption.

Has the Standard for Performing a Phase I Environmental Site Assessment Changed? Yes and No

Posted on December 17, 2013 by Jeff Civins

Purchasers and lessees of commercial or industrial properties know to obtain Phase I environmental site assessments to identify the presence of contamination - so-called recognized environmental conditions (RECs) - because of the very substantial liabilities these conditions may create. And their lenders generally require them. The industry standard for Phase I’s is based on EPA regulations that flesh out Superfund’s “all appropriate inquiry (AAI)” standard. In those regulations, EPA expressly approved use of a standard developed by ASTM, i.e., E1527-05. ASTM recently issued a new standard, E1527-13, that EPA initially approved in a final rule in August, but, as a result of unfavorable comment, withdrew in October. Pending the agency’s promulgation of that rule’s companion proposal, expected by the end of this year, the question is which standard purchasers and lessees should use - and which standard should their lenders require - in the meantime.

In addition to providing information pertinent to managing environmental risks associated with contamination, the performance of a Phase I that satisfies AAI also may help establish a defense for the purchaser/lessee under Superfund should contamination be found. Superfund provides three transaction-related defenses that each require AAI, the most pertinent of which is the so-called bona fide prospective purchaser defense. Congress required that EPA promulgate standards establishing AAI and it is those regulations - and the approved ASTM standard - that have become the industry standard for Phase I’s.

As EPA notes, the new ASTM standard includes a number of differences from the prior version, which arguably only makes the standard more rigorous. Among other things, the new standard distinguishes between historical RECS that have been regulatorily resolved or that allow for unrestricted residential use, which are no longer RECs, and those that though regulatorily resolved, require either institutional or engineering controls because contaminants remain in place and that are now referred to as “controlled” RECs. It also clarifies that vapor intrusion - the potential for vapors from contaminants in soils and groundwater to migrate into buildings where they may concentrate at levels that pose threats to human health - is to be considered a REC, like groundwater migration, and not excluded from consideration because it may affect indoor air quality, which itself is generally not within the scope of AAI. The fact the two standards are different creates some regulatory uncertainty.

The response to this temporary dilemma is that purchasers, lessees and lenders should be able to have their cake and eat it too by having environmental professionals indicate that they have satisfied both standards. Environmental professionals that perform Phase I’s and satisfy ASTM E1527-13 presumably will be satisfying ASTM E1527-05 as well. EPA informally has suggested that environmental professionals use the new standard and, in their reports, conclude that they have satisfied both. Presumably, the environmental professional’s certification should reference both as well.

EPA’s Draft Groundwater Remedy Completion Strategy: Focusing on the Procedures or the Problems?

Posted on December 9, 2013 by Charles Efflandt

EPA is seeking stakeholder input on its draft Groundwater Remedy Completion Strategy.   Released on October 29, 2013, the strategy is advertised as a guide for evaluating remedy performance and improving decision-making to more effectively and expeditiously move groundwater sites to completion. Having experienced the problems associated with the “set it and forget it” approach to groundwater remedial action, my interest was piqued by the prospect of a new EPA strategy incorporating more flexibility in evaluating remedial action objectives, remedy performance and systematic risk assessment.

The potential impact of EPA’s remedy completion strategy is arguably diminished, however, by a lack of clarity as to its scope and purpose. The stated objective of documenting a uniform approach to efficiently completing groundwater remedial actions is qualified by an ambiguous disclaimer that the strategy does not change other guidance or policy, is not intended to alter the way the agency develops remedial objectives and cleanup goals and is not intended to interfere with the federal or state site decision-making process. So, what exactly does EPA hope to accomplish in proposing this new strategy?

The elements of the strategy consist of understanding site conditions, designing a site-specific remedy evaluation process, developing performance metrics, conducting remedy evaluations and making appropriate site management decisions. The focus of EPA’s strategy as presented is largely procedural. The strategy does not address common site impediments to achieving an effective and expeditious groundwater exit strategy. To that extent, it is primarily a restatement of a remedy evaluation process that has been the subject of numerous articles and that, in fact, has historically been implemented at many sites.

But perhaps my initial reading is too narrow. The strategy hints at more substantive remedy completion issues, such as addressing site remedial action objectives that become impracticable and unnecessary for the protection of health and the environment, as well as the need to more consistently evaluate remedy change at mature groundwater sites.

From the perspective of focusing on site groundwater scenarios that often delay remedy completion, I suggest that the draft strategy falls short of the goal line. Rather than simply allude to the remedy completion obstacles that presumably inspired the agency’s effort, EPA might better achieve its stated purpose if it revises its strategy to include more discussion of how the strategy may apply to common groundwater completion impediments. For example, it would be useful for the strategy to address the cost and inefficiencies of continuing to operate and maintain asymptotic pump and treat systems at low-threat sites, how to better incorporate plume stability trend information in the evaluation of remedy change, changes in exposure pathway risks and the impact of natural attenuation mechanisms, institutional controls and land use on remedy modification and remedy completion decision-making.

What I had hoped to see in the draft strategy was EPA’s blessing of a more flexible and common sense approach to specific groundwater remedy completion obstacles. My first reading of the draft strategy suggested to me that it was essentially a redundant procedural roadmap for remedy evaluation.  But upon reflection, I think it could be more.  Indeed, it could also be – and I hope, after consideration of stakeholder comments, will be – a tool for encouraging more consistent regulatory acceptance of remedy change and evolving risk assessments to overcome the inertia of inflexible remedial action objectives and remedy selection impacting many groundwater sites.

“Waters of the U. S.” - What’s Not to Understand?

Posted on November 26, 2013 by Rick Glick

EPA and the Army Corps of Engineers continue their ongoing effort to bring clarity to the tangled mess wrought by the Supreme Court in Rapanos v. U. S. In that 2006 case, a fractured Court issued five separate opinions on the jurisdictional reach of the Clean Water Act.  Congress didn’t help in the first place by extending such jurisdiction to “navigable” waters, defined in the Act as “waters of the United States” without further elucidation.  EPA and the Corps have developed new rules now under review by the Office of Management and Budget prior to release for public comment.

The agencies and the courts have long struggled with a workable definition of “waters of the United States,” particularly in the context of filling wetlands.  The Supreme Court previously held that wetlands adjacent to navigable waters are jurisdictional because of their ecological connection to those waters, but isolated wetlands in the Pacific Flyway are not.  In Rapanos, a four member plurality in an opinion by Justice Scalia limited jurisdiction to areas that are wet with flowing or standing water on a more or less regular basis, which would exclude many areas that appear dry but meet the agency definition of wetlands.  The determinative fifth vote, however, was from Justice Kennedy, who applied a different test, requiring only a “significant nexus” between the navigable waterways and the wetland. 

Since Rapanos, many courts have been unable to discern guiding precedent and adopted hybrids of the Scalia and Kennedy tests. In the meantime, the agencies on two occasions have adopted guidance to help permit writers and the regulated community recognize jurisdictional wetlands.  The agencies’ latest effort would go beyond guidance to rules having the force of law. 

The rules define jurisdictional waters of the United States to include categories of wet areas, such as tributaries of navigable waterways.  The rules would exclude drainage ditches excavated on uplands or other artificially wet areas, such as waste treatment systems or irrigated lands.  The expectation is that by establishing by rule categories of jurisdictional waters that per se have a significant nexus to navigable waters, the cost of permitting and litigation would decrease, while certainty for land developers would increase. 

The rules are based on a report by EPA staff that compiles and synthesizes peer-reviewed scientific research on the relationship between tributaries, wetlands and open waters.  The report is under review by EPA’s Science Advisory Board, and EPA has said the rules would not be released for public comment until that review is complete. 

Still, the fact that the rules were developed before the report and Science Advisory Board review is complete has drawn criticism from Congressional Republicans.  They charge that the report is just window dressing for EPA doing what it wants.  In a letter dated November 13 to EPA, the Senate and House Western caucuses urge EPA to withdraw the rule “based on the devastating economic impacts that a federal takeover of state waters would have.”

The prospect of having rules in place to define jurisdictional waters is, on its face, a positive development because of the uncertainty that now pervades this area.  However, in addition to Congressional resistance, the goal of avoiding litigation will likely prove elusive.  If challenged, the agencies will be entitled to a measure of deference once the rules are adopted, but we can safely predict there will be many challenges.  

Once the rules clear OMB and the Science Advisory Board, they will be published for public comment.  Watch this space for updates.

New ASTM E1527-13 Standard for Phase I ESA

Posted on November 11, 2013 by Thomas Lavender

On November 6, 2013, the American Society for Testing and Materials (ASTM) issued the revised version of the ASTM E1527 Standard for Phase I Environmental Site Assessments.  The new standard supersedes the prior 2005 standard, which had been deemed to satisfy EPA’s “all appropriate inquiry” rules.    EPA has expects to confirm whether the new standard is compliant by the end of 2013.

The 2013 amendment to ASTM E1527 provides clarification on the definitions of Recognized Environmental Condition and Historical Recognized Environmental Condition.  The amendment also includes a new term, Controlled Recognized Environmental Condition, and addresses the potential assessment for Vapor Migration Risk.  The amendment further clarifies requirements for the requisite regulatory file review and includes updates to User responsibilities under the standard.  The EPA has summarized the updates and changes from the E1527-05 standard in a document in the EPA docket.  (See Amendment to Standards and Practices for All Appropriate inquiry.)

Cooling Water Intake Rules – Will This Turkey Arrive for the Holidays?

Posted on November 7, 2013 by Molly Cagle

Quoting our colleague Philip Ahrens, “We shall see” indeed.

Invoking force majeure due to the 16-day government shutdown, EPA has again (for the third time) delayed the issuance of the Clean Water Act 316(b) rules past the November 4, 2013 deadline most recently agreed to in its settlement with Riverkeeper.  It remains to be seen if EPA will deliver the 316(b) rules on November 20, 2013 – just in time for a little light reading over your turkey dinner – or seek a further extension with Riverkeeper.  EPA and environmentalists are now in talks for a new deadline, so you can probably head home to enjoy your  turkey and sides at Thanksgiving without toting home a Federal Register package to disrupt your holiday.

Advocates for a more stringent set of rules appear to have used the latest delay to secure political support from a group of House Democrats that recently encouraged EPA Administrator Gina McCarthy to require power plants and other industrial facilities to install closed-cycle cooling water technologies not just to save local ecosystems, but also to respond to climate change.  According to the elected officials, “Closed-cycle cooling structures would ensure greater energy grid security and reduce ecological harm in a warming world.”  That’s a pretty incredible statement all around given that, although the cooling water intake rules have been embroiled in a multi-decade-long saga of regulations and litigation about entrainment and impingement of fish, they have never been about a meaningful assessment of the ecological impact of various entrainment and impingement rates in various types of water bodies.  In fact, the proposed rule completely failed to take into account significant variations in different types of waterbodies.

Given the proposed 316(b) rules, EPA is unlikely to jump on the closed-cycle cooling bandwagon and abandon a more flexible approach.  The Democratic Congressmen say in their letter that flexibility unfairly burdens state environmental protection agencies.  Environmentalist say that the flexible approach will bring more litigation because the proposed approach is not lawful.  Industry groups continue to prefer flexibility as it allows them options such as upgraded screens, barrier nets, reduced intake velocity, fish return systems – technologies that would lead to reduced impingement and entrainment but cost far less than retrofitting plants with cooling towers and other high-energy technologies.  So industry too remains primed for challenge.  At stake is the potential for hundreds of millions of dollars of upgrades for an ill-defined environmental benefit.  

While it’s anyone’s guess when the rules will come out, it does seem reasonable to predict that whenever they emerge, the lawsuits will follow.

Grant of Certiorari in Greenhouse Gas Regulation Litigation: Limited But Important

Posted on October 30, 2013 by David Buente

Of the 21 separate questions presented in the 9 petitions for writ of certiorari filed in the U.S. Supreme Court in Utility Air Regulatory Group et al. v. Environmental Protection Agency et al., challenging nearly every aspect of the Environmental Protection Agency’s recent greenhouse gas regulations—from the initial “endangerment” finding to the restriction on motor vehicle emissions to the stationary-source permitting requirements—the Court granted review of only a single issue:  “[w]hether [EPA’s] regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.”  Several commentators have interpreted this decision (reported in a prior post by Theodore Garrett) as an implicit affirmation of EPA’s regulatory regime, insofar as the Court chose not to address some of the broader challenges to the agency’s basic authority to regulate greenhouse gas emissions under the Clean Air Act.  But, whatever implications might be drawn from the Court’s decision not to grant review of certain issues, far more telling is the Court’s deliberate rewriting of the question presented, narrowly tailored to address the validity of the stationary-source permitting regulations.

Those regulations rest on an exceedingly questionable interpretation of the Clean Air Act.  The stationary-source provisions of the Act require any industrial facility that emits an “air pollutant” in “major” amounts—defined by the statute as 250 or more tons of the pollutant per year—to obtain pre-construction and operating permits from the local permitting authority.  42 U.S.C. § 7475.  EPA acknowledges that it would be “absurd” to apply these provisions by their terms to sources of greenhouse gas emissions, since nearly every business in the country (including even small commercial enterprises and residential facilities) emit greenhouse gases at more than 250 tons per year, and the agency can offer no reason why the statute should not be interpreted instead to apply only to the large industrial facilities that emit “major” amounts of a pollutant otherwise subject to regulation under the permitting provisions—i.e., one of the so-called “criteria pollutants” for which a national ambient air quality standard has been issued.  Nevertheless, EPA has interpreted the statute to apply to sources of greenhouse gas emissions and, to address the acknowledged “absurd results” created thereby, has decided that for these purposes the threshold for a “major” emissions source should be increased from 250 tons per year—as stated in the statute—by 400-fold, to 100,000 tons per year.  The agency has, in other words, literally rewritten the express terms of the statute in order to justify its preferred interpretation.

The dissenting judges in the D.C. Circuit severely criticized the result.  That is most likely the reason the Supreme Court granted review of the case, to correct the agency’s  interpretation of the Act and ensure that neither EPA nor other agencies attempt to redo legislative power in this way in the future.  Whether or not the limited nature of the certiorari grant can be viewed as an approval of EPA’s authority to regulate greenhouse gases from mobile sources, it almost certainly reflects suspicion—if not disapproval—of the agency’s stationary-source regulations.  The definitive answer should come by June 2014, when the Court is expected to rule. 

USEPA Proposes Revisions to the Water Quality Standards Program Under the Clean Water Act

Posted on October 23, 2013 by Kevin Beaton

On September 4, 2013 EPA published proposed changes to its Water Quality Standards Rule at 40 CFR Part 131 (WQS Rule).  The proposal is styled “regulatory clarifications” but the proposal represents the most significant changes made to the WQS Rule in some thirty years.  The WQS Rule currently sets forth the minimum conditions that must be met in each State’s or Tribe’s water quality standards before EPA can approve them under the Clean Water Act (CWA).  Increasingly over the years, state water quality standard decisions have been the driver behind required stringent permit limits in NPDES Permits, TMDLs for impaired waters and lawsuits against EPA.  The proposed rule is mostly an attempt to codify exciting EPA guidance and practices to ensure national consistency and “transparency.”  Many of the proposed changes were generally discussed in EPA’s Advance Notice of Proposed Rule Making (ANPRM) on water quality standards published in 1998 and many come from the Great Lakes Water Quality Guidance at 40 CFR Part 132.

First EPA is proposing to amend the use attainability analysis (UAA) requirements found in the current rule to now require a state or Tribe to identify the highest attainable use (HAU) and the water quality criteria to protect the HAU in any UAA.  A UAA is a structured analysis a State or Tribe can undertake to attempt to demonstrate to EPA that the so called “fishable and swimmable” uses required under the CWA are not attainable based on a number of factors.  These factors include low flows, natural or physical conditions, human caused conditions which cannot be remedied, dams, or because controls to achieve attainment would be too expensive.  At least in the Northwest, EPA have been very reluctant to approve UAAs because the agency has a “rebuttable presumption” that fishable uses and swimmable uses are attainable (some might call it an irrebuttable presumption) and implicitly that it is never too expensive to remedy water quality problems.  Requiring states and Tribes to also adopt a new HAU in connection with a UAA along with associated criteria may make the UAA an even less viable CWA off-ramp.

Speaking of off-ramps, the proposed rule also sets forth the conditions under which a state or Tribe can adopt “variances” to water quality standards for individual or groups of NPDES permittees.  Variances are merely referenced in the current WQS Rule and have been viewed as a “UAA lite.”  Variances are codified in water quality standards (subject to approval by EPA) and allow individual dischargers or groups of NPDES Permits to temporarily exceed water quality based effluent limits based on the same factors which justify a UAA.  EPA articulates in the proposal that it believes variances have been underutilized and therefore sets forth the conditions which the Agency will grant variances for an individual or groups of NPDES permittees.  (e.g. Demonstrate temporary unattainability, maximum timeline of 10 years and protect the HAU during the variance.)  Whether the proposal will lead to more variances may be doubtful.  EPA has typically been unwilling to approve variances for industrial or commercial dischargers (although they are more flexible with municipalities) because pollution controls to meet WQS are seemingly never too expensive.

As my colleague Patricia Barmeyer notes in her recent post, the proposed rule also proposes changes to antidegradation implementation procedures that are somewhat consistent with current practices and guidance by providing some flexibility in how states protect high quality waters and a specific requirement that states must first require dischargers to implement “practicable” pollution controls that minimize or eliminate any degradation to high quality before allowing the discharge.  “Practicable” is not defined but if this term is implemented in the same way as proving economic hardship in a UAA or variance then new and increased discharges could be subject to additional (and expensive) hurdles in going through antidegradation reviews.  Finally, the proposed rule addresses compliance schedules in NPDES permits consistent with current practice and specifies the conditions under which the EPA Administrator will make determinations that a water quality standard does not meet the requirements of the CWA.  Comments on the proposed rule are due on December 3, 2013 (unless an extension is granted).

Smackdown Alert: Certiorari granted to review EPA’s GHG rules

Posted on October 15, 2013 by Theodore Garrett

The Supreme Court agreed today to review the EPA’s authority to regulate emissions of greenhouse gases from stationary sources.  The Justices accepted six petitions for review of the D.C. Circuit’s decision in Coalition for Responsible Regulation v. EPA (No., 12-1146 et al.), consolidated them for argument, and limited review to a single question:

“Whether EPA permissibly determined that its regulation of greenhouse gas (GHG) emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” 

The six petitions granted were filed by the Utility Air Regulatory Group, the American Chemistry Council, the Energy-Intensive Manufacturers, the Southeastern Legal Foundation, the U.S. Chamber of Commerce, and a number of states.

EPA’s position, as presented in the DC Circuit and in its opposition to certiorari, is that regulation of greenhouse gas emissions under Title II triggered permitting requirements under the PSD program and Title V of the Act, which apply to stationary sources emitting “any air pollutant” above the statutory threshold.  EPA has interpreted “any air pollutant” to mean “any air pollutant regulated under the Clean Air Act,” and thus when the EPA’s regulation of emissions from new motor vehicles took effect in January 2011, the permitting requirements under the PSD program and Title V automatically applied to stationary GHG sources above the statutory threshold.

In its petition, the US Chamber of Commerce noted that EPA acknowledged that its tailoring rule would create a result “so contrary to what Congress had in mind — and that in fact so undermines what Congress attempted to accomplish with the [statute’s] requirements — that it should be avoided under the ‘absurd results’ doctrine.”  With respect to the issue upon which cert was granted, the Chamber argued that EPA incorrectly determined that all “air pollutants” regulated by the agency under the Clean Air Act’s motor vehicle emissions provision, 42 U.S.C. § 7421(a)(1), must also be regulated under the Act’s Prevention of Significant Deterioration of Air Quality and Title V programs when emitted from stationary sources.

The Utility Air Regulatory Group petition expressly did not ask the Supreme Court to revisit its holding in Massachusetts v. EPA.  However, the UARG petition did ask the Court to consider whether its decision in Massachusetts v. EPA compelled EPA to include GHGs in the PSD and Title V programs when inclusion of GHGs would expand the PSD program to cover a substance that does not deteriorate the quality of the air that people breathe.  UARG emphasized EPA’s admission that regulation of GHGs under the Title I and Title V permit programs subjects “an extraordinarily large number of sources” to the Act for the first time, “result[ing] in a program that would have been unrecognizable to the Congress that designed PSD.” 

A coalition of environmental groups opposed certiorari, emphasizing that EPA’s endangerment and contribution findings and emissions standards for motor vehicles simply implement  the Supreme Court’s mandate in Massachusetts v. EPA.  They emphasize that the Petitioners’ arguments ignore the “air pollutant” definition that the Court in Massachusetts v. EPA held “unambiguous[ly]” (549 U.S. at 529) covers greenhouse gases. 

It is worth noting that four justices dissented in Massachusetts v. EPA, and the successful petitioners in Coalition for Responsible Regulation argue that Massachusetts does not compel the regulations at issue here.  The granting of the petitions for certiorari is sobering news for EPA. Stay tuned.

U.S. EPA Updates Air Standards for Tanks Used in Oil and Natural Gas Sector

Posted on October 4, 2013 by Chester Babst

EPA is still working the kinks out of its New Source Performance Standards (NSPS) for the Oil and Natural Gas Sector, i.e., 40 C.F.R. 60 Subpart OOOO, referred to by many as the “Oil and Gas NSPS” and by some as simply “Quad O”.  EPA first published the proposed Oil and Gas NSPS on August 23, 2011, in conjunction with proposed revisions to three other air regulations affecting various segments of oil and natural gas operations.  The proposal prompted more than 150,000 public comments and kindled a national discussion on emissions at natural gas well sites.  The final Oil and Gas NSPS rule was published in August 2012.  Although the rule is most famous for establishing the first federal air standards for hydraulically-fractured natural gas wells, the rule also set significant volatile organic compound (VOC) standards for “storage vessels” used by the oil and natural gas industries.

Several stakeholders responded to the August 2012 rulemaking by filing petitions for administrative reconsideration of the Oil and Gas NSPS.  On April 12, 2013, EPA published a notice granting reconsideration for a number of issues and proposing revisions to the storage vessel standards, in particular.  Evidently, EPA significantly underestimated the number of storage vessels coming online in the field when it developed the August 2012 final rule, which required individual storage tanks with VOC emissions of 6 tons or more per year to achieve at least 95% reduction in VOC emissions.  Tanks are commonly used at natural gas well sites, for example, to store condensate, crude oil, and produced water.  In light of an updated tank estimate, EPA recognized that additional time would be needed for manufacturers to produce a sufficient number of VOC control devices. 

Most recently, on September 23, 2013, EPA published final revisions to the storage vessel requirements in the 2012 Oil and Gas NSPS.  Per the revised rule, which was immediately effective, an individual tank may be considered an affected facility if its construction, modification or reconstruction commenced after August 23, 2011; it has potential VOC emissions of 6 tons or more per year; and it contains crude oil, condensate, intermediate hydrocarbon liquids, or produced water.  EPA made a number of important adjustments in the revised rule, chief among them an extension of the compliance date to give tank owners and operators more time to purchase and install controls.  For the so-called “Group 1” storage vessels (which were constructed, modified or reconstructed between the August 2011 original proposal and the April 2013 proposal), the deadline to control VOC emissions is now April 15, 2015.  For “Group 2” storage vessels (i.e., vessels that come online after April 12, 2013), the compliance deadline is April 15, 2014.  Notably, pursuant to the revised Oil and Gas NSPS, operators only have until October 15, 2013 to estimate potential VOC emissions of Group 1 storage vessels for purposes of determining whether the rule applies.

Meanwhile, the agency is continuing to evaluate other issues raised in the reconsideration petitions that were submitted in response to the August 2012 rulemaking.  EPA has stated in the past that it intends to address the remaining issues by the end of 2014.