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.

More on Daubert: The 11th Circuit Allows EPA’s Experts to Testify on NSR Violations

Posted on September 27, 2013 by Seth Jaffe

Last spring, my colleague Robby Sanoff complained on our firm’s blog about the problem resulting from appellate courts’ refusal to give appropriate discretion to district judges in performing their gatekeeping function under Daubert.  As Robby put it:

"The difference between “shaky but admissible” and unreliable and inadmissible evidence would seem to be entirely in the eye of the beholder."

Robby will not be pleased by last’s week’s decision by the 11th Circuit Court of Appeals in United States v. Alabama Power, reversing a district court order excluding EPA’s expert testimony in support of its NSR enforcement action against Alabama Power.  The Court majority performed an extensive review of the testimony provided in the Daubert hearing below, and concluded that the district court’s decision was clearly erroneous.  (For those of you concerned with the merits of these cases, the question was whether EPA’s model, which clearly applied to determinations of emissions increases for baseload plants, could be applied as well to cycling plants generally and the plants at issue in the case in particular.)

The case is particularly interesting because Judge Hodges, taking Robby’s view, dissented.  As Judge Hodges noted, prior to the Supreme Court decision in General Electric v. Joiner, appellate courts did not grant significant discretion to district courts in exclusion rulings.  However, Joiner made clear that the abuse of discretion standard applies even in outcome-determinative exclusion rulings.

Next, Judge Hodges noted that, in Daubert rulings, there should be a “heavy thumb – really a thumb and a finger or two – that is put on the district court’s side of the scale.”  He then rehearsed the actual statistics on Daubert reversals in the 11th Circuit:  3 reversals out of 54 cases.

Finally, Judge Hodges conducted a brief review of evidence tending to support the district court’s conclusion and determined that its decision was not “a clear error in judgment.”  Concluding that a different result might be appropriate if review were de novo, Judge Hodges quoted Daubert itself:

"We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning of authentic insights and innovations. That, nevertheless, is the balance that is struck by Rules of Evidence designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes."

Decisions such as this have to be discouraging to district court judges, as Robby noted.  It’s worth pointing at that Judge Hodges is actually a district court judge, sitting on the court of appeals by designation.  It seems fitting that the district judge on the panel would be the judge vainly trying to protect the discretion of district judges in Daubert matters.

Shoot First -- Ask Questions Later

Posted on September 26, 2013 by Mark Walker

“Shoot first, ask questions later” is how Congressman Chris Stewart described EPA’s efforts to link groundwater contamination to hydraulic fracturing.  Stewart is the Chair of the Environmental Subcommittee of the House Committee on Science, Space and Technology, chairing the July 24 hearing on “Lessons Learned:  EPA’s Investigations of Hydraulic Fracturing.”  Specifically at issue was the EPA’s investigation in Pavillion, Wyoming.

In December, 2011, the EPA issued a “draft” report which concluded that hydraulic fracturing in the Pavillion, Wyoming gas field had caused pollution of the deep drinking water aquifer.  The draft report was based upon sample results from two EPA monitor wells and was issued without peer review or stakeholder input.

There were serious flaws with EPA’s work.  For starters, EPA failed to complete the monitor wells according to its own guidelines.  Annular sealants were not properly installed, allowing cement to impact the water quality.  A landowner’s complaint that EPA had an anti-freeze leak during drilling operations was not disclosed in the draft report.  EPA exposed the wellbores to painted low-carbon steel casing and welding materials, which are known to contain various organic and metal compounds, yet the report inaccurately stated that stainless steel casing had been used.  Moreover, several of the constituents which the EPA attributed to hydraulic fracturing fluids (e.g. glycols, 2-butoxyethanol and phenols) are known to be associated with the high pH cement that the EPA used to complete the wells.  The bottom line is that the EPA’s own operations introduced the contaminants that it blamed on hydraulic fracturing fluids.

Subsequent testing by the USGS was unable to verify the EPA’s results.  The USGS was unable to find some of the compounds that EPA claimed were present, and other constituents were found at significantly lower levels.  The USGS was unable to sample one of the two wells due to improper well construction.

The EPA has now walked away from its flawed study, turning the entire investigation over to the State of Wyoming.  The EPA has stated that the draft report will not be peer reviewed or finalized, and that the results will not be used in its national hydraulic fracturing study.  Nevertheless, the EPA’s handling of Pavillion has cast doubt over the EPA’s national investigation of hydraulic fracturing intended to develop regulatory policy for unconventional reserves, causing Chairman Stewart to conclude, “given EPA’s rush to judgment in Wyoming…we should question whether the Agency’s ongoing study is a genuine, fact-finding, scientific exercise, or a witch-hunt to find a pretext to regulate.”

Court Upholds Multi-State Chesapeake TMDL

Posted on September 25, 2013 by Ridgway Hall

On September 13, in a 99 page decision, the U.S. District Court for the Middle District of Pennsylvania upheld EPA’s multi-state Clean Water Act Total Maximum Daily Load (“TMDL”) for the Chesapeake Bay and its tributaries against a broad range of challenges brought by the American Farm Bureau Federation and six other farm industry trade associations. Six environmental organizations led by the Chesapeake Bay Foundation, plus four municipal water associations led by the National Association of Clean Water Agencies, intervened in support of EPA.

The Chesapeake Bay TMDL is not the first to cover multiple states, but it is by far the largest, covering 64,000 square miles in Maryland, Virginia, Delaware, Pennsylvania, West Virginia, New York and the District of Columbia.  It requires substantial reductions of nitrogen (25%), phosphorus (24%) and sediment (20%) by 2025 to  meet water quality standards.  Because of the interstate nature of the long-standing pollution problems, after more than two decades of collaborative but unsuccessful efforts, the states agreed in 2007 that EPA should develop the TMDL. It was issued in 2010 and included allocations for each of 92 tidal segments which, after consultation with the states, were further allocated among states, watersheds and sectors (such as agriculture, wastewater, stormwater, etc). During the process, each state developed its own Watershed Implementation Plan (“WIP”), specifying  wasteload allocations (“WLA’s”) for point sources, load allocations (“LAs”) for nonpoint sources, and identifying the regulations, programs and resources that would be used to achieve the required reductions. For more on this TMDL see "EPA Issues Biggest TMDL Ever for Chesapeake Bay Watershed" and ELI Environmental ForumThe Chesapeake Bay TMDL” (May/June 2011). 

The plaintiffs alleged that (1) the TMDL was an unauthorized “implementation” of  allocations by EPA, (2) requiring WIPs exceeded EPA’s authority, (3) EPA’s use of watershed and related models in setting the allocations was an abuse of discretion, and (4) there was insufficient public notice.  In addressing these challenges, the court first held (as several others have) that a TMDL is not self-implementing, but is an “informational tool”, developed collaboratively by EPA and the states under CWA Section 303(d), and implemented primarily by the states.

Turning to the merits, the court upheld EPA’s definition of a TMDL for a waterbody or segment as the sum of all WLAs and LAs plus natural background.  It also upheld  EPA’s authority to establish a multi-state TMDL,  when the affected states either fail to do so or ask EPA to do it (both occurred here), including limitations on sources in upstream states to achieve compliance with water quality standards in downstream states. It held that EPA’s “holistic” or “watershed-wide approach” was consistent with the broad national goals of the CWA to “restore … our Nation’s waters.” In reaching this result the court emphasized the collaborative efforts of the Bay states and EPA starting in 1983 to address the problems of interstate pollution, transported by rivers and tides, and their consensus that an EPA-led multistate effort was needed.

The court further held that the WIPs – new tools in the TMDL context – were authorized as part of the “continuing planning process” under CWA Section 303(e). This process is initiated by the states to achieve water quality goals, and is subject to review and approval by EPA. Because EPA had advised the states in letters what it expected in terms of general content and specificity in the WIPs, but left the details to the states, the court held EPA did not exceed its authority. The court also relied on CWA Section 117(g) - a Chesapeake Bay-specific provision - requiring EPA to “ensure that management plans are developed and implementation is begun by [all the affected states] to achieve and maintain…” the applicable water quality goals.

The plaintiffs also challenged EPA’s requirement that each WIP contain “reasonable assurances” of timely and effective implementation, and EPA’s use of “backstop” allocations where EPA determined that a WIP provision was deficient.  “Backstops” involved requiring NPDES permits from previously unregulated sources. The court held that EPA could properly require “reasonable assurance” under CWA 303(d)(1), which requires a TMDL must be “established at a level necessary to implement the applicable water quality standards.”  The court upheld “backstops”, which were only used in 3 instances, as a reasonable exercise of EPA’s authority under CWA 303(d)(2) to ensure that the contents of the TMDL are designed to achieve the applicable water quality goals.

The court upheld EPA’s use of models as scientifically supported and within EPA’s discretion.  It rejected the challenge to adequate notice and opportunity for public participation since (1) a 45 day public comment period had been provided, (2) there had been hundreds of public meetings during the more than 10 year development of the TMDL, and (3) plaintiffs showed no prejudice from the fact that some details of the modeling were not available until after the comment period.

The court held that TMDL establishment and implementation involves “cooperative federalism” between the states and EPA, and that the Chesapeake Bay TMDL properly reflects the shared responsibilities and necessary interactions, despite some bumps along the road. While EPA exerted strong leadership, the court held that it did not unlawfully usurp the states’ implementation functions. The court noted  the preserved authority of the states to implement nutrient trading and offsets, and to set or revise source-specific loading allocations.  In conclusion, there is a lot of thoughtful analysis, as well as precedent, in this decision, which makes it an excellent resource for CWA practitioners.

Yes, Another Blow, but not a Knockout

Posted on August 28, 2013 by Ralph Child

A recent post from Mary Ellen Ternes characterized the August 23, 2013 decision in EME Homer City Generation as another blow to EPA’s ability to enforce against long ago violations of the requirement to obtain New Source Review.

The Third Circuit’s decision certainly is a blow to EPA’s NSR enforcement initiative, but not nearly a knock-out.

First, the decision depended on the fact that neither the Clean Air Act or Pennsylvania’s EPA-enforceable State Implementation Plan expressly requires a major source to operate in compliance with the results of a New Source Review.  But some states do have that requirement in their EPA-enforceable SIPs, as the Third Circuit recognized in distinguishing other cases.  In such states, major sources that did not go through NSR as allegedly required at the time of construction or modification should still anticipate potential EPA enforcement via the SIP. 

Second, even where it is not illegal to operate in compliance with NSR, the question is still open whether the government may obtain injunctive relief anyway.  In United States v. United States Steel Company (N.D. Indiana), the Court held on August 21, 2013 that no penalties could be imposed at law because there is no federally enforceable requirement in Indiana to operate in accordance with the results of an NSR.  Yet the Court went on to  hold that the United States still can seek injunctive relief against a plant that allegedly violated the NSR requirement.  The Court reasoned that because the sovereign is not subject to laches, the government remains able to invoke the Court’s equitable powers and to seek an injunction to correct the violation.

On to the Seventh Circuit?

Another Blow to EPA’s NSR/PSD Enforcement Initiative

Posted on August 27, 2013 by Mary Ellen Ternes

Followers of this Blog will not be at all surprised with the Third Circuit’s August 22, 2013 ruling denying EPA’s requested CAA New Source Review enforcement relief against former and current owners of the grandfathered and allegedly subsequently modified power plant that has been called “one of the largest air pollution sources in the nation.”   Former and current owners of such aging power plants caught in EPA’s NSR national enforcement initiative are reassured with the Third Circuit’s finding that text of the Clean Air Act does not authorize injunctive relief for wholly past PSD violations, even if that violation causes ongoing harm.

Having lost its battle for the Cross-State Air Pollution Rule (CSAPR, or the Transport Rule) in August 2012, EPA was dealt another blow with United States v. EME Homer City Generation, in which the Third Circuit upheld the District Court’s 2011 dismissal of the government’s claims.

In 2011, the District Court for the Western District of Pennsylvania agreed with the current and former owners of the power plant that EPA had no authority to hold either party liable for alleged PSD violations arising from purported modifications to their grandfathered power plant.  In reaching defendants’ bases for dismissal, the District Court reviewed the permit actions approved by air permitting authorities in 1991, 1994, 1995 and 1996, which EPA alleged with Notices of Violation in 2008 (against the current owner) and 2010  (against current and former owners), to have triggered PSD, and which caused the current Title V permit to be incomplete.   The Court’s holding that the PSD violations constituted singular, separate failures by the former owner rather than ongoing failures meant that EPA was outside the five year statute of limitations, allowing no civil penalties against the former and current owners.  Moreover, the District Court held EPA was left with no injunctive relief against the current owner because they were in no position to apply for a PSD permit prior to their acquisition of the plant in 1998, and thus could not have violated PSD.

The District Court separately addressed EPA’s claims of injunctive relief against the former owner, recognizing the ongoing higher SO2 emissions that occurred without the benefit of an historic PSD permit.  The District Court was unwilling to reach a broad conclusion regarding its authority to award injunctive relief under the PSD program, but given that the former owners no longer owned or operated the plant, and therefore no longer violate PSD, held that there was no plausible basis for granting the rare and extraordinary remedy of injunctive relief, despite the higher emissions occurring the absence of BACT, which the court characterized as a present consequence of a one-time violation.

Upon review, the Third Circuit rejected EPA’s arguments that the current owners violated PSD by operating the plant without BACT with a simple, “no,” pursuant to the plain text of 42 USC 7475(a) which references merely “construction” and “modification,” not “operation, ” relying on U.S. v. Midwest Generation and Sierra Club v. Otter Tail Power Co.,  adopting the positions of the Seventh and Eighth Circuits that “even though the preconstruction permitting process may establish obligations which continue to govern a facility’s operation after construction, that does not necessarily mean that such parameters are enforceable independent of the permitting process,” and thoroughly refuting EPA’s arguments that PSD could somehow result in ongoing operational requirements outside the PSD permitting process.  

Likewise, the Third Circuit rejected EPA’s proposed injunctive relief, which would have required the former owners to install BACT or purchase emission credits and retire them, affirming the District Court’s decision on narrower grounds.  Specifically, the Third Circuit held that the text of the Clean Air Act does not authorize an injunction against former owners and operators for a wholly past PSD violation, even if that violation causes ongoing harm. 

Hopefully, this Third Circuit decision, along with the Seventh and Eighth Circuit decisions relied upon therein, will signal a substantive end to EPA’s NSR/PSD Enforcement Initiative for similarly situated historic grandfathered power plants and their former and current owners.  But, we may have to wait out EPA’s hard headed circuit by circuit enforcement approach.  See e.g., EPA’s December 21, 2013 enforcement memorandum, “Applicability of the Summit Decision to EPA Title V and NSR Source Determinations,” following the Sixth Circuit’s Summit Petroleum Corp. v. EPA et al.

Petroleum Refinery Enforcement Initiative 2.0

Posted on August 5, 2013 by Paul Seals

Enforcement with a Flair

EPA has seen the smoke.
This certainly is no joke.
Benzene is a neighborhood scare,
With upsets going to the flare.

On July 10, the Department of Justice and EPA announced the lodging of a consent decree with Shell Oil Company to resolve alleged Clean Air Act violations at Shell’s refinery and chemical plant in Deer Park Texas.  This agreement represents the fourth “refinery flare consent decree” in the past year.  More are expected.

Shell will spend $115 million to control emissions from flares and other processes, and will pay a $2.6 million civil penalty.  EPA alleged that Shell was improperly operating its flaring devices resulting in excessive emissions of benzene and other hazardous air pollutants.  Shell will spend $100 million to reduce flare emissions.

These flare consent decrees represent a new chapter in EPA’s national Petroleum Refinery Initiative (“PRI”), which, beginning in 2000, resulted in the entry of 31 settlements covering 107 refineries in 32 states, affecting 90% of the domestic refining capacity.  EPA did address refinery flares as one of the marquee issues in PRI consent decrees – compliance with the New Source Performance Standards (“NSPS”) for Petroleum Refineries.

EPA is now pushing the envelope to impose “regulatory requirements plus.”  Through an enforcement alert in August of last year, EPA warned industry that there were significant issues with flare efficiency and excessive emissions.  EPA Enforcement Alert:  EPA Enforcement Targets Flaring Efficiency Violations.

What is EPA doing?  What is the basis of this Petroleum Refinery Initiative 2.0 and the imposition of “regulatory requirements plus”?

EPA bases this new initiative on the “general duty” requirements.  NSPS requires that at all times owners and operators should operate and maintain a facility or source consistent with “good air pollution control practices.”  In addition, Section 112r of the CAA requires owners and operators to maintain a safe facility by taking such steps as are necessary to prevent releases of hazardous air pollutants (“HAP”), and to minimize the consequences of accidental releases which do occur.  Accordingly, with no threshold amount, any release of a listed HAP (e.g. benzene) that could have been prevented violates this general duty.  If a flare smokes, there must be a violation.

This general duty is used to require control measures that go beyond those specified in the regulations.  The consent decrees include conditions addressing flare combustion efficiency limits incorporating automated controls with complex and expensive monitoring systems, flaring caps for individual flares and the overall refinery, and flare gas recovery systems for individual flares.

The enforcement train has left the station.  Who will be next in line?  How much will the ticket cost?  Are there rulemaking or other actions that may be taken to slowdown or stop the train?  Flares are not unique to petroleum refineries and petrochemical plants (e.g. flaring in oil and gas production facilities).  Will EPA provide other industries the opportunity to go for a train ride?

Cooperative Federalism? We Don’t Need No Stinkin Cooperative Federalism

Posted on July 31, 2013 by Seth Jaffe

On Friday, July 19, the Court of Appeals for the 10th Circuit, in Oklahoma v. EPA, affirmed EPA’s rejection of Oklahoma’s state implementation plan setting forth its determination of the Best Available Retrofit Technology, or BART, to address regional haze.  The Court also affirmed EPA’s promulgation of a federal implementation plan in place of the Oklahoma SIP.  While rehearsing the Clean Air Act’s “cooperative federalism” approach, the Court seemed more focused on deference to EPA’s technical assessment of the SIP than on any obligation by EPA to cooperate with states.

"Given that the statute mandates that the EPA must ensure SIPs comply with the statute, we fail to see how the EPA would be without the authority to review BART determinations for compliance with the guidelines.
                                                            ***
While the legislative history may evidence an intent to prevent the EPA from directly making those BART decisions, it does not necessarily evidence an intent to deprive the EPA of any authority to ensure that these BART decisions comply with the statute."

Judge Kelly dissented.  As he noted, while the courts normally grant deference to EPA’s decisions, such deference is appropriately limited where “EPA rejected Oklahoma’s evidentiary support with no clear evidence of its own to support its contrary conclusion.”  Judge Kelly also noted that, even in a statute relying substantially on state implementation, the amount of power given to the states to implement the regional haze program is particularly evident.

I don’t know whether Oklahoma will seeking rehearing en banc.  (It’s difficult to imagine that the Supreme Court would be interested in hearing this case.)  I do know that cooperation is in the eye of the beholder.

Enough Is Enough!

Posted on July 3, 2013 by Michael McCauley

On June 13, 2013, U.S. EPA announced its enforcement priorities for the next three years. Among other things, the Agency decided to continue its ill-fated, 15-year old "New Source Review (NSR) Enforcement Initiative."  This effort has targeted coal-fired power plants and other large manufacturing facilities for alleged violations of the Clean Air Act.  The allegations often pertain to projects which were implemented over twenty and thirty years ago.

Not surprisingly, EPA has not fared very well in the courts with cases like this.  The Agency has run into problems, including:  1) statute of limitations concerning projects completed more than five years before legal action has been commenced; 2) successor liability issues when the current owner/operator of a facility did not own or operate the facility when a targeted project was undertaken; and 3) serious evidentiary questions as to whether a decades-old project caused the requisite actual air emissions increase which triggers the requirements for NSR review under the Clean Air Act.  See generally "EPA's Utility Enforcement Initiative: The MetED Decision May Pose Problems for Plaintiffs," BNA Daily Environment Report, June 13, 2013; U.S. v. Midwest Generation, LLC, 694 F. Supp. 2d 999 (N.D. Ill. 2010), appeal pending in 7th Circuit Court of Appeals.

A recent notice of violation illustrates some of the unfairness and waste of resources connected with EPA's NSR Enforcement Initiative.  EPA issued the notice in 2012.  It alleged a number of NSR violations against the owner/operator of a manufacturing facility (not a utility).  One of the allegations pertained to a change made at that facility in 1982.  Since 1982, the ownership of the facility has changed four times.  The current owner has been targeted in EPA's enforcement action.  Records regarding the 1982 project are scant, and the personnel involved in the work in 1982 are all either long-retired or deceased.

To make matters worse, EPA had received the available information about the 1982 project in 1999 from the party who owned the facility at that time.  This was done in response to a Section 114 Information Request issued by EPA.  That owner heard nothing further from EPA about any of the projects covered in the 1999 inquiry.

In 2011, EPA issued a new Section 114 Information Request to the current owner who had acquired the facility in 2006.  The request covered projects that occurred after 1999, but it also covered projects which were done prior to 1999, including the 1982 project discussed above.

A reasonable person could ask:  1) Why did EPA wait for 13 years to allege a NSR violation regarding the 1982 project when the Agency was given information about it in 1999?  2) Why is EPA taking action now on a change made at the facility over thirty years ago?  3)  Why is EPA targeting the owner who acquired the facility in 2006 -- some seven years after EPA was first given information about the 1982 project?  4)  Has EPA considered that the current owner/operator of the facility is four times removed from the owner/operator who implemented the change in 1982?

Substantial amounts of money and countless hours of valuable employee time have been expended by the current owner in dealing with EPA on this case.  Both the money and the time could have been better utilized in helping to keep the facility competitive in a very challenging global marketplace.

EPA should consider whether the continuation of the NSR Enforcement Initiative is justified with respect to projects that occurred decades ago.  With most of these cases, fair-minded decision-makers at EPA will find that "Enough is Enough!"

Partners?

Posted on June 25, 2013 by Steve McKinney

Congress said EPA and the States are partners in implementing the Clean Air Act.  It’s simple: EPA sets pollutant-by-pollutant standards for clean air (NAAQS) and each State develops and implements a state-specific plan to meet and maintain those NAAQS.  Each partner is well-positioned and equipped to perform its assignment and Congress included appropriate “carrots and sticks” in the Act to ensure that both do their job.  The Supreme Court has extolled Congress’s partnership approach and EPA routinely professes its deep appreciation of its State partners and their important role.  So wassup with EPA suddenly demanding that thirty-six States delete rules about excess emissions during startup, shutdown and malfunction (SSM) that have been EPA-approved for 30 to 40 years?

On February 22, in response to a 2011 petition by Sierra Club, EPA proposed to “call” thirty-six state implementation plans (SIPs) because they contain affirmative defense, exemption, or director’s  discretion rules for excess emissions during periods of SSM. EPA’s previous approval of the offending rules wasn’t even a speedbump.  EPA also rejected any obligation to connect the offending rules with air pollution problems in the affected States.  EPA’s legal position on how the States should enforce their CAA permits was enough to shuck the partnership and impose the federal will.  And EPA didn’t even ask nicely.  State requests for information about EPA’s consideration of their SIPs were ignored and States were given 30 days to comment on a proposal EPA took more than a year to develop.  EPA gave its State partners another 45 days only after more than a dozen State Attorneys General jointly asked for more time and the Senate Committee considering the new Administrator’s confirmation made the same request.

When comments were filed on May 13, thirty affected States filed comments; none of them supported EPA’s proposed call of their SIP.  Not even EPA’s regular supporters on issues like tougher NAAQS thought EPA’s dictation was a good idea.  Complaints from EPA’s partners ranged from being wrongfully excluded from EPA’s evaluation of their SIP to EPA trampling on the States’ planning and implementation responsibilities to EPA creating a lot of work that could have been avoided if EPA had just talked to them.  No amount of spin can make this look good for state–federal relationships.

So why?  Well, Sierra Club did ask for it.  Maybe because an obvious compliance impact is on emission limits with continuous monitoring and short averaging times like opacity.  And maybe because coal-fired power plants always have opacity limits and deleting common excess emission rules will set those sources up for widespread enforcement litigation.  Or, maybe the States and the previous EPAs had it wrong for all these years and someone finally straightened everyone else out.  Like so many conundrums of this type, it might take some judges to give us the answer.

Pursuant to a settlement agreement with Sierra Club, EPA must finalize the SSM SIP Call by August 27, 2013.

I Believe in Environmental Regulation, But….

Posted on June 10, 2013 by Seth Jaffe

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…

New EPA Case Studies on Environmental Justice and Permitting

Posted on June 4, 2013 by Elliott Laws

With the 20th anniversary of Executive Order 12898 soon approaching, EPA has been planning on extensively incorporating “environmental justice” into its permitting processes.  This executive order required all federal agencies to address disproportionately adverse human health or environmental effects of their programs, policies, and activities on minority and low-income populations in the U.S.

To that end, nearly two years ago, EPA issued “Plan EJ 2014” as a roadmap – not as a rule – to implement the executive order throughout the agency.  Specifically, Plan EJ 2014 formally introduced EPA’s priorities of promoting increased public participation in the permitting process and considering more stringent permit conditions.  In February of this year, EPA selected two case studies that highlight the agency’s approach to achieving these permitting priorities.

The first case study involved a recent Prevention of Significant Deterioration (PSD) permit for the Pioneer Valley Energy Center, a power plant expected to generate up to 431 MW in Westfield, Massachusetts.  From the developers’ filing of the permit application in November 2008 through EPA’s issuing of the final permit in April 2012, Region 1 incorporated what it has described as environmental justice into this permitting process by providing enhanced public engagement opportunities and including more stringent conditions in the permit.  These stricter conditions were aimed at limiting the applicant’s ability to burn ultra-low sulfur diesel for testing of its emergency generator when air quality would already be diminished.

The second case study involved a National Pollutant Discharge Elimination System (NPDES) general permit for oil and gas exploration in Cook Inlet, Alaska.  Even as this permit has evolved over time, now with federal and state authority split, the subject conditions have been based on environmental justice considerations dating back to 2006-2007.  In the permit’s 2007 iteration, Region 10 incorporated environmental justice into this permitting process by collecting and considering tribal traditional knowledge about the effects of development and by imposing more restrictive permit conditions.  These conditions imposed new monitoring requirements, extended the area where discharges were prohibited for all sources from 1,000 to 4,000 meters from sensitive coastal areas, and explicitly did not authorize several types of drilling discharges for new sources.
 
There are two striking facets of these case studies.  First, even as EPA found no disproportionate adverse effect on minority populations, low-income populations, or tribal populations, EPA still included somewhat more restrictive permit conditions based upon environmental justice considerations.  Second, the imposed conditions do not appear to be particularly onerous – perhaps explaining why the permittees did not challenge the additional restrictions.  Opinions vary as to the impact of these “EJ conditions” on the permitting process, as EPA likely  could have imposed these restrictions under existing statutes and regulations without any reference to environmental justice. 

Nevertheless, EPA seems to be testing the limits of its authority and telegraphing its intent to continue these efforts.  Consequently, practitioners and permit applicants should be wary of EPA seeking to impose potentially unnecessary conditions based upon environmental justice.

Will Supreme Court Accept Challenges to Obama Climate Change Authority?

Posted on June 3, 2013 by Richard Lazarus

Four votes.  That is the number of votes required to grant a Supreme Court petition for a writ of certiorari.  And because that is the same number of Justices who dissented from the Court’s landmark 2007 ruling in Massachusetts v. EPA, EPA has reason to worry over the summer.

Pending before the Court are nine petitions seeking review of a wide ranging set of challenges to EPA’s regulation of greenhouse gas emissions from new motor vehicles and new stationary sources.  Petitioners include most every significant part of American industry, 14 States, and numerous political leaders.  Some petitions, consistent with Judge Brett Kavanaugh’s dissent from the D.C. Circuit’s denial of rehearing en banc in Coalition for Responsible Regulation v. U.S. EPA, are strategically narrow; they ask the Court to review only a relatively narrow issue regarding the applicability of the Clean Air Act’s Prevention of Significant Deterioration Program to greenhouse gas emissions. Others, by asking the Court to overturn EPA’s determination that greenhouse gas emissions from new motor vehicles endanger public health and welfare seek, as a practical matter, to topple   the Obama Administration’s effort to address global climate change in the absence of new federal legislation.  But a few of the petitions jettison even any pretense of modesty by directly asking, consistent with D.C. Circuit Judge Janice Rogers Brown’s blistering dissent from en banc denial, the Court to do no less than overrule Massachusetts v. EPA.

The Solicitor General and other respondents (including 18 States) will no doubt oppose cert on all issues in their responsive filings this summer.  They have nontrivial arguments, especially given the serious questions they can raise concerning the Article III standing of petitioners to raise the particular legal claims that would likely otherwise have the most force on the merits.  But EPA is likely to be less concerned with whether review is granted than, if granted, on what issues.  The legal stakes for some issues raised are far less consequential than they are for others, which are quite enormous.

Any cert grants will likely be announced in late September, shortly before October’s “First Monday” to allow for expedited briefing and argument as early as January 2014 and more likely in February. Otherwise, all petitions will be denied on that First Monday.  It will be a long summer’s wait for all parties.

Decommissioning Power Plants: A Process Without a Standard Regulatory Framework

Posted on May 7, 2013 by Pamela Giblin

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.