Ohio Environmental Law Blog

A Revised ASTM Standard for Due Diligence to Be Issued

Joe Koncelik — Thu, 11 Apr 2013 17:44:20 -0500

A task force assigned to review the ASTM standard for Phase I environmental assessments has completed its review of the current standard. It has sent its recommendations to U.S. EPA who is expected to accept the recommendations.

Any revisions to the ASTM standard for Phase I has big implications. Phase I reports are a requirement of the "All Appropriate Inquiries" process to establish CERCLA liability defenses. Most property transactions involve a Phase I assessment.

As reported on the Schnapf LLC blog, the revised standard will likely include the following changes:

definition of REC was tweaked to make it more understandable to environmental consultants;
A new term “Controlled REC” (CREC) was added which is intended to complement the HREC term. The latter applies to prior RECs that have been remediated to unrestricted cleanup levels while CREC applies to risk-based cleanups that have ongoing institutional or engineering controls;
creates a presumption that the environmental professional should perform a file review of agency records in determining the presence of a REC. If the environmental professional decides a file review is not required, it must explain why a file review was not performed;
the revised legal appendix clarifies scope of the CERCLA indoor air exclusion from definition of release and also discusses other CERCLA exclusions;
the revised legal appendix clarifies the role of that vapor intrusion in phase 1 reports (it is just like any other exposure pathway- (groundwater, air, soil). In most cases, there will be an underlying REC (contaminated groundwater or soil) that will already be a REC. However, there may be instances where there is an off-site source where there is potential for vapors to have laterally migrated through the soil gas to the subject property. In such an scenario, the potential for Vapor intrusion could be a REC. However, determining if the pathway is completed will usually beyond scope of the phase 1unless otherwise specified by the client;
a new Business Environmental Risk (BER) appendix describes the BERs that are commonly encountered for commercial properties and discusses factors that may be considered in determining if a client wants to include BERs in the scope of the phase 1.

A couple comments on these potential changes:

REC Definition- It will be interesting to see how the definition of REC is modified. In my experience, there is a wide range of interpretations applied by environmental consultants. Some will opine that any property that had industrial operations should be identified as a REC. Others say there needs to be some information suggesting a release or at least the potential for a release to have occurred to be identified as a REC.
Vapor Intrusion- Adding specificity that vapor intrusion issues should be identified as a REC will add to the complexity of analyzing Phase I reports. With the clarification discussed, it may lead to the vapor intrusion pathway being identified as a REC in more Phase I reports. This has big implications for due diligence because the vapor intrusion pathway is often the most difficult to assess in a subsequent Phase II. It doesn't help that U.S. EPA still hasn't finalized its vapor intrusion guidance and relies upon 2002 OWSER vapor intrusion guidance still labeled draft.

Tenants Can Now More Easily Qualify for Protection from Liability for Pre-Existing Contamination

Joe Koncelik — Thu, 28 Mar 2013 14:36:07 -0500

Often times businesses only worry about performing due diligence (Phase Is and Phase IIs) when they are purchasing a building, factory or land. In my experience, many tenants never think about the fact that they could inherit liability for pre-existing contamination just by leasing property. However, tenants, particularly those that are leasing industrial space, should be concerned and protect themselves accordingly.

Now, U.S. EPA has created an even larger incentive for performing proper due diligence as a tenant. On December 5, 2012, US EPA issued new guidance that expands liability protections for tenants that could be held liable for cleanup and remediation costs at leased properties.

Quick Primer on Tenant Liability under CERLCA

The environmental statute that has the most broad reaching liability for pre-existing contamination is the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)- also known as Superfund. Under CERCLA, any "owner" or "operator" can be held jointly and severally liable for cleanup costs at a site for even contamination that was present prior to their use or ownership of the property.

Tenants can be deemed an "owner" under CERCLA depending on the structure of the lease. For example, they could be deemed a de facto owner if they have control over the entire property.

Tenants could also be held liable for pre-existing contamination as an "operator" if they store or generate hazardous substances on the leased property during the term of the lease. There are varying tests for determining whether a tenant should be deemed an "operator" under CERCLA. However, any tenant utilizing hazardous substances on a leased property should be aware that they could be deemed potentially liable for pre-existing contamination.

Tenants and the Bona Fide Purchaser Defense (BFPD)

In order to encourage re-use of brownfield properties, in 2002 Congress passed the Small Business Liability Relief and Brownfields Revitalization Act. As part of the Act, Congress created the "bona fide purchaser defense" (BFPD) which allows purchasers that conduct proper due diligence and follow other requirements to purchase property with knowledge of hazardous substance contamination without incurring liability as an "owner" or "operator."

However, when the law was passed in 2002 it did not provide the same opportunities to tenants to qualify for the BFPD. The only way a tenant could qualify for the protection is if they were deemed an "owner" based upon the lease terms or if the owner already qualified for the BFPD. Tenants under traditional lease arrangements with an owner that never qualified for the BFPD fell into a gap. They simply couldn't qualify on their own for BFPD protections.

Finally, in December 2012, EPA recognized there was a gap in potential liability protection for most tenants and it issued a new guidance allowing all tenants to qualify for the BFPD if they meet certain conditions, including:

Don't dispose of hazardous substances on the property;
Conducts proper due diligence (known as "All Appropriate Inquires");
Makes all legally required notices;
Takes "reasonable steps" regarding releases;
Cooperates with regulators;
Complies with any use restrictions or controls designed to protect against exposure to contamination;
Complies with administrative subpoenas and information requests; and
Is not potentially liable for response costs or affiliated with a person who is liable for response costs at the facility.

It is worth noting that this is only enforcement discretion guidance and not statutory liability protection. This means that EPA could still file a suit against a tenant if it felt the circumstances justified such an action.

Tenants Should Consider the BFPD and Contract Provisions to Protect Themselves

Due to the large liability exposure associated with leasing property that may have had some history of use of hazardous substances, tenants should take steps to protect themselves. First, perform due diligence prior to signing the lease. Second, insist on contractual provisions that release and protect them from liability associated with pre-existing contamination. However, contract provisions still don't prevent regulators from suing you. Therefore, as a third step tenants should evaluate are the benefits of the BFPD as another means of mitigating risk.

Clean Ohio Council Approves Changes to Brownfield Funding

Joe Koncelik — Fri, 15 Mar 2013 16:01:06 -0500

On March 6th the Clean Ohio Council approved major changes to the Clean Ohio program. The changes are now effective and will govern the remaining $15 million in funding that was set aside in the last budget.

After the $15 million has been exhausted, JobsOhio has indicated it will launch a new $43 million per year brownfield redevelopment program. No word yet on what the details of that program may look like, however, it is safe to assume that the more streamlined structure and emphasis on jobs will be key aspects of the JobsOhio program.

Here are the major changes approved by the Council on March 6th:

Single incentive program- COAF and CORF Combined into one brownfield funding program:
Streamlined application process- Requests for funding are now initiated by submitting a letter of interest to JobsOhio regional network. This is a positive development for CORF projects that required applicants to invest $20,00 or more to file the application without knowing whether they will be funded;
All grants will be awarded on a rolling basis- This replaces the CORF process of two rounds of funding with pools of applicants competing against one another.
Cleanup grants remain capped at $3 million- The proposal had been to reduce them to $1 million;
Assessment grants are capped at $200,000- compared to $300,000 under the old program.
Expanded eligible infrastructure costs under the grant
Eliminated the Redevelopment Ready Track- Grant applicants must have a committed end user of the property.

Brownfield Redevelopment Incentives Back on the Table in Ohio

Joe Koncelik — Tue, 05 Mar 2013 16:40:37 -0500

Last year the Kasich Administration announced that it was phasing out the Clean Ohio brownfield grant program. The Clean Ohio program,which had been in existence for over a decade, had provided approximately $37.5 million per year in incentives for cleanup and redevelopment of brownfields.

Last May, the Administration allocated a final $15 million toward traditional Clean Ohio programs for sampling and cleanup work. JobsOhio took over administration of the program from the Ohio Department of Development. (Click here for prior post discussing changes)

What has been somewhat unclear since the announcement regarding phase out of the Clean Ohio program is whether JobsOhio would replace it with a new brownfield incentive program. As discussed in an article in the Crain's Cleveland Business magazine, it appears JobsOhio does plan on a sizable brownfield redevelopment incentive program to replace Clean Ohio.

About $43 million of the $100 million JobsOhio can spend annually for economic development programs will go toward revitalization projects, Mr. Minor said.

The planned allocation to land revitalization is a big change in the Kasich approach to economic development. The Kasich administration let the former program, Clean Ohio, die last year without assurances that it would be picked up by JobsOhio...

Clean Ohio offered communities as much as $3 million in loans or grants for remediation projects — a number JobsOhio might match, Mr. Minor said. But Mr. Minor said the new program will prefer to invest with companies that will occupy the cleaned-up properties.

What is clear from the comments of JobsOhio officials is that only projects that have a committed end-users after cleanup will qualify for the new brownfield incentives. Also, the old scoring methods utilized by Clean Ohio will not longer be used to identify good projects. JobsOhio will heavily emphasize the following factors in selecting projects:

number of jobs the project retains;
the number of jobs created; and
investment in redevelopment of the property and/or equipment.

Clean Ohio Council to Meet

The Clean Ohio Council will meet tomorrow to discuss changes to its policies for awarding grants. However, whatever changes are made will likely only govern the remaining $15 million in funding. After that money is spent, JobsOhio will initiate its own program with its own procedures and methodologies for selecting projects.

Regardless of whether you like some or all of the changes to the process for selecting projects, it is very good news that a strong brownfield incentive program will exist post-Clean Ohio. In a state with a rebounding economy it is critical to attract redevelopment to properties that may have historical issues tied to Ohio's strong industrial history.

Ohio Court Finds State Law Preempts Local Oil & Gas Ordinances

Joe Koncelik — Wed, 13 Feb 2013 16:40:36 -0500

Across the country more local governments are attempting to pass their own ordinances regulating or even prohibiting natural gas drilling in their jurisdictions. Under home rule principals, the typical rule of thumb is that local ordinances are preempted if the state has a comprehensive regulatory scheme for that area. However, various state courts have reached different conclusions as to whether local ordinances are banned by a comprehensive state regulatory scheme. Now, an Ohio court has weighed in on this issue.

New York

Recently, in New York, two state courts upheld bans on natural gas drilling. In one case, the town of Dryden amended its zoning ordinance to “ban all activities related to the exploration for, and production or storage of, natural gas and petroleum." The ordinance was challenged by company owning thousands of acres of leases in the area.

The Court said the ordinance was not preempted by state law governing oil & gas drilling. The Court said the purpose of the state law is to “regulate any development or production of such resources which may occur in a manner that prevents waste, permits greater ultimate recovery of oil and gas, and protects the correlative rights of all persons." See, Anschutz Exploration Corp. v. Town of Dryden

Pennsylvania

The Pennsylvania Supreme Court found a local ordinance governing drilling preempted while, in a separate case, upheld an ordinance governing where drilling could take place. The Supreme Court found a municipal ordinance that regulated the permitting of drilling as well as site restoration requirement preempted by the state Oil & Gas Act. See, Range Resources Appalachia, LLC v. Salem Tp., 600. Pa. 231, 964 A.2d 869, 876-77 (2009 The Court held the Act preempts all local regulation of gas well operations.

However, the Court upheld a ordinance which designated where natural gas drilling could take place. See, Huntley & Huntley, Inc. v. Borough Council of Borough of Oakmont, 600 Pa. 207, 964 A.2d 855, 866 (2009). The Court said such an ordinance serves a different purpose that the state Oil & Gas Act.

Ohio

Now, an Ohio Court has reviewed the extent of preemption of natural gas drilling. In State ex rel. Morrison v. Beck Energy Corp., Ninth Dist. Case No. 25953, 2013-Ohio-356, the Ninth Appellate District reversed a decision of the Summit County Court of Common Pleas and held that local ordinances of the City of Munroe Falls regarding oil and gas drilling were preempted by the comprehensive state regulatory scheme granting authority to regulate oil and gas drilling to the Ohio Department of Natural Resources (ODNR). As a result, the City was barred from enforcing its oil and gas drilling ordinances against Beck Energy.

In its “home rule” analysis, the Appellate Court found that the City’s permit, zoning and rights-of-way ordinances were exercises of the City’s police power, but also that Ohio Revised Code Chapter 1509 was a general law and provided a comprehensive regulatory scheme for oil and gas well operations in this state. The Appellate Court found that the City’s oil and gas drilling and zoning ordinances were in direct conflict with Ohio Rev. Code Chapter 1509 and thus preempted.

The Appellate Court said the City could enforce its ordinances regarding construction of rights-of-way, as long as it did not enforce them in a discriminatory manner against oil and gas well drilling.

The Court did not opine as to whether a local ordinance banning fracking would be preempted. Similar ordinances were upheld in New York despite state drilling regulations. In this instance,the Munroe Falls zoning ordinance could be viewed simply as a permit to drill which was more clearly preempted by the state's oil & gas drilling regulations.

Air Emissions Violations Presumed Continuing in Nature for Purposes of Civil Penalties

Joe Koncelik — Tue, 29 Jan 2013 15:07:27 -0500

On December 6, 2012, the Ohio Supreme Court issued a rare opinion pertaining to the proper calculation of civil penalties in the context of an environmental enforcement action. The decision has serious ramifications for any company that is required to perform stack tests to demonstrate compliance with air emission standards. It also may impact any company that has been issued a notice of violation for an air emission violation.

In State ex rel. Ohio Atty. Gen. v. Shelly Holding Co., Slip Opinion No. 2012 – Ohio – 5700 (Dec. 6, 2012), the Court found that once a violation of an air emission permit or regulatory limit has been demonstrated, the violation is presumed to be continuing in nature until the company provides convincing rebuttal evidence that the violation has ceased. This finding means that any company that exceeds an air emission limit must act quickly to change operations or reduce emissions to demonstrate compliance. Otherwise, the company could face a very large civil penalty because each day of non-compliance could warrant a penalty up to $25,000 per day.

Rebuttal of the Presumption Air Emissions Violation is On-Going

The Shelly company had failed a stack test of its asphalt plant. A key aspect of the failed stack test was that it had to been run under "worst case" conditions- Meaning the emissions were measured when the facility was operating at maximum capacity. The Court held that the failed stack test established that there was an emission limit violation.

The State asserted civil penalties were owed for each day following the failed stack test until the Company demonstrated it had returned to compliance. Shelly argued that it was inappropriate to presume such a violation was continual in nature when its normal operations were not at maximum capacity.

While the trial court had agreed with the Company, the Supreme Court disagreed with Shelly and concluded the burden was on the Company to demonstrate it returned to compliance through one of the following:

A subsequent stack test at maximum capacity that showed emissions within permit limits;
A revised permit or variance;
Operating conditions during the stack test no longer existed;
Mechanical failures were repaired; or
Raw materials and fuels were changed.

However, relative to numbers 3 through 5, the Court suggested a company would need to supply convincing evidence that emissions were actually within limits. For example, the Court rejected Shelly's argument that normal operating conditions where below maximum capacity and, therefore, the State lacked evidence it violated emission limits on days other than the initial stack test.

Huge Increase in Disposal of Frac Water in Ohio Deep Wells

Joe Koncelik — Wed, 23 Jan 2013 09:47:33 -0500

An article in the Akron Beacon Journal discusses a study by Kent State University regarding the disposal of flow back water from natural gas fracking in deep wells in Ohio. Flow back water is the water that comes back up from fracking a natural gas well. The flow back water is considered wastewater.

A prior post discussed the issues Pennsylvania was facing in handling disposal of flow back water. As a result of increased regulations in Pennsylvania, the main method of disposal of flow back water had become shipment to Ohio for disposal in deep wells. Ohio has 179 permitted deep wells. Pennsylvania has five permitted deep wells.

Here are some of the key statistics from the study as discussed in the ABJ article:

The volume of Marcellus wastewater has grown 570 percent from 2004 to 2011 due to increased shale gas production in Pennsylvania, Lutz said.

Pennsylvania has about 6,400 Marcellus shale wells that have been drilled and another 3,500 that have been permitted. In comparison, Ohio has about 500 wells permitted in the Utica shale, of which 200 have been drilled.

Lutz said Pennsylvania generated about 20 million barrels (each holding 42 gallons) of wastewater in 2011. About 7 million barrels were shipped to Ohio injection wells.

Ohio is projecting that its injection wells handled nearly 14 million barrels in 2012, up from 12.8 million barrels in 2011. (Final figures have not been compiled). More than half of that volume came from Pennsylvania and West Virginia.

While the increases are huge, what happens when Ohio has more wells? Will there be a reliable method for disposal of the flow back water from the Pennsylvania and Ohio wells.

As mentioned in the article, Ohio has no means of banning the shipments from out of state. Ohio tried to regulate shipments of out-of-state solid waste from the east coast. A similar issue arose when eastern states stopped permitting new landfills and Ohio was the closest state with available capacity. Ohio starting receiving shipments of solid waste by rail.

Laws meant to regulate the shipments of out-of-state solid waste were struck down as unconstitutional. Solid waste was determined by the courts to constitute "interstate commerce." Under the U.S. Constitution, one state cannot treat unfairly interstate commerce.

Now a similar dynamic is playing out with flow back water from fracking. The issue will only get worse when Ohio has more wells drilled and needs to find a home for more flowback water generated in-state.

Ohio Continues its Efforts to Address Algal Blooms in Lake Erie

Joe Koncelik — Thu, 06 Dec 2012 08:54:20 -0500

Algal blooms in Lake Erie have resurfaced as a major problem in recent years. Large algal blooms can even be viewed from satellite images. (Photo: Courtesy of NOAA)

Considerable effort and funding has been directed at studying the causes of the problem. Efforts are now under way to try and address the issue. One such effort is the Ohio Clean Lakes Initiative, which is under the management of the Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency. The purpose of the initiative is to collaborate with farmers and other stakeholders to understand the problem better and develop programs that could address the root causes of algal blooms.

In an interview with the Ohio Environmental Law Blog, Chris Abbruzzese, Deputy Director of the Ohio Environmental Protection Agency, provided additional background about the Ohio Clean Lakes Initiative.

From Ohio EPA’s perspective, please provide an explanation of what the Agency believes is happening and where it thinks the problem is coming from?

Thirty years ago farmers, municipalities and industries in the Western Lake Erie Basin made significant efforts to cut the amount of phosphorus and sediment loading into Lake Erie by 50 percent. However, the dissolved form of phosphorus entering Ohio’s waterways from a variety of sources in the area remains an issue, resulting in increased occurrences of algal blooms. Over the last several years the increased frequency of algal blooms has had a significant impact in the Western Basin of Lake Erie, threatening its ecological integrity and creating a more challenging economic climate.

An algal bloom is a rapid increase in the population of algae, often as a result of excess nutrients, primarily phosphorus and nitrogen. Sources of nutrients include fertilizers used on farms and lawns, sewage treatment plants, faulty septic tanks & other home sewage treatment systems and some industrial operations. Some algal blooms can become toxic, potentially making the water unsafe for human contact or consumption. These toxic blooms create nuisance conditions that interfere with recreation and may cause fish kills when dead organic matter decays and depletes oxygen in the water. Public water supplies have water treatment plants that remove algal toxins but high levels of algal organic matter causes taste and odor problems and the formation of harmful by-products that must be controlled. All of this significantly increases the cost of providing safe drinking water supplies.

Under the direction of Governor Kasich, the Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency established the Clean Lakes Ohio Initiative this year to address these concerns.

What programs will the Ohio Clean Lakes Initiative establish?

The Ohio Clean Lakes Initiative will: educate and encourage farmers to use good nutrient stewardship; expand the use of on-the-ground practices to help control the displacement of agricultural nutrients; expand the frequency and type of soil testing; and create a monitoring network to implement and access the effectiveness of management practices.

How do farmers view the Initiative?

Ohio farmers are stepping up to the plate to learn more about nutrient management and about modern conservation technologies. The Ohio Department of Agriculture is encouraging farmers across the state to adopt the 4R Nutrient Stewardship model to reduce excess nutrients in the state’s waterways. Good nutrient stewardship not only benefits the environment, it also benefits farmers by saving money and time instead of applying unnecessary or excessive fertilizer to the field.

Studies indicate that the timing of fertilizer application and how well it is incorporated into the soil layer can significantly reduce dissolved phosphorus runoff. Being more conscious of what is going into the fields, when it is going into the fields and how it is going into the fields will maintain agricultural integrity while improving water quality.

Such an initiative could be controversial with the agricultural industry. How is the state trying to work with agri-business?

The Ohio Department of Agriculture and Ohio Department of Natural Resources are exploring partnerships with the agribusiness industry to expand the frequency and type of soil testing being used. For example, the Ohio Department of Natural Resources has worked with farmers in Wood, Henry, Hancock, Putnam and Defiance counties to enroll over 18,000 acres of farmland in a new soil testing initiative.

Due to size of the Lake Erie Basin, this seems like it’s more of a regional issue than an Ohio specific issue. Is there anything being done across the region to address the issue?

Yes. The Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency directors met last spring with their counterparts from Michigan and USEPA to discuss issues related to improving water quality in the Western Lake Erie Basin. A lot of good ideas were shared and several other organizations are also interested in improving the water quality in Lake Erie. The International Joint Commission Water Quality Board is in the process of developing a plan to improve water quality in Lake Erie.

Also, in August, Ohio joined Indiana and Kentucky in a pilot multi-state water quality trading plan to reduce the run-off of agricultural nutrients. The Ohio River Basin Water Quality Project Pilot Trading Plan is the first consensus plan for interstate trading to reduce nutrients. The agreement provides businesses and municipalities with a more economically viable option to efficiently reduce nitrogen and phosphorus loading in rivers, lakes and streams while providing the agricultural community more resources to implement conservation and best management practices in a watershed. The experience from this pilot plan can be used in the Western Lake Erie Basin.

[For more information on the initiative please see cleanlakes.ohio.gov]

What Does a Second Term for President Obama Mean for Environmental Regulation?

Joe Koncelik — Sat, 10 Nov 2012 10:07:37 -0500

Through out the long and contentious election process the focus of the debate was getting America back to work. Much of the debate centered on tax policy and budget cuts. However, the President was accused of "over-regulation" which Mitt Romney argued cooled the economic recovery.

As part of the debate over regulation, environmental regulation was discussed. The President was accused of waging "a war on coal." Governor Romney also asserted that the President's climate change regulations represented an over-reach.

Now that the election is over and the President has won a second term, what does a second term really mean for forthcoming environmental regulation. Most observers believe the President will be more emboldened in terms of environmental regulation now that he doesn't need to worry about re-election.

Below are some of the areas in terms of environmental regulation that the Obama Administration will likely push forward with:

Climate Change- Some of environmental groups supporting President Obama hope that he will push forward with a major piece of legislation on climate change. In the President's first term, Democrats came close to passing a cap-and-trade bill that would have put in place the largest new environmental program since creation of the EPA and the early environmental statutes (Clean Air Act, Clean Water Act, Superfund). In reality, new legislation on climate change looks very unlikely. The Re publican's still control the House and the margin is thin for the Democrats in the Senate. Instead, the Administration will continue to implement climate change regulations under EPA's existing authority under the Clean Air Act. This will likely mean lowering the carbon emission thresholds that trigger New Source Review and Title V permitting utilizing the Tailoring Rule. It also means establishing emission standards for new major sources (i.e. New Source Performance Standards).
Ozone- The President came into office promising to undo the Bush era ozone standard of .75 ppm stating the standard was not based on science. While the EPA proposed lowering the ozone standard it ended up punting on four separate occasions due to pressure from the business community. Now it appears almost a certainty that the EPA will finally move forward with a lower standard of .70 ppm.
Coal-Fired Power Plant Emission Reductions- This past August the D.C. Circuit Court vacated U.S. EPA's Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule." The Transport Rule was the second attempt by EPA to establish emission standards for existing coal-fired power plants. The Transport Rule was blamed for potentially forcing the closure of a significant number of existing power plants threatening to driving up energy prices. CSAPR was the Obama's Administration's effort to fix the issues the predecessor Bush era program known as the Clean Air Interstate Rule (CAIR) which was also struck down by the Courts. In the Obama Administrations second term, EPA will once again attempt to fix this massive regulation.
Fracking Regulation- The natural gas industry continue to boom in Pennsylvania, Ohio and West Virginia. The massive reserves found in the Marcellus and Utica Shale formations promise to provide home grown energy for a century. Fracking is used to access these deep reserves that were previously not accessible. Fracking uses deep wells and then breaks up the rock to release the gas. Environmentalists are very concerned with the air emissions, water pollution and potential to contaminate groundwater from the fracking process. The Obama Administration moved slowly in putting in place new regulations in his first term. EPA did establish federal air permitting requirements for new wells. The Obama Administration also created a federal agency fracking working group to look at the process and recommend new regulations and coordinate between federal agencies. It is very likely that in a second term will be proactive developing new regulation.
Support for Renewable Energy- The Obama Administration is likely to continue its strong support for renewable energy like wind, solar and biomass. Its possible the President will explore a federal renewable energy standard similar to the renewable energy portfolio standards (RPS) imposed in many states. An RPS mandates a certain percentage of power production must be provided by renewable energy sources. It is possible the President will try and impose such a mandate nationally. This still seems unlikely given the make up of Congress. More likely is that the Obama Administration will continue financial support for the industry through tax breaks, grants and loans.
Boiler MACT- In a second term, President Obama is likely to implement long-delayed emissions regulations for industrial boilers that apply to a whole array of industry. The Boiler MACT (Maximum Achievable Control Technology), was proposed in 2004 before being delayed by litigation in the Courts. EPA issued a new proposal in 2011 which was again delay due to controversy surrounding the sweeping new standards. EPA may issue the final rules as soon as December.
The Role of the Courts- Many of the areas of regulation discussed above are involved in protracted litigation. Challenges to climate change regulation are still pending. EPA's re-write of CASPR will be challenged again. There could be more challenges to the final boiler MACT rule. The final ozone rule will almost certainly be challenged. The petroleum industry will likely challenge any new fracking regulation. Overall, the second term will not only see significant new regulation but major uncertainty as proposals, both new and old, will be challenged in the Courts. Businesses like certainty. In the world of environmental regulation that almost never seems to be the case.

Federal Court Overturns EPA's Interpretation of a "Single Source" for Title V Air Permitting

Joe Koncelik — Wed, 24 Oct 2012 07:53:45 -0500

When the Title V permitting program was created it was sold as a way to simplify complex air permitting. U.S. EPA said that it would allow large facilities to aggregate all their air pollution sources under one permit. EPA indicated this would make it easier for businesses to track their requirements.

What emerged from this "simplified" permitting process was, in fact, permits that were hundreds of pages along. In addition, new reporting requirements were added onto businesses. Also, businesses were required to submit an annual certification of compliance which had to be attested to by a responsible official with the company.

The cumbersome nature of the Tittle V permitting process coupled with the new regulatory requirements created a significant incentive for businesses to avoid Title V permitting. Under Title V, every "major source" of air pollution is required to obtain a Title V permit. EPA defines "major source" as any facility that is a source of air pollutants that "directly emits, or has the potential to emit, one hundred tons per year of any pollutant." See, 42 U.S.C. Section 7602(j).

The most common way to avoid Title V for facilities that have a potential emit above 100 tons per year (tpy) is by placing enforceable restrictions (through permitting) that cap emissions below the trigger threshold of 100 tpy. These permits are referred to as "synthetic minor" permits. Facilities that cannot reduce actual emissions below 100 tpy can't use this method to avoid Title V.

What happens when two air sources, owned by the same company, exceed 100 tpy?

EPA will evaluate whether the sources should be treated as a single source for Title V purposes. EPA's guidance in this area is not straightforward and has led to creative interpretations aggregating sources together.

What Constitutes a "Single Facility" for Purposes of Title V Permitting

Under EPA rules, multiple pollutant-emitting activities can be aggregated together and considered a single source for purposes of determining whether the 100 tpy threshold for Title V permitting has been exceeded. Under EPA rules, a single stationary source for Title V purposes must satisfy all of the following factors: (1) the sources are under common control; (2) they are located on one or more contiguous or adjacent properties; and (3) belong to the same industrial grouping. 40 C.F.R. Section 71.2.1

In guidance issued by EPA, the Agency stated that single stationary source determinations should be made on a case-by-case basis and that "in some cases, 'proximity' may serve as the overwhelming factor." See, Memorandum from Gina McCarthy, Assistant Adm'r, to Reg'l Admr's Regions I-X (Sept. 22, 2009).

EPA Finds Summit's Production Plant and Wells One Facility for Purposes of Title V

While EPA guidance says proximity should be the key factor, EPA appears to not always follow its own guidance. Such was the case in its determination with regard to Summit Petroleum Company ("Summit").

EPA found that Summit's natural gas sweetening plant and the associated production wells were one facility for purposes of Title V. Summit’s plant “sweetens” the “sour” gas from approximately one hundred sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located over an area of approximately forty-three square miles at varying distances from the plant—from five hundred feet to eight miles away

EPA said that Summit's plant, wells and flares worked together as a single unit that "together produced a single product." EPA said Summit could not produce any evidence that the plant and wells were not "truly interdependent." EPA concluded that given the functional interrelationship, Summit's plant and wells should not be considered separate emissions sources.

Summit challenged the EPA interpretation arguing that EPA's interpretation ignored the plain language in the regulations that calls for sources to be "adjacent." The Sixth Circuit Court, in a 2-1 decision, agreed with Summit after reviewing the regulatory history and EPA guidance. The Court said EPA may not ignore the term "adjacent' when making determinations as to whether to aggregate related sources. The Court found that the wells distance from the plant - from five hundred feet to eight miles- meant the source were not "adjacent' for purposes of treating them as a single source under Title V. See, Summit v. EPA, Nos. 09-4348; 10-4572 (6th Cir. Aug. 7, 2012).

Conclusion

The Sixth Circuit decision goes a long way in reducing the reach of EPA in trying to aggregate separate emission sources for purposes of Title V. Based upon the ruling, a company with operations in different locations that are related to one another may be able to still avoid Title V permitting so long as there is some geographic separation between the sources.

The Threat of Personal Liability for Environmental Violations of Small Businesses

Joe Koncelik — Tue, 09 Oct 2012 17:04:37 -0500

Owners of small business form corporations, in part, to insulate themselves from personal liability. A recent trend in Ohio is that the State has become far more aggressive in pursuing owners of small businesses personally in environmental enforcement actions.

A business owner could still be pursued even if the corporate formalities were followed. More and more the State is pursuing any president or owner of a small business who has an active role in managing his company day-to-day.

Due to the high costs associated with environmental compliance, this is a trend that owners of small businesses should be aware of and take prudent steps to try and protect themselves.

"Piercing the Corporate Veil"

A fundamental rule of corporate law is that, normally, shareholders, officers, and directors are not liable for the debts of the corporation. There are exceptions to this rule Courts have found that the “veil” of the corporation can be “pierced” and individual shareholders held liable for corporate misdeeds when it would be unjust to allow the shareholders to hide behind the fiction of the corporate entity. This is commonly referred to as "piercing the corporate veil."

The test in Ohio for disregarding the corporate form is whether:

Control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will or existence of its own;
Control over the corporation by those to be held liable was exercised in such a manner as to commit fraud or an illegal act against the person seeking to disregard the corporate entity; and
Injury or unjust loss resulted to the plaintiff from such control and wrong.

[See, Belvedere Condominium Unit Owners' Assn. v. R.E. Roark Cos. (1993), 67 Ohio St.3d 274, 287, 617 N.E.2d 1075]

It had been a rare instance when the AGO would try to "pierce the corporate veil" and pursue shareholders, owners or officers of a corporate personally for environmental violations. That has changed since the State won a victory in 2006 in case of State of Ohio v. Mercomp. In that case, the State successfully pierced the corporate veil attaching personal liability to Manny Rock, a shareholder of a landfill.

What Actions Gave Rise to Liability?

Here are some of the facts that the Court gave rise to personal liability:

Mr. Rock was the sole shareholder of the corporation;
The name of the corporation was based upon his initials;
Regulatory violations by a corporation, absent affirmative wrongful conduct by the shareholder, is sufficient; and
The failure of the Corporation to correct the environmental violations threatened public health and the environment.

It is important to note that the Court found liability even though it did not find under-capitalization, failure to observe corporate formalities, insolvency, or diversion of corporate funds for personal use.

Since 2006 State Seeks Individual Liability Frequently

Since the Mercomp decision in 2006, the State of Ohio has frequently sought (and obtained) personal liability of owners of small businesses. Individuals are not only required to perform clean up, they are also subject to civil penalties if they don't perform on a timely basis.

For small businesses that have a sole or large majority shareholder, the Mercomp case increases the liability risks for individuals. If a company has environmental violations that have gone unaddressed, the State may argue for personal liability.

Owners of small businesses must be aware of these risks and take steps to try and protect themselves. .

Big Changes Proposed for Ohio Brownfield Funding

Joe Koncelik — Mon, 17 Sep 2012 12:20:16 -0500

On Friday, the Clean Ohio Council met to discuss proposed changes to the Clean Ohio program. As discussed previously on this blog, the Kasich Administration has repeatedly discussed completely revamping brownfield funding in Ohio. The Administration previously announced its intention to shift the program's administration to JobsOhio along with the liquor profits that were used to payoff the bonds that created Clean Ohio. The Administration also has indicated it wants to shift from a grant based program to loans.

JobsOhio is currently caught up in a legal challenge to the constitutionality of the semi-public organization. As a result of the legal challenge, the Administration has not provided any details as to what brownfield funding will look like under JobsOhio.

Back in May, it was announced that $15 million in new funding would be allocated to the Clean Ohio program as a stop gap measure until the dust settled on the JobsOhio litigation. Clean Ohio funding has previously been at $37.5 million per year. Many believed that the $15 million would be allocated using the similar Clean Ohio process and procedures that have operated for nearly a decade.

On Friday, staff from the newly created Development Services Agency presented revised policies for new procedures to be utilized in awarding the $15 million in new funding. The proposal presented represents a seismic shift in how funding decisions will be made.

Here is a quick synopsis of the major changes:

Major Reduction in Funding Available Per Project- The maximum available in funding for assessment grants was reduced from $300,000 down to $200,000. The maximum available in clean up funding was reduced from $3 million to $1 million;
Overhaul to the Grant Selection Process- Previously, there were two grant rounds per year. Grant applications received during a round competed against one another for funding. The Clean Ohio Council utilized a scoring process to evaluate each grant application. The scoring criteria was a mix of points based upon the proposed development, amount of clean up occurring and importance to the local community. The new proposal would do away with grant rounds and the scoring process entirely. Under the new system, the Director of Development Services would make awards on a rolling basis utilizing Agency discretion.
Premium on Job Creation- While the application process is still somewhat murky because the forms have not been released, it appears from documents released Friday that the intention is to evaluate applications based on jobs almost exclusively. The old scoring system provided placed higher value on clean up of highly contaminated sites as well as their importance to the local community.
More Funding for Infrastructure- The new proposal increases the percentage of the grant that can be spent on infrastructure versus environmental clean up from a maximum of 10% up to 25%.
Loans- While the policy changes incorporate the concept of loans, as it stands the new policy would retain the limitation that no more than 15% of funding shall be used for loans. (See, Section 6.02). Therefore, the Administration, at least for now, wants to see the vast majority of funding in the form of grants versus loans

Concerns were expressed during the Clean Ohio Council meeting on Friday that there had not been any opportunity for the public to comment on the major restructuring of the program. In response, it was decided to allow a thirty day (30) public comment period on the policy changes.

Click here to access the proposed changes to the Clean Ohio Fund Policies. Instructions for submitting comments are also available on the web page.

Implications of the Policy Changes

It is pretty easy to acknowledge the Clean Ohio as we know will no longer exist if the proposed changes are adopted following the public comment period. The old program had two grant processes:

a) Clean Ohio Assistance Fund (COAF)- Allowed for up to $300,000 for assessment and $700,000 for clean up. COAF applications could be submitted on a rolling basis and decisions were made exclusively by the Director of Development.

b) Clean Ohio Revitalization Fund (CORF)- Allowed for up to $3 million in clean up funding. There were typically two rounds per year. Applications were submitted and competed against one another in each round. The project applications were scored using a mix of points for development, environmental clean up and importance to the local community.

The proposal presented Friday essentially does away with CORF and moves exclusively to a COAF like approach. The advantage of the new approach is the speed as to which funding decisions will be made. However, the disadvantages to this approach are as follows:

$1 Million Dollar Cap on Clean Up Grant Funding will mean Only Smaller Clean Up Projects will Get Funded- The vast majority of the larger development projects involved $2 to $3 million in funding under the old CORF program. By capping the available cap at $1 million, the larger brownfield redevelopment projects are far less likely to occur. What could happen is that the only projects getting funded in future will be for asbestos abatement & demolition. There simply won't be enough funds to deal with sites that have significant soil or groundwater contamination.
No Competition Makes it More Difficult to Ensure the Limited Funds Go to the Best Projects- Because all grant awards will be made on a rolling basis it will be much more difficult to compare and contrast projects. No objective scoring criteria will be implemented and the public involvement in selecting projects will be greatly reduced.

Power Plant Reductions- EPA Gets it Wrong....Again

Joe Koncelik — Fri, 07 Sep 2012 09:59:41 -0500

On August 21st, the D.C. Circuit Court vacated U.S. EPA's Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule." This is not the first time EPA has had its power plant pollution reduction rule vacated. The Transport Rule was the replacement to the Clean Air Interstate Rule (CAIR) which was also struck down by the Court in December 2008.

Here was a paragraph from a blog post I wrote when EPA released the Transport Rule

After two years of development, EPA has released its proposed Transport Rule and is very confident it can withstand legal challenge. They stated in the presentation that their lawyers are confident the structure of the Transport Rule will meet the Courts mandate by ensuring elimination of "significant contribution."

I remember attending this presentation which was made by senior officials with EPA. EPA said their lawyers had combed through the CAIR decision to make sure the had a lock solid replacement rule. After the D.C. Circuit Court ruling, the EPA lawyers better go back to the drawing board.

Why the Court Struck Down the Transport Rule

The Court found two fundamental flaws with EPA's Transport Rule:

Greater Reductions Required than a State's Contribution to Downwind Non-Attainment- Under the Clean Air Act, State's are required to eliminate their contribution to non-attainment of federal air quality standards in downwind States. Under the Transport Rule, EPA quantified State's downwind contribution, but then imposed controls on power plants that were based on cost. In some cases EPA admitted the reductions were more than the State's contribution to downwind non-attainment. The Court said EPA had no right to force reductions beyond a State's downwind contribution even if EPA found the reductions to be cost effective.
EPA Ignored the Federalist Structure of the Clean Air Act- Under the Transport Rule, EPA determined the contribution to downwind non-attainment and then immediately imposed specific reductions on sources in those states. The Court said that EPA should have stopped after it quantified each State's contribution to downwind non-attainment and allowed each State to determine on its own how to eliminate that contribution. Each State should have been given an opportunity to chose its own mix of new air pollution reductions through the State Implementation Plan (SIP) process.

The Court decided to keep CAIR in place while EPA tries to figure out a legally defensible rule requiring reductions from power plants. CAIR now remains in place after it was supposedly vacated by the Courts four years ago.

Implications from EPA's Ruling

It will be very difficult to craft a legally defensible rule that reduces power plant emissions on a regional basis in order to address the "significant contribution" provisions of the Clean Air Act. To be fair to EPA, the Agency appears to get conflicting guidance from the Courts.

The Court in the CAIR ruling was sharply critical of EPA because it allowed power plants to avoid necessary reductions through its emission trading provisions. The provisions of the Transport Rule were designed to specifically address the flaws identified by the Court. EPA felt the Transport Rule addressed the fundamental flaw of CAIR by ensuring each State eliminated its contribution to downwind non-attainment. But after two years of evaluation, EPA still issued an invalid rule.

In reaction to the ruling, EPA may give up on designing a regional reduction program for power plants. It may simply define each State's significant contribution and leave it up to the State to find the necessary reductions. If it goes this route it will shift the burden onto the State's in having to make the really hard choices in terms of emission reductions. It is much easier for the State's to simply implement rules mandated by the federal EPA. Otherwise, the States are left to pick the winners and losers in terms of costly new controls on companies within its borders.

It also looks like it will be very difficult to develop any sort of power plant rule that has emission trading. EPA would likely have to go back to Congress to obtain clear authority under the Clean Air Act. Any change to the Clean Air Act seems highly unlikely in today's political environment. This is a shame because emission trading has been consistently found to be far more cost effective than traditional command and control regulation.

Delay in Clean Ohio Funding Doesn't Appear Connected to JobsOhio Lawsuit

Joe Koncelik — Tue, 14 Aug 2012 11:04:47 -0500

The Kasich Administration has decided that it wants to put the legal challenges to JobsOhio to rest once and for all. Through legal maneuvering the Administration has put the ultimate question- is JobsOhio constitutional- before the Ohio Supreme Court. At issue is whether transfer of liquor profits to JobsOhio violates the Ohio Constitutional prohibition on providing credit/funding to a private corporation.

As discussed in the Columbus Dispatch, David Goodman, Director of the Department of Commerce, has refused to sign the Franchise and Transfer Agreement which would transfer Ohio's liquor distribution operations to JobsOhio. Director Goodman's refusal was in reality a legal maneuver to allow the Ohio Supreme Court to hear the legal challenges to JobsOhio.

Though I personally question the validity of these constitutional challenges, I believe my oath of office to uphold the Ohio Constitution precludes me from executing the Franchise and Transfer Agreement until the Ohio Supreme Court is given an opportunity to address the merits of these claims,” Goodman wrote in a letter this week to Mark Kvamme, interim president and chief investment officer for JobsOhio.

Implications for Brownfield Redevelopment in Ohio

The Kasich Administration has made clear that their ultimate goal is for JobsOhio to take over most of the economic development activities from the former Ohio Department of Development. Those responsibilities would include control over brownfield funding and redevelopment.

JobsOhio officials and the Kasich Administration have hinted that the future of Ohio brownfield funding will be much different than the $40 million per year that has been handed out as grants over the last decade through the Clean Ohio program. The most controversial aspect of changes to funding is the Administration statements that brownfield redevelopment funding will be more heavily geared towards loans instead of grants.

While it is clear that the legal fight over the constitutionality of JobsOhio has delayed any announcement regarding Ohio's future brownfield programs. The Kasich Administration's midterm budget (H.B. 487) set aside $15 million in funding. The availability of this funding does not appear to be in any tied to the legal fight over JobsOhio.

Here is the language from H.B. 487 regarding the $15 million in funding:

SECTION 301.21. The items set forth in this section are hereby appropriated out of any moneys in the state treasury to the credit of the Clean Ohio Revitalization Fund (Fund 7003) that are not otherwise appropriated.

Appropriations DEV DEVELOPMENT SERVICES AGENCY

C19500 Clean Ohio Revitalization $ 12,000,000

C19501 Clean Ohio Assistance $ 3,000,000

Total Development Services Agency $ 15,000,000

TOTAL Clean Ohio Revitalization Fund $ 15,000,000

The foregoing appropriation items C19500, Clean Ohio Revitalization, and C19501, Clean Ohio Assistance, shall be used in accordance with sections 122.65 to 122.658 of the Revised Code, and are subject to all provisions of Am. Sub. H.B. 482 of the 129th General Assembly that are generally applicable to such appropriations.

The budget language makes clear that the current Clean Ohio Revitalization Fund (CORF) and Clean Ohio Assistance Fund (COAF) will be used to administer the $15 million in funding. The language also seems to suggest that the current process for awarding grants under COAF and CORF will be utilized.

While H.B. 487 passed in May, the Administration has yet to announce when the $15 million in funding will be made available. The need for this funding is great. New brownfield projects are not entering the pipeline due to the lack of assessment money.

A Phase II environmental assessment answers the biggest question with regard to a property- how much will it cost to clean up and is redevelopment feasible. Unless a property is just perfect for redevelopment, most companies and re-developers are unwilling to pay for the cost of a Phase II assessment out of their own pocket.

COAF funding for Phase II environmental assessment ended last December. Since that time no new funding opportunities at the State level have been presented.

While the shape of the State's brownfield funding may be uncertain until the JobsOhio fight is resolved, the $3 million in COAF funds could be made available immediately so we do not continue to lose momentum on brownfield redevelopment in the State.

Is the Hot Summer Breathing New Life into Addressing Climate Change?

Joe Koncelik — Mon, 06 Aug 2012 15:02:57 -0500

It is an issue that just won't go away...Our incredibly hot summer seems to have re-focused attention on doing something regarding climate change.

James E. Hansen, director of NASA's Goddard Institute for Space Studies, in Friday's Washington Post, announced the release of a new study. The title of Mr. Hansen's op-ed piece shows what the new study concludes- Climate Change is Here---and Worse than
We Thought:

In a new analysis of the past six decades of global temperatures, which will be published Monday, my colleagues and I have revealed a stunning increase in the frequency of extremely hot summers, with deeply troubling ramifications for not only our future but also for our present.

This is not a climate model or a prediction but actual observations of weather events and temperatures that have happened. Our analysis shows that it is no longer enough to say that global warming will increase the likelihood of extreme weather and to repeat the caveat that no individual weather event can be directly linked to climate change. To the contrary, our analysis shows that, for the extreme hot weather of the recent past, there is virtually no explanation other than climate change.

Media reports from this summer are painting a dramatic picture of the impact from the summer's heat wave. Take today's AP news article - Thousands of Fish Die as Midwest Streams Heat Up:

Thousands of fish are dying in the Midwest as the hot, dry summer dries up rivers and causes water temperatures to climb in some spots to nearly 100 degrees.

About 40,000 shovelnose sturgeon were killed in Iowa last week as water temperatures reached 97 degrees.....The fish are victims of one of the driest and warmest summers in history. The federal U.S. Drought Monitor shows nearly two-thirds of the lower 48 states are experiencing some form of drought, and the Department of Agriculture has declared more than half of the nation's counties — nearly 1,600 in 32 states — as natural disaster areas. More than 3,000 heat records were broken over the last month.

With new media reports of the impact of the heat wave and new studies emerging confirming the impact of climate change conservatives have started to see its an issue that they need to get ahead of rather than simply resist.

Conservative groups have held meetings this summer to talk about pushing for a carbon tax to replace other taxes while addressing climate change. A recent CNN article discusses how the proposal to put a tax on certain fossil fuels in gaining support amount some Republicans- Carbon Tax Gets Unusual Support:

We have to have a system where all forms of energy bear their full costs," President Reagan's former Secretary of State George Shultz said in a recent interview with Stanford University News. Shultz now heads a task force at Stanford that is currently studying the feasibility of a carbon tax.

For Shultz there are many reasons to support such a tax. One is making fossil fuel energy sources absorb costs that are currently borne out by society at large, such as through higher health insurance premiums or Medicare bills caused by pollution-induced diseases.

He also cites energy independence, as well as global warming, "which is not a matter of opinion, but a matter of fact," he said. "The arctic is melting. A lot of people seem to be scoffing at the idea of global warming, but reality will catch up with them."

The old saying is that elections go the way of the economy. Perhaps the debate over climate change regulation goes the way of the weather.

Political ads still try and cast support for cap and trade as a negative for those politicians that supported the proposal in Congress. However, as long as media headlines are filed with the dramatic impacts of this years hot summer, it will become much more difficult for politicians to cast support for doing something on climate change as a negative. Perhaps that is why conservative groups are trying to get ahead of the curve by exploring policy options that they see as more palatable.

Let's say Romney wins the election. Do you see President Romney, with the current "hot weather" news cycle, repealing all of the EPA climate change regulations without some sort of new policy initiative like a carbon tax? That just seems far less likely.

For an interesting discussion as to whether climate change regulation is back on the table, see the National Journal's Energy Expert's Blog- Is Momentum Building to Act on Climate Change.

Ohio EPA Attempts Second Effort to Develop Beneficial Use Rules

Joe Koncelik — Wed, 11 Jul 2012 13:37:50 -0500

In June 2012, Ohio EPA issued an Early Stakeholder Outreach for Beneficial Use of Industrial Byproducts. This is the Agency's second attempt at developing a comprehensive regulatory scheme for reuse of industrial materials such as fly ash, bottom ash, foundry sand, slag and other materials.

From 1994 until the early 2000's, Ohio EPA regulated these materials under Policy 400.007 "Beneficial Use of Non-Toxic Bottom Ash, Fly Ash and Spent Foundry Sand, and Other Exempt Waste." The policy was revoked after legal challenge was raised to EPA's authority to regulate through policy. Since revocation of Policy 400.007, Ohio EPA has not had clear guidelines for reuse of these materials.

Revocation of the policy left a regulatory vacuum. Some industry representatives take the position that the industrial materials are unregulated because Ohio EPA has not established rules. Ohio EPA takes the legal position that this material is regulated as a waste under R.C. 6111. Ohio EPA asserts that companies need authorizations from the Division of Surface Water in order to be deemed protective of water resources.

Back in 2006, Ohio EPA first announced an effort to develop beneficial use rules. The Agency's 2006 effort provided highly controversial. After debating the issue for six years, the Agency is attempting a second run at rule development. Making matters worse, in recent years, Ohio EPA seems reluctant to issue authorizations for beneficial reuse without completion of its rulemaking effort.

Many Obstacles Remain to Ohio EPA's Development of Beneficial Reuse Rules

Policy 400.007 was very popular because of its flexibility and generous standards. In essence, any material that was below thirty times (30 x) drinking water standards could be reused without obtaining a permit from Ohio EPA. In addition, the agency required only limited sampling to verify material met applicable standards.

As part of the early stakeholder outreach, Ohio EPA released an three page concept paper which discussed the proposed structure of the rules. While Ohio EPA would allow pre-approved uses in some cases, the majority of beneficial use projects will need coverage under either a general or individual permit from Ohio EPA.

What is missing from Ohio EPA's conceptual proposal is any discussion of proposed standards or discussion of the potential scope of sampling that would be required. Back in 2006, the Agency stated it felt the 30 times drinking water standard was not protective. In subsequent draft proposals, Ohio EPA proposed standards orders of magnitude lower than the 30 x drinking water standards under Policy 400.07. The Agency also proposed more extensive sampling.

As demonstrated by the 2006 proposal, the three biggest hurdles the Agency faces to development of a successful beneficial rule are:

Development of reasonable standards for "acceptable" levels of contamination in the material proposed for reuse:
Pragmatic sampling requirements (i.e. number of samples and frequency of sampling)
Overcoming industry objections that the rules expand Ohio EPA's regulatory authority beyond current requirements.

Historically, Ohio EPA has been unable to force through unpopular rules that weren't mandated by U.S. EPA. There is no such U.S. EPA mandate in play with regard to beneficial reuse. Unless Ohio EPA successfully engages with industry, it will likely be revisiting the issue again in another six years.

EPA Maintains Tailoring Rule Thresholds for Greenhouse Gas Permitting...But the Clock is Ticking

Joe Koncelik — Fri, 06 Jul 2012 10:23:39 -0500

Last month, the D.C. Circuit Court of Appeals rejected challenges to U.S. EPA's Tailoring Rule which establishes the permitting threshold for greenhouse gas (GHG) pollutants. On July 3rd, EPA issued a rulemaking that will maintain the current GHG thresholds for the immediate future. The question is how long before environmental groups push EPA to lower the thresholds?

Tailoring Rule

Pursuant to the Clean Air Act, any facility that emits more the 100/250 tons per year of a pollutant regulated under the Act must go through EPA's New Source Review (NSR) program. As part of NSR, new sources or existing sources that are modified must demonstrate they have installed Best Available Control Technology (BACT) to reduce emissions of each regulated air permit.

Once EPA promulgated the Tailpipe Rule to control GHG emissions from vehicles, GHG's became a "regulated pollutant" for purpose of NSR. Once GHGs became a "regulated pollutant" any source that emits GHGs above applicable thresholds would trigger NSR.

Because GHGs are emitted in much greater quantities than typical Clean Air Act pollutants, EPA was concerned that application of the 100/250 ton per year threshold to GHGs would trigger thousands of permits. EPA and the States did not have the capacity to process that number of permits.

To address the situation, EPA promulgated the Tailoring Rule to temporarily raise the permitting thresholds. Under the first stage of the Tailoring Rule, new facilities that emit 100,000 tons per year of carbon dioxide-equivalent and existing facilities that increase their emissions by 75,000 tons per year of carbon dioxide-equivalent will trigger NSR.

EPA Must Eventually Lower GHG Thresholds

In the July 3rd action, EPA said that the States and EPA did not have the capacity to process additional NSR permit that would be required if it lowered the threshold. Therefore, it kept the trigger thresholds at 100,000 and 75,000 tons per year. EPA pointed to the economy's impacted on federal and state budgets as one reason that permitting authorities lacked additional capacity to process a greater number of permits.

EPA has announced that it will study the burdens associated with lowering GHG thresholds by April 30, 2015. EPA has said, following completion of the study, that it will review the permitting thresholds and determine if they should be lowered by April 30, 2016.

The EPA must eventually lower the thresholds. The 100/250 ton per year trigger threshold for NSR is in the Clean Air Act. EPA amend the trigger threshold through rulemaking (i.e. the Tailoring Rule). To support the Tailoring Rule, EPA relied on legal precedent that EPA says provides it authority to adjust the statutory thresholds through rulemaking temporarily.

How Long Before EPA is Pressured to Lower the Thresholds?

In their comments to EPA's proposed rule, environmental groups urged EPA to lower the permitting thresholds. In an article appearing in BNA, David Doniger, policy director for the Natural Resource Defense Council's (NRDC) Climate Center, indicated the organization would support EPA position...for now.

“Certainly, this holding things level knocks the legs out from under the feverish claims that EPA was on the march to get to hotdog stands,” Doniger said. “This signals that there's great reluctance on EPA's part to get beyond the largest sources.”

While the NRDC and other groups are willing to hold off for now, its clear that their expectation is EPA will lower the thresholds in 2016. It will be very difficult for EPA to maintain that there is no ability to process additional permits by that date.

EPA Applies Plantwide Applicability Limits (PALs) to GHGs

A PAL is a site-specific plantwide emission level for a pollutant that allows the source to make changes at the facility without triggering the requirements of the PSD program, provided emissions do not exceed the PAL level. Instead of a facility having to analyze each emission unit as a potential modification that may exceed NSR thresholds, the PAL says as long as overall plant emissions form all sources do not exceed the PAL, the facility will not trigger NSR.

In the July 3rd rulemaking, EPA is revising the PAL regulations to allow for GHG PALs to be established on a CO2e basis. This should provide more flexibility and reduce the number of permits that would otherwise be triggered through plant modifications.

Court Validates EPA's Approach to Regulating Greenhouse Gases....What is next?

Joe Koncelik — Tue, 03 Jul 2012 14:23:52 -0500

In perhaps the biggest environmental decision in decades, the D.C. Circuit Court of Appeals upheld all aspects of EPA's complex regulation of greenhouse gases under the Clean Air Act. Each piece of EPA regulation was controversial, yet the Court validated the overall approach paving the way for future action by EPA.

Flashback several years ago, when the Obama Administration stated its preference was to enact cap-and-trade legislation to address climate change. The Administration it preferred Congressional action rather than using the authority under the Clean Air Act which it saw as ill-suited for regulation of GHGs. In an attempt to encourage a reluctant Congress to act on the controversial legislation, EPA threatened that it would proceed with enacting regulations under its existing Clean Air Act authority.

Congressional efforts to pass cap-and-trade failed, while EPA continued to march forward with regulations. Like a series of dominoes, once the initial regulations were promulgated successive regulation followed capturing more sources. Here is a brief re-cap of EPA's actions:

Endangerment Finding- before regulating greenhouse gases (GHGs) from motor vehicles, the Supreme Court told EPA in Massachusetts v. EPA that the Agency must first determine whether GHG emissions "endanger public health;"
Tailpipe Rule- After making the determination GHG motor vehicle emissions did endanger public health, EPA enacted standards for emissions from motor vehicles under the Tailpipe rule;
"Regulated Pollutant"- Under the CAA's structure, once a pollutant becomes "regulated" from any source, stationary sources must comply with New Source Review (NSR) requirements. The CAA establishes a permitting threshold of 100/250 tons per year for any "regulated pollutant." EPA issued the "timing rule" to clarify that GHGs from factories and other so called "stationary sources" would be covered by NSR once the Tailpipe standards were effective.
Tailoring Rule- EPA determined that automatic application of the 100/250 ton threshold for stationary sources would overwhelm regulatory agencies, The Agency estimated federal permit applications would jump from 280 per year to 81,000 per year. To soften the blow of inclusion of GHG emissions in NSR permitting, EPA enacted the Tailoring Rule. Through the rule, EPA temporarily raised the permitting trigger thresholds from the CAA 100/250 tons up to 75,000 tons per year.

Industry and some States filed challenges to each of the rules discussed above. The Court consolidated those challenges and on June 26th, the D.C. Circuit issued its opinion in Coalition for Responsible Regulation, Inc. v. EPA, No. 09-1322 (D.C. Cir. June 26, 2012). The Court rejected all of the Coalition's challenges to each of the EPA rules.

While an appeal to the Supreme Court is likely, the D.C. Circuit often cited to the Supreme Court's decision in Massachusetts v. EPA to support upholding the EPA rules. Therefore, it is quite possible the Supreme Court will reject a petition to hear an appeal.

Notable Findings of the D.C. Circuit

The importance of Court's decision cannot be overstated. The most fundamental finding was the Court upheld every aspect of EPA's overall regulatory strategy for GHGs. Here are some other key findings of the Court:

Science v. Policy- The Court said that EPA's was directed by the CAA to make its Endangerment finding based purely on science, not policy. Petitioners wanted EPA to consider other factors, such as: implications on the economy; whether GHG regulation would be effective in mitigating climate change; and whether society would simply adapt to climate change. The Court held EPA was limited to making a determination as to whether GHGs from motor vehicles endanger public health and welfare based purely upon science. The Court noted that EPA relied upon reviews of some 18,000 peer reviewed scientific studies in concluding GHG emissions do endanger public health.
Precautionary Principle- The Petitioners challenged EPA's Endangerment Finding because it did not specifically determine the level of atmospheric concentration of GHGs that endanger public health (i.e. the safe levels of GHGs). The Court found the CAA is "precautionary and preventive" in nature. In other words, EPA need not establish with certainty that climate change is occurring and will cause specific harms. EPA only needed to find that the scientific evidence show its reasonable to anticipate dangers to public health if GHGs are not controlled.
Those Who Benefit from Reduced Regulation Don't Have Standing to Challenge the Reduction- Of all the EPA climate change rule-making, the Tailoring Rule seemed to be the most susceptible to legal challenge. EPA, in essence, re-wrote a statue through rule-making. This is typically not a power granted the executive over the legislative branch of government. Perhaps to avoid confronting the issue, the Court held the petitioners had no standing to challenge the relaxation of the 100/250 ton per year permitting threshold in the Tailoring Rule because petitioners only benefit from the rule. The Court questioned why Petitioners would want the rule struck down triggering thousands of federal permits.
Court Says Congressional Action Unlikely- In commentary, the Court said it hat "serious doubts" that Congress will ever enact legislation addressing Climate Change.

What's Next?

If the decision stands, it paves the way for EPA to proceed with stricter regulation using its existing CAA authority. EPA could proceed without any Congressional action.

Even though EPA's Tailoring Rule was upheld, the Agency will be forced to slowly ratchet down over time the permitting threshold. Unless Congress acts, EPA will be forced to require permits from more and more sources, including smaller commercial buildings.

EPA is also likely to follow with additional GHG regulations. EPA will likely adopt new GHG emission threshold standards for major source categories. It is even possible that EPA will implement National Ambient Air Quality Standards (NAAQS) for regulation of GHGs. Use of the NAAQS could force each of the states to adopt there own GHG regulations on sources.

While EPA marches forward with complex GHG regulations, as things stand, it appears the Court is right in its prediction that Congress will not take action. Any sort of cap and trade bill appears dead. With the division between Republicans and Democrats over the issue, it appears Congressional reform of the CAA to better fit GHG regulation is highly unlikely.

U.S. EPA Proposes New P.M. 2.5 Federal Air Quality Standard

Joe Koncelik — Mon, 18 Jun 2012 14:54:32 -0500

Under increasing pressure from the Courts, EPA announced on June 14th its proposed revision to the federal air quality standard for fine particles (microns less than 2.5). The last standard was 15 ug/m3 which was established in 1997. EPA is now proposing to lower the standard somewhere between 12 and 13 ug/m3.

Back in 2009, the Court overturned EPA's proposal to keep the standard at 15 ug/m3. Since that time various groups have been trying to force EPA to promulgate a new standard.

In May, the District Court of Columbia had granted a motion for preliminary injunction sought by the American Lung Association, other environmental groups and the States. The case is American Lung Association et al. v. EPA, No. 1:12-cv-00243-RLW (D.D.C.). The order resulted in EPA accelerating release of its proposed standard.

Background on Federal Air Quality Standards (National Ambient Air Qulity Standards- NAAQS)

Counties that fail to meet the federal air quality standard are designated "non-attainment." Under the Clean Air Act, non-attainment areas face more difficult air permitting requirements for larger air sources which can deter economic development.

In addition, each state must develop a plan (called a "State Implementation Plan" - SIP) to meet the federal standards. The SIP must demonstrate that a mix of federal and state air pollution regulations will allow each of the counties in the state to meet the standard. The SIP process often results in state's implementing new pollution control requirements which increase compliance costs.

States that fail to meet the deadline for attaining the standards face sanctions from EPA.

Ohio's Progress in Meeting the PM 2.5 Standard

Due to its relatively high population and manufacturing base, Ohio has always faced challenges in meeting air quality standards. Ohio still has areas that have failed to properly demonstrate compliance with the 1997 fine partcle standard.

Below a is chart from a presenation by Ohio EPA from March which shows current monitoring of air quality in the major cities in Ohio:

It is worth noting that an improvement of 1 ug/m3 is quite significant.

The Chart shows Ohio's air quality is improving. However, even if EPA picks the high end of the range and sets the new standard at 13 ug/m3, the State will have a number of counties designated as non-attainment areas.

U.S. EPA says they will make designations of counties in December 2014 with non-attainment designations will become legally effective in early 2015. States will be given until 2020 to comply with the standard.

National Progress in Meeting the Standard Hinges on Proposed EPA Rules

U.S. EPA projects that only a couple of counties will be out of attainment by 2020.

However, this projection is based upon a major assumption- all currently proposed federal air pollution rules remain effective. Many of these rules are highly controversial and face legal as well as political challenges. The federal rules EPA considered in place for purpose of the modeling include: the Cross State Air Pollution Rule (power plans), the Mercury and AIr Toxics Standard (power plants) and various emissions standards for vehicles, aircraft, locomotives and ships.

Governor Signs Three Major Pieces of Environmental Legislation

Joe Koncelik — Tue, 12 Jun 2012 16:12:25 -0500

Typically, environmental legislation may be passed in Ohio once every few years. In fact, most environmental regulatory reform is done in small doses during the budget bill process. In the last two weeks, Governor Kasich has signed into law three separate bills that including major environmental regulatory provisions.

S.B. 315- Establishes new regulations for oil & gas drilling, including provisions regarding fracking;
S.B. 294- Contained a series of legislative overhauls to laws administered by Ohio EPA including: wetlands, solid waste, and underground storage tanks
H.B. 473- Implemented Ohio's Water Withdrawal Regulatory Program under the Great Lakes Compact

Below are some of the major highlights from each piece of legislation.

H.B. 473- Ohio's Implementation of the Great Lakes Compact

The Great Lakes Compact required each State to pass implementation legislation to set up regulations governing withdrawls and diversions from the Great Lakes. Under the Compact, the Great Lake States were given wide discretion for deciding when a permit would be needed and the criteria for issuance of a water withdrawal permit. Now that H.B. 473 has passed, for the first time Ohio, businesses may need to get a permit before withdrawing water from Lake Erie or its tributaries.

Last summer, Governor Kasich vetoed Ohio's first attempt at passage of the Compact implementation legislation- H.B. 231. The bill was sharply criticized as being too business friendly.

This time Governor Kasich signed the legislation after certain aspects of the water withdrawal permitting program were made more stringent. (See Prior Post) Here are the most notable changes from H.B. 231:

Withdrawal Triggers- The thresholds for triggering a permit were significantly lowered. Any withdrawal of the following size will trigger a permit:
- 2.5 million gallons per day (MGD) from Lake Erie or a recognized navigation channel;
- 1 MGD from a river or ground water
- 100,000 gallons from designated high quality streams
Adverse Impact- If you trigger a permit, ODNR can't grant a permit if it determines the withdrawal will have an "adverse impact" on Lake Erie. H.B. 231 defined adverse impact in the negative- any withdrawal from the Lake less than 90 mgd was presumed to cause no impacts. This proved highly controversial and was jettisoned in H.B. 473. Rather than try and define adverse impacts in the legislation, H.B. 473 simply defers to ODNR to define the term through rulemaking.

In one significant way H.B. 231 and H.B. 473 are very similar. Only impacts to Lake Erie are to be considered in determining whether a withdraw would have an adverse impact. Impacts to the receiving stream itself are not evaluated, except possibly with high quality streams. In the end, Ohio's program is still, in essence, a Lake Erie and not a stream protection program.

S.B. 294- Ohio EPA Omnibus Regulatory Reform Bill

S.B. 294 was dubbed the Ohio EPA regulatory reform bill by the Administration. While it does contain some significant changes to certain Ohio EPA programs, the regulatory reform could hardly be described as controversial.

Most of the changes tweak certain administrative aspects of Ohio EPA's programs. While it is true the legislation does not contain any major substantive regulatory reforms, there are some much needed reforms in the bill, including the following:

OCAPP Confidentiality- The Office of Compliance Assistance and Pollution Prevention is housed within Ohio EPA. The Office serves as a free compliance assistance resource to businesses. One historical impediment to use of OCAPP has been related to confidentiality. Previously, Ohio law only protected as confidential inquiries related to air pollution compliance. S.B. 294 changes this and provides confidentiality protection to all inquiries made to OCAPP regardless of subject matter (hazardous waste, solid waste, wetland permitting, surface water, and drinking water).
Underground Storage Tanks- S.B. 294 addresses a longstanding issue with regulatory overlap pertaining to clean up of underground storage tanks. Prior to the legislative changes, a developer or business wishing to clean up their property under Ohio EPA's Voluntary Action Program (VAP) had to first deal with any underground storage tanks regulated by BUSTR. Those portions of the property with BUSTR tanks had to be cleaned up first under BUSTR's clean up program before proceeding with the VAP. This double regulation made no practical sense since VAP standards were designed to address this type of contamination. S.B. 294 allows volunteers to address BUSTR USTs through the VAP thereby removing a significant hurdle that had delayed and increased costs at many brownfield and site clean ups.
Wetland Mitigation- S.B. 294 provides Ohio EPA the authority to establish an "in-lieu fee" program for wetland mitigation. Instead of a developer needing to create wetlands on-site or buying credits at a wetland bank to offset its wetland impacts, the developer could write a check to pay for the necessary wetland mitigation. If the program is established it could significantly streamline the wetland permitting process.

S.B. 315- New Regulation for Oil & Gas Drilling including "Fracking"

While S.B. 315 was dubbed as an all encompassing energy bill, it is largely tilted toward one form of energy- natural gas. The most significant provisions in the bill place new regulation on the oil & gas industry, in particular "fracking."

For over a year, renewable energy companies and advocates feared Governor Kasich would do away with Ohio's fledgling renewable energy standards (RPS). For many, the good news regarding S.B. 315 is what the bill didn't do- overhaul Ohio's RPS. The bill did allow waste energy recovery systems to qualify for credits towards meeting Ohio's RPS, but the main structure of Ohio's RPS was left in tact.

With regard to oil & gas drilling, S.B. 315 did put in place major new regulations, including:

New Oil & Gas Permit Requirements- The legislation requires more information to be submitted with permit applications. This includes: agreements with local governments regarding road maintenance, identification of the proposed source of surface or ground water, as well as requiring water well sampling in the neighboring area prior to drilling.
Disclosure of Chemical Used in Drilling- Upon well completion, the well owner must supply information regarding the amount of products, fluids, and substances used to facilitate drilling or stimulate the well. However, the bill includes a broad trade secret provision that exempts covered chemicals or materials from the disclosure requirements.
Insurance- Requires the oil and gas well owner to obtain liability insurance in an amount not less than $5 million dollars for bodily injury or property damage. The insurance policy must also include a "reasonable level" of coverage for environmental claims.