Sixth Circuit Issues Stay of the Clean Water Rule

Today, the Sixth Circuit issued a stay of the Clean Water Rule in response to a challenge filed by eighteen states, including Ohio.  The issuance of a stay represents a major set back to EPA in  effort to better define the limits of federal jurisdiction under the Clean Water Act (CWA).

The CWA limits jurisdiction to "navigable waters" which is defined as "waters of the United States, including the territorial seas." 33 U.S.C. Section 1361(7)  Interpretation of the vague term- "waters of the United States"- has been left largely to guidance and the Courts. The most significant decisions were issued by the Supreme Court in Rapanos and SWANCC. Justice Kennedy, plurality decision in Rapanos held that CWA jurisdiction extended to both navigable waters and any non-navigable water that had a "significant nexus" to a navigable waterway.

EPA issued the Clean Water Rule in attempt to better define how the significant nexus test should be applied as well as establish which waterways were exempt from coverage.  The rule was harshly criticized as an overreach by EPA. Soon after its release, the rule was challenged by a number of states and business groups.  

States sought a stay of the effectiveness of the rule while the Court considers their challenge.  The issuance of a stay prevents EPA from using the the Clean Water Rule to define federal jurisdiction over wetlands or streams.  In order to be granted a stay, the states challenging the rule had to demonstrate they were likely to win on their challenge to the legality of the rule.  In addressing this issue the Court said the following:

Meanwhile, we conclude that petitioners have demonstrated a substantial possibility of success on the merits of their claims. Petitioners first claim that the Rule’s treatment of tributaries, “adjacent waters,” and waters having a “significant nexus” to navigable waters is at odds with the Supreme Court’s ruling in Rapanos, where the Court vacated the Sixth Circuit’s upholding of wetlands regulation by the Army Corps of Engineers. Even assuming, for present purposes, as the parties do, that Justice Kennedy’s opinion in Rapanos represents the best instruction on the permissible parameters of “waters of the United States” as used in the Clean Water Act,3 it is far from clear that the new Rule’s distance limitations are harmonious with the instruction.

Now that the stay has been issued, the Army Corps of Engineers (ACOE) will have to revert back to the prior methods for issuing Jurisdictional Determinations (JDs) which were largely based on internal guidance.  

In practical experience, the ACOE has been aggressive in asserting jurisdiction over wetland and streams even before the Clean Water Rule.  However, the rule would have provided them more legal support for their determinations when they are challenged.

With the Court's grant of a stay, it seems pretty likely the rule will be overturned and EPA will have to go back to the drawing board.

Uncertainty in Valuing Contaminated Property Complicates Brownfield Redevelopment

A key issue in brownfield redevelopment relates to proper valuation of property that is contaminated.   As discussed below, Ohio does recognize that contamination is a relevant factor that should be considered in determining a properties value.  However, other than recognizing it is a relevant factor, Ohio has failed to develop a consistent and reasonable approach to reducing the value of property due to the presence of contamination.

The failure to have a clear cut approach makes brownfield redevelopment more difficult.  Inflated property values lead to higher property tax bills.  This can act as a major disincentive to purchasing brownfield property and can complicate redevelopment.

Ohio has attempted to partially address the tax issues associated with brownfield redevelopment by providing a tax incentive to those who properly cleanup such properties.  Ohio provides a 10 year property tax abatement for properties that are cleaned up in accordance with Ohio EPA's Voluntary Action Program (VAP). See, Ohio Revised Code 5709.87  

In prior posts, I discussed the practical timing issues that can arise in attempting to take advantage of this tax exemption.  However, perhaps the biggest difficulty with this law is that it assumes current tax valuations (which are to be frozen for 10 years) properly account for the presence of contamination.  

I have represented clients who have challenged current valuations as well as discussed this issue with others attorneys.  Those that represent property owners agree that Ohio's current process for properly accounting for contamination is uncertain and doesn't take into account the practical realities of contaminated property. 

Ohio Rejects the "Cost to Cure" Approach

Perhaps the most straight forward methodology for valuing contaminated property is the "cost to cure" approach.  Using this approach, the property is valued assuming it is clean.  This valuation is then reduced by the cost or projected cost to cleanup the property.  

The "cost to cure" approach has been recognized by other states.  The benefit of this approach is that it minimizes subjectivity.  The property is first appraised in the local market as if it were clean. Then expert testimony is presented regarding the total cost to cleanup the property to regulatory standards.  This cost is deducted from the value.  

When cleanup costs exceed the value of the property, the value for tax purposes is set at zero.  This recognizes market reality.  Most property that costs more to cleanup than its worth will simply sit idle until either property values rise or brownfield incentives, such as grant funding, can be used to offset costs.

Multiple Ohio cases have held that introduction of evidence regarding the cost of cleanup and a request to reduce the value by that cost is inappropriate. See,  Chem-Masters Corp. v. Geauga Cty. Bd. of Revision (Dec. 21, 1990) BTA Case No. 88-J-994, unreported; Society National Bank v. Carroll County Board of Revision, BTA Case No. 94-M-454 (April 19, 1996); Hufford v. Montgomery County Board of Revision, BTA Case No. 95-M-855 (May 2, 1997); McDonald Local School District Board of Education v. Trumbull County Board of Revision, Case No. 94-A-757 (1996).

Ohio Accepts Evidence on Impact of Contamination

Many of the cases referenced above also discuss the need for introduction of an appraisal which considers the impact of the contamination on the value of the property. For example, in Company at 34 v. Lake Cty. Bd of Revision (Mar. 25, 1994), 92-T-763, the BTA held that evidence must be submitted on the “diminutive effect the contamination has upon the value of the property.” Testimony from a consultant or someone familiar with the property will more than likely not be sufficient.

There have been a couple cases in which an appraisal was submitted that argued for a reduction in the value by deducting cleanup costs. In Alder v. Licking Cty. Bd. of Revision (Apr. 22, 1994), BTA Case No. 92-R-976, the BTA did not find an appraiser’s testimony and report credible because the appraiser did not have “personal knowledge surrounding the contamination…and had never appraised a parcel of contaminated real estate.”

Most Recent Ohio BTA- Battle of Appraisers

In May of 2015, the Board of Tax Appeals (BTA) heard another case that involved a dispute over the proper methodology to value contaminated property. See, FIP Realty Co. LTD v Franklin County Board of Revision (Case Nos. 2014-1120, 2014-1121). The case involved a 68.5 acre industrial property in the Columbus area.    The County assessed the property at $5,981,600.  Both the property owner and School Board presented testimony from expert appraisers to support their positions regarding valuation of the property.

The property owner appraiser, using an income approach, opined the property "clean" would be worth $2,785,000 at market rates.  As an alternative, the appraiser uses a sales comparison approach to arrive at a valuation, assuming the property to be clean, of $2,750,000.  The appraiser then reduced both methods of arriving a clean values based upon the amount to cleanup up the property ($2,215,000) using a discounted cash flow analysis.  The owner's expert arrived at an "as is" value of $570,000 under the income approach and $895,000 under the sales comparison approach.  

The owner's expert asserted that his methodology did not amount to a dollar-for-dollar reduction based upon cleanup costs because those costs were discounted based on the time value of money. The appraiser's testimony was supported by additional testimony from the environmental consultant responsible for the cleanup.

The School Board appraiser also used both the income approach and sales comparable approach to value the property. Under the income approach, the appraiser used a higher capitalization rate to account for environmental contamination (i.e. discounted the value of the property).  Under the sales comparable approach, the School Board's appraiser selected the lower range of comparable sales to account for environmental contamination.

The BTA rejected the property owners approach as still amounting to a "cost to cure" method.  The BTA accepted the School Board's appraisers methodology finding he had properly accounted for contamination.

However, the issue with the methodology endorsed by the BTA is that it is still not based in reality. The School Board's appraiser only chose the lower range of comparable sales from "clean" properties. With regard to the income approach, he chose a higher capitalization rate to provide  discount to account for contamination.  However, that capitalization rate was not based on real world examples of contaminated property.

The most recent BTA decision endorses a very subjective approach to valuing contaminated property.  The method did not compare sales of other brownfield properties or provide a clear methodology for discounting values based upon the presence of contamination.  Without such a clear methodology, property owners will be forced to speculate regarding the discounted value of their properties.  

Pennsylvania Supreme Court Decision on Valuation of Contaminated Property

On September 29, 2015, the Pennsylvania Supreme Court ruled that the presence of contamination is a relevant factor in determining the value of property. See, Harley Davidson v. Springettsbury Township, et al. Case No. 82 MAP 2014.  The Court also endorsed the concept of of reducing contaminated property due to the stigma caused by the presence of contamination.  Due to the unique circumstances of the case in which a pre-existing settlement covered full cleanup costs, the Court refused to decide whether the "cost to cure" approach was appropriate in Pennsylvania. 

Harley-Davidson owns a 229-acre parcel of industrial property where it operates a motorcycle manufacturing plant.  The property was previously used by the U.S. Navy for weapon manufacturing.  Approximately half of the property is contaminated and half is clean form prior use.  Under as settlement agreement, Harley-Davidson has been cleaning up the property.  The parties have agreed to split future cleanup costs.

Similar to the Ohio case, the competing experts arrived at two different valuations of the property based upon the contamination issues.  The taxing authority expert said the property should be valued as essentially two pieces- the manufacturing half and the vacant half.  Harley-Davidson's expert argued the whole property should be valued as industrial.

The "cost to cure" approach was rejected due to the existing of the settlement agreement under which all future remediation costs were the responsibility of the settling parties.

The Court held:

  • Relevant Factors- “[a]ll relevant factors having a bearing on the value of a property, including environmental contamination, must be considered in a fair market value determination, [and that] the potential impact of a settlement agreement regarding environmental remediation and ongoing limitations and maintenance as a by-product thereof, through a buyer-seller agreement, are relevant factors that must be taken into account.”
  • Stigma- “environmental stigma, although an inherently imprecise concept, may be relevant to determining fair market value of real estate for tax purposes.” The court opined that a 5% stigma discount to the value was potentially appropriate even though the expert provided little support for the 5% figure other than it was based upon his professional experience. 

It would have been helpful to have seen the Court weigh in on the "cost to cure" approach. Overall, the decision is similar to the recent Ohio BTA opinion in that does not provide a clear methodology for valuing contaminated property.  

After Lengthy Delay EPA Sets Ozone Standard at 70 ppb

As predicted last year in a prior blog post, EPA announced today that it would revise the current ozone standard of 75 ppb downward to 70 ppb. EPA had been contemplating a revised standard between 70 ppb and as low as 60 ppb.  

Under the Clean Air Act, EPA is required to review the ozone standard every five years.  The current 75 ppb standard was established in 2008.  The EPA was required to review the 2008 ozone standard by March 12, 2013.

President Obama had sharply criticized the 75 ppb standard established by President Bush as not following science.  After six years, the Obama Administration finally revised the standard.  In April 2014, after multiple delays by EPA, the U.S. District Court of the Northern District of California ordered the EPA to issue a final ozone standard by October 1, 2015.   

As previously discussed in a prior post (EPA's Decision to Deny Ozone Petition Based on Reality), the delays in establishing the ozone standard have been very beneficial to the states and industry. There are significant federal regulations that mandate cuts in emissions that are being phased in over time.  These federal regulations are much more effective in reducing ozone levels than local controls that can be imposed by the states.  The delays have allowed more time for the federal regulations to take effect.

As noted in an article on POWER, the 70 ppb will likely be relief to many in the power sector who thought the standard could be lower.   As quoted in the Wall Street Journal, the American Lung Association was somewhat critical of the final standard:

“The level chosen, of 70 parts per billion, simply does not reflect what the science shows is necessary to truly protect public health,” said Harold Wimmer, president and CEO of the American Lung Association, one of the public-health groups that sued the EPA to issue the standard by Oct. 1. “Nonetheless, the standard announced today offers significantly greater protection than the previous, outdated standard.”

Ozone Standard in Ohio

Back in March of this year, Ohio EPA provided comments on U.S. EPA proposed ozone standard and asserted there was no scientific basis to lower the standard below 75 ppb.  

"Ohio EPA is unaware of any new study or scientific evidence that compels a change to the existing standard.  When setting the 2008 standard, U.S. EPA had before it a largely similar set of studies as are before U.S. EPA now.  In 2008, U.S. EPA considered all available information, examining the potential for setting the standard as low as .060 ppm, but nevertheless chose .075 ppm.  Just as in 2008, Ohio EPA does not see a clear-cut basis for arriving at the conclusion of setting a significantly lower standard."

Based on air quality data from 2012 through 2014, two of the three areas in Ohio designated as nonattaintment are now achieving the 75 ppb standard.  The last area that remains in nonattainment is entitled to a one year extension.

As Ohio has nearly achieved compliance with the 2008 standard, it will now need to submit new plans to reduce ozone levels further. 

Aggregation of Oil & Gas Equipment for Federal Air Permitting

As part of President Obama's Clean Power Plan, the EPA recently released rule proposal directed at the oil & gas industry.  On August 27, 2015, U.S. EPA published its proposed rule for "single source permitting" for the oil & gas industry.  The comment period will close October 26, 2015.  

The proposed rule will have a major implications for the oil & gas industry.  The rule will make it much more likely for oil & gas operations to trigger federal air permitting requirements.  The purpose of the rule is to establish standards for when air emissions from oil & gas equipment, which may not be at the same location, should be aggregated.  By aggregating emissions from the equipment total emissions will be more likely to exceed federal permitting thresholds (i.e. New Source Review or NSR). 

The proposed rule has two options for determining adjacency for purposes of evaluating when oil & gas equipment should be aggregated (i.e. considered part of the same stationary source). The proposed rule targets oil & natural gas production (which includes natural gas compressor stations) and natural gas processing facilities.

Option 1- Adjacency will be determined based solely on physical proximity of the facility. The proposed rule states that emitting activities at the same surface site would be aggregated. The rule specifically states “surface site” includes “any combination of one or more graded pad sites, gravel pad sites, foundations, platforms, or immediate physical location upon which equipment is physically affixed.” Furthermore, any emitting equipment separated by less than ¼ mile will be aggregated.

Option 2- Adjacency will be based on whether the activities are “functionally interrelated.” While the rule is not specific on how this will be determined, it is likely that groups of equipment will be aggregated if they are dependent on one another.

Litigation Regarding Aggregation

In 2012, EPA lost a case on aggregation in the Sixth Circuit in the energy sector when it attempted to apply the functionally interrelated test. The Sixth Circuit Court of Appeals struck down EPA’s consideration of “functional interrelatedness” to determine adjacency. See, Summit Petroleum Corp. v. EPA, 690 F.3d 733 (6th Cir. 2012).

The Sixth Circuit reversed an EPA determination that a natural gas plant and associated wells were one “source” for purposes of Clean Air Act permitting.   Specifically, the court held that “EPA’s determination that the physical requirement of adjacency can be established through mere functional relatedness is unreasonable and contrary to the plain meaning of the term ‘adjacent.” Id. at 735.  EPA has issued an internal memorandum that it intends to continue to apply the functional relatedness test everywhere except the Sixth Circuit.

More recently, in the case of Citizens for Pennsylvania's Future v. Ultra Resources, Inc., (No. 4:11-CV-1360 Feb. 23, 2015), an environmental group challenged the State's (Pennsylvania DEP) issuance of eight separate air permits to oil & gas compressor stations. The compressor stations operate to compress gas from wells at nearby locations.  The compressor stations were not interconnected, but designed to work together (i.e. boosting pressure at a specific well and pushing gas to a common meter).  Perhaps most importantly to the Court, the compressor stations were about 1 mile apart within a five square mile area.

The District Court did not believe the compressor units emissions should be aggregated because the units were physically too far apart.  However, in dicta the Court disagreed with the Sixth Circuit by stating that functional interrelatedness could lead to or be a factor in deciding adjacency.  It also held that emission sources could be aggregated, even if physically distant from one another, if each source is part of a "physically connected process."


EPA's clear intent to look more closely at emissions from oil & gas operations.  Regardless of which option EPA selects following the public comment period, it will be more likely that such operations will trigger NSR permitting requirements.  

Ohio Supreme Court Upholds Sewer District's Stormwater Program

After five years of litigation, the Ohio Supreme Court issued its decision today in Northeast Ohio Regional Sewer District (NEORSD) v. Bath et. al., upholding the District's authority to implement a storm water management program.  The Supreme Court's decision overturns an prior ruling by the Appellate Court which had held NEORSD did not have legal authority to regulate storm water.

The legal issue was rather simplistic- Does the NEORSD grant of authority to control waste water include storm water?

The District authority stems from statute.  R.C. 6119.01 states the authority of the District has either to a) supply water; or b) "provide for the collection, treatment, and disposal of waste water."  R.C. 6119.011(K) defines "waste water" as "any storm water and any water containing sewage or industrial waste or other pollutants or contaminants derived from the prior use of the water."  

The Appellate Court concluded that storm water is only waste water when it is co-mingled with other pollutants or sewage.  If storm water is not co-mingled in this way (i.e. typical storm water runoff), then the Appellate Court held the District has no authority to regulate the runoff.

The Supreme Court held there are two categories of water the District can regulate.  The Court held the category of "waste water" includes:

  1. "storm water;" and
  2. "any water containing sewage or industrial waste or other pollutants or contaminants..."  

After concluding that the Sewer District has authority to implement a regional storm water management system, the Court then reviewed whether the District has authority to assess fees for projects that have yet to be built.  A majority of the Court concluded that the District does have authority to assess fees now to finance future storm water management projects.  

Restarting the Storm Water Fee

As noted in the Cleveland Plain Dealer article discussing the decision, the Common Pleas Court has held $20 million in fees collected prior to the Appellate Court ruling in escrow.  After the Appellate Court ruling, the fees- approximately $35 per household per quarter- were put on hold.  The District now says it will begin to collect fees again as well as ask for release of the funds in escrow.  The District also stated it would not attempt to retroactively collect fees that would have been assessed while the Appellate Court decision was on appeal.

Practical Implications for Industry

The amount of fees paid depends on that amount of impervious surface at the property.  Businesses with large parking lots or buildings could face thousands in storm water fees. The fees will act as a strong financial incentive for businesses to manage storm water at their properties in a different manner, including reducing impervious surface or discharges to storm sewers. 

The District will also be implementing projects in the region, including providing 25% of the fees collected to local governments to implement their own projects.  

Overall, the Supreme Court Decision will clearly have major implications for businesses that operate within the NEORSD service territory.

WKSU Radio Interview Regarding Clean Power Plan

I was fortunate enough to be asked to participate in a radio interview with Jeff St. Clair, WKSU Radio, regarding the Clean Power Plan.  It was an interesting discussion of the legal questions surrounding the plan as well as a broader discussion of the state of environmental regulation in the United States.

Here is an excerpt from the story:

Energy policy through the courts, instead of Congress
“The courts are not the ideal place to be sorting out your environmental policy or your energy policies,” says Koncelik.

Koncelik has the admittedly utopian view that Congress should decide these environmental issues. But he acknowledges that in today’s dysfunctional political system a reasonable compromise from happening.

“So,” he says, “the EPA is forced to act and when they act they do things that are questionable and vague because you’re dealing with laws that are outdated and technology that is radically different than the 80’s.”

“That’s what we’re left with as a country,” says Koncelik, “and until we have real compromise and real discussion, what we’re going to end-up with is regulatory uncertainty which is not good for the economy.”

Congress Fails to Pass Significant Environmental Legislation in Twenty Five Years

One of the points we discussed in the interview is that Congress has not passed new environmental legislation nor significantly amended an existing statute since the 1990 amendments to the Clean Air Act.   Despite Congressional failure to act, EPA has moved forward with thousands of pages of new regulations.  

EPA's new regulations are based upon authority granted to it by Congress.  However, those regulations often rely on vague terminology or ambiguity in underlying environmental statutes. What results is constant litigation regarding the extent of EPA's authority or legality of the new regulations.

For example, I am certain that in 1990, Congress never envisioned that the Clean Air Act would be used as the basis to address climate change.  The Clean Air Act principally deals with local or regional air pollution issues, not a complex international issue like climate change.  Remember, even EPA said that the Clean Air Act was "ill suited" to address the issue of climate change prior to embarking on its massive new regulations.

Most recently, the Obama Administration decided to move forward with its Clean Power Plan to address climate change relying upon questionable EPA legal authority under the Clean Air Act. As a result, the are multiple legal challenges pending to this very significant new rule.

Due to the inability of Congress to enact significant changes to existing environmental laws or pass new ones, EPA fills the void.  EPA constantly develops new regulations which are almost always challenged in the Courts.  This results in uncertainty for businesses and, at best, inconsistent environmental policy in the U.S. 

Federal District Court Blocks EPA's Water's of the U.S. Rule

Last week, the U.S. District Court for North Dakota imposed a preliminary injunction against EPA's implementation of its "Waters of the U.S. Rule" which defines the waterways and wetlands regulated under the Clean Water Act.  See, North Dakota v. EPA.  The Court issued its decision despite the EPA and Army Corps’ argument that exclusive jurisdiction to hear the challenge to the rule lies with the Sixth Circuit Court of Appeals, where several similar cases are currently pending review.

In order for the Court to issue a preliminary injunction it must determine that the State of North Dakota (and other challengers) have a "likelihood to succeed on the merits" once the Court makes its final determination of the legality of the rule.  In holding that the State of North Dakota would likely succeed, the Court found that EPA went beyond the test articulated by Justice Kennedy in the Supreme Court's decision in Rapanos when developing the rule:

The Rule allows EPA regulation of waters that do not bear any effect on the “chemical, physical, and biological integrity” of any navigable-in-fact water. While the Technical Support Document states that pollutants dumped into a tributary will flow downstream to a navigable water, the breadth of the definition of a tributary set forth in the Rule allows for regulation of any area that has a trace amount of water so long as “the physical indicators of a bed and banks and an ordinary high water mark” exist.

The 13 states covered under the Court’s injunction are: Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming. Practically speaking, this means that two different standards for determining federal jurisdiction over waters exist. at least under the Sixth Circuit rules.

Two other District Court's ruled that district courts do not have jurisdiction to hear challenges to EPA’s rule defining waters of the United States because courts of appeal have original jurisdiction over “any effluent limitation or other limitation" citing § 509(b)(1) of the CWA, 33 U.S.C. § 1369(b)(1). See, Murray Energy v. EPA and Georgia v. McCarthy, et al.,

The Basics of Wetland and Stream Permitting

Under the Clean Water Act (CWA), you cannot impact a federally protected stream or wetland unless you obtain a 404 permit from the Army Corps of Engineers (ACOE).See 33 U.S.C. §§ 1344(a), 1362(7). If you trigger the need for a 404 permit, you will also need a 401 Water Quality Certification.  Ohio Administrative Code Chapter 3745-32.

After the release of the new jurisdictional rule this summer, most streams and wetlands will likely fall under federal protection (See, prior post discussing the new "Waters of the U.S. Rule").  Assuming you are dealing with federally protected wetlands or streams, what does the typical permitting process look like?

Step 1:  Wetland Stream Assessment-  If you are evaluating a piece of property (or multiple properties) for development you may want to consider a basic wetland/stream assessment.  This is not a formal determination of the exact locations of wetland on the property.  An assessment provides general information regarding the ecological issues on the property, including:

  • General estimate of the quality, size and location of wetlands on the property;
  • Quality and length of streams on the property; and
  • Presence of any endangered species habitat on the property

Gathering this information can be extremely helpful in determining the viability of development on a piece of property.  It can also assist with determining permitting timeframes.  

When evaluating between a number of different properties, assessments can also provide critically important information when deciding which property would likely be the least costly to obtain required permits and involve the shortest permitting timeframes.

Step 2:  Wetland Delineation-  This is a formal determination by a qualified wetland consultant as to the exact location, size and quality of wetlands and streams on a property.  A formal delineation is more costly than a basic assessment, but it is a required step for the permitting process.  A property owner or developer must hire a qualified wetland/stream consultant to perform the delineation.

It typically takes around two weeks to complete a wetland delineation.

Step 3:  Jurisdictional Affirmation-  The Army Corps reviews the wetland delineation report and performs a site visit typically thirty (30) days after receipt of the report.  After the site visit is complete, the Army Corps will issue a formal Jurisdictional Determination or JD.  The JD is an approval of the wetland delineation.

Step 4:  Determination of the Type of Permit Needed

After the Army Corps issues its JD, the next step is to determine the type of permit that the project will require.  The type of permit is dependent on the nature of the wetlands and the size of impacts.  Many developers try and configure their project to fall under a Nationwide Permit as described below because it is the least costly and has the quickest permitting timeframes.

Army Corps Nationwide Permit-  Industrial and commercial developments can typically impact up to .5 acre of jurisdictional wetland or 300 linear feet of stream under a Nationwide Permit (NWP).  A NWP is a streamlined permitting process and does not require the level of justification an individual permit requires. 

  • Timeframe:  3-6 months

Ohio EPA Isolated Permit-  Ohio is in the minority of states that created their own wetland permitting program for any wetlands that do not fall under federal jurisdiction (i.e. Isolated Wetlands).  After release of the "Waters of the U.S. Rule"  it is even less likely that wetlands will be classified as isolated.  If you have isolated wetlands, the application is filed only with Ohio EPA.  (Note: You can have both federal jurisdiction and isolated wetlands on the same property).  

  • Timeframe: 3 - 8 months

Individual Army Corps 404 Permit and Ohio EPA 401 Water Quality Certification-  If your project impacts more than the Nationwide Permit thresholds, it will need an individual permit.  This is the most costly, complex and uncertain permitting process.  

  • Timeframes:  12-18 months 
  • Alternatives Analysis:  Individual permits require a demonstration in the application that other locations were evaluated and the selected site is the best alternative for the project.  Alternative site configurations must also be shown to minimize on-site impacts.  The alternatives analysis can be highly subjective and the process can be very lengthy. 

Step 5:  Mitigation-  In addition to the consultant fees discussed above, a property owner/developer must also mitigate for all stream and wetland impacts (Ohio EPA Wetland and Stream Mitigation Webpage).  The regulations contain ratios of required mitigation which is tied to the quality of wetland or stream impacted (Ex: 2 to 1 or 3 to 1).  

Regulations no have a preference toward approved wetland mitigation banks where credits can be purchased to offset impacts to streams or wetlands.  To utilize a mitigation bank, credits must be available in the mitigation bank within the watershed where the project is taking place.  Wetland mitigation bank credits can cost anywhere from $30,000 to $60,000 per acre.  Stream mitigation credits can cost between $300-$500 per linear foot. 

If credits are not available, then a conceptual mitigation plan will likely need to be submitted to the Army Corps and Ohio EPA.  This could require identifying a piece of property off-site which currently is not protected.  If mitigation bank credits are not available, the cost and complexity of mitigation becomes much more significant.

Key Eligibility Issue Needs to be Decided for New Underground Storage Tank Fund

I previously posted about the new $20 million dollar cleanup fund created to address old gas stations.  The fund with be operated by the Ohio Development Services Agency (ODSA).  

The fund will provide up to $100,00 for sampling and $500,000 for cleanup of abandoned gas stations or underground storage tanks that are classified as Class C (i.e. the Bureau of Underground Storage Tanks has certified that the party responsible for cleanup is not viable).  

ODSA is currently developing program guidelines and is planning on having the program up and running some time this fall.  One major legal issue that needs to be resolved is who exactly is eligible to receive funding.  

The legislation states that the “property owner” for purposes of applying for the grant money must be “a political subdivision and an organization that owns publicly owned lands.”  The Legislative Service Commission (LSC) analysis for H.B. 64 states that a political subdivision must own the land but “publicly owned lands include land that is owned by an organization that has entered into a relevant agreement with such a political subdivision.”

What does “entered into a relevant agreement with such a political subdivision” mean? Does this mean that a private property owner (as long as they didn’t create the contamination) could enter a redevelopment agreement with a City similar to how Clean Ohio operated(i.e. the City applies for the funds, but a private entity can own the land as long as it has a redevelopment agreement with a public entity). Or, does this mean the organization must hold the property on behalf of the City for public purposes?

If ODSA ultimately decides only political subdivisions or entities that hold public land can receive funding, there may be a pretty limited pool of applicants for funding.  Such an interpretation would ultimately require a City or County to take ownership of the land in order to clean it up.   

First, many cities may not have the wherewithal to purchase or take ownership of such property even through foreclosure.  Second, many may be concerned with liability concerns since neighbors could still sue for releases of contamination.  These are the types of liability issues and costs that government typically relies upon the private sector to address.

How this issue gets decided in the coming months will be a major factor in how quickly funds are utilized and how effective the program will be in addressing these sites.

Clean Power Plan- An Ambitious Plan with Serious Legal Issues

On August 3rd, the Obama Administration and U.S. EPA released the much-anticipated final Clean Power Plan designed to curtail greenhouse gas emissions to combat climate change.  The regulations promise to be the most comprehensive, complex and costly regulatory program ever launched without specific authorization from Congress.   

How the Plan Works

The final plan calls for a 32% reduction in the amount of 2005-level carbon emissions that existing power plants must eliminate by 2030.  How does EPA achieve the reductions?

Performance Rates

EPA establishes both interim and final CO2 emission performance rates for two subcategories of fossil fuel-fire electric generating units (EGUs):

  • Fossil fuel-fired electric steam generating units (coal and oil-fired power plants); and
  • Natural gas-fired combined cycle generating units

Interim performance rates must be met between 2022 and 2029.  The final emission rate by 2030.

The EPA reviewed prior determinations made under Section 111(d) regarding "best system of emissions reduction" (BSER) that has been demonstrated for a particular pollutant and a particular group of sources by looking at technologies already being used.  

Statewide Goals

The rates were established geographically by applying three different strategies to existing fossil fuel power plants. Those building blocks include the following:

  1. Operate Existing Coal Fired Power Plants More Efficiently- reducing carbon intensity of electricity generation by improving the heat rate of existing coal-fired power plants.
  2. Switch from Coal to Natural Gas-  substituting increased electricity generation from lower-emitting existing natural gas plants for reduced generation from higher-emitting coal fired power plants.
  3. Switch from Coal to Renewable Energy- substituting increased electricity generation from new zero-emitting renewable sources (like wind and solar) for reduced generation from existing coal-fired power plants.

By applying the building blocks to the existing plants, EPA determined the average coal plant can reduce emissions in from 2,160 pounds of CO2 per MWh down to 1,305 pounds/MWh by 2030.  Natural gas combined-cycle plants can go from 894 lbs/MWh to 771 lbs/MWh by 2030.  

The emissions rates are then used to establish state wide goals based upon the mix of existing coal and natural gas power plants in the state.  

States can also elect to use a rate-based goal or a mass-based target.  With mass-based targets, the states will have a total amount of CO2 emissions in 2012 and a final goal for 2030.  In otherwords, total metric tons of CO2 emission will be calculated for the 2030 versus individual plant average emission rates.

What are some the pro's and con's of rate-based versus mass-based?  EPA believes mass-based will be slightly cheaper to comply with and will allow for emission trading.  Whereas, rate-based allow overall emissions to increase with economic growth (i.e. all power plants must average a certain carbon intensity).

State Complaince Plans

State can elect from a variety of strategies to meet these goals.  Examples of strategies include:

  • Develop renewable energy sources
  • Switch to natural gas from coal-fired power plants
  • Build nuclear or increase production from nuclear
  • Energy efficiency programs
  • Emission trading (i.e. cap-and-trade programs)

Important Changes from Draft to Final Rules

Emission reductions are phased in between 2022 and 2030.  This was in response to criticism by states that the original plan demanded reductions too quickly.

As discussed below, EPA dropped energy efficiency out of concern it weakened the legal authority for the plan. 

The final plan shows more favor toward renewable energy sources to the detriment of natural gas. The final rule calls for 28% (instead of 22%) of all power generate to come from renewable energy sources.

The final rules gave an extension to states to submit compliance plans, from 2016 to 2018.  Also, compliance periods were pushed out from 2020 to 2022.

Legal Basis for the Rules

Fifteen states, including Ohio, have pledged to challenge the legal authority for the Clean Power Plan in Court.  Nine other states have pledged to defend it.  

EPA asserts that it has broad authority under Section 111(d) of the Clean Air Act - New Source Performance Standards (NSPS)- to craft the rules.  At issue is the definition of the term "standard of performance" as used in Section 111.  Does that term apply to the plant itself or can EPA use it to set standards for each state in terms of emissions from its power sector?

Opponents argue the EPA authority under Section 111(d) is limited to requiring certain technologies be installed at the plant itself.  Opponents argue that fuel switching, renewables and a trading program are all well beyond its authority.  If the opponents are successful in their challenge, the fundamental building block of the Clean Power Plan will be eliminated.

The final rule removed one of the strategies proposed for meeting reduction goals- energy efficiency. Many commentators speculate that EPA removed this component from the plan because it was the least legally defensible under Section 111(d) authority.

Another challenge to EPA's authority will be that Section 111(d) only applies to new sources.  The Clean Air Act Section 112 provides EPA the authority to regulate existing power plants.  Section 112 covers regulation of hazardous air pollutants (HAPs) from existing power plants.

EPA argues there is ambiguity between Section 111(d) and Section 112.  Therefore, where the Clean Air Act contains ambiguity, the Agency argues it entitled to deference so long as it articulates a "reasonable interpretation" of the provision.  See, Chevron USA Inc. v. Natural Resource Defense Counsel.

Chevron was the at issue in the recent MATS decision discussed in my prior post.  In that instance, the Supreme Court held that EPA went way beyond a "reasonable interpretation" of its authority.  However, in other instances, such as the Cross-State Air Pollution Rule, the Court found the EPA did articulate a "reasonable interpretation."  Therefore, it is hard to review the prior Supreme Court cases and discern definitive guidance as to whether the Court would uphold the Clean Power Plan.

The Supreme Court has shown a willingness to support EPA's effort address climate change.  First, the Court upheld EPA determination that greenhouse gases were pollutants regulated under the Clean Air Act in Massachusetts v. EPA. Second, it upheld the major components of EPA initial greenhouse gas regulations in its Tailoring Rule- UARG v. EPA.  While the Court upheld major components of EPA's authority to address climate change, the Clean Power Plan is the most ambitious effort to date.

Making matters more difficult to predict how the Supreme Court may rule is the lack of case law interpreting EPA's authority under Section 111(d).