Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

I have been on all sides of the fence relative to environmental enforcement actions.  I have represented the State, managed Ohio EPA enforcement program and now I represent companies who find themselves the subject of enforcement.  These experiences have given me valuable insight into what things to do and not to do when dealing with compliance oversight.

When speaking on the topic of enforcement, I am asked to provide practical advice on how to reduce the chances that your business will be a target of EPA enforcement.  In this post I provide five tips regarding your early interactions with EPA.

Much of my advice may be viewed as simple common sense.  However, I am consistently surprised how many times companies don't follow these simple steps. 

Relationship with Inspector-

Most inspectors are assigned a Division (air, water, hazardous waste, etc.) and a geographic territory.  This means you are likely to see this same person again and again at your facility. 

• If possible, try and develop a good relationship with the inspector.  Cooperation at this lowest level can often prevent communication issues that sometimes lead to enforcement. 
• Also, while not true in all cases, developing a good reputation with inspector assigned to your facility may lead to additional flexibility when addressing Agency concerns or issues.

  • Ask yourself-  Which report or permit application will get more scrutiny- one submitted by a company with a good reputation/relationship or a bad one....

The EPA Inspection- 

The Agency has the ability to perform both announced and unannounced inspections of your facility.  It is understandable that companies are frustrated by the disruption that an EPA inspection causes at their facility.  Just don't let that frustration carry over to your interactions with the inspector. 

• Listen closely to the inspector- Accompany them during the inspection. If they point out concerns that can easily be addressed, fix them. Also, follow up in writing telling the inspector what you have done. EPA appreciates pro-active companies who listen and respond to Agency concerns. This can go a long way toward establishing a good reputation.
• Debrief with the inspector- Don't be shy about asking for an oral report of the inspector's findings during or after the inspection. Take notes of any concerns or requests for information made by the inspector. Then follow up if possible. Don't wait for the inspector to provide a letter if you can easily address some of the issues.  If you are able to provide information not available during the inspection that demonstrates compliance, you may avoid seeing these issues in a formal notice or letter from EPA.

Respond to Requests for Information or Notice of Violations- 

If you receive a notice of violation (NOV) or a request for information, respond within the time frame requested or write and ask for additional time.  ALWAYS WRITE A RESPONSE.  It is far better to write a letter formally disputing findings, then to not respond at all. 

• Silence will quickly lead to more NOVs and escalated enforcement.  Companies have learned time and again, simply ignoring the situation will not make it go away.  Also, the higher you go up the enforcement chain the more likely you will see a demand for civil penalties.

In the Early Stages of Interaction Involve an Attorney to Help Respond-

This may come across as a blatant advertisement, but its not intended as one.  The fact of the matter is the difficult compliance issues often arise due to the complexity of the environmental regulations. 

• How your respond or what information you choose to provide in this early stage can significantly impact the likelihood or severity of escalated enforcement.  Make sure you are putting your company in the best defensive position possible, particularly on issues that carry significant risk of liability.

Try and Resolve Issues at Lowest Level Possible-

A common reaction of companies who find themselves in a major disagreement with EPA or subject to enforcement, is the to call senior management and complain.  Some may think if they just get management involved they will see it their way and the issued will be resolved. 

• Due to the number of issues that arise, senior manager constantly push decision making down to the lowest possible level.  Usually the first question you will get when you call is "have you talked through these issues with staff assigned?"   Even if you don't hear that question, the first thing they will do when the hang up the phone is to call the inspector to hear "their side of the story." 
• Remember, you are trying to build a relationship with your inspector.  It is human nature to not like it when someone tries to "go over your head."  Sometimes the situation demands such action be taken, but be prudent when choosing to utilize that option.

Of course every situation is different.  The five pieces of practical advice are meant to be general guidelines on conduct rather than legal insight.  The more significant the dispute or compliance issue, the more cautious you should be in your interactions with the Agency.  Hire a good supporting team to assist on those issues. 

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On October 30, 2009 U.S. EPA finalized the first mandatory rule related to climate change- Greenhouse Gas (GHG) Mandatory Reporting Rule.  Beginning this year 31 industries must track and report their emissions.  Overall, the original GHG mandatory reporting rule required reporting for an estimated 85 percent of the total GHG emissions in the U.S. 

Only a few months later, U.S. EPA has already decided to expand the scope of their GHG mandatory reporting rule.  Under the proposal, new source categories will have to begin collecting data January 1, 2011. New source covered would include:

• Expansion of Oil & Gas Production/Storage/Transmission- Vented, flared and fugitive emissions from petroleum and natural gas facilities that emit equal to or greater than 25,000 metric tons of CO2 equivalent per year .  This sector was in the original rule but has been expanded to include the following facilities:  offshore & onshore production facilities and LNG import and export facilities and natural gas distribution facilities owned or operated by local distribution facilities
• Carbon Sequestration- Facilities that inject carbon dioxide (CO2) underground for the purpose of long-term geologic sequestration (GS) or to enhance oil and gas recovery
• Large sources of fluorinated greenhouse gases (F-GHGs) - GHG covered include: hydrofluorocarbons (HFCs), nitrogen trifluoride (NF3), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).  Source include: electronic manufacturers (semiconductors, phot voltaic, liquid crystal display and micro-electo-mechanical systems), flurinated gas production, manufacture and use of electric transmissiona and distribution equipment

Focus on Natural Gas and Petroleum Industry

Why does EPA say it is focusing on the natural gas and petroleum industry?  The primary GHG emitted in methane which is 20 time as potent as CO2 at warming the atmosphere.  The potency of methane makes this sector the fifth largest source category covered by the mandatory reporting rule.  Also, the vast infrastructure associated with the industry.  This from EPA's preamble:

The U.S. petroleum and natural gas industry encompasses hundreds of thousands of wells, hundreds of processing facilities, and over a million miles of
transmission and distribution pipelines.

While the scope of emissions may argue for inclusion in the rule, the difficulty always has been making accurate calculations of fugitive methane emissions from the oil & gas sector.  Through this rulemaking EPA wants to change some of the methodologies for measuring fugitive and vented emissions.  This from EPA:

Whereas the initial proposal focused on comprehensive leak detection and direct measurement, this proposal includes direct measurement of emissions for only the most significant emissions sources, and the use of engineering estimates, emission modeling software, and emission factors, as appropriate, for other sources.

These fugitive emissions from leaks in valves in hundreds of miles of pipes has always made this a difficult area to measure accurately.  No doubt this will be the most complex area to measure. 

Over the last several years, interest in addressing fugitive emissions of methane from natural gas storage and piping were strong carbon offset projects.  The question now arises whether EPA is contemplating mandatory standards for this sector versus placing incentives for voluntary projects. 

Is the reporting rule an indication EPA may enact mandatory rules that include specifications for the design of valves on piping to reduce GHG emission?  Can you imagine the complexities involved in writing such a rule?  Further evidence that command and control regulation is not the right approach to reducing GHG emissions.

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I was interviewed for a good story appearing in Law360 (subscription or free trial required) about environmental insurance coverage for businesses.  The emphasis of the story were recent lawsuits where businesses were denied coverage under for environmental claims even though the companies thought they had purchased coverage.  As reported in the story:

• Headwaters Inc., a company that re purposes coal combustion and other energy byproducts, was denied coverage by Ace American Insurance Co. for nuisance suits against Headwaters over coal byproduct-based fill material used for a golf course, citing pollution provisions and other exclusions
• Changing World Technologies Inc., converts agricultural waste into biodiesel, have been hit with legal claims associated with a class action suit related to odors from a biodiesel production facility.  Their insurer denied coverage for the claims.

Companies still don't realize most general liability insurance policies will not provide coverage for environmental claims even if they do, the coverage will be limited.   Companies must either negotiate special endorsements on those policies or buy special pollution liability insurance policies to cover these types of claims.

As reported in the story in Law 360, companies either fail to purchase coverage or don't pay close attention to the language in their policies to make sure it will cover the risks associated with their product or operations.

“We would argue that generally it’s an underinsured marketplace,” Anderson said, adding that environmental liability coverage makes up just half of one percent of the roughly $450 billion in commercial property and casualty premium volume each year...Sometimes the problem stems from companies failing to conduct enough upfront risk analysis, including evaluating whether indemnification agreements from other companies are secure, or whether they are buying adequate insurance, attorneys and brokers said...

“I believe a lot of times insureds don't see the big picture with regard to their exposures,” said Stephanie Story, senior vice president in the environmental practice at insurance brokerage Marsh. “What they should probably focus on first is sitting down and being honest with themselves, and having discussions internally with their real state folks, or their legal counsel, or their operations teams.”

Remember, Insurance companies have attorneys as well who are paid to think of ways exclusions will apply to prevent paying out claims.  Spending time up-front to analyze your risks is prudent.

Example:  Suppose you own a business that recycles wastes into a new product that is distributed to multiple sites.  Perhaps the product is used as fill, insulation or ground cover.  What happens if you are sued by people who claim your product has released chemicals at sites where your product was used. 

Even if you purchase pollution liability insurance, you must make sure coverage will extend to locations where your product has been utilized.  Policies can often be limited to the production facility.

Also, if you are going to purchase pollution liability insurance make sure you review the actual language of the policy.  Just because its special environmental insurance coverage does not mean it will cover all environmental claims. 

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The President called together key Senators and members of his cabinet in hopes of re-invigorating stalled discussions in the Senate over climate change legislation.  This summer the House of Representatives passed a bill that would require greenhouse gas reductions of 17 percent by 2020 compared with 2005 levels.  Since legislative debate moved to the Senate, a viable bill has yet to emerge.

Senators Kerry, Lieberman and Graham have been attempting to hammer together a compromise that they feel could garner the 60 votes needed in the Senate.  At yesterday's meeting Senator Kerry stated he expects a bill to emerge from their discussions by the end of the month. 

The renewed effort comes as a recent Gallup polls shows Americans with the highest level of skepticism for global warming:

 The poll notes the highest skepticism is among Republicans.  However, there is has been a general trend upward.

The poll results come after months of mounting criticism of the United Nations climate science panel's findings regarding the likelihood of climate change.  Fact checks revealed some of the more drastic impacts claimed in the UN's report appear to have been exaggerated by the authors.  This from the Times:

The latest criticism of the IPCC comes a week after reports in The Sunday Times forced it to retract claims in its benchmark 2007 report that the Himalayan glaciers would be largely melted by 2035. It turned out that the bogus claim had been lifted from a news report published in 1999 by New Scientist magazine.

Turns out the more likely date for melting the glaciers is a few hundred years away.  Just yesterday the UN announced it would perform an independent review of the the study in the face of mounting criticism.  This from the U.K. Guardian. 

In an announcement at the UN in New York Ban Ki-moon, the UN secretary general, and Rajendra Pachauri, the much-criticised head of the Intergovernmental Panel on Climate Change, said the InterAcademy Council, which represents 15 national academies of science, would conduct the independent review.

The announcement follows months of controversy which, while not altering the scientific consensus on climate change, has given fresh ammunition to opponents of action on global warming.

The latest polling and issues at the UN form the backdrop to efforts to pass climate legislation and their influence should not be under appreciated.  Some Senators are pushing for dropping cap and trade entirely from the bill leaving a national mandate on renewable energy.  The President has commented he is not in favor of this approach and still believes a price on carbon is the way to go.

Senator Kerry made comments that the proposed bill to appear at the end of the month will look much different than anything which has been revealed to date.  Most likely it will be much narrower in scope than the House passed bill.  It may take a sector approach versus the much broader cap proposed in the House bill.   Emissions from the utility sector could be the only regulated pollutants.

Regardless, with criticism mounting on the key UN report and public opinion showing reduced support, it will be tough to pass any climate legislation.  At the same time, it appears the bills designed to prohibit the EPA from moving forward with greenhouse gas regulations under existing Clean Air Act authority are for show only.  

Best guess is that all this political maneuvering will leave us with EPA regulations beginning this month and no climate legislation in 2010.   Word to the wise...we will be revisiting this approach down the line.

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Ohio does not have regulations governing the disposal or recycling of consumer electronic waste.  State legislation has been adopted by at least nineteen other states to encourage the recycling of e-waste and divert computers and other electronic equipment from landfills. 

Why manage e-waste differently? E-waste components can contain hazardous or toxic compounds that make it different than other household municipal waste. 

Recently, Representative Dennis Murray introduced legislation (H.B. 447) designed to encourage the recycling of e-waste in the state.  Sponsor testimony will be heard this Wednesday. 

The bill is directed at manufacturers who produce and sell computers, printers and video equipment.   Some of the key elements of the proposed legislation include:

• Registration-  Requires all manufacturers of electronics to register with Ohio EPA.
• Fee-  Manufactures must pay an annual registration fee of $5,000 to pay for administration of the program
• Take-Back Programs-  By April 2011 mandate computer and video display consumer take back programs.  Allow consumers to mail or drops of equipment at stores for recycling by the manufacturer
• Prohibit sales- Without registration or a take back program
• Reporting-  Manufacturers must report to the State on the success of their take-back programs

The Electronics Take-Back Coalition maintains a good website that provides information regarding state and federal efforts to mandate recycling of electronic waste.  The web site provides a great resource to compare and contrast state legislation that has been adopted in other states with the Ohio proposal.

The chart above from the Coalition web page provides some interesting information regarding recycling rates.  Certainly, more can be done in Ohio to manage e-waste issues.

The Legislation may cast too broad of a net (covering too many products) or places too onerous requirements on manufacturer take-back programs.  However, there is good information available to compare Ohio to the other nineteen (19) states operating programs.  Ohio stands to learn from what has worked and what hasn't worked in these other states. 

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