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

There was a lot of anticipation this summer about the scope of the energy bill coming out of the U.S. Senate.  Would the Senate try and tackle climate change?  Would it develop a national renewable portfolio standard? 

The bill was released yesterday and the answer was "no" on both accounts. 

The White House kept a glimmer of hope that climate change provisions- Cap & Trade- could be added back in at a later date.  This from Reuters:

But the White House indicated on Tuesday that climate provisions could be added back into a bill once negotiators from the Senate and the House of Representatives hammer out differences between their respective versions during "conference" talks.

The House bill, passed last year, includes climate provisions to cut greenhouse gas emissions.

White House spokesman Robert Gibbs, when asked whether the administration would seek to do a separate climate bill later after getting a narrow energy-focused bill first, said: "No, I think the process is you get an energy bill through the Senate then you can conference that legislation with the House."

Also absent from the bill was a proposed national renewable energy standard (RES) that would have mandated 15% of electric generation from renewable sources.   Some Democrats claimed there were 62 votes in favor of an RES.  They pointed to the urgency of restoring incentives for construction of renewable energy sources noting wind development dropped 72% in the first half of 2010 compared to last year.  This from the N.Y. Times:

Many see an RES as an achievable goal that could spark construction of manufacturing plants for wind turbines and drive the development of clean energy. Several senators, including Mark Udall (D-Colo.) and Byron Dorgan (D-N.D.), said yesterday that support for a modest RES that requires utilities to find 15 percent of their power by 2020 exists in the Senate.

"It seems to me that would be logical to include that [RES] in the energy bill that was going to be brought to the floor," said Dorgan, whose state stands to be a key generator of wind power. "I hope maybe there's a way to be found to do that."

Udall said there are about 62 senators who would support the 15 percent standard.

EPA and States Maintain Center Stage

The prospects for cap & trade and an RES diminish rapidly.  It seems hard to imagine the Democrats trying to cram such major provisions through reconciliation.  Though it appears that is being left open as an option.

What has become clear is that EPA's greenhouse gas regulations are center stage.  EPA's Tailoring Rule will kick in at the end of 2010 on new sources.  Mandatory monitoring and reporting already exists for other sources.  With legislation seemingly forever stalled in the Senate, pressure will mount on EPA to adopt more climate change regulations.

As to renewable energy standards, the states' have been on center stage for several years.  Thirty-seven states have adopted some form of a renewable or alternative energy standard.  Some are stronger than others, but there are strong incentives at the state level for development of alternative sources of power. 

However, there is inconsistency among the states in defining renewable sources, the % required, and marketability of production credits.  A federal bill could have addressed these inconsistencies.

However, the price of addressing those inconsistencies in mandating renewable energy generation in every state, including the Southwest which has resisted the standards.  Southern states don't feel there is a much opportunities for renewable energy development.

Like cap & trade, prospects have dimmed for a national RES.  Incentives for development will be left primarily to the states.

(For more information on each states specific programs, click on the map above)

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Ohio has one of the best state brownfield grant programs in the country.  There are two pots of money available at the state level:

• Clean Ohio Revitalization Fund (CORF)- Grant that offers up to $3 million to reimburse clean up and some redevelopment costs.  Requires a 25% match.  Typically awards are made twice a year and applications for projects compete against one another for limited funding.
• Clean Ohio Assistance Fund (COAF)- Grants are awarded on a rolling basis so long as money remains available in the grant cycle.  COAF pays up to $300,000 in assessment costs (Phase II) and $750,000 for clean up.

A year ago, the Ohio Department of Development (ODOD) announced a major change to COAF-greatly expanding areas eligible to submit COAF applications.  ODOD has just released the 2010 Priority Investment map which shrinks the eligible areas back down the "normal" coverage under the program.

Properties eligible to request COAF funding are those located in a "inner city area", a "labor surplus area" or a "situational distress area" as defined by O.R.C. 122.65(H). Each year the Ohio Department of Development releases a map of the State that identifies which areas fall under one of the three categories and could apply.

ODOD also announced a freeze on COAF clean up grant requests because the number of applications in the pipeline already exceed available funds for FY 2011.  You can still submit an application, but you will not receive clean up funding in FY 2011.  This is in part because ODOD decided to prioritize Phase II grants last year thereby reducing available funding for clean up.

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Recently, Ohio EPA released its newsletter directed toward those interested in brownfield redevelopment (SABR News).  The July 2010 newsletter included some important recent developments at the federal and state level.

Federal Brownfields Legislation

The Federal Brownfield Re-authorization Bill was introduced in May 2010.  If the bill passes it could include some important reforms to U.S. EPA's brownfield programs, including:

• Increased funding- From $350 million in 2011 up to  $600 million in FFY 2016.  While an increase in funding helps spur brownfield redevelopment, one has to question whether such an increase is at all likely given the state of the federal deficit.
• Increase in the cap on federal grants-  Move from $200,000 to $750,000. This is obvious change because the cap was woefully low compared to real word sampling and clean up costs at brownfield sites. Compare it to the Clean Ohio program that has a cap for property assessment work of $300,000.  Over and above the assessment money, you can also get a maximum of $3 million in clean up funding under Clean Ohio. 
• Locally owned properties eligible for federal funding-  Under current law, any municipality who takes ownership of a parcel through foreclosure is considered a PRP under CERCLA and is ineligible for federal brownfield funding.  The legislation would remove this prohibition. This is a very important change.  Cities often take properties because of health or safety issues presented by their current conditions.  We shouldn't penalize cities for being proactive.

Background Soils Workgroup

The newsletter provides an update on Ohio EPA's effort to create a background soil database.  Native Ohio soils can contain various contaminants.  For example, Ohio farm soils are known for higher natural arsenic content. 

At clean up sites, consultants are often asked to perform an analysis to determine if detected levels of contamination are "above background."  If levels are at or below background, then remediation is not necessary. 

The site specific background evaluations can become time intensive and costly.  Hopefully, by producing an Ohio background soil database these types of evaluations will be streamlined and can be performed in a more cost effective manner.  A draft of the database may be available by this Fall.

New Guidance on Vapor Intrusion

In May 2010, Ohio EPA released its new guidance document for sampling and evaluation of potential vapor intrusion associated with contaminated soil and groundwater.  The technical guidance document provides information regarding how Ohio EPA will determine whether soil or ground water contamination would potentially result in unhealthy indoor air exposure to occupants of buildings. 

Vapor intrusion is getting much more attention nationally.  Previously, Ohio EPA simply referred to U.S. EPA's OSWER guidance on vapor intrusion.  Now, Ohio EPA has developed their detailed guidance. 

From discussion with some environmental consultants, they indicate that the Ohio EPA guidance seems to tilt the scales toward sampling in addition to just modeling.  Regardless, it is an important guidance document on an issue that will be receiving heightened attention.

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U.S. EPA has released its CAIR replacement program called the "Transport Rule."  In a previous post I discussed EPA's efforts under the Transport Rule to address the Court's ruling striking down the CAIR rule.  After listening to a presentation by EPA, the structure of the Transport Rule is a little clearer.

The major issue identified by the Court was that CAIR failed to ensure that upwind states significant contribution to the air quality issues in downwind states would truly be eliminated.  The court ruled that utilities in a state could make no actual reductions, they simply could satisfy their regulatory obligations by purchasing allowances (pollution permits) under the cap and trade program. 

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."

Here is how the program works.  Each state has a firm budget which serves as a state specific  cap on emissions.  At the end of the trading year, U.S. EPA will review emissions information from each state and see if any exceeded their caps.  If a state is below the cap, nothing happens.  If the state is above, EPA will embark on a more extensive review to determine which companies within the state were responsible for exceeding the cap. 

Companies responsible for exceeding the state cap by failing to actually reduce emissions significantly enough, will be required to turn in extra allowances based upon their pro rata share of the amount the State's cap was exceeded.  Perhaps an oversimplified example would help:

 Assuming the state of Ohio has only three utilities companies operating in the State.  Hypothetically, it has a State budget under the Transport Rule of 90 tons.  In 2014, actual emissions in the State (120 tons) exceed its  budget by 30 tons. 

The slide shows that two companies will be required to surrender extra allowances equivalent to the amount the Ohio exceeded its budget.

Certainly this is far more complicated than the original CAIR rule struck down by the Courts.  Let's hope the Transport Rule can withstand legal challenges. Otherwise, States will face a complex mess in trying to meet federal air quality standards.  Also, utilities will face tremendous uncertainty preventing them from making long term choices.

Has EPA left a window open for environmental groups who may not like the Transport Rule to successfully challenge the rule?  In essence, EPA is penalizing companies who caused the state to exceed its budget (which represents it significant contribution to downwind states). 

Will the courts deem this adequate to meeting the Clean Air Act obligation to eliminate actual significant contribution?  Or will the courts still maintain the view that the utilities will be able to meet their obligations through purchasing allowances and not by actual reductions?  In other words, what is the assurance each state's significant contribution will be actually eliminated?

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Ohio is using federal stimulus money to establish a new grant opportunity in the renewable energy area.   The Ohio Department of Development has released an RFP soliciting proposals with a total of $10 million in available funding. 

Minimum award is $500,000 and maximum is $1 million.

The grant program is looking for projects that convert feedstocks such as municipal solid wastes, food and farm wastes, or other bio-mass or waste materials to electricity, heat, fuel and/or bio-products.

There is a cost share requirement of 25% of total cost of the project. Cost share can take the form of financial or in-kind contributions.

Grant funds can only be used to purchase and install eligible project equipment for conversion of wastes and biomass into energy , heat, fuel or products.  Due to limitations placed on federal stimulus funding, you may not use grant funds for any of the of the following:

• Construction costs;
• Purchase of buildings or land; and
• Purchase of equipment for renewable energy techniques that are deemed not commercially available.

More information on the Transforming Waste to Value grant program offered by ODOD.

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U.S. EPA released is long awaited replacement rule for the Clean Air Interstate Rule (CAIR) which was the controversial cap and trade program for coal-fired utilities.  In December of 2008, the U.S. Court of Appeals for the D.C. Circuit ruled CAIR exceeded EPA's regulatory authority and ordered the Agency to develop an new proposal.

Originally, the Court planned on throwing out the CAIR rule entirely.  However, it was embedded in so many other State air pollution control plans, the Court allowed CAIR to remain in place temporarily while EPA worked to finalize the replacement rule proposed today.

EPA is calling its new proposal the “Transport Rule."   It represents a significant revision from CAIR for a number of reasons including:

• Steeper reductions of NOx and SO2 than proposed under CAIR
• Virtual elimination of the cap and trade mechanism, by assigning each State a firm emission budget which it may not exceed
• Accelerating the time frame for reductions to coincide with the attainment deadlines faced by the States

The Transport Rule proposes a hard 2014 deadline for meeting reduction requirements- it appears the ability to bank allowances ("pollution permits") will no longer be permitted.  Overall, the rule would reduce power plant emissions of sulfur dioxide (SO2) by 71 percent over 2005 levels and nitrogen oxides (NOx) by 52 percent.  SO2 and NOx react in the atmosphere to form fine particle pollution and ground-level ozone (smog).

The agency puts the expected annual cost of compliance to power plant operators at $2.8 billion in 2014.   However, elimination of original cap & trade program set forth in CAIR can only mean significantly increased compliance costs.  The real benefit of cap & trade is to utilized market mechanisms to achieve more cost effective emission reductions.

State Budgets Based On "Contribution" to Downwind Air Quality Problems

The Court's big issue with CAIR, was EPA inability to ensure that the rule would eliminate each State's contribution to downwind air quality issues.  The Court pointed out that all the utilities in any given State, could in theory, meet their compliance obligations by buying allowances and electing not to install pollution controls.

While this is in theory true, that is the point of a cap & trade program designed to utilize cost effective reductions.  The power plants that can reduce pollution in the most cost effective manner will aggressively reduce emissions and sell excess reductions to those plants facing higher compliance costs.

A quick skim of the 1,300 page rule suggests the absence of a real market mechanism to achieve reductions.  Sure EPA says interstate and intrastate trading can remain under its preferred option.  However, States now have imposed hard emission budgets. 

Perhaps this will mean limited intrastate trading, but far less interstate trading.  With a smaller market to trade allowances, EPA makes it more difficult to leverage cost effective reductions. 

Of course, EPA had to address the legal flaws identified by the Court.  The real solution was to get better authority from Congress.  Otherwise, we are left with a shell of a cap & trade program resulting in higher utility compliance costs (aka as higher utility bills).

EPA will take public comment on the proposal for 60 days after the rule is published in the Federal Register. The agency also will hold public hearings. Dates and locations for the hearings will be announced shortly.
 

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