Ohio EPA Begins Policy to Rotate Inspectors

Ohio EPA has recently announced a new policy of rotating personnel within its districts and divisions. The new policy will apply to inspectors and staff, but will not apply to management.  

The policy is intended to provide Ohio EPA staff with a wider range of experience and technical skill.  

This from Director Butler announcing the staff rotation policy:

"As many of you know, creating professional development opportunities in any area of business is essential to maintaining a well-rounded organization.  Many of you in the private sector offer your employees these opportunities and we are implementing a similar strategy in an effort to streamline our operations and improve the depth and breadth our employee's knowledge."
 

A second letter was sent by the Division of Surface Water announcing how the new policy will impact staff charged with reviewing Permits-to-Install and NPDES permits:

"The Division of Surface Water (DSW) staff assignments will change in the National Pollutant Discharge Elimination System (NPDES) and permit-to-install programs approximately every five years.  For NPDES permittees, this means the same staff person will likely complete one permit renewal since renewals are required every five years."

Having worked with many Ohio EPA inspectors both while at the Agency and since working in the private sector, it will be interesting to see how the new policy is received.  As expected with every large organization, there is array of expertise, temperament and communication styles among inspectors and staff.  

For facilities and business that like the inspector assigned to them, the new policy will likely not be seen as good news, especially if the newly assigned inspector isn't viewed in a positive light.  For those that have been frustrated by their current inspector or permitting staff, they may welcome the change.

While rotating personnel will certainly provide a wider range of experience to staff.  It will also have the effect of shifting institutional knowledge.  Some sites and facilities are very complicated.  It may take a few years for staff to fully understand all the operations or issues.  

Rotating staff could mean that businesses experience some level of frustration when trying to "get the new person up to speed."  Perhaps, Ohio EPA will try and accommodate these situations by maintaining continuity at these more complex sites.

If I had to predict, the Agency will likely get more calls complaining about the policy then praising it. Most people only call when they are frustrated or don't like a change. 

Hazardous Waste (RCRA) and Retailers

When most people think of businesses that handle hazardous waste, they think of manufacturing and other industrial companies.  The classic image is the storage of 55 gallon drums marked with placards indicating the contents are hazardous. 

In the last two years and unlikely sector has found themselves the focus hazardous waste enforcement and regulatory development- retails stores.  National awareness occurred in 2013 when Walmart announced a settlement with EPA to resolve violations of the Resource Conservation and Recovery Act (RCRA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Clean Water Act (CWA) .  The violations were related to the handling of returned, unsold, and off-specification products. Walmart agreed to pay $7.628 million in civil penalties and pled guilty and agreed to pay $81.6 million in three federal criminal cases. Walmart entered into a Consent Agreement and Final Order (CAFO) with EPA, under which Walmart agreed to implement various measures to ensure future compliance. 

While the Walmart settlement was the largest, EPA and State EPA's have been very active in taking enforcement against retailers.  Actions include:

  • Walgreen Co., $16.6 Million (2012)
  • Costco Warehouse, $3.6 Million (2012);
  • CVS Pharmacy, $800,000 (CT, 2013) and $13.75 Million (CA, 2012
    settlement);
  • Target Corp., $22.5 Million (2011);
  • Home Depot, $425,000 (2006) and $10 Million (2007).

When Does RCRA Become an Issue for Retailers?

Products are not regulated as a hazardous waste.  However, if a product is returned by a customer or the store takes the product off the shelf due to damage or for some other reason, the product can become a hazardous waste if it meets certain characteristics.

At issue for retailers are paints, aerosol cans, bleach, polishes, and other chemical products that could be considered reactive, ignitable, corrosive or toxic.  When those products are returned by customers or if they are removed from the store, the retailer must evaluate whether the product has become a hazardous waste and should be managed as such.  

Waste can be generated at the retail store level through customer returns, household hazardous waste events, product recalls, damaged product containers or packaging, off specification product, unauthorized dumping, customer spills, and change out of inventory by the store. 

Large retailers also use reverse logistics systems to consolidate products that may be returned or removed from retail stores.   These products are sent to consolidation centers where decisions can be made regarding whether the product can still be sold, returned to the vendor, donated, recycled or discarded.  

Is a removed/returned product a "waste" when it leaves the retail store or when the decision is made it is to be discarded at the consolidation center?  That is one of many critical open issues facing retailers.

If a product is a hazardous waste, then it must be stored, managed, transported and disposed properly.  In addition, RCRA's "cradle to grave" regulatory scheme requires maintenance of required paperwork to verify any hazardous waste was managed properly.

EPA Collects Information Regarding Hazardous Waste Requirements for Retailers

On February 14, 2014, EPA released a Notice of Data Availability (NODA) in order to "collect information towards improving hazardous waste requirements for the retail sector."  In the NODA EPA sums up the challenge facing retailers- "Retailers are required to make numerous hazardous waste determinations at thousands of sites, generally by store employees with limited experience with the RCRA hazardous waste regulations."

Some national retailers (Walmart and Home Depot) already submitted comments to EPA.  Some of the issues/concerns raised by these retailers include:

  1.  Waste characterization at the retail store level by employees with little training or understanding of the regulations;
  2. Generation of waste at the store level that can force stores to fluctuate between Conditionally Exempts Small Quantity Generator to Large Quantity Generator status under RCRA (different regulations apply depending on the store's classification);
  3. The lack of applicability of the Household Hazardous Waste Exemption which allows customers to dispose of the same products in the trash as EPA requires retailers to manage as a hazardous waste;
  4. Argue for the application of Universal Waste classification which would make it much easier for retailers to manage products; and
  5. Application of RCRA regulations to central processing centers utilized by retailers;
  6. Regulation of empty prescription bottles;
  7. Ambiguous regulations of electronic waste.

Retailers identify legitimate issues with application of RCRA to their stores.  In reality, RCRA was designed to regulate generate hazardous waste from industrial operations, not consumer stores.  

How EPA decides to move forward to develop sensible regulations will be very interesting to watch. However, in the meantime, retail stores must be aware there is not "timeout" while EPA figures this out.  No better evidences exists than the multi-million dollar enforcement cases against large retailers.

(Photo: courtesy Flickr Catawba County)

TSCA Penalty Serves as Warning Regarding Non Compliance with Disclosure Requirements

 In a very significant case, the Chief Administrative Law Judge (ALJ) for U.S. EPA imposed a $2.5 million dollar penalty against a manufacturer, Elementis Chromium, Inc. ("Elementis") for failing to submit a health study to EPA pursuant to the requirements of TSCA.  The EPA imposed the large penalty despite the fact,

  • Many of the findings in the study were disclosed to EPA through other studies; and
  • The violation occurred more than five years ago- past the applicable statute of limitations period

Background

Elementis was part of a business coalition who undertook an epidemiological study of chromium-based products.  The study was performed, in part, as an attempt to potentially provide support for modification of the permissible exposure limit (PEL) for hexavalent chromium adopted by OSHA. 

The study was completed in 2002.  Elementis didn't provide the study to U.S. EPA until six years later, in 2008, in response to a subpoena.  

EPA filed a complaint against Elementis for failing to disclose the study in accordance with the requirement set forth in TSCA Section 8(e) which provides:

Any person who manufacturers, processes, or distributes in commerce a chemical substance or mixture and who obtains information which reasonably support the conclusion that such substance or mixture presents a substantial risk of injury to health or the environment shall immediately inform the Administrator of such information unless such person has actual knowledge that the Administrator has been adequately informed of such information.

Elementis argued the EPA was "adequately informed" regarding the impacts of chromium and the study did not need to be disclosed as a result.  Also, the company asserted the failure to disclose occurred more than five years ago, past the applicable statute of limitation period. 

Statute of Limitations

EPA admitted that the five-year statute of limitations is generally applicable to administrative penalty actions brought under TSCA.  However, the EPA's ALJ ruled that violations of TSCA Section 8(e) are continuing in nature.  Therefore, so long as the company failed to disclose, the statute of limitations did not begin to run.

New Information

The company also argued there was no violation of Section 8(e) because EPA was previously aware of the general conclusions of the study.  The ALJ rejected the Company's argument and ruled it was required to disclose the report because there were significant distinctions between the study at issue and previous studies.  

The ninety page decision includes a highly detailed analysis of the ALJ determination the study had distinguishing characteristics which triggered the mandatory duty to disclose under TSCA. Many of the differences noted by the ALJ were with regard to the test methodologies employed, not necessarily health impacts.  

The opinion highlights the risks involved in the TSCA duty to disclose under 8(e).  The company incurred a substantial penalty despite:

  • Information and conclusions in the study had similarities to prior studies of chromium-based products;
  • The violation, failure to disclose, occurred more than five years ago which was past the normal statute of limitations period.

It is worth noting that the ALJ felt the Company's failure to report, was so egregious in this instance, that it increased the penalty by 10%.  The ALJ felt the Company made critical comments in regulatory proceedings regarding data gaps involving chromium health impacts while being aware of the study, which it helped complete, and did not disclose to regulators.

 

Ohio EPA Director Scott Nally Resigns- Butler Named as Interim Director

On January 7th, Scott Nally resigned as Director of Ohio EPA after a three year stint.  Local media coverage of his resignations raised questions regarding the abrupt and surprise announcement.  Speculation included the fact that it was tied to the Nally's firing of long-time Division of Surface Water Chief George Elmaraghy earlier this year.  This from the Columbus Dispatch:

“We can’t understand what Director Nally did or didn’t do in complete lock step with this administration. Maybe he is voluntarily pursuing other interests, but it’s suspicious he didn’t personally make the announcement.”

Kasich spokesman Rob Nichols said Nally’s resignation was not connected to the resignation last year of George Elmaraghy, who was chief of the EPA division that oversees the state’s efforts to protect streams, lakes and wetlands from pollution. Elmaraghy said he was asked to step down by Nally and Kasich because of clashes with the coal industry about water-pollution permits.

With Director Nally's resignation, Craig Butler, who had served in Governor Kasich's office, was named as interim Director.  With the Governor's election this November, it it unlikely a replacement will be named until after the election.  This means Mr. Butler will more than likely serve as Director until after the election.

Butler brings a wealth of experience to the position.  He served as an industrial liaison in the Director's Office of Ohio EPA under Governor's Voinovich and Taft.  He also served as District Chief of Central District Office and Southeast District Office.  More recently, he served in Governor Kasich's Office as the Executive Assistant to various agencies, including Ohio EPA.

His background and experience will be a major asset to him as he serves as Director.  He has seen the practical implications of EPA regulations on businesses, dealt with local issues as a District Chief as well as the political side to the Agency (Both in the Director's Office and Governor's Office).  

 

State Settlements: When Can You Recover Costs from Prior Owners/Operators

If you settle with the State EPA in your jurisdiction and perform a cleanup under State regulatory statutes, can you recover costs from prior a owner and/or operator?  

This is an issue that federal courts are grappling with in the aftermath of the U.S Supreme Court Ruling in Cooper Industries, Inc. v. Aviall Services, Inc.  In Aviall, the Supreme Court limited the rights of a potentially responsible party (PRP) under CERCLA to recover its costs by bringing a contribution claim under Section 113(f) of the Act.  The Court ruled that a PRP could not sue other owners/operators (PRPs) to recover its costs under Section 113(f) unless it had settled its CERCLA liability with the government.  

After this ruling, companies (PRPs) voluntarily performing cleanups were potentially left without any means of seeking contribution unless the government had already sued them or they had reached a settlement. 

In 2007, the U.S. Supreme Court found that a PRP could still bring an action under Section 107 without having to wait for government enforcement.  See, United States v. Atlantic Research Corp.

However, you are only entitled to bring Section 107 claims as long as you haven't settled with the government.

What about State Settlements?

After Aviall, an issue that was still left open was whether a PRP that reached a settlement with the State EPA under State specific statutory cleanup authorities could seek contribution from other PRPs.  For example, in Ohio, R.C. 3734.20 provides some authority to Ohio EPA to seek cleanup of hazardous waste.  If you settle with Ohio EPA under this authority it can you seek contribution under Section 113 of CERCLA?  

This issue has yet to be decided in the Sixth Circuit.  However, a split has emerged amount the other circuits.

The Second Circuit appears to have answered "no" to this question initially. In two cases, Consolidated Edison Co. of N.Y. Inc. v. UGI Utils. Inc. and W.R. Grace & Co. v. Zotos International Inc.,, the Second Circuit held that Section 113(f) creates a contribution right only after the resolution of claims brought under CERCLA, not a state statute.

Recently, the Third Circuit found the opposite result.  In Trinity Industries v. Chicago Bridge & Iron, the Third Circuit held that Section113(f) of CERCLA allows a PRP to seek contribution from another PRP for cleanup of a contaminated Pennsylvania site even though the PRP seeking contribution resolved its environmental liability with Pennsylvania regulators under a pair of state statutes.

Due to the large cost of environmental cleanup, it makes sense to explore all possible remedies and rights of recovery.  In regards to cleanup of contaminated sites, CERCLA represents the most complicated statute with the broadest authorities and the most litigation.  It has been more than 30 years since passage CERCLA, yet the courts are still deciding what rights parties posses to recover costs or pursue cleanup.  

Huge Increase in Disposal of Frac Water in Ohio Deep Wells

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.
 

 

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

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:

  1. 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).
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
     

 

The Threat of Personal Liability for Environmental Violations of Small Businesses

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:

  1. 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;
  2. 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 
  3. 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. .

Ohio EPA Attempts Second Effort to Develop Beneficial Use Rules

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.

Governor Signs Three Major Pieces of Environmental Legislation

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. 

 

Ohio EPA's Asbestos Rule Change Continues to Generate Controversy

In two prior posts, I discussed the recent Ohio EPA rule change to its asbestos rules.  As discussed previously, Ohio EPA added a single sentence to definition of "friable asbestos" appearing in Ohio Administrative Code Rule 3745-20-01.  The sentence states:

Any category I or category II asbestos containing material that becomes damaged from either deterioration or attempts at removal or abatement resulting in small fragments the size of four square inches or less shall also be considered friable or RACM.

The change is being referred to as the "four square inch" rule. 

Since the rule change was issued, many contractors and industry officials have commented that it represents a significant change that directly impacts abatement and demolition practices.  Ohio EPA has maintained that all they were doing was providing greater clarity as to what the term "small fragments" refers to in the rule.

BECO Luncheon Highlights Controversy Regarding the Rule

This afternoon I attended the Building Environment Council of Ohio (BECO) luncheon where a panelist of three Ohio EPA staff were present to discuss and answer questions regarding the rule.  A simple once sentence change resulted in more than two hours of discussion. 

Why so much discussion?  The dispute seems to boil down to whether non-friable asbestos category I material, such as vinyl floor tile or roofing material, must be removed prior to demolition of the structure. 

Contractors in the audience told Ohio EPA that it was virtually impossible to demolish a large structure without breaking up Category I material into four square inches.  They also asserted that if the demolition didn't break up the material, the clean up afterward would more than likely result in four squire inch pieces.  Contractors noted that U.S. EPA guidance suggests Category I non-friable asbestos can remain during demolition.

Ohio EPA responded that they felt the rule change had nothing to do with the issue of removal prior to demolition.  The Agency indicated all the rule does is define what constitutes "small fragments."  The Agency personnel acknowledged the U.S. EPA guidance and said its still the rule that non-friable material can remain during demolition, but noted, even prior to this rule change- you run the risk material gets broken up into small fragments which we could consider a potential violation.

The Agency mentioned that in West Virginia and Tennessee the asbestos rules simply require removal of all Category I non-friable material prior to demo.  Contractors in the audience asked the Agency why they didn't simply write the rule to require removal like those other states. 

Ohio EPA responded that they wanted to preserve the option that building owner did not have to remove the Category I non-friable material prior to demolition.  Staff said that "perhaps the owner is very confident demolition won't result in small fragments."  It was noted by several in the audience that the lack of clear standard puts demolition contractors in a very tough spot.

The takeaway from the discussion-  If you leave Category I asbestos material in place during demolition, you run the risk that from the point of demolition to disposal in a landfill it gets broken into small fragments which the Agency may consider a violation.  The Agency said said one piece four inches in size wouldn't be a violation, there would have to be a "substantial" amount of such small fragments.  What constitutes "substantial" would be decided on a case by case basis.

U.S. EPA Releases New Air Emission Standards for Fracking

On April 17th, EPA issued new rules designed to reduce air emissions from oil & gas operations, including wells drilling using hydraulic fracturing ("fracking").  The new federal standards (New Source Performance Standards -NSPS) are seen as the first significant new federal regulation governing fracking. 

Some may wonder how gas wells generate air emissions.  When a horizontal gas well is drilled and fracking is used, large amounts of water and some chemicals are pumped down the well to break up rock in the shale formations in order to release the gas for recovery.  Prior to putting the well into production, the water and chemicals are removed.  This is referred to as "flowback water."

When flow back water is recovered it is accompanied by gases, including volatile organic compounds (VOCs) and methane, which in most cases, is simply vented to the atmosphere. 

Methane emissions from fracking has received significant attention recently due to the fact it is a potent greenhouse gas- 20 times more damaging than CO2 emissions.

EPA says that the oil & gas industry is the largest source of methane emissions in the U.S. making up approximately 40% of all methane emissions.  Controlling VOC and methane emissions is what prompted EPA to issue the new federal standards.

EPA Delay's More Expensive Controls to 2015

EPA seeks to reduce air emissions from fracking by requiring, initially destruction of the gas and then recovery through "green completion."  In a green completion, special equipment separates gas and liquid hydrocarbons from the flowback that comes from the well as it is being prepared for production. The gas and hydrocarbons can then be treated and used or sold.

EPA's draft rule would have mandated "green completion" as the best control technology.  However, industry voiced strong concern that the equipment wasn't widely available and requiring this technology too quickly could impact production.  In the final rule, EPA decided to delay the mandate for "green completion" until January 1, 2015.

Until 2015, producers must control emissions by using flares to burn off the VOCs and methane emissions. The flare must be able to eliminate 95% for the VOC emissions.

For more information:

 

Ohio EPA Loses in Court Over "Friable Asbestos" Triggering Rule Change

In a prior post (Ohio EPA Asbestos Rule Changes Could Prove Costly), I discussed Ohio EPA rule change to the definition of friable asbestos.  As discussed in the prior post, Ohio EPA added a single sentence to definition of "friable asbestos" appearing in Ohio Administrative Code Rule 3745-20-01.  The sentence states:

Any category I or category II asbestos containing material that becomes damaged from either deterioration or attempts at removal or abatement resulting in small fragments the size of four square inches or less shall also be considered friable or RACM.

It appears that the Ohio EPA rule change was triggered by the fact is lost in Court over this very issue- whether small pieces of category I ACM were "friable asbestos" triggering NESHAP management regulations.  Not only did Ohio EPA lose at the trial court level, it now has also lost on appeal. 

A Battle of Experts

The appellate court decision was issued March 30th in State of Ohio v. Titan Wrecking & Environmental LLC.  The case involved the removal of vinyl floor tile in a Cleveland School prior to demolition. 

The issue was whether Titan's method of removal (use of a bobcat to pull up the tile) caused the tile to become "regulated asbestos containing material" (RACM) and subject to asbestos regulations (the NESHAP regulations).  State experts asserted at trial that the vinyl floor tile was rendered friable and/or that it had been subject to grinding by Titan's removal activities and, as a result, Titan should have complied with the emission control and disposal procedures set forth in the Ohio Administrative Code.

Ohio EPA asserted that contractors cannot deliberately cause ACM tile to become friable by removal.  That the tile should have been removed intact and remain that way all the way through disposal.  The fact the tile was "broken into small pieces...some pieces smaller than a dime" meant it had become friable.

Titan's expert said U.S. EPA had removed the term "broken" in prior guidance.  Current EPA guidance says the tile must be "crumbled, pulverized, or reduced to powder" to be considered friable, not just broken. 

The Court said it weighed the evidence and the testimony of the experts and agreed with Titan's expert (Wayne Ingram- Testing Services International)  The Court of Appeals refused to overturn the trial court's decision that broken vinyl floor tile was not enough evidence to conclude it had become friable.

After Losing in Court Ohio EPA Changes the Rule

As you can see from the description of the case, the issue really came down to whether broken pieces of floor tile triggered asbestos regulations.  Since Ohio EPA lost based on expert witness testimony and a review of current EPA guidance, Ohio EPA decided to amend the rule to specifically add language incorporating their preferred interpretation.

As discussed in the prior post, the rule change could prove costly for contractors who typically preferred removing floor tile or other ACM prior to demolition. 

 

President Issues Executive Order Creating Interagency Work Group on Fracking

On April 13th, President Obama issued an Executive Order creating a federal inter-agency task to coordinate efforts on oversight of horizontal well drilling and hydraulic fracturing for natural gas.  Method such as hydraulic fracturing (i.e. "fracking") have allowed access to massive new deposits of natural gas bring the price down for natural gas to historic lows.  While fracking has resulted in a huge increase in production, the drilling method continue to generate environmental concerns.

Thus far, the States have really taken the lead in development of new regulations and requirements for fracking.  In my last post I discussed Ohio's recent legislative proposal. Now, the federal government will attempt to coordinate its efforts regarding oversight and planning associated with unconventional natural gas drilling techniques such as fracking.  The Executive Order creates the inter-agency work group for the following purposes:

  1. Coordinate agency policy activities, ensuring their efficient and effective operation and facilitating cooperation among agencies, as appropriate;
  2. coordinate among agencies the sharing of scientific, environmental, and related technical and economic information;
  3. engage in long-term planning and ensure coordination among the appropriate Federal entities with respect to such issues as research, natural resource assessment, and the development of infrastructure; 
  4. promote interagency communication with stakeholders; and
  5. consult with other agencies and offices as appropriate.

The Work Group is made up of 13 federal agencies and departments, including: U.S. EPA, U.S. Dept. of Transportation, Dept. of Interior, Dept. of Energy, and others. 

It appears that industry supports the working group as a potential mechanism to avoid applicative regulation.  This from the Washington Post:

“We have called on the White House to rein in these uncoordinated activities to avoid unnecessary and overlapping federal regulatory efforts and are pleased to see forward progress,” said Jack Gerard, president and CEO of the American Petroleum Institute, the largest lobbying group for the oil and gas industry.

Gerard and other industry leaders met with White House officials Friday.

Dave McCurdy, president and CEO of the American Gas Association, said the new working group will help promote consistency among administration policies.

In it is interesting that the Washington Post and other news outlets reported the purpose of the working group as to "coordinate new regulation."  However, reading through the five stated purposes of the working group none of them even mention regulation. Rather, it appears as if the purpose of the group is to share information, not coordinate regulatory efforts.

In my experience working with such federal inter-agency workgroups associated with the Great Lakes, federal agencies were reluctant to give up their own turf.  Unless the Administration takes an active role in working group it seems very unlikely the agencies, on their own, will coordinate their regulatory efforts.. 


 

 

Governor Releases Bill to Regulate Shale Gas Drilling and Wastewater Disposal

Right now there is no other topic in Ohio that generates more news coverage than horizontal gas drilling (or "fracking").   It seems a day doesn't go by without a new news story regarding fracking or related developments.

Ohio has seen oil & gas wells installed for well over a hundred years.  However, until recently huge deposits of natural gas in shale formations deep beneath the ground were not accessible.  Now, using new technology (i.e. fracking) those deposits can be tapped.  The implications for Ohio are certainly significant.

Along with the tremendous opportunity that access to the Utica Shale deposits present, come concerns regarding protecting the environment, including ground water resources. Many have said that Ohio's out dated oil & gas laws need to catch up with today's technology.

Senate Bill 315

In order to address these concerns, on March 22nd Governor Kasich released Ohio Senate Bill 315 (S.B. 315).  While the bill is dubbed an energy bill and does touch on other subjects, its principal focus is new regulation of horizontal gas well drilling.

The bill also attempts to increase regulations on deep well injection as a means of disposal of massive amounts of fracking wastewater and/or brine.  In the aftermath of the controversy as to whether disposal of fracking wastewater led to earthquake(s) in Northeast Ohio, the bill adds to the growing list of new regulations governing this method of disposal.

Major New Requirements in S.B. 315 Governing Horizontal Wells or "Fracking"

  • Creates a new oil & gas permit to be issued by the Ohio Department of Natural Resources (ODNR) for "horizontal wells:"
  • The new horizontal well permit application will require new information that the old oil & gas permit applications never addressed, including:
    • A $15,000 permit fee;
    • Road Use Maintenance Agreements-  will require the applicant to provide a copy of an agreement with local government(s) concerning maintenance of roads, streets, and highways;
    • Source Water Identification- must identify the ground water or surface water source for the production of the well.  This is requirement applies to horizontal well permits because they use millions of gallons of water;
    • Residential Well Sampling-  must show the sample results of all water wells within 1,500 feet of the proposed well prior to commencement of drilling;
    • Insurance Coverage-  must obtain $5 million in coverage for injury to persons or property.  Also, must include a "reasonable level" of coverage for any pollution or contamination that may occur as a result of the drilling, operation, or plugging of the owner's wells. (See discussion below regarding insurance)
    • Disclosure of fluids used in wells- one area of controversy associated with fracking is the use of chemicals along with the water during the drilling and fracking process.  Under the bill, the owner of the well will have to disclose all chemicals used and the amount used during service, operation, and plugging of the well.  These compounds will be posted on ODNR's web page.
    • Fresh Water Impoundments-  ONDR is given rule making authority to regulate location and construction of fresh water impoundments used in fracking.

Major New Requirements Governing Deep Well Injection

  • S.B. 315 increases disposal fees and includes new regulations governing oil & gas injections wells, including:
    • Doubles the fee for each barrel of substance generated locally that is disposed through deep well injection;
    • Raises the fee by five times the amount (20 cents to $1 dollar) for out of state substances shipped in for disposal in Ohio deep wells.  This is likely to address the concern Pennsylvania is shipping its wastewater associated with fracking to Ohio for disposal;
    • Increases the information that must be submitted by a brine/wastewater transporter to be properly certified by the State; and
    • Owner of deep well must obtain list from transporter of brine or wastewater generated through fracking a list of all chemical compounds.

Key Issue under S.B. 315:  How Much Environmental Insurance will be Required?

The philosophy of the bill seems to be requiring data collection prior to commencing the fracking process.  What data is being collected?  The current levels of contamination, if any, in existing residential wells within 1,500 feet prior to horizontal drilling.  Followed by disclosure of all the chemicals compounds used in the fracking process.  

The hope is that the information  (i.e. baseline record) could be used to determine if fracking contaminated groundwater or drinking water supplies.  Simply compare the old well samples to new sample, post fracking, and see if any of the disclosed chemical compounds are detected.

Assume it is demonstrated that contamination did occur as a result of fracking.  The bill requires a "reasonable level" of insurance coverage be provided for environmental contamination.  The determination of "reasonable" will be key issue.

It is likely (and would make good business sense) if you were an oil & gas driller to use the corporate form to try and limit liability if something goes wrong.  This means it is quite possible the only funds that may be available to address contamination will be insurance proceeds.    Therefore, how much insurance coverage is required will be a key issue. 

EPA Overhauls Underground Storage Tank Regulations for the First Time in Over Two Decades

EPA is proposing a whole series of new inspection and testing requirements for underground storage tanks (USTs).  By expanding the types of UST systems covered under the rules, EPA is  proposing to extend application of all UST regulations to entities not previously regulated, such as hospitals and universities.

EPA first promulgated regulation governing underground storage tanks (USTs) in 1988 (40 CFR Part 280). This regulation set minimum standards for new tanks and required owners and operators of existing tanks to upgrade, replace, or close them. The regulations largely covered gasoline dispensing facilities (GDFs).  Now EPA wants to extend these regulations to other UST systems, such as those used for emergency power generators.

EPA has not significantly changed the UST regulations since 1988.  In November 2011, EPA released a proposed UST rule package that would amend the 1988 regulations for the first time in over two decades. 

Basic Purpose of New UST Regulations

EPA states the purpose of the amendments to the UST regulations is to add additional protections to prevent contamination of ground water. The amendments add new requirements in the following areas:

  • new inspection requirements;
  • establish operator classifications and associated mandatory training;
  • establish new standards for when tanks must be replaced; and
  • extend application of the regulations to tanks not previously covered.

Costs Associated with the New Regulations

U.S. EPA performed a regulatory impact analysis for the new requirements for USTs.  It asserts that the total cost for businesses to comply with the new requirements is $210 million.  EPA asserts that these costs are offset by the avoided clean up costs associated with spills that the new requirements are projected to prevent. 

In weighing compliance costs with spill prevention, EPA says there is a net benefit to businesses. Its hard to see that businesses will view these new requirements as an overall cost benefit.  In addition, the regulations add a new layer of paperwork for every tank covered.

EPA estimates it will cost each facility approximately $900 per year to comply with the new requirements.  However, that figure does not capture the costs that may be incurred by entities that will be covered by the UST regulations for the first time.

Details on the Proposed Changes to the 1988 UST Rules

Along with the rule package, EPA put together a chart explaining the changes to the 1988 rules.  Some of the major changes worth noting are as follows:

  1. Extends Regulations to New USTs-  the proposed rule eliminates "deferrals" that had exempted certain tank systems from the UST rules.  Systems that would be covered include: emergency power UST systems, airport hydrant fuel distribution systems, field-constructed tanks, and certain waste-water treatment tanks systems.
  2. National Inventory of USTs-  All owners of USTs covered by the rule are required to submit a one-time notification of how many USTs they have, where they are located, when they were installed, and other identifying and compliance information.
  3. Creates Operator Classifications and Mandatory Training- the new regulations create three classifications of operators (A, B and C).  An individual must be designated for each of the three classes which cover employees with managerial, maintenance and day-to-day operational duties.. Each operator classification is required to be trained on minimum defined areas.  Records must be maintained at each facility to show the operator training requirements have been satisfied;
  4. New Tanks Must Have Secondary Containment and Under-Dispenser Containment (UDC)-  all new and replaced UST systems must have secondary containment and UDC.
  5. Spill and Overfill Inspections and Testing-  Overfill equipment must be tested regularly.  Spill prevention and release detection equipment must be tested regularly.  Walk through inspections will be required to check on condition of equipment.  The rules would phase out vapor monitoring and groundwater monitoring as release detection methods.
  6. Replacement of UST Once Lining Fails-  The 1988 UST regulations allowed lining as an upgrade option to extend the life of some tanks.  Under amendment, once lining fails the UST must be taken out of service and replaced.
  7. Testing After Repairs-  Testing of the system is required after any repair to spill and overfill equipment and secondary containment.  Even if the repair was due to general maintenance and not related to a release.
  8. Standards for Tanks Holding Ethanol or Biodiesel-  EPA is concerned certain chemicals are degrade tanks more quickly.  Therefore, any tank holding greater than 10% ethanol or 20% biodiesel must demonstrate compatibility.  The proposed regulations set forth standards for determining compatibility. 
  9. States Given Three Years to Adopt New Standards

Comment Period Extended

The original rule package was issued on November 18, 2011.  EPA decided to extend the comment period until April 16, 2012. 

Ohio EPA Reform Bill Introduced

Last week Senator Schaffer introduced Senate Bill 294- dubbed the EPA reform bill.  According to testimony from Senator Schaffer and OEPA Director Scott Nally, the two had been working on the legislation for months.

This bill is the probably the first since Ohio EPA creation that touches on so many different areas of EPA regulatory authority, including:

  • Infectious waste- eliminate duplicate regulation
  • Wetland mitigation- change the hierarchy of mitigation (see below)
  • Underground storage tank clean up at brownfields- streamlines brownfield clean up (see below)
  • Compliance assistance to small businesses- expands confidentiality for inquiries for assistance by small businesses
  • Construction & demolition debris fees- clarifies fees apply to asbestos containing material
  • Statute of limitations for environmental enforcement actions- applies statute of limitations to enforcement actions related to construction & demolition debris
  • Regulation of public water systems and public water system operators- establishes criminal penalties for falsification and vandalism related to public drinking water systems
  • Disposal of solid waste- bans disposal of certain aluminum production waste after issues with fires at Countywide landfill

While the bill is broad in scope, many of the changes are minor fixes to address out of date statutory language.  The biggest changes fall into the following areas:

Wetland Mitigation- 

Anytime a developer impacts wetlands, they must offset the impacts with mitigation.  Under current law, the hierarchy of mitigation required the developer to, first, try and perform mitigation on-site by creating new wetlands.  Then mitigate off-site, but in the same watershed.  If on-site and off-site mitigation weren't possible, the final option was purchasing credits at a wetland mitigation bank owned and operated by a third party. 

Years ago, Ohio EPA studied the effectiveness of on-site mitigation and found that most newly created wetland were failing.  This prompted a lengthy discussion about the merits of using wetland banks versus developer driven mitigation projects.

S.B. 294 flips the hierarchy on its head.  Now, the preferred option is purchasing credits at a mitigation bank.  Such a change may allow for better success in terms of survival of man-made wetlands.  Also, a preference towards banks should greatly accelerate the permitting process for developers who often get bogged down in trying to find mitigation sites.

S.B. 294 also provides Ohio EPA with the authority to start an in lieu fee program.  Under such a program, a developer could simply write a check paying for mitigation credits versus finding a mitigation project or bank.  Ohio EPA, ODNR or a private entity operating the in lieu fee program could then use the funds to start mitigation projects they select.  This option assist developers when they can't find sufficient credits at an acceptable mitigation bank.

Underground Storage Tanks at Brownfields-

This has long been an issue highlighted on this blog.  Under current Ohio law, any business or developer cleaning up a brownfield is forced to go through two separate clean up programs if their site has underground storage tanks regulated by the Bureau of Underground Storage Tank Regulation (BUSTR).

Under Ohio law, any areas of brownfield site with BUSTR tanks is ineligible for participation in the Voluntary Action Program (VAP) until it, first, clean up the BUSTR tanks in accordance with BUSTR regulations.  Never mind that the VAP clean up standards and BUSTR were equivalent in their protection of human health and the environment.

What resulted is lengthy delays at brownfield sites while the volunteer addressed all BUSTR tank issues prior to proceeding with the VAP.

S.B. 294 will allow any person cleaning up a brownfield to use the VAP to address BUSTR tanks as long as two conditions are met:

  1. The VAP clean up also addresses other hazardous substances or petroleum that is not BUSTR regulated; and
  2. The fire marshal has not issued an enforcement order requiring BUSTR closure.

This is a great reform that is a long time coming.  It should make brownfield as well as VAP clean ups at operating sites far less complicated.

Compliance Assistance for Small Businesses

Ohio EPA has the Office of Compliance Assistance and Pollution Prevention (OCAPP).  OCAPP allows small business to call EPA staff and ask for assistance with permitting or compliance issues without fear of enforcement. 

Under existing law, only inquiries regarding air permitting are confidential.  S.B. 294 would make inquiries into other permitting programs confidential.  This gives the business the comfort of knowing their noncompliance, by law, cannot be reported to other EPA divisions or offices. 

OCAPP can be a great tool for small businesses to cost effectively untangle complex EPA regulations and file for permits.  S.B. 294 will enhance OCAPP's capabilities.

Introduction Just Marks the Beginning of the Legislative Process

S.B. 294 will be very interesting to watch as it proceeds through the legislature.  Will Senator Schaffer and Ohio EPA be able to prevent it from becoming a "Christmas Tree", where every group and legislator tries to include their concepts or ideas for reforms to EPA?

Time will tell.

 

Recent Court Case Limits Ohio EPA Enforcement Authority and Ability to Recover Costs

A recent court case calls into question Ohio EPA's legal authority to recover certain costs related to investigation and clean up of contaminated sites.  The case also raises questions about Ohio EPA's long standing practice to negotiate administrative settlements of enforcement actions.

On January 18, 2012, the First District Court of Appeals in Hamilton County issued a decision in DeWine v. Mass Realty.  Due to the serious implications that may stem from this decision, it is certain the State will seek a appeal to the Ohio Supreme Court.

Recovery of "Response Costs"

Ohio EPA has long pursued recovery of costs it incurs in investigating, cleaning up and taking enforcement actions at sites that have soil and groundwater contamination.  Ohio EPA tracks the time its personnel work on these properties and routinely recovers such costs through enforcement actions against the owners or operators of those sites.  Ohio EPA relies on R.C. 3734.20 as the basis of its authority to recover such costs.

The Court in Mass Realty said that Ohio EPA had over reached its statutory authority under R.C. 3734.20 in terms of the types of costs it could recover.  The Court said Ohio EPA's authority is limited to costs the Agency's incurs directly related to "investigation" or "corrective measure."  The Court said that staff time and travel costs were simply "normal office overhead items" for which Ohio EPA does not have the legal authority to recover.

The Court's view of costs recoverable under R.C. 3734.20 is more limited than U.S. EPA's ability to recover response costs under CERCLA (Superfund). 

Enforcement Authority

For decades, Ohio EPA has negotiated resolution of enforcement actions with companies using administrative order settlements.  These orders are referred to as Consensual Director's Findings & Orders ("Consensual F&Os").

Use of agreed settlements is important to Ohio EPA because it lacks the authority to unilaterally impose civil penalties. By negotiating resolutions of enforcement actions, Ohio EPA could impose penalties without having to refer those cases to the Ohio Attorney General's Office.

In virtually all Consensual F&Os issued over the last decade, Ohio EPA routinely cited to R.C. 3745.01 as its legal authority for such actions.  Ohio EPA has argued this statutory provision provides the Agency the ability to enter contracts.  Ohio EPA says Consensual F&Os are contracts- a voluntary agreement to resolve violations between the Agency and companies or individuals.

The Court rejected Ohio EPA's claim.  It said that R.C. 3745.01 did not provide the legal authority for such Orders.  The Court said Consensual F&Os goes beyond the type of contracting authority granted the Agency by the Ohio Legislature.

Potential Impact of the Ruling on Ohio EPA's Enforcement Process

Ohio EPA stopped issuing enforcement reports in 2006.  However, reviewing the charts from the last available report, highlights the significant issue that the Agency faces should Ohio EPA be found to lack the authority to impose penalties through Consensual F&Os.

 If Ohio EPA is forced to refer every case to the Attorney General's Office that it wishes to impose a civil penalty could mean a 400% increase in the number of cases referred.

 

 

 

 

 

Ohio Could be at the Center of a Major Energy Transformation from Coal to Natural Gas

U.S. EPA finally issued its long awaited air pollution regulation aimed at reducing mercury emissions from coal-fired power plants- Mercury and Air Toxics Standards (MATS).  MATS sets specific numeric emission standards for mercury and other air toxics from coal-fire power plants  25 megawatts in size or larger.

MATS will apply to some 1,400 generating units across the country.  The rules carry with them a $9.6 billion dollar price tag.  Power produces have until 2015 to 2016 to comply with the new regulations.

The new regulation, along with a series of earlier federal regulations, have made coal power generation more expensive. Meanwhile, the rich deposits of natural gas in the Marcellus and Utica Shale have kept natural gas prices down. 

Ohio could be at the center of a major shift in power generation.   Right now Ohio's baseload power generation tilts heavily in favor of coal with 86% of its generation from coal and only 2% from natural gas.  However, the scales may be starting to go  in favor of natural gas.  MIT's recent study on natural gas showed its role will increase significantly the coming years in the energy sector. 

On June 8, 2011, AEP released its compliance plan which calls for retirement of coal plants and new natural gas capacity.  According to SourceWatch:

 AEP’s compliance plan would retire nearly 6,000 megawatts (MW) of coal-fueled power generation; upgrade or install new advanced emissions reduction equipment on another 10,100 MW; refuel 1,070 MW of coal generation as 932 MW of natural gas capacity; and build 1,220 MW of natural gas-fueled generation. The cost of AEP’s compliance plan could range from $6 billion to $8 billion in capital investment through the end of the decade

In 2011, many power producers announced they were closing Ohio coal-fire generating facilities.  These include:

  • AEP's Picway
  • AEP's Conesville
  • AEP's Muskingham River
  • Duke Beckjord
  • DP&L Hutchings

According to an Associated Press survey of 55 power producers, more than 32 mostly coal-fired power plants in a dozen states would close. The survey indicated no threat to the reliability of the nation’s power system.

Pennsylvania is about decade ahead of Ohio in its shift toward natural gas due to the fact the Marcellus shale formation is proven and the Utica shale is not.  Pennsylvania offers a glimpse into Ohio's future.

Chart shows Pennsylvania's ten fold increase in natural gas power generation.  In a decade, natural gas has gone from 2% of Pennsylvania's power generation to 17%. 

Meanwhile, coal power generation in Pennsylvania has seen a corresponding drop from 56% to 47% of overall generation in the State.   (Chart- Investment U "Pennsylvania leading the shift to natural gas)

 

Study Reveals Environmental Issues in Oil & Gas Leases

There was an excellent article in the New York Times discussing the issues homeowners and landowners are facing when signing oil & gas leases- Learning Too Late of the Perils in Oil & Gas Leases

The Times reviewed 111,000 oil & gas leases from Ohio, Pennsylvania, New York Texas and West Virginia.  It found many of the leases contained very unfavorable terms for landowners and homeowners who sign up with drilling companies.  Many of the issues pertain to the potential environmental problems that may happen once drilling commences or even after work is finished at the property.

Concerns identified included:

  • less than half the leases compensate for water contamination;
  • many lack language to protect against livestock and crop damage;
  • grant driller broad rights to build road, store chemicals and even leave waste in place once drilling has ceased.

Not discussed in the article are other issues that need to be considered by landowners when negotiating leases. 

First, even if the lease contains language which entitles the landowner to compensation if environmental contamination or other property damage occurs, does the company really have the resources to pay?  Its possible the corporate structure is established to prevent liability from flowing to the parent corporation.  

Second, what happens if you neighbors sue you claiming environmental contamination, nuisance or property damage?  Does the lease provide any guarantee that your attorney costs will be paid? 

Landowners are constantly hearing about the opportunities associated with the Marcellus and Utica shale deposits.  However, are they protecting themselves properly in the event something goes wrong?   

Sackett Case Could Be a "Game Changer" on EPA Enforcement

Back in June, the Supreme Court agreed to hear the case of Sackett v. EPA which could forever change the way EPA enforcement actions are defended.  While the case involves an EPA administrative enforcement order for unauthorized filling of a wetland, the ruling potentially impacts EPA enforcement under all its major statutes- RCRA (hazardous waste), Clean Air Act (CAA), Clean Water Act (CAA), and even CERCLA.

What is at issue?

When EPA believes a violation of its regulations has occurred it has the power to issue an administrative order compelling the alleged violator to remedy the issue.  EPA takes the position that the person/entity subject to that order cannot challenge the Order's validity prior to EPA taking a formal enforcement action in Court (referred to as "pre-enforcement review"). 

EPA's position leaves the person or company subject to the order with a Hobson's choice- either comply and incur the costs upfront or defy the order and face penalties for its noncompliance.

The courts have almost universally upheld EPA's position that its compliance orders cannot be challenged until it takes an enforcement action.  However, the Supreme Court has agreed to take a fresh look at this issue in the Sackett case.

Synopsis of Sackett Case

The Sacketts were building a residential home on their property.  EPA alleges that, during construction of the home, the Sacketts filled a 1/2 wetland without a permit. Filling a wetland without a permit is a violation of Section 404 of the Clean Water Act.   EPA issued an administrative order requiring the Sacketts to remove the fill and restore their property to its original condition.

Sacketts could either spend the money to remove the fill and restore the property or they faced penalties for non-compliance with EPA's order of up to $37,500 per day.  To give an idea of the risk the Sacketts must take if they did not comply, one month's worth of penalties could equal $750,000.

Sacketts petitioned EPA for a hearing to challenge EPA conclusion that their property had a jurisdictional wetland.  EPA did not grant the hearing, so the Sacketts filed suit making the following challenges:

  1. No Bar to Pre-Enforcement Review of EPA's Order-  The Sacketts argue that the Clean Water Act ("CWA"), unlike CERCLA (Superfund), contains no express statutory bar to pre-enforcement review of administrative orders.  Therefore, the should be able to challenge the validity of EPA's order without risking being subject to civil penalties for non-compliance with the Order.
  2. If there is a Bar to Pre-Enforcement Review it Violates Due Process under the Constitution-  In the alternative, if the Court finds that the CWA does contain an implied bar against pre-enforcement review, such a bar violates the U.S. Constitutional guarantee of Due Process.

 Game Changer?

If the Supreme Court agrees with the Sacketts, companies and individuals would be provided much better options when facing an EPA order.  Rather than immediately complying or risking penalties, they could challenge the EPA's order in Court.  Importantly, the challenge could be made before EPA has the legal authority to assert civil penalties for failure to comply with the Order.

This case involves EPA's enforcement authority under all its major statutes (CWA, RCRA, CAA and CERCLA).  This means EPA efforts to immediately compel action under any of these statutes through administrative orders would be practically be eliminated.  It would likely mean that EPA would, in many cases, skip the administrative order step and immediately sue in Court.

Legal Arguments

Implied Bar Against Pre-Enforcement Review

Only CERCLA contains an express bar in the statute against pre-enforcement review of administrative orders issued under the Act.  While the other environmental statutes (CWA, RCRA and CAA) don't contain such an express bar, the Administrative Procedures Act (APA) states that a bar exists if the "the congressional intent to preclude judicial review is fairly discernible in the statutory scheme."

The Ninth Circuit in Sackett said the bar was implied in the CWA because Congress intended EPA to have the authority to remedy violations quickly.  Similar arguments have been successful in other cases challenging EPA's authority involving other statutes.

The Supreme Court will review the Ninth Circuit's determination that an implied bar exists.

Bar Against Pre-Enforcement Review Violates Due Process

Even if the Court finds the implied bar exists, it could still say such a bar violates the Constitution.  At issue will be whether the negative ramifications of receiving a Unilateral Administrative Order constitute property deprivations protected by the Due Process Clause

General Electric ("GE") challenged EPA's Administrative Order authority when it received an CERCLA Order requiring clean up.  GE argued that its stock price could suffer, its brand would take a hit and it could face higher financing costs.  GE said all of these negative ramifications were enough a property deprivation to require due process (i.e. the ability to challenge the Order pre-enforcement).

The D.C. Circuit rejected GE's arguments.  It said GE could always challenge any penalties for noncompliance once EPA brought an enforcement action in Court.  It also found the consequential impacts on GE from receiving the Order were not significant enough to merit due process protection.

Conclusion

The odd thing is that the Supreme Court agreed to hear the Sackett case.  Only three weeks earlier it rejected GE's petition on the Due Process issue.  Also, regarding the existence of an implied bar, there appears to be no split among Circuits on the issue that typically is a basis for the Supreme Court to review an issue. 

The fact that the Court agreed to hear the case suggests some on the Court are uncomfortable with the current state of the law.

New BUSTR Classification for Underground Storage Tanks Meant to Accelerate Clean Ups

One of the issues that can complicate a clean up is if multiple environmental regulatory programs apply to the site.  Even the same type of contamination may be required to be addressed under different programs and different processes.

A prime example of this issue in Ohio is the disconnect between Ohio's Voluntary Action Program (VAP) and the Bureau of Underground Storage Tank Regulation (BUSTR) which applies to petroleum underground storage tanks (USTs).  Until recent legislation, a BUSTR regulated UST was totally ineligible for clean up under the VAP.

As a practical matter, the ineligibility of BUSTR tanks can cause significant delays on a clean up project.  Why?  Because the property owner typically wants to eliminate the BUSTR eligibility issue first by investigating and cleaning up USTs under BUSTR regulations before proceeding with the VAP. 

If you don't front load the BUSTR clean up and proceed with the VAP, you can be left with what is called a "Swiss Cheese" covenant upon completing the VAP- you get a legal release (covenant not to sue- CNS) from Ohio EPA that excludes all areas failing to complete a BUSTR required clean up.

In order to avoid the "Swiss Cheese" CNS, property owners complete their BUSTR Tier 1 investigations and Tier 2 clean up, if needed, under BUSTR regulations first before completing the VAP.  This often prolongs a clean up by months or even up to a year.  It also adds costs to the project.

Does this really make sense when both VAP  and BUSTR clean up standards have been determined to be protective of human health and the environment?

New Legislation Creates BUSTR Class C

In an attempt to partially remedy the delays caused by the conflict between BUSTR and VAP, House Bill 152 amended the law on June 30, 2011.  The new law is effective as of September 28th.

The law states that certain BUSTR USTs- Class C tanks- can be cleaned up under the VAP without completing a BUSTR clean up first. The tank has to be removed in accordance with BUSTR regulations, but the soil assessment and clean up can be performed under the VAP.

A Class C release is defined as a release of petroleum subject to BUSTR laws, where the responsible person for the release is determined by BUSTR to not be a viable person capable of undertaking or completing the required assessment and clean up.  In other words, the responsible party has no money to perform the BUSTR clean up.

BUSTR can determine a UST is a Class C if the following apply:

  • responsible party is deceased or bankrupt
  • a review of financial records demonstrates the responsible party is financially unable to assess and clean up the release

Based upon an Ohio EPA fact sheet on the BUSTR Class C designation, 121 sites have Class C releases already determined (as of July 12, 2011).  

For more information here is a link to Ohio EPA's web page discussing the Class C designation.

Class C Designation Doesn't Go Far Enough

As discussed above, the fact BUSTR clean up regulations can apply to a VAP clean up can result in significant delays, added costs and additional complexities.  Both clean up programs are protective of the environment.  So, why not allow all BUSTR regulated tanks to be closed and cleaned up pursuant to the VAP?

I suppose the State's answer is, in part, if a viable party responsible for the tanks exists they shouldn't be allowed off the hook for their BUSTR clean up obligations.  This would be rewarding a tank owner who ignored its legal obligations.

The only problem with that argument  is that the ineligibility of BUSTR tanks for the VAP really hurts the volunteer more than it does the responsible party.  The volunteer wants an expedited and cost effective clean up. The volunteer often doesn't want to chase down the responsible party before completing its clean up.  Forcing the volunteer to address the outstanding BUSTR obligations first before proceeding with the VAP results in both delays and added costs to the detriment of the volunteer.

Why not at least allow a volunteer to address BUSTR tanks under the VAP without having to demonstrate the tank's responsible party is not viable?  You could still exclude the responsible owner from using the VAP.  This would at least not reward the UST responsible party, but would greatly assist the volunteer.

(Photo:  South Carolina Department of Health and Environmental Control)

Kasich Administration Releases Plan for Reorganization of the Ohio Department of Development

One of Governor Kasich's top priorities is to restructure the Ohio Department of Development shifting some of its core functions to the private sector. The General Assembly passed the JohsOhio Bill which launched an evaluation of the current Department.

The bill allowed for the creation of a non-profit corporation which would assume some of the duties and responsibilities of the existing Department. The bill also required the Director of the Ohio Department of Development to evaluate all powers, functions, and duties of the existing Department and submit a report to the General Assembly that includes recommendations in the following areas:

  • Improve the functions and efficiency of the Department
  • Transfer specified powers, functions, and duties to other existing state agencies or to JobsOhio (private sector entity);
  • Eliminate specified powers, functions, or duties of the Department.

On August 18th, the Administration released its report with the results of its review and proposal for restructuring the Ohio Department of Development to the Ohio General Assembly. In the report, the Administration makes the recommendation to transfer core duties to the non-profit corporation. The Department will also undergo a restructuring relative to those duties and responsibilities that remain with the Department.

JobsOhio Duties

The following functions will be moved to the non-profit corporation:

·        Office of Business Development- responsible for jobs retention, expansion and location. This includes incentive packages to attract or retain companies.

·        Office of Grants and Tax Incentives- responsible for grants and tax incentives associated with business attraction and development.

·        Office of Loans and Services- loan origination and servicing

·        Ohio Tourism- marketing of the tourism in the State

Ohio Development Services Agency

The old Ohio Department of Development will be renamed the Ohio Development Services Agency. It will have three key divisions that will retain a large portion of the remaining functions of the current Department.  The new organization of the Agency will consist of three divisions:

·        Business Services

·        Community Services

·        Operations

Impact on Environmental Grant Programs (Clean Ohio)

The Clean Ohio and Jobs Ready Site programs are the two largest grant programs available for redevelopment of brownfields. These programs will remain government functions and be housed under the Community Services Division of the newly formed Ohio Development Services Agency.

The report includes additional recommendations from stakeholders and staff about changes to the urban development functions including the Clean Ohio program. One possibility apparently not seriously discussed was moving these functions over to Ohio EPA’s brownfield program.  Other improvements suggested including reducing public notice periods and expediting grant administration.

It appears that the Clean Ohio program will largely be untouched by the major transformation at the Ohio Department of Development. The only possibility could be staff reductions. The report contains the following chart showing significant staff reductions. However, the report notes that most of those reductions will be through attrition (i.e. as people leave they won’t be replaced). 

 

 

 

 

 

 

What the Debt Deal Means for EPA....Staff Cuts and Lawsuits

It is no secret that EPA and its wave of recent and forthcoming regulations have stirred up much angst among Republicans in Congress. Many industry groups argue that EPA's rulemaking, especially its anticipated announcement of a much stricter ozone standard, will have a devastating impact on our fragile economy.

While plenty of bills have been floated since the start of the Obama Administration to try and stop EPA from enacting rules, in particular climate change related regulations, those efforts have been unsuccessful. So long as there is a power split between the House and Senate, any proposal to rein in EPA is a non-starter

The best the Republican controlled House has been able to do is call in EPA to testify before House Subcommittees to put pressure on EPA directly. Those efforts have had little success as the regulations continue to emerge from the Agency.

Now comes the debt deal and its initial $1 trillion in budget cuts. Due to political wrangling the cuts come almost entirely from discretionary spending which makes up approximately one-fifth of the total federal budget. Republicans see the cuts an opportunity to push forward their anti-regulatory agenda through significant funding reductions that will effectively prevent EPA from being able to act.

EPA and Renewable Energy Programs on the Chopping Block

Both Republican and Democrat lawmakers have indicated that funding for EPA and other federal agency programs that benefit the environment and renewable energy are surely to get hit and get hit hard.  EPA staffing cuts in programs implementing climate regulations, air programs and water infrastructure will result from the first round of the $917 billion in cuts called for in the debt-ceiling deal.  The Department of Energy will likely see less funding for grants, loans and other programs for renewable energy.

Time Magazine said the hidden Republican agenda in the debt-deal battle was to "gut the EPA."

It was lost in the endless drama of the debt-ceiling negotiations, but last week, the Republicans in charge of the House of Representatives launched an unprecedented attack on the U.S.'s environmental protections. GOP Representatives added rider after rider to the 2012 spending bill for the Environmental Protection Agency and the Interior Department, tacking on amendments that would essentially prevent those agencies -- charged with protecting America's air, water and wildlife -- from doing their jobs.

While the riders were unsuccessful, the dramatic budget cuts seem inevitable.  This from Politico discussing likely cuts to EPA and renewable energy programs:

“These guys are looking at 20 percent real cuts in the next two or three or four years,” said GOP strategist Mike McKenna said. “That’s a big, big hit for an agency to take.”

 Lawmaker Says Cuts will Mean More Lawsuits

While the EPA will have less staff to implement its programs and develop new regulations, EPA still faces statutory mandates to enact rules.  EPA routinely is sued by environmental groups trying to enforce these statutory deadlines.  One such example is the ozone standard which EPA is under a Court order to act.  

Jim Moran, D-Va., ranking Democrat on the House Interior-Environment spending subcommittee predicted an avalanche of new suits seeking to compel EPA to act.

"The irony is that the law isn’t going to change, it’s just that the people whose job it is to implement the law won’t be able to do that, so the environmental issues will play out in the courts instead of administratively or over a negotiating table," Moran told National Journal. "It’s more costly, it’s more time-consuming, and usually it’s less satisfying." 

While reducing funding can slow down EPA's ability to act, its a much messier then changing the law.  As long as the law remains the same, the regulatory environment really won't change for industry.

 

Ohio Debates Purpose and Scope of Great Lakes Compact

Competing bills have been introduced to the Ohio Legislature which are designed to implement the Great Lakes Compact.  The Compact was passed by the other States that border the Great Lakes.  Its fundamental purpose was to establish a new regulatory structure over water withdraws from the Great Lakes.  

In 2008, Ohio passed H.B. 416, by which Ohio officially became part of the Compact.  After all states passed endorsements of the Compact, it was approved by Congress.  While the Compact set up the regional structure for regulation of water withdraws, the nuts and bolts of the program were left to States through implementation legislation. 

If a State fails to pass its own implementation legislation, then the Compact has provisions that automatically become applicable in the State. Ohio wants to avoid the automatic standards and is moving forward now with implementation legislation.

Some of the key issues decided in the Ohio's implementing legislation include:

  • What size withdrawal from Lake Erie or its tributaries will require a permit?
  • What industries or types of withdrawals should be entirely exempt from the water withdrawal regulatory process?
  • If the size of the withdraw triggers the need for a permit, what is the standards for determining issuance of the permit.  Principally, will the withdraw have adverse impacts?
  • Are tributaries meant to be protected under the Compact or was the goal to protect the lakes themselves?

One legislative proposal is being supported by industry and the other is being pushed by environmental groups.  The proposals take vastly different views of the purpose the Great Lakes Compact.

Reasons for Passage of Compact at the Center of Ohio Debate

The seeds for passage of the Compact were laid in 1998 when Nova Group, a Canadian company, saw an opportunity to meet the growing fresh water needs of Asia and received a permit to export 158 million gallons per year of water from Lake Superior. The permit was eventually retracted.

However, the Nova proposal coupled with the growing scarcity of water in the western states raised fears the Great Lakes, which holds 20% of the world's fresh water, would drained by exports to areas in need of fresh water.  The Compact was seen as a means to create a new legal structure to prevent unregulated exports out of the basin. 

As the Compact was developed it added water conservation measures to the mix, including allowing States to regulate withdraws by any business within their boundaries.  The question remained as to how much regulation local businesses who were not exporting water should be subject o under the Compact.  The Compact left that debate up to the individual states who were provided flexibility to shape their own programs.

In Ohio, the debate has become a classic example of economy versus environment.    At its core, the debate centers on whether an enhanced water conservation and regulatory program is needed.

H.B. 231 Sponsored by Rep. Wachtmann (Companion Bill in Senate Sponsor- Sen. Grendell)

H.B. 231 Great Lakes Compact Implementation Legislation is supported by a variety of industry groups (Ohio Chamber, Ohio Manufacturers Association, Ohio Farm Bureau, etc.).  In addition, the Kasich Administration has testified in support of the Legislation. 

Key provisions in H.B. 231:

  1. Trigger thresholds for permit-  As outlined in a recent Dispatch article, the bill would set some of the highest trigger thresholds of any of the States who passed the Compact.  Withdraws from Lake Erie trigger a permit at 5 million gallons per day (gpd).  The lowest trigger is for small high quality streams, with a withdrawal requiring a permit at 300,000 gpd. Michigan has triggers of 2 mgd for lake withdrawals and 100,000 gpd from streams.  Pennsylvania and New York require permits at 100,000 gpd no matter the location of the withdrawal.
  2. Adverse Impacts-  Under the Compact, a permit cannot be issued if it results in adverse impacts.  Under the bill, only impacts to Lake Erie can be considered and not potential impacts to a stream where the withdrawal occurs.  As to lake impacts, the bill defines adverse impacts in the negative- anything at below 90 mgd from the Lake or 45 mgd from groundwater is presumed not to cause an impact.(Note:  the bill uses the term "annual mean runoff" but those figures can be converted roughly to the mgd figures noted above) 90 mgd is a very large withdrawal, there may be only one current user with that large of withdraw.

Key perspectives shaping the legislation:

  • Avoid Creating New Regulations that Do Not Address a Real Problem-   Groups supporting H.B. 231 note the lack of examples where businesses who withdrawal for industrial or agricultural purposes are having a negative ecological impact on the Great Lakes as direct result of that withdrawal.  They argue implementing legislation should focus Compact requirements on preventing exports of water to other states outside the Great Lakes or to other countries.
  • Avoid Creating Additional Regulatory Hurdles for Economic Development-  The implementing legislation establishes a major new environmental regulatory program that could complicate business expansions or prevent new facilities from being built in the Great Lakes region.  If Ohio has less regulation it could put the State at a competitive advantage to attracting new business.

 H.B. 257 Sponsored by Rep. Murray (Companion Bill in Senate- Sponsor Sen. Skindell)

A competing bill H.B. 257, was introduced which is supported by environmental groups and offers a stark alternative to H.S. 231. 

Key Provisions:

  1. Trigger Thresholds-  At the high end, for Lake withdraws the bill sets a trigger level of 2.5 mgd.  The other trigger levels are based on size of the stream and go as low as 10,000 gpd.  These triggers would be close to those enacted by other states, but would be more restrictive for high quality streams.
  2. Adverse Impacts-  The bill defers to rulemaking the standards for determining adverse impacts.  However, the rule's definition of "adverse impact" would have to be based on a science based assessment that includes an analysis of whether stream flows would be protective of aquatic life.  Furthermore, impacts to streams would be considered.

Key perspectives shaping the legislation:

  • Passage of Compact Included Water Conservation-  Those supporting a more restrictive regulatory program argue that water conservation programs and regulation of local withdraws were part of the bargain in passing the Compact.  They argue Congress, with members of states outside the Great Lakes states, wanted to see requirements regulating "local withdraws." That was the bargain struck for there to be broad support of the Compact in Congress.
  • Streams Need Protection from Impacts from Withdrawals-  Environmental groups argue that large withdraws that go beyond a stream or rivers capacity can harm the ecological quality of those streams.  Therefore, Ohio should go beyond protecting just the lake itself and include the rivers and streams that feed Lake Erie.

Editorials across Ohio Newspapers have focused on comparing the standards in H.B. 231 to neighboring states.   

Toledo Blade Editorial on Great Lakes Compact

Cleveland Plain Dealer Editorial on Great Lakes Compact

Akron Beacon Journal Editorial on Great Lakes Compact

 

 

EPA's Self- Assessment of Regulatory Improvements Misses a Golden Opportunity

Back on January 18th President Obama issued Executive Order 13563 requiring federal agencies to consider the impacts of new regulations and to perform a self assessment of existing regulations.  For existing regulations, the President requested the agencies perform an analysis to determine whether rules are "outmoded, ineffective, insufficient, or excessively burdensome." 

After performing self-examinations, each agency was ordered to do the following:

"Within 120 days of the date of this order, each agency shall develop
and submit to the Office of Information and Regulatory Affairs a preliminary
plan,..to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome in achieving the regulatory objectives." (emphasis added)

On May 24th, U.S. EPA issued its preliminary plan, titled "Improving Our Regulations:  A Preliminary Plan for Periodic Retrospective Reviews of Existing Regulations."   EPAs preliminary plan falls way short of the goals articulated in the President's Order. 

Specifically, the preliminary plan calls for very little review of existing regulations to determine if they should be modified or repealed.  In fact, the EPA's plan in some cases calls for new regulations, including:

  • SSO Blending Rule
  • MACT Rules to "reduce emissions through the use of technologies and practices to achieve multiple benefits"

In other cases, EPA calls for additional rules to "clarify" or "streamline" requirements.  Often efforts to clarify simply mean additional regulations increasing complexity:

  • Water Quality standards- EPA intends to clarify antidegredation and  variance provisions, among other requirements;
  • Clean Air Act Title V-  streamline by use of electronic filings

What is missing from EPA's proposal is an acknowledgment that some key regulatory programs should be reviewed to determine if there is simply a more efficient and effective way to achieve the same goals.  Or, whether some regulations are outdated.

EPA Should Listen to the Business Community in Developing its Plan

The President's Order only gave U.S. EPA 120 days to develop a preliminary plan.  That did not leave much time for public input prior to development of the plan.  The EPA's plan is open for public comment until June 27th.  Click here to an EPA link to comment on the plan

Because EPA has already developed its plan pursuant to the Order its much harder to make wholesale changes to plan that is already in writing.  More than likely, EPA will tweak the existing plan some based on the comments it receives.

However, by simply packaging some existing tweaks to rules and policies as its regulatory analysis EPA is simply playing around the edges.  EPA is missing a golden opportunity to look at fundamentally overhauling its more complex and controversial rules.  While I believe there are multiple examples of regulations that deserve a complete overhaul, I think one particular program serves as a shining example: 

New Source Review-  The NSR program is highly complex.   It also involves far too much subjectivity.  Courts have reached vastly different conclusions regarding whether NSR was triggered in cases involving very similar projects and fact patterns.  To make matters worse, NSR has recently been applied to greenhouse gases which raises dramatically the impact of the program.  Perhaps no EPA program symbolizes more the frustration of the regulated community and is in serious need of review/overhaul.

 

Ohio EPA Budget Testimony Sheds Light on New Initiatives

On April 5th, Ohio EPA Director Nally testified on the Agency's proposed budget before the House Finance and Appropriations – Agriculture and Natural Resources Subcommittee.  According to the Director's Testimony, Ohio EPA is not asking for any fee increases.  Ohio EPA's proposed budget calls for a reduction of 11.8% for fiscal year 2012 and 13.8% for fiscal year 2013.  To meet these budget reductions, the Agency is planning on reducing 53 current positions through attrition.

The Director also mentioned the consolidation of the Division of Hazardous Waste Management  (DHWM) into the Division of Solid & Infectious Waste (DSIWM) along with other components in the Division of Emergency Remedial Response (DERR).  DHWM's permitting and inspection activities will be in DSIWM and clean up will be with DERR.

In addition to budget reductions and the consolidation of DHWM, Director Nally also hinted at other initiatives the Agency is planning to undertake in the near future. 

New Ohio EPA Initiatives

“In-lieu Fee” Program –  The Director signaled potential significant change on wetland and stream mitigation requirements.  Typically the 404/401 permit applicant must find appropriate mitigation projects and include those proposals in their permit application.  With an “in-lieu fee" program, the applicant is relieved of the burden of finding a mitigation project .  Rather, the applicant pays a few based on the acreage of wetlands or feet of stream impacted by the project.  The Director has recently announced a "listening session" to hear from the regulated community and others regarding the proposal.

Permitting efficiencies/Permitting Backlog – Most every Ohio EPA Director faces the pressure to get permits out the door faster.  Director Nally is no different.  Upon taking office, he announced this would be a top priority of his administration.  His testimony suggests he will be re-looking at permit-by-rule and general permits to streamline permit approvals.  While the Agency has utilized these tools in the past, business complain that the terms and requirements are too onerous.  Modifying air permitting requirements can present unforeseen issues, as the business community learned after the Courts stepped in blocking major changes adopted in Senate Bill 265.

IT initiatives and Compliance Assistance –  Ohio EPA has moved toward allowing more reports and permitting to be performed using the web or through special electronic systems.  These systems provide flexibility, but businesses complain they can be difficult to use.  The Director announced training sessions to assist businesses with understanding how to use these systems better. 

Brownfields redevelopment – The Director testimony contained a vague reference to a new initiative with brownfield redevelopment.  The current structure has the Ohio Dept. of Development passing out the grant money and Ohio EPA monitoring the clean up.  It will be interesting to watch whether Ohio EPA announces new initiatives in this area to accelerate re-use of  brownfields.

Marcellus and Utica Shale – ODNR has the lead with regard to permitting for gas exploration.  However, U.S. EPA has indicated it will be closely watching and may exercise enforcement authority at sites where drilling has gone wrong or resulted in polluted groundwater.  The Director intends to support ODNR's efforts in light of U.S. EPA's scrutiny.

Expedited Settlement Program (ESP) -- No details were given regarding this new concept to accelerate resolution of enforcement actions.  Here was the Director's testimony...Given my priority of compliance first, I am initiating modifications to the current enforcement process to help drive quicker compliance.  Historically, the existing enforcement options have been time consuming and resource intensive for both the agency and the regulated entity. By developing new steps to be used early in the enforcement process, I hope to resolve uncomplicated cases
expeditiously, putting a facility on notice of a problem, and quickly achieving compliance. 

Perhaps Ohio EPA intends to make modifications at the Notice of Violation (NOV) stage.  The Agency could improve tracking of NOVs and notify businesses more quickly when issues have been resolved.

The Director's testimony did provide a good insight into his early priorities.  Details were not provided so we will need to watch closely as they are released.

Budget and Collective Bargaining Bill Impact Ohio EPA

As reported in the Columbus Dispatch, Ohio EPA has experienced a drop in revenue attributable to reduced fees collected associated with its various programs due to the recession.  Governor Kasich has not proposed any fee increases to restore the loss in funding. 

Fee increases are seen as additional direct taxes on business which runs counter to the Governor theme of restoring a pro-business environment to Ohio.  Here is the discussion of the budget impacts reported in the Columbus Dispatch:

Since 2005, the Ohio Environmental Protection Agency has relied on fees it collects from businesses to fight pollution and clean the state's air, land and water.

It's an arrangement that worked pretty well until the recession hit. EPA officials hoped to collect $130 million this fiscal year, but estimate they'll fall short by $21.4million.

That led to the proposed 11.8 percent overall spending cut in Gov. John Kasich's proposed two-year budget plan, which begins July 1.

The article reports that the loss in revenue will not lead to layoffs, but Ohio EPA will eliminate 14 vacant positions. From some Ohio EPA staff I have talked to the Agency will also experience a slow attrition because it will not filling vacant positions with departures or retirements. 

The Collective Bargaining Bill (S.B. 5) is also having an impact on the Agency beyond the changes to the law.  It has accelerated retirements of long time Agency employees who fear that S.B. 5 is the first step toward additional changes to the State's retirement system (PERS).  Long-time employee (30 years of experience or more) are leaving in hopes of locking retirement benefits under the current structure.

The loss of institutional knowledge will have a greater impact than the elimination of vacant positions or a de facto hiring freeze.  Staff with thirty years of experience have managed numerous challenging sites, permits and issues.  They also understand the history behind various environmental programs.

While young staff can bring a much needed fresh perspective to management.  Experienced staff are often the most capable problem solvers. 

The  cuts and loss of experienced staff also coming at a time when U.S. EPA continues to place more and more work on State EPAs.  The loss of staff couples with additional demands means Ohio EPA will need to do even more with less...to borrow a phrase from former Governor Voinovich.

(Chart from Dispatch Article)

Economic Impact of Permitting Energy Projects

The U.S. Chamber commissioned a study of the economic impact of project that have been delayed or canceled as a result of federal and state permitting processes. As described by the U.S. Chamber on its website:

This study estimates the potential loss in economic value of 351 proposed solar, wind, wave, bio-fuel, coal, gas, nuclear and energy transmission projects that have been delayed or canceled due to significant impediments, such as regulatory barriers, including inefficient review processes and the attendant lawsuits and threats of legal action.

The Chamber does acknowledge you can't blame the fact these project did not move forward exclusively on permitting:

As noted above, we do not believe that all of the subject projects will be approved or constructed even in the absence of any legal and regulatory barriers. Also, as with all economic forecasts, we recognize that there is an element of uncertainty. This could be true here because, to our knowledge, this is the first empirical study to quantify the macroeconomic and employment impact of the regulatory barriers imposed on the development and operation of so many energy projects.

The Study is a first real attempt to aggregate data on the impacts regulations on development. Below is a snaptshot of projects at issue in Ohio.

 

Reorganization of Ohio EPA Underway

Rumors had been swirling that there would possibly be a merger between Ohio EPA and the Ohio Department of Natural Resources (ODNR) in an effort to consolidate programs and reduce staff.  Such a proposal was debated in the prior Ohio Legislature as part of larger plan to reduce the total number of State Agencies.  Its possible that as budget discussion progress that proposal will see new life.

While State Agency mergers remain a possibility, Ohio EPA has already started to reorganize internally. Without an official announcement, word is that the Division of Hazardous Waste Management (DHWM) will be broken apart and portions merged with the Division of Solid and Infectious Waste Management (DSIWM) and the Division of Emergency and Remedial Response (DERR). 

The solid and hazardous waste permit writers and inspectors will be working together under one newly formed Division.  The DHWM clean up staff (RCRA closure and Corrective Actions) will be merged with the DERR staff.

With the dwindling number of permitted hazardous waste (RCRA) facilities, such a reorganization makes practical sense.  This will provide the Agency the opportunity to review work loads and reallocate staff to meet current needs.

Perhaps the most interesting portion of the reorganization to watch will be the merger of the DHWM clean up staff with DERR.  The line between Voluntary Action Program (VAP) clean ups and regulatory clean up in other programs has become increasingly thin.  For example, RCRA Corrective Actions can now be completed by entering the VAP program.

The administrative costs and clean up standards for standard RCRA closures are still much more onerous than VAP clean ups.  Will the merger of this staff lead to a reassessment of how clean ups are conducted?  While federal regulatory requirements still limit the State's flexibility to some degree, there remains the possibility for more common sense and consistent approaches to clean up.

Forbes Doesn't Have a Clue About Cleveland

I'm taking a break from the typical focus of my posts to address an article that just makes me crazy.  Forbes has come out with its annual "Most Miserable City List."  Last year Forbes ranked Cleveland No.1 and this year it dropped to No.10.  This is how Forbes described this year's Cleveland ranking:

Last year's most miserable city, Cleveland, fell back to No. 10 this year despite the stomach punch delivered by LeBron James when he announced his exit from Cleveland on national television last summer. Cleveland's unemployment rate rose slightly in 2010 to an average of 9.3%, but the city's unemployment rank improved relative to other cities, thanks to soaring job losses across the U.S. Cleveland benefited from a housing market that never overheated and therefore hasn't crashed as much as many other metros. Yet Cleveland was the only city to rank in the bottom half of each of the 10 categories we considered.

First of all, I thought Forbes was considered a business magazine.  Since when does a pop culture development like a star basketball player leaving get factored its analysis?  But beyond this simple fact, Forbes has no clue as to what is happening in Cleveland right now.

There is a building boom in downtown Cleveland with over $2 billion dollars worth of construction and this construction boom is occurring during one of the toughest economies.  This new construction includes the Medical Mart and New Convention Center, Inner Belt Bridge Project, Flats East Bank Project, Aquarium, and Casino

The Cleveland Plain Dealer, a paper in my mind notorious for dwelling on negatives, had an editorial this weekend recognizing the positive developments in the Greater Cleveland region.  Those included:

• With evidence growing that manufacturing is actually leading the nation's economic recovery, unemployment in Greater Cleveland has been running a full percentage point below the national average.

• Monster.com just named Cleveland the seventh-hottest job market in the country.

• Venture capitalists poured $221 million into this region last year -- double the pace of such investments in 2009.

• The Milken Institute, a think tank that has consistently ranked Ohio among the least fertile states for innovation, just cited the state as its most improved for entrepreneurial activity.
 

Want even more indications of Cleveland's positive direction?  From reforming local government to visionary new projects, Cleveland is heading in the right direction.

  • Travel & Leisure Magazine just name Cleveland one of the most visionary cities in the world for its urban farming efforts, including its mall to greenhouse transformation.  Only two other U.S. cities were even on the list.
  • Entrepreneur magazine recently ranked Northeast Ohio as one of the hottest entrepreneurial regions.
  • There is an on-going $350 million dollar renovation of the Cleveland Museum of Art transforming it into a showplace museum.
  • Government corruption is part of the criteria Forbes reviews, but it failed to consider recent developments.  Most cities do little about corruption issues and just try and get by.  No doubt Cleveland had its issues, but in November, local voters passed a ballot measure which completely reforms local County government. 
  • Cleveland has an organized and progressive sustainability movement which is serving as a model to other Cities-  Sustainable Cleveland 2019.  Partially in recognition for these efforts, a 2008 ranking had Cleveland jumping 12 spaces to the 16th most sustainable City in the U.S. and a lot has happened since then.
  • According to U.S. News and World Report, Northeast Ohio hospitals ranked in the top 10 of 11 specialty areas, including heart, pediatrics and urology.
  • TripAdvisor.com recently cited Cleveland as one of the top 10 most underrated destinations in the world
  • Cost of Living- A family of four can enjoy amenities and attractions in Northeast Ohio, comparable to any other major city or region in the nation, and save as much as 35%.
  • Site Selection Magazine named Ohio, for the fourth year in a row, as having the most new or expanded private-sector capital projects edging out Texas for the top spot.

One of the biggest issues facing Cleveland is its own inferiority complex.  Articles likes those written by Forbes don't help to lift the region. To combat this issue, leaders organized an on-going branding effort to accentuate all the positive development in the Greater Cleveland region- Clevelandplus. (Check it out for the latest positive developments).

Before a magazine like Forbes creates a rankings that tags a city with a negative image, perhaps it could spend a little more time gathering information.  No doubt it overlooked all the recent developments I have highlighted.   

Maybe Forbes should issue a correction- Cleveland, one of the top 10 most improved Cities.  Just like Clevelanders, instead of dwelling on negatives, perhaps Forbes can start recognizing positive developments in its publication.

 

(Photo:  Innerbelt Bridge Design- ODOT webpage)

Ruling Highlights Benefits of Recent Legislative Changes to Permit Status During Appeal

Recently, the Toledo Blade had a story on the recent court ruling regarding the FDS Coke permit.  The FDS permit has been the subject of numerous appeals which have dragged on years.  The 10th Appellate Court recently issued a ruling sending the FDS  permit back to the Environmental Review Appeals Commission for determination of whether construction had begun in order to maintain the validity of the permit.

The FDS permit had a condition that a continuing program of construction must be commenced to maintain the validity of the permit.  The Court said more information was need to determine whether the permit was still valid.

The ruling is largely irrelevant for future air permits due to a legislative change that allows permits to be valid so long as an appeal is pending. R.C. 3704.03(F)(2)(b)(iv) was revised to expressly suspend the expiration clock for air permits during a third party appeal.  It states: 

(iv) The installation permit is the subject of an appeal by a party other than the owner or operator of the air contaminant source that is the subject of the installation permit, in which case the date of termination of the permit is not later than eighteen months after the effective date of the permit plus the number of days between the date in which the permit was appealed and the date on which all appeals concerning the permit have been resolved.

However, its another legislative change to the appeal process that I want to comment on.  The Blade included the following in the story regarding the FDS Coke decision:

In 2005, former Ohio EPA Director Joe Koncelik took the unprecedented action of modifying the permit while it was still under appeal, softening it for FDS. That action was ruled invalid, prompting Gov. Ted Strickland to seek a permanent change in state law that would allow such modifications to occur. The Ohio General Assembly approved it, giving greater power to state EPA directors.

The permanent change referenced was Am. Sub. H.B. 119 (September 2007) which modified the language in Revised Code 3745.04 to state:

The environmental review appeals commission has exclusive
original jurisdiction over any matter that may, under this
section, be brought before it. However, the director has and
retains jurisdiction to modify, amend, revise, renew, or revoke
any permit, rule, order, or other action that has been appealed
to the commission.

The story implies that the bill was some sort of power grab for Director's of Ohio EPA.  In fact, it is necessary authority given the reality of our permit appeal process. 

It is not unusual for permits to be under appeal for years.  During that time period circumstances can change that warrant modifications, revisions or revocation of a previously issued permit.  It could be changing regulations or environmental conditions that push the need for the change. 

If the law was left as it stood after the ruling saying Director's could not modify permits under appeal, it would effectively freeze these action in time while ever changing environmental conditions and regulations march forward.  The legislative change was a logical reaction to this reality.

 

 

Kasich Names New Directors for Ohio EPA and ODNR

Last week, Governor-Elect Kasich named the new Director's for Ohio EPA (Scott Nally) and the Ohio Department of Natural Resources (David Mustine).  At the press briefing, Kasich reiterated his election theme of returning business growth to Ohio.  This from the Columbus Dispatch:

"These departments are going to send a message to Ohio that we are open for business," Kasich said in naming Scott Nally of Indiana as head of the EPA and former American Electric Power executive David Mustine as director of Natural Resources.

Kasich, a former Republican congressman who will take office Jan. 10, emphasized that he doesn't plan to empower business at "the cost of environmental degradation." But in the next breath, he said he wants to "exploit the wonders of our state."

"When you have something that's really valuable, use it," he said in a briefing at the Rhodes Tower. That includes drilling for oil and gas in state parks and on state land, he said.

Additional Background on Both Appointments

Scott Nally

Current Title: Assistant Commissioner, Office of External Affairs for IDEM

Degree(s): Master of Science from University of Wyoming; Bachelor of Science in Biological Sciences from North Carolina State University

Special license(s): Wastewater Operator certified in Indiana and Virginia; Pesticide Applicator License certified in Indiana

Experience: Regional environmental manager at Perdue Farms Incorporated; numerous publications; held various positions in the environmental and biological sciences; served as president, chairman or board member on various county boards

David Mustine

David Mustine was a Senior Vice President for American Electric Power (AEP) for European business development.  More recently he had his own consulting business. He also served as an investment manager for a Bechtel Group.  He has a B.S. in business from Ohio State, an MBA from DePaul and a MA from Ashland Seminary.

Appointments Consistent with Kasich "Business" Theme

The Governor Elect was all about jobs, jobs and jobs during the election.  He said a key to addressing Ohio's high unemployment rate was creating a better business climate.

Both appointments appear consistent with those themes. Scott Nally served in The Indiana Department of Environmental Management (IDEM) which has been under the leadership of Tom Easterly since 2005 when Governor Mitch Daniels appointed him Commissioner.  Easterly has  had a strong emphasis in running IDEM with an eye toward assisting business in navigating complex environmental regulations. 

Mustine's background at AEP will certainly be viewed with a skeptical eye by many environmental groups in Ohio.  However, he brings a unique business background to a organization whose past two Directors were much more political- both were former State Senators. 

Quick Hits: Boiler MACT Delayed; S.C. to Hear Climate Change Nuisance Case

Boiler MACT Rules-  On December 7th, EPA filed a motion with the Court requesting more time in order to re-propose the Boiler MACT rules and allow for public comment.  In EPA's motion to the Court, EPA sets forth following timetable if its motion is granted to move impending January deadline is moved to April: it will publish revised proposals no later than June 1, 2011, and promulgate the final emission standards no later than April 13, 2002. 

EPA states that more time is needed because significant issues with the proposed standards were raised in the public comment period and it needs more time to evaluate the technical merits of those comments.  This from EPA's motion:

As evidenced by the number of comments, which include a substantial amount of
additional new data, the major source boilers, area source boilers, and CISWI rules will have far reaching effects. Estimates of the monetized value of the public health benefits for all three rules combined range from $18 billion and $44 billion. The economic impacts of implementation of these standards will also be significant and vary by rule. For example, the nation-wide capital cost for the proposed major source boilers rule was estimated to be $9.5 billion in the year 2013, with a total national annual cost of $2.9 billion in the year 2013. The major source and area source boilers rules are expected to apply at almost 200,000 boilers at over 90,000 facilities. On balance, given the broad impact these rules will have, EPA believes that the overall public interest is best served by allowing EPA to re-propose the rules so that the Agency will be able to issue emission standards that are based upon a thorough consideration of all available data and reduce potential litigation risks
.

Many are very relieved that EPA has decided to take a second look at its proposed standards.  The rules have wide ranging applicability and huge costs associated with them.

U.S. Supreme Court to Hear Climate Change Nuisance Case-  The Supreme Court has agreed to hear an appeal of Second Circuit's decision in American Electric Power v. Connecticut.  The lower court allowed several states, municipalities, and environmental groups to pursue a federal public nuisance action against a group of electric power producers for their emissions of greenhouse gases (GHGs). 

The issue of GHG emission contributing to climate change is global issue with millions of sources contributing.  The Court will examine how much a single subset of sources should be exposed to liability for their contribution to the issue.  

The lower court found the Plaintiffs showed the requisite grounds to bring the suit.  The Court found plaintiffs properly identified an injury, presented causation and redressability that should allow the suit to go forward.   The Supreme Court granted the petition to hear the appeal to review this determination.

Also at issue is whether federal nuisance actions have been displaced by U.S. EPA's recent promulgation of climate change regulations (monitoring, Endangerment Finding, Light-Duty Vehicle Rule, Tailoring Rule).  Federal nuisance actions are no longer available if it is determined that their is sufficient federal action to address the issue. 

If the Court finds federal nuisance action has been displaced by EPA's regulations, this may prove to by a phyrric victory for some.  Presumably, federal nuisance is only displaced so long as those regulation remain in place.  What should happen if congressional action delays implementation or litigation successfully overturns the Endangerment Finding?

Regardless, this will be a fascinating case to follow next year.

Ohio EPA + ODNR?

 

 

Ohio is facing a $8 billion dollar budget gap.  Governor-elect Kasich has stressed the need to streamline state government as part of solving the budget crisis as well as making government more efficient. 

During his campaign he already announced one very creative proposal to eliminate the Ohio Dept. of Development.  Could an idea being tested in other states- combining State environmental programs-be a proposal worth considering in Ohio? 

Good in Theory?

A brief overview of the current state structure suggests combining responsibilities would gain efficiencies.  Similar functions and staff with similar capabilities are spread across five different state agencies. 

Combining functions and potentially agencies could benefit those organizations.  Greater efficiency is not only good for business, its good for agencies that are constantly fighting for funding to support their programs.

The counter argument is that combining large government agencies you run the danger of creating even a larger bureaucracy.  Not only could there be even more layers of management the organization could become too large to effectively manage. 

An Overview of the Current Ohio Structure

Most environmental regulatory functions are split between the Ohio EPA and the Dept. of Natural Resources.  However,  there are clean up, regulatory and grant programs related to the environment spread across a total of five different state agencies. 

Here is just a quick look at various functions that have commonalities and are divided up between multiple agencies.

Brownfield Redevelopment and Clean Up

  • Clean Ohio Program- divided between Ohio Dept. of Development and Ohio EPA

Federal Water Pollution Permitting Programs

  • Combined Animal Feeding Operations NPDES (Clean Water Act) permit program-  Department of Agriculture
  • NPDES (Clean Water Act) permit program- Ohio EPA

Litter and Recycling

  • Division of Soil & Water Resources (Previously Divisions of Soil & Water Conservation and Division of Recycling & Litter Prevention)- ODNR
  • Division of Solid Waste Management (manages Solid Waste Management District recycling efforts)- Ohio EPA

Wetlands

  • Environmental Review Program (Wetlands)- ODNR
  • Division of Surface Water (401 and Isolated Wetlands Permitting)- Ohio EPA

Ground Water Management

  • Ground water well information (within Division of Soil & Water Resources)- ODNR
  • Division of Drinking and Ground Waters- Ohio EPA

Surface Water and Lake Erie

  • Soil and Water Conservation programs - ODNR
  • Coastal Zone Management Program - ODNR
  • Great Lake Compact Program (Under development)- ODNR
  • Lake Erie grants program- Lake Erie Commission
  • Surface water Lake Erie Unit- Ohio EPA
  • Surface water regulatory and permitting programs- Ohio EPA

Underground Storage Tanks

  • Bureau of Underground Storage Tanks (BUSTR)- regulation and clean up of releases of hazardous substances from USTs- Dept. of Commerce
  • Clean up of hazardous substances un-related to USTs- Ohio EPA
    Diesel Engine Grant Programs

Diesel Emission Reduction Programs

  • Diesel Emission Reduction Grant Program- Ohio Dept. of Development
  • School bus diesel emission grant program- Ohio EPA

The list of similar functions spread across multiple agencies is probably longer.   In addition to similar regulatory functions, each of these agencies maintain their own Information Technology Offices, HR, Motor Pools, Facilities Management, Press Offices and Director's Offices.  Combining support offices could also gain efficiencies.

Not a Budget Fix

After modifications to its funding strategy, Ohio EPA utilizes no general revenue funds to support its programs.  ODNR has substantially reduced its reliance on GRF.  So combining agencies is not going to do much to fix the $8 billion dollar budget hole.

However, both agencies (as well as the other three agencies) assess multiple fees to business to support their programs.  These fees have regularly been increased to support rising human resource expenses within the Agencies.  Fees, while imposing costs on businesses, have traditionally not received the same political attention as GRF.

While streamlining and combining functions may not solve the $8 billion budget hole, it could avoid or reduce the need to raise fees on businesses. 

For a discussion of what has occurred in other states...continue reading.

Continue Reading...

Long Awaited "Green Guides" Revisions Published

On October 6th, the Federal Trade Commission (FTC) published the final revisions to the 1988 "Green Guides" which provide guidance to companies when making environmental claims regarding their products.  The FTC is seeking public comments on the proposed changes until December 10, 2010, after which it will decide which changes to make final.

The FTC can take legal action against unfair or deceptive marketing practices under Section 5 of the FTC Act.  The 1988 "Green Guides" provide standards for asserting environmental benefits or advantages of products.  However, the 1988 guides were outdated.  Since their release in 1988, the number of companies asserting environmental benefits relative to their products has grown exponentially as well as the type of claims being asserted.

The proposed revisions to the "green guides" (copy here) provide much more detail than the 1988 version.  For the first time issues such as- renewable energy claims, carbon offsets, and use of renewable materials are addressed in the proposed revisions.

Past court decisions highlight the importance of the guides.  Judges have been willing to abide by the guidance set forth in the guides in determining whether a claim constitutes an unfair or deceptive marketing practice. 

Here are some of the key proposed revisions:

  • Stay away from general environmental benefit claims.  These general claims such as "green" or "eco-friendly" are almost impossible to substantiate.  The requirement to justify any green claims is a central requirement of the guides.
  • Third Party Certifications- Seals or endorsement of environmental benefits will receive heightened scrutiny.  Any material connection to the certifier must be disclosed.  Also, a 3rd party certification doesn't eliminate the requirement to substantiate all claims.
  • Renewable Energy-  If a company wants to say they utilize renewable energy in the manufacturing of their product, they better be prepared to provide more detail.  For example, if the company does not have its own wind or solar generation sources and is only purchasing RECs, it must disclose this as part of its claim.  If you generate your own renewable energy, but sell the RECs you cannot claim you use renewable energy.
  • Climate Change-  The concept of "additionality" has entered into marketing claims regarding carbon offsets.  A company cannot claim it is offsetting its carbon emissions if those reductions were required by law.
  • Recycling- Proposed revisions will create various tiers for claiming your product is recyclable.  If the product is only partially recyclable due to lack of access to recycling, then any recycling claim must carry with it certain qualifications.

This is just a brief highlight of the many topics covered in the revised guidelines.  Once the revisions are finalized, the guides will likely cause wholesale revisions to marketing campaigns for products.  While companies will still have a strong incentive to market the green attributes of their products, those campaigns will have lawyers reviewing the labeling, support for claims and mandatory qualifications required under the guides.

 

EPA Releases Interim Guidance on Environmental Justice

In my tenure at Ohio EPA, no issue was as vexing as Environmental Justice (EJ).  In a nutshell, there is a legitimate issue behind the concept of EJ- low income and minorities are exposed to more pollution.  Here is how EPA presents the EJ issues:

Fair Treatment means that no group of people should bear a disproportionate burden of environmental harms and risks, including those resulting from the negative environmental consequences of industrial, governmental, and commercial operations or programs and policies.

The root causes of disproportionate impacts can be traced to the history of how our country developed and expanded. Lower income housing can typically be found near areas zoned industrial.  In our past, this occurred for easy access to plant and factories.  However, this history has carried forward and people living in these communities are disproportionately impacted by pollution. 

However, the difficulty was trying to address this social problem through EPA rulemaking or decision making on permits for new industrial facilities.  EJ issues come into conflict with concepts of urban redevelopment, brownfield redevelopment and creating jobs in low income communities. 

Are we really prepared to declare an industrial area off limits to new factories or manufacturing because the pollution burden is too great?  How would someone establish a standard for what is deemed too great an exposure?

How does EPA "regulate away" this social issue?  EPA struggled with answer to these questions for so long that is has released and than retracted EJ policies over time.  For long stretches the Agency simply put EJ issues on the back burner. 

Now, EPA has released its first new Environmental Justice guidance document in a long time.

EPA is required to develop procedures to evaluate EJ issues in its decision making process as a result of Executive Order 12898 which directs agencies such as EPA to do the following:

 “[t]o the greatest extent practicable and permitted by law,” to “identify[…] and address[…], as appropriate, disproportionately high and adverse human health or environmental effects” of agency programs, policies, and actions on minority populations and low-income populations.

EPA's new fifty page guidance document walks through a complex process for evaluating EJ issues in EPA decision making.  I think the chart below says it all.   Is this really helpful in addressing a complex social issue?

Reading the document, the EJ document is strinkingly similar to past efforts by EPA.  It really seems to boil down to two requirements that fall onto EPA staff.

1.  Ensure participation by low income and minority groups in the EPA decision making process-  the guidance offers suggestions for how to reach out to communities and make sure they are informed regarding EPA actions.

2.  Document that EJ issues were considered in the decision making process-  When EPA issues is response to public comments, it must include a description of the EJ issues that were identified and how those impacted the decision making process.

What the guidance document doesn't address- When EPA is required to take alternative action as a direct result of EJ considerations?  The reason EPA avoids setting such standards is that a uniform "regulation" would be nearly impossible to develop.  Therefore, the new guidance appears to be very similar to past EPA approaches to incorporate EJ considerations in its decision making-

  1. Inform;
  2. Consider the alternatives; and
  3. Document how EJ issues were considered in the decision making process 

E-Waste Recycling Legislation Introduced in Ohio

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.

Recycling Rates E-Waste
Product Units Disposed Trashed Recycled Recycle Rate
T.Vs 26.9  million 20.6 6.3 18%
Computers 205.5 million 157.3 48.2 18%
Cell Phones 140.3 million 126.3 14 10%

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. 

 

Meeting with Serbian Delegation Leads to Interesting Exchange

A few weeks back I was contacted by the Cleveland Council on World Affairs (CCWA) to meet with a small delegation of representatives from Serbia who were interested in learning about environmental regulations, specifically those that relate to solid waste and/or recycling. While I was to be interviewed by the delegation members, I think I learned much more even though I wasn't asking the questions.  Here is a bit of background on the CCWA from their e-mail invitation:

The Cleveland Council on World Affairs (CCWA) hosts international leaders from all over the world year-round. Each year the CCWA hosts over 400 foreign nationals to meet and confer with their professional counterparts and to experience America firsthand. The visitors, who are selected by American Foreign Service Officers and U.S. Embassies overseas, are current or potential leaders in government, politics, the media, education, the arts, business and other fields. This program is sponsored and funded by the United States Agency for International Development (USAID)

Members of the delegation worked in the following areas:

  • Journalist reporting on environmental issues
  • Manager of an electronic waste recycler
  • Member of a trade association for chemical manufacturers
  • Manager for a public utility company
  • Members of Environmental Groups
  • Local Government
  • Green business consultant
  • Small business owner with recycling operation

What jumps out at me from the list above is that you have the same cross-section of organizations and individuals involved in environmental policy in the U.S.  Each individual is interested in representing their own constituents, business or advancing their own environmental principles. 

During the exchange I was asked to describe various regulatory challenges faced by businesses.  I was also asked, generally, about general attitudes of citizens toward protecting the environment or environmental issues.  Here are a few interesting observations or conclusions I made from the meeting:

  1. Management of Electronic Waste-  The delegation was interested to learn that there were no mandates requiring individuals or businesses to recycle electronic waste in Ohio.  I was pressed on this point several times by members of the delegation.  They thought it was interesting that any citizen could carry his old TV out to the corner to be thrown away in a landfill.   Here is Ohio EPA guidance encouraging recycling of electronic waste
  2. Used Tires-  While I think elimination of used tire piles is one of the biggest environmental success stories in the State of Ohio, the delegation provided a different perspective.  The laughed and smirked when told that an individual was allowed to accumulate 23 million tires on their property (Kirby Tire Pile).  For a country known for its sophisticated (if not overly complex) environmental regulations, it is somewhat odd this slipped through the cracks.  As a result, Ohio was forced to enact a new tax on tires and it took nine years to clean up the Kirby Tire Pile.
  3. Renewable Portfolio Standards-  I was asked to provide some pretty detailed information regarding Ohio's Advanced Energy Portfolio Standard, including use of alternative compliance payments and renewable energy credits (RECs).  I was told that Serbia was working toward a RPS standard.  I thought it was interesting that a small European country was developing a very sophisticated energy program.
  4. Jobs and the Environment-  I was asked to comment on general attitude of the public on environmental issues.  Some were interested in understanding how those attitude vary depending on what state you called home.  Overall, there seemed to be general understanding among the delegation of the interplay between the economy and environmental regulation which challenged my perception those debates were less heated in Europe than in the U.S.  Just like in the U.S., I got the feeling there was a wide range of opinions within the room.  Those opinions can change with time as well.  As noted in CNN recent poll on attitudes of Americans towards the root cause of global warming.

Overall, some of my own perceptions or paradigms regarding environmental regulation were challenged.  It usually takes someone or a group of people from the outside to get you to re-examine your own perceptions.  I found it very enlightening even though I didn't get to ask a single question. 

Great Lakes Restoration Initiative Money Could Sit Idle

The Obama Administration proposal for funding the Great Lakes, known as the Great Lakes Restoration Initiative (GLRI), has cleared a key House-Senate conference committee.  The legislation would provide $475 million for a comprehensive Great Lakes restoration and protection initiative.  The funding would be targeted toward the most critical environmental concerns facing the Great Lakes, including invasive species, toxic sediments, non point source pollutants and wildlife habitat loss.

While its wonderful news that increased funding is being directed toward the Great Lakes, there are key components of the legislation that could leave a large portion of the federal money unspent.  Those key components relates to clean up of contaminated sediment under the Legacy Act (the primary vehicle for providing federal funding for removal of sediments).

A recent U.S. EPA Inspector General Report was highly critical of the pace of clean up under the Legacy Act

Contaminated sediment is a massive problem in the Great Lakes. There is an estimated 75 million cubic yards of contaminated sediment. To date, under the Legacy Act, five sediment projects have been completed removing 800,000 cubic yards of contamination.  This represents about 1% of the problem.  As stated in the report, at the current pace, it would take more than 77 years to complete all the contaminated sediment projects in the Great Lakes.  

Now this is where I part ways with the Inspector General Report.  The IG placed the blame for the slow pace of contaminated sediment clean up on the lack of management within the Great Lakes National Program Office (GLNPO).  The real story is the lack of resources at the state and local level.

Cost of removal of contaminated sediment is estimated at $3 billion in federal, state, and local funds. The Legacy Act includes the requirement for a 35% local share before federal funds can be used for clean up. 

 

Sediment projects carry large price tags. Even a small sediment project can cost millions of dollars. While at least five project have been able to cobble together required 35% match, in some cases it took 5-10 years to generate the funds.  In many other instances there are simply not the resources to develop the required 35% match. 

 

The inability to generate this level of funding can be attributed to:

 

  • Limited amount of companies with money to pursue who contributed to the contaminated sediment problem (known as PRPs); 
  • Even if PRPs are identified, complex legal actions or settlements must be pursued which can slow the process for years;
  • Furthermore, the current strain on local and state governments due to economic considerations, especially in the Midwest, makes state/local funding unlikely

As long as the millions in funding for sediment clean up in GLRI includes the 35% local share requirement, major portions of the federal money could remain sitting unused.  Statutory changes to the Legacy Act are needed to provide authority to waive or reduce the 35% local share if it can be demonstrated, for instance that:

 

  • There are no or few PRPs;
  • The project should be fast tracked based on human health or environmental risks:
  • Local or State governments are constrained on their ability to contribute more of the local share

 

Court Orders Full Hearings in Ohio Environmental Appeals

The saga involving the Environmental Review Appeals Commission (ERAC) appears to have come to a conclusion (see prior post). ERAC had limited all administrative hearings to 1-hour in response to deadlines imposed by the Ohio General Assembly.  Today, a Franklin County Common Pleas Court issued an judgment entry today ordering ERAC to: 

  1. Vacate all one hour hearings;
  2. Require full and fair hearings (de novo); and
  3. Declaring the Legislative imposed deadlines as non-binding

While we may now return to the status quo as it relates to the hearing process on environmental appeals, the fallout is not over. 

First, ERAC will now have to go through the process of re-scheduling hearings in hundreds of pending appeals.  The result may be a longer time frame for decisions than what would have occurred had the General Assembly never tried to impose deadlines. 

Second, Legislation is still possible.  The deadlines were imposed for a reason and business groups may try to re-craft deadlines in a more constructive manner.  The Court found the deadlines non-binding because no ramification was imposed on ERAC if it missed the deadline.  Some may see that as a road map to creating effective deadlines. 

My hope is that all of this will bring about positive change in terms of increased funding for ERAC.  Most see that as the real answer.  Now we just have to find the money, which may be no easy task.

Ohio Environmental Appeals Proceed with 1-hour Hearings Despite Court Actions

The latest developments in the saga involving current hearing process in the Ohio Environmental Review Appeals Commission (ERAC) shows chaos rains for the hundreds of appeals pending before the Commission.  As previously covered on this blog (see, A Dozen Companies File Constitutional Challenges to 1-hour Hearings), in response to legislative deadlines imposed on the Commission, ERAC has scheduled or has proposed to schedule 1-hour hearings with no discovery on ALL pending appeals.

Businesses as well as environmental groups were very concerned with ERAC's approach.  The first legal challenge to be filed sought a writ of mandamus from the 10th Appellate Court to compel ERAC to provide for full blown hearings (de novo hearings).  The State, attorneys for ERAC and the attorneys for the 13 companies negotiated an uncontested motion for the writ.  Despite the uncontested nature of the motion, the Court issued a ruling declining to issue the writ.  However, the ruling contained some non-binding language (dicta) regarding due process rights:

Indeed, the clear legal right and clear legal duty identified are uncontroversial-relators have a right to de novo hearings that comply with due process, and the Commission has the duty to provide for such.

Despite the language in the order, ERAC continued to proceed with holding 1-hour hearings.  I even heard a story of one attorney who tried to put a witness on to introduce evidence only to be cut-off after thirty minutes by the Commission telling them "your time is up." 

The attorneys representing the original 13 companies followed the Appeals Court advice and filed a declaratory judgment action in common pleas court.  Shortly after the suit was filed, the Court issued a temporary restraining order (TRO) against ERAC preventing the Commission from holding any of the 1-hour hearings in the 40 upcoming hearings involving the 13 companies.

Even after the TRO was obtained, ERAC continued to proceed with 1-hour hearings in cases that were not covered by the Order.  Chairwoman of the three-member commission, Lisa Eschleman, was quoted in the Columbus Dispatch as saying:  "ERAC is going to proceed as scheduled so that we can comply with the mandate of the General Assembly," 

Because ERAC is continuing to proceed with 1-hour hearings on appeals not involving the 40 subject to the TRO, each Appellant is being forced to go to the Court and request their own TRO. Others have elected just to proceed with 1-hour hearings probably betting that the decision will be overturned on appeal because due process was not provided.

If companies and environmental groups are both upset with the current process, why hasn't the State which represents Ohio EPA and the Ohio Department of Agriculture (among others) been vocal?  I have been told that one reason the State is not objecting to ERAC's process is that the whole mess has forced settlement of a lot of pending appeals.  Another reason for the lack of concern maybe that 1-hour hearings make it much more likely that the decision of the State Agency will be upheld due to the limitations on presenting evidence.

Hopefully, the Court will issue a decision in the declaratory judgment action that results in a permanent fix- restoring full hearings on appeals.  Until such a decision is issued, the situation involving the hundreds of appeals before the Commission remains in a state of flux. 

Meanwhile, the outcry has grown (including me) that the real solution to this problem is to fund ERAC who has a tiny budget. Only problem- where do you get the money in a State which is facing a $1 billion dollar hole in their current budget.  On Tuesday, the Columbus Dispatch issued a editorial against legislative deadlines and supporting more funding:

"Such a delay demands further explanation, but arbitrarily rationing time before the commission is unreasonable. Lawmakers should consider whether the three-person commission, which has only two additional employees, needs more help. Unlike other such boards, ERAC members conduct all their own hearings, do their own legal research and write their decisions."

A Dozen Companies File Constitutional Challenge to 1-hour Hearings on Ohio Environmental Appeals

A discussed in prior posts, the Environmental Review Appeals Commission (ERAC) has taken an aggressive respond to deadlines imposed by the Ohio Legislature compelling ERAC to render decisions in 339 appeals in a matter of months.  It issued orders in all pending appeals canceling prior hearings and establishing an expedited hearing format that consists of the following:

  • one hour hearings- split between the sides equally
  • no presentation of witnesses
  • five page briefs
  • no meaningful discovery (depositions, document production, etc.)

My prior posts resulted in an interview with Gongwer regarding the ERAC deadlines and corresponding orders for expedited hearings.  In the article, Gongwer quoted ERAC Chairwoman Lisa Eschleman who said:

Limits on hearings were necessary to comply with new deadlines for ERAC to issue rulings, which were included in the biennial budget bill (HB 1).
Under the new deadlines, the commission must issue final decisions in 339 appeals by Dec. 15, she said, noting hearings were scheduled through Dec. 1.

"We took 339, divided it by the number of days, minus the number of holidays. It means we had to do six de novo hearings a day," she said. "Physically we had to put a limit on the amount of the time the people can have."

Previously, average de novo hearings at ERAC lasted about five days, she said.

The deadlines imposed in the Budget Bill were not opposed by the business community, only environmental groups sought a veto from Governor Strickland.  However, now that ERAC has responded to the deadlines with its expedited hearings, businesses are scrambling to address the issue.

A lawsuit was filed in the 10th Appellate Court on behalf of over a dozen companies with forty appeals pending before ERAC.  The lawsuit (called a Writ of Mandamus) seeks the Appellate Court to issue an order to compel ERAC to comply with due process requirements.  The suit states:

A writ is necessary because the Commission has embarked upon a process of scheduling hearings de novo in over three hundred pending appeals that limit appellants, including the Relators, to not more than one-half hour to present evidence in support of their appeals, as more fully described below. Such a patent deprivation of Relators’ right to a hearing de novo that adheres to the most basic requirements of due process can only be adequately addressed through issuance of the requested writ.

While such a lawsuit was inevitable, even if successful, it will not on its own address the other two hounded and ninety appeals that also received orders.  Nor will address the hundreds of appeals that are still pending after the initial December 15th deadline. 

Clearly, a broader fix is necessary.  While quicker decisions is an admirable goal, mandated deadlines such as this result in unanticipated consequences.  The real answer to this problem is difficult to implement in tough budget times- more money for ERAC.  The Commission is grossly understaffed and has outdated technology to handles the several hundred cases it has pending. 

Perhaps there is even the need for appointment of more Commissioners to hear all these appeals.  ERAC has three Commissioners and all three hear every appeal.  Appellate Courts have more judges than sit on any one panel for a case, why not ERAC?

Its still clear this problem will become worse without some kind of legislative fix either

  • giving the money ERAC needs
  • increasing its staff and/or Commissioners or
  • simply removing the deadlines and tolerating longer appeals.

Environmental Commission Responds Forcefully to Appeal Deadlines Established by the Ohio Legislature

The Ohio General Assembly included in the state budget a series of deadlines for issuing decisions in environmental appeals. (See prior post) The deadlines apply to the Environmental Review Appeals Commission (ERAC) which hears administrative appeals for hundreds of Ohio EPA and other state Agency actions.  Here are the deadlines imposed on ERAC:

The commission (ERAC) shall issue a written order affirming, vacating, or modifying an action pursuant to the following schedule:

(1) For an appeal that was filed with the commission before April 15, 2008, the commission shall issue a written order not later than December 15, 2009.

(2) For all other appeals that have been filed with the commission as of October 15, 2009, the commission shall issue a written order not later than July 15, 2010.

(3) For an appeal that is filed with the commission after October 15, 2009, the commission shall issue a written order not later than twelve months after the filing of the appeal with the commission.

ERAC has responded in a forceful way to the imposed deadlines.  It has been issuing orders for numerous pending appeals that restructure the normal hearing process.  Typical hearings included discovery, motions and multi-day hearings followed by briefs.  In response to the imposed deadlines ERAC has cut out all discovery, limited hearings to one hour and will accept only five page briefs.  (Here is an example ERAC order on one of the many appeals facing the deadline)

For many complicated environmental cases heard by ERAC it is impossible to present the issues in a coherent and supported manner under this structure.  Based upon the limited amount of information provided to ERAC under this structure suggests they will mostly play it safe in rendering decisions by perhaps deferring to the Agency.

Perhaps this is an example of unintended consequences, but it seems almost certain that this will not be the end of the story.  Additional legislative action to tweak or change the budget language almost seems a certainty.

Ohio Budget Update: Environmental Related Developments

Here is a quick update on some of the important changes that were or were not included in the Ohio Budget (H.B. 1) that impact environmentally related issues and Ohio EPA's budget:

ERAC Deadlines-   As discussed in my previous post, the Ohio Budget included mandatory deadlines placed on ERAC for making determinations on appeals filed before the Commission.  Environmental groups wrote a strong letter to the Governor requesting a veto the ERAC deadlines.  The Governor did not veto the provision, however it appears likely the language will be tinkered with in the Budget Corrections Bill. 

Extension of Deadline for Construction after Issuance of Air PTI:  All air permits for construction and installation of new sources in the State of Ohio include a requirement that the permit expires after eighteen (18) months if construction of the source has not been completed.  An appeal of an air PTI can complicate financing efforts for projects.  Banks may not provide financing while an appeal is pending.  To address this and other issues associated with the construction deadline, the Budget Bill included new language that allows extension of that deadline for any of the following reasons (copy of amendment for exact language):

  • Owner has undertaken a continuing program of installation or modification during the eighteen-month period
  • Owner entered a binding contract for construction of the source within the eighteen month period
  • Director of Ohio EPA issues an extension
  • The air PTI is the subject of an appeal by a third party receives an automatic extension based upon the number of days the permit was under appeal
  • Original permit is superseded by a subsequent air PTI

$1.25 increase in Solid Waste Tipping Fee to fund Ohio EPA:  The municipal solid waste tipping fee was increased by $1.25 a ton which raises the total fee from $3.50 a ton to $4.75 a ton. Of the increase, .25 goes to ODNR for the Soil and Water Conservation Districts. The remaining $1.00 will go to Ohio EPA to support its programs.  

The tipping fee increase was included, in part, to address a reduction in the amount of solid waste going into Ohio's landfills.  As the fee continues to increase, businesses will have a greater incentive to look for alternative ways to dispose of industrial waste other than sending it to a solid waste landfill.  One such option is beneficial use of the material.  Ohio EPA has yet to to release its second draft of the beneficial use rules, however, as costs of disposal increase interest in this option will rise.

Spending Authority Caps:  While the Legislature agreed to restore the $1.25 increase in tipping fees, it failed to remove the spending caps that were placed on Ohio EPA fee accounts in the Senate.  The practical ramification is that even though the accounts have fee revenue, Ohio EPA will be prevented from spending the revenue to support its staff and programs.  Ohio EPA intends to seek removal of the spending authority caps through the Controlling Board.  If Ohio EPA gets support from business groups it appears likely the caps will be removed and possibility of dramatic staff reductions appears unlikely.

Rejection of the Expansion of Renewable Energy Projects-  Ohio has one of the broadest definitions for what qualifies as "renewable energy source" for purposes of meeting the State's Renewable Portfolio Standard (RPS).  Efforts were rejected to expand the definition to include burning of solid waste.

Ohio Budget Includes Directive to Speed Up Decisions on Environmental Appeals

Buried in the thousand pages of the Ohio Budget Bill (H.B. 1) is an amendment that could have a major impact on hundreds of pending and future appeals of environmental decisions.  The budget bill amendment includes language placing strict deadlines for issuing decisions on environmental appeals. The deadlines could impact some very controversial permit appeals, including the Natural Resource Defense Council (NRDC) appeal of AMP Ohio's air permit for its new baseload coal-fired power plant.

By law the Environmental Review Appeals Commission (ERAC) hears and issues decisions on a multitude of actions by Ohio EPA as well as a limited number of actions by other state agencies.  The appeals heard by ERAC include:

  • Ohio EPA rules
  • Ohio EPA enforcement orders
  • Ohio EPA permitting decisions in air, water, solid waste, hazardous waste, etc.
  • Actions by the Boards of Health related to solid waste facilities
  • Ohio EPA decision related to the Voluntary Action Program (brownfields)
  • Orders of the State Fire Marshall relative to underground storage tanks (BUSTR)
  • Water permits and orders issued by Ohio Department of Agriculture for large factory farms

At any given time ERAC will typically have hundreds of appeals pending.  Some appeals can sit before ERAC for years, but this is typically by mutual consent of the parties in the appeal.   However, its not uncommon  in complex cases for hearings to be scheduled 18 to 24 months after appeal has been filed. 

Obviously someone felt concerned that ERAC was taking too long in issuing the majority of its decisions because the Ohio Budget Bill included strict deadlines for making determinations.  Here is the language (click here for the actual H.B. 1 Budget amendment):

The commission (ERAC) shall issue a written order affirming, vacating, or modifying an action pursuant to the following schedule:

(1) For an appeal that was filed with the commission before April 15, 2008, the commission shall issue a written order not later than December 15, 2009.

(2) For all other appeals that have been filed with the commission as of October 15, 2009, the commission shall issue a written order not later than July 15, 2010.

(3) For an appeal that is filed with the commission after October 15, 2009, the commission shall issue a written order not later than twelve months after the filing of the appeal with the commission. 

The language is silent on what happens if ERAC fails to adhere to the deadlines.  If left as is the language could create a right to file an action against ERAC to compel it to issue a decision (called a mandamus action). 

I am told that the legislative intent of the language was to remove the appeal from ERAC's jurisdiction and allow the Court of Appeals to hear the appeal.  If that was indeed the intent it would appear to be unworkable given the Court of Appeals doesn't accept testimony of witnesses.   In addition, there would be no assurance a Court, with its very busy docket, would make a determination any quicker.

Regardless, the new deadlines could have a significant impact.  With so many appeals pending before ERAC, the Commission may be forced to shorten hearings, reduce discovery or take other steps to speed up the decision making process.  It is also possible the deadlines could influence ERAC's level of scrutiny of Agency actions.

Indeed, the language could impact some very controversial actions currently under appeal, including the NRDC appeal of the AMP Ohio air permit on multiple grounds including regulation of greenhouse gases. According to ERAC's docket, a hearing is scheduled to begin March 8, 2010. The original appeal was filed in early spring of 2008. Under the imposed deadlines a decision would have to be issued no later than December 15, 2009.

It is possible that the Legislature will used the Budget Correction Bill to amend the language. Given the fact that the public hasn't had an opportunity to see it or provide input we may yet see substantial revisions. 

(Photo: wallyg/everystockphoto.com)

Budget Update: Ohio EPA Faces Potential Loss of 200 Staff

Its not often you see business associations support budget requests by State agencies, especially when its Ohio EPA.  However, as a result of Senate actions with would cap Ohio EPA's spending authority business groups have sent a strong letter of support to the Ohio Legislature requesting the caps be removed. (Ohio Chamber and Ohio Manufacturer's Letter Re: Ohio EPA's Budget).

When Ohio EPA introduced their budget proposal they requested an increase in solid waste and construction & demolition debris tipping fees in order to maintain the current staff.  Under the proposal municipal waste dumping fees would go from $4.75 per ton from the current $3.50 per ton.  C&D fees would have seen the largest jump, going from $1.70 per ton to $4.40 per ton.Ohio EPA argued the fee increases were necessary to offset increasing costs to maintain as well as adjust for a decline in the amount of waste being disposed in Ohio's landfills. 

The fees became lost in a sea of other fee increase proposed by Governor Ted Strickland designed to help balance Ohio's beleaguered budget.  More so than in budget battles past, the fees were likened to tax increases and many (including Ohio EPA's request) were stripped from the budget.

In a recent Springfield News-Sun article, State Sen. Keith Faber, R-Celina, articulated "fees are hidden taxes" argument.  Here is his quote from the article:

“The EPA is a fee-based entity. They should have to tighten their belts like everybody else. Not just ask for more fees,” Faber said.

Ohio EPA requested that the Legislature restore their spending authority and re-establish the $1.00 fee increase in municipal solid waste fees.  Now this issue will play out in a contentious Conference Committee this weekend.  The Business Group's letter strongly supports the restoration of spending authority, but is silent on any fee increase. 

However, the Senate went one dramatic step beyond stripping out proposed fee increases, it placed a cap on allowable expenditures from existing fees.  In other words, Ohio EPA would be prohibited above the cap from spending money it had already collected from existing fees.

In response, Ohio EPA issued an analysis that if the fees remain out and the caps in place it would be forced to eliminate 200 positions (cut or not fill vacant positions).  Understanding the budget debate needed to be linked to Ohio's ailing economy, the Agency said many of the eliminated positions would likely be in permitting sections which could slow down economic development in the State. Here is the analysis provided by Ohio EPA of the potential staff cuts. 

Division of Air Pollution Control Staff Cuts

Division of Surface Water Staff Cuts

Unfortunately, this issue is a relatively small issue in terms of the $2.4 billion dollar budget gap that the Conference Committee must fill.  Governor Strickland recently proposed very controversial spending cuts to many State programs.  How Ohio EPA will fair in this type of difficult budget climate remains to be seen. 

Ohio EPA is my former employer and I still have the scars from past budget battles.  From my time at the Agency I am a strong believer in the fact the Agency needs to maintain staff to keep up with an ever increasing workload. A workload that many outside the Agency walls don't see or don't fully appreciate. I am crossing my fingers that the Legislature will devote a small amount of time to resolve this issue and will do the right thing.

(Photo: J.Stephen Conn/flickr)

Green New Deal? Green Trinkets and Empty Packages in the Stimulus Bill

I have been following discussion regarding the green elements of the Presidents Stimulus Package, known as the American Recovery and Reinvestment Act of 2009.  There is certainly a lot directed toward environmentally related projects, especially renewable energy development.  Leading some to call these provisions the "Green New Deal." 

What is the real story behind some of the spending that has been reported?  You certainly can find information all across the web and on government sites that simply lists the amount of money in the bill and which program it has been directed.  However, detail about what the money will really be used for can be hard to find.

Bottom line, some provisions are better than others.  For instance, much of the money directed toward U.S. EPA will pay for existing projects.  This includes prior grant applications, clean ups already under contract or projects previously selected for funding.  So, for many of you expecting great new opportunities for EPA related projects, I don't think the bill offers you that much. (with the exception of diesel engine related grants- see below).

The renewable energy side of the equation is a totally different story.  There are continued and new tax incentives as well as new grant opportunities.  There is a lot in the bill and it will literally pay to stay on top of what is available. 

I.  EPA Side- the American Recovery and Reinvestment Act of 2009 specifically includes $7.22 billion for projects and programs administered by EPA

Below is a description of the major areas of funding as well as an analysis of whether this funding presents new opportunities. EPA has established a web site page with helpful links that discuss the opportunities in the Stimulus Bill relative to the money designated for EPA.

Brownfields:  There is over $100 million directed to U.S. EPA's brownfield redevelopment program.  I was intrigued regarding this new slug of money for it could present another great opportunity for clients outside of the Clean Ohio program.  However, after asking for more details from U.S. EPA, I learned that this money is basically already spent.  The U.S. EPA intends to use it for projects that requested funding back in 2008 but were not funded due to an over abundance of proposals.  While its good news more projects are getting funded, I believe U.S. EPA could have even received better project proposals if they would have allowed for new applications. 

Diesel Emission Retrofits Act (DERA):  The Stimulus directed over $300 million in new money to fund the DERA program. DERA is the federal grant program that pays for diesel engine retrofits, repowers and replacements.  Last years allocation was only $50 million for the entire country.  So the Stimulus does provide real, new money for this program.  U.S. EPA intends to spend the money quickly so watch U.S. EPA's website and Recovery.gov to jump in with your project.

Underground Storage Tank (USTs) Cleanups: $200 million was provided to U.S. EPA's Leaking Underground Storage Tanks (LUST) Program, EPA provides resources to states and territories for the oversight, enforcement and cleanup of petroleum releases from underground storage tanks (USTs). EPA estimates that every year 7,570 new releases occur which just adds to the sites that have not yet been completed.  There could be as many as 116,000 sites requiring clean up actions in 2009. However, it appears the funding will be used to help pay for clean ups of abandoned tanks rather than create a new grant program.  Here is additional detail from the from the Convenience Store News regarding the Stimulus package:

Other measures relevant to c-stores include a final approval of $200 million for the Leaking Underground Storage Tank (LUST) Trust Fund, which assists in the cleanup of abandoned gas stations, but will not pay for inspections or to assist state reimbursements programs.

Superfund Cleanups: $600 million was provided to U.S. EPA's superfund program.  However, these funds will be obligated mostly through existing contracts and Interagency Agreements.  In 2009 there could be as many as 20 Superfund sites ready for construction, but not funded due to budget shortfalls. The Recovery funds will begin to address those sites, plus accelerate construction at many of 600 sites where work has been limited in the past by funding constraints.

Clean Water State Revolving Fund and Drinking Water State Revolving Fund: $4 billion for assistance to help communities with water quality and wastewater infrastructure needs and $2 billion for drinking water infrastructure needs. A portion of the funding will be targeted toward green infrastructure, water and energy efficiency and environmentally innovative projects. (guidance on the green infrastructure component)

Ohio EPA has begun soliciting projects for its Drinking Water and Wastewater Revolving Loan Programs.  However, projects must already have been planned and reviewed by Ohio EPA for inclusion on project planning lists.  For instance, drinking water projects must be on the Drinking Water Project Priority List (PPL).

II.  Renewable Energy- the American Recovery and Reinvestment Act of 2009 bill is anticipated to provide around $43 billion for renewable energy in the form of tax breaks and other incentives

The extended entry includes a summary of the renewable energy incentives and investment as assembled by the American Council on Renewable Energy (ACORE). (the link provides you a hard copy of the ACORE document- which does a great job of assembling the relevant information for renewable energy incentives- or see the extended entry for a summary).

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