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

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. 

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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. 

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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.

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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)

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In working on brownfield redevelopment projects, I find that addressing old underground storage tanks (USTs) or hazardous waste (RCRA) units can be one of the trickiest issues to address.

Why are these two issues tricky? Because they complicate the clean up process under Ohio's Voluntary Action Program (VAP). 

Due to the flexibility under the VAP and the fact it provides for more cost effective clean up options than other regulatory  programs, the VAP program is a common way to address environmental liabilities at brownfield sites.  In addition, Ohio's premier brownfield grant program- Clean Ohio- requires the grantee to complete a VAP clean up as part of the grant agreement. 

How do USTs and RCRA issues complicate the VAP and Clean Ohio process?

• Areas where USTs or RCRA units are located are ineligible for a VAP clean up until they are certified closed by the proper regulator
• Clean Ohio grant programs will not pay for clean up of USTs regulated by the State Fire Marshal Bureau of Underground Storage Tank Regulation (BUSTR)
• Clean Ohio grant programs significantly restrict the ability to uses funds to pay for hazardous waste unit (RCRA) closures

Understanding a Projects UST and RCRA Risks

Due to these limitations, property developers and companies need to front load in their analysis of a site's redevelopment potential the property's BUSTR and RCRA issues.  It is essential that a full blown examination of any outstanding UST and RCRA closure be performed as part of the Phase I/Phase II environmental assessment process. 

Key questions relatives to USTs include:

1. Are there BUSTR regulated USTs remaining on site?
2. Were BUSTR regulated USTs that were removed from the site properly closed in accordance with applicable regulations (i.e. did BUSTR issue a "No Further Action" letter)?
3. If "No Further Action" (NFAs) letters do not exist for tanks removed, what does BUSTR consider is needed to properly issue such a certification?
4. What will the costs be associated with receiving a NFA for each tank?
5. How will the process to obtain an NFA impact the timing of your redevelopment project?

Key question for RCRA units on-site can include:

1. What is the closure status of the RCRA unit?
2. What is the size of the unit?
3. What type of sampling is needed to determine the clean up requirements for the unit?
4. What will Ohio EPA require in terms of clean up for that unit?

USTs and RCRA issue do not impose a total barrier to development.  However, it is absolutely essential that in industrial property transactions and brownfield redevelopment projects that you gain a thorough understanding of the outstanding RCRA and UST obligations.

(Photo: Missouri Department of Natural Resources)

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U.S. EPA has released its fiscal year 2011 request for proposals (RFP) for brownfield assessment and clean up grants.   There is a relatively short window of opportunity to file your application- the deadline is October 15, 2010. 

[Click here for access to U.S. EPA's RFP for the brownfield assessment, clean up and revolving loan]

There is a total of $92.9 million available.   While the RFP allows for greater funding under certain circumstances, the basic limit is $200,000 per site for assessment or clean up.  EPA is required to expend 25% of the total amount available for sites contaminated with petroleum. 

Ohio is lucky to have one of the best state brownfield grant programs- Clean Ohio.  Often Clean Ohio is a better option than pursuing the U.S. EPA grant funding because U.S. EPA's program is a national competition.  However, there are certain circumstances that make the U.S. EPA brownfield grant program potentially a better option than Clean Ohio.

COAF Clean Up Funding Exhausted for this Fiscal Year

The Ohio Dept. of Development announced that it is no longer providing funding under the Clean Ohio Assistance Fund (COAF) for clean up of brownfields in fiscal year 2011.  However, assessment funding remains.

COAF can provide provide up to $750,000 in funding for clean up of brownfields.  Projects are evaluated and grants awarded on a rolling basis. 

Clean Ohio Revitalization Fund (CORF) is still available to fund clean up.  It provides up to $3 million in funding per site.  However, a 25% match is required and there are only two CORF rounds per year which typically are competitive.  Therefore, for smaller clean up projects looking for funding in the next year, U.S. EPA's program may be the better option.

Abandoned or Vacant Gas Stations

Under the Clean Ohio policies, removal and clean up of BUSTR (Bureau of Underground Storage Tank Regulation) regulated storage tanks and remediation of leaks from such tanks are not eligible costs under either the Clean Ohio Assistance Fund (COAF) or the Clean Ohio Revitalization Fund (CORF).

For local governments that are trying to deal with abandoned or vacant gas stations in their communities, the U.S. EPA brownfield grant may be their best option.  Communities can seek money for sampling of the site to determine if contamination exists. 

The fear of the unknown (whether contamination exists) acts as a strong deterrent to purchase and redevelopment by private parties.  Once sampling data has been generated, it removes one more impediment to purchase and redevelopment of the site.

Of course if sampling reveals contamination, this can act as a major obstacle to redevelopment.  However, communities can secure clean up funding for these sites under the U.S. EPA program.

Community Assessment Grants

U.S. EPA's program may also be better for communities that are interested in creating a brownfield inventory of various sites within their jurisdiction.  Also, U.S. EPA's program is great for local communities that want to create and fund their own local brownfield assessment programs. 

For example, in Northeast Ohio, the Northcoast Brownfield Coalition was created using U.S. EPA funding.  The Coalition is made up of  the Cuyahoga County Board of Commissioners, the City of Cleveland, the Cleveland-Cuyahoga Port Authority and the Northeast Ohio First Suburbs Consortium.  The Coalition makes provides local grant funding for brownfield projects in Northeast Ohio in amounts up to $30,000.

Below are the applicable limits for assessment grants under the U.S. EPA program:

(Photo:  everystockphoto peasap)

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