Back in April of this year, a citizen group filed a petition that argued Ohio illegally tried to exempt oil & gas companies from complying with federal emergency planning and citizen reporting requirements under the "Emergency Planning and Community Right-to-Know Act ("EPCRA").  EPCRA requires companies that store certain hazardous chemical above certain thresholds to inform local emergency responders, known as "local emergency planning committees" (LEPCs), regarding the chemical storage.  The Act also makes certain information available to the public.   

In 2001, the Ohio General Assembly adopted Ohio Revised Code (R.C.) 3750.081, Compliance by Oil & Gas Facilities: Use of Electronic Database which provided an alternative to EPCRA’s reporting requirements.  The State believed the state and federal reporting requirements were "overlapping" and, therefore, felt R.C. 3750.081 was necessary to eliminate potentially duplicative reporting requirements.  The law stated that the information required under EPCRA could be provided in the Ohio Department of Natural Resources (ODNRs) Division of Oil & Gas annual reporting requirements.

In response to the Citizen’s petition, U.S. EPA determined that R.C. 3750.081 does not supersede the reporting requirements of EPCRA.  Therefore, U.S. EPA determined oil & gas well owners and operators must separately comply with EPCRA.  

On September 11th, the Ohio State Emergency Response Commission (SERC) notified oil and gas well owners and operators of U.S. EPA’s determination.  It clarified that owners and operators must comply with the reporting requirements under EPCRA despite R.C. 3750.081.  The memorandum contained the following guidance:  

  1. EPCRA Initial Reporting Requirements-  If a well owner maintains any hazardous chemical for which a facility must maintain a Material Safety Data Sheet (MSDS) in quantities at or above 10,000 pounds, the owner must provide written notice to the SERC, LEPC and local fire department within 90 days after receiving a shipment or producing the substance at the site.  A lower reporting threshold applies to chemical classified as "Extremely Hazardous Substances (EHS)."
  2. Tier II Chemical Inventory Annual Reporting-  By March 1st of each year, a well owner must provide a chemical inventory report annually if, at any time during the calendar year, the owner stored more than 10,000 pounds of a hazardous chemical or between 1 to 500 pounds of an EHS (depending on the chemical). 
  3. Trade Secret Claims-  Any well owner who does not want to disclose a particular chemical for proprietary reasons, must follow U.S. EPA’s procedures for asserting trade secret protection.  

Failure to comply with EPCRA requirements may result in enforcement by U.S. EPA, including civil penalties of up to $32,500 per day for violations of the Tier II chemical reporting requirements.  It is worth noting that U.S. EPA frequently takes enforcement for failure to comply with EPCRA reporting requirements.

If you believe you may have failed to report, it may be worth evaluating U.S. EPA Audit Policy.  If a company performs a voluntary audit of its compliance an discloses any noncompliance to U.S. EPA, the company may qualify for reduction in civil penalties.  You should consult your attorney before deciding whether to report noncompliance under the Audit Policy.

 

 On September 30th, the Congressional Research Service released a very interesting report titled "EPA Standards for Greenhouse Gas Emissions from Power Plants: Many Questions, Some Answers."  The report was prepared as a review of the effect of recent new Clean Air Act regulations on existing and future coal fired power plants.

How New Source Performance Standards (NSPS) Were Triggered for Coal Plants

Since the Supreme Court’s decision in Massachusetts v. EPA, greenhouse gases have been considered a pollutant under the Clean Air Act.  As a pollutant, EPA has regulatory authority to reduce emissions under the existing authority provided under the Act if it determined regulation was necessary.

In December 2009, EPA followed the Supreme Court decision with its "endangerment finding" with regard to emissions of GHGs. The finding was that GHGs "may reasonably be anticipated to endanger public health and welfare" as a result of climate change.  This key finding triggered the requirement to regulated GHGs under the Clean Air Act.

According to EPA, coal fired power plants roughly account for one third of all man made GHGs emissions in the United States.  Under Section 111 of the Clean Air Act, EPA must set air emission standards for categories of sources that cause or contribute significantly to air pollution.  As the largest source of GHGs, EPA was legally required to move forward with establishing regulations under Section 111.

Once EPA establishes NSPS standards for new sources, under Section 111(d) it must then promulgate NSPS standards for existing sources.

EPA Establishes NSPS Regulations for New Coal Fired Powered Plants 

In 2012, EPA initially proposed NSPS standards for new coal fired power plants.  The EPA received a large number of comments and decided to re-propose NSPS standards in September 2013.  

The re-proposed standard would set a limit of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour (MWh) of electricity generated for coal fired electric generating units (EGUs).  The EPA also set a standard of 1,000 or 1,100 lbs/MWh for new natural gas fired boilers.  The effect of the rule is that new coal fired power plants would have to basically have equivalent emissions to a natural gas plant.

EPA stated in its proposal that a new coal fired power plant produces roughly 1,800 lbs. CO2/MWh. Therefore, new plants would need to achieve a 40% reduction in emissions to be equivalent to natural gas plants.

The only technology that could possibly achieve a 40% reduction is carbon capture and storage (CCS).  However, CCS poses a number of unique challenges.  First, it roughly uses 30% of the energy a plant would generate to transport and store the CO2 below ground.  Second, industry argues that it is still not a proven technology.

The "War on Coal"

Industry believes the EPA’s NSPS proposal for new coal fired power plants effectively ensures no new plants will be constructed.  Between the lost efficiency in having to transport and store C02 and the lack of reliability of CCS as a control technology, coal will no longer be competitive with natural gas for future electric generating units.  For these reasons, the industry has argued that EPA is engaged in a "war on coal."

EPA argues that the technology has been proven and the rule is necessary in order to motivate industry to improve CCS technology.  EPA cites to prior examples where the Clean Air Act spurred technological development at much less cost than anticipated.

While the fight over the NSPS standard for new plants is intense, the real issue is EPA’s future promulgation of an NSPS standard applicable to existing sources.  The average coal-fired power plant is approximately 40 years old.  Requiring CCS on plants that are close to retirement seems highly unlikely.

EPA seems to be suggesting that the NSPS for existing sources will push for efficiency improvements in order to reduce emissions rather than CCS.  Even if the NSPS for existing sources is more flexible than for new plants, it will still increase compliance costs for existing coal plants.  

Key Observations in the CSR Report 

The Congressional Report regarding EPA’s NSPS standards concludes that the argument over the "war on coal" is largely symbolic.  The report notes that the cheap cost of natural gas is really causing the shift away from coal power, not EPA regulations.  The report notes:

"The debate over EPA’s proposed carbon pollution standard for new power plants is largely symbolic, and is characterized by exaggeration on both sides.

  • It is symbolic because this rule by itself will have little impact.  Its real significance is that without the promulgation of a rule for new sources, EPA cannot, under the Clean Air Act, proceed to regulate existing sources.  It sis the standards for those existing plants that may actually reduce the nations’ GHG emissions, and in the process, could have significant impacts on coal-fired electricity.
  • It is exaggerated because both EPA and the affected industries describe the rule itself as having far more impact than it will.

"Gas is projected by most experts to be cheap and abundant for the foreseeable future.  Since the early 1990’s, new coal-fired plants have accounted for less than 10% of new power-generating capacity.  In these conditions, the electric power industry is likely to continue what it has already been doing for two decades:  building gas-fired plants (or relying on renewable sources) when it needs new capacity."

"The coal industry is unhappy with this, and has tended to place the blame for its current difficulties on EPA; but, actually, the market is the key factor in coal’s recent decline…The net result is that coal is simply not competitive with natural gas in most areas."

With so much intensity surrounding the debate regarding EPA’s NSPS standard for new coal fired power plants, the report serves as reality check.

This past summer the Ohio General Assembly passed House Bill 59 which changed various aspects of the regulatory approach toward oil & gas waste material management.  One aspect dealt with under H.B. 59 was the regulation of oil & gas related waste that may be considered technologically enhanced naturally occurring radioactive material (TENORM).  H.B. 59 provided Ohio EPA the authority to adopt rules regarding the regulation of TENORM.

What is TENORM?

To understand TENORM, one must understand what constitutes NORM- naturally occurring radioactive materials.  NORM is radioactive materials naturally present in the environment (i.e. soils, air and water).  NORM emits low levels of naturally occurring radiation and is common to the environment.   

TENORM is naturally occurring radioactive material with radionuclide concentrations that are increased by or as a result of pat or present human activities.  TENORM is regulated by the Ohio Department of Health.   Oil & gas drilling can generate TENORM.

Which oil field wastes are NORM and which are TENORM?

Certain oil & gas related waste is classified as NORM and exempt from regulation.  As set forth in the Ohio EPA Fact Sheet on TENORM (see below), drill cuttings are considered NORM and not TENORM.  Drill cuttings are the mixture of rock, soil and other subterranean matter brought to the surface during drilling of oil & gas production wells.

Oil & gas drilling related waste classified as TENORM include tank bottoms, spent drilling muds and pipe scale.  Here is a description of each of those waste streams:

  • Tank Bottoms- material accumulated in storage tanks associated with the oil & gas drilling
  • Pipe Scale– the build-up of minerals, rocks, oil and other substances that accumulate on the inside of metal casing and tubing used for the production of oil and natural gas.
  • Drilling Mud–  fluid used to cool and lubricate the drill bit, helps stabilize the well bore during drilling and keeps fluids in the formation from entering the borehole

What do the new guidance documents from Ohio EPA require?

As of September 29, 2013, any landfill or solid waste transfer facility must receive sample results of any TENORM regulation waste to ensure that the material doesn’t exceed the regulatory limit of 5 pCI/g above natural background.  The facilities receiving this material must maintain daily logs that identify the waste streams from oil & gas drilling and retain copies of the sampling.

A solid waste transfer facility or landfill that wants to accept TENORM with concentrations above 5 picocuries per gram must receive proper authorizations from ODH and Ohio EPA.  Facilities may receive the material if authorized for purposes of dilution.  However, material above 5 picocuries per gram cannot be disposed of in the landfill. 

Are rules likely to be adopted by Ohio EPA regarding TENORM?

Yes.  Ohio EPA has released a fact sheet soliciting early stakeholder outreach regarding the development of rules regarding TENORM at solid waste landfills and transfer facilities.  The rules would potentially govern:

  • Monitoring leachate and groundwater for radioactive material;
  • Establishing regulations to ensure that TENORM greater than 5 picocuries per gram above natural background is not accepted at the facility.  This include development of detection and prevention plans at landfills or solid waste transfer facilities.

What available guidance documents and fact sheets are available  from Ohio EPA on this issue?

  1. Fact Sheet: Drill Cuttings from Oil and Gas Exploration in the Marcellus and Utica Shale Regions of Ohio (October 2013)
  2. Fact Sheet:  House Bill 59- TENORM Acceptance at Solid Waste Landfills and Transfer Facilities;
  3. Guidance Document:  Impact of HB 59 on Solid Waste Landfills and Transfer Facilities
  4. Municipal Solid Waste Landfill– Daily Log of Operations (Draft)
  5. Solid Waste Transfer Facility– Daily Log of Operations (Draft)

 

An EPA inspector shows up at your facility unannounced and requests access to inspect your facility.  Do you have to let them in?  If you deny access, how likely is it that EPA will quickly gain access?  What is the downside of making EPA  go through the step of legally gaining access by obtaining a search warrant?

Criminal Searches

In responding to the questions above, we are assuming this is an administrative inspection, not a criminal.  Typically, the EPA will have already secured a criminal search warrant before showing up on your property.  Less common, EPA could request your consent to perform a criminal search of your facility.  Under either circumstance, due to the serious nature of criminal inspections, you should contact your attorney immediately.

Here are some things you should do in addition to immediately contacting your attorney:

  • Do not answer any questions without your attorney present;  
  • Employees may, but are not required to answer questions of the inspectors, they have the right to the presence of their own attorney during any interview (the rights of employees during a criminal search warrant is a complicated issue that you should discuss with your attorney);
  • Request a copy of the search warrant as well as the inventory of seized items (if any);
  • Do not consent to the the search of an area or the seizure of materials not identified in the search warrant; 
  • Do not interfere with the government agents if a search warrant is provided;
  • If the warrant allows sampling, request a split sample of any material tested; and
  • Listen to what the inspectors are saying and take notes.

Administrative Searches

EPA, as an administrative agency, is authorized by law to conduct inspections of any property or facility under their jurisdiction.  

Can you deny EPA access for an administrative inspection?

Generally speaking, unless the inspector has obtained an administrative search warrant, you have the right to refuse the inspection and ask the inspector to leave.  The inspector can either try and negotiate a more convenient time to perform the inspection or obtain an administrative search warrant from a court.

While generally you have the right to refuse access when the EPA inspector does not have an administrative search warrant, the standard for obtaining such warrant is not that high.  When EPA is enforcing laws with health, safety, or welfare standards, or enforcing regulatory schemes, EPA only need demonstrate their inspection is supported by "reasonable legislative or administrative standards" (i.e. administrative probable cause).  See, U.S. v. M/V Sanctuary, 540 F.3d 295, 299 (4th Cir. 2008).

Here are some of EPA’s specific statutory inspection authority that provides the agency the right to obtain an administrative search warrant:

  • CERCLA-  EPA is authorized to enter at reasonable times any property where hazardous substances may be or has been generated, stored, treated, disposed of, or transported from.  Even properties where a release is only threatened.  EPA has the authority to collect samples, but must provide the results to the owner.  See, 42 U.S.C. Section 9604(e)
  • RCRA- Similar to EPA authority under CERCLA, EPA may perform inspections at reasonable times and collect samples of any facility where hazardous wastes are or have been generated, stored, treated, disposed of, or transported from.  See, 42 U.S.C. Section 6927(a)
  •  Clean Water Act– Relative to NDPES permitting, EPA has the right to enter any facility which is an effluent source or which is required to maintain records under the Act.   EPA can enter at reasonable time and get access to and copy any records, inspect any monitoring equipment or any other compliance method.  They also can sample effluent. See, 33 U.S.C. Section 308
  • Clean Air Act-   If you own or operate an air emissions source regulated under the Clean Air Act, EPA has broad authority to inspect the facility, monitoring equipment and records. EPA can also sample emissions. See, 42 U.S.C. Section 7414
  • TSCA-  Regulates "chemical substances."  A typical chemical substance subject to regulation under TSCA are PCBs.  EPA has broad inspection authority of any facility that is subject to regulation under TSCA.  EPA may inspect any establishment, facility, or other premises in which chemical substances, mixtures, or products subject to TSCA regulation are manufactured, processed, stored, or held.  See, 15 U.S.C. Section 2610

Note: Courts have found limited exceptions when EPA can perform a warrantless administrative search with regard to enforcement of environmental regulations.  As an example, the New Jersey Supreme Court held the State EPA did not need a warrant before inspecting a property that was subject to the terms of a wetland permit.  See, New Jersey Department of Environmental Protection v. Robert and Michelle Huber

Should you deny access if the EPA inspector does not have an administrative search warrant?

It depends, it is always worth consulting with your attorney to review the particulars of the situation. Also, when the inspector arrives try and gain more information as to the purpose of the inspection. Before contacting your attorney, you should ask the inspector:

  • What they are seeking to inspect or issues are they concerned with?
  • What program are they from? (hazardous waste, air, water or multi-media inspections)
  • Did they receive a complaint or is this a routine inspection?  

As discussed above, the EPA will generally be able to secure a warrant from court to perform an administrative search.  Therefore, if you simply deny access without discussing the situation with your attorney, you run the risk the inspector will conclude you have something to hide.  

When the inspector secures the warrant, they could be inclined to perform a more intense inspection of your facility.  Furthermore, it is more than likely that the EPA inspector requesting access is assigned to your facility and will visit again in the future.  It is important to try and maintain a good working relationship with your inspector.

In conclusion, inspections are routine with regard to environmental regulation.  An inspection can simply confirm your facility is in compliance or it can be the first step in a lengthy and costly enforcement action.  If you are subject to an inspection, it is important to talk with your attorney.
 

So you have decided to retain an environmental consultant to assist with sampling, cleanup or compliance assistance.  Many times businesses have the tendency to review the terms of the proposal itself without paying much attention to the "standard terms & conditions" that are often attached to the proposal.  These standard terms & condition make up the consultant’s contract.  

There are aspects of any consultant’s contract that are definitely worth reviewing.

The bigger the project, the more risk that the contract terms could become a major issue.  Here are some clauses that may appear in a environmental consulting contract that are worth close review:

  1. Limitations on Liability–  Most contracts will place a cap on potential recoverable damages if a claim is made under the contract. Not all such caps are unreasonable. However, I regularly see caps that state the recoverable damages cannot be any greater than the fees paid under the contract.  With environmental work, claims related to negligence or breach of the standard of care can result in hundreds of thousand or even millions in damages.  Limiting recoverable damages to the fees paid is unreasonable.
  2. Indemnity–  Similar to caps on liability, many contracts include "one way" indemnity clauses. Meaning the client must reimburse for damages the consultant suffers as a result of client’s negligence, but no indemnification is provided it the consultant is negligent.
  3. Ownership/Use of Document-Many contracts state that any documents prepared by the consultant remain the sole property of the consultant.  Such language can be broad enough even to include drawings and sampling.  If you pay for the documents, you should have rights to use the documents.  It is fair for the consultant to include a disclaimer that reuse without their consent is at the client’s sole risk, but an absolute prohibition on reuse is problematic.
  4. Payment–  Pay close attention to the terms related to payment.  It is not uncommon for a consultant to quote a price for services, but the contract terms allow them to exceed the quote without getting prior approval.  Also, if you expect the consultant to be paid from grants or a special fund, pay close attention to terms the govern submissions for reimbursement.
  5. Termination-  Standard consultant contract language can try and limit the client’s right to terminate the consultant.  Sometimes the language limits a client’s right to terminate only if there is a breach of the agreement.  The client should have the right to terminate the contract without cause.  If you are unhappy with the consultant’s performance for any reasons, you need the right to get out of the contract.

As an example of recent litigation involving an environmental consulting contract, consider the case involving a clause in a consulting contract that limited the right to bring an action to one year from the date of the contract. Shahin v. I.E.S., Inc., 2013 Mass. App. LEXIS 93 (May 31, 2013) In this case a Massachusetts Appellate Court struck down the contractual provision as unreasonable.  The Court noted a contract can place limits on when a claim can be brought, but those limits must be reasonable.

The Court noted that the "discovery rule" should be allowed to operate.  Under the discovery rule, a claim is tolled if the claimant didn’t have information, with reasonable due diligence, necessary to bring the suit.  In other words, if the client didn’t know they had a claim an issue didn’t appear until two years after the consultant performed their work, the Court found it would be unreasonable to bar such a claim.

Such litigation is an example of how the terms and conditions of an environmental consultant’s contract can potentially have significant impacts.  

 

The title of this blog post may make many in the environmental consulting and legal business laugh.  "Of course not…" most would certainly reply.  With Phase I’s governed by two ASTM guidance documents and the EPA "All Appropriate Inquiries" Rule (AAI), how can there be such variations?

The answer is that a Phase I environmental assessment requires professional judgment.  Not all consultants will look at the same site conditions the same way.  As an example, take a look at the website in which environmental consultants debate various technical issues associated with due diligence. Read the debate over how to handle "dirty floors" or "old dry cleaners" when performing a Phase I. 

In both instances, the consultants couldn’t come to total agreement as to whether these particular situations should be identified in the report as "Recognized Environmental Conditions" (RECs).  Of course, the REC determination is critical because it impacts the process for securing liability protection under U.S. EPA’s Innocent Landowner or Bona Fide Purchaser Defenses.

Changed Definition of a REC

As discussed in a prior post, U.S. EPA published a rule that allows entities to utilize either ASTM E1527-05 or E1527-13 guidance in performing Phase I consistent with the AAI Rule. My prior post reviewed some of the key difference between the two standards.

In considering how professional judgment impacts Phase I reports, examine the proposed changes to the definition of REC.  The changes were intended to "clarify" the definition and promote greater consistency among environmental professionals in writing Phase I reports.

The old definition (E1527-05) defined REC as:

"The presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into ground, groundwater, or surface water of the property.  The term includes hazardous substance or petroleum products even under conditions in compliance with laws."

Comments received during preparation of the revised ASTM standard- E1527-13 were that the definition of REC was confusing or ambiguous.  The changes made to the definition were intended to add clarity.  

The revised definition of REC in E1527-13 is as follows:

"The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property 1) due to any release to the environment; 2) under conditions indicative of a release to the environment; or 3) under conditions that pose a material threat of a future release to the environment."

Let’s take a closer look at some of the differences between the two definitions:

  • "Into structures on the property" versus "environment"–  I’m sure consultants could debate how these terms should be interpreted.  It appears that by removing the "into the structures" language relative to release means that there must be some indication contamination made it into either the soil, groundwater, surface water or indoor air.
    • For example:  simply having staining on a concrete floor may not be enough to conclude there was a release to the "environment." There should be evidence of drains or cracks that could serve as a conduit for contamination.  Of course, as evidenced by my link above, not everyone may agree. 
  • "Ground, groundwater or surface water" versus "environment"–  Some had debated under the old REC definition whether a Phase I included evaluation of releases to indoor air through vapor intrusion.  Most thought the old definition includes indoor air, the new definition and other changes in E1527-13 make clear the indoor air through vapor intrusion is to be considered.

Keep in mind, lawyers don’t write the Phase I report.  They can provide comments or advise their client relative to the conclusions.  It is the consultant who exercises the professional judgment which includes the findings detailed in the Phase I report.

Be Comfortable with the Consultant Selected 

Regardless of changes in E1527-13 which were intended to promote greater consistency, there will still be big differences in how consultants write their Phase I reports.  You simply can’t remove professional judgment when such vague terms are utilized.  

Why should you care?  The exercise of professional judgment could result in major difference in whether potential liabilities are investigated.  Or, such a difference could result in more expensive due diligence when a consultant is very conservative in how they view a site.  

Prior to engaging a consultant to perform a Phase I, it is advisable to go beyond just written proposals.  It would be prudent to interview the consultant to learn about their philosophy in performing Phase I’s.  As the customer, you should be comfortable with that philosophy because it impacts your exposure and bottom line.

When performing such an interview, make sure you talk to the consultant who will actually be performing the Phase I, not just anyone in the company.  There can be wide disparities even among consultants in the same firm.

Ohio EPA has established its own voluntary cleanup program for addressing hazardous substances and obtaining a legal release from liability- the Voluntary Action Program (VAP).  The VAP program has been on the books since 1995. 

When the VAP was created its purpose was to allow the private sector to address historical contamination at industrial or commercial properties.  The key word in the program’s title "Voluntary" means that Ohio EPA does not order companies to complete the VAP.  Rather, the program offers an opportunity to either:

  • Address historical contamination at brownfield sites that may otherwise limit or prohibit redevelopment; or
  • Allow an operating company to address its potential liability for historical contamination at a property it is still utilizing.

In the nearly twenty years of the VAP, approximately 360 properties have completed the cleanup process and obtained an legal release. (You can visit a map of VAP properties here)   In reality, 360 VAP cleanups is not that many considering there are thousands of properties in Ohio with historical contamination.  

Process

A complex set of rules and guidance documents govern VAP cleanups.  Those documents are accessible through Ohio EPA’s website.  Here is a very brief overview of the process:

  1. Hire a Certified Professional (CP)-  In order to perform a VAP cleanup and receive a legal release from the State you must retain a CP.  A CP is an environmental consultant that has been certified by Ohio EPA has being technically capable of completing a VAP cleanup.
  2. "No Further Action" (NFA) Letter–  Unlike other regulatory cleanup programs, VAP is intended to allow a CP to complete a cleanup without Ohio EPA review of sampling and cleanup plans prior to initiating work.  The CP can develop a NFA without oversight by the Agency.  However, if a company wants a legal release from the State, the NFA must be submitted to Ohio EPA. The components of an NFA would likely include: the Phase I/Phase II assessment, a Risk Management Plan, an Operation & Maintenance (O&M) Plan, an O&M agreement and an Environmental Covenant.
  3. "Covenant Not to Sue" (CNS)–  If the company decides it wants a legal release from the State upon completing a VAP cleanup, it must have its CP submit the NFA for review.  If the Ohio EPA agrees that the NFA meets VAP cleanup regulations and the property meets VAP standards, it will issue the CNS. 

Issues/Considerations with VAP Cleanups

While the VAP has been a success, there are complex issues that must be evaluated prior to initiating a cleanup under the program.  Some of those considerations include:

  • Benefits–  Companies looking to address potential liability exposure, the VAP is worth considering. Performing a VAP to address contamination will make property more marketable as most major banks are familiar with the program in Ohio.  Furthermore, the VAP is a key tool for brownfield redevelopment in order to attract new tenants or users of the property who may otherwise be concerned with environmental liability or exposures associated with old industrial or commercial properties.
  • Limits on CNS-  The CNS does not release you from liability from third party property damage or injury lawsuits, including toxic tort claims related to exposure to releases of contamination.  Furthermore, the State takes the view that the CNS is also limited to the property itself, not contamination that has left the property. Finally, the CNS does not include a release from U.S. EPA (although you can obtain certain comfort that U.S. EPA won’t pursue separate action once the VAP cleanup is complete).
  • Eligibility Issues–  Certain regulatory requirements must be addressed before a property can be deemed eligible to participate in the VAP.  Properties subject to State environmental enforcement may not be eligible.  Portions of the property required to be cleaned up under hazardous waste regulations (RCRA) are ineligible until cleanup is completed.  The presence of underground storage tank (USTs) can complicate VAP eligibility. 
  • Complex Cleanup Issues–  Each site cleanup is different.  However, it doesn’t take much for a site to present complex cleanup challenges.  Existing buildings and structures may present vapor intrusion issues.  Off-property migration of contaminated groundwater may also need to be addressed.  Impacts to surface water or other ecological features may need to be evaluated.
  • Costs-  Again, each site cleanup is different.  However, the cost of cleanup can be expensive.  State and local brownfield grant programs can help mitigate those costs.  Even the costs of preparing and submitting the documents to Ohio EPA can be costly.  Due to such cost considerations, some businesses have decided to utilize the VAP standards to address historical contamination without submitting the NFA to the Agency for review. 

Options to Address Environmental Liability in Ohio

The VAP has been a very useful tool for addressing historical contamination.  However, the costs and complexities involved in completing such cleanups make it less attractive, particular for smaller sites with very limited contamination.

As discussed in prior posts, Ohio currently does not have a less formal means of addressing historical contamination, such as Michigan’s Baseline Environmental Assessment Program.   This leaves may buyers or tenants with choosing between costly VAP cleanups or performing due diligence to try and establish the federal "Bona Fide Purchaser Defense."  

ASTM 1527-05 was the first ASTM standard recognized by U.S. EPA as meeting the requirements of the "All Important Inquiries Rule." (AAI)   AAI sets forth the standards and practices necessary for fulfilling the requirements to obtain liability protection (i.e. bona fide purchaser defense) under CERCLA section 101(35)(B).  Most Phase I proposals reference 1527-05.  

ASTM standards have a five year shelf life and a three year grace period.  After the eight year period, the standard can sunset or be renewed.  In preparation for the eight year period coming to an end on 1527-05, an updated version of the standard has been developed- ASTM 1527-13.  On August 15, 2013, U.S. EPA officially recognized the updated version of the ASTM standard for conducting Phase I environmental assessments as satisfying AAI.   

What are the Major Differences Under the New ASTM Standard?

It is interesting to note that the new ASTM is not being billed as really changing anything, rather it just clarifies requirements that were already part of the old standard  (ASTM 1527-05).  However, in my experience at least two "clarifications" will either change or modify practice among many environmental consultants.  Those two areas include:

  1. Vapor intrusion; and
  2. Agency file reviews

Vapor Intrusion

Some have debated whether consideration of vapor intrusion issues was part of ASTM 1527-05. Many attorneys view the definition of "release" to include vapor of contaminants.  However, some consultants took the view that ASTM 1527-05 classified "indoor air quality" issues as non-scope items. 

In my practice, I have reviewed many Phase I reports and discussed findings with a wide variety of consultants.  Many of the consultants took different views with regard to assessing vapor intrusion.

The new ASTM 1527-13 standard makes very clear that vapor intrusion issues are to be considered as part of Phase I environmental assessments.  First, the definition of "migrate/migration" was amended to specifically reference vapor.

"the movement of hazardous substances or petroleum products in any form, including for example, solid, liquid at the surface or subsurface, and vapor in the subsurface.”

The new standard also specifically states that non-scope indoor air quality issues are "unrelated to releases of hazardous substances or petroleum products into the environment." 

Finally, ASTM E2600-10, the Standard Guide for Vapor Encroachment Screening on Property Involved in Real Estate Transactions, is specifically referenced in the new standard.  It is not a requirement for a consultant to use E2600-10, rather the standard is recognized as an acceptable means of evaluating the potential for vapor intrusion.

There seems to be debate among consultants as to whether they will utilize E2600-10.  Some believe it is too onerous.  Regardless, consultants are going to have to evaluate the potential for vapor intrusion as part of Phase I assessments and include a discussion in their report. This does not mean vapor intrusion sampling is required, just that the consultant needs to consider whether site conditions dictate identifying vapor intrusion as a potential "Recognized Environmental Condition" or REC in the findings section of the Phase I report.

Agency File Reviews

The new standard adds a section on agency file reviews which basically states:

  • If the property or adjacent property is identified in governmental records search, the relevant records in the agency files should be reviewed…at the discretion of the environmental consultant;
  • If the consultant doesn’t think the file review is warranted, then it must include its opinion in the final Phase I report;
  • A consultant can review information from other sources (e.g. on-site records, user provided records, local government agency records, etc.)
  • A summary of the information reviewed should be included in the report as well as an opinion as to the sufficiency of those records.

It is not always the case that regulatory files are reviewed.  Inclusion of this new guidance on file reviews will make it more common practice that such reviews take place.  

However, agency records are not always readily accessible.  Often there is a lot of time pressure on completing the Phase I report.  However, if that pressure forces the consultant to include a statement that records were not reviewed and the review was warranted, that could create a huge issue with the Phase I report. 

Conclusion

U.S. EPA still recognizes 1527-05 as consistent with the AAI rule.  However, if the new standard is deemed as simply a clarification, it begs the question as to why any proposal for a Phase I assessment would reference 1527-05 going forward and not 1527-13.  

After recognition of 1527-13 by U.S. EPA this month, vapor intrusion issues will become even a bigger part of due diligence going forward.  In addition, consultants will face increasing pressure to balance finalizing reports to meet client deadlines, with the need for comprehensive reviews of available records. 
 

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.  

Pardon the pun, but toxic algae has been a growing problem in Ohio.  Significant issues with toxic algae have occurred in Lake Erie, Grand Lake St. Marys and elsewhere.  In fact, Ohio EPA recently added a new feature to their webpage in which you can track and identify toxic algae issues around the state:

 On the website, you can now view the whole state and Ohio EPA will identify those waterways in which harmful algae blooms are currently a problem.  

The website includes a list of current public health advisories.  

The increased awareness and issues associated with toxic algae has triggered initiatives to tighten regulations in hopes of eliminating harmful blooms.

Senate Bill 150-  Increased Authority to Regulate Nutrient Discharges from Farms

This summer the Kasich Administration introduced Senate Bill 150, which would provide increased regulatory authority to the Ohio Department of Agriculture and Ohio Department of Natural Resources.  The bill would require farmers to develop "Nutrient Management Plans" that would help ensure best practices were utilized in application of fertilizer to reduce nutrient runoff.  

The bill would also create a fertilizer applicator licensing program with certification and continuing education requirements.  No person could apply fertilizer for agricultural purposes without being properly certified by the state.

The other components of the bill include expansion of the types of fertilizer regulated by the state (current regulatory authority is largely limited to manure).  S.B. 150 would provide regulatory authority over commercially manufactured fertilizers.

Also, the bill would give regulatory agencies greater enforcement authority.  For example, the Director of Agriculture could revoke a persons fertilizer certification if the failed to comply with the regulations.

Ohio EPA Nutrient Regulation

While S.B. 150 attempts to address nutrient run-off from so called "non-point sources" such as farm fields, Ohio EPA has proposed increased regulation to traditional point sources (i.e. wastewater treatment plants).  This spring Ohio EPA released a proposal to target watersheds that may need to have nutrient permit discharge limits included in NPDES permits.  

Under the proposal, waterways would go through a stream survey evaluation process. The following factors would be evaluated under the Agencies proposed "Trophic Index Criteria:"

  • Dissolved oxygen;
  • Nitrogen and phosphorus concentrations;
  • Algal biomass; and
  • The biological community.

By evaluating these criteria, the Agency will assign the waterway a category of either "Impaired", "Threatened" or "Acceptable."  Impaired waterways would likely see the imposition of nutrients discharge limits in future NPDES permits.  

Conclusion

With increased awareness of toxic algae, it appears the state is moving quickly to try and increase regulation of nutrients.  The state is at the early stages of increased regulation.  New proposal are almost certainly forthcoming.