Algal blooms in Lake Erie have resurfaced as a major problem in recent years. Large algal blooms can even be viewed from satellite images. (Photo: Courtesy of NOAA)

Considerable effort and funding has been directed at studying the causes of the problem. Efforts are now under way to try and address the issue. One such effort is the Ohio Clean Lakes Initiative, which is under the management of the Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency. The purpose of the initiative is to collaborate with farmers and other stakeholders to understand the problem better and develop programs that could address the root causes of algal blooms. 

In an interview with the Ohio Environmental Law Blog, Chris Abbruzzese, Deputy Director of the Ohio Environmental Protection Agency, provided additional background about the Ohio Clean Lakes Initiative.  

From Ohio EPA’s perspective, please provide an explanation of what the Agency believes is happening and where it thinks the problem is coming from?

Thirty years ago farmers, municipalities and industries in the Western Lake Erie Basin made significant efforts to cut the amount of phosphorus and sediment loading into Lake Erie by 50 percent. However, the dissolved form of phosphorus entering Ohio’s waterways from a variety of sources in the area remains an issue, resulting in increased occurrences of algal blooms. Over the last several years the increased frequency of algal blooms has had a significant impact in the Western Basin of Lake Erie, threatening its ecological integrity and creating a more challenging economic climate.

An algal bloom is a rapid increase in the population of algae, often as a result of excess nutrients, primarily phosphorus and nitrogen. Sources of nutrients include fertilizers used on farms and lawns, sewage treatment plants, faulty septic tanks & other home sewage treatment systems and some industrial operations. Some algal blooms can become toxic, potentially making the water unsafe for human contact or consumption. These toxic blooms create nuisance conditions that interfere with recreation and may cause fish kills when dead organic matter decays and depletes oxygen in the water. Public water supplies have water treatment plants that remove algal toxins but high levels of algal organic matter causes taste and odor problems and the formation of harmful by-products that must be controlled. All of this significantly increases the cost of providing safe drinking water supplies.    

 Under the direction of Governor Kasich, the Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency established the Clean Lakes Ohio Initiative this year to address these concerns.

What programs will the Ohio Clean Lakes Initiative establish?

The Ohio Clean Lakes Initiative will: educate and encourage farmers to use good nutrient stewardship; expand the use of on-the-ground practices to help control the displacement of agricultural nutrients; expand the frequency and type of soil testing; and create a monitoring network to implement and access the effectiveness of management practices.

How do farmers view the Initiative?

Ohio farmers are stepping up to the plate to learn more about nutrient management and about modern conservation technologies. The Ohio Department of Agriculture is encouraging farmers across the state to adopt the 4R Nutrient Stewardship model to reduce excess nutrients in the state’s waterways. Good nutrient stewardship not only benefits the environment, it also benefits farmers by saving money and time instead of applying unnecessary or excessive fertilizer to the field.

Studies indicate that the timing of fertilizer application and how well it is incorporated into the soil layer can significantly reduce dissolved phosphorus runoff. Being more conscious of what is going into the fields, when it is going into the fields and how it is going into the fields will maintain agricultural integrity while improving water quality.

Such an initiative could be controversial with the agricultural industry. How is the state trying to work with agri-business?

The Ohio Department of Agriculture and Ohio Department of Natural Resources are exploring partnerships with the agribusiness industry to expand the frequency and type of soil testing being used. For example, the Ohio Department of Natural Resources has worked with farmers in Wood, Henry, Hancock, Putnam and Defiance counties to enroll over 18,000 acres of farmland in a new soil testing initiative.

Due to size of the Lake Erie Basin, this seems like it’s more of a regional issue than an Ohio specific issue. Is there anything being done across the region to address the issue?

Yes. The Ohio Department of Natural Resources, Ohio Department of Agriculture and Ohio Environmental Protection Agency directors met last spring with their counterparts from Michigan and USEPA to discuss issues related to improving water quality in the Western Lake Erie Basin. A lot of good ideas were shared and several other organizations are also interested in improving the water quality in Lake Erie. The International Joint Commission Water Quality Board is in the process of developing a plan to improve water quality in Lake Erie.

Also, in August, Ohio joined Indiana and Kentucky in a pilot multi-state water quality trading plan to reduce the run-off of agricultural nutrients. The Ohio River Basin Water Quality Project Pilot Trading Plan is the first consensus plan for interstate trading to reduce nutrients. The agreement provides businesses and municipalities with a more economically viable option to efficiently reduce nitrogen and phosphorus loading in rivers, lakes and streams while providing the agricultural community more resources to implement conservation and best management practices in a watershed. The experience from this pilot plan can be used in the Western Lake Erie Basin.

 [For more information on the initiative please see cleanlakes.ohio.gov]

 

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.
     

 

When the Title V permitting program was created it was sold as a way to simplify complex air permitting.  U.S. EPA said that it would allow large facilities to aggregate all their air pollution sources under one permit.  EPA indicated this would make it easier for businesses to track their requirements.

What emerged from this "simplified" permitting process was, in fact, permits that were hundreds of pages along.  In addition, new reporting requirements were added onto businesses.  Also, businesses were required to submit an annual certification of compliance which had to be attested to by a responsible official with the company.

The cumbersome nature of the Tittle V permitting process coupled with the new regulatory requirements created a significant incentive for businesses to avoid Title V permitting.  Under Title V, every "major source" of air pollution is required to obtain a Title V permit.  EPA defines "major source" as any facility that is a source of air pollutants that "directly emits, or has the potential to emit, one hundred tons per year of any pollutant."  See, 42 U.S.C. Section 7602(j).

The most common way to avoid Title V for facilities that have a potential emit above 100 tons per year (tpy) is by placing enforceable restrictions (through permitting) that cap emissions below the trigger threshold of 100 tpy.  These permits are referred to as "synthetic minor" permits.  Facilities that cannot reduce actual emissions below 100 tpy can’t use this method to avoid Title V.

What happens when two air sources, owned by the same company, exceed 100 tpy? 

EPA will evaluate whether the sources should be treated as a single source for Title V purposes.  EPA’s guidance in this area is not straightforward and has led to creative interpretations aggregating sources together.

What Constitutes a "Single Facility" for Purposes of Title V Permitting

Under EPA rules, multiple pollutant-emitting activities can be aggregated together and considered a single source for purposes of determining whether the 100 tpy threshold for Title V permitting has been exceeded. Under EPA rules, a single stationary source for Title V purposes must satisfy all of the following factors: (1) the sources are under common control; (2) they are located on one or more contiguous or adjacent properties; and (3) belong to the same industrial grouping.  40 C.F.R. Section 71.2.1

In guidance issued by EPA, the Agency stated that single stationary source determinations should be made on a case-by-case basis and that "in some cases, ‘proximity’ may serve as the overwhelming factor."   See, Memorandum from Gina McCarthy, Assistant Adm’r, to Reg’l Admr’s Regions I-X (Sept. 22, 2009). 

EPA Finds Summit’s Production Plant and Wells One Facility for Purposes of Title V

While EPA guidance says proximity should be the key factor, EPA appears to not always follow its own guidance.  Such was the case in its determination with regard to Summit Petroleum Company ("Summit"). 

EPA found that Summit’s natural gas sweetening plant and the associated production wells were one facility for purposes of Title V. Summit’s plant “sweetens” the “sour” gas from approximately one hundred sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located over an area of approximately forty-three square miles at varying distances from the plant—from five hundred feet to eight miles away

EPA said that Summit’s plant, wells and flares worked together as a single unit that "together produced a single product."  EPA said Summit could not produce any evidence that the plant and wells were not "truly interdependent."  EPA concluded that given the functional interrelationship, Summit’s plant and wells should not be considered separate emissions sources.

Summit challenged the EPA interpretation arguing that EPA’s interpretation ignored the plain language in the regulations that calls for sources to be "adjacent."  The Sixth Circuit Court, in a 2-1 decision, agreed with Summit after reviewing the regulatory history and EPA guidance. The Court said EPA may not ignore the term "adjacent’ when making determinations as to whether to aggregate related sources.  The Court found that the wells distance from the plant – from five hundred feet to eight miles- meant the source were not "adjacent’ for purposes of treating them as a single source under Title V.  See, Summit v. EPA, Nos. 09-4348; 10-4572 (6th Cir. Aug. 7, 2012).

Conclusion

The Sixth Circuit decision goes a long way in reducing the reach of EPA in trying to aggregate separate emission sources for purposes of Title V.  Based upon the ruling, a company with operations in different locations that are related to one another may be able to still avoid Title V permitting so long as there is some geographic separation between the sources.

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. .

On Friday, the Clean Ohio Council met to discuss proposed changes to the Clean Ohio program. As discussed previously on this blog, the Kasich Administration has repeatedly discussed completely revamping brownfield funding in Ohio.  The Administration previously announced its intention to shift the program’s administration to JobsOhio along with the liquor profits that were used to payoff the bonds that created Clean Ohio.  The Administration also has indicated it wants to shift from a grant based program to loans.

JobsOhio is currently caught up in a legal challenge to the constitutionality of the semi-public organization.  As a result of the legal challenge, the Administration has not provided any details as to what brownfield funding will look like under JobsOhio.

Back in May, it was announced that $15 million in new funding would be allocated to the Clean Ohio program as a stop gap measure until the dust settled on the JobsOhio litigation.  Clean Ohio funding has previously been at $37.5 million per year. Many believed that the $15 million would be allocated using the similar Clean Ohio process and procedures that have operated for nearly a decade.

On Friday, staff from the newly created Development Services Agency presented revised policies for new procedures to be utilized in awarding the $15 million in new funding. The proposal presented represents  a seismic shift in how funding decisions will be made.

Here is a quick synopsis of the major changes:

  1. Major Reduction in Funding Available Per Project- The maximum available in funding for assessment grants was reduced from $300,000 down to $200,000.   The maximum available in clean up funding was reduced from $3 million to  $1 million;
  2. Overhaul to the Grant Selection Process-  Previously, there were two grant rounds per year.  Grant applications received during a round competed against one another for funding.  The Clean Ohio Council utilized a scoring process to evaluate each grant application.  The scoring criteria was a mix of points based upon the proposed development, amount of clean up occurring and importance to the local community.  The new proposal would do away with grant rounds and the scoring process entirely.  Under the new system, the Director of Development Services would make awards on a rolling basis utilizing Agency discretion.
  3. Premium on Job Creation-  While the application process is still somewhat murky because the forms have not been released, it appears from documents released Friday that the intention is to evaluate applications based on jobs almost exclusively.  The old scoring system provided placed higher value on clean up of highly contaminated sites as well as their importance to the local community. 
  4. More Funding for Infrastructure–  The new proposal increases the percentage of the grant that can be spent on infrastructure versus environmental clean up from a maximum of 10% up to 25%.
  5. Loans- While the policy changes incorporate the concept of loans, as it stands the new policy would retain the limitation that no more than 15% of funding shall be used for loans. (See, Section 6.02).  Therefore, the Administration, at least for now, wants to see the vast majority of funding in the form of grants versus loans

Concerns were expressed during the Clean Ohio Council meeting on Friday that there had not been any opportunity for the public to comment on the major restructuring of the program. In response, it was decided to allow a thirty day (30) public comment period on the policy changes. 

Click here to access the proposed changes to the Clean Ohio Fund Policies.  Instructions for submitting comments are also available on the web page.

Implications of the Policy Changes

It is pretty easy to acknowledge the Clean Ohio as we know will no longer exist if the proposed changes are adopted following the public comment period. The old program had two grant processes:

a) Clean Ohio Assistance Fund (COAF)-  Allowed for up to $300,000 for assessment and $700,000 for clean up.  COAF applications could be submitted on a rolling basis and decisions were made exclusively by the Director of Development.

b) Clean Ohio Revitalization Fund (CORF)-  Allowed for up to $3 million in clean up funding.  There were typically two rounds per year.  Applications were submitted and competed against one another in each round.  The project applications were scored using a mix of points for development, environmental clean up and importance to the local community.

The proposal presented Friday essentially does away with CORF and moves exclusively to a COAF like approach.  The advantage of the new approach is the speed as to which funding decisions will be made.  However, the disadvantages to this approach are as follows:

  • $1 Million Dollar Cap on Clean Up Grant Funding will mean Only Smaller Clean Up Projects will Get Funded-  The vast majority of the larger development projects involved $2 to $3 million in funding under the old CORF program.  By capping the available cap at $1 million, the larger brownfield redevelopment projects are far less likely to occur.  What could happen is that the only projects getting funded in future will be for asbestos abatement & demolition.  There simply won’t be enough funds to deal with sites that have significant soil or groundwater contamination.
  • No Competition Makes it More Difficult to Ensure the Limited Funds Go to the Best Projects-  Because all grant awards will be made on a rolling basis it will be much more difficult to compare and contrast projects.  No objective scoring criteria will be implemented and the public involvement in selecting projects will be greatly reduced.

 

On August 21st, the D.C. Circuit Court vacated U.S. EPA’s Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule."  This is not the first time EPA has had its power plant pollution reduction rule vacated.  The Transport Rule was the replacement to the Clean Air Interstate Rule (CAIR) which was also struck down by the Court in December 2008.

Here was a paragraph from a blog post I wrote when EPA released the Transport Rule

After two years of development, EPA has released its proposed Transport Rule and is very confident it can withstand legal challenge. They stated in the presentation that their lawyers are confident the structure of the Transport Rule will meet the Courts mandate by ensuring elimination of "significant contribution."

I remember attending this presentation which was made by senior officials with EPA.  EPA said their lawyers had combed through the CAIR decision to make sure the had a lock solid replacement rule.  After the D.C. Circuit Court ruling, the EPA lawyers better go back to the drawing board. 

 Why the Court Struck Down the Transport Rule

The Court found two fundamental flaws with EPA’s Transport Rule:

  1. Greater Reductions Required than a State’s Contribution to Downwind Non-Attainment–  Under the Clean Air Act, State’s are required to eliminate their contribution to non-attainment of federal air quality standards in downwind States.  Under the Transport Rule, EPA quantified State’s downwind contribution, but then imposed controls on power plants that were based on cost.  In some cases EPA admitted the reductions were more than the State’s contribution to downwind non-attainment.  The Court said EPA had no right to force reductions beyond a State’s downwind contribution even if EPA found the reductions to be cost effective.
  2. EPA Ignored the Federalist Structure of the Clean Air Act-  Under the Transport Rule, EPA determined the contribution to downwind non-attainment and then immediately imposed specific reductions on sources in those states.  The Court said that EPA should have stopped after it quantified each State’s contribution to downwind non-attainment and allowed each State to determine on its own how to eliminate that contribution. Each State should have been given an opportunity to chose its own mix of new air pollution reductions through the State Implementation Plan (SIP) process.

The Court decided to keep CAIR in place while EPA tries to figure out a legally defensible rule requiring reductions from power plants.  CAIR now remains in place after it was supposedly vacated by the Courts four years ago.

Implications from EPA’s Ruling

It will be very difficult to craft a legally defensible rule that reduces power plant emissions on a regional basis in order to address the "significant contribution" provisions of the Clean Air Act.  To be fair to EPA, the Agency appears to get conflicting guidance from the Courts.

The Court in the CAIR ruling was sharply critical of EPA because it allowed power plants to avoid necessary reductions through its emission trading provisions.  The provisions of the Transport Rule were designed to specifically address the flaws identified by the Court.  EPA felt the Transport Rule addressed the fundamental flaw of CAIR by ensuring each State eliminated its contribution to downwind non-attainment.  But after two years of evaluation, EPA still issued an invalid rule.

In reaction to the ruling, EPA may give up on designing a regional reduction program for power plants.  It may simply define each State’s significant contribution and leave it up to the State to find the necessary reductions.  If it goes this route it will shift the burden onto the State’s in having to make the really hard choices in terms of emission reductions.  It is much easier for the State’s to simply implement rules mandated by the federal EPA.  Otherwise, the States are left to pick the winners and losers in terms of costly new controls on companies within its borders.   

It also looks like it will be very difficult to develop any sort of power plant rule that has emission trading. EPA would likely have to go back to Congress to obtain clear authority under the Clean Air Act.  Any change to the Clean Air Act seems highly unlikely in today’s political environment.  This is a shame because emission trading has been consistently found to be far more cost effective than traditional command and control regulation.

The Kasich Administration has decided that it wants to put the legal challenges to JobsOhio to rest once and for all. Through legal maneuvering the Administration has put the ultimate question- is JobsOhio constitutional- before the Ohio Supreme Court.  At issue is whether transfer of liquor profits to JobsOhio violates the Ohio Constitutional prohibition on providing credit/funding to a private corporation.

As discussed in the Columbus Dispatch, David Goodman, Director of the Department of Commerce, has refused to sign the Franchise and Transfer Agreement which would transfer Ohio’s liquor distribution operations to JobsOhio.  Director Goodman’s refusal was in reality a legal maneuver to allow the Ohio Supreme Court to hear the legal challenges to JobsOhio.

Though I personally question the validity of these constitutional challenges, I believe my oath of office to uphold the Ohio Constitution precludes me from executing the Franchise and Transfer Agreement until the Ohio Supreme Court is given an opportunity to address the merits of these claims,” Goodman wrote in a letter this week to Mark Kvamme, interim president and chief investment officer for JobsOhio.

Implications for Brownfield Redevelopment in Ohio

The Kasich Administration has made clear that their ultimate goal is for JobsOhio to take over most of the economic development activities from the former Ohio Department of Development.  Those responsibilities would include control over brownfield funding and redevelopment.

JobsOhio officials and the Kasich Administration have hinted that the future of Ohio brownfield funding will be much different than the $40 million per year that has been handed out as grants over the last decade through the Clean Ohio program.  The most controversial aspect of changes to funding is the Administration statements that brownfield redevelopment funding will be more heavily geared towards loans instead of grants.

While it is clear that the legal fight over the constitutionality of JobsOhio has delayed any announcement regarding Ohio’s future brownfield programs.  The Kasich Administration’s midterm budget (H.B. 487) set aside $15 million in funding.  The availability of this funding does not appear to be in any tied to the legal fight over JobsOhio.

Here is the language from H.B. 487 regarding the $15 million in funding:

SECTION 301.21. The items set forth in this section are hereby appropriated out of any moneys in the state treasury to the credit of the Clean Ohio Revitalization Fund (Fund 7003) that are not otherwise appropriated.

Appropriations DEV DEVELOPMENT SERVICES AGENCY

C19500 Clean Ohio Revitalization $ 12,000,000

C19501 Clean Ohio Assistance $ 3,000,000

Total Development Services Agency $ 15,000,000

TOTAL Clean Ohio Revitalization Fund $ 15,000,000

The foregoing appropriation items C19500, Clean Ohio Revitalization, and C19501, Clean Ohio Assistance, shall be used in accordance with sections 122.65 to 122.658 of the Revised Code, and are subject to all provisions of Am. Sub. H.B. 482 of the 129th General Assembly that are generally applicable to such appropriations.

The budget language makes clear that the current Clean Ohio Revitalization Fund (CORF) and Clean Ohio Assistance Fund (COAF) will be used to administer the $15 million in funding.  The language also seems to suggest that the current process for awarding grants under COAF and CORF will be utilized.

While H.B. 487 passed in May, the Administration has yet to announce when the $15 million in funding will be made available. The need for this funding is great.  New brownfield projects are not entering the pipeline due to the lack of assessment money. 
 

A Phase II environmental assessment answers the biggest question with regard to a property- how much will it cost to clean up and is redevelopment feasible.  Unless a property is just perfect for redevelopment, most companies and re-developers are unwilling to pay for the cost of a Phase II assessment out of their own pocket. 

COAF funding for Phase II environmental assessment ended last December.   Since that time no new funding opportunities at the State level have been presented.

While the shape of the State’s brownfield funding may be uncertain until the JobsOhio fight is resolved, the $3 million in COAF funds could be made available immediately so we do not continue to lose momentum on brownfield redevelopment in the State.

It is an issue that just won’t go away…Our incredibly hot summer seems to have re-focused attention on doing something regarding climate change. 

James E. Hansen, director of NASA’s Goddard Institute for Space Studies, in Friday’s Washington Post, announced the release of a new study.  The title of Mr. Hansen’s op-ed piece shows what the new study concludes- Climate Change is Here—and Worse than
We Thought:

In a new analysis of the past six decades of global temperatures, which will be published Monday, my colleagues and I have revealed a stunning increase in the frequency of extremely hot summers, with deeply troubling ramifications for not only our future but also for our present.

This is not a climate model or a prediction but actual observations of weather events and temperatures that have happened. Our analysis shows that it is no longer enough to say that global warming will increase the likelihood of extreme weather and to repeat the caveat that no individual weather event can be directly linked to climate change. To the contrary, our analysis shows that, for the extreme hot weather of the recent past, there is virtually no explanation other than climate change.
 

Media reports from this summer are painting a dramatic picture of the impact from the summer’s heat wave.  Take today’s AP news article – Thousands of Fish Die as Midwest Streams Heat Up:

Thousands of fish are dying in the Midwest as the hot, dry summer dries up rivers and causes water temperatures to climb in some spots to nearly 100 degrees.

About 40,000 shovelnose sturgeon were killed in Iowa last week as water temperatures reached 97 degrees…..The fish are victims of one of the driest and warmest summers in history. The federal U.S. Drought Monitor shows nearly two-thirds of the lower 48 states are experiencing some form of drought, and the Department of Agriculture has declared more than half of the nation’s counties — nearly 1,600 in 32 states — as natural disaster areas. More than 3,000 heat records were broken over the last month.

With new media reports of the impact of the heat wave and new studies emerging confirming the impact of climate change conservatives have started to see its an issue that they need to get ahead of rather than simply resist.

Conservative groups have held meetings this summer to talk about pushing for a carbon tax to replace other taxes while addressing climate change.  A recent CNN article discusses how the proposal to put a tax on certain fossil fuels in gaining support amount some Republicans-  Carbon Tax Gets Unusual Support:

We have to have a system where all forms of energy bear their full costs," President Reagan’s former Secretary of State George Shultz said in a recent interview with Stanford University News. Shultz now heads a task force at Stanford that is currently studying the feasibility of a carbon tax.

For Shultz there are many reasons to support such a tax. One is making fossil fuel energy sources absorb costs that are currently borne out by society at large, such as through higher health insurance premiums or Medicare bills caused by pollution-induced diseases.

He also cites energy independence, as well as global warming, "which is not a matter of opinion, but a matter of fact," he said. "The arctic is melting. A lot of people seem to be scoffing at the idea of global warming, but reality will catch up with them."

The old saying is that elections go the way of the economy.  Perhaps the debate over climate change regulation goes the way of the weather.  

Political ads still try and cast support for cap and trade as a negative for those politicians that supported the proposal in Congress.  However, as long as media headlines are filed with the dramatic impacts of this years hot summer, it will become much more difficult for politicians to cast support for doing something on climate change as a negative. Perhaps that is why conservative groups are trying to get ahead of the curve by exploring policy options that they see as more palatable. 

Let’s say Romney wins the election.  Do you see President Romney, with the current "hot weather" news cycle, repealing all of the EPA climate change regulations without some sort of new policy initiative like a carbon tax?  That just seems far less likely. 

For an interesting discussion as to whether climate change regulation is back on the table, see the National Journal’s Energy Expert’s Blog- Is Momentum Building to Act on Climate Change.

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.

Last month, the D.C. Circuit Court of Appeals rejected challenges to U.S. EPA’s Tailoring Rule which establishes the permitting threshold for greenhouse gas (GHG) pollutants.  On July 3rd, EPA issued a rulemaking that will maintain the current GHG thresholds for the immediate future.  The question is how long before environmental groups push EPA to lower the thresholds?

Tailoring Rule

Pursuant to the Clean Air Act, any facility that emits more the 100/250 tons per year of a pollutant regulated under the Act must go through EPA’s New Source Review  (NSR) program.  As part of NSR, new sources or existing sources that are modified must demonstrate they have installed Best Available Control Technology (BACT) to reduce emissions of each regulated air permit.

Once EPA promulgated the Tailpipe Rule to control GHG emissions from vehicles, GHG’s became a "regulated pollutant" for purpose of NSR.  Once GHGs became a  "regulated pollutant" any source that emits GHGs above applicable thresholds would trigger NSR.

Because GHGs are emitted in much greater quantities than typical Clean Air Act pollutants, EPA was concerned that application of the 100/250 ton per year threshold to GHGs would trigger thousands of permits. EPA and the States did not have the capacity to process that number of permits. 

To address the situation, EPA promulgated the Tailoring Rule to temporarily raise the permitting thresholds.  Under the first stage of the Tailoring Rule, new facilities that emit 100,000 tons per year of carbon dioxide-equivalent and existing facilities that increase their emissions by 75,000 tons per year of carbon dioxide-equivalent will trigger NSR.

EPA Must Eventually Lower GHG Thresholds

In the July 3rd action, EPA said that the States and EPA did not have the capacity to process additional NSR permit that would be required if it lowered the threshold.  Therefore, it kept the trigger thresholds at 100,000 and 75,000 tons per year. EPA pointed to the economy’s impacted on federal and state budgets as one reason that permitting authorities lacked additional capacity to process a greater number of permits.

EPA has announced that it will study the burdens associated with lowering GHG thresholds by April 30, 2015.  EPA has said, following completion of the study, that it will review the permitting thresholds and determine if they should be lowered by April 30, 2016.

The EPA must eventually lower the thresholds.  The 100/250 ton per year trigger threshold for NSR is in the Clean Air Act.  EPA amend the trigger threshold through rulemaking (i.e. the Tailoring Rule).  To support the Tailoring Rule, EPA relied on legal precedent that EPA says provides it authority to adjust the statutory thresholds through rulemaking temporarily.

How Long Before EPA is Pressured to Lower the Thresholds?

In their comments to EPA’s proposed rule, environmental groups urged EPA to lower the permitting thresholds.  In an article appearing in BNA, David Doniger, policy director for the Natural Resource Defense Council’s (NRDC) Climate Center, indicated the organization would support EPA position…for now.

“Certainly, this holding things level knocks the legs out from under the feverish claims that EPA was on the march to get to hotdog stands,” Doniger said. “This signals that there’s great reluctance on EPA’s part to get beyond the largest sources.”

While the NRDC and other groups are willing to hold off for now, its clear that their expectation is EPA will lower the thresholds in 2016.  It will be very difficult for EPA to maintain that there is no ability to process additional permits by that date. 

EPA Applies Plantwide Applicability Limits (PALs) to GHGs

A PAL is a site-specific plantwide emission level for a pollutant that allows the source to make changes at the facility without triggering the requirements of the PSD program, provided emissions do not exceed the PAL level.  Instead of a facility having to analyze each emission unit as a potential modification that may exceed NSR thresholds, the PAL says as long as overall plant emissions form all sources do not exceed the PAL, the facility will not trigger NSR.

In the July 3rd rulemaking, EPA is  revising the PAL regulations to allow for GHG PALs to be established on a CO2e basis.  This should provide more flexibility and reduce the number of permits that would otherwise be triggered through plant modifications.