EnviroNotes

DECEMBER 2009

SPCC Rule Amendments Finalized
U.S. EPA Proposes Tougher SO2 Air Standard
EPA's Ploy to Limit its GHG Permitting Workload - the Draft GHG Tailoring Rule
Court Issues Mandate Vacating Exemptions from Emission Limits During Startup, Shutdown and Malfunction Events
U.S. EPA Designates All Indiana Counties as Attainment with 24-Hour PM2.5 NAAQS
U.S. EPA Guidance Memorandum Clarifies Applicability of CERCLA Bona Fide Prospective Purchaser Liability Exemption to Tenants

SPCC Rule Amendments Finalized
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

On December 5, 2008, U.S. EPA amended the Spill Prevention, Control and Countermeasure (SPCC) rule to clarify and streamline requirements and tailor other requirements to specific industry sectors. The Obama administration delayed the effective date of the December 2008 amendments to further review the revisions.

On November 13, 2009, U.S. EPA published a final rule making technical corrections to the December 2008 amendments. 74 Federal Register 58703 (Nov. 13, 2009). Most of the December 2008 amendments were retained. U.S. EPA did remove the following from the December 2008 amendments:

• Exclusions for oil production facilities and farms from the loading/unloading rack requirements;
• Alternative criteria for an oil production facility to be eligible to self-certify a SPCC plan; and
• Exemption for certain produced water containers.

The SPCC rule applies to owners and operators of non-transportation facilities that drill, produce, store, process, refine, transfer, distribute, use or consume oil or oil products that could be reasonably expected to discharge oil to navigable waters or adjoining shorelines. Facilities are required to have a SPCC plan if they have aboveground oil storage capacity greater than 1,320 gallons or completely buried oil storage capacity greater than 42,000 gallons.

The final rule is effective on January 14, 2010. The November 13, 2009 notice and final rule is available at www.regulations.gov/search/Regs/home.html#documentDetail?R=900006480a56ca3.

U.S. EPA Proposes Tougher SO2 Air Standard
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

On November 16, 2009, U.S. EPA issued a notice of proposed revisions to the National Ambient Air Quality Standards (NAAQS) for sulfur dioxide (SO2). U.S. EPA proposes replacing the current 24 hour standard of 140 ppb and annual standard of 30 ppb with a single one-hour standard to be set within a range between 50 ppb and 100 ppb. U.S. EPA will accept comments on the appropriate level for the new one-hour standard and other aspects of the proposed standard for a period of 60 days after the notice is published in the Federal Register. According to U.S. EPA, the largest sources of SO2 emissions are from fossil fuel combustion at power plants (66 percent) and other industrial facilities (29 percent).

U.S. EPA estimates that the new one-hour standard would provide health benefits valued between $16 billion and $100 billion. U.S. EPA has concluded that there is insufficient scientific evidence demonstrating an association between long-term exposure to SO2 and public health effects. As a result, U.S. EPA is proposing to revoke the current annual primary SO2 standard. U.S. EPA believes the one-hour standard will prevent SO2 concentrations from exceeding the current 24-hour standard.

U.S. EPA first set NAAQS standards for SO2 in 1971. The last review of the SO2 NAAQS was completed in 1996 and U.S. EPA chose not to revise the standards. The decision not to set a five-minute standard in 1996 was challenged successfully by the American Lung Association, and the court remanded the standards back to U.S. EPA in 1998. U.S. EPA had not taken any formal action with regard to the remand until this proposal. Under the terms of a judicial consent decree, U.S. EPA must complete its review of the primary SO2 standard by June 2, 2010.

U.S. EPA expects to issue final attainment and nonattainment designations in June 2012. States will have until the winter of 2014 to submit their state implementation plan revisions. Attainment with the one-hour standard will be required by summer 2017.

Based on 2006-2008 monitoring data, U.S. EPA believes that 13 Indiana counties (Daviess, Floyd, Fountain, Gibson, Jasper, Lake, Marion, Morgan, Porter, Vanderburgh, Vigo, Warrick and Wayne) will be in nonattainment if the one-hour standard is set at the lowest level of 50 ppb. Currently all Indiana counties are in attainment with the existing 24-hour and annual SO2 standards.

The proposed rule can be found at www.epa.gov/air/sulfurdioxide/pdfs/20091116so2NPR.pdf

EPA’s Ploy to Limit its GHG Permitting Workload – the Draft GHG Tailoring Rule
By Larry Kane, Partner, Environmental Law Department, Bingham McHale LLP

Can climate change regulation go too far, even for its proponents? Apparently the U.S. EPA believes so, judging by its proposed “Greenhouse Gas Tailoring Rule,” published in the October 27, 2009, 74 Fed. Reg. 55292. This proposed rule is intended to mitigate the Federal Register, Agency’s (and state air quality agencies’) Clean Air Act (CAA) permitting workload under the Prevention of Significant Deterioration (PSD) program and the Title V operating permit program that will ensue if U.S. EPA finalizes two other pending administrative actions: (1) a proposed endangerment finding relating to greenhouse gas (GHG) emissions from mobile sources; and (2) a proposed rule to regulate GHG emissions from new mobile sources.

Before delving into the GHG Tailoring Rule proposal, a brief background overview may be helpful. In Massachusetts v. EPA, 549 U.S. 497 (2007), the U.S. Supreme Court found carbon dioxide (CO2) and other GHGs to be air pollutants under the CAA and mandated U.S. EPA to decide, pursuant to Section 202(a) of the CAA, whether mobile source emissions of GHGs are an endangerment to the public health or welfare. This decision set in motion a series of U.S. EPA actions that are likely to lead to broad regulation of GHG emissions.

• On April 17, 2009, U.S. EPA proposed a finding under the CAA’s § 202(a) that mobile source emissions of GHGs do endanger the public health or welfare. See 74 Fed. Reg. 18886.
• On May 22, 2009, U.S. EPA proposed a rule to regulate GHG emissions from new mobile sources (cars and light trucks). If this rule is finalized, which it must be if U.S. EPA finally adopts the endangerment finding, GHGs will be regulated pollutants under Title II of the CAA. See 74 Fed. Reg. 24007.

U.S. EPA has taken the position that regulation of mobile source GHG emissions under Title II of the CAA will be construed as making GHGs “subject to regulation under the Act” for purposes of Title I of the CAA as well, and Section 169(3), in particular, such that proposed construction of new or modified major stationary sources of GHGs will require PSD permits requiring a high level of emissions control known as Best Available Control Technology. (See GHG Tailoring Rule, 74 Fed. Reg. at 55294.) This position may be challenged, but some argue it is supported by the literal language of the CAA.

Under the CAA’s PSD provisions, a major source is defined by potential emissions of 100 to 250 tons per year of a regulated pollutant. 42 U.S.C. § 7479(1). Much lower “significance” thresholds determine PSD applicability for major modifications to a major source. In fact, a modification to a major source of GHGs that produces any increase in actual emissions of GHGs, no matter how small, would subject the modification to PSD unless U.S. EPA adopts rules setting a higher significance threshold. Since GHGs are routinely emitted in much higher quantities than other pollutants, U.S. EPA estimates that, if GHGs become regulated air pollutants, PSD permits for about 40,000 sources of GHGs would be required annually (compared to a current annual PSD permitting workload of 300 sources), and the universe of Title V sources requiring permitting will increase from 15,000 sources to roughly 6 million sources. (See GHG Tailoring Rule, 74 Fed. Reg. at 55295.) It has been estimated by some commentators that sources that would be subject to PSD and/or Title V permitting if GHGs were regulated pollutants would be likely to range from power plants, cement plants, steel mills and other industrial facilities to an extensive array of smaller sources such as big box retail stores, hospitals, schools, and even multi-family apartment buildings.

In anticipation of finalization of the proposed GHG mobile source rule and the initiation of PSD and Title V permitting for stationary sources that would follow, U.S. EPA developed the proposed GHG Tailoring Rule to reduce the tsunami of permit applications that otherwise would be expected to a manageable number. The GHG Tailoring Rule would do this as follows. The major source threshold for PSD and Title V purposes would be increased to 25,000 tons/year of GHGs (roughly a hundredfold increase) during an initial five-year phase. In addition, the U.S. EPA proposes to increase the PSD significance level for major modifications to within the range of 10,000 tons/year to 25,000 tons/year. Finally, the proposed GHG Tailoring Rule sets an initial five-year evaluation period – the first phase of the GHG Tailoring Rule program – to assess the effect of the rule on reducing the CAA permitting workload and whether revisions to the major source and significance thresholds are necessary. (See, e.g., GHG Tailoring Rule, 74 Fed. Reg. at 55326.)

Whatever else may be said about the proposed GHG Tailoring Rule, it appears to be squarely contradictory to the major source definition of the CAA as established at Section 169(1) by proposing to set major source thresholds for GHGs a hundred times greater than the statutory level. Thus, this rule, if adopted, would be vulnerable to legal challenge. Recognizing the obvious interpretative problems posed by the proposed higher major source threshold, U.S. EPA has developed two lines of legal argument in defense of the proposed rule. One is that the rule is necessary to prevent an “absurd result” – here said to consist of an overwhelming flood of sources otherwise subject to permitting requirements under the CAA’s provisions that would ensue if GHGs become regulated pollutants under the statutory major source thresholds. See 74 Fed. Reg. at 55306. The second line of argument, referred to as the “administrative necessity doctrine,” is similarly based on the effects of the flood of permit applications on the ability of the U.S. EPA and state agencies to continue to function. See 74 Fed. Reg. at 55311.

Given the legal difficulties confronting the proposed GHG Tailoring Rule, it can be speculated whether the real underlying purpose of the proposal is to pose a high-stakes game of “chicken” by the Obama Administration with the Congress to prod enactment of Climate Change legislation, based on an implicit assumption that any Congressional legislative action would include major source thresholds similar to that proposed in the GHG Tailoring Rule (unless, of course, the anticipated legislation would eliminate PSD and Title V permitting applicability for GHG emitting sources altogether).

Court Issues Mandate Vacating Exemptions from Emission Limits During Startup, Shutdown and Malfunction Events
By Jennifer K. Thompson, Partner, Environmental Law Department, Bingham McHale LLP

On October 16, 2009, the D.C. Circuit Court of Appeals issued a mandate vacating the Startup, Shutdown and Malfunction (“SSM”) exemptions contained in the General Provisions of the National Emission Standards for Hazardous Air Pollutants (“NESHAP”), 40 C.F.R. §§ 63.6(f)(1) and 63.6(h)(1). See Sierra Club v. EPA, 551 F.3d 1019 (D.C. Cir. 2008). The vacatur directly affects the NESHAP source categories/subparts that only incorporate 40 C.F.R. §§ 63.6(f)(1) and 63.6(h)(1) by reference and that contain no other source specific exemption for SSM events. The Court’s vacatur does not directly impact those source categories that include a separate exemption or otherwise excuse compliance during SSM events because these other provisions were not challenged.

The mandate comes as no surprise, as the D.C. Circuit Court of Appeals issued its decision to vacate the SSM exemptions on December 19, 2008. Since that time various parties had requested and obtained stays of effectiveness of the Court’s decision.

Since their adoption in 1994, 40 C.F.R. §§ 63.6(f)(1) and 63.6(h)(1) have exempted sources from the NESHAP emission limits during SSM events; however, other provisions have required sources to minimize emissions during such events. Now sources which relied solely on 40 C.F.R. §§ 63.6(f)(1) and 63.6(h)(1) for a SSM exemption must comply with their NESHAP limits during SSM events because the Court found that the NESHAP must apply continuously in accordance with Section 112 of the Clean Air Act.

Adam Kushner, U.S. EPA Director of Civil Enforcement, issued a guidance letter on July 22, 2009 which identifies the specific source categories U.S. EPA has identified as being affected by the Court’s vacatur (see Table 1 of the Kushner Letter). Additionally, Mr. Kushner explains that U.S. EPA will review each source-by-source SSM exemption given the Court’s reasoning in Sierra Club v EPA. Thus, it is likely U.S. EPA will be adopting changes to the SSM exemptions for those sources not immediately affected by the D.C. Circuit Court’s vacatur (see Table 2 of the Kushner Letter for the specific source categories U.S. EPA has identified as not being affected by the vacatur). A copy Mr. Kushner’s letter can be accessed at: http://www.epa.gov/oecaerth/civil/caa/ssm-memo080409.pdf.

U.S. EPA encourages sources that anticipate compliance problems during SSM events to contact U.S. EPA or IDEM to discuss their individual circumstances and the nature and extent of expected excess emissions. Many sources will have to adjust operating practices and/or add emission controls or measures to reduce or eliminate excess emissions during SSM events. In some cases Administrative Orders that include a schedule of compliance may be necessary until corrective measures are completed.

U.S. EPA Designates All Indiana Counties as Attainment with 24-Hour PM2.5 NAAQS
By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

On Friday, November 13, 2009, the U.S. EPA published its attainment designations for the 2006 24-hour fine particulate (“PM2.5”) National Ambient Air Quality Standards (“NAAQS”). Based on recent monitoring data, the U.S. EPA has determined that all of Indiana is now in attainment with the PM2.5 24-hour NAAQS. 74 Fed. Reg. 58688 (November 13, 2009).

The U.S. EPA first promulgated an annual and 24-hour PM2.5 NAAQS in 1997, but revised the standards in 2006, tightening the 24-hour limit and retaining the annual limit. On December 22, 2008, then Administrator Stephen Johnson, signed a notice outlining the U.S. EPA’s attainment designations for the revised standard. That notice stated that 18 Indiana counties would be designated as nonattainment based on monitoring data from 2005-2007. This notice, which was sent to Indiana and posted on the IDEM and U.S. EPA’s webpage, was never published in the Federal Register and the new U.S. EPA Administrator, Lisa Jackson, stated she would review the designations before publication. Those designations never became effective. IDEM submitted new monitoring data for 2008 in February 2009.

The U.S. EPA is now finalizing its attainment designations for the revised 2006 PM2.5 24-hour standard. The final designations are based on 2006, 2007 and 2008 air quality monitoring data. As a result of the inclusion of the 2008 data, the U.S. EPA has determined that no Indiana counties are exceeding the revised standard and has designated all of Indiana as “attainment.” Across the U.S., the number of nonattainment areas decreased from 58 areas under the Johnson determination to just 31 areas under the current determination.

It should be noted, however, that the 1997 annual PM2.5 standard is still in place and the following Indiana counties or partial counties are designated as nonattainment for the annual standard: Clark, Dearborn, Dubois, Floyd, Gibson, Hamilton, Hendricks, Jefferson, Johnson, Lake, Marion, Morgan, Pike, Porter, Spencer, Vanderburgh and Warrick. The 2006 annual standard which was retained at 15 ug/m3 was remanded by the D.C. Circuit Court in 2009, but remains in place. The U.S. EPA stated that it is not promulgating new designations for the 2006 annual standard at this time. Thus, the attainment designations announced for the 24-hour standard may have little practical meaning outside of Knox County because Knox County was the only county that was listed as nonattainment under the Johnson determination that is not listed as nonattainment for the 1997 annual PM2.5 standard. Therefore, new sources or major modifications of existing sources in Knox County will be subjected to less stringent permitting requirements which will not require emission offsets and the application of the lowest achievable emission rate as required under the New Source Review program for sources in nonattainment areas.

U.S. EPA Guidance Memorandum Clarifies Applicability of CERCLA Bona Fide Prospective Purchaser Liability Exemption to Tenants
By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On January 14, 2009, the United States Environmental Protection Agency (“U.S. EPA”) issued to its Regional Administrators an enforcement discretion guidance memorandum entitled Enforcement Discretion Guidance Regarding the Applicability of the Bona Fide Prospective Purchaser Definition in CERCLA § 101(40) to Tenants (“Guidance Memorandum”). The Guidance Memorandum instructs the U.S. EPA’s Regions on how the U.S. EPA intends to exercise its enforcement discretion with regard to the applicability of the Bona Fide Prospective Purchaser (“BFPP”) liability exemption under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq., to the following categories of tenants: (1) tenants whose lease gives sufficient indicia of ownership to be considered an “owner” and who meets certain BFPP requirements and obligations; and (2) tenants of owners who are BFPPs.

The Guidance Memorandum provides that where a tenant has sufficient indicia of ownership to be considered the “owner” of a contaminated property (e.g., a long-term lease), the U.S. EPA will exercise its enforcement discretion and consider the tenant a BFPP, provided that the tenant complies with the threshold requirements and on-going obligations applicable to a person acquiring actual control over the property. The Guidance Memorandum states that a tenant must comply with the requirements set forth under CERCLA §§ 101(40)(A)-(H) and 107(r)(1) in order to be considered a BFPP by the U.S. EPA. Specifically, the Guidance Memorandum indicates that a tenant with sufficient indicia of ownership must satisfy the following requirements in order for the U.S. EPA to consider the tenant a BFPP: (1) enters into the lease agreement after January 11, 2002; (2) does not dispose of hazardous substances at the property; (3) conducts all appropriate inquiries into the previous ownership and uses of the property prior to executing the lease; (4) provides legally required notices; (5) takes reasonable steps with respect to hazardous substance releases; (6) provides cooperation, assistance and access to the property; (7) complies with land use restrictions and institutional controls; (8) complies with information requests and administrative subpoenas; (9) is not affiliated with a liable party at the leased property; and (10) does not impede the performance of a response action or natural resources restoration at the property.

The Guidance Memorandum also clarifies the applicability of “derivative” BFPP status to tenants. Under the BFPP definition provided in CERCLA § 101(40), a BFPP includes the “tenant of a person” who qualifies as a BFPP. The U.S. EPA states that such derivative BFPP status applies to a tenant so long as the property owner maintains its BFPP status and the tenant does not dispose of hazardous substances at the facility or impede the performance of a response action or natural resource restoration. According to the Guidance Memorandum, if a tenant qualifies for derivative BFPP status and the owner loses its BFPP status through no fault of the tenant, the U.S. EPA may exercise its enforcement discretion not to pursue the tenant under CERCLA § 107(a)(1) for remediation and removal costs. The U.S. EPA may exercise its enforcement discretion in this scenario if the tenant complies with the following requirements: (1) does not dispose of hazardous substances on the property; (2) provides legally required notices; (3) takes reasonable steps with respect to hazardous substance releases; (4) provides cooperation, assistance and access; (5) complies with land use restrictions and institutional controls; (6) complies with information requests and administrative subpoenas; and (7) does not impede any response action or natural resource restoration.

Memorandum is available online at: The Guidance
http://www.epa.gov/compliance/resources/policies/cleanup/superfund/bfpp-tenant-mem.pdf.

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