Environotes

IDEM Seeks Comments on Rulemaking to Expand Regulation of Degreasers
U.S. EPA Announces Stricter NAAQS for Ozone
EPA Objects to Power Plants’ Title V Permits for Failing to Adequately Explain Exclusion of Alternate Control Technology from BACT Analysis as Requiring a Redesign of the Source
Court Rules RCRA Injunction Cannot be Discharged In Bankruptcy
U.S. IDEM Interim Implementation Document Clarifies Impact of House Enrolled Act 1162 on Remediation and Closure of Contaminated Sites
U.S. EPA Issues Endangerment Finding for Greenhouse Gases

IDEM Seeks Comments on Rulemaking to Expand Regulation of Degreasers
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

The Indiana Department of Environmental Management (IDEM) published notice on January 13, 2010 that it is seeking comments on a draft rule to amend 326 IAC 8-3 to expand regulation of organic solvent degreasers located in all counties. LSA Doc. #07-352; DIN 20100113-IR-32607035SNA. Currently, only degreasers located in Clark, Floyd, Lake or Porter Counties are subject to 326 IAC 8-3. IDEM believes that expanding the regulation of degreasers to all counties and eliminating the grandfathering of degreasers is necessary to ensure attainment of the 2008 8-hour ozone standard of 0.075 ppm and to address the potential for a lower ozone standard to be imposed in the future. On January 19, 2010 U.S. EPA published a proposed rule to strengthen the 8-hour standard to a level within the range of 0.060-0.070 ppm. 75 F. Reg. 2938 (January 19, 2010).

The new rule would apply to new degreasers constructed after July 1, 1990 located anywhere in the state and to any degreaser located in the State of Indiana as of January 1, 2011, unless exempted. Degreasers that are not located in Clark, Floyd, Lake or Porter Counties are exempt from operation and control requirements if the degreaser: (i) is subject to 40 CFR 63, Subpart T, the NESHAP for halogenated solvent cleaning; or (ii) uses a solvent containing less than 1% of VOC by weight.

The vapor pressure and record keeping requirements of 326 IAC 8-3-8 do not apply to degreasers employing organic solvents which: (i) are used to clean electronic components; (ii) are subject to the Aerospace NESHAP at 40 CFR 63, Subpart GG, and are not located in Clark, Floyd, Lake or Porter Counties; or (iii) use aqueous cleaning solvents and are not located in Clark, Floyd, Lake or Porter Counties.

Regulated degreasers must comply with certain operational requirements, such as using a cover, affixing labels, properly draining parts, and using control devices depending on the type of degreaser.

IDEM is accepting comments through February 12, 2010. Additional information can be obtained from Amy Smith, Rule and State Implementation Plan Development Section, Office of Air Quality, (317) 233-8628.

U.S. EPA Announces Stricter NAAQS for Ozone
By Jennifer K. Thompson, Partner, Environmental Law Department, Bingham McHale LLP

On January 6, 2010, the United States Environmental Protection Agency (“U.S. EPA”) proposed two new stricter National Ambient Air Quality Standards (“NAAQS”) for ground-level ozone. U.S. EPA has proposed to lower the health-based “primary” ozone standard to 0.060-0.070 ppm (daily maximum 8-hour average) and the “secondary” standard which is designed to protect sensitive vegetation and ecosystems within the cumulative index value range of 7-15 ppm-hours. The proposal stems from a reconsideration of the 0.075 ppm identical primary and secondary ozone standards set in 2008.

Ground-level ozone forms through a reaction of nitrogen oxides (NOx), volatile organic compounds (VOCs), carbon monoxide (CO), and methane (CH4) in the presence of sunlight. Sunlight and hot weather accelerate the formation of ground-level ozone, thus it is mainly a summertime air pollutant. Both rural and urban areas can have high ozone levels because ozone and/or its precursors can be transported from hundred miles away.

Stricter ozone standards will likely mean that additional Indiana counties will be in violation of the NAAQS for ozone. Additionally, numerous communities across the country, far from industry and highways, are projected to be in violation of the proposed standards.

U.S. EPA will conduct a sixty (60) day public comment period following publication of the proposed standards in the Federal Register. The agency also plans to conduct three public hearings on the proposal in the following locations: Arlington, Virginia and Houston, Texas on February 2, 2010; and Sacramento, California on February 4, 2010.

U.S. EPA is expected to issue the final ground-level ozone standards by August 31, 2010. The proposed timeline for implementation includes an accelerated schedule for designating areas for the primary ozone standard. Under the proposed regulations, states would be required to submit attainment designations by January 2011 and U.S. EPA would make final designations by July 2011. Said designations would then become effective in August of 2011. State implementation plans to reduce ground-level ozone to meet the standards would be due in December 2013. Lastly, states would be required to meet the primary standard between 2014 and 2031(dependent upon the severity of existing ozone pollution).

For more information regarding the proposed ozone standards, click here.

EPA Objects to Power Plants’ Title V Permits for Failing to Adequately Explain Exclusion of Alternate Control Technology from BACT Analysis as Requiring a Redesign of the Source
By Larry Kane, Partner, Environmental Law Department, Bingham McHale LLP

On December 15, 2009, the U.S. EPA Administrator issued orders denying in part and granting in part petitions for objection to Title V operating permits for two proposed power plants – one proposed by American Electric Power in Arkansas and the other proposed by Cash Creek Generation, LLC in Kentucky. These orders were issued in In the Matter of American Electric Power Service Corporation, Southwest Electric Power Company, John W. Turk Plant, Fulton, Arkansas, Petition No. VI-2008-01 (“AEP Order”) and In the Matter of Cash Creek Generation, LLC, Henderson, Kentucky, Petition Nos. IV-2008-1 and IV-2008-2 (“Cash Creek Order”). This note briefly discusses an issue on which the petitions for objection were granted in both orders – EPA’s policy for determining when proposed alternative production processes or pollution controls are considered unavailable and outside the scope of a BACT analysis since they would result in a “redesign of the source.”

The AEP Order
An improper application of EPA’s “redesigning the source” policy was the only one of four grounds raised by petitioners on which the EPA Administrator granted the petition for objection in the AEP Order. An objection was granted on the basis of a defective BACT analysis in which the state permit agency failed to provide a reasoned basis for rejecting use of IGCC technology under EPA’s “redefining the source” policy. (The Title V permit that was the subject of the petition incorporated PSD-derived terms from a companion PSD permit authorizing construction of the proposed coal-fired power plant with an ultra-supercritical steam boiler.

In its decision in In re Prairie State Generating Company, PSD Appeal No. 05-05 (August 24, 2006) (“Prairie State”), the EPA’s Environmental Appeals Board (“EAB”), referenced the following statement from EPA’s New Source Review Workshop Manual (Oct. 1990 Draft) (“NSR Manual”):

“. . . historically, EPA has not considered the BACT requirements as a means to redefine the design of the source when considering available control alternatives.”

NSR Manual, at B.13. This concept is the germ of what has come to be known as EPA’s “redefining the source” policy. The state agency reviewing AEP’s application for the proposed Turk Plant relied upon this policy in rejecting public comments stating that IGCC technology should be considered in the BACT analysis for the proposed coal-fired plant.

EPA acknowledged that the Arkansas permit agency made a good faith effort to address the “redefining the source” policy consistent with prior EPA determinations. However, the Administrator stated that an EAB decision issued in In re: Desert Rock Energy Company, LLC, PSD Appeal Nos. 08-03 et al. (Sept. 24, 2009) (“Desert Rock”) has since determined that the justification employed by EPA offices for applying the redefining the source policy in the past is inadequate. Though the Desert Rock decision issued after the AEP permit was issued, the Administrator concluded that it nonetheless should be considered in her order concerning the petition for objection to AEP’s Title V permit. More specifically, the Administrator found that the AEP permit was issued without an adequate justification, including a reasoned basis on the record, by the state permit agency to support its conclusion that IGCC technology should be excluded from consideration in the BACT analysis under the “redefining the source” policy. (AEP Order, at 8 – 10). These conclusions were based on the following two deficiencies also found to be applicable to EPA Region 9’s permit decision as remanded by the EAB’s Desert Rock decision.

One, the Arkansas permit agency failed to address (as did Region 9 in the Desert Rock permit) why IGCC technology has been considered as a potentially available control technology in two state PSD reviews but would not be potentially available for application to the AEP plant. (The two state PSD decisions referenced include the Prairie State permit and the Christian County permit, both Illinois facilities.) Two, while the Arkansas agency relied upon AEP’s description of the basic design for its plant as a coal-fired supercritical PC plant, which is the first step in applying the redesigning the source policy, the state agency failed to move to the next step in the required analysis, which is to take “a ‘hard look’ at how AEP defined its project and to ‘discern which design elements were inherent to that purpose and which design elements could be changed to achieve pollutant reductions without disrupting the [applicant’s] basic business purpose.’” AEP Order, at 10 (citing Desert Rock, Slip op. at 69).
As a result, the AEP permit has been remanded to the Arkansas agency for further proceedings to address the objection.

The Cash Creek Order
Of the eight issues raised in the petitions for objection, the Administrator’s Cash Creek Order granted the petitions on six different grounds. Only two will be discussed here: (i) an objection based on the failure of the applicant and the Kentucky agency to include the potential use of natural gas as a clean fuel in the BACT analyses (the permit was a consolidated PSD and Title V permit); and (ii) an objection based on the permit’s lack of an emission limit for PM2.5.

The permit was issued to authorize construction and operation of an integrated gasification combined cycle (IGCC) electric generation facility. The BACT issue arises from comments made to the Kentucky agency during the permit review process that the BACT analyses for the project failed to consider use of natural gas as a clean fuel as allegedly required under the statutory definition of BACT. EPA recognized that the proper scope of the BACT analysis no doubt turned on application of EPA’s policy concerning process and/or control options that would be considered unavailable because they would “redefine the [proposed] source”.

EPA’s reasoning and conclusion concerning the issue of “redefining the source” appears to be strained and unduly selective in its use of precedent in this case. Though EPA here purports to be following the same track as in the AEP Order, above, concerning its reliance on the legal analysis of the “redefining the source” issue laid down in the Desert Rock and Prairie State decisions, the factual and legal context of the Cash Creek Order is substantially different. The AEP Order involves a permit for a proposed coal-fired power plant with an ultra-supercritical steam boiler that was challenged by petitioners urging that use of an IGCC plant, an alternative coal-based plant design, should have been considered in the first stage of the top-down BACT analysis. In contrast, the Cash Creek Order, ironically, involves a permit for construction of a coal-fueled IGCC plant that was opposed by petitioners’ contentions that the potential use of a different fuel – natural gas – should have been considered at the first stage of the BACT analysis.

The EPA remarked in the Cash Creek Order that, based on the record, the permit agency failed to provide a “reasoned explanation” why “the option of using exclusively natural gas is not ‘available’ for this facility.” Order at 8. This remark appears to ignore the critical principle stated by the EAB in Prairie State concerning application of EPA’s “redefining the source” policy – the permit applicant defines the proposed facility’s purpose or basic design in its permit application (subject to limited review by the permit agency) which may not be redesigned through BACT analysis. In Cash Creek, the applicant proposed an IGCC facility, which innately utilizes coal as the input to the gasification process to generate syngas to drive combustion turbine generators. It would seem that this application clearly implied that the applicant intends to use coal as the basic energy resource input to its electric generation facility. If the applicant’s purpose or basic design had been only to generate electricity using gaseous fuel, it most likely would have proposed a natural gas-fired combustion turbine generation facility since the extensive gasification component of the IGCC plant would have been superfluous.

In this context, the EAB in Prairie State importantly observed (slip op., at 32 – 33) that,

“It has also been long-standing EPA policy that certain fuel choices are integral to the electric power generating station’s basic design. See NSR Manual at B.13 (“applicants proposing to construct a coal-fired electric generator, have not been required by EPA as a part of a BACT analysis to consider building a natural gas-fired electric turbine although the turbine may be inherently less polluting per unit product); In re SEI Birchwood, Inc. 5 E.A.D. 25, 29-30 n.8 (EAB 1994) (switch to natural gas would redefine coal-fired electric generating plant); In re Haw. Commercial & Sugar Co., 4 E.A.D. 95, 99-100 (EAB 1992) (switch from coal to oil-fired combustion turbine not required): In re Old Dominion Elec. Coop., 3 E.A.D. 779, 793 (Adm’r 1992) (switch to natural gas would redefine coal-fired electric generating plant).

It is difficult to conceive how the EPA Administrator can fault the Kentucky permit agency for not considering the possibility of using natural gas as an alternative primary fuel source in the face of such unequivocal past EAB precedent to the contrary cited in the Prairie State decision that is the ostensible guiding light for the Cash Creek Order. Superficially, the Administrator may be resting the Cash Creek Order on a hypertechnicality that the state agency did not use the talismanic words that a requirement to use natural gas as the primary fuel for the Cash Creek facility would “redefine the source.” If so, the decision would seem to border on the disingenuous.

This perception grows even stronger when it is considered that the EAB concluded in the Prairie State decision that the basic design of the proposed power plant at issue there was to generate electricity using solely coal originating from a coal mine at which the power plant was to be located. Given this basic design, the EAB opined that requiring the applicant and the state permit agency to consider the use of another source of coal – specifically, low sulfur western coal, let alone another type of fuel, in the BACT analysis for the plant would constitute redesigning the source.

The Cash Creek Order also granted the petition to object on the grounds that the permit failed to include a BACT limit for PM2.5 and relied inappropriately on EPA’s PM10 surrogate policy. This aspect of the Order is quite similar to a previous order granting a similar petition on this issue in regard to permits for a proposed Louisville Gas & Electric generation unit in Trimble County, Kentucky. Finally, we note that in both Orders, EPA declined to object to the two permits that were issued without BACT limits for CO2.

Summing up, the AEP Order and the Cash Creek Order are further examples of a new aggressive practice by EPA to use the Title V petition-for-objection process to advance changes in PSD permitting policy at EPA.

Court Rules RCRA Injunction Cannot be Discharged In Bankruptcy
By Katherine L. Shelby, Partner, Environmental Law Department, Bingham McHale LLP

Apex Oil Company (“Apex”) was ordered by a United States District Court to abate a hydrocarbon plume that was contaminating groundwater and emitting fumes into nearby homes in a town in Illinois. The District Court found that millions of gallons of oil trapped underground created hazards to health and the environment. The plume resulted from an oil refinery owned by a corporate predecessor of Apex, and therefore the Court ordered Apex to abate the plume. Apex estimated that the clean up costs would be $150 million.

After having found Apex’s challenges to the District Court’s findings about the plume to have no possible merit, the U.S. Seventh Circuit Court of Appeals addressed the principal question involved in the appeal: Whether the United States Environmental Protection Agency’s claim to an injunction under the Resource Conservation and Recovery Act (“RCRA”) was discharged in a prior bankruptcy reorganization and could not be asserted in this lawsuit. U.S. v. Apex Oil Co., 579 F.3d 734 (7th Cir. 2009).

The Judge’s approval of a claim in a Chapter 11 proceeding discharges the debtor from “any debt that arose before the date of” confirmation, with certain exceptions not relevant to this case. The Bankruptcy Code defines “debt” as “liability on a claim” and defines “claim” as either a “right to payment” (11 U.S.C. § 101(5)(A)), or a “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.” 11 U.S.C. § 101(5)(B). The Seventh Circuit Court of Appeals interpreted 11 U.S.C. § 101(5)(B) to mean that if the holder of an equitable claim can obtain a money judgment if the equitable remedy is not obtainable, then the claim is dischargeable in bankruptcy.

Applying that principle to the U.S. EPA’s claim against Apex, the Seventh Circuit Court of Appeals found that a plaintiff’s equitable claim under Section 6973 of RCRA does not entitle the plaintiff to demand, in lieu of injunctive relief, payment of clean-up costs. As the Court of Appeals stated: “[Section 6973] does not authorize form of monetary relief.” 579 F.3d at 737. In so holding, the Court noted that the U.S. Supreme Court had previously ruled that RCRA’s private suit provision codified at 42 U.S.C. § 6972, which contains identical language to 42 U.S.C. § 6973, also did not authorize monetary relief.

Therefore, the Seventh Circuit Court of Appeals held that U.S. EPA’s claim for an injunction ordering Apex Oil to abate the hydrocarbon plume and vapors emitting therefrom was not dischargeable in the prior bankruptcy proceeding and upheld the District Court’s injunction ordering Apex to abate the plume of contamination and vapors emitted into homes of nearby residents.

Because RCRA injunction remedies cannot be discharged in bankruptcy, the U.S. EPA may choose to employ RCRA injunction remedies as a tool to compel abatement of environmental contamination when a potentially responsible party is in bankruptcy or previously received a discharge in bankruptcy.

U.S IDEM Interim Implementation Document Clarifies Impact of House Enrolled Act 1162 on Remediation and Closure of Contaminated Sites
By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On December 7, 2009 the IDEM released the House Enrolled Act (“HEA”) 1162 Interim Implementation Document (“Implementation Document”). According to the IDEM, the Implementation Document is intended to be a bridge between the existing Risk Integrated System of Closure (“RISC”) 2001 Technical Guide and a revised Technical Guide currently under development.

On July 1, 2009, HEA 1162 became effective and amended several statutes governing Indiana’s remediation programs including the Voluntary Remediation Program (“VRP”), the State Cleanup Program, the Leaking Underground Storage Tank Program, the Excess Liability Trust Fund, and actions taken pursuant to the Resource Conservation and Recovery Act. Generally, under the provisions of HEA 1162, the IDEM: (1) must consider as valid approaches to site closure remedies that manage risk and control existing or potential exposure pathways; (2) will approve remedies that are effective in mitigating risks; and (3) will not rely on fixed risk-based remediation objectives but will consider site-specific conditions that may lead to several possible closure scenarios.

The Implementation Document discusses the IDEM’s interpretation of HEA 1162’s impact on a variety of components of site remediation and closure including the following:

• Soil and Groundwater Investigations
The Implementation Document provides that the IDEM must consider the remediation objectives when evaluating the adequacy of nature and extent investigations. For soils, depending on site-specific circumstances, the IDEM may not require delineation of on-site soil contamination to residential closure levels at commercial/industrial sites. For groundwater, depending on site-specific circumstances, the IDEM may not require delineation of groundwater contaminants within an area of exposure control to residential levels if it can be reasonably inferred that contaminants will not migrate beyond the area of exposure control at concentrations exceeding the residential closure levels and the groundwater is not used as a potable water source.

• Unconditional Site Closures
Under the Implementation Document, unconditional site closure may be available for sites where non-permanent remedies are used. Proposed remedies will be evaluated for effectiveness. For soils, such an evaluation will consider the following: (1) confirm that there is no current exposure to impacted soil; (2) evaluate the potential for vapor intrusion if constituents are volatile; (3) evaluate contaminant fate and transport; (4) demonstrate ability to prevent exposure to contamination; and (5) consider financial assurance where appropriate (long-term obligations). For groundwater, such an evaluation will consider the following: (1) confirm that there is no current exposure to impacted groundwater; (2) demonstrate the ability to control access to the contaminant plume; (3) evaluate the potential for vapor intrusion if constituents are volatile; (4) evaluate preferential pathways; (5) conduct a susceptible area evaluation; and (6) consider financial assurance where appropriate (long-term obligations).

• Closure of Sites Impacted by Free Product
According to the Implementation Document, HEA 1162 impacts how the IDEM grants conditional site closure where free product is present. For sites impacted by free product, responsible parties will not be required to remove free product to the extent practicable in all circumstances and the IDEM must consider a risk-based approach when evaluating free product.

• Use of Environmental Restrictive Covenants (“ERCs”)
HEA 1162 revised the ERC definition and limited the IDEM’s authority to approve ERCs. Under the revised definition, ERCs must include the following additional provisions: (1) grant the IDEM access to the subject land; (2) require notice to a transferee of the land or an interest in the land of the existence of the ERC; and (3) identify how relevant files at the IDEM may be located. In addition, ERCs are no longer subject to IDEM approval in their entirety. Instead, the IDEM has the limited authority to: (1) approve or disapprove the use or activity restrictions contained in ERCs; (2) review ERCs to determine if they meet the statutory definition of a restrictive covenant; and (3) for certain properties (existing or former hazardous waste facilities and CERCLIS-listed sites) require an owner to record an ERC on the property if the IDEM determines one is necessary to protect human health and the environment. According to the Implementation Document, the IDEM will continue to provide ERC templates and will require copies of recorded ERCs be provided if a responsible party intends to rely on an ERC to obtain site closure.

• Use of Environmental Restrictive Ordinances (“EROs”)
HEA 1162 provides a definition of EROs and requires the IDEM to consider and give effect to EROs in evaluating risk-based remediation proposals. According to the Implementation Document, the IDEM will review EROs individually for effectiveness as institutional controls at each site upon which the use of an ERO is proposed as part of a risk-based remediation.

• Covenants Not to Sue and No Further Action Letters
Prior to the enactment of HEA 1162, the IDEM Voluntary Remediation Program (“VRP”) would not grant site closure, and would not issue a Covenant Not to Sue or No Further Action Letter, to applicants where the selected remedy involved ongoing obligations. Based on provisions added to the Voluntary Remediation Program statute under HEA 1162, the IDEM may include in a Covenant Not to Sue or No Further Action Letter conditions that must be performed or maintained after issuance of the certificate or covenant.

General questions regarding Implementation Document may be directed to Jeff Sewell, Section Chief, Office of Land Quality, Science Services Branch at (317) 234-1000. Questions related to the application of the Implementation Document to specific remediation sites should be directed to the IDEM project manager assigned to the project.

U.S. EPA Issues Endangerment Finding for Greenhouse Gases
By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

On December 15, 2009, the U.S. EPA published its endangerment finding for greenhouse gases (“GHGs”). See, “Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act,” 74 Fed. Reg. 66496 (December 15, 2009) (“Endangerment Finding”). The Endangerment Finding stems from the U.S. Supreme Court’s ruling in Massachusetts v. EPA, 549 U.S. 497 (2007) in which the Court ruled that GHGs were pollutants under the Clean Air Act and required the U.S. EPA to make a determination as to whether emissions of GHGs from motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or the welfare.

The Endangerment Finding concluded that the current and projected atmospheric concentration of six GHGs – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride – endangers the public health and welfare of current and future generations. 74 Fed. Reg at 66496. Additionally, the U.S. EPA found that the combined emissions of these GHGs from motor vehicles contribute to global climate change. Id.

The Endangerment Finding itself does not impose any regulatory requirements on sources emitting GHGs; however, it is the first step in the U.S. EPA’s march towards regulating GHGs. The Endangerment Finding was the last hurdle the U.S. EPA faced before it could finalize its GHG emission standards for light-duty vehicles which it proposed on September 15, 2009. Once these emission standards are finalized, carbon dioxide and the other GHGs will become “regulated NSR pollutants” under the Clean Air Act’s New Source Review program and will trigger the Act’s PSD and NSR permitting requirements for new or modified stationary sources. In preparation for this, the U.S. EPA has proposed a “tailoring rule” which exempts sources from the PSD permitting requirements unless it emits more than 25,000 tons per year of carbon dioxide equivalent. See, “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule,” 74 Fed. Reg. 55292 (October 27, 2009). If the tailoring rule is not made final prior to the issuance of the GHG emission standards for light-duty vehicles, then new sources that emit 100 or 250 tons of carbon dioxide per year will be subject to PSD permitting requirements for GHGs. Likewise, existing major sources that undergo a modification that results in an increase in any amount of GHG emissions would require a PSD permit.

The Endangerment Finding has been appealed to the U.S. Court of Appeals for the D.C. Circuit by several industry groups.