ENVIRONOTES

U.S. EPA Proposes Coal Ash Regulation
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

On May 4, 2010, the U.S. EPA proposed first-time national rules to regulate the disposal and management of coal ash from coal-fired power plants under the Resource Conservation and Recovery Act (RCRA). Coal ash is also referred to as coal combustion residuals (CCR) and includes fly ash, bottom ash, flue gas desulfurization materials, synthetic gypsum and boiler slag. The proposed rules are largely in response to the 2008 failure of a Tennessee Valley Authority coal ash impoundment which resulted in a massive release of more than a billion gallons of water and coal ash onto nearby land and into streams and rivers, requiring hundreds of millions of dollars in cleanup costs. U.S. EPA is seeking comments on two options for the regulation of coal ash: (1) as a hazardous waste under Subtitle C of RCRA; or (2) as a nonhazardous waste under Subtitle D of RCRA.

Under the Subtitle C option, coal ash would be listed as a “special waste.” As a special waste coal ash would be regulated as a hazardous waste under the cradle-to-grave requirements of Subtitle C of RCRA, except that coal ash would be unregulated if it is reused for certain beneficial purposes, such as encapsulation in building materials or road construction. Under the Subtitle C approach, U.S. EPA will effectively phase out the wet handling of coal ash and existing surface impoundments. Existing surface impoundments must meet land disposal restrictions and would be required to be retrofitted with liners within five years of the effective date of the rule to remain in operation. New surface impoundments must meet land disposal restrictions and liner requirements. New landfills must install liners. Existing and new landfills would be subject to groundwater monitoring requirements. Surface impoundments operated after the effective date of the rule would be required to meet structural stability standards set by the federal Mining Safety and Health Administration (MSHA). The Subtitle C option would require permits for the treatment, storage or disposal of coal ash.

Under the Subtitle D option, U.S. EPA would establish national minimum standards for the disposal of coal ash in landfills or surface impoundments. Permits would not be required. States are not required to adopt the minimum standards. The proposed minimum standards include a composite liner requirement for new landfills and surface impoundments. Existing surface impoundments would be required to cease operating or retrofit a composite liner within five years of the effective date of the rule. Surface impoundments would be required to meet MSHA structural stability standards. U.S. EPA is also seeking comment on a modified Subtitle D approach which would allow existing surface impoundments to continue to operate without installing composite liners.

A chart listing the key differences between the Subtitle C and Subtitle D options is available at www.epa.gov/epawaste/nonhaz/industrial/special/fossil/ccr-rule/ccr-table.htm.

The proposed rule includes U.S. EPA’s clarification that coal ash used as fill in sand and gravel pits and other large scale projects are not considered beneficial uses.

According to U.S. EPA, Indiana ranks third highest among the 45 states which generate CCR. Nationally 56% of CCR is disposed in landfills or surface impoundments. About 37% of CCR is beneficially reused and the remaining 7% is used as minefill. The proposed rule does not address minefilling. U.S. EPA estimates annual compliance costs of $1.4 billion for the Subtitle C option and $587 million for the Subtitle D option. Utility customers can expect to bear the costs of the new regulations.

Once the proposed rule is published in the Federal Register, the public will have 90 days to submit comments. More information can be obtained at www.regulations.gov by using Docket ID No. EPA-HQ-RCRA-2009-0640.

Sierra Club Seeks Prospective Relief for CO2 BACT Limits Based on Tailoring Rule
By Larry Kane, Partner, Environmental Law Department, Bingham McHale LLP

In a petition for review to the U.S. EPA’s Environmental Appeals Board (EAB) challenging a PSD permit issued by the Illinois EPA (IEPA) to a lime kiln, the Sierra Club has signaled a new strategy to seek to expedite imposition of BACT limits for CO2 emissions under U.S. EPA’s recently issued Tailoring Rule. The petition, captioned In the Matter of Vulcan Construction Materials, EAB Appeal No. PSD 10-_____, and dated May 9, 2010 (and docketed by the EAB as Appeal No. PSD 10-11), involves a Prevention of Significant Deterioration (PSD) permit issued by IEPA to Vulcan Construction Materials for a lime kiln that had been shut down for approximately seven years due to inability to comply with existing air permit limits.

Interestingly, although Sierra Club did not pose the matter as an issue for review by the EAB, the Sierra Club requests in its petition that, if the PSD permit does not become final prior to January 2, 2011, IEPA be required to revise the permit to include BACT limits for CO2 emissions. This request is based on the date on which U.S. EPA’s Light Duty Vehicle Rule (“LDV Rule”, 75 Fed. Reg. 25324 (May 7, 2010)), takes effect to require greenhouse gas (GHG) restrictions on 2012 model vehicles and, thus, makes GHGs, including CO2, “subject to regulation” for purposes of the New Source Review (NSR) requirements of the Clean Air Act (CAA). This same date – January 2, 2011 – has been incorporated by U.S. EPA into its final Greenhouse Gas Tailoring Rule (“Tailoring Rule”) as the beginning date for Phase 1 of NSR permitting requirements for GHG emissions for new sources or modifications to existing sources if the new source or modification would trigger NSR for other regulated pollutants and would have 75,000 tons per year or more of GHG emissions.

Sierra Club appears to be trying to introduce an extreme bootstrap argument to the EAB on the CO2 issue. Sierra Club did not pose the lack of BACT for CO2 as a formal issue in its petition to the EAB since U.S. EPA’s March 30, 2010 finalization of its reconsideration of the so-called “Johnson Memorandum” undermined Sierra Club’s position. In the Reconsideration, U.S. EPA essentially reaffirmed historic agency interpretation of “subject to regulation” as meaning a requirement for actual control of emissions of a pollutant. Nonetheless, Sierra Club asserts to the EAB that if U.S. EPA’s Reconsideration of the Johnson Memorandum is overturned or vacated under judicial review or if the permit does not become final by January 2, 2011, the Vulcan Construction Materials permit must be revised to establish BACT limits for GHGs.

The Sierra Club’s contention that BACT limits for CO2 are required if the Reconsideration of the Johnson Memorandum is voided is certainly overreaching. Such a development would not, of itself, definitively establish that CO2 were already subject to regulation, as Sierra Club is wont to imply. The import of such a hypothetical decision would depend, obviously, upon the reasoning of the reviewing court.

The impending January 2, 2011 deadline poses a more serious issue for the permit under review as well as for other pending permits from GHG-emitting sources. Sierra Club’s petition, nonetheless, marks a substantial departure for petitions before the EAB in requesting relief based on a future regulatory date. The Sierra Club gambit emphasizes the importance of Congress taking action in the near future to remove GHG regulation from the scope of the Clean Air Act or to defer any GHG regulation by U.S. EPA. Two proposals to that end are pending in the U.S. Senate. One is a proposed resolution introduced by Sen. Lisa Murkowski (R-AK) to block U.S. EPA regulation of GHG emissions. This proposal is scheduled for a vote on June 10, 2010. The other is a proposal by Sen. Jay Rockefeller (D-WV) for a two-year delay in stationary source controls for GHGs.

Clearly, the nature and scope of climate change regulation will remain unsettled for quite some time to come.

IDEM Proposes Changes to Stack Testing Rules

By Jennifer K. Thompson, Partner, Environmental Law Department, Bingham McHale LLP

The Indiana Department of Environmental Management (“IDEM”) has public noticed proposed changes to the stack testing requirements of 326 IAC 3-6 as part of its Second Notice of Comment Period for Amendments to Rules Concerning Compliance Monitoring, LSA # 05-330 (“proposed rule”). The proposed rule also includes amendments to rules concerning continuous monitoring requirements, fuel sampling and analysis procedures, and certain sulfur dioxide compliance requirements.

The current stack testing requirements found at 326 IAC 3-6-3 require that emission tests be conducted: (1) while the unit being tested is operating at ninety-five percent (95%) to one hundred percent (100%) of its permitted operating capacity; (2) under conditions representative of normal operations; or (3) under other capacities or conditions as approved by IDEM. “Capacity” is defined as the design capacity of the unit or other operating capacity agreed to by the source and IDEM.

The proposed amendments to 326 IAC 3-6-3 would change these requirements and would instead require tests be conducted: (1) while operating at a minimum of ninety-five percent (95%) of the permitted maximum emissions unit’s operating capacity description; (2) under conditions of worst case emissions; or (3) under other capacities or conditions as specified in an applicable requirement or approved by IDEM. The amendments also would require that all test runs for a given pollutant be conducted within twenty-four (24) hours unless process variables or mandatory test lengths of greater than two hours make this impracticable, then the testing must be conducted on consecutive days, with other periods or durations to be approved by IDEM. Additionally, if the owner or operator does not know what its worst case emissions would be, the proposed rule at 326 IAC 3-6-3(b)(1) assumes the worst case emissions to be the maximum process or operating rate of the emissions unit as listed in the permit’s emissions unit description.

Therefore, the proposed rule changes not only the conditions under which a stack test must be conducted but limits the timeframe for completing all tests runs for a given pollutant. Moreover, the rule relies on the non-enforceable maximum capacities included in operating permits for the purpose of establishing worst case emissions.

The National Emission Standards for Hazardous Air Pollutants, 40 CFR Part 63, and the New Source Performance Standards, 40 CFR Part 60, require that tests be based on representative performance of the affected facility. The Maximum Achievable Control Technology Program further defined “representative performance” as “normal operating conditions.” Thus, the proposed rules differ from existing federal requirements which apply to numerous emission units governed by 326 IAC 3-6. The proposed rule at 326 IAC 3-6-3(c) acknowledges that other applicable requirements regarding stack testing exist, but fails to bridge the gap between the proposed rules and the differing federal standards because it requires compliance with the federal standards and the proposed rule “as appropriate.”

IDEM is accepting comments on the proposed changes to the stack testing requirements as well as other amendments to the Compliance Monitoring Rules through June 11, 2010. The Air Pollution Control Board is expected to conduct a preliminary adoption hearing sometime after September of this year.

A copy of the proposed rule can be accessed at: http://www.in.gov/legislative/iac/20100331-IR-326050330SNA.xml.pdf, and a copy of the extension of the comment period is available at: http://www.in.gov/legislative/iac/20100512-IR-326050330SCA.xml.pdf.

U.S. EPA Issues Final Greenhouse Gas Tailoring Rule

By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

On May 13, 2010, the U.S. EPA issued its final “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule.” This rule sets forth the U.S. EPA’s approach to regulating greenhouse gases (“GHGs”) under the Clean Air Act’s Prevention of Significant Deterioration (“PSD”) and Title V programs. Under the Clean Air Act’s current framework, sources emitting greater than 100 tons per year of a regulated pollutant are subject to the Title V permitting program. Additionally, new sources belonging to 28 specific source categories which emit 100 tons per year or any other source emitting 250 tons per year of a regulated pollutant or “major modifications” to existing sources are subject to the PSD program. Based upon the U.S. EPA’s promulgation of the Light Duty Vehicle Rule (“LDVR”), 75 Fed. Reg. 25324 (May 7, 2010), GHGs will be “subject to regulation” on January 2, 2011, the date GHGs would be subject to "actual control" under the LDVR and would trigger the PSD and Title V permitting requirements. The U.S. EPA, concerned that permitting authorities would be overwhelmed by the millions of sources that would be required to obtain permits under the current thresholds, issued the “Tailoring Rule” to establish new higher thresholds for GHGs.

The Tailoring Rule will be implemented in phases to further reduce the administrative burden in issuing new permits. The phases are described below:

Phase 1 - January 2, 2011 - June 30, 2011
During this initial phase, no sources would be subject to permitting requirements solely due to its GHG emissions; rather, the permitting requirements will only apply if (1) the source would otherwise be subject to PSD based upon its emissions of a pollutant other than GHGs and (2) it is a new source that will emit more than 75,000 tons per year of GHGs or is a modification to an existing source that will result in a net increase of GHG emissions of 75,000 tons per year or more. Additionally, the Title V permitting requirements will only apply to sources currently subject to the Title V program.

Phase 2 - July 1, 2011 - June 30, 2013
During the second phase, the applicability of GHG permitting will be extended to include new sources and existing sources not already subject to Title V that emit, or have the potential to emit, 100,000 tons per year of GHGs. In addition, the PSD requirements will apply to new sources that will emit 100,000 tons per year of GHGs and to existing sources that emit, or have the potential to emit, 100,000 tons per year of GHGs and undergo a modification that increases their net GHG emissions by 75,000 tons per year, even if they do not exceed thresholds for other pollutants.

Phase 3 – July 1, 2013 to April 29, 2016
In the final rule, the U.S. EPA commits to undertake a future rulemaking to address GHG emissions from smaller sources that would take effect on July 1, 2013. The final rule states that the U.S. EPA will complete this rulemaking by July 1, 2012. In the final rule, the U.S. EPA states that sources emitting less than 50,000 tons per year of GHGs or modifications resulting in a net increase of GHGs of less than 50,000 tons per year will not be subject to PSD or Title V permitting requirements until at least April 30, 2016.

The final rule requires that states submit a letter to the U.S. EPA within 60 days of publication of the rule informing the U.S. EPA whether the state will be able to make the necessary changes to its state rules to implement the Tailoring Rule by January 2, 2011. If the state is unable to make the necessary changes by that date, then the U.S. EPA will take additional action to ensure that the existing CAA thresholds do not apply to sources in that state.

With the first phase of the rule requiring GHGs to be addressed in permits by January 2, 2011, permitting authorities have little time to prepare for the implementation of this rule. Further, the rule leaves many unanswered questions, such as how to determine BACT for GHGs, how to do a netting analysis, etc. The U.S. EPA states that it will develop BACT guidance to assist permitting authorities as they begin to issue permits for GHGs that will address these issues.

Given that legal challenges are already pending against the U.S. EPA’s other GHG rulemakings, it is almost certain that challenges will be filed against the Tailoring Rule. It is also a possibility that federal legislation will be enacted which will remove GHGs from the purview of the CAA. Until then, however, sources should begin to prepare for the inclusion of GHGs in future permitting actions.

IDEM Withdraws Proposal to Promulgate Remediation Rules but Moves Ahead with RISC Non-Rule Policy Revisions

By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On May 12, 2010, the Indiana Department of Environmental Management (“IDEM”) published a notice in the Indiana Register announcing the agency’s withdrawal of a proposal to write rules concerning environmental assessment, cleanup, and closure of contaminated environmental media (“Remediation Rules”). The IDEM first solicited comments on the development of the Remediation Rules in a June 11, 2008 announcement (LSA Document #08-422). The IDEM indicated that several provisions of House Enrolled Act 1162 (Public Law 78-2009) directly affected the proposed rulemaking and made moving forward with the development of the Remediation Rules impossible at this time. However, the IDEM may reinitiate the development of the Remediation Rules once the ongoing revisions to the Risk Integrated System of Closure (“RISC”) Technical Guide nonrule policy document (“Tech Guide”) are complete. The public notice withdrawing the proposal to develop the Remediation rules is available at http://www.in.gov/legislative/iac/irtoc.htm?id=1.2&hdate=20100512
&ldate=20100512.

Despite the withdrawal of the proposal to develop the Remediation Rules, the IDEM continues to work on significant revisions of the RISC Tech Guide to incorporate the following changes: (1) implement HEA 1162; (2) update risk assessment methodology; (3) incorporate vapor intrusion and recreational exposure scenario guidance; (4) incorporate a “weight of evidence” approach to site-specific risk assessments; and (5) generally streamline and clarify the guidance. The IDEM is currently conducting focused workgroups, scheduled to be completed by July 2010, on several key issues including background and offsite sources, site characterization, vapor intrusion, and wellhead protection areas. The IDEM hopes to release a draft of the revised RISC Tech Guide by the end of 2010. Additional information regarding the RISC Tech Guide revision process is available at http://www.in.gov/idem/6534.htm.