newsletters

DECEMBER 2006

IDEM Proposes Nonrule Policy Documents on Certain Wetlands Actions

By Larry J. Kane, Partner, Environmental Law Group, Bingham McHale LLP

IDEM has recently proposed two nonrule policy documents (NPD) addressing IDEM decisions concerning proposed wetland activities. The draft NPDs are tentatively scheduled for presentation to the Water Pollution Control Board at its February 14, 2007 meeting. The NPD will become effective 30 days after presentation to the Board.

Policy identifies reasons IDEM will deny a State Regulated Wetlands permit or a § 401 water quality certification.

This NPD [Water-011-NPD] describes three main grounds for denial: deficient applications, the proposed activities are unnecessary, and inadequate compensatory mitigation plans.

Deficient Applications

The NPD provides that an application is deficient if incomplete or inaccurate information has been provided. IDEM indicates that, where statutory review periods allow, the agency endeavors to notify an applicant of deficiencies in advance of deadlines for agency approval or denial.

Unnecessary Activities

An activity is considered “unnecessary” by IDEM, as explained in the NPD, under one of the following circumstances: first, with respect to proposed activities in Class II or Class III State Regulated Wetlands, the applicant has failed to demonstrate that the activity has no reasonable alternative or that it is reasonably necessary or appropriate; and, second, for proposed activities in Class III State Regulated Wetlands, the applicant has failed to demonstrate that the activity has no practical alternative or that the applicant has taken practicable and appropriate steps to minimize potential adverse impacts.

For the first two circumstances, the NPD provides no substantive insight into what are reasonable alternatives to an activity or when an activity is reasonably necessary or appropriate. The NPD merely recites rule language concerning local government resolutions or approvals expressly addressing such factors or IDEM’s general authority to make determinations on these issues. Similarly, with respect to Class III wetlands, the NPD provides no substantive guidance on how to identify whether a practical alternative exists to a proposed wetland activity or whether practicable and appropriate steps have been taken to minimize potential adverse impacts, other than to analogize these factors to those that apply under the Section 404(b)(1) guidelines for projects impacting waters under the jurisdiction of the Clean Water Act.

Inadequate Compensatory Mitigation

Adequacy of compensatory mitigation plans is addressed in three contexts:

One, for purposes of the State Regulated Wetlands and § 401 certification programs, a compensatory mitigation plan will be determined as insufficient if the plan:

• is inaccurate or incomplete;
• will not, upon implementation, meet the required success criteria;
• fails to demonstrate that the proposed mitigation will successfully offset the impacts of the proposed activity; or
• does not include an adequate monitoring plan.

Two, for purposes of the § 401 certification program, a compensatory mitigation plan also will be determined as insufficient if the plan:

• fails to demonstrate that the proposed mitigation is sufficient, based on the proposed mitigation ratio(s), to overcome risk of failure and the temporal loss of function.

Three, under the State Regulated Wetlands program, a compensatory mitigation plan also will be determined as insufficient if the plan proposes an amount or location of compensatory mitigation that is inconsistent with 327 IAC 17-1-5.

Policy on Effect of Amendments to Complete Application on Statutory Review Deadlines

Although it cannot be readily discerned from the title, this NPD [Water-012-NPD] is limited in scope to applications for wetland activity permits under the State Regulated Wetlands program or for § 401 certifications.

The essence of the NPD is that, where IDEM has determined an application submitted under one of these programs to be complete, the agency will consider the applicable statutory deadline for action upon the application to begin on the date of the agency’s receipt of the most recent amendment to the application.

IDEM is taking comments on this NPD through December 29, 2006.

These proposed NPD can be obtained at www.state.in.us/idem.

SPCC Plan Requirements Eased for Small Facilities

By Andy Bowman, Chair, Environmental Law Group, Bingham McHale LLP

On December 14, 2006, the U.S. EPA announced a final rule amending the Spill Prevention, Control and Countermeasures (SPCC) Rule. The SPCC Rule applies to owners or operators of non-transportation related facilities that drill, produce, store, refine, transfer, distribute, use or consume oil or oil products which could reasonably be expected to discharge to navigable waters or adjoining shorelines. Such facilities are subject to the SPCC rule if they have aboveground oil storage capacity greater than 1,320 gallons or below ground storage capacity of greater than 42,000 gallons. Certain exemptions are available, including containers with a capacity of less than 55 gallons of oil.

Under the amendment, facilities with 10,000 gallons or less in aggregate aboveground oil storage capacity and which meet the rule’s historic oil discharge criteria have the option of


preparing a self-certified SPCC Plan rather than one reviewed and certified by a Professional Engineer (PE);

meeting tailored facility security and tank integrity inspection requirements without a PE certification; and

preparing a SPCC Plan which includes PE-certified environmentally equivalent measures or impracticability determinations that would require PE certification only for the portions dealing with environmental equivalence and impracticability determinations with the remainder of the SPCC Plan self-certified.

The amendments also allow an owner or operator of oil-filled operational equipment to implement an inspection and monitoring program together with an oil spill contingency plan and a written resource commitment in lieu of secondary containment for oil-filled equipment. Such facilities must meet historic oil discharge criteria to be eligible for this option. If qualified, the owner or operator will not need to make an impracticability determination for each piece of equipment.

The final rule exempts motive power containers (e.g., fuel tanks on trucks, locomotives, cranes, automobiles, aircraft, bulldozers, and other self-propelled heavy equipment).

The amendments will become effective 60 days after the final rule is published in the Federal Register.

Owners and operators of existing covered facilities are currently required to prepare and implement a revised SPCC Plan by October 31, 2007 which incorporates the 2002 amendments to the SPCC rules. The U.S. EPA has proposed extending this deadline to July 1, 2009.

Additional information is available at www.epa.gov/oilspill/spcc_dec06.htm.

EPA Finalizes its Interpretation of Title V Monitoring Requirements

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

On December 15, 2006, the U.S. EPA issued an interpretation of the Title V monitoring requirements stating its position that the so-called “umbrella monitoring rule” at 40 C.F.R. § 70.6(c) does not provide an independent basis for imposing enhanced monitoring requirements.

The Clean Air Act (“CAA”) requires all sources with Title V permits to conduct monitoring sufficient to demonstrate compliance with applicable requirements of the CAA. To implement this requirement, U.S. EPA promulgated the “periodic monitoring rule” at 40 C.F.R. § 70.6(a)(3) which requires Title V permits to include periodic monitoring whenever the applicable requirement does not include periodic testing or monitoring. The “umbrella monitoring rule” at 40 C.F.R § 70.6(c) requires Title V permits to include testing, monitoring, reporting and recordkeeping requirements consistent with the periodic monitoring rule.

In September of 2002, U.S. EPA proposed to clarify the umbrella monitoring rule to require state and local agencies to review existing monitoring requirements in facility operating permits and to impose enhanced monitoring requirements during the Title V operating permit review process whenever existing monitoring is deemed inadequate. At that time U.S. EPA’s position was that the umbrella monitoring rule provided authority to impose enhanced monitoring independent of the authority provided by the periodic monitoring rule. In a final rule published in January of 2004, the U.S. EPA reversed its position and held that the umbrella monitoring rule did not provide an independent basis for enhancing monitoring requirements. This rule was challenged in Environmental Integrity Project v. U.S. EPA 425 F.3d 992 (D.C. Cir. 2005) and the court vacated the rule on the grounds that it was not a logical outgrowth of the 2002 proposed rule.

On June 2, 2006, the U.S. EPA revived its rulemaking and published its proposed interpretation that the umbrella monitoring rule does not establish a separate regulatory standard or basis for requiring or authorizing review and enhancement of existing monitoring independent of any review and enhancement that may be required under other portions of the rules. On December 15, 2006 EPA finalized this interpretation and it will become effective on January 16, 2007.

Indiana’s federally-approved Part 70 Permit program authorizes the IDEM to include monitoring requirements in Title V permits to assure all reasonable information is provided to evaluate continuous compliance with applicable requirements under 326 IAC 2-7-5(3)(A) and 326 IAC 2-7-6(1). If the compliance determination requirements of the state and federal rules are not sufficient to demonstrate continuous compliance, the IDEM has historically taken the position that state law authorizes it to supplement the required monitoring with additional compliance monitoring requirements.

New EPA Criminal Investigator Joins Indianapolis Office

By Andy Bowman, Chair, Environmental Law Group, Bingham McHale LLP

Special Agent Gregory McDowell has joined Jeff Denny in the Indianapolis office of U.S. EPA’s Criminal Investigation Division (CID). Mr. Denny has been Resident Agent in Charge of the Indianapolis CID for nearly 10 years. Mr. McDowell brings 8 years of experience in U.S. EPA’s CID. Mr. McDowell’s prior experience includes service as a Special Agent with the U.S. Air Force Office of Special Investigations. He has served in Panama, South Korea, Saudi Arabia, Kuwait and Bahrain. He has received numerous awards and decorations in recognition of his distinguished military service.

The Indianapolis CID office currently has 16 open investigations and receives approximately one criminal complaint per week. During fiscal year 2006, the office has obtained four guilty pleas for false statements and bank fraud, a conviction after jury trial for two counts of mail fraud, one pre-trial diversion of a corporate defendant and a corporation’s guilty plea for Clean Water Act violations.

The CID investigates violations of the Clean Water Act, Clean Air Act, Oil Pollution Act, Federal Insecticide, Fungicide and Rodenticide Act, Resource Conservation and Recovery Act, CERCLA, Toxic Substance and Control Act, and U.S. Criminal Code (false statements, certifications and claims, mail fraud, bank fraud and money laundering).

Initiatives for U.S. EPA include the U.S. EPA’s alliance with OSHA to link facilities with poor worker protection histories with environmental compliance. National enforcement priorities for 2007 include Clean Air Act violations involving air toxics (MACT standards) and NSR/PSD as well as Clean Water Act violations.

Air Pollution Control Board Adopts Rules to Implement CAIR

By Larry J. Kane, Environmental Law Group, Bingham McHale LLP

At its November 1, 2006 meeting, the Indiana Air Pollution Control Board adopted rules which will implement the federal Clean Air Interstate Rule (“CAIR”) in Indiana. Only very minor changes were made from the proposal as preliminarily adopted by the Board.

The federal CAIR rules, adopted by EPA on March 10, 2005, establish three cap and trade programs to effect reductions in NOx and SO2 emissions that contribute to violations of NAAQSs for PM2.5 or ozone in downwind states via interstate transport of those pollutants. Indiana has been identified as a source of emissions subject to all three CAIR component programs. Two of these cap and trade programs – the annual NOx reduction program and the annual SO2 reduction programs – are directed toward attaining compliance with the PM2.5 NAAQS, while the third cap and trade program – the ozone season NOx reduction program, is directed at achieving compliance with the ozone NAAQS. The state rules, as codified, which are to implement the CAIR rules are: 326 IAC 24-1 [annual NOx reduction program], 326 IAC 24-2 [annual SO2 reduction program], and 326 IAC 24-3 [ozone season reduction program].

The programs are referred to as cap and trade programs because they utilize a market-based approach in which an overall pollutant emission budget is established for each state’s emission sources for these pollutants and emission allowances are awarded to each emission source subject to the program. Sources which reduce emissions through controls or other means may have a surplus of allowances which may be offered for sale to and purchased by other sources which have less efficient emission controls. Thus, the CAIR programs build upon the market-driven Acid Rain program and the NOx Budget Trading Program associated with the NOx SIP call. The emission budgets under each program require phased reductions in the relevant pollutants. An initial budget, predicated on a uniform reduction of baseline emissions, is set for 2009 emissions for each of the three CAIR cap and trade programs, which is followed by a reduced emission budget for 2015 and beyond for each program. The ozone season budget program also establishes an intermediate reduction in the emission budget for NOx emissions for years 2010 through 2014.

The state rules build upon the NOx and SO2 budgets established for total Indiana emissions under the three CAIR component programs and, generally speaking, do two things: (i) establish a basis of allocation of the state budget for each program among existing sources, as well as set-asides for new sources, energy efficient sources, and other miscellaneous source groups; and (ii) establish rules for the trading, transfer, and use of pollutant allowances for compliance with emission limits set under the rules. Allowance allocations for the annual SO2 reduction program are already determined under the Acid Rain program.

Department of Justice Revises Policy to Seek Waiver of Attorney-Client Privilege in Criminal Investigations of Businesses

By Andy Bowman, Chair, Environmental Law Group, Bingham McHale LLP

On December 12, 2006, the U.S. Department of Justice issued a 19-page memorandum authored by Deputy Attorney General Paul McNulty (“McNulty Memo”) restricting the practice of seeking waivers of the attorney-client privilege from corporations targeted for criminal investigations. The McNulty Memo supersedes the so-called “Thompson Memo” issued by the Justice Department in 2003. The Thompson Memo established guidelines to be considered by federal prosecutors when deciding whether to bring criminal charges against a corporation for violations of federal laws, including environmental laws.

The Thompson Memo included nine factors to be weighed by prosecutors before reaching a decision to seek indictment of a corporation. These factors included pervasiveness of wrongdoing within the corporation, history of similar misconduct, timely and voluntary disclosure of violations and willingness to cooperate. Prosecutors were directed to gauge cooperation by the corporation’s willingness to identify culprits, to make witnesses available, to disclose results of internal investigations and to waive the attorney-client privilege and work product protection. Failure to waive the privilege could result in the indictment of the corporation.

The waiver of attorney-client privilege and work product protection in return for cooperation credit was viewed by many as a substantial erosion of a fundamental protection that would impair the ability of executives to have full and candid discussions with legal counsel. A coalition of groups with varied interests sought legislation to prevent prosecutors from determining a company was not cooperating based on a valid claim of privilege. The McNulty Memo was issued in response to these concerns.

The McNulty Memo reiterates the Thompson Memo factors to be considered by prosecutors. It clarifies that waiver of the attorney-client privilege is not a prerequisite to finding that a company has cooperated. Before seeking a waiver the prosecutor must now demonstrate that there is a legitimate need for the information including that the information cannot be obtained in a timely and complete manner absent a waiver. Prosecutors are instructed to seek the least intrusive waiver necessary and are required to first obtain approval from the United States Attorney for factual information such as interview memoranda, witness statements and key documents. Prosecutors may request attorney-client communications and non-factual attorney work product only in rare circumstances after first obtaining approval of the Deputy Attorney General. If a corporation declines to provide attorney-client communications or work product, the prosecutor may not consider this refusal against the corporation in a charging decision.

The McNulty Memo also clarifies that prosecutors should no longer consider advancement of attorney’s fees to corporate employees as a failure to cooperate. Prosecutors may consider advancement of fees only when: (i) the totality of circumstances show that it was intended to impede a criminal investigation; and (ii) approval has been obtained from the Deputy Attorney General.

The McNulty Memo is available at www.usdoj.gov.

U.S. EPA Increases Public Access to Agency Documents On Web Site

By Jennifer Thompson, Environmental Law Group, Bingham McHale LLP

The United States Environmental Protection Agency (“EPA”) is modernizing its libraries. EPA’s Library Network, established in 1971, is comprised of all of the libraries and repositories in the Agency’s Headquarters, Regional and Field Offices, Research Centers, and specialized laboratories located throughout the country. From this network, now more than 22,000 EPA documents are available through the agency’s public Web site, and EPA plans to have all documents published or produced by EPA online within two years. Additionally, documents from EPA Libraries without physical space are to be available online as of January 2007.

For more information go to EPA Libraries at: www.epa.gov/natlibra/index.html

Bob Keene to Lead IDEM Office of Legal Counsel

By Andy Bowman, Chair, Environmental Law Group, Bingham McHale LLP

Commissioner Tom Easterly announced December 15, 2006, that Bob Keene will serve as Assistant Commissioner of the recently reorganized Office of Legal Counsel which now includes the Office of Compliance and Enforcement and Office of Criminal Investigation. Mr. Keene has served in the Office of Legal Counsel since 1999. Previously, he was a Navy Judge Advocate, First Assistant U.S. Attorney and Master Commissioner with the Marion County Superior Court.