environotes

U.S. EPA Approves IDEM Enforcement Program Changes
EPA Proposes Rule for GHG Emissioins Reporting
U.S. EPA Upholds State's Decision Not to Include Compliance Schedule in Title V Permit
U.S. Supreme Court Limits Superfund Liabiity
Montana Jury Acquits W.R. Grace & Co. and Three Former Officials of Criminal Charges for Violations of the Clean Air Act


U.S. EPA Approves IDEM Enforcement Program Changes
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

In the fall of 2008, the Indiana Department of Environmental Management (“IDEM”) undertake undertook several significant changes to its enforcement policies and enforcement program structure. These included shifting enforcement personnel from the former Office of Enforcement to the program offices, terminating all local air agency contracts and updating its 2003 Compliance and Enforcement Response Policy (“CERP”) which categorizes how different types of violations will be enforced. These sweeping changes were viewed with concern by local agencies, environmental advocacy groups and others. Several stakeholders sought more public input on these changes. Some viewed these changes as a relaxation of the IDEM’s enforcement function. Ultimately these concerns were voiced to U.S. EPA Region 5.

U.S. EPA representatives conducted meetings with IDEM officials, representatives of certain local air agencies, and leaders of environmental organizations to discuss these concerns. After the meeting with the IDEM officials, the IDEM revised the CERP to address U.S. EPA’s concerns regarding the language used by the IDEM which required an unauthorized preventable discharge or other preventable violation to result in an “actual” threat to human health or safety or an “actual” impact to the environment or an unpermitted activity to result in a “significant” threat to human health or the environment before the violation would be classified as a Class 1 violation requiring immediate review by the program Assistant Commissioner for enforcement action. The IDEM made the revised CERP available for public comment from March 2, 2009 to April 16, 2009. See Nonrule Policy Document MP-005-R1-NPD dated March 2, 2009, available at www.in.gov/idem/files/MP-005-R1-NPD.pdf. The revised CERP drops the wording requiring an actual threat or impact or significant threat. The IDEM also made other clarifying revisions to the CERP and updated the CERP to reflect the shift of enforcement personnel to the program areas.

In a May 21, 2009 letter to IDEM Commissioner Easterly. Region 5 Administrator Bharat Mathur acknowledged the IDEM’s revisions to the CERP and its intent to include both potential and actual threats as Class 1 violations. Region 5 deferred to the IDEM regarding the changes to its enforcement structure and local agency utilization, stating: “We recognize that it is IDEM that administers its programs, and that it is to be afforded flexibility in issues like organizational structure and contracting.” Region 5 noted the importance of transparency and public participation and emphasized U.S. EPA’s expectation that the IDEM will take steps to “ensure a high level of communication and openness in the State’s programs.”

The U.S. EPA’s acceptance of the IDEM’s policy and program changes leaves little recourse for those unhappy with the new enforcement approach other than to monitor the IDEM’s ongoing enforcement efforts. Certain environmental organizations have sought U.S. EPA’s audit reports covering Indiana’s enforcement program for the last five years. Region 5 has indicated it will provide these reports to the requesting groups. The revised CERP must be presented to each of the rule-making boards and will become effective 30 days after being presented to the last board.

EPA Proposes Rule for GHG Emissions Reporting
By Larry Kane, Partner, Environmental Law Department, Bingham McHale LLP

Pursuant to a late 2007 Congressional directive, the U.S. EPA issued a proposed rule on March 11, 2009 to mandate the monitoring and reporting of greenhouse gas (GHG) emissions. The voluminous rule proposal was published in the Federal Register on April 10, 2009 (74 Fed.Reg. 16447). A 60-day comment period on the rule proposal ends on June 9, 2009.

According to the proposal, U.S. EPA estimates that approximately 13,000 facilities will be subject to the rule’s GHG reporting requirements, representing from 85-90% of all GHG emissions in the United States. Six major greenhouse gases or groups of gases would be subject to the rule’s reporting obligations: CO2, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, and perfluorochemicals, along with certain other fluorinated gases. Reporting and recordkeeping obligations under the proposed rule appear to be rather extensive.

Overall, the rule would cover three general classes of entities: (1) larger GHG emitters; (2) producers or manufacturers of fuels or other substances that, when combusted or otherwise used in manufacturing processes, lead to emission of GHGs; and (3) manufacturers of transportation equipment.

Applicability of the rule is generally determined in one of two ways: (1) certain listed source or producer categories would be subject to the rule regardless of the level of GHG emissions; and (2) other sources of GHG emissions above a specific threshold level of 25,000 metric tons/year of CO2 equivalent would also be subject to reporting under the rule. More specifically:

• Source categories proposed for inclusion regardless of emission levels include facilities that produce adipic acid, aluminum, ammonia, cement, HCFC-22, lime, nitric acid, petrochemicals, phosphoric acid, silicon carbide, soda ash, and titanium dioxide, as well as petroleum refineries.
• Other source categories that would be subject to the rule if facility emissions exceed 25,000 metric tons of CO2-equivalent include producers of ferroalloys, fluorinated greenhouse gases, glass, hydrogen, iron and steel, ethanol, lead, magnesium, pulp and paper, and zinc. Also included are certain food processing facilities, oil and natural gas systems, and industrial wastewater treatment systems. Facilities potentially subject to the rule only on the basis of combustion of fossil fuels would be exempt if total maximum rated heat input capacity for all stationary combustion units or equipment is less than 30 MMBtu/hr.
• Still other sources appear to be subject to the rule on the basis of criteria that are a hybrid of the first two approaches, being identified in part by source category but also subject in part on the basis of emission thresholds or other threshold applicability criteria. This latter grouping includes electric power systems, electricity generating facilities, electronics manufacturing facilities, landfills, manure management facilities and underground coal mines.

Excluded from reporting obligations under the proposal would be: (i) individual homeowners and vehicle owners; (ii) operators of vehicle fleets; (iii) most commercial buildings; (iv) the bulk of small businesses; and (v) most agricultural operations (except for large manure management operations).

U.S. EPA intends, if the rule is finalized quickly enough, that monitoring of GHG emissions by affected facilities would begin in 2010 with submittal of annual reports to commence in 2011.

U.S. EPA Upholds State’s Decision Not to Include Compliance Schedule in Title V Permit
By Jennifer K. Thompson, Environmental Law Department, Bingham McHale LLP

Over the past few years, activists have been objecting to the issuance of certain Title V permits on the grounds that the permits do not include compliance schedules to address outstanding notices of violation (“NOV”) that have been issued to the permittee. In 2005 the U.S. Court of Appeals for the Second Circuit ruled in the environmentalists’ favor. New York Public Interest Research Group v. Johnson, 427 F.3d 172 (2nd Cir. 2005). However, courts in other circuits have not ruled directly on this issue, and environmentalists continue to raise objections.

Pursuant to Section 505 of the Clean Air Act (“CAA”), the United States Environmental Protection Agency (“U.S. EPA”) is to object to an operating permit that does not comply with the CAA requirements. If U.S. EPA does not object to a permit, any person may petition the U.S. EPA Administrator within sixty (60) days of expiration of U.S. EPA’s forty-five (45) day review period, to object to the permit. Environmentalists have been filing such petitions arguing that the issuance of an NOV (for example, alleging various Prevention of Significant Deterioration (“PSD”) and/or New Source Review (”NSR”) violations) is clear evidence that a Title V Permit is not in compliance with all of the CAA requirements.

Recently U.S. EPA Administrator Lisa Jackson upheld the Bush Administration’s position that the mere issuance of an NOV and referenced information contained therein are not sufficient to demonstrate that a permit is not in compliance with the requirements of the CAA. See U.S. EPA’s Order Partially Denying and Partially Granting Petition for Objection to Permit in the Matter of Cemex, Inc., Permit No. 95OPBO082. Administrator Jackson’s order, which responds to a petition to object to a Title V Permit, explains that the existence of an NOV is a relevant factor to consider when determining whether all of the information presented by a petitioner demonstrates the applicability of a Title V requirement. However, other factors also must be considered, including “the quality of information, whether the underlying facts are disputable, the types of defenses available to the source, and the nature of any disputed legal questions.” Using these factors, Administrator Jackson denied the petition with respect to the allegations contained in the NOV (which was issued after the public notice of the draft Title V Permit), but clarified that the Title V permit shield does not alter or affect the liability of an owner or operator of a source for violations of applicable requirements prior to or at the time of permit issuance.

Additionally, the Administrator denied other objections raised by the petitioners on the grounds that said objections were not raised with reasonable specificity by the petitioners during the public comment period for the draft Title V permit. However, the Administrator granted the petition on two separate issues which were raised during the public comment period because the reviewing state agency (the Colorado Department of Public Health and Environment) failed to adequately respond to the allegations. The reviewing agency’s response to petitioner’s allegations regarding two prior modifications simply stated:

The modifications you cite were evaluated under the rules that existed at the time of each modification, and determined to not trigger, or to net out of PSD review. The emissions increases were determined to meet regulatory requirements at the time of application, and are not part of the operating permit review.

Because the state agency’s response contained no citations or summary of the basis for its past decisions, the Administrator directed the agency to address the comments on the two modification projects and make any necessary changes to the permit. Administrator Jackson clarified that she was not concluding that either project triggered PSD and/or NSR, rather she held that the permit record does not provide a meaningful response and therefore lacked an adequate basis for the reviewing agency’s determination.

Notice of U.S. EPA’s final action on the petition was included in the May 11, 2009 Federal Register (74 Fed. Reg. 21803). U.S. EPA’s Order Partially Denying and Partially Granting Petition for Objection to Permit in the Matter of Cemex, Inc., Permit No. 95OPBO082 can be viewed at www.epa.gov/region07/programs/artd/air/title5/petitiondb/petitions/cemex_response2009.pdf.

U.S. Supreme Court Limits Superfund Liability
By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

On May 4, 2009, the U.S. Supreme Court decided Burlington Northern & Sante Fe Railway Co. et al. v. United States et al., No. 07-1601, Slip Op. (May 4, 2009) in which it placed new limits on liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The case involved an agricultural chemical distribution company, Brown & Bryant, Inc. (“B & B”), that distributed a pesticide known as D-D which it purchased from Shell Oil Company (“Shell Oil”). Shell Oil knew when it sold D-D that spills and leaks often occurred during the transfer of the chemical from seller to buyer. Despite Shell Oil’s efforts to safeguard against such spills and leaks, B & B contaminated property it leased from two railroad companies due to releases of hazardous substances, including D-D. The Supreme Court was faced with determining which of these parties should be liable and the proper allocation of that liability among the parties.

First, the Court was tasked with determining whether Shell Oil could be held liable under CERCLA’s “arranger” liability provision. Under CERCLA, a party “who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances” can be held liable for contamination that resulted from the release of the hazardous substances. 42 U.S.C. § 9607(a)(3). In Burlington Northern, the issue was whether Shell Oil could be held liable as an arranger where it sold a product and knew that the product could spill or leak during the transfer of the product from seller to buyer. The Supreme Court held that although Shell Oil’s purpose had been to supply a useful raw material, rather than dispose of a waste product, the seller of a useful virgin product can, in some instances, still be liable as an arranger. The Court held that such liability hinges on whether the seller affirmatively intended that some portion of the product be disposed of upon delivery of the raw material. In declining to hold Shell Oil liable, the court held that there was no evidence that Shell Oil “intended” for any of its product to be disposed and “mere knowledge that spills and leaks continued to occur is insufficient grounds for concluding that Shell “arranged for” the disposal of D–D within the meaning of § 9607(a)(3).”

Next, the Court decided that the railroads which leased the property to B & B were liable under CERCLA as “owners.” The issue was whether the railroads were joint and severally liable for the contamination, meaning that any single responsible party could be responsible for the entire cost of the cleanup. The Supreme Court held that while CERCLA allows for joint and several liability, it is not proper in every case. The Court held that joint and several liability does not apply where defendants can demonstrate “a reasonable basis” for determining the contribution of each party. In so doing, the Supreme Court reversed the Ninth Circuit Court of Appeals. The Ninth Circuit had denied splitting the liability and held the railroads liable for all response costs because the parties had not met their burden of proving a reasonable basis for apportionment that was based upon precise and detailed evidence of each party’s contribution. Instead, the Supreme Court upheld the trial court’s basis for apportionment in which it considered the percentage of contaminated land owned, the duration of ownership, the relative harm of the substances and the relative cost of remediating the hazardous substances on that property. Thus, the Supreme Court has opened up apportionment to defendants that may not have precise and detailed records of their involvement at a Superfund site.

Montana Jury Acquits W.R. Grace & Co. and Three Former Officials of Criminal Charges for Violations of the Clean Air Act
By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On May 8, 2009, a federal jury in Montana unanimously found the W.R. Grace & Co. and three former officials, two executives and a former industrial hygienist and Director of Health, Safety and Toxicology, not guilty of criminal charges related to alleged Clean Air Act violations. In the case, United States of America v. W.R. Grace, et al., prosecutors alleged that W.R. Grace & Co. and the three former officials violated the Clean Air Act by knowingly exposing residents of Libby, Montana to asbestos released from the company’s vermiculite mine. Federal prosecutors initially accused W.R. Grace & Company and the former executives of exposing the approximately 100,000 residents of Libby, Montana to asbestos while operating the vermiculite mine, ultimately resulting in 200 deaths and 2,000 illnesses. Vermiculite ore removed from the mine contained tremolite asbestos which is linked to asbestos-related illnesses including malignant mesothelioma, lung cancer, and asbestosis.

According to the eight count indictment filed in 2005 in the United States District Court for the District of Montana, Missoula Division, the company and executives were accused of conspiracy, violations of the Clean Air Act, and obstruction of justice. The indictment alleged that W.R. Grace conspired to “knowingly release” asbestos and attempted to cover-up the dangers of inhalation of asbestos fibers from company employees and residents of Libby, Montana. The indictment also alleged that W.R. Grace & Co. attempted to impair and frustrate a 1999 U.S. Environmental Protection Agency investigation of the vermiculite mine.

This case covered activities that took place over a 40-year period. Over three million documents were involved. This case illustrates the difficulty of proving charges of intentional violations involving complex technical issues.