Newsletters

Environment April 2008

Federal Environmental Appeals Board Decides that NPDES Permits May Contain Compliance Schedules Exceeding the 5-Year Permit Term

Larry J. Kane, Partner, Environmental Law Department, Bingham McHale LLP

The U.S. EPA’s Environmental Appeals Board (”EAB”) recently issued a decision in an NPDES permit appeal, In re District of Columbia Water and Sewer Authority, _____ E.A.D. ____, NPDES Appeal Nos. 05-02, 07-10, 07-11, and 07-12 (E.A.B. March 19, 2008) (the “DC WASA” decision), which has potential repercussions for other CSO communities. Briefly, this decision holds that the U.S. EPA, where it is the NPDES permitting agency, must incorporate an approved compliance schedule for Long Term Control Plan (“LTCP”) implementation, even if longer than 5 years, into the community’s NPDES permit if the state water quality agency has legal authority for allowing compliance schedules of that length for attaining water quality standards. Notably, the District of Columbia had enacted a regulation requiring compliance schedules for implementation of water quality-based effluent limits in an NPDES permit of whatever length the permittee can demonstrate is warranted. This regulation was a part of the District’s water quality standards that had been approved by U.S. EPA.

While the EAB decision in DC WASA applies, strictly speaking, to NPDES decisions by U.S. EPA as the permitting authority, there appears to be no legal basis for the rationale of this decision not being equally applicable to NPDES permit decisions where a state is the NPDES permitting agency so long as the underlying factors of the DC WASA case are present. Consequently, the provisions of P.L. 54-2005, § 5, enacted by the Indiana General Assembly in 2005 as SEA 620, become relevant. This legislation requires incorporation of approved LTCP compliance schedules in NPDES permits, when requested by the permittee, even though such schedules may extend beyond a 5-year permit term. As a result, Indiana CSO communities should be eligible for the same requirement as that recognized in the DC WASA decision that such compliance schedules be included in their NPDES permits, regardless of whether the compliance schedule extends beyond the 5-year term of an NPDES permit.

It should be noted that the potential ramifications of the DC WASA decision regarding the use of enforcement orders for establishment of enforceable LTCP implementation schedules in instances where the LTCP compliance schedule is incorporated in an NPDES permit was not addressed in depth by the EAB.

Federal Court Rules that Statute of Limitations Bars CERCLA Claims Against Dissolved Corporation and Its Insurers

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

The United States District Court for the Southern District of Indiana has recently ruled that a claim brought under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) against a dissolved corporation to recover clean-up costs for environmental contamination caused by prior property owners is barred by the two-year statute of limitations governing claims against dissolved corporations. The Court further ruled that claims against insurance companies which provided coverage to the dissolved corporation are also barred by the two-year statute of limitations. Sanyo North America Corp. v. Absocold Corp., S.D. Ind., Case No. 1:06-CV-0405-LJM-WTL (March 6, 2008).

The Court also held that the dissolved corporation’s failure to provide notices of dissolution to creditors, the Indiana Department of Revenue, the Indiana Employment Security Division and the Unclaimed Property Section of the Attorney General as required by the corporate dissolution statute, Indiana Code 23-1-45 did not defeat the two-year statute of limitations. Id. at p. 6.

Sanyo had purchased property in Richmond, Indiana from Design and Manufacturing Corporation (“D&M”) in 1986. D&M voluntarily dissolved and ceased to exist in 1990. Sanyo incurred clean-up costs to address environmental contamination alleged to have resulted from D&M’s and other prior businesses’ operations before 1986. Sanyo brought claims under CERCLA in 2006.

The Court followed the Seventh Circuit Court of Appeals decision in Citizens Electric v. Bituminous Fire and Marine Insurance Co., 68 F. 3d 1016 (7th Cir. 1995) and rejected Sanyo’s argument that the public policy purposes of CERCLA should trump Indiana’s right to set limitations on claims against dissolved corporations. Id. at p. 7.

U.S. EPA Revises 8-Hour Ozone Standard

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

On March 12, 2008, the U.S. EPA announced that it was tightening the National Ambient Air Quality Standard (“NAAQS”) for ozone. The new standard was published in the Federal Register on March 27, 2008 at 73 Fed. Reg. 16435. The new standard reduces the primary standard, designed to protect public health, from 0.08 parts per million (“ppm”) to 0.075 ppm. The U.S. EPA also set the secondary standard, aimed at protecting public welfare, at 0.075 ppm. The U.S. EPA specified that states must now monitor and specify compliance based on readings taken to the third decimal place. Previously, compliance was determined using only two decimal places which effectively made the old standard 0.084 ppm.

The ozone NAAQS revision will require the Indiana Department of Environmental Management ("IDEM") to determine which counties are in attainment with the new standard. The Clean Air Act (“CAA”) requires that the IDEM submit its attainment/nonattainment recommendations to the U.S. EPA by March of 2009, and EPA must promulgate the designations by March of 2010, although extensions can be obtained under the CAA. Once the designations are promulgated, the IDEM will have three years to submit a new state implementation plan (“SIP”) setting forth the IDEM’s plan to meet the new ozone standards.

An Indiana county will be in attainment of the new standard if the 3-year average of the fourth-highest daily maximum 8-hour average ozone concentrations measured at each monitor within an area does not exceed 0.075 ppm. Based on data from 2005-2007, twenty-four Indiana counties would be designated as nonattainment. A map of the 2005-2007 data and proposed attainment designations are available at http://www.in.gov/idem/air/prop_standard_075.pdf.

If the IDEM designates these counties as nonattainment, it will have a significant impact on major sources located in those counties. Those sources would become subject to the new source review nonattainment requirements of the CAA, which require new sources and major modifications to comply with the lowest achievable emissions rate (“LAER”) and emissions offsets.

IDEM Unveils Draft Revisions to Supplemental Environmental
Projects Policy

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

On February 1, 2008, the Indiana Department of Environmental Management (“IDEM”) released a draft version of a Non-Rule Policy Document (“NPD”) setting forth revisions to IDEM’s policy regarding Supplemental Environmental Projects (“SEPs”). The 2008 Draft SEP NPD (08-003-NPD) is intended to replace the original SEP NPD that became effective on April 5, 1999. SEPs are environmentally beneficial projects that enhance public health or the environment which a violator agrees to perform in return for a penalty reduction.

The 2008 Draft SEP NPD contains significant changes from the original 1999 SEP Policy including: (1) clarification of the when a SEP proposal must be made; (2) additional and revised categories of acceptable SEPs; (3) additional and revised explanations of the criteria used by IDEM in approving or denying proposed SEPs; and (4) revised criteria regarding the extent to which assessed gravity-based civil penalties may be reduced by performance of a SEP. IDEM intends to present the 2008 Draft SEP NPD to the Indiana Solid Waste Management Board (“SWMB”) at its meeting scheduled for May 20, 2008. The new NPD will be effective 30 days after it is presented to the last of the three rulemaking boards.

With regard to the timing of submission of proposals to perform SEPs, the 2008 Draft SEP NPD provides some flexibility by requiring that SEP proposals must be made “as early as possible in the enforcement process.” The 1999 SEP Policy required that a SEP proposal be submitted “shortly after the enforcement process begins.” Neither the original NPD nor the revised NPD fix a specific time for a SEP submittal and the acceptance of a SEP remains discretionary on the part of the IDEM.

The 2008 Draft SEP NPD includes two new categories of acceptable SEPS not listed in the 1999 SEP Policy: community involvement and public health. According to the 2008 Draft SEP NPD, community involvement SEPs “support community environmental projects or outreach, or promote emergency planning and preparedness” and a public health SEP “provides diagnostic, preventative and/or a remedial component to human health care which is related to the actual or potential damage to human health caused by a Violation.” In addition to these newly listed SEPs, the 2008 Draft SEP NPD expands the acceptable SEP projects related to environmental restoration by including projects that involve conservation and protection of an ecosystem or geographic area.

Unlike the 1999 SEP Policy, the 2008 Draft SEP NPD provides detailed explanations of the criteria to be used by the IDEM in determining whether to approve a SEP. Specifically, the 2008 Draft SEP NPD states that IDEM staff must consider certain enumerated criteria in assessing a proposed SEP. The 2008 Draft SEP NPD includes specific conditions under which a SEP may be rejected by the IDEM even if the project appears to satisfy all the provisions of the Draft 2008 SEP NPD and lists examples of specific projects that are not appropriate for SEPs, including projects that were started or for which funding was identified before the violation was identified by the IDEM and projects where the violator will be the primary recipient of the benefits from the project.

Under both the Draft 2008 SEP NPD and the 1999 SEP Policy, Respondents that perform SEPs are generally allowed offsets of gravity-based civil penalties in a ratio of 2:1. That is, for every $2 spent on an approved SEP the gravity-based penalty is typically reduced by $1. However, unlike the 1999 SEP NPD, the 2008 Draft SEP NPD provides a list of specific instances in which the performance of a SEP may offset a gravity-based penalty by a 1:1 ratio. These instances include: (1) pollution prevention SEP proposals; (2) environmental conservation, protection, and restoration SEPs involving a proposal to donate funds to an Internal Revenue Code § 501(c)(3) environmental or natural resources not-for-profit organization; (3) SEP proposals submitted by governmental entities, small businesses, or not-for-profits; (4) SEPs proposed by respondents that have been issued their first Notice of Violation; (5) where small gravity-based civil penalties (less than $10,000) are assessed; (6) SEPS proposed in response to violations of non-federally delegated programs; and (7) when a 1:1 offset is requested for a project which goes beyond any legal requirement and results in direct reductions of pollutants entering the environment or the actual remediation of contaminated sites. It should be noted that the use of 1:1 offsets is completely within the discretion of the IDEM.

A copy of the Draft 2008 SEP NPD is available at http://www.in.gov/idem/rules/policies/enforcement/08-003.pdf. Additional information regarding the Draft 2008 SEP NPD may be obtained from Lori Kyle Endris, Chief, Office of Enforcement, at 317-234-1819.