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ExxonMobil Ordered to Pay Compensatory Damages to City of New York in MTBE Suit; Court Throws Out Claim for Punitive Damages

    Methyl Tertiary Butyl Ether ("MTBE") has been used as a gasoline additive in the United States since the late 1970's. MTBE initially was used as an octane enhancer and later as an oxygenate blend with reformulated gasoline for use in ozone non-attainment areas designated by EPA under the Clear Air Act. As its use became widespread, so did industry knowledge of some of the problems associated with it. In an industry where spills and leaks from underground storage tanks are not uncommon, it became apparent that MTBE because of its solubility would travel further and faster than other constituents of gasoline (e.g., benzene). In addition, it turned out that MTBE was much harder to clean up. As a result, over time MTBE became the second most ubiquitous contaminant found in United States groundwater according to the USGS. 

    Although there is much debate concerning whether MTBE presents a human health risk, there is no dispute that at very low concentrations it has an objectionable taste and odor (which some describe as similar to turpentine). Early attempts by the plaintiffs' bar to bring claims against refiners and marketers on behalf of residential and commercial drinking water well owners failed when courts denied class action status. The rationale given by the courts was that due to the differences from one water well to another the plaintiffs could not establish the necessary elements to certify a class. 

    Later, the plaintiffs' bar determined that it could achieve the scope of a class action by bringing cases on behalf of public drinking water suppliers such as municipalities. Actions were commenced across the country claiming that MTBE manufacturers and gasoline refiners, wholesalers, distributors and retailers were liable for contamination of public water systems based on several theories of law including product liability, nuisance and trespass. Many of these actions were aggregated in In re: Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, 00 MDL 1898 in the United States District Court for the Southern District of New York before the Honorable Shira Scheindlin, United States District Judge. 

    One of the cases in the multi-district litigation was the City of New York v. ExxonMobil Corp. The City had sued ExxonMobil and a number of others involved in the manufacture and sale of MTBE and gasoline blends containing MTBE for the prospective contamination of a public water facility, Station Six, to be constructed within the next 15 years. The jury concluded that the wells comprising this facility would be contaminated by 10 parts per billion of MTBE in the year 2033. For this prospective contamination, the jury awarded the City $105 million from ExxonMobil. Prior to the ExxonMobil trial, 22 other defendants had settled with the City.  

    Despite losing the case for compensatory damages, ExxonMobil was able to prevail on the issue of punitive damages, the court holding as a matter of law that ExxonMobil could not be liable under the standard applied in the State of New York. This standard required that the City either show that ExxonMobil had malicious intent to cause harm or that it acted with a high degree of moral culpability manifested by wanton and reckless disregard of the City's rights. In order to prove its case, the City presented evidence that ExxonMobil was aware of MTBE's adverse effect on the taste and odor of water and that it could render water undrinkable. The City was also able to show that ExxonMobil was aware of an issue regarding MTBE's potential impact on human health. Studies tended to show that MTBE was known as an animal carcinogen and potential human carcinogen. Next, the City was able to prove that ExxonMobil was aware of the probability that MTBE would escape into the environment either from product spills or leaking underground storage tanks or lines. Finally, the City presented evidence that MTBE was different than other gasoline compounds in that it migrates further and faster and may affect greater areas; has a low taste and odor threshold; and is more difficult to remediate. 

    Despite this, the court concluded as a matter of law that ExxonMobil could not be found liable for punitive damages. Although the court conceded that ExxonMobil had a general awareness of the dangers of MTBE while it continued to produce, distribute and store it, the City offered little evidence with respect to ExxonMobil's conduct with respect to Station Six that manifested a wanton, reckless and highly immoral disregard for the rights of others. The court noted that the jury found that MTBE concentrations at Station Six would reach a peak of 10 ppm (the maximum contaminate limit (MCL) for MTBE in New York) in 2033. Therefore, the court concluded that there was no evidence that punishing ExxonMobil would advance a strong public policy or that its conduct presented a severe risk to the public. In addition, the court noted that most of the conduct of which the City complained occurred while the MCL for MTBE in New York was 50 ppm. The court also noted that the contamination predicted for the Station Six wells was not the result of ExxonMobil's conduct alone, but included contributions from other refiners, distributors and retailers. Finally, the court concluded that the risk of harm to the City resulting from ExxonMobil's conduct could not be found to have outstripped the actual harm caused by that conduct. 

 This article was authored by James R. Snyder, Jackson Kelly PLLC. For more information on the author see here.

Geologic Carbon Sequestration News

In the United States alone, Geologic Carbon Sequestration has a multitude of projects at various stages of completion. Recently, the DOE Midwest Partnership announced successful completion of CO2 injection at the East Bend Site located near Rabbit Hash, Boone County, Kentucky. Now that the actual injection has been completed, the area will still be monitored to determine the suitability of future injection or whether the well should be capped for permanent closure. This project, although started three years ago, is just a small scale test site. For more information on the East Bend Project, the formal announcement (as seen in the Carbon Capture Journal) of successful injection has been included. For an overall picture of the project, see the Midwest Regional Carbon Sequestration Partnership (MRCSP) website at http://216.109.210.162/CincinnatiArch.aspx.

In addition, another article from the Carbon Capture Journal has been included. This article is about the CO2 Capture Project (CCP). Although there are many publicly funded programs, CCP is a partnership of the world’s leading energy companies. Just as publicly funded partnerships include other resources; this partnership utilizes academic institutions and government agencies. As apparent from this introduction, in order for Geologic Carbon Sequestration and Carbon Capture to be viable options for our future, all of these partnerships and projects are essential. Sharing this information is for the greater good of the technology and our future. The article about CCP details their recent findings and introduces a publication - Advances in CO2 Capture and Storage Technology.

DOE Midwest Partnership completes CO2 injection
Storage, Oct 21 2009 (Carbon Capture Journal)

- The Midwest Regional Carbon Sequestration Partnership (MRCSP) has successfully injected 1,000 metric tons of CO2 into the Mount Simon Sandstone.

The formation is a deep saline formation that is widespread across much of the Midwest.

Preliminary results indicate that the formation has good CO2 storage potential and could possibly serve as a repository for CO2 emissions captured from stationary sources in the region, says the DOE.

In the controlled test, members of the MRCSP research team injected liquefied CO2 at Duke Energy’s East Bend Generating Station, located along the Ohio River near the town of Rabbit Hash in Boone County, Kentucky.

The CO2 was injected into the lowest 100 feet of the Mount Simon Sandstone, which is present at the East Bend site at approximately 3,230 to 3,530 feet below ground. The formation has properties that are considered conducive to CO2 storage, such as the appropriate depth, thickness, porosity, and permeability; in addition the formation is overlain by layers of low-permeability rock that should keep the CO2 safely and permanently confined.

Before drilling the test well, the partnership conducted a seismic survey at the site and obtained permits for the injection test from the U.S. Environmental Protection Agency (EPA) and the Kentucky Division of Oil and Gas. The research team then injected clean brine, as required in the permit issued by the EPA, to determine formation properties such as the maximum safe injection pressure.

Following brine injection, a total of approximately 1,000 metric tons of CO2 were injected in two 500-metric-ton steps, concluding on September 25th. The injection rate, pressure, temperature, and quantity of CO2 in the formation were measured throughout the test to confirm that the injection proceeded as planned.

Over the next two years, the MRSCP team will monitor groundwater at the site to ensure that it is unaffected by the CO2. Underground sources of drinking water are located within a few hundred feet of the surface in the region, far above the injection zone. The Eau Clair Shale provides approximately 450 feet of containment above the injection zone, thereby ensuring the safety of drinking water supplies.

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CO2 Capture Project releases latest findings
Projects / Policy, Oct  20  2009 (Carbon Capture Journal)

- The CO2 Capture Project (CCP) presented 'breakthrough findings' gained from the last five years of its research at the third Carbon Sequestration Leadership Forum (CSLF).

The studies undertaken by the CCP confirm that the safe, long-term geological storage of CO2 is achievable; they draw on the decades of experience that the oil & gas industry has of storing and monitoring gases and liquids underground.

Capture of CO2 emissions is shown to be technically and economically possible using a range of methods which have undergone thorough testing.

The CCP’s findings, from the second phase of its work, are set out in a new book - Advances in CO2 Capture and Storage Technology - part of a series entitled CO2 Capture for Storage in Deep Geologic Formations.

Highlights include:

R&D studies that addressed outstanding issues confirm that CO2 can be stored underground safely and securely. They include:

- A Well Integrity Field Study shows that selecting the correct drilling and installation procedures is more important than the choice of materials for long term well stability, and thus secure long-term subsurface storage

- A Certification Framework, developed to provide a simple, transparent guide to site certification; essential to help decision makers to manage the CO2 storage process

- Outstanding technical progress was achieved following an in-depth review of more than 200 capture technologies. About 10 technologies, covering the whole range of techniques (post-combustion, precombustion, oxy-fuel), and applicable to varied point sources, were developed from concept and are now being evaluated for potential demonstration:

- Identification of a preferred CO2 capture method for oil refineries - Oxy-fuel combustion has been shown to offer the greatest potential, both technically and economically, for capturing CO2 emitted by the largest source in oil refineries, the Fluid Catalytic Cracking unit (FCC). A pilot test in an industrial scale refinery is scheduled for next year

- Potential for CO2 capture from extraction of heavy oil and tar sands – a novel advanced oxy-firing technology - chemical looping combustion (CLC) - has been developed, which has the technical and economical potential in the mid-term for scaling up to capture CO2 from heavy oil and tar sand steam extraction processes

- Post-combustion identified as most likely short-term option for capturing CO2 from gas fired power stations, although pre-combustion may be more viable in the medium-term.

The findings are the result of a major collaborative effort between the members of CCP including eight oil & gas majors and government bodies including the EU, the US Department of Energy, the Norwegian Research Council and 60 academic institutions, industry and leading environmental groups.

Over 150 projects have been undertaken by the CCP, to date, to increase understanding of the science, engineering applications and economics of CCS.

The CCP is now entering its third phase – using insights from the first two phases to further test and trial high potential technologies. This work will prepare the ground for widespread deployment of these technologies throughout the oil and gas industry and the power sector.

This article includes publically available information, and was assembled by Rachel Shanteau, Acacia Environmental Group LLC. For more information on the author see here.

Recent GHG Case Breaks from 2nd Circuit

In the case of Kivalina et al. v. Exxon Mobil Corp. et al., case number 4:08-cv-01138 (N.D. Cal. Sept. 30, 2009), the U.S. District Court for the Northern District of California dismissed a public nuisance lawsuit brought by the Alaskan village of Kivalina against 24 energy and utility companies, finding that the Eskimo village who brought the suit could not establish that the threat to its existence from rising sea levels was “fairly traceable” to the defendants’ greenhouse gas (GHG) emissions and thus lacked standing. Judge Saundra Brown Armstrong of the U.S. District Court for the Northern District of California further ruled that the plaintiffs’ federal common law nuisance suit touched on a political question properly reserved for the legislative or executive branch. This was a break from the current trend in the federal courts of holding companies liable for historic GHG emissions that contribute to global warming.  

In Connecticut v. American Electric Power Co., the Second Circuit revived a similar nuisance suit filed by a coalition of states and environmental groups against American Electric Power Co. Inc., the Tennessee Valley Authority, Xcel Energy Inc. and other power companies. The suit, brought under a federal common law claim of nuisance, alleged that by contributing to global warming, AEP and the other defendants were harming the environment, the states’ economies and public health. It was originally tossed by a district court, but then revived last month by a two-judge panel of the Second Circuit, which said the district court had wrongly read the plaintiffs’ claims as seeking a change in national policy rather than protection from immediate harm. 

“Nowhere in their complaints do plaintiffs ask the court to fashion a comprehensive and far-reaching solution to global climate change, a task that arguably falls within the purview of the political branches,” the judges said. “Instead, they seek to limit emissions from six domestic coal-fired electricity plants on the ground that such emissions constitute a public nuisance that they allege has caused, is causing and will continue to cause them injury.”  

“These decisions side by side I think show the great disagreements both in the law and in society about how to handle these claims,” said Steven F. Napolitano, a partner at Skadden Arps Slate Meagher & Flom LLP. “They are 180 degrees different.” 

The Kivalina case is one of the many recent public nuisance lawsuits brought against energy and utility companies. The Kivalina decision falls in line with prior decisions coming out of the district courts, whereas the Second Circuit’s decision is an outlying decision right now in the field of global warming. 

“The district court judges pretty consistently seem to be going with the view that these are difficult cases to entertain, that they run into problems of fundamentally political judgments,” added Ronald J. Tenpas, co-chair of the environmental practice at Morgan Lewis & Bockius LLP and a former assistant attorney general at the U.S. Department of Justice. “And now you have one court of appeals going in a different direction. So it definitely leaves things in a bit of a flux right now.” 

While the Second Circuit relied on comparisons to water pollution and air pollution nuisance cases, Judge Armstrong criticized the Second Circuit in the Kivalina decision, questioning whether water pollution and air pollution cases provided appropriate guidance in assessing global warming nuisance cases, pointing to the admitted and significant distinctions between a nuisance claim based on water or air pollution and one based on global warming.  

“While a water pollution claim typically involves a discrete, geographically definable waterway, plaintiffs’ global warming claim is based on the emission of greenhouse gases from innumerable sources located throughout the world and affecting the entire planet and its atmosphere,” Armstrong said. 

Armstrong further said that the nuisance claim required the judiciary to make a policy decision about who should bear the cost of global warming. “Though alleging that defendants are responsible for a ‘substantial portion’ of greenhouse gas emissions, plaintiffs also acknowledge that virtually everyone on Earth is responsible on some level for contributing to such emissions,” she said.” Yet, by pressing this lawsuit, plaintiffs are in effect asking this court to make a political judgment that the two dozen defendants named in this action should be the only ones to bear the cost of contributing to global warming.” 

In yet another similar case, a proposed class of property owners alleged that dozens of oil and chemical companies made Hurricane Katrina worse through their contributions to global warming, and that they were therefore liable for damages from the storm. In Comer v. Murphy Oil, the Fifth Circuit held that the plaintiffs had Article III standing to assert state law nuisance and trespass claims for the resulting damage to their property and that the political question doctrine did not apply to this “ordinary tort suit.” 

In contrast to Judge Armstrong’s criticism of the AEP decision, the Fifth circuit lauded AEP’s “careful analysis” of the political question doctrine and sharply criticized the AEP trial court’s “serious error of law.”  

“It’s clear that these cases are hardly the last word, that there will be continued litigation and that there are still plenty of … good arguments from the defendant’s perspective as to why the [cases don’t] withstand scrutiny and full proof,” Tenpas said in reference to the AEP and Kivalina cases. 

The green light given to the federal judiciary by the Second and Fifth Circuits, combined with the EPA’s recent steps to regulate GHGs under the Clean Air Act, could place additional pressure on Congress and the relevant stakeholders to pass comprehensive climate change law for fear of courts (and juries) being involved in the business of climate change regulation. 

This article was authored by Matthew S. Tyree, Jackson Kelly PLLC. For more information on the author see here.

Cleaning the Air Contributes to Water Pollution

The NY Times ran an article recently titled “Cleansing the Air at the Expense of Waterways”, October 13, 2009. The article was critical of the combustion of coal and quoted Senator Barbara Boxer, a California Democrat in support of that criticism. The article makes the point that the burning of fossil fuels for energy use has resulted in new air quality strategies forcing the installation of new air pollution control technology which in turn has had an impact on the related industrial waste water.  

As coal fired power plants install scrubbers to reduce their emissions, they are faced with the dilemma as to how best to manage the consequent changes in the character of the water discharges. The state and federal regulatory agencies have been slow to acknowledge the dilemma as evidenced by recent NPDES permit issuances. Water permits are being rewritten to allow for reasonable compliance schedules. One key to successfully managing both the Clean Air Act and the Clean Water Act is to allow reasonable time to develop water quality solutions that are being driven by the air pollution control equipment. In some instances, that is exploring new treatment technologies and in others it is modifying the air pollution control equipment operations to address water quality issues.  

If not managed properly this issue, could present is a major problem as to which statutory program takes precedence, the Clean Air Act or the Clean Water Act. It is essential that measured steps be taken to resolve the debate in a manner that creates guidance for permit writers and the regulated community as to how to efficiently handle new waste byproducts generated by the scrubbers while preserving the goals of both statutory programs.  

This article was authored by Laura G. Swingle, Jackson Kelly PLLC. For more information on the author see here.

Public Hearings Held Regarding U.S. Army Corps of Engineers Proposal to Suspend NWP 21

    On Tuesday, October 13, 2009, approximately 4,500 people gathered in the Eastern Kentucky Expo Center in Pikeville, Kentucky for a public hearing on the proposed suspension and modification of Nationwide Permit 21 in the Appalachian Region of Kentucky, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia. This hearing was one of six held; one in each of the affected states. Written comments to supplement the hearing records may be submitted to the United States Army Corps of Engineers (“Corps”) until October 26, 2009. 

    The hearings are the result of a Corps proposal to suspend Nationwide Permit 21(“NWP 21”) to prohibit its use to authorize surface coal mining activities in the Appalachian region. NWP 21 authorizes discharges of dredged or fill material into waters of the United States for surface coal mining activities. According to 33 CFR 330.5, suspension of nationwide permits is a short term measure for quickly halting the use of a nationwide permit in response to identified concerns about impacts to jurisdictional waters of the United States. The Corps also seeks to modify NWP 21 to make that prohibition permanent until NWP 21 expires on March 18, 2012. Modification of a nationwide permit is a long term solution for addressing concerns about impacts to jurisdictional waters of the United States. However, the Chief of Engineers can not suspend or modify a nationwide permit until he or she has issued notice soliciting public comment and provided the opportunity for interested parties to request a public hearing. 33 CFR 330.5(b)(2)(i). 

    If NWP 21 is eventually suspended in the Appalachian region, those activities that were verified by District Engineers prior to the effective of the suspension as being authorized by NWP 21 will continue to be authorized unless the District Engineer takes action to modify, suspend or revoke a particular NWP authorization on a case by case basis in accordance with the procedures of 33 CFR.330.5(d). If NWP 21 is modified to prohibit its use to authorize surface coal mining activities in the Appalachian region, then the “grandfather” provision of 33 CFR 330.6(b) would apply giving each permittee twelve (12) months from the date the NWP is modified to complete the authorized activity, unless the District Engineer modifies, suspends or revokes the NWP 21 authorization for that particular activity. To qualify for the “grandfather” provision at 33 CFR 330.6(b), the activity must have commenced construction or be under contract to commence construction before the effective date of the modification. 

This article was co-authored by Kevin McGuire and Mary Beth Naumann, Jackson Kelly PLLC. For more information on the authors see (McGuire) here and (Naumann) here. 

EPA to Focus on Clean Water Act Enforcement

October 15, 2009 the Clean Water Act Enforcement Action Plan was submitted to EPA Administrator Lisa Jackson. EPA recognizes that over the last 30 years water pollution from the large direct industrial point sources, such as factories and sewage treatment plants, has been abated to a large extent , but that water quality threats from other sources--many of which were historically deemed to be non-point sources is causing serious pollution challenges. The regulated universe has expanded from roughly 100,000 traditional point sources to nearly one million far more dispersed sources such as animal feeding operations and storm water runoff. EPA found that many of the nation’s waters are not meeting water quality standards, and the threat to drinking water sources is growing. EPA proposes to target federal and state enforcement to tackle sources posing the biggest threats to water quality while increasing vigorous civil and criminal enforcement against traditional end-of-pipe pollution.  

EPA announced that it is responsible for assuring that the protections of the Clean Water Act extend to all citizens and that while some states have strong water quality protection and enforcement programs, as a whole, state compliance and enforcement is uneven, creating an unlevel playing field for businesses that do comply with the law, and denying citizens equal protection under the environmental legal framework. EPA notes that it must ensure that states protect water quality and consistently apply the law by issuing protective permits and by pursuing vigorous enforcement. EPA intends to set standards for acceptable state programs, and consistently hold states accountable. Where states are not meeting these expectations, EPA needs to strengthen water quality protection by disapproving permits that are not protective and by pursuing federal enforcement against serious violators.  

EPA also emphasized that the public has a right to know what the threats are to water quality, where violations are occurring, and what EPA is doing about them. Additionally, the increased and dispersed numbers of pollution sources require EPA to target enforcement to the biggest problems. EPA intends to advance both goals by requiring reports to be submitted electronically.  

Through the State Review Framework, EPA has made available comprehensive reports and data on water enforcement for all 54 states and territories, including those states/territories where EPA directly administers the permitting and enforcement program itself. The reports also review the clean air and RCRA hazardous waste compliance enforcement programs for each state and territory. EPA has also developed new web-based tools, ECHO, to help the public search, assess, and analyze the enforcement data that EPA used to help prepare those reports. 

The May through July 2007 assessment of the West Virginia Division of Water and Waste Management (WV DWWM) found problems with data accuracy, timeliness and completeness during the course of its review. EPA found that WV DWWM fails to enter required data into the national computer database system which flow through to the ECHO website, accessible to the public. Significant non-compliances are not identified to EPA in a timely manner even though the file review indicated significant noncompliance events. Moreover WV DWWM does not enter the enforcement activity it takes into the national computer database on a monthly basis. EPA has recommended that West Virginia enter all significant noncompliance into the database and designate facilities as significant violators.   Complete data entry is required in order to ensure an adequate picture of the West Virginia's compliance and enforcement program. 

This article was authored by Barbara D. Little, Jackson Kelly PLLC. For more information on the author see here.

GHG Mandatory Reporting Rule

On September 22, 2009 the U.S. Environmental Protection Agency issued a final rule for mandatory reporting of greenhouse gases (GHG) from large GHG emissions sources in the United States.  

Changes from the April 2009 proposal:  

There are significant changes from the April 2009 proposal.  

Applicability – Reduced the number of source and supply categories that facilities and suppliers must report under this final rule. The following source and source categories are not required to report at this time:

Electronic manufacturing	Oil and natural gas systems
Ethanol production	SF6 from electrical equipment
Fluorinated GHG production	Underground coal mines
Food processing	Wastewater treatment
Industrial landfills	Suppliers of coal
Magnesium production

Exiting the Program – Added a mechanism for facilities and suppliers to cease annual reporting by reducing their GHG emissions.

o    Cease reporting after 5 consecutive years of emissions below 25,000 metric tons CO₂e/year.

o    Cease reporting after 3 consecutive years of emissions below 15,000 metric tons CO₂e /year.

o    Cease reporting if the GHG-emitting processes or operations are shut down.

 

Measuring Devices – Added a provision to allow use of best available monitoring methods in lieu of the required monitoring methods for January – March 2010. Facilities can request a date extension beyond March 2010, but EPA will not approve any requests for an extension beyond 2010.

 

Monitoring Equipment – In several subparts, added monitoring options, changed monitoring locations, or allowed engineering calculations to reduce the need for installing new monitors.

 

Sampling Frequency – For fuel combustion and some other source categories reduced the required frequency for sampling and analysis.

 

Exemption – Excluded R&D activities from reporting.

 

Quality Assurance – Added calibration requirements for flow meters and other monitoring devices including a five percent accuracy specification.

 

Report Revision – Added provision to require submittal of revised annual GHG reports if needed to correct errors.

 

Records Retention – Changed the general records retention period from 5 years to 3 years.

 

Verification – In several subparts, required more data to be reported rather than kept as records to allow EPA to verify reported emissions.

 

Combustion Sources – Added exemptions for unconventional fuels, flares, hazardous wastes, and emergency equipment. Reduced the need for mass flow monitors for some units or fuels. Allowed more facilities to aggregate reporting of emissions from smaller units rather than report emissions for each individual unit.

 

Manure Management Systems – Added an animal population threshold to reduce the burden of determining applicability. Reduced the monitoring requirements. 

Highlights of GHG reporting rule 

Categories that will need to report under the final GHG reporting rule:  

There are three types of sources that will need to report GHG emissions: upstream sources, downstream sources and mobile sources. The tables below provide details for each of these sources. 

Upstream Sources

Suppliers of Coal-based Liquid Fuels	Suppliers of Petroleum Products
Suppliers of Natural Gas and Natural Gas Liquids	Suppliers of Industrial GHGs
Suppliers of Carbon Dioxide (CO2)

 Downstream Sources

General Stationary Fuel Combustion Sources	Lime Manufacturing
Electricity Generation	Miscellaneous Uses of Carbonates
Adipic Acid Production	Nitric Acid Production
Aluminum Production	Petrochemical Production
Ammonia Manufacturing	Petroleum Refineries
Cement Production	Phosphoric Acid Production
Ferroalloy Production	Pulp and Paper Manufacturing
Glass Production	Silicon Carbide Production
HCFC-22 Production and HFC-23 Destruction	Soda Ash Manufacturing
Hydrogen Production	Titanium Dioxide Production
Iron and Steel Production	Municipal Solid Waste Landfills
Lead Production	Zinc Production
	Manure Management

 Mobile Sources – Vehicles and engines outside of the light-duty sector.

 Reporting Thresholds:

The emission based threshold is 25,000 metric tons of carbon dioxide equivalent (CO₂e) per year for most sources (other than mobile sources). The capacity based threshold will be used where appropriate and feasible. Approximately 85% of total U.S. greenhouse gas emissions covered by rule. It is estimated that there will be 10,000 reporters.  

There is an applicability tool online to help facilities assess whether they are required to report GHG, available here. 

Reporting Methodologies: 

Facilities already reporting and collecting emissions data for programs such as the Acid Rain Program must use direct measurement of emissions. Other source categories can use facility-specific calculations. Industrial gas ad fossil fuel suppliers use direct reporting of gas produced, imported and exported.  

Annual Reporting to EPA: 

Data collection will begin January 1, 2010 with the first reports submitted to EPA by March 31, 2011. Those facilities already reporting quarterly for existing mandatory programs (e.g. Acid Rain Program) will continue to report quarterly.  

Emission Verification: 

Reports will self-certify and submit emissions and activity data necessary for verification. EPA will have targeted audits. EPA can take enforcement action for non-compliance. This approach is consistent with most EPA programs.  

Mobile Sources: 

Emissions from mobile sources will be captured by reports from fuel suppliers and manufacturers of vehicles and engines. Note: There is no requirement for fleet operators or state and local governments to calculate GHG emissions from mobile sources.  

Confidential Business Information: 

EPA will protect any information claimed as confidential business information (CBI) in accordance with regulations in 40 CFR § 2, subpart B. In general, emissions data collected under CAA sections 114 and 208 shall be available to the public and cannot be withheld as CBI. The US EPA will undertake a separate notice and comment process next year on CBI status of data elements collected (comments received on the proposed rule will be considered as EPA develops the notice).  

Relationship to State and Regional Programs: 

This rule does not preempt States from regulating or requiring reporting of GHGs. USEPA will not delegate this program to the states. Reporting entities will report directly to EPA. For additional information on the relationship between the US EPA and the West Virginia GHG program is available in the following article.  

Electronic Data System: 

The USEPA is developing an electronic based reporting system. The system will be web-based. The web-based system will guide reporters through data entry and submission. There will be a mechanism to submit the electronic file directly using standard format (e.g. XML). There will be continued stakeholder input during system development. Once a system is developed, USEPA will provide training and hotline to assist reporters using the system.  

This article was excerpted from publically available information, and was authored by Joyce Gentry, Acacia Environmental Group LLC. For more information on the author see here.

Industrial Facility Accident Reporting Rule Civil Penalty Issue

Many industrial facilities throughout West Virginia will be regulated and affected by the recently enacted Industrial Facility Accident legislation (“SB 279”) passed in the 2009 legislative session and signed into law by Governor Joe Manchin. Also, the legislation has spawned a proposed Industrial Accident Rapid Response administrative rule (“170 CSR 2”) to provide greater guidance and detail on the issue. A major issue that needs to be resolved as the rule develops is the disparity between the statute’s civil penalty provision and the rule’s civil penalty provision. The rule’s civil penalty provision is double the amount intended by the legislature in the statute. The civil penalty provision of the statute states: 

(e) Civil penalties.

(1) The director shall impose a civil penalty of up to $100,000 on the industrial facility if he or she determines that the industrial facility failed to comply with the reporting requirement of subsection (b) of this section…
(2) The director shall impose a civil penalty on the operator or operators of an industrial facility if he or she determines that the industrial facility failed to comply with the communication or access requirements of subsections (c) and (d) of this section…

W.Va. Code §15-5b-3a(e) 

The statute caps the reporting penalty at $100,000 but is silent on the communication and access penalty. The proposed rule contains tables 170-2 A & 170-2 B at the end of the rule developed under the authority of section 5. These tables show a regulated facility may be exposed to a total of $200,000 for violations of the rule: $100,000 of potential liability for a violation of the reporting requirement and $100,000 of potential liability for a violation of the communication and access requirements.  

It was clearly the legislature’s intent to cap the entire penalty for all violations of the statute at $100,000. As evidence of this intent, the Senate Judiciary Committee subcommittee on SB 279 amended the flat $100,000 penalty language by inserting “up to” language because they felt the mandatory $100,000 penalty was arbitrary and capricious without considering the extent of the violation. So, while the legislature undertook measures intended to mitigate the $100,000 penalty, the Division of Homeland Security has developed a civil penalty provision exposing regulated facilities to twice the $100,000 liability ($200,000). The civil penalty provision in the proposed rule runs contrary to the legislature’s intent on this issue. 

There are two rule amendments, if it is decided that the agency’s interpretation is highly objectionable, that would address this problem. First, the proposed rule's maximum penalty for a notification infraction could be lowered from $100,000 to $50,000 and the maximum penalty for communication/access infractions could be lowered from $100,000 to $50,000. Second, the proposed rule could have one penalty matrix or table accounting for all circumstances that is capped at $100,000. With either of these rule amendments, the maximum penalty would be capped at $100,000 to meet the legislature’s intent on the civil penalty issue. 

This article was authored by Donnie L. Adkins, Jackson Kelly PLLC. For more information on the author see here.

Major Differences between West Virginia’s and USEPA’s GHG Reporting Rules

DAQ’s GHG Reporting Rule is more stringent than new federal counterpart in key aspects 

The WVDEP-Division of Air Quality (DAQ) has a relatively new GHG Reporting Rule – 45CSR42 “Greenhouse Gas Emissions Inventory Program” (effective June 1, 2008, known as Rule 42). Rule 42 requires mandatory reporting of specified greenhouse gases (GHG) over de minimis levels for Title V permittees in West Virginia. The first mandatory reporting of GHG for those sources subject to Rule 42 occurred earlier this year for calendar year 2008 emissions. 

The US Environmental Protection Agency (EPA) promulgated its final GHG Reporting Rule on September 22, 2009, at 40 CFR Part 98 “Mandatory Greenhouse Gas Reporting”. The EPA’s GHG Reporting Rule is much more detailed and specific than the DAQ’s Rule 42. 

The purpose of this article is not to discuss in depth each of these GHG reporting rules, but rather to highlight some of the areas in which the DAQ’s state reporting rule is more stringent than the federal rule. This matters for two reasons: 

1.   The West Virginia Air Quality Code (§22-5-4.(4)) contains the following “no more stringent than” federal counterpart provision: 

§22-5-4. Powers and duties of director; and legal services; rules.

 

…

(4) To promulgate legislative rules in accordance with the provisions of chapter twenty-nine-a of this code not inconsistent with the provisions of this article, relating to the control of air pollution: Provided, That no rule of the director shall specify a particular manufacturer of equipment nor a single specific type of construction nor a particular method of compliance except as specifically required by the "Federal Clean Air Act," as amended, nor shall any such rule apply to any aspect of an employer-employee relationship: Provided, however, That no legislative rule or program of the director hereafter adopted shall be any more stringent than any federal rule or program except to the limited extent that the director first makes a specific written finding for any such departure that there exists scientifically supportable evidence for such rule or program reflecting factors unique to West Virginia or some area thereof; 

2.   During the West Virginia rulemaking/legislative process in 2007 & 2008, industry groups were assured by WVDEP management that the DAQ GHG reporting rule would not be any more stringent than any future EPA GHG reporting rule. Industry was told by WVDEP that Section 4.3 of Rule 42 provided that assurance: 

4.3. The Secretary shall determine the form and format of the information reported by affected sources under subsection 4.1 to ensure that the information is consistent as possible with developing regional, national, or international greenhouse gas emissions programs. 

Rule 42 More Stringent than EPA Part 98 in These Key Areas 

A. Emission Thresholds – The EPA rule threshold is 25,000 metric tons/year of CO2 equivalent (CO2e), while the DAQ rule is 10,000 short tons/year of CO2e. Note that one metric ton equals approximately 2,200 pounds, while one short ton equals 2,000 pounds. 

B. Source Category Exclusions – The EPA rule completely exempts the following stationary source categories at this time, while the DAQ rule has no specified stationary source category exemptions:

·     Electronic manufacturing

·     Ethanol production

·     Fluorinated GHG production

·     Food processing

·     Industrial landfills

·     Magnesium production

·     Oil and natural gas systems

·     SF6 from electrical equipment

·     Underground coal mines

·     Wastewater treatment

·     Suppliers of coal 

C. Combustion Source Exemptions – The EPA rule has exemptions for certain combustion sources - unconventional fuels, flares, hazardous wastes, and emergency equipment, while the DAQ rule has no specified exemptions for these types of combustion sources. 

Note that there are many other differences between the EPA rule and the DAQ rule. 

Conclusions & Recommendations 

Since EPA Part 98 is not effective until calendar year 2010 operations, West Virginia sources who are subject to DAQ Rule 42 will still need to report their facility GHG emissions per the requirements of Rule 42 for calendar year 2009 operations.  

The author recommends that WVDEP-DAQ provide written guidance which clarifies that those West Virginia stationary sources who are within the scope of the federal EPA GHG reporting rule do not have to report GHG emissions under Rule 42. The author requests that DAQ specify that any West Virginia facility which either reports GHG emissions to the EPA per 40 CFR Part 98, or is exempt per 40 CFR Part 98 from federal reporting of GHG emissions, should also be exempt from all provisions of DAQ Rule 42. The regulated community is still awaiting official guidance from DAQ on this matter. 

For further details on the DAQ and USEPA GHG Reporting Rules, see the following web sites: 

• 45CSR42 “Greenhouse Gas Emissions Inventory Program”

http://apps.sos.wv.gov/csr/search.asp [to obtain a copy of Rule 42, type 45-42 in the Search For box and press enter, then click the appropriate links to download]

http://www.wvdep.org/Docs/17114_CY2008%20%20WV%20GHG%20Emission%20Inventory%20Instructions.pdf 

• EPA Final Mandatory Reporting of Greenhouse Gases Rule

http://www.epa.gov/climatechange/emissions/ghgrulemaking.html  

This article was partially excerpted from publically available information, and was authored by Rick Wilson, Acacia Environmental Group LLC.  Any opinions expressed in this article are those solely of the author, and are not intended as legal or professional guidance to any specific readers. For more information on the author see here.

PSD and Title V Greenhouse Gas Tailoring Rule

On September 30, 2009, EPA announced that it is proposing a greenhouse gas emissions regulatory program that will require large industrial facilities that emit at least 25,000 tons of GHGs a year to obtain construction and operating permits covering these emissions. The prepublication version of the rule can be found at the attached link http://www.epa.gov/nsr/documents/GHGTailoringProposal.pdf. These permits must demonstrate the use of best available control technologies and energy efficiency measures to minimize GHG emissions when facilities are constructed or significantly modified. EPA is proposing a two phase program. The first phase will be a five year program tailored to address the most significant emitters of GHGs. At the end of that five years, there would be a study and proposal as to how best to refine and expand the regulation. 

The large facilities impacted by the first phase would include power plants, refineries, and factories. Small businesses such as farms and restaurants, and many other types of small facilities, would not be included in this round of requirements. 

This proposal follows immediately after the Federal Register publication of the proposed fuel-economy rule to regulate GHGs from cars and trucks is finalized. As you may recall, the U.S. Supreme Court Case, Masssachusetts v. EPA, 549 U.S. 479 (2007), held that GHGs are air pollutants covered by the Clean Air Act. The Supreme Court ruled that EPA must determine whether or not emissions of GHGs from new motor vehicles or motog engines cause of contribute to air pollution wich may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. When the light-duty vehicle rule takes effect in the spring of 2010, (see proposal of September 28, 2009, 74 Fed. Reg. 49454 (http://frwebgate6.access.gpo.gov/cgi-bin/PDFgate.cgi?WAISdocID=093894486446+31+2+0&WAISaction=retrieve ), Clean Air Act permits would automatically be required for stationary sources emitting GHGs. This proposed rule focuses these permitting programs on the largest facilities, responsible for nearly 70 percent of U.S. stationary source greenhouse gas emissions. With the proposed emissions thresholds, EPA estimates that 400 new sources and modifications to existing sources would be subject to review each year for GHG emissions. In total, approximately 14,000 large sources would need to obtain operating permits that include GHG emissions. Most of these sources are already subject to clean air permitting requirements because they emit other pollutants.

The proposed tailoring rule addresses a group of six greenhouse gases: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF₆). In addition, EPA is requesting public comment on its previous interpretation of when certain pollutants, including CO2 and other GHGs, would be covered under the permitting provisions of the Clean Air Act. A different interpretation could mean that large facilities would need to obtain permits prior to the finalization of a rule regulating greenhouse gas emissions. 

This article was authored by Kathy G. Beckett, Jackson Kelly PLLC, (304) 340-1019 or kbeckett@jacksonkelly.com. For more information on the author see here.