SCHNAPF ENVIRONMENTAL NEWS REPORT

A Monthly Newsletter Covering Recent Environmental Developments and Caselaw

January 1999													Vol. 1, Issue 2
	
	The Schnapf Environmental News Report is a monthly newsletter which provides updates on regulatory developments in the major environmental programs and also highlights significant federal and state environmental law decisions cases that were issued during the prior month. 

	The newsletter is published free of charge by the Schnapf Environmental Law Center which provides regulatory guidance, legal research and writing resources, litigation support and assistance with environmental issues associated with corporate, financing and real estate transactions for businesses and law firms. 

We have made a number of changes to the layout and added new features to this issue. We are interested in your feedback to our changes as well as suggestions for future features. Please feel free to send your comments to Larry Schnapf at: LSchnapf@environmental-law.net or contact him at 212-996-5395. More detailed information on the topics covered by the newsletter is available at our web site: http//: www.environmental-law.net. 

We also offer a 4-hour environmental law seminar which is taught by Larry Schnapf who is an adjunct professor of environmental law at New York Law School. The seminar focuses on the environmental issues associated with business transactions and will be conducted at your office. The seminar is eligible to be approved by the Continuing Legal Education Board as an Accredited Mandatory Continuing Legal Education (“MCLE”) Program so that attendees would receive credits towards the New York State MCLE requirements. If you are interested in this seminar, please contact Larry Schnapf at LSchnapf@environmental-law.net.

Finally, if you would be interested in being added to our subscription list for our quarterly New York Brownfields Report, please let us know at LSchnapf@environmental-law.net. The New York Brownfield Report analyzes the agreement issued by the New York Department of Environmental Protection under its voluntary cleanup program and also discusses major policy changes for the program.  

AIR POLLUTION DEVELOPMENTS

EPA Announces new Clean Air Act enforcement policy

EPA issued a guidance document for prioritizing enforcement actions against sources of air pollution. This policy focuses on “high priority violations (HPV)” and supercedes older guidance documents which targeted “ significant violators”. When a violation is detected, it must be compared against two categories of HPV which are established under the policy. The first category, known as the “General HPV Criteria” category, contains a list of 10 criteria that will be used to determine if a violation should be considered a HPV. The second category, the High Priority Violation Matrix” covers four types of violations and establishes a matrix of factors that must be weighed to determine if those violations qualify as a HPV. 

EPA is currently finalizing a “Timing and Appropriate Penalty” guidance documents which will set forth the types of penalties that may be assessed against HPV as well as the amount of time that a facility may be given to resolve the HPV.

New Restrictions for Facilities seeking to modify or add new major sources 

Under the new source review (NSR) program of the Clean Air Act, new or modified major sources located in non-attainment areas must be equipped with either the best available control technology (BACT) or lowest achievable emission rate (LAER). Until recently, EPA policy allowed those sources to avoid complying with BACT or LAER by reducing their emissions below the major source threshold. Under a new policy, companies with NSR violations will no longer be allowed to avoid BACT or LAER by reducing emissions once they become subject to an enforcement action.   

WATER POLLUTION DEVELOPMENTS

New Regulatory Program Proposed For Large Animal Feed Operations

During the past two decades, there has been a increase in the number and size of large animal feedlots known as concentrated animal feeding operations (CAFOs). This operations can produce quantities of manure that rivals the amount of sewage generated by small cities. Much of this manure flows untreated into rivers and streams because the runoff is not regulated under the federal Clean Water or many state laws. Recent studies have indicated that drinking and surface waters in 30 states may be contaminated from the runoff of CAFOs. To address this problem, EPA has produced a draft strategy which requires CAFOs to establish nutrient management plans. Meetings to discuss this draft strategy are currently being held in affected regions of the country.

EPA Announces New Treatment Rules For Drinking Water

The past few years have seen an increase in illnesses from microbes such as cryptospordium which have found their way into public drinking water supplies. To reduce the risk posed by these microbes as well as to reduce the exposure of consumers to byproducts of the disinfectants EPA recently promulgated two rules known as the “Stage I Disinfectant and Disinfection ByProduct Rule” and the Interim Enhanced Surface Water Treatment Rule.” These rules which are issued under the Safe Drinking Water Act Amendments of 1996. will require water suppliers to either change the way they disinfect or filter drinking water or to build new treatment plants. Recent studies have suggested that exposure to disinfectant byproducts may cause an increase in birth defects and miscarriages. EPA will be issuing a Stage II rule in 2002 that will cut in half the byproducts allowed under the Stage I rule and also provide for even stricter microbial controls.

HAZARDOUS WASTES

EPA Will Not Require Post-Closure Permits Landfills

Closure of hazardous waste landfills no longer requires the issuance of a post-closure permit under a rule issued by EPA pursuant to RCRA. When a landfill closes, the owner or operator of the landfill must take corrective action, develop a groundwater monitoring system and establish financial assurance to finance the post-closing operation and maintenance program. Since 1982, RCRA required that these requirements be embodied in a post-closure permit. However, post-closure permits have been difficult to obtain especially where the owners and operators cannot comply with the groundwater monitoring or financial assurance requirements. 

Under the new rule which took effect October 22nd, state and federal regulators may use alternative legal authorities such as corrective action orders or to address environmental issue at landfills. When post-closure permits are not used, the public must be afforded  adequate opportunity to comment on the adequacy of any cleanups and monitoring programs that are proposed under this alternative approach.

New Flexible Corrective Action Regulations Announced by EPA

EPA also issued a scaled-version of its much-delayed Hazardous Wastes Identification Rule (“HWIR”) for remediation waste. Under the HWIR rule, remediation wastes include solid or hazardous wastes, debris and contaminated media (groundwater, surfacewater, soils and sediments). 

The HWIR rule which was published in the November 30, 1998 federal register (63 FR 65873) is intended to expedite the cleanup of contaminated RCRA sites by streamlining the requirements for managing remediation wastes. For example, the rule provides relief from the land disposal restrictions by allowing temporary storage and accumulation of remediation wastes, relaxes the minimum design standards by permitting state and federal regulators to determine site-specific requirements for the waste staging areas and also creates a new permit known as a remedial action plan (RAP). The RAPs will require less information that a regular RCRA Part B permit and will be limited to the contaminated portions of sites. Under the current RCRA regulations, facilities could have been required to perform facility-wide corrective action. However, RAPs will still require public participation. The streamlined provisions are not limited to RCRA interim status or permitted facilities that are subject to RCRA corrective action but may apply to any site such as a generator-only site where a hazardous cleanup is to be performed.

EPA Memo Sets Forth all RCRA Corrective Action Alternatives

In a related matter, the EPA issued a memo entitled “ Management of Remediation Waste Under RCRA” that sets forth in one document all of the remedial alternatives that are available under RCRA for waste created during the cleanup of a contaminated site. The memo is designed to expedite the process of selecting the cleanup method. The memo may be found at http://www.epa.gov/epaoswer/hazwaste/ca/pspd_mem.pdf.

SUPERFUND/BROWNFIELDS

Results of Superfund Reforms Are Reviewed

In 1993, EPA announced that it would implement a series of reforms of the Superfund program. The agency recently announced that it has completed the bulk of those reforms. 

One of the reforms involved the CERCLIS which is the inventory of potential Superfund sites. Sites on the CERCLIS  undergo a preliminary assessment and site inspection. If this investigation reveals a release of hazardous substances, the EPA may commence enforcement proceedings. In addition, if the contamination is serious enough,  EPA may place the site on the Superfund list known as the National Priorities List (“NPL”). In the past, sites remained on CERCLIS even if the investigation revealed that no response action was required. The presence of a site on the CERCLIS often made the property unmarketable. As a result, EPA agreed to remove sites from CERCLIS that had no evidence of contamination. To date, 30,000 sites have been archived off the CERCLIS.

Another hindrance to property development has been the concern of prospective purchasers that they could be liable for historical contamination that pre-dated their ownership of the site. To eliminate this concern, EPA issued a new prospective purchaser policy in 1993. Approximately 100 prospective purchaser agreements have been issued under this new policy.

Another initiative involved parties who may have sent only minor amounts of contamination to a site. In the past, these so-called “de minimis” PRPs had to participate in the often drawn-out process of site investigation and negotiation of a consent decree despite the fact that their total liability was usually just several thousands of dollars. As a result, they would incur legal costs that were far in excess of the actual liability for the site. In response, EPA developed procedures for developing expedited settlements with de minimis parties to remove them from the site early in the process. By the end of fiscal  year 1998, EPA had entered into de minimis settlements with over 18,000 parties.

Uniformity in cleanup decisions has also been a concern. There had been concern that different types of remedies were being used for sites with similar contamination which may have resulted in unnecessarily expensive or inconsistent cleanups. To address this concern, EPA also created a National Remedy Review Board which was supposed to review all cleanup decisions where the estimated cleanup cost was over $30 million or the preferred cleanup remedy was at least $10 million and was 50% more expensive than the least costly remedy alternative. The board has reviewed cleanups at 33 sites which has resulted in savings of $43 million. In addition, EPA has reviewed remedy decisions at 210 sites and has saved more than $1 billion in future cleanup costs.

At many sites, there are PRPs who are either no longer in existence or financially unviable. Under the joint liability scheme of CERCLA, EPA has often required the viable PRPs to absorb the costs of these “orphan costs.” To promote greater fairness and to encourage PRPs to perform cleanups, EPA has agreed not to require PRPs at some sites from paying for these orphan shares. So far, EPA has elected not to pursue $145 million of orphan costs at 72 sites.   

SIGNIFICANT ENVIRONMENTAL LAW DECISIONS

“Grandparent” Corporation Found Liable by Federal District Court

Last month, we reported on a decision issued by the United States Supreme Court in U.S. vs. Bestfoods that limited the liability of parent corporations under CERCLA. In the first parent liability case since the Bestfoods decision, a federal district court in Ohio held that a “grandparent” corporation could be liable for the generator liability of a remote subsidiary. In AT & T Global Information Solutions Co. V. Union Tank Car Co., Larsan Manufacturing (“Larsan”) sent hazardous wastes to a solvent reclamation site.  Larsan had been acquired by Vermont American and then transferred the stock of the company transferred to a subsidiary, Larsan of Nevada.  After  this intermediary company was dissolved, Ohio environmental officials identified Larsan as a PRP at the solvent reclamation site. A group of PRPs agreed to perform a groundwater remediation and then brought a contribution action against other PRPs, including Vermont American as the parent corporation of Larsan.  The court determined that Larsan of Nevada was a legal fiction which had  “no more than a paper existence.” Based on the facts before it, the court concluded that Vermont American had exercised sufficient control over Larsan to be derivatively liable for the disposal practices of Larsan.

Federal District Court Deals Setback to EPA Effort to Force More PRPs to Participate in Cleanups 

For much of CERCLA, EPA would pursue an enforcement action against a few PRPs at a site and expect the PRPs to use their own resources to seek contribution from other unnamed PRPs for the site. This approach placed the PRPs subject to the EPA enforcement action at a disadvantage because their liability was strict and joint in the government action  but the liability of the PRP defendants they pursued was proportional. The PRPs who did not receive a notice letter of liability from the EPA also tried to use this to reduce their liability in contribution actions. During the past few years, the EPA has reversed this policy and has been trying to identify as many PRPs as possible and has been working with existing PRP groups to help bring new PRPs at a site.  This new policy was served a setback recently when a federal district court ruled that EPA had no authority to issue new orders to previously unnamed PRPs when the agency had also entered into a consent order with PRPs to perform a cleanup. 

Fifth Circuit Expands Types of Oversight Costs Recoverable by Federal Government

CERCLA allows EPA and state environmental agencies to recover their reasonable and necessary costs of supervising cleanups. Consent decrees often contain provisions allowing regulators to recover these expenses which are known as oversight costs. Because these provisions are often broader than the reimbursement rights granted under CERCLA, we have are recommended to clients that these provisions be reviewed carefully and not to accept the boilerplate language offered by regulators. The importance of approach was recently demonstrated in U.S. v. Chromalloy American Corp., where the federal appeals court for the Fifth Circuit upheld a provision that did not limit an agency’s reimbursement to those costs that are reasonable and necessary.

RCRA Citizen Suits May Be Brought Against Former Facility Owners

Under section 7002 of RCRA, private parties may bring actions against anyone who is in violation of RCRA or who has “contributed to” the disposal, treatment, transportation or disposal of solid or hazardous wastes. It has been unclear if actions may be brought against parties who disposed of hazardous wastes in the past but are not currently in violation of RCRA. Recently, a federal district court recently allowed the RCRA citizen suit to proceed against a former owner of a RCRA facility. While citizen suits may not be brought for wholly past violations of RCRA but the court found that the presence of contaminated groundwater represented a continuing violation of RCRA. As a result of the ruling, the former owner of the RCRA facility will be responsible for contributing towards the costs of remediating groundwater at the site. 

EPA ANNOUNCES ON-LINE COMPLIANCE CENTERS

As part of the Clinton Administration’s effort to reinvent government, EPA has been devoting increasing resources away from enforcement and towards regulatory assistance. This past fall, EPA announced the formation of additional compliance centers for specific industries. These centers consist of a web site which direct users to regulatory information on that industry, an “800” number and “faxback” system as well as chat rooms where persons from specific industries may exchange information. The centers also have information on self-auditing. Following is a list of the centers and their web sites:

Chemical Industry- www.chemalliance.org
Local Government- www.lgean.org
Paints and Coating-www.paintcenter.org
Transportation-www.transources.org
Metal Finishing-www.nmfrc.org
Automotive Service & Repair-www.ccar-greenlink.org
Printing- www.pneac.org
Printed Wiring Boards- www.pwbrc.org.
Agriculture- www.epa.gov/oeca/ag