State Water Board Approves Composting General Order

Water Quality

     Earlier this month, the California State Water Quality Control Board (“State Water Board”) approved a General Order for Waste Discharge Requirements (“WDRs”) for composting operations, which will streamline and standardize permitting processes and regulate water quality at new and existing composting facilities.  While the General Order was approved with very little fanfare or media coverage, its implications are significant.

General Order Coverage

    The General Order, which applies to State composting facilities that process at least 500 cubic yards of material per year, will impose a regulatory scheme on a large number of the organics facilities already operating in the State.  Moreover, the General Order’s facility coverage is likely to expand in the coming years, given the recent passage of California Assembly Bill 341 (“A.B. 341”) (2011), which encourages the addition and expansion of State composting facilities by establishing a State policy goal that at least 75 percent of the solid waste generated in the State be source-reduced, recycled, or composted by 2020.

Waste Disposal and Composting in California

     The State of California currently disposes of an annual estimated 35 million tons of waste in landfills, of which an estimated 32 percent is compostable organic material, 29 percent is construction debris, and 17 percent is paper.  Much of the organic material could be, but is not being, composted, which is leading to the excessive and unnecessary filling of State landfills.  Composting yields environmental benefits by preserving nutrients, diverting waste from landfills, improving soil, reducing runoff, and sequestering carbon.

Prior Regulatory Scheme 

     In the past, potential water quality issues arising from composting facilities were regulated by the State’s nine Regional Water Quality Control Boards through individual facility WDRs, or waivers of WDRs.  California Water Code section 13263 requires that the water boards prescribe WDRs that, among other things, implement water quality control plans and consider the beneficial uses to be protected.

     Historically, the principal water quality issue at composting facilities has been the control of “leachate,” a liquid byproduct of composting.  Leachate consists of a variety of pollutants, including salts, nitrates, pesticides, and metals, which have the potential to impact ground waters and surface waters of the State.

Permit Basics

     The General Order puts most composting facilities in either a Tier I or a Tier II category, with Tier II facilities being subject to heightened regulatory requirements.  Classification is predominantly based on feedstock type, total volume of materials, and hydrogeological siting.

     With respect to each tier, the General Order sets forth standards for depth to groundwater, distance to surface water, allowable and prohibited feedstocks, additives, surface pads, wastewater handling, berms, and facility monitoring.  Some composting facilities will fall into neither tier, necessitating the continued use of individual WDRs.

 Over-Regulation of Composting?

     A number of composting industry participants have suggested that the cost of compliance with the General Order is high compared to the relatively innocuous threats posed to water quality by composting activities.  Consequently, they argue, composting facilities may consider shutting down or raising fees—both of which would be detrimental to the State’s A.B. 341 goals.

     In response to industry comments, the State Water Board revised a number of the General Order’s more onerous regulatory requirements.   For example, in an earlier draft of the General Order, detention ponds at composting facilities were required to contain all runoff from working surfaces in addition to precipitation from a 25-year, 24-hour storm event.  Industry participants argued that the requirement lacked flexibility.  In response, the General Order was revised to indicate than an “equivalent alternative” to the detention pond requirement could be approved by a regional water board.

     Whether the General Order strikes the appropriate regulatory balance between encouraging composting and adequately protecting water quality is still in question.  Only time will tell whether the General Order accomplishes those dual objectives.

 Next Steps for Composting Facilities

     Existing composting facilities, except those with individual WDRs or conditional waivers of WDRs, are required to seek coverage under the General Order by submitting a Notice of Intent (“NOI”), filing fee, and technical report within one year of adoption of the General Order (as indicated above, the General Order was adopted on August 4, 2015).  New composting operations that propose to begin operating after adoption of the General Order, are required to seek coverage under the General Order by submitting a complete NOI, filing fee, and technical report at least 90 days prior to commencement of operations.

     After the appropriate regional water board determines that an NOI and technical report are complete and the operation can be appropriately regulated under the General Order, the regional water board will issue a Notice of Applicability (“NOA”) which will confirm the facility’s tier and a timeline for compliance with the General Order.  Existing facilities will have six years to come into full compliance with the General Order.

Insurance Protection for Losses May Be Freely Assigned in Connection with a Corporate Sale or Reorganization

Environmental Litigation

On August 20, 2015, the California Supreme Court handed down its much anticipated decision in Fluor Corporation v. Superior Court (Hartford Accident & Indemnity Company). The court held that Insurance Code §520, a seldom cited provision of the Insurance Code dating back to 1935, bars an insurer from refusing to honor a policyholder’s assignment of policy coverage regarding injuries or damages that pre-date the assignment. In the process, the high court overruled its 2003 decision in Henkel Corp. v. Hartford Accident & Indemnity Co., 29 Cal.4th 934, which had held that when a liability policy contains a “consent-to-assignment” clause (a standard provision in pre-1985 policy forms), the policyholder may not assign its rights to policy benefits without the insurer’s consent until the claim against the insured is reduced to a judgment or settlement with the claimant.

 The decision, which deals with post-loss assignment of insurance benefits under general liability policies in the context of a corporate reorganization, has particular relevance to companies who acquire companies with existing environmental or other long-tail liabilities. Before the Fluor decision, it was often necessary to structure a transaction as a stock purchase and maintain the target company as a subsidiary of the acquiring company to obtain the benefit of the target company’s legacy coverage typically dating back many years to the time period when the environmental or other liabilities for the target company’s operation arose. In Fluor, the California Supreme Court expressly recognized that its decision will protect the ability of a policyholder “in the course of transferring assets and liabilities to another business entity in connection with a corporate sale or reorganization, to assign rights to claim defense and indemnification coverage provided by prior and existing insurance policies concerning the business’s previous conduct.”

 Greenberg Glusker represents policyholders in insurance recovery litigation against insurers.  For more information regarding our insurance coverage practice, please contact Jonathan B. Sokol at 310.201.7423 or JSokol@greenbergglusker.com.

 

EPA Must Consider Costs in Deciding Whether to Regulate HAPs From Power Plants

Air Quality

Last week, in Michigan v. EPA, the U.S. Supreme Court held that it was unreasonable for the U.S. Environmental Protection Agency (“EPA”) to refuse to consider costs in connection with its finding that it was “appropriate and necessary” to regulate hazardous air pollutant (“HAP”) emissions from power plants under the federal Clean Air Act (“CAA”).

By way of background, the CAA instructs EPA to regulate HAP emissions from power plants if it concludes that regulation is “appropriate and necessary.”  The “appropriate and necessary” language stems from the 1990 CAA amendments, wherein Congress established a procedure for determining the applicability of the HAP program to power plants.  Those amendments require EPA to regulate power plants as ordinary major sources if, after conducting several studies, EPA finds that it is “appropriate and necessary.”

After EPA completed the required studies in 1998, it concluded that regulation of power plants was in fact “appropriate and necessary.”  EPA’s “appropriate” finding was based on a conclusion that power plants emitted mercury and other HAPs which posed a risk to human health and the environment and that emission reduction controls were available.  EPA’s “necessary” finding was based on its conclusion that then-existing requirements did not eliminate risks.  In conjunction with its conclusions, EPA determined that “costs should not be considered” in determining whether power plant HAPs should be regulated.  A Regulatory Impact Analysis issued by EPA estimated that EPA’s decision would cost power plants $9.6 billion per year, whereas quantifiable regulatory benefits would be worth $4 to 6 million per year.

Reviewing EPA’s statutory interpretation under the test enunciated in Chevron USA, Inc. v. NRDC, Inc., 720px-Seal_of_the_United_States_Supreme_Court_svgthe U.S. Supreme Court concluded that the phrase “appropriate and necessary” requires “at least some attention to cost.”  Moreover, the Supreme Court found that statutory context reinforced the relevance of cost, as EPA was asked to study cost prior to determining whether it was “appropriate and necessary” to  regulate HAP emissions from power plants.  Although EPA argued, among other things, that the statute at issue did not mention cost and therefore did not require EPA to consider cost, the Supreme Court maintained that the statute’s broad reference to “appropriateness” encompassed multiple relevant factors—including cost.

Several commentators have concluded that the effect of the Supreme Court’s decision in Michigan v. EPA is somewhat inconsequential, since EPA can nevertheless regulate HAP emissions from power plants (including mercury) provided that it merely considers costs in the future.  It is unclear whether this conclusion is true, as the Supreme Court’s opinion is chock-full of intimations that in determining “appropriateness,” EPA must also weigh—to at least some extent—costs against benefits.   For example, the Supreme Court stated that “[o]ne would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”  Moreover, although the Supreme Court acknowledged that “[i]t will be up to [EPA] to decide . . . how to account for cost,” the Court also acknowledged that EPA must nevertheless consider costs “within the limits of reasonable interpretation.”  Thus, in any event, Michigan v. EPA stands for the principle that EPA must engage in reasoned decision making in its decision to regulate HAP emissions from power plants.

 

State Water Board Continues Deadline for Compliance with New California Industrial General Permit for Stormwater until August 14, 2015

Water Quality

As an update to a previous write-up on the deadline for compliance with the new California Industrial General Permit for Stormwater (General Permit), the State Water Resources Control Board (State Water Board) has continued the deadline for registration and compliance from July 1, 2015 to August 14, 2015.

In a notice circulated on the original deadline for compliance, July 1, 2015, the State Water Board acknowledged that its web-based database for stormwater compliance (SMARTS) was experiencing technical issues which were limiting registration access.

As a result, the State Water Board extended the deadline for registration from July 1, 2015 to August 14, 2015.  This extended deadline should enable those industrial facilities that were either unaware of the July 1, 2015 deadline or those struggling to meet that deadline to timely register.

As mentioned before, determining whether an industrial facility is subject to the General Permit and maintaining compliance with the General Permit can be complicated.  Simplifying that process can be done through enlisting the assistance of water quality professionals such as legal counsel or consultants.  If you haven’t already, it is important to identify water quality professionals with experience in stormwater permitting and compliance to ensure a facility appropriately complies with the new General Permit.

 

 

 

 

 

Christopher ‘Smitty’ Smith
CSmith@GreenbergGlusker.com
310.201.7579

 

Deadline For Compliance With New California Industrial General Permit For Stormwater Is A Week Away (July 1, 2015)

Water Quality

On July 1, 2015, the new California Industrial General Permit for Stormwater (General Permit) will take effect and along with it come a host of new compliance obligations. Chief among those obligations is the completion and submission of a notice of intent (NOI) to be bound by the new General Permit. The last time industrial facilities were obliged to submit an NOI was when the soon-to-be-expired General Permit was updated back in 1997.  Much has changed in the world of industrial stormwater compliance since then.

For those less familiar with the General Permit, it applies in California to the tens of thousands of industrial facilities throughout the state and serves to regulate stormwater emanating from those facilities. The application of the General Permit to any given facility is based on that facility’s Standard Industry Classification (SIC) code. The SIC code for a given facility is determined based on the primary industrial activity at the facility.

The first step in complying with the new General Permit is to determine if an industrial facility is subject to it.  For those industrial facilities that already have their own individualized permit for stormwater, the General Permit’s compliance obligations are inapplicable. And for those industrial facilities that are already operating under the soon-to-be-expired General Permit, the new General Permit’s compliance obligations may be inapplicable.  Oftentimes, industrial facilities will just re-notice their intent to be bound by a new permit without evaluating whether their facility should be subject to a permit. This common practice should be avoided, if possible, to ensure that a facility is not expending time and money to comply with a permit that is inapplicable. Finally, for those industrial facilities that are not already operating under the General Permit, it’s time to evaluate whether the General Permit applies.

Determining whether a facility is subject to the General Permit begins with identifying the primary operations at a facility and locating the associated SIC code. To determine a facility’s SIC code, the State Water Resources Control Board has included Attachment A to the new General Permit which matches up SIC codes with a facility’s primary activity. Generally, the SIC codes covered include industrial operations ranging from manufacturing, oil and gas, mining, hazardous waste, landfill and recycling, transportation, and sewage and wastewater treatment works.

Bear in mind that if it is determined that a facility was not previously obligated to comply with the General Permit because that facility fell under the light industry exemption, that exemption is not carried through to the new General Permit. It remains unclear how many new facilities will be obligated to comply with the new General Permit based on the removal of this exemption, but the estimates are in the tens of thousands statewide. Despite doing away with the oft-utilized light industry exemption, the new General Permit provides a separate carve out from coverage known as the no exposure certificate (NEC). An NEC is available to a facility if that facility does not expose stormwater to industrial activities.  Practically, obtaining an NEC serves to circumvent the obligations associated with compliance with the General Permit.

Assuming an industrial facility is obligated to comply with the new General Permit, then along with completing and submitting an NOI, that facility must ensure registration in the stormwater multiple application and report tracking system (SMARTS). SMARTS is a web-based database for stormwater compliance and reporting. Instituting SMARTS is a change from the old model which involved submitting quarterly and annual reports in hardcopy. While SMARTS will make it easier and less expensive to maintain compliance with regulators, it will equally enable concerned citizens and environmental groups to have instant and up-to-date access to a facility’s records of compliance. A facility’s stormwater pollution prevention plan (SWPPP) may serve as the best example of how SMARTS may change the landscape for stormwater compliance.  Historically, some industrial facilities have been lax about maintaining and updating SWPPPs.  Prior to SMARTS, this lax effort may have gone unnoticed, but now that same lax effort is more likely to garner the attention of regulators, concerned citizens and environmental groups, or both.  And with the recent spike in Clean Water Act citizen suits filed in federal courts around the state, garnering the attention of any one of these groups can prove to be very costly and time consuming.

Determining whether your facility is subject to the General Permit and maintaining compliance with the General Permit can be complicated. Simplifying that process can be done through enlisting the assistance of water quality professionals such as legal counsel or consultants.  If you haven’t already, it is important to identify water quality professionals with experience in stormwater permitting and compliance to ensure a facility is afforded the protections available for compliance with the General Permit.

 

 

 Christopher ‘Smitty’ Smith
CSmith@GreenbergGlusker.com
310.201.7579

Public Entities Can Inadvertently Waive Privilege in Response to a Public Records Act Request

Environmental Litigation

200146012-001California’s Public Records Act (PRA) law requires public entities to make their public records open for inspection and copying. Environmental practitioners often use PRA requests as a tool to obtain information regarding a contaminated or a potentially contaminated site. In a recent case, Ardon v. City of Los Angeles, the California Court of Appeals found that a public entity can waive statutory privileges that it otherwise would have if it produces privileged documents in response to a PRA, even if inadvertently.

In Ardon, the plaintiff in litigation against the City of Los Angeles sought records under the PRA from the city concerning the subject matter of its complaint. After receipt of the records, Ardon’s counsel notified the city that it had obtained copies of some records that appeared to be privileged. The city responded by asserting that the documents had been inadvertency produced. The city demanded that Ardon return the documents to the city and agree not to rely upon the documents in any way. Ardon declined this request, asserting that the city had waived any privilege claim.

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THE SUNSET WILL LAST A LITTLE LONGER — UST FUND EXTENDED

Contaminated Property

contaminationOn September 25, 2014, Governor Brown signed SB 445 (Hill) Underground storage tanks; hazardous substances: petroleum: groundwater and surface water contamination into law (UST Law).  The UST Law was an urgency measure that took effect immediately.

The UST Law makes changes to the Underground Storage Cleanup Fund (UST Fund).  The UST Fund provides a mechanism to reimburse owners and operators of USTs the cost to remediate contaminated sites as the result of leaking USTs.  Most importantly, the UST Law extended the program’s sunset date by ten years to January 1, 2026.  Under the prior law, the UST Fund was set to expire in 2016, leaving many UST sites without access to state funds.

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CEQA Lead Agencies Do Not Waive Defense that CEQA Did Not Apply Despite Proceeding under CEQA

Environmental Litigation

cityscapeRecently, the court in Rominger v. County of Colusa found that a lead agency which approved a mitigated negative declaration for a project, can take the seemingly inconsistent position that the proposed project was not a California Environmental Quality Act (CEQA) project or was exempt from CEQA when its action is subsequently challenged.

In Rominger, real party in interest Adams Group, Inc. filed an application with the County of Colusa for the approval of a tentative subdivision map to divide 4 existing parcels into 16 parcels.  The application indicated that no specific plan for future expansion was available and that they intended to continue the existing use of the property.  The County prepared an initial study and issued a mitigated negative declaration under CEQA.

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Substantive Dispute over Land Application of Biosolids Remains Unresolved

Environmental Litigation

LandfillForm over substance continues to obscure the substantive issue presented in the case of the City of Los Angeles (City) vs. Kern County (County). At its core, the dispute involves the land application of biosolids. Biosolids are organic material produced during the processing and treatment of wastewater. Historically, waste by-products like biosolids were disposed of in a landfill or were incinerated. With environmental concerns on the rise, more sustainable practices have been identified to dispose of biosolids, one of which includes land application.

The dispute between the City and County over the land application of biosolids began in the early 1990s when the City began working with County farmers to utilize biosolids in land application as fertilizer for crops. After several years of successful land application, residents of the County passed a measure banning the practice. The practice was successfully portrayed as the City disposing of its waste in the County rather than keeping the waste in the City. Residents of the County overwhelmingly passed the measure and the City sued to block implementation of the measure. Years of protracted litigation between the City and County culminated in the most recent decision by the California Supreme Court (Court).

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ASTM Issues New Standard For Phase I Environmental Site Assessments

Contaminated Property

OLYMPUS DIGITAL CAMERAOn November 6, 2013, ASTM revised its standard for conducting Phase I environmental site assessments, known as Standard E1527-13 (entitled “Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process”).  ASTM E1527-13 is the first revision to the ASTM Phase I standard since its 2005 revision of the standard (known as ASTM E1527-05).

The ASTM standards are a helpful tool for parties seeking to avoid, or at least minimize, potential liability pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA,” also known as “Superfund”).  CERCLA imposes liability without regard to fault or negligence on present facility owners and certain past owners, as well as certain other parties, for any environmental contamination found on the property.  This means that a purchaser and current owner of land contaminated by the actions of others could be held liable under CERCLA for the cleanup of the property.  Fortunately, CERCLA has a few defenses for these situations for so-called “innocent landowners,” “bona fide prospective purchasers,” and “contiguous property owners.”  However, to qualify for these defenses, CERCLA requires a property owner to conduct “all appropriate inquiries” on or before the date of acquiring the contaminated property, among other requirements.

Prior to November 2005, there was no federally approved statute or regulation defining the procedure that a prospective purchaser must follow in conducting all appropriate inquiries.  However, on November 1, 2005, the United States Environmental Protection Agency (“EPA”), issued a final rule entitled the “Standards and Practices for All Appropriate Inquiries.”  Effective on November 1, 2006, the All Appropriate Inquiries Rule for the first time established federal standards and practices for conducting all appropriate inquiries, as a first step to qualifying for one of the elusive CERCLA defenses.

While establishing its own standards for how all appropriate inquiries should be conducted, the most important aspect of the All Appropriate Inquiries Rule from a practical standpoint was the rule’s endorsement of the ASTM E1527-05 standard for conducting Phase I assessments.  Issued the same date as EPA’s All Appropriate Inquiries Rule, the ASTM E1527-05 standard provided a blueprint for environmental consultants to follow to ensure compliance with CERCLA’s all appropriate inquiries requirements.

However, because ASTM has recently revised (and replaced) its Phase I standard, there is some ambiguity regarding the applicable standard to follow to ensure compliance with CERCLA’s all appropriate inquiries requirement.

On August 15, 2013, EPA issued a direct final rule amending the All Appropriate Inquiries Rule, effective on November 15, 2013, to approve use of the ASTM E1527-13 standard to satisfy the all appropriate inquiries requirement.  The rule also continued to allow use of the 2005 standard for that purpose.  That same day, EPA also issued a proposed rule that contemplated amending the All Appropriate Inquiries Rule to approve use of the ASTM E1527-13 standard to satisfy the all appropriate inquiries requirement.  The proposed rule sought public comments on the rule amendment.  If you are confused about EPA issuing a direct final rule and proposed rule on the same day to accomplish the same goal, you are not alone.  EPA did this to allow comments, via the proposed rule, on the amendment, because it did not expect any adverse comments.

However, EPA did receive subsequent adverse public comments.  Several commenters raised concerns about EPA’s decision to continue to recognize the 2005 standard as compliant with the All Appropriate Inquiries Rule.  In particular, some commenters indicated that referencing two standards with different requirements, as discussed below, makes it unclear what parties such as potential real estate purchasers seeking to benefit from the All Appropriate Inquiries Rule must do.  Accordingly, EPA withdrew the direct final rule on October 29, 2013, before its effective date.

On December 30, 2013, in what feels like déjà vu, EPA issued a new final rule, effective immediately, amending the All Appropriate Inquiries Rule to approve use of the 2013 standard and to continue allowing use of the 2005 standard.  However, perhaps in response to the public comments described above, EPA indicated that it intends to publish a proposed rule “in the near future” that will propose amending the All Appropriate Inquiry Rule to remove the reference to the ASTM 1527-05 standard.  EPA will accept public comments on that forthcoming proposed rule.

There are a few important differences between the 2005 and 2013 ASTM standards:

  • Vapor intrusion pathway must be considered.  ASTM added a definition of “migrate/migration,” which refers to the movement of hazardous substances or petroleum products in any form, including “vapor in the subsurface.”  This definition means vapor intrusion risk, which is a quickly evolving area of environmental law, must be considered in the environmental site assessment process.
  • Simplified definition of “recognized environmental condition” (“REC”).  ASTM simplified its definition of REC in the 2013 standard to encompass conditions that suggest a release or threatened release of a hazardous substance at the property.  The term is now defined as “the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment.  De minimis conditions are not recognized environmental conditions.”
  • “Historical recognized environmental condition” (“HREC”) definition limited.  ASTM now defines HREC to mean a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority or meets unrestricted use criteria without institutional or engineering controls (i.e., property suitable for residential use).  However, a past release that may have previously constituted only an HREC could constitute a REC at the time of the report if, for example, regulatory cleanup criteria have been made stricter.
  • “Controlled recognized environmental condition” (“CREC”) added as a new term.  ASTM has added a definition for CREC, which means “a recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority (for example, as evidenced by the issuance of a no further action letter or equivalent, or meeting risk-based criteria established by regulatory authority), with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls.”
  • Stricter regulatory file review requirement.  The 2013 standard imposes a stricter standard for conducting regulatory file reviews.  If the subject property or an adjoining property is listed on one or more of the standard environmental record sources that must be searched (e.g., the CERCLA National Priorities List of contaminated sites, the federal Resource Conservation and Recovery Act hazardous waste generator list, etc.), then the environmental professional should review “pertinent regulatory files and/or records associated with the listing.”  If the environmental professional chooses not to conduct this review, he or she must explain why in the Phase I report.  As an alternative to this file review, the environmental professional can review files and records from alternative sources, such as on-site records, user-provided records, etc., and include that information in the report along with a statement that the environmental professional believes this information is sufficient to evaluate RECs, HRECs, CRECs, and de minimis conditions.

What should a practitioner do?  For the time being, compliance with either the 2005 or 2013 standard will technically satisfy the All Appropriate Inquiries Rule and potentially allow parties to reap the benefits of CERCLA’s landowner liability protections.  However, ASTM indicated its 2005 standard has been superseded and replaced.  In addition, EPA stated in its new rule that the 2013 standard includes improvements to the previous standard and recommends that environmental professionals and prospective purchasers use the 2013 standard.  So it would be wise for those parties to begin complying with the 2013 standard now to ensure maximum potential protection from CERCLA’s onerous liability scheme.