Energy & Environmental Law Blog

Energy & Environmental Law Blog

VORYS Helping Clients With Their Energy and Environmental Needs

New USEPA COVID-19 Enforcement Guidance Issued (Plus Similar State Policies Being Announced)

Posted in Environment

As an update to our previous post regarding COVID-19 and environmental compliance, new developments at the state and federal levels continue, especially with respect to the exercise of enforcement discretion.

USEPA GUIDANCE

Summary

On March 26, 2020, USEPA issued a memorandum entitled COVID-19 Implications for EPA’s Enforcement and Compliance Assurance Program (the “COVID-19 Memorandum”).

Through the COVID-19 Memorandum, subject to several conditions, USEPA has adopted a policy of not seeking penalties for violations of routine compliance monitoring and reporting requirements caused by COVID-19.  With respect to other potential violations (emissions limit exceedances, etc.) USEPA will take the COVID-19 pandemic into account when considering the whether an enforcement response is appropriate.

In addition, subject to several conditions, generators of hazardous unable to meet regulatory timeframes to transfer waste off-site due to the COVID-19 pandemic will continue to be treated as generators, not treatment, storage, and disposal facilities.

The COVID-19 Memorandum does not apply to: 1) prevention of, response to, or reporting of accidental releases, 2) criminal violations, or 3) activities carried out under Superfund and RCRA Corrective Action enforcement instruments (separate policies are expected).  COVID-19 Memorandum at 2, 7.

In addition, USEPA suggests that facilities subject to an administrative order or consent decree take advantage of force majeure provisions of those agreements.

Further details regarding the COVID-19 Memorandum are below.

Conditions on Enforcement Discretion

The exercise of any enforcement discretion under the COVID-19 Memorandum is conditioned upon:

“1. Entities should make every effort to comply with their environmental compliance obligations.

and

2, If compliance is not reasonably practicable, facilities with environmental compliance obligations should:

a. Act responsibly under the circumstances in order to minimize the effects and duration of any noncompliance caused by COVID-19;

b. Identify the specific nature and dates of the noncompliance;

c. Identify how COVID-19 was the cause of the noncompliance, and the decisions and actions taken in response, including best efforts to comply and steps taken to come into compliance at the earliest opportunity;

d. Return to compliance as soon as possible; and

e. Document the information, action, or condition specified in a. through d.”

COVID-19 Memorandum at 1-2.

Routine Compliance Monitoring and Reporting

The COVID-19 Memorandum outlines USEPA’s decision to use its enforcement discretion not to seek penalties for “violations of routine compliance monitoring, integrity testing, sampling, laboratory analysis, training, and reporting or certification obligations in situations where the EPA agrees that COVID-19 was the cause of the noncompliance and the entity provides supporting documentation to the EPA upon request.”  COVID-19 Memorandum at 3.

Settlement Agreements and Consent Decrees

For facilities subject to USEPA administrative settlement orders or consent decrees to which USEPA is a party, facilities should use the force majeure provisions in those documents, including any required notice provisions.  COVID-19 Memorandum at 4.

Facility Operations, including Failure of Air Emission Control or Wastewater or Waste Treatment Systems or other Facility Equipment

The affected facility should submit a notification to the regulatory authority as soon as possible.  “The notification also should include information on the pollutants emitted, discharged, discarded, or released; the comparison between the expected emissions or discharges, disposal, or release and any applicable limitation(s); and the expected duration and timing of the exceedance(s) or releases.”  COVID-19 Memorandum at 5.  USEPA will evaluate the information submitted, and “The EPA will consider the circumstances, including the COVID-19 pandemic, when determining whether an enforcement response is appropriate.”  COVID-19 Memorandum at 5.

Hazardous Waste Generators

If a facility is a generator of hazardous waste and, due to disruptions caused by the COVID-19 pandemic, is unable to transfer the waste off-site within the time periods required under RCRA to maintain its generator status, the facility should continue to properly label and store such waste and take the steps identified above to qualify for enforcement discretion. If these steps are met, as an exercise of enforcement discretion, the EPA will treat such entities to be hazardous waste generators, and not treatment, storage and disposal facilities. In addition, as an exercise of enforcement discretion, the EPA will treat Very Small Quantity Generators and Small Quantity Generators as retaining that status, even if the amount of hazardous waste stored on site exceeds a regulatory volume threshold due to the generator’s inability to arrange for shipping of hazardous waste off of the generator’s site due to the COVID-19 pandemic.  COVID-19 Memorandum at 5-6.

Public Water Systems

In the COVID-19 Memorandum, USEPA “strongly encourages public water systems to consult with the state and EPA regional offices without delay if issues arise that prevent the normal delivery of safe drinking water and encourages states to continue to work closely with the EPA on measures to address the potential impacts of COVID-19. The EPA also encourages certified drinking water laboratories to consult with the state and the EPA if issues arise that prevent laboratories from conducting analyses of drinking water contaminants.”  COVID-19 Memorandum at 6.

USEPA will consider the circumstances, including the COVID-19 pandemic, when determining whether any enforcement response is appropriate at public water systems acting in accordance with this subpart.

Critical Infrastructure

In situations where a facility is essential critical infrastructure, the EPA may consider a more tailored short-term No Action Assurance, with conditions to protect the public, if the EPA determines it is in the public interest. Such determinations are made by the OECA Assistant Administrator on a case-by-case basis. The EPA will consider essential the facilities that employ essential critical infrastructure workers as determined by guidance issued by the Cybersecurity and Infrastructure Security Agency.  COVID-19 Memorandum at 6-7.

STATE GUIDANCE

Some states have adopted similar policies to the federal COVID-19 Memorandum discussed above.  For example, Ohio EPA has established a specific email inbox for receipt of requests for enforcement discretion: EPA.COVID-19REGFLEX@epa.ohio.gov.  Ohio EPA’s COVID-19 site notes that:

All regulated entities remain obligated to take all available actions necessary to ensure compliance with environmental regulations and permit requirements to protect the health and safety of Ohioans and the environment. However, in the instance where regulated entities will have an unavoidable noncompliance situation, directly due to impact from the coronavirus, an email box has been established by Ohio EPA to accept requests for the Director of Ohio EPA to consider providing regulatory flexibility, where possible, to assist entities in alternative approaches to maintaining compliance, such as extending reporting deadlines, consideration of waiving late fees and exercising enforcement discretion.

The email should at a minimum include the following:

  • The specific regulatory or permit requirement which cannot be complied with
  • A concise statement describing the circumstances preventing compliance
  • The anticipated duration of time that the noncompliance will persist
  • The mitigative measures that will be taken to protect public health and the environment during the need for enforcement discretion
  • A central point of contact for the regulated entity, including an email address and phone number

Where alternative compliance options are authorized by Ohio EPA, regulated entities must maintain records adequate to document activities related to the noncompliance and details of the regulated entity’s best efforts to comply.

In addition, the Texas Commission on Environmental Quality announced it will consider requests for enforcement discretion when a situation directly related to COVID-19 results in an unavoidable issue of non-compliance. Regulated entities should email both OCE@tceq.texas.gov and Ramiro.Garcia@tceq.texas.gov with specific information regarding the situation and maintain records adequate to document activities related to the noted issue of noncompliance, including details of the entity’s efforts to comply. The email should contain: (1) a concise statement supporting request for enforcement discretion; (2) anticipated duration for the need for enforcement discretion; and (3) a citation to the regulation or permit provision for which enforcement discretion is requested.

Other states have adopted similar policies, or may be doing so shortly, following the issuance of the COVID-19 Memorandum by USEPA.

 

Before taking advantage of an offer of enforcement discretion by reaching out to a regulatory agency, an environmental attorney should be consulted to ensure that the request meets the requirements of the applicable policy, and to provide advice on the consequences of making the request.

Thinking about delaying environmental compliance due to COVID-19? Think carefully!

Posted in Environment

As businesses across the United States confront the ongoing impact of the COVID-19 pandemic, the Vorys environmental team is ready to provide counsel and guidance on a number of potential issues.  As the situation continues to evolve day by day, we recommend carefully reviewing each of your facilities’ environmental-related permits, orders, and other compliance obligations, keeping the following issues in mind:

  1. Ensure that upcoming reporting, compliance, or permit renewal deadlines are being tracked, and that plans are in place to comply with those timelines. If staffing or other issues might make compliance infeasible, consider whether the state, local, or federal agency with jurisdiction has the authority to waive the deadline.
  2. For permit renewals, recall that under many programs (e.g. NPDES, Title V) a facility is permitted to operate under an existing permit, and the permit shield continues in place, so long as a renewal application is submitted timely.
  3. Consider the entire chain of companies and individuals involved in your compliance and reporting obligations. For example, many facilities rely on third party consultants and labs to meet testing and reporting obligations.  Consider reaching out to these entities to confirm that they have plans in place if, for example, travel restrictions are enhanced.
    1. Ohio EPA has produced guidance (attached) for the designation and identification of essential employees related to the provision of wastewater or water services.
    2. Consider whether your industry/organization could be considered a critical function or essential business. At the federal level, the Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) issued a “Memorandum on Identification of Essential Critical Infrastructure Workers during COVID-19 Response.”  In its guidance, CISA sets forth a recommended list of “Essential Critical Infrastructure Workers” to help determine the sectors, sub-sectors, segments, or critical functions that should continue normal operations.  Ohio has adopted a “Stay at Home” Order excepting many of the same categories of essential businesses.  Other states have adopted similar orders.
  4. Many Orders entered into between regulated entities and environmental regulators include specific compliance deadlines coupled with stipulated penalties for non-compliance, in addition to force majeure provisions. These force majeure provisions often require that notice be provided to the regulator within a specific time period after the regulated entity knew or should have known of the event causing the delay.  Whether a force majeure provision might apply is highly situation specific.  We strongly recommend reaching out to a Vorys environmental attorney before relying on a force majeure provision.
  5. Many environmental agencies may be operating with reduced staffing, or reduced availability of staff. Paperwork and self-reporting obligations will continue to be held to a very high standard.  Do not assume any of these reporting obligations have been waived – as they have not.  It is better to ask for (and receive) permission rather than asking for forgiveness after the fact.
  6. If your business is contemplating a potential halt in operations (even if temporary), consider whether there are environmental laws applicable to ceasing certain operations. For example, Ohio EPA’s cessation of regulated operations requirements which mandates submittals to Ohio EPA.  (Ohio Adm. Code 3745-352.) Your state may have similar cessation obligations; Vorys can assist in the identification of, and compliance with, these requirements.

The list of issues above is not exhaustive, nor is it intended to be an in-depth explanation of each.  There are potentially serious ramifications of unapproved and un-waived non-compliance, including but not limited to potential civil penalties.  In addition, the complexity inherent in obtaining a discretionary waiver of a deadline or other requirement, invoking force majeure, or taking advantage of statutory or regulatory exemption means that an environmental attorney should be involved in any determination involving non-compliance with an obligation imposed by permit, order, rule, statute or any other source.

Please contact any member of the Vorys environmental team for assistance regarding any of the above identified issues, or any other environmental compliance issues facing your business during this tumultuous time.  We will continue to provide updates to this notice as the COVID-19 situation continues to evolve.

 

 

Proposed Amendments to NEPA Regulations

Posted in Energy, Environment

As discussed in an earlier post, found here, the Council of Environmental Quality (“CEQ”) recently published proposed amendments to update the procedural regulations used to implement the National Environmental Policy Act (“NEPA”). The proposed amendments were published in the Federal Register on January 10, 2020 and can be found here. Public comments on the proposed amendments are due on March 10, 2020. A more expansive discussion of the proposed amendments follows.

CEQ’s proposed amendments are the first major changes to NEPA’s procedural regulations since their promulgation in 1978. The proposed amendments aim to increase efficiency of the environmental review process through reductions of paperwork and avoidance of delays. While many of the proposed changes simply reorganize, clarify, or add other non-substantive revisions, the proposed amendments include several significant substantive changes. If adopted, the amendments would apply to all NEPA reviews initiated after the effective date. Agencies would have the discretion to apply the changes to reviews that are ongoing at the time the rule becomes effective.

Threshold analysis of whether NEPA review is required

The proposed amendment includes several provisions intended to clarify how and when an agency decides whether a NEPA review is required and what level of review is required. In §1501.1 of the proposed regulations, CEQ proposes to add a list of considerations to determine if NEPA applies: (1) whether the proposed action is a “major federal action”, (2) whether the action is non-discretionary, (3) whether compliance with NEPA would conflict with other statutory requirements, (4) whether compliance with NEPA would be inconsistent with Congressional intent, and (5) whether the agency has determined that other analyses or processes serve as an equivalent to NEPA. To guide agencies under the first consideration, the proposed amendment narrows the definition of a “major federal action” to only those actions subject to extensive federal control and responsibility. This removes actions from NEPA review where there is “minimal federal funding or minimal federal involvement such that the agency cannot control the outcome on the project.” The agency is seeking public comment on whether to include a dollar or percentage threshold that would determine whether the level of federal funding for a project is sufficient to deem it a “major federal action”.

Although no significant changes are proposed for NEPA’s categorical exclusions (“CEs”), the proposed amendment does provide clarity of an agency’s designation and application of CEs. Under the current rules, CEs are types of actions designated by individual agencies (and included in their internal NEPA compliance regulations) that do not require NEPA review. CEQ is seeking comments on whether it should include specific CEs in the final regulations to be applied by all agencies. Comments are also sought on whether to allow an agency to apply another agency’s CEs to its own actions.

Environmental Assessments (“EA”) and Environmental Impact Statements (“EIS”)

In an attempt to reduce paperwork and increase efficiency, the proposed amendments include several major changes to the EA and EIS requirements. The biggest change in the proposed amendments is to the definition of “effects”. This is significant because the required level of NEPA review turns on the action’s potential effects to the environment. The current “effects” definition is interpreted broadly and requires agencies to consider indirect and cumulative effects of the proposed agency action, meaning more expansive and longer NEPA reviews. The proposed changes narrow the definition so that only those effects that are reasonably foreseeable and have a reasonable close causal relationship to the proposed action must be considered. The proposed amendment explicitly provides that cumulative effects need not be considered, nor should effects be considered significant if they are remote in time or geography, or the result of a lengthy causal chain. This proposed change is certain to attract significant comments.

Similarly, the proposed amendments include limitations to the alternatives that must be considered in an EIS. CEQ’ proposed amendment intends to limit the number of project alternatives considered in an EIS by striking requirements that agencies consider alternatives outside the jurisdiction of the lead agency; only reasonable alternatives are to be considered. CEQ seeks comments on whether a presumptive maximum number of alternatives that must be considered.

Other proposed efficiency changes to the EA and EIS process include time and page limits. CEQ proposes to limit EAs to 75 pages and a one year timeframe for completion. EISs will be limited to 300 pages and a two year timeframe. Both limits are subject to extensions with approval of a senior agency official involved in the review process. Agencies would also be given more flexibility to complete their EAs and EISs by relying on applicants or contractors to provide more information or materials. If an agency relies on the applicant or contractor to prepare the EA or EIS, the agency must still take responsibility for its content and accuracy through an independent evaluation.

Vorys will continue to follow the proposed amendment throughout the public comment process. If you have any questions regarding the changes discussed above, or other proposed changes that are not included in this discussion, please feel free to reach out to a Vorys attorney.

PA Supreme Court Holds the Rule of Capture Applies to Hydraulic Fracturing Operations

Posted in Energy

On January 22, 2020, the Supreme Court of Pennsylvania decided Briggs v. Southwestern Energy Prod. Co.  The issue before the Court was whether the rule of capture applies when a developer drains oil and gas from an adjacent property by drilling a well “using hydraulic fracturing solely within the developer’s property.” (emphasis in original).

The Court “reject[ed] as a matter of law the concept that the rule of capture is inapplicable to drilling and hydraulic fracturing that occurs entirely within the developer’s property solely because drainage of natural resources takes place as the direct or indirect result of hydraulic fracturing, or that such drainage stems from less ‘natural’ means than conventional drainage.”

Cabined by pleading deficiencies with the landowners’ complaint and a narrow issue on appeal, the Court declined to address whether the rule of capture immunizes a developer from liability when hydraulic fracturing operations physically intrude into the subsurface of an adjoining property.

Click here to read the decision.

 

Supreme Court of Ohio to Determine Whether the Ohio Dormant Mineral Act Supersedes the Ohio Marketable Title Act as to Severed Oil and Gas Interests

Posted in Energy

On January 21, 2020, the Supreme Court of Ohio accepted an appeal from the Seventh District Court of Appeals’ decision in West v. Bode, Case No. 18-MO-0017. The issue accepted for review by the Court is whether, due to a perceived conflict between the statutes, the Ohio Dormant Mineral Act (R.C. 5301.56), being the specific statute, supersedes and controls over the Ohio Marketable Title Act (R.C. 5301.47, et seq.), being the general statute, as to the termination of severed oil and gas interests. The Court’s decision should provide some clarity to operators in Ohio regarding the ownership of severed oil and gas interests.

You can read the Seventh District Court of Appeals’ decision here.

Proposed regulatory amendments published for the National Environmental Policy Act

Posted in Energy, Environment

The Council for Environmental Quality recently published proposed amendments to update the procedural regulations used to implement the National Environmental Policy Act (“NEPA”). The proposed amendments were published in the Federal Register on January 10, 2020 and can be found here. The main goal of NEPA is to assure that federal agencies adequately consider the environmental impacts of major federal actions. This is primarily done through the completion of Environmental Assessments and Environmental Impact Statements. This review process can be both lengthy and expensive.

The proposed amendments are highly anticipated by industry as they include significant changes that would relax the requirements for how and when the federal government fulfills its role under NEPA. Most notably, the proposal aims to cut down review times, limit the consideration of cumulative environmental impacts (such as climate change), exempt certain projects from full review, and allow some projects to be reviewed by the developer. We will continue to review the proposal and provide updates as it progresses through the rulemaking process.

Comments on the proposed amendments are due by March 10, 2020.

Lessor Notice is Required in Certain Circumstances to Forfeit a Lease for Breach of the Implied Covenant of Reasonable Development

Posted in Energy

In Pavsek v. Wade, 18 MO 0024, Ohio’s Seventh District Court of Appeals considered whether a lessor must serve notice upon its lessee demanding that the lessee drill additional wells on the leasehold prior to seeking a partial forfeiture of the lease due to the lessee’s breach of the implied covenant of reasonable development. The Court held such notice is required if the lessee drilled a well on the leasehold that is currently producing in paying quantities. Further, the lessor must provide its lessee with a reasonable amount of time to develop the remaining leasehold prior to seeking forfeiture. In these cases, the Court will not excuse the lessor’s failure to serve notice upon its lessee simply because a long period has passed since the lessee drilled the still-producing well.

You can read the Pavsek decision here.

U.S. EPA Redesignates Ohio Portion of Stubenville OH-WV SO2 Nonattainment Area

Posted in Environment

On November 29,2019, U.S. EPA issued a final rule redesignating the Ohio portion of the Stubenville Ohio-West Virginia nonattainment area from nonattainment to attainment of the 2010 SO2 National Ambient Air Quality Standards (NAAQS), pursuant to section 107(d)(3)(E) of the Clean Air Act. EPA determined that Ohio demonstrated that the area is attaining the SO2 standard due to permanent and enforceable SO2 emission reductions. The Agency also approved Ohio’s maintenance plan that will ensure the area continues to maintain the SO2 NAAQS.

The Ohio portion of the Stubenville nonattainment area includes Cross Creek Township, Stubenville Township, Warren Township, Wells Township, and Stubenville City. U.S. EPA’s redesignation became effective on November 29, 2019.

New USEPA Title V and NSR Guidance: “Adjacent” does actually mean “Adjacent”

Posted in Environment

On November 26, 2019, USEPA published a guidance memorandum “Interpreting ‘Adjacent’ for New Source Review and Title V Source Determinations in All Industries Other Than Oil and Gas” (the November 26 Guidance).  In the November 26 Guidance, USEPA updated its interpretation of the regulations governing the scope of a “stationary source” under the NSR and Title V Clean Air Act programs.[1]

Those regulations generally define a stationary source as “all of the pollutant-emitting activities which belong to the same industrial grouping, are located on one or more contiguous or adjacent properties, and are under the control of the same person (or persons under common control)….”  See e.g. 40 CFR 52.21(b)(5)-(6) (emphasis added).

Previously, USEPA had interpreted “adjacent” to include not only physical proximity, but also the functional interrelatedness of different facilities, regardless of physical proximity.  In the November 26 Guidance, USEPA determined that it will no longer use the existence of some functional interrelationship to establish “adjacency”.

As USEPA summarized its decision:

[F]or purposes of making source determinations for NSR and title V, EPA interprets the term “adjacent” to entail physical proximity between properties. From this point forward, EPA will consider properties that do not share a common boundary or border, or are otherwise not physically touching each other, to be “adjacent” only if the properties are nevertheless nearby, side-by-side, or neighboring (with allowance being made for some limited separation by, for example, a right of way). This is inherently a case-specific inquiry where determining the appropriate distance at which two properties are proximate enough to reasonably be considered “adjacent” may vary depending on the nature of the industry involved.  Therefore, EPA is not here establishing or recommending a “bright line,” or specifying a fixed distance, within which two or more properties will be deemed (or presumed) by EPA to be in close enough physical proximity to be considered “adjacent.”  In each case, this determination should ultimately approximate the “common sense notion of a plant.”

November 26 Guidance at pg. 8 (emphasis added).

Despite the fact that USEPA did not establish a bright-line distance within which properties will be considered adjacent, adjacency may be narrowly determined, given the language USEPA uses in the November 26 Guidance (“allowance being made for some limited separation by, for example, a right of way”).  This means that the November 26 Guidance may result in fewer major stationary source determinations (because fewer facilities will be considered a single stationary source and have their emissions aggregated for major source determinations).

That said, the November 26 Guidance makes clear that it only applies prospectively, and that adjacency determinations will continue to be made on a case by case basis.  In addition, permitting authorities with USEPA-approved permitting programs (including Ohio EPA) are not required to apply the November 26 Guidance.

For example, Ohio EPA Engineering Guide #58 (still active from March 1995, supplementing Ohio EPA’s Title V regulations) still evaluates the functional interrelationship between facilities in determining adjacency (and uses five miles as a potential threshold for adjacency).  In light of the November 26 Guidance, Engineering Guide #58, which seemingly relies on USEPA determinations that existed at that time, may be out of date, but as of this writing is still Ohio EPA’s guidance on the adjacency question.

The November 26 Guidance should be considered going forward when locating a new facility in proximity to an existing facility to determine if emissions would be aggregated together for NSR and Title V purposes.  Even though many permitting authorities are not required to apply the November 26 Guidance, it will likely be persuasive authority that a permitting authority should consider in making a case-by-case adjacency determination.

[1] In a previous rulemaking, USEPA established a bright-line definition of adjacency for the oil and gas extraction industry only: “Pollutant emitting activities shall be considered adjacent if they are located on the same surface site; or if they are located on surface sites that are located within 14 mile of one another (measured from the center of the equipment on the surface site) and they share equipment. Shared equipment includes, but is not limited to, produced fluids storage tanks, phase separators, natural gas dehydrators or emissions control devices.”  See e.g. 40 CFR 52.21(b)(6)(ii).  The November 26 Guidance does not apply to this definition.

Supreme Court of Ohio Holds 21-Year Statute of Limitations Applies to Stale Lease Expiration Claims

Posted in Energy

On November 26, 2019, the Supreme Court of Ohio clarified that a declaratory judgment claim that an oil and gas lease terminated for lack of production is subject to the 21-year statute of limitations for recovery of title to or possession of real property in R.C. 2305.04.  See Browne v. Artex Oil Co., Slip Op. No. 2019-Ohio-4809. In Browne, the lessee argued that an action like the case at bar was subject to the 15-year statute of limitations for actions upon written contracts in former R.C. 2305.06.  The Court disagreed. The Court noted that the lessors were not alleging a breach of the oil and gas lease, but were simply requesting a declaration that the oil and gas lease had terminated by its terms through operation of law.  This claim was was more akin to an action to quiet title than one upon a written contract, the Court found, as the lessee had no obligation to produce under the lease and the parties did not dispute the lease’s provisions.   Relying heavily on the notion that in Ohio an oil and gas lease vests a real property interest in the lessee, the Court held that R.C. 2305.04 was the controlling limitations statute.  The Court reasoned that because the oil and gas lease vested the lessee with a real property interest and the lessors were merely seeking recognition of their reversionary interest in that real property, R.C. 2305.04, which applies to actions to recover title to or possession of real property, was the operative statute.  The Court remanded the matter to the trial court for an evaluation of the parties’ claims in light of the correct statute of limitations.

[Disclosure: Vorys represented amici curiae Ohio Oil and Gas Association and Southeastern Ohio Oil and Gas Association in this case.]