The EPA Proposed Two Different Coal Ash Regulation Options, Just to Keep Us Guessing!

Right now, coal combustion residuals, or coal ash, are considered exempt wastes under an amendment to the Resource Conservation and Recovery Act (“RCRA”). Many are byproducts of the combustion of coal in power plants captured by pollution control technologies, like scrubbers. According to the American Coal Ash Association, nearly 110 million tons of coal ash was produced in the U.S. in 2012, and about 47 percent of that was re-used. The rest was deposited in landfills. Lately, pundits across the political spectrum have been writing about the coal ash regulations the Environmental Protection Agency (the “EPA”) is due to finalize any day. But what does that all mean?

First, a quick background. In 2008, a slurry spill from the Tennessee Valley Authority (the “TVA”) Kingston Fossil Plant in Kingston, Tennessee triggered numerous lawsuits against the TVA. The EPA considered the spill from the plant’s “surface impoundments” (ponds) to be an unpermitted discharge of a pollutant in violation of the Clean Water Act. The TVA and EPA entered an Agreed Order delineating the cleanup responsibilities and requiring the TVA to meet all federal and state environmental regulations in restoring the damaged areas. At this point, there were no federal regulations governing the handling of coal ash; instead, the EPA had allowed the states to enact their own rules and regulations. Various groups pressured the EPA to promulgate rules regarding the storing, handling, and disposal of coal ash

Fast-forward several years to 2013. Several environmental groups sued the EPA to push it to finalize regulations on the storage and disposal of coal ash. The result of that suit was a Consent Decree from the District Court for the District of Columbia setting a deadline of December 19, 2014 for an EPA rule.

On June 21, 2010, the EPA issued a Proposed Rule for the required public comment period. The Proposed Rule can be viewed here. The public comment period closed on November 19, 2010. Over 11,000 comments were received. The EPA issued numerous Notices of Data Availability over the next several years and invited further public comment.

The EPA has proposed two possible outcomes for the management of coal ash. Both options fall under RCRA. The first option is the “Subtitle C” option. Under this creatively-named option, the EPA would list coal ash as a “special waste” when destined for disposal in landfills or surface impoundments, subject to hazardous waste regulation under subtitle C of RCRA. The second option is referred to as the “Subtitle D” option because under it, you guessed it, the EPA would regulate coal ash under subtitle D of RCRA, the section for non-hazardous wastes. Environmental groups have lobbied for the former option, while industry representatives prefer the latter. The EPA sent its proposal to the White House Office of Management and Budget (the “OMB”) in October, 2014. This is the final review stage for the rule.

What does all of this mean for the industry? Option C would require state and federal enforcement, while Option D would leave federal enforcement to citizens’ suits (states would be considered citizens). Option C would require state and federal monitoring, but Option D is self-implementing. Importantly, under Option C, the rule would include a federal requirement for permit issuance by states. Option D would not. Option C includes requirements for storage, including containers and tanks. Option D does not.

A key provision involves those surface impoundments, or ponds. Option C would require existing impoundments to remove solids, meet land disposal restrictions, and retrofit the impoundment with a liner. Option D would require existing impoundments to remove solids and install a liner or stop accepting coal ash within five years. Option C requires new surface impoundments to meet land disposal restrictions and liner requirements. Option D also would require the installation of liners in new impoundments, but would not require them to meet land disposal restrictions. Option C essentially would phase out the use of existing and new surface impoundments. Even Option D, in practice, would make using new surface impoundments difficult.

Option C also includes financial assurance requirements. Option C includes requirements for generation, storage, transport, management, and disposal of coal ash, while Option D focuses on disposal. Under Option C, the effective date will vary by state, as each authorized state must adopt the rule individually, which could take one or two years. Option D would be effective six months after the final rule is promulgated for most provisions; certain provisions have a later date. Both proposals exempt “beneficial uses” from any regulation under RCRA. The definition of “beneficial uses” is still unclear, but may include agricultural soil amendments, use in capped structural fill such as road beds, and recycling coal ash into asphalt or concrete. The EPA has a handy chart that summarizes many of these differences here.

Several bills have been introduced in Congress to block the EPA from regulating coal ash; the most recent passed the House in July but didn't make much leeway in the Senate. We will find out in the next week whether the White House picks Option C or D, or, more likely than not, some combination of the two options. Rules do not come out of the OMB review in the same shape in which they went in. The OMB's role is, in theory, to allocate finite resources, ensure relevant agencies are sharing scientific information and cost data, and to make sure the final regulation takes the public comments into consideration. In practice, however, the OMB places the ultimate authority for rule-making in the hands of the OMB personnel, who may not be experts in the substantive areas of regulations and are not accountable to Congress or the electorate. With this wide leeway, and the intense lobbying from all sides, the best bet is that the White House OMB will authorize a blended approach, some where between Option C and Option D. As the wise philosopher Adam Levine once sang: "it's not always rainbows and butterflies, it's compromise that moves us along."

In any event, many in the industry already are preparing for the changes that either option will bring. Electricity-producers, waste management firms, and construction companies will be immediately affected by these regulations. Electricity-users (aka all of us) will also see an effect down the road as the changes are implemented.

Local Beer & The Environment

Interesting article about Sun King's efforts to be environmentally friendly brewers, written by Sun King's intern from the Bard Center for Environmental Policy Christina Wildt: http://pojonews.co/1vGcGfF (photo courtesy of Sun King's website).

Considerations in Land Application Leases

I recently wrote an article for the Indiana Agricultural Law Foundation Spotlight newsletter that focused on important considerations in land application agreements. These are the agreements used when a confined feeding operation ("CFO") applies manure to land not owned by the CFO. For example, a CFO may determine that it will produce more manure than it can legally apply to its own fields. The CFO can contract with a nearby landowner to apply excess manure to the landowner's fields. Here in our state, the Indiana Department of Environmental Management ("IDEM") has promulgated various regulations that control when and how much manure can be applied to the land.

A land application agreement should be carefully drafted to spell out the responsibilities of each party and the allocation of liability between the landowner and the producer who will be applying the manure. No one plans on an accidental release or runoff, but the agreement should include a section on how such a release will be addressed and who will be responsible for any resulting damages. For more information, link to the full Indiana Agricultural Law Foundation Spotlight newsletter article here.

Indiana Wines

As I've written before, Indiana wine growers produce a surprising number and variety of easy-drinking table wines. Read: Wine is Good for You...and for Agri-Tourism.

I recently enjoyed reading Purdue University's AGRIcultures Magazine, which just started a multimedia series called Through the Grapevine. The first installment was a story entitled "Getting to Know Indiana Wines". The article describes four varieties--Traminette, Vignoles, Chambourcin, and Noiret--that are home grown here in the Hoosier State. Read the story in full, here.

I plan on starting with Noiret--a rich, peppery, red. Cheers!

Indiana's Late Notice Prejudice Analysis Supported by 7th Circuit

(Image from 7th Circuit website)

Although this blog post is not about environmental law, it touches on a major funding source for environmental cleanups: insurance.  Insurers often contest coverage by claiming that a late notice defense precludes coverage. Last week, the 7th Circuit provided further support for Indiana's policyholder-friendly late notice prejudice analysis.               

The late notice prejudice analysis in Miller v. Dilts, 463 N.E.2d 257 (Ind. 1984) was recently supported by a well-reasoned decision from the 7^th Circuit.  In Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co. LLC, Nos. 3:11-cv-00015RLY-WGH, 3:11-cv-00161-RLY-WGH (7^th Cir. Oct. 29, 2013), Mead Johnson’s insurance policies required it to notify its insurer “as soon as practicable” after a claim.  Mead Johnson, however, did not notify its insurer of a false advertisement lawsuit until after it had lost a $13.5 million jury trial.  Even though Mead Johnson “failed inexcusably to comply with the notice provisions in its liability insurance policies,” the 7^th Circuit reaffirmed that unreasonably late notice only “create[s] a presumption of harm.” Mead Johnson at 7.  The burden then shifts to the policyholder to produce “some evidence” of no prejudice from the late notice. Id.  When the policyholder does so, the burden shifts to the insurer to produce evidence of actual prejudice. Id. at 9.  The court held that because the insurer produced no evidence of prejudice, summary judgment for the insurer was reversed and the case remanded for further proceedings. Id.    

Judge Posner, writing for the 7^th Circuit concluded that the Indiana Supreme Court would not approve the holdings of two Indiana Court of Appeals decisions that had formed the basis for the trial court to erroneously hold that the presumption of prejudice from late notice can be irrebuttable. Id. at 10.  In Allstate Ins. Co. v. Kepchar, 592 N.E.2d 694, 699 (Ind. Ct. App. 1992) (involving a motorcycle accident) and Milwaukee Guardian Ins., Inc. v. Reichhart, 479 N.E.2d 1340, 1343 (Ind. Ct. App. 1985) (involving alleged negligence in clearing a drainage ditch) the Indiana Court of Appeals held that the failure to provide notice until after the underlying suit was tried deprives an insurer of the opportunity to make decisions regarding the conduct of the trial and justifies a finding of prejudice as a matter of law. Kepchar, 592 N.E. 2d at 699–700; Reichhart, 479 N.E.2d at 1343.  The 7^th Circuit held the deprivation of the right to control the defense “is not a tangible injury . . . nor, if the insurer could have done no better in managing the defense at trial than the insured did, even a cause of injury.” Mead Johnson at 10. 

“There is no indication that the Indiana Supreme Court will retreat from its position that the presumption of harm to an insurer from untimely notice is rebuttable.” Id. at 10–11.  “Indiana law, as stated in the Miller case, holds to the principle that if an insured inflicted no cost on his insurer by untimely notice, with the result that the insurer lost nothing by virtue of the untimeliness, then to allow the insurer to reject the insured’s claim would confer a windfall on the insurer.” Id. at 11.  “In effect the insurer would be awarded damages equal to the insured’s claim even though the insurer had not been injured at all.” Id.  

If you have any questions about this decision or any other insurance coverage questions, please do not hesitate to contact me or any of the insurance lawyers at Plews Shadley Racher & Braun LLP.

Bird Law...or Something Like It

The legal expert Charlie Kelly once said, "I know a lot about the law and various other lawyerings. I'm well educated. Well versed. I know that situations like this- real estate wise- they're very complex." (Author's note: Charlie Kelly, of the lovely comedy series "Always Sunny in Philadelphia," is not an expert in anything except Nightcrawlers.) However, Charlie had a point about Bird Law. "Bird law in this country is not governed by reason." 

The closest thing we have to Bird Law here in the real world is the former U.S. Army Corps of Engineers "Migratory Bird Rule." At one time, the Corps adopted this so-called "Migratory Bird Rule," which asserted that the Corps had jurisdiction over any water, even over isolated wetlands, "which are or would be used as habitat by... migratory birds that cross state lines." This rule was overturned by the U.S. Supreme Court in Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001). The Supreme Court held that neither the Corps nor the EPA can exert jurisdiction over isolated wetlands based solely on the presence of migratory birds. Thanks to SWANCC, Bird Law in the U.S. is one step closer to being governed by reason. The EPA and the Corps do not have jurisdiction over isolated wetlands just because a migratory bird takes a rest there. See Rapanos and my earlier post on the Clean Water Act here for more information about where the EPA and the Corps do have jurisdiction. 

Clean Water Act 101 for Farmers

Swampbuster was the villain of my last post. However, Swampbuster is only one of the two major federal statutes that affects a farmer's ability to cultivate, excavate, and control his or her farmland in areas where wetlands are prevalent. The other key law in approaching wetlands in agricultural areas is the Clean Water Act ("CWA"). 33 USC § 1251 et seq. The CWA allows the EPA to enforce its provisions and provides for citizen suits. Non-compliance with the CWA can lead to fines and lawsuits. Farmers should make sure they are not violating the CWA anytime they move dirt on their farm.

The definition of wetlands under the CWA is essentially the same as under Swampbuster. Again, "wetlands" are those areas that are inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. 40 CFR § 230.3(t). 

The national pollutant discharge elimination system ("NPDES") permit program controls water pollution by regulating point sources that discharge pollutants into waters of the United States. Section 404 of the CWA establishes a program to regulate the discharge of dredged or fill material into waters of the United States, including wetlands. It is also unlawful to discharge dredged or fill material into the waters of the U.S. without first receiving authorization from the U.S. Corps of Engineers. Waters of the U.S. generally includes wetlands. (There are scores of cases discussing exactly what "waters of the U.S." means, but suffice to say that it likely includes most wetlands.) “Discharge of dredged material” means any addition of dredged material into, including redeposit of dredged material other than incidental fallback within, the waters of the United States. This is the area most likely to affect farmers and agricultural areas. While most ongoing farming activities do not require Section 404 permits, a farmer likely does need a permit to discharge soil or any other deposit into a wetland because of the broad language in the statute. See 33 USC § 1311(a); 33 CFR § 323; 40 CFR 232.2. Point sources are discrete conveyances such as pipes or man-made ditches. Surface waters can include wetlands. Point sources may not discharge pollutants to surface waters without an NPDES permit from the Environmental Protection Agency ("EPA") in partnership with state agencies. In Indiana, the state agency responsible for NPDES permits is the Indiana Department of Environmental Management ("IDEM"). IDEM issues its NPDES permits, called "Rule 5" permits, for discharges pursuant to 327 IAC 15-5. Certain non-point sources (including agricultural stormwater discharges and irrigation return flows) are not subject to the federal permit program. 

There is no CWA jurisdiction over isolated waters or wetlands, but many wetlands that might appear "isolated" to a layman could be considered to have a "significant nexus" to traditional navigable waters. That is enough for the federal government to exercise jurisdiction under the CWA. The recent Supreme Court decision on this issue is called Rapanos v. United States, 547 U.S. 715 (2006). It includes five separate opinions and no majority, and is the perfect piece of reading material if you're having trouble sleeping.

There are exemptions to the Clean Water Act that might apply to a farmer's discharges into the water or wetland area. The "agricultural exemption" applies to "normal farming" activities. Those activities must be part of an established, ongoing program. Changing crops as part of a crop rotation is exempt. Resumption of farming fallow areas as part of a rotation is also exempt. "Normal farming" activities include cultivating, harvesting, plowing, seeding, and "minor damage." These words are all specifically defined in regulations. 40 CFR § 232.3(d). The agricultural exemption also applies to stormwater discharges, return flow from irrigated agriculture, normal activities associated with farm roads, and normal activities associated with construction and maintenance of irrigation ditches or maintenance of drainage ditches. The agricultural exemption, like other CWA exemptions, is construed narrowly. Farmers must be careful, because "maintenance" of a ditch does not include changing the location or footprint of the ditch or levee.  The agricultural exemption is subject to a "recapture provision." Any discharge of dredged or fill material into the waters of the U.S. incidental to any activity intended to bring an area of the water or wetland into a new use, whether the flow, circulation, or reach of navigable waters might be impaired is required to have a Section 404 permit. This "recapture provision" can bring a large swath of activities back under the CWA, even if at first glance it appeared the agricultural exemption applied. For instance, courts have held that converting from silviculture (growing trees) to soybean production and even from wetlands farming to dryland farming can subject the activities in question to recapture, particularly if it involves hydrologic alterations, such as loss of wetlands. 

Non-exempt discharges are not necessarily prohibited, but they do require either a general or individual Section 404 permit. Like the Swampbuster, the CWA contains mitigation provisions. When considering mitigation options, a farmer should seek to "avoid, minimize, and compensate" for the loss of wetlands. The farmer should work with the local Corps, NRCS, and state agencies to determine the appropriate use of mitigation in each situation.

 Like the Swampbuster, the CWA is not something to be ignored. Farmers and consultants should be aware of these federal statutes and the way in which those statutes can affect agricultural land use. Contact an attorney if you have questions. As always, this blog post should not be considered legal advice.