Indiana's Environmental Progress

In May, the Indiana Department of Environmental Management released its Criteria Pollutants Air Quality Trend Analysis Report.  This report tracked Indiana's air quality from 1980 to 2010 in twelve geographic regions.  Our firm has offices in both Indianapolis and South Bend, so I reviewed the air quality trends for the Central Indiana and North Central Indiana regions, which include Marion County and St. Joseph county, respectively.  The news for the Central Indiana region (Boone, Hamilton, Hancock, Hendricks, Johnson, Marion, Morgan, Putnam, and Shelby counties) is good. Although population and vehicles miles traveled have increased over the past thirty years, the region's emissions have also decreased.  The air quality in the North Central region (Elkhart, Fulton, Kosciusko, Marshall, and St. Joseph counties) has also improved over the past thirty years despite an increase in population and vehicle miles traveled. Hopefully Indiana's air quality will continue to improve as businesses and individuals work with environmental attorneys to help them comply with complex state and national environmental regulations.  For an in-depth look at the air quality levels across Indiana, please click here.

New EPA Guidelines: To Frack or Not to Frack?

The somewhat controversial practice of hydraulic fracking has gotten its fair share of news headlines lately, for better or for worse.  While the intricacies and scientific technicalities of fracking perhaps are better left to another day, this blog post provides a quick and dirty guide to the debate over fracking and its environmental repercussions.

Hydraulic fracking is a process which has been around since the 1940s, but has gained international attention recently due in part to the energy crisis, and in part to the enhanced science we have available today to make it an economically feasible method to release natural gas from deep within the earth.  On one hand, fracking gives us access to an energy source which otherwise was inaccessible to us.  On the other hand, opponents argue that fracking will lead to increased groundwater contamination and potential unknown other pollutants being released into the air, groundwater, and soil.

Fracking involves pumping a liquid into an existing wellbore, generally located in shale rocks or coal beds.  The fracking liquid being pumped into the rock increases the pressure and forces the rock to crack.  The liquid extends deeper into the crack, which further extends the crack until it reaches the natural gas deep beneath the earth's surface, releasing the gas upward into the well area where it can be captured and piped out as an energy source.  Different liquids can be used as fracking liquids, but the most common is a mix of water and chemical additives.  Fracking liquids are also used to inject sand and other solids to stabilize the cracks without losing the permeability that allows the gas to rise up.  These solids are called "proppants."  These wells are then "tapped" to catch the natural gas that is released.  During the tapping and fracking processes, trace amounts of natural gas, methane, volatile organic compounds ("VOCs"), and other fracking fumes may be released.

In April, 2012, the Environmental Protection Agency ("EPA") passed new rules regarding fracking under the Clean Air Act ("CAA").  See the EPA's news release here. However, the rules do not take effect until 2015. Once the new rules go into effect, they will require the industry to perform a process called "green completion" to trap the fumes that are currently being released into the air. Certain states, such as Wyoming and Colorado already require green completion.  The EPA's CAA fracking rules are a step in the right direction to control VOC and methane gas air contamination while allowing companies to develop needed cutting-edge oil and gas drilling technologies to release new stores of energy.  As an added benefit, it is believed the industry will be able to sell the gases captured during green completion to recoup some of the costs incurred in becoming compliant with the rules by 2015.

On May 4, 2012, the EPA released a draft of a new guidance to follow if diesel fuel is used as the fracking fluid.  You can read this draft here.  This draft was published in large part in response to concerns about groundwater when diesel is injected into the ground.  EPA is holding a public meeting on the proposed draft on June 29, 2012 in Washington, D.C.  The draft is open to public comment until July 9, 2012.

Common Sense Approach to Underage Drinking

This has nothing to do with environmental law, but I'd like to applaud the Indiana legislature's common sense approach to underage drinking.

On March 16, Governor Mitch Daniels signed Senate Enrolled Act 274 into law.  Today, he took part in a ceremonial signing of the act, which will go into effect July 1.  The so-called Lifeline Law prevents police officers from arresting a minor solely for public intoxication, minor possession, consumption, and/or transportation of alcohol if the minor sought medical attention for an intoxicated person and remained at the scene until emergency personnel arrived.  The law was proposed by college students at various Indiana schools.  Indiana is the twelfth state to adopt a Lifeline Law.  Hopefully, some lives will be saved if underaged drinkers are not forced to chose between saving someone's life and turning themselves in to the authorities.   

For the full text of the act, click here.  For the Indiana Lawyer's disussion, click here.

Temporary Restraining Orders in Environmental Litigation

Temporary restraining orders, known in the legal world as “TROs”, are a powerful tool in environmental litigation.  For a party that is considering a TRO, it has the power to immediately halt excavation, stop construction, or prevent the imposition of a new regulation.  For a party facing a TRO, violation of such an order can lead to steep fines, being held in contempt of court, and a multitude of other punishments.

TROs are often litigated in the environmental arena.  Recently, the Indiana Supreme Court considered a TRO in the context of an underground storage tank (“UST”) site.  In Witt v. Jay Petroleum, Inc., Cause No. 38S02-1110-CV-608 (Ind. March 21, 2012), the Supreme Court decided that the property owner, his attorney, and his environmental consultant were properly held in contempt of court for violating a TRO.  In that case, the property owner sued a prior owner, claiming the petroleum contamination he was cleaning up was from the prior owner’s use of the USTs.  The parties could not agree on a method for removing the USTs and testing the surrounding soil.  The trial court issued a TRO prohibiting any UST removal, soil excavation, or other environmental investigation and remediation activities until the court could conduct a preliminary injunction hearing.  Id., slip op. at 3.  The environmental consultant and other parties to the litigation continued excavating the UST area, and the trial court found them in contempt.  Id. at 3–4.  The Indiana Supreme Court eventually affirmed the trial court’s order.  See also Commissioner  v. RLG, Inc., 755 N.E.2d 556, 558 (Ind. 2001).  In RLG, the Indiana Department of Environmental Management (“IDEM”) sought preliminary injunctive relief against a landfill.  The defendant landfill agreed to remedy its environmental violations and to close the landfill, and IDEM agreed to drop its action for other civil penalties.  When defendant failed to comply, default judgment was entered for $3.1 million against landfill for violating the temporary restraining order.  The Indiana Supreme Court affirmed the judgment.          

This short recap of the Witt and RLG cases illustrates the applicability of the TRO in environmental litigation, and the extreme importance in abiding by a TRO.  A TRO expires within ten days after it was issued (unless the court extends it for good reason).  Ind. R. Trial P. 65(B). As soon as possible after the entry of a TRO, the trial court will conduct a preliminary injunction hearing where all parties can present their arguments regarding whether the activity that is the subject of the TRO should be enjoined pursuant to a more permanent preliminary injunction.  This powerful tool should not be overlooked—by the party filing it, or the party opposing it.

Indiana Rule of Trial Procedure 65 controls injunctions and temporary restraining orders (“TROs”).

To obtain a preliminary injunction, [the movant has] the burden of showing by a preponderance of the evidence that: (1) their remedies at law were inadequate, thus causing irreparable harm pending resolution of the substantive action; (2) they had at least a reasonable likelihood of success at trial by establishing a prima facie case; (3) the threatened injury to them outweighed the potential harm to the Appellees resulting from the granting of an injunction; and (4) the public interest would not be disserved by the granting of a preliminary injunction. If the party moving for an injunction fails to prove any of those four requirements, a. grant of an injunction to that party is an abuse of discretion. Stated another way, if, on appeal, the moving party cannot demonstrate that it proved each of those four requirements then the trial court’s denial of the movant's request for an injunction must be affirmed.

Curley v. Lake County Bd. of Elections & Registration, 896 N.E.2d 24, 32–33 (Ind. Ct. App. 2008).  While Curley was a case about elections, not the environment, the same TRO rules apply in the environmental context.

The lesson?  TROs are a powerful tool for any party—the government, property owners, defendants, plaintiffs, and anyone in between.  Parties should be aware of the usefulness of such a weapon, and if a TRO is entered against you, beware the consequences of violating that court order. 

IDEM's New Remediation Closure Guide

Yesterday, fellow Monitoring Well bloggers Brianna Schroeder, Sean Hirschten, and I attended a presentation by Keramida's Steven Sittler on using IDEM's new Remediation Closure Guide.  The Remediation Closure Guide replaces the Risk Integrated System of Closure (RISC) guide that had been used since 2001.  Some of the important characteristics of the Remediation Closure Guide are that: remediation objectives have replaced hard and fast default closure levels; the Conceptual Site Model may lead to increased up-front costs but may reduce the amount of remediation needed; and the guide is intended to be flexible to allow for alternative remediation approaches.  It is important that environmental attorneys and other environmental professionals stay on top of these and other changes at IDEM.

Law and Economics and the Pollution Exclusion; or Why Flexdar is Right

In stark contrast to the Indiana Supreme Court's recent decision in Flexdar (more about which is here), the Seventh Circuit Court of Appeals recently came down with a case that bends over backwards to interpret the absolute pollution exclusion to achieve the optimal outcome for insurance companies.  At issue in Scottsdale Indemnity Company v. Village of Crestwood, 2012 U.S. App. LEXIS 5069 (7th Cir.) was an absolute pollution exclusion that purported to exclude losses for bodily injury, property damage, or personal injury "arising out of . . . alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants' at any time," and also excluded coverage for expenses arising from orders for "cleaning up . . . or in any way responding to, or assessing the effects of pollutants."  "Pollutants" were defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkilis, chemicals and waste."


The Village of Crestwood, Illinois got its drinking water in part from wells that were contaminated with PCE, a solvent commonly used in drycleaning.  Residents sued for damages, claiming they contracted cancer due to ingesting the PCE in their drinking water.  Crestwood turned to its insurers, who denied coverage based on the above exclusion.  The Court, in an opinion by Judge Posner, held that PCE was a "contaminant," and therefore a "pollutant."  Thus, there was no coverage.  However, the court didn't just stop there, as it acknowledged it could have.  Instead, it went into a long discussion of the business model of insurance companies and reached the result it did because that result is, according to the court, the most compatible with the business model of insurance companies.  The court went into this digression in the first place because it acknowledged that the pollution exclusion, if interpreted literally, would exclude coverage for accidents caused by "pollutants" even if they aren't acting like "pollutants."  The example the court gave was a tanker truck full of PCE crashing into a bridge and spilling that PCE all over the highway.  If another driver skidded in the PCE (which is a liquid) and crashed, a literal interpretation of the pollution would exclude coverage.  But of course, that result is absurd.  


The Indiana Supreme Court, in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996), acknowledged the same thing with a similar hypothetical.  Kiger involved a gas station, and the court noted that if a customer were to slip and fall on grease, any resulting liability would be excluded by a literal reading of the pollution exclusion.  But the Indiana Supreme Court, in Kiger and again in Flexdar, used the rules of construction applicable to insurance policies, and really to contracts generally, to conclude that the exclusion is ambiguous and overly-broad and, thus, unenforceable.  The Seventh Circuit, following Illinois law, bent over backwards to enforce the exclusion in this case.  To be fair, Illinois law follows the "situational" approach, enforcing the exclusion when the harm involved is "traditional environmental pollution."  (That phrase, incidentally, always brings two images to my mind.  The first is a metal drum, oozing green gunge, and sporting a tri-corner hat.  The other is the "Tradition" song and dance routine from Fiddler on the Roof.  Because where would we be without traditional environmental pollution?)


In order to determine whether the seepage of PCE into Crestwood's wells was "traditional environmental pollution," the court went into a long discussion of why insurers developed the pollution exclusion and the business of insurance.  It's "Law and Economics of Insurance."  What it is not is an analysis of the language of the pollution exclusion based on the rules of contract interpretation.  I understand the critique of legal reasoning that claims it's just a screen to hide policy preferences, and that a wily argument can use any rule to justify any action.  And I have read many opinions that pay lip service to contra proferentem and other rules of construction, but then ignore those rules in actually deciding the case.  But with the Illinois Supreme Court having already decided that the rules don't apply to the pollution exclusion, we are left with judges falling back on what they think the outcome should be, with essentially no policy prescriptions or legal reasoning to guide them.  So the Seventh Circuit thinks that if insurers covered pollution losses, they'd all go out of business (and you should read the opinion to see just how dire the court sees things; according to this analysis, there should be no insurance available in Indiana at a reasonable rate, since insurers, who have covered pollution liability here for 15 years, should all have left a decade ago due to the dreaded "adverse selection.")  


But the question that I was left with was "why should the court bend over backward to enforce this exclusion?"  The insurance companies, after all, drafted it themselves.  If a literal application of this exclusion is unenforceable (which the court acknowledged it is), why not tell the insurers to draft a better exclusion?  The Village argued in part that, because it didn't cause the pollution (the PCE was introduced by a drycleaner), the exclusion shouldn't apply to it.  The court rejected that argument, stating that "[t]he pollution exclusion would be largely nugatory" if only the "original author [of the pollution's]" coverage were excluded.  But why is it so important that the exclusion not be "largely nugatory?"  Why are we so concerned that this exclusion has to mean something?  Why not tell the insurers that if they want their exclusions enforced, they need to draft them with an eye toward the plain, simple, and almost universal rules of construction that courts at least say they use to interpret insurance policies?  Such an approach would lead to better-written policies, and would prevent the courts from being in the awkward position of determining what an exclusion means based on how that meaning accords with the needs and inner-workings of the insurance industry.  The whole reason for writing a policy is to explain what is and isn't covered.  If the insurance company can't look out for its own interests by drafting a clear exclusion, the courts should not step in and do their job for them.

EPA Releases Proposed GHG Emissions Standard for Power Plants

On March 27, 2012, the EPA released its proposed new source performance standard (NSPS) for carbon dioxide (which EPA is calling “carbon pollution” in its press releases) from electric utility generating units. The proposed emissions limitation is an output-based standard of 1,000 pounds of CO₂ per megawatt-hour (lb. CO₂/MWh).  Conventional coal-fired plants currently average about 1,800 lb. CO₂/MWh.  The proposed new standard is based on the performance of natural gas combined cycle (NGCC) technology.
   
In other words, any new stationary source will need to be a natural-gas fired plant, a renewable energy facility, or a coal plant built with some type of carbon-capture (CCS) technology.

EPA does not attempt to mask its intent with this new proposed standard: the elimination of new coal-fired power plants in the U.S. (although EPA does indicate in the proposal that coal-fired power plants may have a limited useful purpose in terms of "promoting energy diversity").   

EPA recognizes that coal-fired power plants will only be able to achieve the 1,000 lb. CO₂/MWh standard by incorporating expensive carbon capture and sequestration (CCS) technology, but speculates that this technology may become more affordable in the future and that sources may be able to secure funding from the federal government for CCS projects. The proposed regulation would allow coal (and pet coke) fired sources to be subject to an 1800 lb. CO₂/MWh standard for the next 10 years, but these sources would then be subject to a 600 lb. CO₂/MWh for the subsequent 20 years (resulting in a 1000 lb. CO₂/MWh average over the 30 year period).

The proposed NSPS would not apply to “transitional sources” – those that have acquired a complete PSD permit prior to March 27, 2012 and that commence construction within 12 months. It also would not apply to existing EGUs whose CO₂ emissions increase as a result of installation of pollution controls for conventional pollutants (such as SCR dampers).

At this point, EPA has only proposed the NSPS for new and modified sources under §111(b). Emissions guidelines for existing sources under §111(d)—which will be converted into performance standards by the states (in a process much like the SIP process)—are referenced in the proposal, but EPA said yesterday in a conference call that it currently has no plans to regulate existing power plants.

The comment period will run 60 days from the date the proposed rule is published in the Federal Register—which has not happened yet. EPA will also hold public hearings on the proposal, the dates, times and locations of which have not yet been announced.

You can read the full text of the proposed rule here.  More on this to come....