Beware of 60 day notification rule for PA USTIF Claims

Gasoline service stations rely on reimbursement from the PA Underground Storage Tank Indemnity Fund (USTIF) to pay for site investigation and remediation of petroleum contamination after a “release” is discovered. Costs to comply with DEP regulatory requirements often exceed $100,000 and occasionally go to $1 million or more. In areas where homeowners are not connected to public water, private law suits by well users may accompany DEP enforcement action.

In light of the above, USTIF remedial funding and defense of private suits is crucial, and denial of a claim for procedural deficiencies can be catastrophic, especially for privately owned service stations.

A common procedural issue in USTIF claims is the regulatory requirement to notify USTIF within 60 days of “confirmation” of a release. Claimants typically run afoul of this requirement by waiting to report until after initial sampling results confirm exactly where and how much of a release is occurring. This process often takes several months. However, USTIF typically takes the position that once a claimant discovers contamination, the 60 day period begins to run, and the claimant is not entitled to wait for a formal report containing more details.

The 60 day rule often arises when ownership of a service station changes hands. Many facilities have documentation of historic releases, discovered during tank upgrades or other construction work. The extent of soil remediation varies and may not be clear from available documents. Therefore, a new owner typically takes title with some knowledge of previous contamination—either disclosed by the Seller or documented during due diligence, or both. If the new owner subsequently performs sampling and discovers a problem that requires remediation, USTIF may very well invoke the 60 day rule unless you can prove that there is a new leak that is unrelated to what was “known” previously.

If USTIF denies a claim, an administrative appeal must be filed within 35 days of the date of the denial. The results of such an appeal will be unpredictable in light of the vagueness of the USTIF regulation and the limited reported case law regarding the 60 day rule. Nevertheless I have, on at least one occasion, obtained reversal of an initial claim denial, on the grounds that previous investigation results were inconsistent and that a release was not confirmed until post-acquisition follow up sampling was implemented.

In any event, purchasers of service stations are well advised to assure that the property is not coming with previously documented conditions that require remediation but may be disqualified from USTIF coverage because of the 60 day notification rule.

Locating Renewable Energy Facilities on Brownfield Sites

DOE's National Renewable Energy Lab (NREL) and USEPA  are actively promoting the redevelopment of Brownfield sites for renewable energy projects. The program goes by the name of "RE-Powering America's Land: Siting Renewable Energy on Potentially Contaminated Land and Mine Sites" (RE-Powering America's Land).  See web page at http://tinyurl.com/lefkry
An excellent overview article by Sari Kreiger appeared in the WSJ earlier this week:  http://tinyurl.com/38lryaa. 

This two-for-one campaign is a reincarnation of the "Brightfields" program of 10 years ago, which did not attract much attention.  It merits attention this time around because it is supported by a number of federal grant and loan programs, including substantal Recovery and Reinvestment Act funds.  Combining renewable energy with Brownfields redevelopment therefore opens the door to diversified and potentially significant project funding resources  . 

As part of the program, EPA is conducting an evaluation of numerous  traditional Brownfield sites as well as abandoned mining properties, to determine the type and extent of renewable energy development that would be sustainable at each.  This effort has already produced an inventory of such sites which can be accessed on line by potential developers.

EPA Region III sites being evaluated include: 1) The Jeddo Tunnel in Drums, PA, which receives contaminated runoff from several abandoned mining areas(Evaluation for hydro-turbine facility); and 2) Several former chemical plant properties in Nitro, WV (Evaluation for solar facility).

The program is also considering the feasibility of including former gasoline service stations, with a feasibility study due to be completed later this year.

Vapor Intrusion issues discussed at Environmental Law Forum

Thought I would share a few points discussed last week at the Environmental Law Forum, pertaining to vapor intrusion.  It is becoming increasingly important to include good quality vapor intrusion evaluations in risk-based site remediation proposals.  Brownfield site purchasers may also include such evaluations in pre-aquisition due diligence.  If new information is generated at a site that previously obtained PA Act 2 approval, it could be grounds for reopener of that approval.  However, DEP is currently not interested in affirmatively pursuing such reopeners.

In some instances it appears sensible to take indoor air samples rather than going through a soil screening process possibly followed by additiona sampling.  However, indoor sampling can be inaccurate and can raise unwanted issues.  Stories are told of elevated VOC levels ultimately determined to be caused by employee dry cleaning hanging in a closet, or elevated levels that are probably not related to the subsurface soil contamination but cannot be readily explained and lead to worker hysteria etc. 

DEP previously proposed amending the Act 2 regulations to specifically require vapor intrusion evaluation, but finalization is still believed to be several months away. 

Gas Drilling Issues Discussed at Environmental Law Forum

Thought I would share some interesting points regarding gas drilling that were  discussed last week in Harrisburg at the annual Environmental Law Forum.  These are of particular relevance in light of the current attention on drilling in the Marcellus Shale formation.  If you represent landowners, the first thing to note is that the property in question is often subject to a "split estate".  The rights to extract subsurface material may have been conveyed to a third-party many years ago, and that party may now be leasing those rights to yet another party--possibly from out of state.  Such leases require "due regard" for surface owner rights but the subsurface rights are superior to the surface rights.  Marcellus Shale drilling can be extremely intrusive for a surface owner, with clumps of wells constructed and operated on a concrete pad, and millions of gallons of water being trucked in. 

The large volume of water required can become a water allocation permit issue, with the Susquehanna River Basin Commission currently being much more permissive than the Delaware River Basin Commission. 

Discharge of high brine content wastewater is a big issue.  PADEP is currently working on a 'technology based standard" that would trump otherwise applicable water quality based standards.  Because of the public profile of the Marcellus Shale water quality issues, this standard may turn out to be "technology forcing"--i.e., there is no reliably proven technology to meet the standard at the present time. 

We were also reminded that EPA has sole regulatory authority over deep well injection of wastewater, and that if a contractor carries out such injection without an EPA permit, they risk federal felony prosecution.    

Federal Jury awards $6.5 million damages against PADEP

On March 4, a federal jury in Philadelphia awarded MFS Inc. $6.5 million in damages against the PADEP Northeast Regional Director, the current and former air quality program managers, and an enforcement attorney.  See:  MFS, Inc. v. Thomas A. Dilazaro et al., No. 08-2508 (E.D. Pa).  In so doing, the jury found that high ranking DEP managers had violated the company's constitutional Due Process and Equal Protection rights, had taken enforcement action as retaliation against the company, and had interfered in efforts to sell the property.    The jury verdict was preceeded by a court ruling that the individuals were not necessarily protected by sovereign immunity, and that the alleged facts, if proven, could in fact constitute violations of First Amendment retaliation and 14th Amendment Due Process and Equal Protection . 

This result is highly unusual because sovereign immunity typically protects a state agency against claims that they enforced regulations unfairly or in a mean spirited way ( which his how clients often feel after a contentious enforcement action).  In the MFS case, the conduct of DEP managers (including the Director) was deemed to be sufficiently outrageous to rise to the level of constitutional violation. 

The impact of this verdict remains to be seen; however it is reasonable to expect more suits alleging constitutional violations as well as increased care n by DEP personnel in the way that enforcement decisions are  both rendered and documented.   

New Climate Change/GHG Emission Evaluation Requirements for NEPA and SEC Filings

The SEC and CEQ have recently issued Interpretive Guidance and Draft Guidance, respectively, pertaining to climate impact.  The NEPA draft guidance (Feb.18, 2010) would require consideration if a proposed action is reasonably anticipated to cause direct annual emissions of 25,000 tons of CO2 equivalent GHG.  This threshold happens to match up to EPA's  recently issued GHG reporting rule.  Nevertheless, the Guidance makes clear that 25,000 tons is not intended to be a presumptive criterion for determining significant environmental impact.  It is literally, a way to assure that substantial GHG emissions are considered when determining whether a full EIS is appropriate. 

The SEC interpretive guidance, at 75 Fed. Reg. 6290 (Feb.8, 2010) is not legally binding but will be applied by SEC as if it were.  The guidance is not a model of specificity; however it essentially requires disclosure of potentially material impacts of both climate change legislation and climate change itself. It also covers both corporate operations and the materials used by such operations.  An energy company producing electricity or liquid fuels would be an obvious potentially covered party; but one could also be covered if the price of an agricultural commodity will be affected by climate change, or if the price of fuel will increase due to federal legislation. 

PADEP Proposes Revisions to NPDES Regulations

See 40 Pa. Bull. 847 (Feb.13, 2010) for extensive proposed revision to Chapter 92.  This section would be reorganized as well as adding several provisions necessary for consistency with EPA regulations, including Phase II Stormwater regulations.  There are new definitions and deletion of some existing definitions. There is also a revision of section 92.2 listing EPA regulatory provisions that are incorporated by reference.  If you are involved with municipal sewage treatment plants, take a look at proposed provisions to the secondary treatment requirements as well as a new "technology based" tertiary treatment requirement applicable to facilities which expand hydraulic capacity or increase pollutant loadings and discharge to an stream on the "impaired" list.  For industrial facilities, they are proposing a technology-based limit of 50 mg/l CBOD and 60 mg/l TSS regardless of federal effluent limitation guidelines.   Public comments are due by March 15.