Re: Gold King Mine – Statement, Photos and Audio from EPA Administrator in Durango, CO

Today, EPA Administrator Gina McCarthy visited Durango, CO to inspect response efforts relating to the release of waste water from Gold King mine, and meet with state, local and tribal officials and community members. Tomorrow, Administrator McCarthy will visit the response efforts in Farmington, NM. More details about the visit will be released as they become available.

EPA

While in Durango, Administrator McCarthy attended a briefing at the Unified EPA Area Command where she discussed promising new data from August 7th, 8th, and 9th that is showing water quality levels in the Animas River near Durango similar to pre-event conditions. EPA is continuing to work with local community officials tasked with making decisions about public health. Later this afternoon EPA scientists will be meeting with those officials to discuss the new data and any decisions moving forward.

Photos: Photos from EPA Administrator Gina McCarthy’s trip to Durango, CO to inspect response efforts relating to the release of waste water from Gold King mine, and meet with state, local and tribal officials and community members.

Audio: Audio from EPA Administrator Gina McCarthy’s remarks and press conference at the Unified EPA Area Command in Durango, CO, on response efforts relating to the release of waste water from Gold King Mine.

Following the briefing, the Administrator held a press briefing at the Unified EPA Area Command in Durango. The following remarks can be attributed to EPA Administrator Gina McCarthy:

No agency could be more upset about the incident happening, and more dedicated in doing our job to get this right. We couldn’t be more sorry. Our mission is to protect human health and the environment. We will hold ourselves to a higher standard than anyone else.

I want to assure the general public as well as the leaders in the states, the counties and the tribal leaders, that we are working hand in hand with our partners to expedite this review, to expedite some return to normalcy in terms of using this river.

The river is returning to pre-event conditions. This is very good news, but we will be working with our partners so they have a chance to review this data thoroughly and have a chance to talk through this data in terms of what it means to their decisions moving forward. We are going to let this high quality and reliable science be our guide.

From this point on, the data will continue to come out. And that’s what’s going to influence decisions on what should happen in this river and in the affected counties.

For additional information on the response to the Gold King Mine release www.epa.gov/goldkingmine

This article first appeared in the EPA Newsroom.

© Copyright 2015 United States Environmental Protection Agency

Supreme Court Decisions Raise Questions about Future Judicial Scrutiny of EPA’s Clean Power Plan

Two of the Supreme Court’s major, end-of-term decisions turn on the deference the Court gives to agency determinations of the meaning of ambiguous clauses in complex regulatory statutes, applying the familiar Chevron framework.  The Court’s less deferential applications of Chevron raise important questions about the deference courts might be expected to give to the scope of EPA’s exercise, in its Clean Power Plan, of its statutory authority to establish carbon dioxide emission reduction standards for existing fossil-fuel power plants under Section 111(d) of the Clean Air Act.

In King v. Burwell, the Court reviewed an Internal Revenue Service regulation that allowed tax subsidies under the Affordable Care Act for insurance plans purchased on either a federal or state-created “Exchange.”  In Michigan v. EPA, the Court reviewed EPA’s threshold determination under Section 112 of the Clean Air Act that it was “appropriate and necessary” to initiate regulation of hazardous air pollutants emitted by power plants, without consideration of costs at that initial stage of the regulatory process.

The outcome in each case depended upon the Court’s review of the regulatory context of the applicable ambiguous statutory clause.  Since the context of Section 111(d) of the Clean Air Act differs markedly from the contexts of the Affordable Care Act and Section 112 of the Clean Air Act, the outcomes in King v. Burwell and in Michigan v. EPA do not likely portend the outcome of future court challenges of the Clean Power Plan.  However, the Court’s application of Chevron deference in these two cases may portend a strikingly less deferential judicial review of EPA’s Clean Power Plan than might have been expected under the traditional two-part test of Chevron.

Under Chevron, courts examine first whether a regulatory statute leaves ambiguity and, if so, courts are directed to defer to a federal agency’s reasonable resolution of the ambiguity in a statute entrusted to administration by that agency.  All of the Court’s majority and dissenting opinions in King v. Burwell and in Michigan v. EPA (except for Justice Thomas’s lone dissenting opinion questioning the constitutionality ofChevron deference) confirm the applicability of the traditional Chevronframework.  What stands out in these cases is that the Court’s majority opinions do not defer to the agency’s resolution of ambiguity.

Chief Justice Robert’s opinion for a 6-3 majority in King v. Burwell grounds Chevron in “the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.”  But, “in extraordinary cases,” the Court states that Congress may not have intended such an “implicit delegation.”  The Court holds the statutory ambiguity before it to be one of those extraordinary cases in which Congress has not expressly delegated to the respective federal agency the authority to resolve the ambiguity and, therefore, seemingly, zero deference is given by the Court to the applicable IRS regulation.  The Court explains that whether billions of dollars in tax subsidies are to be available to insurance purchased on “Federal Exchanges” is a question of “deep economic and political significance,” central to the scheme of the Affordable Care Act, such that had Congress intended to assign resolution of that question to the IRS “it surely would have done so expressly,” especially since the IRS “has no expertise in crafting health insurance policy of this sort.”  Eschewing any deference to the IRS interpretation, the Court assumed for itself “the task to determine the correct reading of” the statutory ambiguity.

King v. Burwell is the rare case in which the Court accords a federal agency zero deference in resolving statutory ambiguity under Chevron.  Notably, the Court left open how appellate courts should determine whether other statutory ambiguities similarly deserve less or no deference to agency interpretations.  The Court, perhaps, offered a hint by citing to its much quoted dicta in its 2014 decision in Utility Air Regulatory Group v. EPA that the Court “typically greet[s] … with a measure of skepticism, … agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy.”  Many commenters have opined, even before King v. Burwell, as to whether this dicta has implications for judicial review of the Clean Power Plan, which, it may be argued, has “deep economic and political significance” comparable to the Affordable Care Act.  However, EPA surely has longer experience, greater expertise and wider latitude in crafting policy under the Clean Air Act than the IRS has in crafting health insurance policy.  Given the Court’s strong precedent establishing that greenhouse gases are expressly within the scope of the Clean Air Act, appellate courts might distinguish King v. Burwell and apply traditional Chevron deference to the final Clean Power Plan.

Michigan v. EPA applies Chevron to EPA regulations under a different part of the Clean Air Act.  In this case, the Court reviewed EPA’s threshold determination, under Section 112 of the Clean Air Act, that it was “appropriate and necessary,” without regard to costs, to regulate hazardous air pollutants, such as mercury, from power plants.  The specific mercury emission limits imposed on categories of power plants were established during subsequent phases of EPA’s rulemaking under Section 112 based on EPA’s explicit consideration of costs.  Justice Scalia’s opinion for a 5-4 majority strikes down EPA’s determination that it could find regulation of hazardous air pollutants from power plants to be “appropriate and necessary” without consideration of costs.  The Court states it was applying the traditional Chevron framework, under which it would normally defer to EPA’s choice among reasonable interpretations of the  ambiguous and “capacious” statutory test requiring an EPA finding that regulation be “appropriate and necessary.”  But, the Court finds EPA’s interpretation of this test, as not requiring any consideration of costs, to “have strayed far beyond … the bounds of reasonable [statutory] interpretation.”  Michigan v. EPA may be the first case in which the Court has applied Chevron to find that EPA adopted an entirely unreasonable resolution of statutory ambiguity in its Clean Air Act regulations.

Justice Kagan’s dissent in Michigan v. EPA faults the Court for failing to give due deference under Chevron to EPA’s decision as to when in its regulatory process it gives consideration to the costs involved in regulating hazardous air pollutants from power plants.  While all nine Justices seem to agree that EPA must consider costs in its Section 112 rulemakings, and seem also to agree that EPA gave consideration to costs in later stages of its rulemaking, the dissent criticized the majority’s “micromanagement of EPA’s rulemaking,” emphasizing that EPA reasonably determined “that it was ‘appropriate’ to decline to analyze costs at a single stage of a regulatory proceeding otherwise imbued with cost concerns.”

It is difficult to predict whether, based upon King v. Burwell and Michigan v. EPA, appellate courts might narrow the deference accorded to EPA’s resolution of statutory ambiguities under Section 111(d).  Those ambiguities arise in a quite different context than those considered by the Court.  As one example, critics of the Clean Power Plan have argued that two different versions of Section 111(d) appear to have been signed into law, one of which critics claim should prohibit EPA from issuing regulations under Section 111(d) for sources of pollution already covered by other EPA regulations, such as hazardous pollutant regulation under Section 112.  EPA sharply disagrees with its critics and defends its interpretation of which statutory version applies and the scope of permissible regulation under either statutory text.  A related issue under the statutory version pressed by critics concerns whether the status of the hazardous air regulations under Section 112, during remand after Michigan v. EPA, should alter EPA’s analysis the potentially competing statutory provisions.  It remains to be seen what kind ofChevron deference courts will give to EPA’s reasoned interpretations of the different versions of Section 111(d).

Critics also point to purported ambiguity in Section 111(d) as to whether EPA may prescribe carbon dioxide performance standards based on so-called “outside the fence” measures, and whether those standards may be determined on an average state-wide basis, rather than for individual sources.  EPA’s resolutions of these and related programmatic issues have occasioned widespread commentary and may feature prominently in future court challenges to the Clean Power Plan.  Again, it remains to be seen whether the Court’s recent cases will influence the extent of Chevron deference given by appellate courts to EPA’s well-considered interpretation of its authority to craft the details of the Clean Power Plan under Section 111(d).

On one point, there should be little doubt.  Section 111(d) expressly directs EPA to consider costs in establishing performance standards reflecting “the best system of emission reduction.”  Unlike in Michigan v. EPA, EPA expressly addressed “costs” as a factor considered in its proposed rules.  EPA is expected to elaborate upon the costs (and benefits) of regulation in its final Clean Power Plan.  Michigan v. EPA should, therefore, be inapposite with respect to any possible challenges of the manner in which the Clean Power Plan addresses costs.

The applicability of Chevron deference is, of course, only one among many legal issues that could face the U.S. Courts of Appeals and, ultimately, the Supreme Court, if and when they review the Clean Power Plan.  The precise legal issues to be framed for the courts and the timing of litigation will not begin to come into focus until after the Obama Administration issues the final Clean Power Plan later this summer.  And, Congress could step in and alter the course of judicial review.  Stay tuned.

© 2015 Covington & Burling LLP

Draft EPA Study Finds Fracking Has Not Led to Widespread Drinking Water Contamination

The EPA released a draft of its study, U.S. EPA Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources (External Review Draft), EPA, Washington, DC, EPA/600/R-15/047, 2015, assessing the impact of hydraulic fracturing (fracking) on drinking water in early June (the draft Assessment). According to the EPA’s press release, the study finds that “hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources,” but “identifies important vulnerabilities.” Fracking opponents, however, argue that the study vindicates their position.

The draft Assessment evaluated the potential impact of fracking at each stage of the Hydraulic Fracturing Water Cycle: water acquisition, chemical mixing, well injection, flowback, and wastewater treatment and waste disposal. The study’s objective was to “assess the potential impacts of hydraulic fracturing on drinking water resources, if any, and to identify the driving factors that may affect the severity and frequency of such impacts.” The draft Assessment “provides a review and synthesis of available scientific literature and data to assess the potential for hydraulic fracturing for oil and gas to impact the quality or quantity of drinking water resources, and identifies factors affecting the frequency or severity of any potential impacts.”

According to Dr. Thomas A. Burke, EPA’s Science Advisor and Deputy Assistant Administrator of EPA’s Office of Research and Development, the draft Assessment “is the most complete compilation of scientific data to date, including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports.”

[H]ydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources . . .

Supporters of fracking, such as American Petroleum Institute Upstream Group Director Erik Milito,say that the evidence gathered by EPA confirms that “[h]ydraulic fracturing is being done safely under the strong environmental stewardship of state regulators and industry best practices.” Meanwhile, opponents note that the EPA’s review found specific instances where well integrity and wastewater management related to hydraulic fracturing activities impacted drinking water resources. “The EPA’s water quality study confirms what millions of Americans already know – that dirty oil and gas fracking contaminates drinking water,” said Sierra Club Executive Director Michael Brune.

Numerous peer-reviewed EPA scientific reports were also released on the same day as the draft Assessment. Those reports were a part of EPA’s overall hydraulic fracturing drinking water study and contributed to the findings outlined in the draft assessment. More than 20 peer-reviewed articles or reports were published as part of this EPA’s draft Assessment.

The draft Assessment will be finalized after review by the Science Advisory Board (SAB) and public review and comment. The Federal Register Notice with information on the SAB review and how to comment on the draft assessment can be found here.

© 2015 Schiff Hardin LLP

EPA and U.S. Army Corps of Engineers Approve New Definition of “Waters of the United States”

The U.S. EPA and the U.S. Army Corps of Engineers announced today that they have jointly approved a new definition of the key term “waters of the United States,” a term that defines the limits of federal jurisdiction over surface waters under the Clean Water Act and several other federal laws. The rule containing the new definition will become effective 60 days after its publication in the Federal Register, which typically occurs within a week or so of the agencies’ public announcement of a new rule.

The agencies announced the new rule after several years of wrestling with this regulatory definition, which establishes the scope of federal wetlands permitting authority, federal discharge limitations, and other important programs. EPA and the Corps assert in the preamble to the rule that this new definition is “narrower” than the existing regulatory definition, and that “fewer waters will be defined as ‘waters of the United States'” than under existing regulations. In the debate leading up to today’s announcement, however, a variety of affected parties – landowners, developers, farmers, manufacturers and others – have argued that the agencies’ effort to redefine “waters of the United States” will lead to a broadening of federal jurisdiction.

Several features of the new rule are of particular importance to interested parties in California and other western arid states:

  • All “tributaries” are jurisdictional (i.e., subject to federal regulation) “by rule” if they have an ordinary high water mark and a “bed and bank” and if those features can be shown to be hydrologically linked to navigable waters or interstate waters. The “by rule” designation means that it will no longer be necessary for the agencies to establish that a tributary has a significant link to a navigable water, regardless of how attenuated that connection might be. There are no threshold requirements for volume of water nor for frequency of flow. By way of example, it appears that a “tributary” that is miles removed from the closest river, lake or ocean, with only a trickle of flow that occurs once every 10 years or more, will nevertheless be deemed jurisdictional as long as there is physical evidence of a “bed and bank” and an ordinary high water mark.

  • Certain “adjacent wetlands” are now also jurisdictional “by rule” if, for example, they are located in a 100-year floodplain and are within 1,500 feet of a “traditional navigable water” (e.g., a river, lake, or ocean) or of a tributary.

  • Case-by-case determinations of whether an aquatic feature has a “significant nexus” to a navigable water – thereby rendering it jurisdictional – will continue to be made for a variety of different waterbody types, including “western vernal pools in California” and any surface water feature within the 100-year floodplain or within 4,000 feet of a navigable water or covered tributary that is not already defined as jurisdictional by the “by rule” standard. The term “significant nexus” is given some definition in the final rule by reference to a familiar list of functional ecosystem values served by wetlands and other water bodies.

The final rule does call out a narrow class of “waters” that are determined not to be jurisdictional as “waters of the United States,” including, but not limited to,

  • certain types of ditches;

  • artificially irrigated areas that would revert to dry land should the irrigation cease;

  • erosional features, including gullies, rills, non-wetland swales;

  • groundwater, including groundwater drained through subsurface drainage systems;

  • stormwater control features

  • swimming pools, ornamental waters created in dry land, “puddles.”

Added to this list is a statement in the preamble to the final rule that it does not “regulate shallow subsurface connections nor any type of groundwater.”

Importantly, this rule applies only to new jurisdictional determinations that are required after the rule’s “effective date.” The agencies will not reopen existing approved jurisdictional determinations unless the usual conditions apply for a revision of the determination.

Implementation of this rule will be far more complicated and detail-driven than what can possibly be captured here in this very brief synopsis. It is hard to calculate its impact on the regulated community, especially in places like California where the Corps and EPA have traditionally taken a very aggressive approach to their claims of jurisdiction. At the very least, this rule will bolster those claims by giving the agencies a formal regulation to rely upon. Litigation challenging this rule has been threatened for months, and certain Members of Congress have vowed to do what they can to take legislative action.

© 2010-2015 Allen Matkins Leck Gamble Mallory & Natsis LLP

EPA and U.S. Army Corps of Engineers Approve New Definition of "Waters of the United States"

The U.S. EPA and the U.S. Army Corps of Engineers announced today that they have jointly approved a new definition of the key term “waters of the United States,” a term that defines the limits of federal jurisdiction over surface waters under the Clean Water Act and several other federal laws. The rule containing the new definition will become effective 60 days after its publication in the Federal Register, which typically occurs within a week or so of the agencies’ public announcement of a new rule.

The agencies announced the new rule after several years of wrestling with this regulatory definition, which establishes the scope of federal wetlands permitting authority, federal discharge limitations, and other important programs. EPA and the Corps assert in the preamble to the rule that this new definition is “narrower” than the existing regulatory definition, and that “fewer waters will be defined as ‘waters of the United States'” than under existing regulations. In the debate leading up to today’s announcement, however, a variety of affected parties – landowners, developers, farmers, manufacturers and others – have argued that the agencies’ effort to redefine “waters of the United States” will lead to a broadening of federal jurisdiction.

Several features of the new rule are of particular importance to interested parties in California and other western arid states:

  • All “tributaries” are jurisdictional (i.e., subject to federal regulation) “by rule” if they have an ordinary high water mark and a “bed and bank” and if those features can be shown to be hydrologically linked to navigable waters or interstate waters. The “by rule” designation means that it will no longer be necessary for the agencies to establish that a tributary has a significant link to a navigable water, regardless of how attenuated that connection might be. There are no threshold requirements for volume of water nor for frequency of flow. By way of example, it appears that a “tributary” that is miles removed from the closest river, lake or ocean, with only a trickle of flow that occurs once every 10 years or more, will nevertheless be deemed jurisdictional as long as there is physical evidence of a “bed and bank” and an ordinary high water mark.

  • Certain “adjacent wetlands” are now also jurisdictional “by rule” if, for example, they are located in a 100-year floodplain and are within 1,500 feet of a “traditional navigable water” (e.g., a river, lake, or ocean) or of a tributary.

  • Case-by-case determinations of whether an aquatic feature has a “significant nexus” to a navigable water – thereby rendering it jurisdictional – will continue to be made for a variety of different waterbody types, including “western vernal pools in California” and any surface water feature within the 100-year floodplain or within 4,000 feet of a navigable water or covered tributary that is not already defined as jurisdictional by the “by rule” standard. The term “significant nexus” is given some definition in the final rule by reference to a familiar list of functional ecosystem values served by wetlands and other water bodies.

The final rule does call out a narrow class of “waters” that are determined not to be jurisdictional as “waters of the United States,” including, but not limited to,

  • certain types of ditches;

  • artificially irrigated areas that would revert to dry land should the irrigation cease;

  • erosional features, including gullies, rills, non-wetland swales;

  • groundwater, including groundwater drained through subsurface drainage systems;

  • stormwater control features

  • swimming pools, ornamental waters created in dry land, “puddles.”

Added to this list is a statement in the preamble to the final rule that it does not “regulate shallow subsurface connections nor any type of groundwater.”

Importantly, this rule applies only to new jurisdictional determinations that are required after the rule’s “effective date.” The agencies will not reopen existing approved jurisdictional determinations unless the usual conditions apply for a revision of the determination.

Implementation of this rule will be far more complicated and detail-driven than what can possibly be captured here in this very brief synopsis. It is hard to calculate its impact on the regulated community, especially in places like California where the Corps and EPA have traditionally taken a very aggressive approach to their claims of jurisdiction. At the very least, this rule will bolster those claims by giving the agencies a formal regulation to rely upon. Litigation challenging this rule has been threatened for months, and certain Members of Congress have vowed to do what they can to take legislative action.

© 2010-2015 Allen Matkins Leck Gamble Mallory & Natsis LLP

Source Aggregation: Recent Court Decision Addresses Whether Certain Facilities are “Adjacent”

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On February 23, 2015, the U.S. District Court for the Middle District of Pennsylvania issued a decision finding eight compressor stations to be “separate sources” under the Clean Air Act and State of Pennsylvania regulations.  Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., 4:11-CV-1360, 2015 WL 769757 (M.D. Pa. Feb. 23, 2015).  This case addresses a concept known as “source aggregation,” also referred to as “single source” or “co-location.”  This is the concept where a regulatory agency views multiple facilities or activities as a “single source,” air emissions from which must be aggregated to determine whether certain permitting thresholds are met, such as the Clean Air Act’s Title V or New Source Review major source programs.

As discussed in detail in the following sections, there are many EPA determinations, advisory letters and memoranda discussing whether certain facilities are “adjacent” under the source aggregation test, but there have not been many court decisions. Thus, this District Court decision in Citizens for Pennsylvania’s Future is notable because it is one of only a few cases that provide guidance on this issue. In addition, the Court decision itself is important in that there are now two federal court decisions holding that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.

With these insights, read on to see why facility operators need to be aware of how states in which they operate interpret the “adjacency” element of the source aggregation test and why possibilities for controversy remain.

Underlying Facts in Citizens for Pennsylvania’s Future

In Citizens for Pennsylvania‘s Future, the operator of eight compressor stations, Ultra Resources, Inc., obtained eight separate minor source permits for each of its compressor stations. The compressor stations were scattered across two counties.  The shortest linear distance between any two of the compressor stations was more than ¾ mile apart, and the furthest linear distance was nearly 4½ miles apart.  If lines were drawn between all of the compressors, the total area within the lines would be less than 5 square miles.

Each compressor station was connected to a central metering and regulating station, but the compressor stations were not connected to each other.  While none of the compressor stations individually had the capacity to emit more than 100 tons per year (tpy) of nitrogen oxide (NOx), collectively the eight compressor stations could potentially emit more than 100 tpy of NOx.  The applicable major source permitting threshold for NOx discussed in Citizens for Pennsylvania’s Future was 100 tpy.

An environmental group, Citizens for Pennsylvania’s Future (known as “PennFuture”) filed a citizen suit against Ultra Resources, claiming that the eight compressor stations should be considered a single source of air emissions; and therefore, emissions from the eight stations should be aggregated.  PennFuture argued that because the aggregated NOx emissions would exceed major source thresholds, Ultra Resources was in violation of the Clean Air Act and certain Pennsylvania regulations for not having obtained a major source permit under the nonattainment New Source Review program.

Ultra Resources filed a Motion for Summary Judgment, arguing that the compressor stations were separate sources and that it properly obtained separate minor source permits for each of the compressor stations.  The February 23, 2015 Court decision was issued in response to Ultra Resources’ Motion for Summary Judgment.  The contested issue addressed by the Court decision was whether the eight compressor stations were properly considered to be separate sources or whether they should be deemed a single source.

Source Aggregation Test and the “Adjacent” Element

The federal New Source Review program defines a single source using a three-part test, under which facilities are a single source if they: (1) are under common control; (2) have the same two-digit, i.e., major industry grouping, SIC code; and (3) are co-located, i.e., they are located on adjacent or contiguous properties. 40 C.F.R. § 51.166(b)(5) and (6) (defining a “stationary source” under the New Source Review program); 40 C.F.R. § 52.21 (b)(5) and (6) (defining a “stationary source” under the New Source Review program, as applied to delegated state programs).  Each element must exist to be deemed a single source.

The State of Pennsylvania adopted a similar test in its regulation, defining a “facility” as “[a]n air contamination source or a combination of air contamination sources located on one or more contiguous or adjacent properties and which is owned or operated by the same person under common control.”  25 Pa. Code § 121.1.

In Citizens for Pennsylvania’s Future, the Court explained that it was undisputed that the compressor stations were under common control and that they were not located on contiguous properties.  Because Pennsylvania’s regulatory definition of a source, quoted above, does not contain the SIC code element, that element was not discussed in the case.  Thus, the Court’s inquiry focused on whether the compressor stations were “adjacent.”

The term “adjacent” is not expressly defined in the Clean Air Act or in the U.S. Environmental Protection Agency (EPA) regulations.  Over the many years of Clean Air Act implementation, EPA has interpreted the term to entail a review of not only whether facilities are physically proximate, but also whether the facilities are functionally interrelated.

EPA’s assessment of whether facilities are functionally interrelated has been controversial.  Some have touted the consideration of functional interrelatedness as useful to assess whether the subject facilities approximate the “common sense notion of a plant,” which EPA has described as a fundamental feature of a single source.  See EPA, Final Rule, Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans, 45 Fed. Reg. 52676, 52695 (Aug. 7, 1980).  Others have opposed the consideration of functional interrelatedness as inserting too much subjectivity to the source aggregation test and as varying from the plain meaning of the language used in the regulatory definition of a source.

While various EPA guidance materials discuss whether certain facilities are “adjacent,” such as EPA decisions, opinions and memoranda, and while some states have developed their own such guidance materials, there have not been many court decisions.  Thus, Citizens for Pennsylvania’s Future is one of the few court cases addressing this controversial topic.

District Court’s Analysis of Whether the Compressor Stations were “Adjacent”

The Citizens for Pennsylvania’s Future Court reviewed several resources to guide its analysis of whether the eight compressor stations were “adjacent.”  The Court discussed the 2012 U.S. Court of Appeals for the Sixth Circuit decision in Summit Petroleum Corp. v. EPA, 690 F.3d 733, which directed EPA to apply the plain meaning of the term “adjacent” as determinative.  Summit Petroleum involved a gas sweetening plant and approximately 100 sour gas wells scattered across 43 square miles and ranging from 500 feet to 8 miles in distance from the sweetening plant.  EPA had concluded the sweetening plant and gas wells were a single source, based on EPA’s consideration of the functional interrelatedness of the plant and wells.

On appeal filed by the operator, the Sixth Circuit held that EPA’s consideration of functional interrelatedness was improper and, under the Clean Air Act’s definition of a source, EPA must determine whether the sweetening plant and gas wells are “close to,” “next to,” “adjoining,” or “physically proximate.”  The District Court in Citizens for Pennsylvania’s Future acknowledged that the Sixth Circuit decision in Summit Petroleum was non-binding; however, the District Court ultimately followed the Sixth Circuit’s conclusion that the plain meaning of the term adjacent is determinative in the source aggregation analysis.

The District Court also reviewed relevant Pennsylvania decisions and guidance interpreting Pennsylvania’s definition of a source.  Unlike most other states in the U.S., Pennsylvania has adopted guidance to help address the question of what is adjacent.  The Pennsylvania guidance reviews the dictionary definition of “adjacent” and provides that the plain meaning of the term “adjacent” should be the dispositive factor when determining whether sources are located on adjacent properties.  However, the guidance also states that functional interrelatedness may be considered when performing a source aggregation analysis. The guidance further provides that properties located within ¼ mile are considered adjacent.  For properties located further than ¼ mile apart, a case-by-case review must be performed.  Thus, the guidance does not foreclose the possibility that facilities located further than ¼ mile apart may be deemed adjacent based on a case-by-case consideration of functional interrelatedness.

Following its review of Summit Petroleum and the Pennsylvania guidance, the District Court applied the plain meaning of “adjacent” and concluded that the Ultra Resources’ compressor stations were not sufficiently “close to” or “near” enough to each other to be considered “adjacent.”  Although the Court held that the plain meaning of “adjacent” should be determinative, the Court noted that, given the Pennsylvania guidance, functional interrelatedness could be considered on a case-by-case basis.

Even looking at functional interrelatedness, the Court concluded that because the compressor stations were not connected to each other and they operated independently of one another, and despite the fact that each station was connected to a metering and regulating station for ultimate deposit into a transmission pipeline, the compressor stations were not functionally interrelated anyhow. Therefore, the Court granted Ultra Resources’ Motion for Summary Judgment concluding that the compressor stations were not adjacent and, as such, were not a single source and were properly permitted as separate sources.

Import of Citizens for Pennsylvania’s Future

The recent District Court decision in Citizens for Pennsylvania’s Future is noteworthy as one of the few court cases that offers guidance on this controversial topic.  The outcome of the Court decision itself is also significant because there are now two federal court decisions that reached similar conclusions that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.  Though, unlike the Sixth Circuit’s decision in Summit Petroleum, there was a Pennsylvania policy which was relevant in the District Court’s analysis of adjacency in Citizens for Pennsylvania’s Future and the District Court acknowledged that pursuant to the Pennsylvania policy the consideration of functional interrelatedness may be appropriate on a case-by-case basis.

Thus, Citizens for Pennsylvania’s Future highlights that facility operators need to be aware of how states in which they operate have interpreted the “adjacency” inquiry of the source aggregation test and be alert to any future guidance and court decisions on this controversial topic.

Source Aggregation: Recent Court Decision Addresses Whether Certain Facilities are "Adjacent"

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On February 23, 2015, the U.S. District Court for the Middle District of Pennsylvania issued a decision finding eight compressor stations to be “separate sources” under the Clean Air Act and State of Pennsylvania regulations.  Citizens for Pennsylvania’s Future v. Ultra Resources, Inc., 4:11-CV-1360, 2015 WL 769757 (M.D. Pa. Feb. 23, 2015).  This case addresses a concept known as “source aggregation,” also referred to as “single source” or “co-location.”  This is the concept where a regulatory agency views multiple facilities or activities as a “single source,” air emissions from which must be aggregated to determine whether certain permitting thresholds are met, such as the Clean Air Act’s Title V or New Source Review major source programs.

As discussed in detail in the following sections, there are many EPA determinations, advisory letters and memoranda discussing whether certain facilities are “adjacent” under the source aggregation test, but there have not been many court decisions. Thus, this District Court decision in Citizens for Pennsylvania’s Future is notable because it is one of only a few cases that provide guidance on this issue. In addition, the Court decision itself is important in that there are now two federal court decisions holding that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.

With these insights, read on to see why facility operators need to be aware of how states in which they operate interpret the “adjacency” element of the source aggregation test and why possibilities for controversy remain.

Underlying Facts in Citizens for Pennsylvania’s Future

In Citizens for Pennsylvania‘s Future, the operator of eight compressor stations, Ultra Resources, Inc., obtained eight separate minor source permits for each of its compressor stations. The compressor stations were scattered across two counties.  The shortest linear distance between any two of the compressor stations was more than ¾ mile apart, and the furthest linear distance was nearly 4½ miles apart.  If lines were drawn between all of the compressors, the total area within the lines would be less than 5 square miles.

Each compressor station was connected to a central metering and regulating station, but the compressor stations were not connected to each other.  While none of the compressor stations individually had the capacity to emit more than 100 tons per year (tpy) of nitrogen oxide (NOx), collectively the eight compressor stations could potentially emit more than 100 tpy of NOx.  The applicable major source permitting threshold for NOx discussed in Citizens for Pennsylvania’s Future was 100 tpy.

An environmental group, Citizens for Pennsylvania’s Future (known as “PennFuture”) filed a citizen suit against Ultra Resources, claiming that the eight compressor stations should be considered a single source of air emissions; and therefore, emissions from the eight stations should be aggregated.  PennFuture argued that because the aggregated NOx emissions would exceed major source thresholds, Ultra Resources was in violation of the Clean Air Act and certain Pennsylvania regulations for not having obtained a major source permit under the nonattainment New Source Review program.

Ultra Resources filed a Motion for Summary Judgment, arguing that the compressor stations were separate sources and that it properly obtained separate minor source permits for each of the compressor stations.  The February 23, 2015 Court decision was issued in response to Ultra Resources’ Motion for Summary Judgment.  The contested issue addressed by the Court decision was whether the eight compressor stations were properly considered to be separate sources or whether they should be deemed a single source.

Source Aggregation Test and the “Adjacent” Element

The federal New Source Review program defines a single source using a three-part test, under which facilities are a single source if they: (1) are under common control; (2) have the same two-digit, i.e., major industry grouping, SIC code; and (3) are co-located, i.e., they are located on adjacent or contiguous properties. 40 C.F.R. § 51.166(b)(5) and (6) (defining a “stationary source” under the New Source Review program); 40 C.F.R. § 52.21 (b)(5) and (6) (defining a “stationary source” under the New Source Review program, as applied to delegated state programs).  Each element must exist to be deemed a single source.

The State of Pennsylvania adopted a similar test in its regulation, defining a “facility” as “[a]n air contamination source or a combination of air contamination sources located on one or more contiguous or adjacent properties and which is owned or operated by the same person under common control.”  25 Pa. Code § 121.1.

In Citizens for Pennsylvania’s Future, the Court explained that it was undisputed that the compressor stations were under common control and that they were not located on contiguous properties.  Because Pennsylvania’s regulatory definition of a source, quoted above, does not contain the SIC code element, that element was not discussed in the case.  Thus, the Court’s inquiry focused on whether the compressor stations were “adjacent.”

The term “adjacent” is not expressly defined in the Clean Air Act or in the U.S. Environmental Protection Agency (EPA) regulations.  Over the many years of Clean Air Act implementation, EPA has interpreted the term to entail a review of not only whether facilities are physically proximate, but also whether the facilities are functionally interrelated.

EPA’s assessment of whether facilities are functionally interrelated has been controversial.  Some have touted the consideration of functional interrelatedness as useful to assess whether the subject facilities approximate the “common sense notion of a plant,” which EPA has described as a fundamental feature of a single source.  See EPA, Final Rule, Requirements for Preparation, Adoption, and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans, 45 Fed. Reg. 52676, 52695 (Aug. 7, 1980).  Others have opposed the consideration of functional interrelatedness as inserting too much subjectivity to the source aggregation test and as varying from the plain meaning of the language used in the regulatory definition of a source.

While various EPA guidance materials discuss whether certain facilities are “adjacent,” such as EPA decisions, opinions and memoranda, and while some states have developed their own such guidance materials, there have not been many court decisions.  Thus, Citizens for Pennsylvania’s Future is one of the few court cases addressing this controversial topic.

District Court’s Analysis of Whether the Compressor Stations were “Adjacent”

The Citizens for Pennsylvania’s Future Court reviewed several resources to guide its analysis of whether the eight compressor stations were “adjacent.”  The Court discussed the 2012 U.S. Court of Appeals for the Sixth Circuit decision in Summit Petroleum Corp. v. EPA, 690 F.3d 733, which directed EPA to apply the plain meaning of the term “adjacent” as determinative.  Summit Petroleum involved a gas sweetening plant and approximately 100 sour gas wells scattered across 43 square miles and ranging from 500 feet to 8 miles in distance from the sweetening plant.  EPA had concluded the sweetening plant and gas wells were a single source, based on EPA’s consideration of the functional interrelatedness of the plant and wells.

On appeal filed by the operator, the Sixth Circuit held that EPA’s consideration of functional interrelatedness was improper and, under the Clean Air Act’s definition of a source, EPA must determine whether the sweetening plant and gas wells are “close to,” “next to,” “adjoining,” or “physically proximate.”  The District Court in Citizens for Pennsylvania’s Future acknowledged that the Sixth Circuit decision in Summit Petroleum was non-binding; however, the District Court ultimately followed the Sixth Circuit’s conclusion that the plain meaning of the term adjacent is determinative in the source aggregation analysis.

The District Court also reviewed relevant Pennsylvania decisions and guidance interpreting Pennsylvania’s definition of a source.  Unlike most other states in the U.S., Pennsylvania has adopted guidance to help address the question of what is adjacent.  The Pennsylvania guidance reviews the dictionary definition of “adjacent” and provides that the plain meaning of the term “adjacent” should be the dispositive factor when determining whether sources are located on adjacent properties.  However, the guidance also states that functional interrelatedness may be considered when performing a source aggregation analysis. The guidance further provides that properties located within ¼ mile are considered adjacent.  For properties located further than ¼ mile apart, a case-by-case review must be performed.  Thus, the guidance does not foreclose the possibility that facilities located further than ¼ mile apart may be deemed adjacent based on a case-by-case consideration of functional interrelatedness.

Following its review of Summit Petroleum and the Pennsylvania guidance, the District Court applied the plain meaning of “adjacent” and concluded that the Ultra Resources’ compressor stations were not sufficiently “close to” or “near” enough to each other to be considered “adjacent.”  Although the Court held that the plain meaning of “adjacent” should be determinative, the Court noted that, given the Pennsylvania guidance, functional interrelatedness could be considered on a case-by-case basis.

Even looking at functional interrelatedness, the Court concluded that because the compressor stations were not connected to each other and they operated independently of one another, and despite the fact that each station was connected to a metering and regulating station for ultimate deposit into a transmission pipeline, the compressor stations were not functionally interrelated anyhow. Therefore, the Court granted Ultra Resources’ Motion for Summary Judgment concluding that the compressor stations were not adjacent and, as such, were not a single source and were properly permitted as separate sources.

Import of Citizens for Pennsylvania’s Future

The recent District Court decision in Citizens for Pennsylvania’s Future is noteworthy as one of the few court cases that offers guidance on this controversial topic.  The outcome of the Court decision itself is also significant because there are now two federal court decisions that reached similar conclusions that the plain meaning of the term “adjacent” is determinative in the inquiry of whether multiple facilities are co-located under the source aggregation test.  Though, unlike the Sixth Circuit’s decision in Summit Petroleum, there was a Pennsylvania policy which was relevant in the District Court’s analysis of adjacency in Citizens for Pennsylvania’s Future and the District Court acknowledged that pursuant to the Pennsylvania policy the consideration of functional interrelatedness may be appropriate on a case-by-case basis.

Thus, Citizens for Pennsylvania’s Future highlights that facility operators need to be aware of how states in which they operate have interpreted the “adjacency” inquiry of the source aggregation test and be alert to any future guidance and court decisions on this controversial topic.

EPA Expands the Definition of Solid Waste Rule

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The United States Environmental Protection Agency (EPA) is cracking down on alleged sham recycling with the issuance of a final “Definition of Solid Waste” Rule. The rule aims to reestablish hazardous waste restrictions eased by the Bush administration in 2008. Rulemaking on the Definition of Solid Waste, Pre-Publication version (Dec. 9, 2014) (to be codified at 40 CFR Parts 260 and 261) (the Rule). The 2008 rule exempted hazardous secondary materials that would be reclaimed from the definition of solid waste. Doing so, according to EPA, effectively de-regulated 1.5 million tons of materials, such as arsenic, benzene, trichloroethylene, lead and mercury. Environmental groups and EPA claim that the deregulation resulted in third-party recyclers over-accumulating materials, increasing the risk of accidents and environmental releases. Consequently, the Rule redefines certain materials as hazardous waste and implements stricter controls on facilities and processes.

The new Rule has the potential to affect numerous industries because it changes what may be recycled, and how, without being subject to hazardous waste requirements. EPA has grouped the regulatory changes into six major categories, outlined below.

1. Exclusion for hazardous secondary materials that are legitimately reclaimed under the control of the generator. The Rule retains the exclusion from solid waste for companies who recycle the waste they generate.

2. Verified Recycler Exclusion. The Rule will also replace the transfer-based exclusion with an exclusion for verified recyclers reclaiming hazardous materials. A more restrictive framework for generators will result, as the responsibility shifts to the generator to ensure that it is sending hazardous secondary materials only to a recycler or intermediate facility that has obtained the proper RCRA permit or solid waste variance. The solid waste variance procedure replaces a “reasonable efforts” environmental audit process in the 2008 Rule and requires EPA or state involvement before recycling operations begin.

3. Remanufacturing Exclusion. The Rule excludes from the definition of hazardous waste certain higher-value hazardous spent solvents that are remanufactured into commercial-grade products. This new exclusion, according to EPA, will encourage sustainable materials management and reduce the environmental effects of raw materials use. Facilities may submit a rulemaking petition to request the addition of other higher-value hazardous secondary materials to the remanufacturing exclusion.

4. Prohibition of Sham Recycling and Revisions to the Definition of Legitimacy. The Rule tightens the standards required to show “legitimate recycling,” now mandating the following:

  1. The hazardous secondary material must provide a useful contribution to the recycling process or product;

  2. The recycling process must produce a valuable product or intermediate;

  3. The hazardous secondary material must be managed as a valuable commodity; and

  4. The recycled product must be comparable to a legitimate product or intermediate.

The Rule confirmed the exclusion from solid waste for commodity-grade recycled products, such as scrap metal, and in-process recycling.

5. Revisions to Solid Waste Variances and Non-Waste Determinations. Companies may seek a variance to conduct recycling or reclamation, or they may apply for a non-waste determination on a particular waste stream or product.

6. Deferral on Revisions to Pre-2008 Recycling Exclusions. The new Rule declines to supersede pre-2008 recycling exclusions and exemptions. Thus, any existing facilities operating under a pre-2008 solid waste exclusion determination are not subject to a re-determination unless the state chooses to revisit the regulatory determination. However, all facilities will have to comply with the recordkeeping requirements for speculative accumulation and legitimate recycling.

Although the Rule will become effective six months after publication, most states (those that are authorized to enforce RCRA) must individually adopt the Rule before it becomes effective in those States. Such states will have until July 1, 2016 to adopt the new federal rules, though a one-year extension may be available if a statutory amendment is needed. Compliance will likely require a significant investment in proactive planning and new protocols.

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United States Supreme Court Round-Up: Key Opinions from 2013 to 2014 and Upcoming High-Profile Business Disputes

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The 2013–2014 term of the United States Supreme Court resulted in a wide range of decisions of importance to business. In this article, we highlight some of the key opinions and explore their likely impacts. We also preview a few of the high-profile business disputes the Supreme Court has agreed to hear next term.

Key Business Cases from the 2013–2014 Term

American Chemistry Council v. Environmental Protection Agency: Holding: The Environmental Protection Agency (EPA) reasonably interpreted the Clean Air Act to require sources that would need permits based on their emission of chemical pollutants to comply with “best available control technology” for greenhouse gases. Effect: The decision reinforces the Supreme Court’s previous recognition that the EPA has the power to regulate greenhouse gases as pollutants. However, portions of the decision strongly cautioned the EPA against overreach, stating that the agency may not “bring about an enormous and transformative expansion in [its] regulatory authority without clear congressional authorization.” These comments suggest that the Supreme Court may take a hard line when the Obama Administration’s other climate regulations eventually go to court.

Daimler AG v. Bauman: Holding: A foreign company doing business in a state cannot be sued in that state for injuries allegedly caused by conduct that took place entirely outside of the United States. Effect: Daimler makes it much harder for plaintiffs to establish general jurisdiction over foreign entities. The opinion re-characterizes general jurisdiction as requiring the defendant to be “at home” in the state, a circumstance that the Supreme Court suggested will generally be limited to the places where the defendant is incorporated or where it has its principal place of business. Moreover, the fact that a domestic subsidiary whose activities are imputed to the foreign parent may be “at home” in the state will not make the foreign parent “at home” in that locale for purposes of general jurisdiction.

Halliburton v. Erica P. John Fund, Inc.: Holding: Plaintiffs in private securities fraud actions must prove that they relied on the defendants’ misrepresentations in choosing to buy stock. Basic v. Levinson’s holding that plaintiffs can satisfy this reliance requirement by invoking a presumption that the price of stock as traded in an efficient market reflects all public, material information, including material misstatements, remains viable. However, after Halliburton, defendants can defeat the presumption at the class certification stage by proving that the misrepresentation did not in fact affect the stock price. Effect: While investors will continue to pursue class actions following large dips in stock prices, the Halliburton decision helps to level the playing field by providing defendants a mechanism to stop such suits at the class certification stage.

Lawson v. FMR LLC: Holding: Employees of privately held contractors or subcontractors of a public company are protected by the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 (SOX). Effect: Following Lawson, there will likely be an increase in SOX litigation against public and non-public companies. Because many of the issues concerning the scope and meaning of SOX have yet to be resolved, lower courts will continue to wrestle with defining the parameters of the law. Questions left unanswered byLawson include whether the whistleblower’s accusation must be related to work he or she performed for the company and whether the contract with the public company must have some relation to public accounting or securities compliance.

Chadbourne & Park LLP v. Troice: Holding: The Securities Litigation Uniform Standards Act of 1988 (SLUSA) does not preclude state-law class actions based on false representations that the uncovered securities that plaintiffs were purchasing were backed by covered securities. Effect: SLUSA bars the bringing of securities class actions “based upon statutory or common law of any state” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with a purchase of sale of covered securities.” The statute defines “covered securities” to include only securities traded on a national securities exchange or those issued by investment companies.

U.S. v. Quality Stores: Holding: Severance payments to employees who are involuntarily terminated are taxable wages for purposes of the Federal Insurance Contributions Act. Effect: Employers should, under most circumstances, treat severance payments to involuntarily terminated employees as wages subject to FICA taxes. There are exceptions, however, and employers should therefore seek legal counsel to assist in determining the tax status of a particular severance arrangement.

Business Cases to Watch in the 2014–2015 Term

Integrity Staffing Solutions v. Busk: Whether time spent in security screenings is compensable under the Fair Labor Standards Act.

Mach Mining v. Equal Employment Opportunity Commission: Whether and to what extent a court may enforce the Equal Employment Opportunity Commission’s mandatory duty to conciliate discrimination claims before filing suit.

Omnicare v. Laborers District Council Construction Industry Pension Fund: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, a plaintiff may plead that a statement of opinion was untrue merely by alleging that the opinion itself was objectively wrong, or must the plaintiff also allege that the statement was subjectively false through allegations that the speaker’s actual opinion was different from the one expressed.

Young v. UPS: Whether, and in what circumstances, an employer that provides work accommodations to non-pregnant employees with work limitations must provide work accommodations to pregnant employees who are similar in their ability or inability to work.

As in recent years, the Supreme Court continues to grant review on more and more cases involving matters of concern to U.S. businesses. Andrews Kurth attorneys are available to provide further detail and guidance on the decisions highlighted here, and on any other issues of concern to your company that have reached the high court.

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EPA Issues Changes to Due Diligence Requirements for All Appropriate Inquiries (AAI) Under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

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2005 ASTM No Longer Accepted Effective Oct. 6, 2015

On October 6, 2014, EPA issued a final rule mandating the use of the 2013 standard, ASTM E1527-13, for conducting Phase I Environmental Site Assessments for satisfaction of All Appropriate Inquiries (“AAI”) under CERCLA. [Click here for a copy of EPA’s preamble to the final rule, published in the federal register today].

In December 2013, EPA adopted a new AAI rule allowing use of the updated 2013 standard and continuing to allow use of the 2005 standard, ASTM E1527-05. The reference to both standards was widely criticized as a source of confusion in due diligence requirements. Prospective owners/operators were strongly encouraged to use the 2013 standard; however, they had flexibility to decide whether to use the 2013 or 2005 standard for each particular site.

Today’s revised AAI rule removes the reference to the 2005 standard, thus allowing use of only the 2013 standard for entities performing AAI. The new rule does not modify the 2013 standard; it merely mandates the use of it for AAI.

Notably, the new rule will not become effective until October 6, 2015, giving prospective property owners/operators and consultants one year to complete site assessments that are currently being performed consistent with the 2005 standard. Though EPA’s expectation is that entities will no longer use the 2005 standard and transition to the 2013 standard, the EPA’s rule allows use of the 2005 standard for property acquired prior to the effective date of October 6, 2015.

The primary differences between the 2013 and 2005 standards are:

  1. The 2013 standard requires evaluation of the potential for the release of subsurface vapor contamination (vapor migration), and more clearly identifies vapor migration as a recognized environmental condition. The 2005 standard did not explicitly require an analysis of vapor migration
  2. The 2013 standard clarifies existing and adds new definitions, which as a result, revises the potential scope of assessment. For example, the term “Controlled Recognized Environmental Condition” was added to the standard to include past releases that have been addressed but allow contamination to remain in place.
  3. The 2013 standard requires a more extensive review of agency files and historical site documents.

Overall, the 2013 standard is considered more comprehensive and thorough based on today’s realities and is touted by EPA in its final rule preamble as “the consensus-based, good customary business standard.”

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