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Environmental Updates - April 2013

April 10, 2013

Illegal Exporter of e-Waste Sentenced to 30 Months in Prison

A federal court has sentenced the owner of a Michigan-based computer company to 30 months in prison and fined him $10,000 for counterfeiting and improper storage and disposal of hazardous waste. Mark Glover, of Discount Computers, Inc., pleaded guilty to trafficking in counterfeit goods and storing and disposing of hazardous waste without a permit. The company shipped cathode ray tube (CRT) monitors to Egypt with fake factory labels claiming more recent manufacturing dates intended to evade that country’s prohibition on importing computer equipment more than five years old. The export scheme also evaded the federal Resource Conservation and Recovery Act’s requirement to dispose of old CRT monitors as hazardous waste. The U.S. Environmental Protection Agency (U.S. EPA) has targeted illegal e-waste exports as one of its top international priorities. In addition to the penalties imposed on Mr. Glover, the company was fined $2 million and ordered to pay over $10,000 in restitution to its Michigan landlord. United States v. Glover, No. 2:12-28282 (E.D. Mich. Mar. 22, 2013).

Federal Court Ends Oversight of DWSD

Judge Sean Cox in the U.S. District Court for the Eastern District of Michigan has closed a 35-year-old case in which a federal court has supervised the operations of the Detroit Water and Sewerage Department (DWSD) due to its failure to comply with the Clean Water Act. Judge Cox said that, although DWSD’s record of compliance still is not perfect, it has improved to the point where the Michigan Department of Environmental Quality (MDEQ) will be able to work with DWSD to resolve any issues that may arise, and further court intervention is not necessary. The judge denied a request to order the transfer of DWSD’s assets to a regional authority, citing a lack of authority to issue such an order. Meanwhile, Rep. Kurt Heise (R-20) has introduced a bill (H.B. 4009) to create a regional water authority for the Detroit metro area. United States v. Detroit, No. 77-71100 (E.D. Mich. Mar. 27, 2013).

Appeals Court Holds That U.S. EPA Can Challenge Procedures Used to Project Air Emissions, But Not the Projections Themselves

A federal appeals court has held that a lower court improperly dismissed a U.S. EPA enforcement action against DTE Energy Corp. (DTE) regarding DTE’s projection of emissions following renovations of electric utility steam generating units at its plant in Monroe, Michigan. In a 2-1 split, the three-judge panel of the U.S. Court of Appeals for the Sixth Circuit reversed a district court ruling that held that U.S. EPA was precluded from challenging DTE’s determination that the project did not require a Clean Air Act permit because it would not result in an increase in emissions. The district court had found that because DTE had satisfied U.S. EPA notification and recordkeeping requirements, U.S. EPA could bring an enforcement action only if the actual annual emissions after the project significantly increased. Significantly, the appeals court agreed with the lower court’s key ruling that whether a permit is required would be determined by the actual emissions after the project, rather than by DTE’s pre-construction projection of emissions. The court specifically refused to endorse U.S. EPA’s contention that U.S. EPA was entitled to challenge the accuracy of DTE’s emission projections. However, the court did agree with U.S. EPA’s argument that it was entitled to bring an enforcement action before construction commenced “to ensure that the projection is made pursuant to the requirements of the regulations.” Therefore, although the lower court’s ruling was “largely correct,” the appeals court vacated the dismissal of U.S. EPA’s action and remanded the case for further proceedings. The dissent argued that the case was moot because the issue of the correctness of DTE’s emission projection was resolved by the fact that emissions after the project have decreased. Moreover, the dissent argued that the majority opinion was self-contradictory because on the one hand the majority acknowledged that DTE was not required to obtain U.S. EPA approval of its emission projections while on the other hand the majority held that U.S. EPA could seek a preliminary injunction to stop the project, if EPA disagreed with procedures used to make the projections. “The only difference between the scheme that the majority endorses and the prior-approval scheme (that the majority purports to reject) is which party is the plaintiff and which the defendant,” stated the dissent. United States v. DTE Energy Co., No. 11-2328 (6th Cir. Mar. 28, 2013).

Michigan Court of Appeals: MDEQ Properly Issued Permit to Coal-Fired Power Plant

The Michigan Court of Appeals has affirmed a lower court’s holding that MDEQ had the authority to issue an air permit to the Holland, Michigan Board of Public Works for the expansion of a coal-fired power plant. The suit, by the Natural Resources Defense Council and Sierra Club, claimed that the permit did not comply with federal and state regulations requiring MDEQ to evaluate clean fuels and consider alternate technologies, and that MDEQ’s analysis of these fuels and technologies was inadequate and flawed. The petitioners also claimed that the circuit court had failed to apply the proper standard of review to the MDEQ’s action. The circuit court had upheld MDEQ’s issuance of the permit, citing an enormous administrative record and stating that the court could not substitute its judgment for MDEQ’s as long as MDEQ’s decision was supported by substantial evidence. The petitioners argued that the circuit court had improperly deferred to MDEQ rather than reviewing de novo whether MDEQ’s decision complied with the Clean Air Act.

The appeals court agreed with the petitioners that the circuit court was required to review de novo whether MDEQ’s action complied with the statute. However, the appeals court held that, even if the circuit court had erroneously deferred to MDEQ’s evidentiary findings, it was harmless error because the circuit court had correctly reviewed de novo whether MDEQ’s decision was authorized by law. The appeals court found that MDEQ had performed an adequate review of alternate fuel sources, including “clean” fuels, and alternative technologies. Therefore, it held that the circuit court had properly concluded that MDEQ’s issuance of the permit was authorized by law and affirmed its decision. Natural Resources Defense Council v. MDEQ, No. 310036 (Mich. Ct. App. Mar. 21, 2013).

Michigan’s Bottle Return Law Held Unconstitutional In Part

A federal court has held that a provision in Michigan’s bottle-return statute that requires beverage containers sold in Michigan to have a Michigan-specific mark violates the dormant Commerce Clause of the U.S. Constitution. A 2008 amendment to the statute required entities that exceed a certain threshold to include on their returnable containers sold in Michigan a unique “symbol, mark, or other distinguishing characteristic” to enable container-return machines to identify those containers sold in the state and, therefore, legitimately returned for a refund. The law also forbade the sale of the specially-marked containers in another state unless the other state has a similar bottle return law. The American Beverage Association challenged the requirement, claiming that it violated the “dormant Commerce Clause” of the U.S. Constitution. The U.S. Court of Appeals for the Sixth Circuit agreed, and struck down the requirement. It held that a requirement that containers sold in Michigan have a special mark, and outlawing sale of the containers in other states, impermissibly regulates commerce that occurs outside of the state. At last report, Michigan was considering appealing the ruling to the U.S. Supreme Court. Michigan, whose 10 cent per container refund is the highest in the country, has one of highest bottle recycling rates. But it also estimates that it loses more than $10 million annually when people purchase containers out of state, return them in Michigan, and claim the refund. The problem is especially acute in counties bordering Ohio, Indiana and Wisconsin, which do not offer refunds. American Beverage Ass’n v. Snyder, No. 11-2097 (6th Cir. Nov. 29, 2012).

U.S. EPA Proposes Best Management Practices to Control Construction Site Erosion

On April 1, U.S. EPA proposed to require construction sites to use best management practices to control the volume and velocity of stormwater runoff. The proposed rule marks another turn in the long-running saga of U.S. EPA efforts to regulate stormwater runoff from construction sites. In 2009, U.S. EPA issued a rule imposing numeric limits on turbidity in construction runoff. In 2010, U.S. EPA stayed the turbidity limit, and in 2012 withdrew it, in the wake of litigation filed by builders and utilities. The new proposed rule is available at 78 Fed. Reg. 19434 (Apr. 1, 2013). Comments are being accepted through May 30.

Just When You Thought You Knew All About Phase I ‘s...

U.S. EPA is reviewing proposals that would change how Phase I environmental site assessments (ESAs) are performed. The revisions were proposed by ASTM, which created the E 1527 standard incorporated by reference into U.S. EPA’s All Appropriate Inquiries (AAI) rule (40 CFR Part 312). This is the first Phase I ESA procedure makeover since 2005. According to published reports, the most significant proposed revisions are:

  • Adds the concept of “controlled recognized environmental condition” or CREC. This term will apply to known past releases of hazardous substances that have not been remediated to unrestricted residential criteria but which are subject to controls such as activity or use restrictions, restrictive covenants and institutional controls. The application of the CREC label to an issue does not include a judgment whether the controls are actually effective.
  • Requires the environmental professional (EP) to consider the risk that vapors may migrate from other sites onto the subject property. This does not include an evaluation of the risk of vapor intrusion into buildings; that still will not be considered by E 1527.
  • Exempts certain applications of fertilizers from the meaning of “release.”
  • States that the EP should review agency files in determining the presence of a recognized environmental condition. If such a review is not performed, the EP must so state and explain why.
  • Adds a new “business environmental risk” (BER) appendix that describes commonly encountered BERs at commercial properties and discusses when a person may want to add an evaluation of BERs to the Phase I ESA scope of work.
  • Makes the table of contents requirement less prescriptive so that the EP can decide the presentation order, and eases other current “verbatim” requirements.
  • The revisions include many technical changes as well, to make the standard easier to understand and more consistent with the language and requirements of the federal Comprehensive Environmental Response, Compensation, and Liability Act, as amended (CERCLA) and the AAI rule.

The revisions seem likely to increase the costs of, and amount of time needed for, Phase I ESAs where agency file reviews and/or consideration of vapor migration risks are appropriate.

If U.S. EPA approves the changes, the new ASTM E 1527-13 will become the equivalent of complying with the AAI rule, which is necessary for land owners or operators to be eligible for one of the landowner liability protections available under federal and most states’ laws, including Michigan.

Developer Liable to Clean Up Pre-Existing Contamination for Failing to Exercise “Appropriate Care”

A buyer of contaminated property was held to have lost its ability to claim to be a non-liable “bona fide prospective purchaser” under CERCLA because it failed to act appropriately with respect to hazardous substances it found on the site. As a result, the buyer was held responsible for cleanup costs.

From 1884 to 1972, fertilizer production on a 43 acre parcel of land in Charleston, SC caused releases of arsenic, lead and other hazardous substances into the soil. In 2003, Ashley II of Charleston, Inc. (Ashley) bought a 27.62 acre portion of the property to include it in a mixed-use project. After Ashley incurred response costs, it sued PCS Nitrogen, Inc. (PCS), as an alleged corporate successor to a company that had caused some of the contamination. PCS counterclaimed against Ashley and brought third-party contribution actions against others currently or formerly associated with the property.

Ashley argued that it was not a “potentially responsible party” (PRP) for the contamination because it was a “bona fide prospective purchaser” (BFPP) under CERCLA. The federal district court disagreed, and on appeal, the U.S. Court of Appeals for the Fourth Circuit affirmed. The court noted that “BFPP status exempts from CERCLA liability a party otherwise liable simply because it is considered to be an owner or operator of a facility’ under” CERCLA. “To qualify for the exemption, a current owner or operator of a facility must have acquired the facility after January 11, 2002, must ‘not impede the performance of a response action or natural resource restoration’ at the facility, and must establish eight criteria by a preponderance of the evidence.” One of those criteria “is the requirement that a current owner ‘exercises appropriate care with respect to hazardous substances found at the facility by taking responsible steps to (i) stop any continuing release; (ii) prevent any threatened future release; and (iii) prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance.’” The appeals court noted that the district court had “specifically found that Ashley failed to clean out and fill in sumps that should have been capped, filled, or removed when related aboveground structures were demolished, and that Ashley did not monitor and adequately address conditions relating to a debris pile” and a crushed limestone partial cover on the site. These findings, the appeals court held, “established that Ashley did not exercise appropriate care at the site.” Therefore, Ashley did not qualify for the BFPP defense and was “a PRP for the site as a current owner” under CERCLA. The court upheld that district court’s decision to allocate 5% of the site liability to Ashley.

In other holdings, the court also affirmed the liability of (1) PCS as a corporate successor to a company that had caused contamination, even though PCS had acquired only assets and not stock of that other company (PCS was assigned a 30% share of the liability); and (2) a company that leased a contaminated two-acre portion of the original 43 acre site, even though (i) it had not caused or exacerbated any contamination; (ii) the land it leased was not involved in the Ashley-PCS dispute; and (iii) no response costs were spent on the land it leased (the lessee was assigned a 1% share of the liability).

The decision demonstrates the importance of determining the applicability of defenses to liability when acquiring or leasing contaminated land and ensuring that they remain applicable on an ongoing basis. PCS Nitrogen Inc. v. Ashley II of Charleston LLC, et al., No. 11-1662 (4th Cir. Apr. 4, 2013).

Where’s the Fracking?

Michigan has large natural gas reserves trapped in shale formations including the Antrim Shale. In other states, such gas is being extracted in massive volumes through the use of hydraulic fracturing, also known as fracking. As fracking gains in both popularity and controversy in places such as Pennsylvania, Ohio and elsewhere, you may be wondering why we don’t hear much about it occurring in Michigan. As recently reported in Crain’s Detroit Business, the simple reason is that Michigan has not yet experienced the recent massive growth in natural gas production that other states have enjoyed. Reasons include the low price of gas, a heavy local reliance on coal-generated electricity and a federal ban on natural gas exports, which puts potential customers in nearby Ontario out of reach. Crain’s reports, however, that it is only a matter of time before natural gas production, and fracking, increase in Michigan. Stay tuned. Jay Greene, Hydraulic fracturing in Michigan: Waiting for the boom, Crain’s Detroit Business (Mar. 25, 2013, at 1; modified Mar. 29, 2013.

Did You Know?

Did you know that the Enbridge oil spill in the summer of 2010 was the largest onshore oil spill in U.S. history? The incident caused more than 20,000 barrels of heavy Canadian crude to gush into the Kalamazoo River system near Marshall, Michigan. Enbridge Energy Partners LLP recently estimated the cleanup costs at $820 million and said that the final sum may exceed its insurance coverage and impact its financial results. The oil, which originated in western Canada, spilled from a pipeline that carries 231,000 barrels a day from northern Indiana to Sarnia, Ontario.

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