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Legislative and Regulatory Developments With Respect to Chemicals & Products

Squire Patton Boggs’ Environmental, Safety & Health Practice in Conjunction with the Ohio Chemistry Technology Council August 8, 2014

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AGENDA

9 a.m. – Welcome & Introductions Karen A. Winters, Environmental, Safety & Health Practice Group Leader, Squire Patton Boggs (Columbus)

Jenn Klein, President, Ohio Chemistry Technology Council 9 a.m. – Congressional Efforts To Reform TSCA

The Honorable Bill Johnson, United States House of Representatives (Washington DC)

10 a.m. – Regulatory Developments under TSCA Stephen A. Owens, Squire Patton Boggs (Phoenix & Washington DC)

10:45 a.m. – Break

11 a.m. – A Review of REACH Enforcement in Europe and Environmental Enforcement Trends in the UK David Gordon, Squire Patton Boggs (Birmingham) Rob Elvin, Squire Patton Boggs (Manchester)


AGENDA

Noon – Luncheon Presentation David Mustine, Senior Managing Director for Energy, Polymers and Chemicals, JobsOhio

1:15 p.m. – Chemical Sector Enforcement Litigation Vincent Atriano, Squire Patton Boggs (Columbus)

2 p.m. – The “Greening” of California’s Green Chemistry Initiative Chris M. Amantea, Squire Patton Boggs (Los Angeles)

2:30 p.m. – Closing Remarks

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Congressional Efforts to Reform TSCA

The Honorable Bill Johnson United States House of Representatives (Washington DC)


Regulatory Developments Under TSCA

Stephen A. Owens, Squire Patton Boggs (Phoenix & Washington DC)


Some Issues to Consider

Is a chemical substance that is being manufactured, imported or processed regulated by TSCA?

Is the chemical on the TSCA Inventory? Public portion Confidential portion

If it is not on the TSCA Inventory, does a Pre-manufacture Notice (PMN) have to be filed with EPA? Is the chemical substance subject to one of the PMN exemptions? Is the chemical substance actually a mixture? Is the chemical substance being imported as part of an article?

Are the uses of the chemical substance limited? Section 5 consent orders Significant New Use Rules (SNUR) Section 6 rules


Current TSCA Reform Legislation

Chemical Safety Improvement Act (S. 1009) Introduced May 22, 2013 by Senators Frank Lautenberg (D-NJ) & David Vitter (R-

LA) with 25 bipartisan cosponsors • April 2013 – Senator Lautenberg had introduced S. 696, the “Safe Chemicals Act of 2013”

Hearing held in Senate EPW Committee on July 31, 2013

Chemicals in Commerce Act (H.R. ____) Multiple hearings held on TSCA reform issues by the House E&C Subcommittee on

Environment & the Economy U.S. House discussion draft released in February 2014 by Rep. John Shimkus (R-

IL) (subcommittee chair) • Revised discussion draft released in April 2014 • Democratic redline edits released in May 2014

Bill not yet introduced


Chemical Safety Improvement Act & Chemicals in Commerce Act

Key aspects of both bills: Set a safety standard for new and existing chemicals Require EPA to make a safety determination for existing chemicals in commerce Require EPA to prioritize existing chemicals (as high or low priority) for evaluation Require EPA to designate existing chemicals as active or inactive Require EPA to consider vulnerable subpopulations in evaluating chemicals Give EPA authority to issue orders to require testing of chemicals Eliminate the “least burdensome” language for chemical restrictions Put limits on confidential business information (CBI) claims Allow EPA to share CBI with states


Chemical Safety Improvement Act & Chemicals in Commerce Act

Comments made by critics about both bills: Use an “unreasonable risk under intended conditions of use” standard Have language preempting state regulation of chemicals under various

circumstances (and CSIA has language affecting state tort actions) Do not set deadlines for EPA action Do not require a minimum data set for chemicals Do not require quick action on the “worst” chemicals (i.e., PBTs) Do not adequately protect vulnerable populations Require a form of cost-benefit analysis for chemical restrictions Require EPA to develop multiple policies and guidance documents, subject to notice

and comment, before taking various actions Limit EPA’s ability to declassify existing CBI claims Do not provide a source of increased funding to EPA


Toxic Substances Control Act (TSCA)

Enacted in 1976 Signed into law by President Gerald Ford

Applies to chemical manufacturers, importers and processers

Covers chemical substances and mixtures, but does not regulate: Substances that are regulated as pesticides under the Federal Insecticide,

Fungicide & Rodenticide Act (FIFRA) Drugs, cosmetics and other items regulated under the Federal Food, Drug &

Cosmetic Act (FFDCA) Material regulated under the Atomic Energy Act (AEA) Tobacco and tobacco products Articles taxed under §4181 of the Internal Revenue Code (firearms & ammunition)

Requires EPA to coordinate with, and sometime defer to action by, other federal agencies (e.g., FDA, CPSC)


TSCA Requirements

In general, if a chemical substance is not listed on the TSCA Inventory, it cannot be produced, distributed, sold or imported in the US. Roughly 85,000 substances are listed on the TSCA Inventory

With certain limited exceptions, any person who “manufacturers for commercial purpose” any “new chemical substance” must file a premanufacture notice (PMN) for that substance with US EPA. A “new chemical substance” is any substance that is not listed on the TSCA

Chemical Substance Inventory (TSCA Inventory) EPA has 90 days to review a PMN Exemptions: research and development (R&D); low volume (LVE); test marketing

(TME); low environmental release and human exposure (LoREX); certain polymers Exceptions: mixtures; imported articles


Key TSCA Provisions

Section 5: Manufacturing and Processing Notices PMNs & SNURs

Section 6: Regulation of Hazardous Chemical Substances and Mixtures Authorizes EPA to take a range of actions to control a chemical hazard that “presents or will

present an unreasonable risk of injury to health or the environment.”

Section 4: Testing of Chemical Substances and Mixtures Gives EPA limited authority to require development of test data on existing chemicals

Section 8: Reporting and Retention of Information § 8a reporting § 8d health & safety studies § 8c records of significant adverse reactions to health or the environment alleged to have been

caused by the substance or mixture § 8e “substantial risk” information

Section 12: Exports Must give notice to EPA before certain substances can be exported

Section 13: Imports Must file certification that substance complies with TSCA or is not subject to TSCA


Recent EPA Actions under TSCA

Ten Action Plans issued in 2009 - 2010 Increasing use of Section 5 Significant New Use Rules (SNURs) for both new and existing chemicals April 2013 GAO report: from 2009 to 2012, EPA issued SNURs affecting 540 chemicals (25% of the 2,180 chemicals subject to SNURs issued since 1976)

New Chemical Data Reporting (CDR) Rule (August 2011) Priority list of 83 “work plan” chemicals announced for risk assessment and potential

risk management (March 2012) Draft risk assessments on five of the chemicals released for public comment in January 2013:

• Antimony Trioxide (ATO) (CASRN 1309-64-4); 1,3,4,6,7,8-Hexahydro-4,6,6,7,8,8,-hexamethylcyclopenta[g]-2-benzopyran (HHCB) (CASRN 1222-05-5); Methylene Chloride (or dichloromethane (DCM)) (CASRN 75-09-2); Trichloroethylene (TCE) (CASRN 79-01-6); N-Methylpyrrolidone (NMP) (CASRN 872-50-4)

Final risk assessment for TCE issued in June 2014

Group of flame retardants also identified for review and risk assessment Planned TSCA rulemaking on disclosure of chemicals used in hydraulic fracturing

(ANPR issued May 2014)


Increased TSCA Enforcement

EPA is increasing enforcement activity under TSCA Increased use of TSCA subpoenas for investigations of potential noncompliance Focus on TSCA § 5 violations for PMNs; SNURs & SNUNs; low volume exemptions (LVEs) Focus on violations related to Action Plan chemicals Target reporting and record keeping under TSCA 8(c), (d) and (e) Focus on the Chemical Data Reporting (CDR) Rule

February 2012: $1.4 million civil penalty announced against Dover Chemical Corp. for alleged failure to file premanufacture notices (PMNs) for chlorinated paraffins it was manufacturing

July 2012: Penalties totaling $362,113 announced against Chemtura Corporation, Bethlehem Apparatus Company, and Haldor Topsoe, Inc. for violations of the 2006 Inventory Update Reporting rule (now the CDR rule)

August 2012: $175,000 civil penalty announced against INEOS for alleged importation of paraffins not listed on the TSCA Inventory

January 2013: $503,110 civil penalty announced against Kemira Chemicals, Inc. for violations of the 2006 IUR rule

November 2013: $2.57 million penalty ordered by EPA ALJ against Elementis Chromium for alleged violations of TSCA Section 8(e) relating to data on hexavalent chromium (now being appealed)


What Should You Do to Avoid TSCA Liability?

Conduct a TSCA audit of your chemical products and compliance procedures Review your TSCA filings to ensure that they are complete and up to date Review your filings under other statutes (EPCRA TRI, RCRA, Clean Air Act) to ensure

that they match your TSCA filings Make sure that the chemicals you are making, importing or processing are listed on

the TSCA Inventory (or are exempt from listing) Be sure to submit all required TSCA import certifications and export notices Ensure that you are complying with all SNURs that apply to the chemicals you are

making, importing or processing Double-check your 2012 CDR submission for completeness and accuracy – and begin

preparing soon for the 2016 submission Monitor EPA actions closely and participate in stakeholder processes and rulemakings,

etc. Keep good records and submit required data to EPA promptly (esp. §8(e)) Always remember: What you don’t know can hurt you!


15 Minute Break


A Review of REACH Enforcement in Europe

David Gordon, Squire Patton Boggs (Birmingham)


Introduction

The Regulator The Legislation Enforcement Powers Penalties (in UK and Europe) The EU Approach to Enforcement Some Enforcement Statistics Practical Advice on How to Deal with Breaches of REACH

– if time permits


ECHA (1)

Established by Article 75 of REACH “for the purposes of managing and in some cases carrying out the technical scientific and administrative aspects of REACH and to ensure consistency at Community level in relation to those aspects”

ECHA describes its mission as being “the driving force amongst regulatory authorities” in implementing REACH, helping companies to comply with the legislation, advancing the safe use of chemicals, providing information on chemicals and addressing areas of concern


ECHA (2)

ECHA’s enforcement role is essentially strategic and policy-related For example, it operates the Enforcement Forum which: Spreads good practice and highlights problems at Community level; Proposes, co-ordinates and evaluates harmonised enforcement projects and joint

inspections; and Identifies enforcement strategies and best practice in enforcement

But ECHA does not prosecute REACH offences itself


HSE

Article 121 REACH – Member states shall appoint competent authorities to enforce REACH within their jurisdictions

For example, primary responsibility for enforcement of REACH in the UK lies within the Health & Safety Executive

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Legislation (1)

As an EU Regulation, the substantive provisions within REACH have direct effect throughout the EU (i.e. no further requirement for national legislation to implement them)

For example, Article 5 – substances shall not be manufactured or placed on the market unless they have been registered

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Legislation (2)

However, Article 126 of REACH specifically requires member states to lay down provisions for penalties following the infringement of REACH and to take all measures necessary to ensure that they are implemented. Penalties must be “effective, proportionate and dissuasive”

In the UK, enforcement powers and penalties are provided for in the REACH Enforcement Regulations 2008

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Enforcement Powers

Enforcement powers will vary slightly between jurisdictions but are likely to include powers: To enter premises (by force in emergencies) To seize equipment or materials To direct that premises (or parts of premises) be left undisturbed To take measurements, photographs, samples To require any person to answer questions To seize goods To stop import and/or manufacture To require certain steps to be taken


Penalties in the UK

Conviction in Magistrates’ Court Maximum fine - £5,000 Maximum prison sentence – 3 months or both!

Conviction in Crown Court Maximum fine – unlimited Maximum prison sentence – 2 years or both!


Corporate Offence

When a breach of REACH is committed by a company and is also Committed with the consent or connivance of an officer; or Attributable to any neglect on the part of the officer, Then the officer (as well as the company) is guilty

“Officer” includes director, company secretary, senior manager, etc.


Penalties in Other Jurisdictions


Enforcement Approaches

REACH-EN-FORCE 1 (2010) – focused on manufacturer and importer obligations for substances and mixtures re. pre-registration and supply chain information

REACH-EN-FORCE 2 (2011) – focused on compliance of downstream users and formulators

REACH-EN-FORCE 3 (2013) – is focussing on registration obligations of manufacturers, importers and Only Representatives


REACH-EN-FORCE 1

2400 companies audited across 26 countries: Regulators tended to focus on the manufacturers and importers of chemical

products – 33% of all companies audited 22 % of the companies inspected were non-compliant Non-compliances regarding registration obligations were found in 7%

companies inspected 17% of the SDS did not comply with REACH Only Representatives were not always in compliance with Article 8 of

REACH


REACH-EN-FORCE 2

Covered 1180 companies, 6,900 substances, 4,500 mixtures and 4,500 SDSs: 50% of companies audited were downstream uses. 67% of companies audited were non-compliant and 57% of these companies

were major corporates 8% had failed to pre-register substances (1% worst*) 52% of SDSs were non-REACH compliant (35% worst*) 24% of labels were also non-compliant 43% of formulators were using substances for a use not covered by the

registration * When compared to REACH-EN-FORCE 1


REACH-EN-FORCE 3 –part 1

528 companies inspected in 28 countries: 14% of companies were non-compliant (a 14% improvement*) Importer were 50% more likely to be non-compliance than manufacturers ORs have the highest non-compliance rate; twice the average rate SMEs also have a non-compliance rate which is twice the rate of non-SMEs There is a growing indication that companies which are not related to the

chemical industry are more likely to be non-compliant. A further 1,500 audits will take place in 2014/15 *when compared to REACH-EN-FORCE 1


Consumer Rights – Supply of ‘Safe Use’ Information


Summary

So, what does it all mean? There’s a good chance that your company will be audited (particular in the

chemical sector) – you should have a protocol in place that anticipates this You should review any OR arrangements that you have in place due to the

high levels of non-compliance in this area Given the high levels of importer breaches you should review your

export/import arrangements and your EU subsidiaries REACH obligations If you are importing articles, check that your testing caters for REACH

SVHCs and put in place appropriate declaration procedures/documents Don’t forget your obligations in respect of SDS and provision of information to

the supply change Also consider your obligations under CLP Have a strategy ready to deal with non-compliance and enforcement


UK Sentencing Council Definitive Guidelines for Environmental Offences – The Shape of Things to Come? Rob Elvin, Squire Patton Boggs (Manchester)


Background (1)

Historically, concern about lack of guidance for courts about sentencing for environmental offices

Contrast with “real” crimes (e.g. theft, assault, etc) Concern about penalties not being high enough to reflect seriousness of

offence or deter offenders Greatly varying levels of fines and custodial sentences have been handed

down


Background (2)

R v Milford Haven Port Authority (The Sea Empress) (2000) Sentencing Council consulted on draft guidelines between 14 March and 6

June 2013 Definitive Guidelines published in February 2014 and took effect from 1 July

2014


Offences covered

Strictly speaking only: S.33 EPA 1990; and Reg 38 EP Regs 2010

But when sentencing for other relevant and analogous environmental offences (e.g. breaches of restriction against transporting waste without registering or breaches of waste duty of care), certain steps should be considered


Definitive Guidelines

Basically, comprise steps that a court should follow when fixing a sentence Two sections: Steps where offender is organisation; and Steps where offender is individual


Organizations (1)

Step 1 – Compensation order for PI, loss or damage? Step 2 – POCA confiscation order (Crown Court only)? Step 3 – Determine offence category: Assess culpability (deliberate, reckless, negligent, or low/no culpability); Assess level of harm/risk of harm (4 categories – category 1 is most serious)


Organizations (2)

Step 4 Having assessed offence category (e.g. category 1 harm where offender has acted

deliberately) refer to tables which contain starting point for fines and possible ranges 4 tables (large organisations, medium organisations, small organisations and micro-

organisations) – based on turnover Very large organisations will have to be dealt with on case-by-case basis


Organizations (3)


Organizations (4)

Step 4 (continued) Once starting point for fine has been established, consider aggravating and

mitigating factors that may push fine up or down the punishment range Non-exhaustive list of factors provided E.g. aggravating – previous relevant convictions, deliberate concealment of wrong-

doing, ignoring risks, etc. E.g. mitigating – remorse, voluntary compensation, one-off event not commercially

motivated, etc.

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Organizations (5)

Steps 5-7 Court must now “step back” – does sentence meet objectives of punishment,

deterrence and removal of gain? Court may increase or decrease fine and even go outside range

Step 5 Does combination of financial orders (compensation, confiscation (if applicable) and

fine) remove any economic benefit (including saving and avoiding costs)

Step 6 Is proposed fine proportionate to offender’s means? – Real impact? Brings home

message to managers/shareholders? Whether fine would make offender insolvent is relevant but not necessarily

unacceptable outcome!

Step 7 Other factors that may warrant adjustment E.g. affects ability of offender to compensate victims or improve internal systems, or

impact on local economy


Organizations (6)

Step 8 Consider factors that indicate reduction (e.g. assisting prosecution)

Step 9 Take account of any potential reduction for a guilty plea

Step 10 Ancillary orders? E.g. forfeiture of vehicle, deprivation of property or remediation

Step 11 Totality – If sentencing for more than one offence or if offender is already serving

sentence, court must consider if combined effect is just and proportionate

Step 12 Give reasons


Individuals (1)

Steps are similar to those for an organization save that: No requirement to check whether fine is proportionate to offender’s means; List of aggravating and mitigating factors and ancillary orders includes those

applicable to individuals; Additional step – consider any time spent on bail

Only one table contains starting points for penalties and possible ranges Custodial sentences and community orders are an option

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Individuals (2)


Recent Case Law - UK

R v Southern Water Services (2014) Court of Appeal upheld fine of £200,000 fine against appellant in respect of breach

of reg 38 of EP Regs 2010 following discharge of untreated sewage into sea LCJ came down hard – “We hope, therefore, that this will be the last case which

comes before this court where water companies and other similar utilities have not taken much more seriously the criminality of such offences of the seriousness involved in this case”


Recent Case Law - UK

R v Sellafield Ltd (appeal against fine) 7 (essentially environmental) offences arising out of the disposal of radioactive

waste for 18 months without required safeguards Criticised for failing to properly install and monitor its equipment and for failing to

improve its systems and controls despite previous prohibition notices and fines £1.6 billion turnover, £29 million profit £700,000 fine (after guilty plea) No actual harm (very small risk of some harm) – accepted by Court of Appeal “The fine must be fixed to meet the statutory purposes with the objective of ensuring

that the message is brought home to the directors and members of the company” “No ceiling on the amount of a fine that can be imposed"

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Recent Case Law - EU

The former water director, environmental director and the former chief executive officer of Cobre Las Cruces mine, one of Spain’s largest mines, are all facing criminal charges related to the contamination of groundwater sources

Bulgarian lead and zinc smelter, OTZK was fined BGN 60,000 (over 30,000EUR) for non compliance with its environmental permit, the largest penalty upheld so far in the region. The breaches included the uncontrolled release of harmful gas emissions and impermissible content of dust and sulphur dioxide around the plant’s chimneys

In 2012, France’s highest court upheld a ruling from 2008 that held the French oil company Total criminally and civilly responsible for the Erika oil spill in 1999. The spill discharged over 20,000 tons of oil into the sea off the French Atlantic coast. Fines totalled EUR192 million for causing environmental damage and another EUR375,000 for ignoring the risks of using an ageing tanker


Implications for Health and Safety

R v Network Rail Infrastructure (2014) Minor injuries to adult and serious injury to child following collision on level crossing

(could have been fatal) S.3 HSWA - It had failed to carry out a proper risk assessment of the crossing and

that if it had done so safety measures would have been introduced which may have averted the accident

£500,000 fine (after guilty plea) Similar considerations voiced by court to those in definitive guidelines (culpability,

harm and mitigating and aggravating factors)

Others: New look—fire safety-- £400,000 M&S—asbestos exposure-- £1m

Sentencing council to consult in 2014 on draft guidelines for health and safety offences


Conclusion

Recent cases have seen significant increase in fines Guidelines aim for greater consistency and fairness in sentencing Sentencing council expects level for fines for most serious cases will

increase but fines for less serious cases will remain the same Similar guidelines expected for health and safety offences

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Luncheon Presentation

David Mustine, Senior Managing Director for Energy, Polymers and Chemicals, JobsOhio

8 August 2014 David Mustine

Squire Patton Boggs

JobsOhio Overview

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JobsOhio is a private, non-profit corporation designed to drive job creation

and new capital investment in Ohio through business attraction, retention, and

expansion efforts.

Presenter

Presentation Notes

Advantages of a privatized organization Discuss source of funding and advantage of non-statutory programs JO, DSA, and regional partners have invested in streamlining processes from selection through grant and credit application and processing.

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JOBSOHIO QUARTERLY RESULTS

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Game Changers

Three industry catalysts are consistently cited as potential game changers – Shale Energy, Big Data, and Advanced Manufacturing. Ohio is uniquely positioned to capitalize on all three of these areas. These game changers not only align well with our target industries, but are also integrated across multiple industries.

Ohio Utica Shale

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Pace of development is increasing: • Activity focused in wet gas window. • 970 wells drilled • 487 wells in production • Key players: Chesapeake, EnerVest, Gulfport, Antero and Hess.

Large investment committed to midstream assets: • New industry established in 24 months.

• Processing and fractionation now operating in eastern Ohio.

• Over $6 billion invested/committed. Ohio’s Economic Development Focus: • Manufacturers in oil and gas supply chain. • Expansion projects at chemical plants, large energy users and refineries. • Recruit companies that are large natural gas users and add value to wet

gas stream.

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Shale NGL Impact Study

Ohio’s Advantage: • Regional demand for Polyethylene is ~24% of US total

• Ethane from Ohio is piped to the Gulf Coast

• Polyethylene is shipped backed to the region

• Opportunity> $100’s of millions in savings

• A regional Petrochemical producer will provide: provide: -superior service -innovation -cluster support

JobsOhio’s Downstream Strategy

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• Focus on site selection with emphasis on sites that have access to shared services such as steam and power.

• Targeted marketing of Ohio premier sites to chemical,

fertilizer, petrochemical and polymer companies. • Need to address storage options and plan for

construction workers. • OCTC and PolymerOhio are critical JobsOhio partners in

economic development.

41 S. High Street, Ste. 1500 | Columbus, OH 43215 (614) 224-6446 | jobs-ohio.com

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Chemical Sector Enforcement Litigation

Vincent Atriano, Squire Patton Boggs (Columbus)


US EPA National Enforcement Initiatives

Set every three years Intended to reflect the most serious

pollution problems affecting communities Chosen with state and public input 78 Fed. Reg. 5799 (Jan. 28, 2013)

Typically involve industry sectors or pollution sources that EPA believes can best be addressed by a national enforcement team

Become a focus of EPA civil and criminal enforcement resources and expertise

NEIs for FY 2014-2016 are a continuation of those for FY 2011-2013


US EPA National Enforcement Initiatives for FY 2014-2016

Keeping Raw Sewage and Contaminated Stormwater Out of Our Nation’s Waters

Preventing Animal Waste from Contaminating Surface and Ground Waters Cutting Toxic Air Pollution that Affects Communities’ Health Reducing Widespread Air Pollution from the Largest Sources,

Especially the Coal-fired Utility, Cement, Glass, and Acid Sectors Reducing Pollution from Mineral Processing Operations Assuring Energy Extraction Sector Compliance with Environmental

Laws


Cutting Toxic Air Pollution

Focus on hazardous air pollutants (HAPs) Currently total 187

Three areas with high rates of noncompliance: Leak detection and repair (LDAR); Flare waste gas reduction and improvements to flare combustion efficiency; and Excess emissions, including those associated with startup, shut down and

malfunction





US EPA concluded enforcement actions during FY2011-2013 under the Air Toxics National Enforcement Initiative:


Leak Detection and Repair

LDAR is a Clean Air Act program that requires periodic monitoring and timely repair of equipment leaks

EPA believes that leaking equipment is the largest source of VOC & HAP emissions from petroleum refineries and chemical manufacturing facilities EPA estimates that a typical refinery or

chemical plant can emit 600-700 tpy of VOCs from leaking equipment

EPA believes there is widespread noncompliance with LDAR requirements and that such noncompliance resulted in an additional 40,000 tons of VOC emissions from refineries in 1999



LDAR requirements are imposed by 25 federal standards, in addition to state and local regulations which may be more stringent

Federal LDAR requirements are imposed by: New Source Performance Standards (NSPS) for new or modified sources under 40

CFR Part 60 National Emission Standards for Hazardous Air Pollutants (NESHAPs), such as

• Hazardous Organic NESHAP (HON) in 40 CFR Part 63, Subpart H State Implementation Plans Resource Conservation and Recovery Act (RCRA), 40 CFR Parts 264 & 265



Focuses on: Valves Connectors Pumps Sampling connections Compressors Pressure-relief devices Open-ended lines

Such components can number in the thousands at a typical chemical plant Opportunities for many potential violations



LDAR requires that VOC emissions be measured in ppm using Method 21 The regulations require that monitoring be conducted periodically according

to specified intervals Leak definitions are established in ppm for each type of component (e.g., 500

or 1,000 ppm) Repairs must be attempted within specified time periods (within 5 or 15 days) Components may be placed on Delay of Repair list if repair is infeasible

without a process shutdown



Typical LDAR compliance issues, according to EPA: Failure to identify all components subject to LDAR monitoring Failure to monitor components as required (missed intervals) Failure to follow Method 21, e.g.:

• Excessively fast monitoring • Failure to monitor component’s maximum leak location • Holding probe too far away from component interface • Failure to properly maintain or calibrate the monitoring instrument

Improperly identifying components are “unsafe” or “difficult” to monitor, for which monitoring may be deferred

Improperly placing or retaining components on Delay of Repair list



EPA response: Enhanced LDAR Program (ELP) in federal court consent decrees Classic example of “regulation by enforcement”

• Essentially a re-writing of the LDAR regulations • EPA’s programmatic concerns are paramount – one size fits all

Based on several significant settlements, e.g.: Dow Chemical Co. (E.D. Mich. 2011) Western Refining Co., L.P. (W.D. Tex. 2011) Hovensa LLC (D.V.I. 2011) Lanxess Corp. (S.D. Ohio 2010) Formosa Plastics (D. Del. 2010)



ELP components: Lower leak definitions than regulations More frequent LDAR monitoring than regulations Low emission (Low-E) valves or packing for all new or replaced valves Incipient leak repair requirements Restrictions on Delay of Repair Additional training for LDAR personnel Annual third-party LDAR compliance audits

• including comparative monitoring and corrective actions if significant disparity

Typical duration: five years Non-compliance subject to stipulated penalties


Flare Combustion Efficiency

EPA contends that improper flare operation can result in hundreds of tons of excess HAP emissions

Concern with over-steaming: excess steam lowers the heating value of the gas, which is detrimental to combustion efficiency

Improperly operated flare (EPA photo):



However, NSPS (§60.18) and NESHAP (§63.11) regulations are minimal: No visible emissions (except for 5 mins. in 2 hours) Flame must be present at all times Net heating value of the combustion gas must be at least 300 BTU/scf if flare is

steam-assisted Exit velocity generally must be < 60ft/sec

These standards were assumed to achieve 98% control



In addition, EPA interprets general provision requiring that process and pollution control equipment be operated “using good air pollution control practices to minimize emissions” to require flare operators to: Follow equipment manufacturer’s specifications Stay abreast of and apply current state of scientific knowledge on flare operation

and combustion

US EPA Enforcement Alert (Aug. 2012)

Problems: Flare operation is highly variable – EPA recognizes there is no single steam-to-vent

gas ratio appropriate for all flares Scientific knowledge on flare combustion efficiency is still emerging



Once again, EPA is resorting to regulation by enforcement to beef up the flare regulations

Based on several significant settlements, e.g.: Flint Hills Resources, Port Arthur, TX (2014) Shell Deer Park, TX (2013) BP Whiting, IN (2012)



Typical flare consent decree requirements: Flare gas recovery system (FGRS) capable of recovering at least 80% of vent gas Installation of additional monitoring equipment (such as vent gas flow meter, steam

flow meter, steam control equipment, gas chromatograph or net heating value analyzer, meteorological station)

Automation of supplemental gas and steam controls Agreed limits on flaring (flaring caps) Agreed minimum heating value in the combustion zone (just above the flare tip) Agreed steam to vent gas ratio limits Agree to 98% combustion efficiency requirement


Reducing Widespread Air Pollution from the Largest Sources

Focus on New Source Review/Prevention of Significant Deterioration (NSR/PSD) requirements under the CAA

EPA believes that many existing facilities failed to install pollution controls after significant modifications

Particular attention to communities overburdened by exposure to environmental risks and vulnerable populations, including children

Builds on past EPA enforcement actions against coal-fired power plants, cement manufacturing facilities, sulfuric and nitric acid manufacturing facilities, and glass manufacturing facilities


Recent Significant NSR/PSD Developments

Greenhouse Gas Emissions (GHGs): Utility Air Regulatory Group v. EPA (SCOTUS June 23, 2014) Held that the CAA neither compels nor permits EPA to require a source to obtain a

PSD or Title V permit on the sole basis of GHGs • However, upheld EPA’s interpretation that sources which require such permits

due to other pollutants must comply with best achievable control technology (BACT) for GHGs

Basis of ruling: definition of “any air pollutant” in PSD and Title V operative provisions limited only to regulated air pollutants

• Court found that “EPA has routinely” applied this “narrower, context-appropriate meaning” to such provisions – “it takes some cheek” for EPA to say it cannot do so now



Utility Air Regulatory Group v. EPA, cont. Court noted that following its 2007 ruling in Massachusetts v. EPA authorizing EPA

to regulate greenhouse gas emissions from new motor vehicles, EPA embarked in the single largest expansion in the history of the CAA

Found that EPA’s interpretation • would constitute an “unprecedented expansion of EPA authority that would

have a profound effect on virtually every sector of the economy,” but • still be “relatively ineffective at reducing greenhouse gas concentrations”

Noted that GHGs “are emitted in such vast quantities that their inclusion would radically transform those programs and render them unworkable”



Statute of Limitations for Injunctive Relief Traditionally, only claims for penalties are subject to 5-year federal general statute

of limitations in 28 USC §2462 However, some recent cases have barred claims for injunctive relief on statute of

limitations grounds as well In United States v. Midwest Generation, (7th Cir. July 8, 2013), the Court of Appeals

affirmed complete dismissal of PSD claims against an electric utility for constructing major modifications without installing BACT more than five years earlier

• The Court rejected the Government’s “continuing violation” arguments, finding that “[o]nce the statute of limitations expired, Commonwealth Edison was entitled to proceed as if it possessed all required construction permits.”



Statute of Limitations for Injunctive Relief, cont. Most recently, we obtained a similar ruling in United States v. US Steel Corp. (N.D.

Ind.) (on motion for reconsideration 4/18/14) • The District Court had previously dismissed EPA’s PSD and NSR claims for

penalties on statute of limitations grounds, but ruled that its injunctive claims were not barred

• On reconsideration, the District Court found: “my earlier ruling was wrong, and … the request for an injunction based on a claimed permit violation from 24 years ago cannot stand”

• Upon further review of Midwest Generation, the Court concluded that “the Seventh Circuit has applied a five-year limitations period to the EPA’s suit for injunction.”

• Accordingly, it dismissed EPA’s injunctive claims as well


Energy Extraction Sector Environmental Compliance

Focus on shale natural gas development using horizontal drilling and hydraulic fracturing or “fracking”

EPA concern with “significant rise in air pollution throughout the intermountain West,” which also could occur elsewhere

Citizen concern that drilling and hydraulic fracturing pose a risk to drinking water sources due to improper well construction or wastewater management

Continuation of US EPA’s 2011 Energy Extraction National Enforcement Initiative

May involve actions under Clean Water Act, Clean Air Act and Safe Drinking Water Act



Significant recent consent decrees: Gasco Energy (D. Colo. 2014) – CWA enforcement action for unpermitted filling of

wetlands in connection with drilling of natural gas wells in Utah • Injunctive relief includes permanent closing of wells and restoration of wetlands

Chesapeake Appalachia (N.D. W. Va. 2013) – CWA enforcement action for unauthorized discharges into wetlands at 27 natural gas extraction sites

• Injunctive relief includes restoration or compensatory mitigation, employee training and development of CWA Section 404 compliance protocol

• Also $3.2M in civil penalties



Significant recent enforcement action settlements, cont.: XTO Energy, Inc. (Exxon Mobil subsidiary) (M.D. Pa. 2013) – CWA enforcement

action for spill of up to 1,366 barrels (57K+ gal.) of fracking wastewater • Injunctive relief includes

- Recycling and disposal of flowback fluid and produced water, plus - Tank management best practices

• Estimated to cost $20M


New Battleground – Local Bans on Fracking

New York’s highest court ruled at the end of June 2014 that local fracking bans are not preempted by state oil and gas law Wallach v. Dryden Cooperstown Holstein Corp. v. Middlefield

Same home rule vs. state law preemption issue currently is before the Ohio Supreme Court in State ex rel. City of Munroe Falls v. Beck Energy Corp. ODNR issued drilling permit to Beck Energy Munroe Falls sued to enforce zoning and other ordinances that prohibit drilling in

residential areas Court of Appeals (9th Dist.) ruled that the local ordinances were preempted by state

law Arguments were heard on Feb. 26, 2014


The “Greening” of California’s Green Chemistry Initiative

Chris M. Amantea, Squire Patton Boggs (Los Angeles)


California Green Chemistry Initiative

Became law in September 2008 Goal of legislation: Cause reformulation of possibly hundreds of

thousands of consumer products sold or distributed in California OR ban their sale, manufacture, import, or distribution in California

“[t]he proposal requires manufacturers to seek alternative ingredients in widely used products, offering California industry the opportunity to lead the way in producing safer versions of goods already in demand around the world…[i]f an alternative is not feasible, DTSC will identify the steps the manufacturer must take to ensure the product is safely used, disposed of, or phased out.” (DTSC, July 2012)


Four Step Implementation Process

Four-step implementation process adopted by DTSC in October 2013 1. Develop list of candidate chemicals 2. Prioritization of product—candidate chemical combinations 3. Notification by responsible entities and product alternative analysis 4. Regulatory responses


“Greening” Green Chemistry

In March 2014, DTSC FINALLY began the process of “greening” Green Chemistry

Announced the first set of “priority products” containing “chemicals of concern”

1. Children’s foam padded sleeping products containing tris(1,3-dichloro-2-propyl) phosphate (TDCPP)

2. Spray polyurethane foam systems containing unreacted diisocyanates; and 3. Paint and varnish strippers and surface cleaners containing methylene

chloride

Selected because they contain a chemical or chemicals that appear on both a hazard trait list and an exposure indicator list


Regulatory Process Set In Motion…

Manufacturers will not have to eliminate the identified chemicals from their products immediately

In May and June, DTSC held a series of public workshops on the proposed priority products/candidate chemicals

DTSC ultimately will adopt regulations for each of the priority products (could take a year or more)

After regulations are adopted, companies will have to (1) notify DTSC that they manufacture products that are on the list; and (2) begin the alternative analysis process

Preliminary alternatives analysis will be due six months after the final regulations are adopted for each priority product


What Next?

By October 1, DTSC is required to issue a priority product work plan identifying other product categories to be evaluated in next three years Workshops scheduled for August 19th and August 25th

For each priority product on the list, retailers will be required to obtain a certificate of compliance stating manufacturer is in compliance with or exempt from the regulations

DTSC has broad authority to implement an array of potentially draconian regulatory responses


Product Not On The List?

Be proactive! Safer Consumer Product regulations are groundbreaking regulations and,

when fully implemented, will have a MAJOR IMPACT on virtually all companies manufacturing, importing, selling or distributing consumer products in California

“Consumer Product” is broadly defined to include “a product or part of the product that is used, bought, or leased for use by a person for any purposes”

Even manufacturers who are not immediately impacted by the initial list should continue to be involved in the regulatory process


Already Complying With Other Regulations?

How do these regulations interface with the many state, federal, and international laws that address chemicals and consumer products?

Companies have raised the overlap and conflicts with California’s Safe Drinking Water and Toxic Enforcement Act (Proposition 65) (Also CPSIA, REACH, TSCA, to name a few)

In general, registration and notification requirements for chemicals and products are on the rise—not only for new chemicals and products containing those chemicals

Broader and more frequent reporting of chemical information on the increase These issues will not go away


How We Can Help

Assist with evaluating the complexities of the proposed Safer Consumer Products Regulations and how they might impact your business, considering overlapping and conflicting international, national, and state regulatory requirements

Help with navigating through various strategic alternatives in implementing the regulations, once they are adopted

Assist in evaluating and revising existing agreements with suppliers, vendors, manufacturers, distributors, or retailers to account for new regulatory requirements

97 squirepattonboggs.com

Vincent Atriano Partner +1 614 365 2783 vincent.atriano@ squirepb.com

Rob Elvin Partner, ES&H Deputy Practice Leader +44 161 830 5257 rob.elvin@ squirepb.com

Steve Owens Partner +1 602 528 4170 firstname.lastname@ squirepb.com

Karen Winters Partner, ES&H Practice Leader +1 614 365 2750 karen.winters@ squirepb.com

Chris Amantea Partner +1 213 689 5131 chris.amantea@ squirepb.com

Dave Gordon Partner +44 121 222 3204 dave.gordon@ squirepb.com

Contact Info Slide

98 squirepattonboggs.com

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