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Environmental Business Alert

Date: Feb 29, 2012

House Committee Questions EPA's Administration of RFS Program and Response to RIN Fraud
The U.S. House Committee on Energy and Commerce is investigating EPA's administration of the renewable fuels program as it relates to the management of renewable identification numbers ("RINs") and the Renewable Fuels Market. RINs are the basic unit by which refiners and other commercial actors demonstrate that they have met their annual obligation to blend a certain volume of renewable fuel to offset their production of conventional fuels, referred to as the "renewable volume obligation" ("RVO"). The House Committee inquiry stems from EPA's investigation and determination that 32 million RINs representing 22 million gallons of biodiesel, were fraudulently generated and introduced into commerce. The House committee is particularly interested in whether EPA intends to provide some relief to the marketplace by extending the February 28, 2012 deadline for parties to meet their RVO. More importantly, the House is seeking to understand why EPA's enforcement response is focusing on those RIN purchasers who may have innocently relied on the RINs, rather than the generator who produced the fraudulent RINs.

Maryland Bill Requiring Electronics Labeling and Takeback Programs Set for Hearing
The Maryland House of Delegates has scheduled a hearing on March 2, 2012, to discuss House Bill 1136 concerning electronics labeling, recycling and reporting. Beginning January 1, 2013, the bill would require manufacturers, prior to selling, offering for sale, or distributing a new covered electronic device, to: (1) affix a specified label on such device; (2) submit detailed registration information and an annual registration fee to the Department of the Environment; and (3) for those manufacturers producing more than 1,000 covered electronics devices per year in the immediately preceding 3-year period, (a) implement and finance an electronics takeback program and (b) submit annual reports to the Department. The proposed registration fees range up to $10,000 for initial registration and $5,000 for subsequent annual registrations for the highest producing manufacturers. Covered electronic devices include computers and computer peripherals; small-scale servers; video display devices with screens greater than 4 inches on the diagonal; video cassettes and digital video recorders and disc players; electronic and video game systems and controllers; signal converter boxes, set top boxes and cable, satellite and digital media receivers; and cables, cords and wiring permanently affixed to or incorporated into the previously mentioned devices.

EPA Extends Public Comment Period for Draft Hydraulic Fracturing Report
EPA has extended the public comment period on its draft report concerning hydraulic fracturing near Pavillion, Wyoming, by 45 days. A scientific peer review panel is scheduled to meet after the public comment period to review the report, and will and is expected to consider any comments submitted by the new March 12, 2012 deadline. Note that in a hearing before the U.S. House Subcommittee on Energy and the Environment held earlier this month, Thomas Doll, Wyoming Oil and Gas Conservation Commission Supervisor, criticized the draft report, claiming that EPA's findings did not take into account key data concerning the depth and construction of production wells or producing aquifer isolation. He also questioned the scientific integrity of the conclusions drawn, asserting that they were not based on the weight of evidence or the best available science.

EPA Considers Mandatory PSD Permit Ozone and PM2.5 Modeling
EPA has granted the Sierra Club's July 28, 2010 petition for rulemaking, which aims to force all Clean Air Act prevention of significant deterioration ("PSD") permit applicants to use designated air quality models to project ozone and fine particulate matter ("PM2.5") emissions impacts. Currently, EPA requires states to develop State Implementation Plans ("SIPs") to ensure national ambient air quality standards ("NAAQS") for ozone and PM2.5 are met. Under the existing approach, states bear responsibility for granting PSD permit applications if they comport with established SIPs. Requiring PSD permit applicants to submit modeling data that demonstrate compliance with ozone and PM2.5 NAAQS could effectively shift the obligation to industry and prevent sources located in areas with high background emission levels from obtaining permits if modeling predicts the proposed activity will result in non-attainment. EPA will provide draft guidance on proposed modeling techniques in its 10th Conference on Air Quality Modeling, scheduled for March 13th through 15th, 2012 in Research Triangle Park, North Carolina.

EPA Appeals District Court Decision Precluding Successor Liability for PSD Violations
EPA has filed an appeal in the Seventh Circuit of a federal district court decision dismissing the Agency's claims under the PSD program. EPA originally sought civil penalties and injunctive relief against six coal-fired power plants currently owned by Midwest Generation, LLC for their alleged failure to obtain preconstruction permits under the PSD program before commencing major modifications that would increase facility emissions. The U.S. District Court for the Northern District of Illinois held that a PSD violation occurs at the time of construction and no later. Accordingly, the district court dismissed EPA's claim that every day of continued operation of these major modifications constituted an ongoing violation. The lower court also found that the alleged violations were not committed by Midwest Generation, LLC but rather the previous owner who completed the major modifications. In a footnote, the court dismissed EPA's theory that Midwest Generation, LCC assumed the previous owner's liability on the basis that the parties entered into an asset-only purchase agreement and the PSD provisions impose obligations on "persons" not "sources." Had Midwest Generation, LCC purchased the corporate entity rather than simply its assets, the lower court may have held otherwise. The brief for the United States is due April 6, 2012; Midwestern Generation, LCC must submit its reply brief by June 5, 2012. See United States v. Midwest Generation LLC, No. 12-1026 (7th Cir. Jan. 5, 2012); United States v. Midwest Generation LLC, No. 09-CV-05277 (N.D. Ill. Mar. 9, 2010).

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