EPA Enforcement Priorities and Trends

Environmental

Compliance and

Sustainability in the

Retail Industry

Sean M. Sullivan

Williams Mullen

301 Fayetteville Street, Suite 1700

Raleigh, NC 27601

(919) 981-4312 ssullivan@williamsmullen.com

Major Topics

• EPA Enforcement Priorities and Trends

• Considerations for Compliance Auditing

• Vapor Intrusion at Brownfields Sites

• Disaster Planning

• Sustainability In Retail

EPA Enforcement Priorities and

Trends

• Stormwater

• Hazardous Air Pollutants

• Underground Storage Tanks

• Hazardous Waste Issues

• Recent Enforcement Cases involving

Retailers


Trends

• EPA’s Nationwide Priorities for FY 2010-

2013 include:

– Stormwater compliance (construction and industrial).

– Emissions of air pollutants from boilers and generators.

– Underground Storage Tanks.


Trends

• Stormwater Compliance

– Construction sites continue to be a high priority for EPA.

– Depending on the structure of a development transaction, anchor stores may find themselves as permittees for stormwater discharges.

• The owner of a construction site is usually the target of enforcement.


Trends


– Can be a major source of pass through costs in leases.

• In NC, DENR has proposed rules that require commercial developments to retrofit pollution controls due to water quality problems in a Raleigh lake.

• Landlords may be able assess tenants for those costs.


Trends


– In Chesapeake Bay Watershed, state and local governments will be forced to install additional controls and meet stricter discharge limits.

• Higher utility fees and taxes.

• Local governments may also impose additional regulations to meet these stricter limits.


Trends


– EPA issued new emissions rules for industrial and commercial boilers in early 2011.

• Apply to both major and minor sources of

HAP emissions.

• Operators of heating boilers (for example) have varying compliance obligations based on:

– Type of fuel source

– Whether they emit more than 10 tpy of any one HAP or 25 tpy of all HAPs.


Trends


– Generators

• All “non-emergency” generators are regulated.

• Emergency generators installed after June 12,

2006 are regulated.

• Emissions and fuel limits, records, notifications.

• Generators can become non-emergency if:

– New generator is used for demand management or is part of a financial arrangement with a third party.

– Existing generator runs > 15 hours per year for demand management or demand shaving deal.


Trends

• Underground Storage Tanks

– Not only an issue for retail operations but also for distribution centers.

– Leak detection, recordkeeping and reporting of potential releases are primary requirements.

• Have had several cases where maintenance staff ignore a faulty sensor because others are working or ignore release alarms because other parts of system indicate no release has occurred.

• You have to fix the faulty sensor or resolve the source of the release alarm, or it’s a violation.

• EPA hits parties hard for not reporting failed leak detection tests.


Trends


– Pesticides, paint, batteries and fluorescent light bulbs are all hazardous waste when disposed or sent for recycling.

– Some of this material must be managed as hazardous waste and some can be managed as universal waste.

• Standard procedures are an easy way to ensure these materials are handled properly.


Trends


– Procedures should not be too generalized.

• Had a case where a client treated any spill of any material with an MSDS as hazardous waste.

• Changed some operations at a distribution center and had a number of spills in one month.

• Between the normal amount of hazardous waste generated, they crossed the LQG threshold one month.

• Had an inspector come through a month later and the facility was not in compliance with LQG rules.

• Could have avoided the violations by not treating absorbents as hazardous waste automatically.


Trends

• Federal Enforcement Data

– Available in the ECHO database.

– Trends over the last five years

• A number of retailers were caught in the silly string cases.

• Numerous retailers have had generator-status violations

• UST violations for gasoline sales, retail distribution centers, and generator fuel.

• Failure to have and comply with Spill Prevention

Control and Countermeasures Plans.

• Construction stormwater enforcement cases.


Trends

• Interesting Individual Enforcement Cases

– Operation of large capacity cesspools in

Hawaii.

• Highlights risks in relying on state guidance.

– Releases of hydraulic fluid containing PCBs from a shopping mall elevator.

• Neither retailer nor mall owner cleaned up known spills of fluid.

– Failure to repair known refrigerant leaks at retailer’s corporate offices (multiple locations).

• Violations can occur anywhere.


Trends

• Pesticide / Product Labeling Issues

– If a product’s labeling claims to control pests, it must be registered as a pesticide.

– Distribution of an unregistered pesticide in commerce is a violation of FIFRA, and enforcement actions against retailers are common.

• Situation also forces retailers to remove large quantities of merchandise from shelves.

– Recent example is mold and mildew cases.


Trends

• Mold and Mildew Cases

– Critical question is whether the product claims the ability to control a living organism.

– Claim to prevent “mold and mildew” can only be made for registered pesticide.

• Safeway paid a $600K civil penalty for this type of claim on its house brand toilet bowl cleaner.


Trends

• Mold and Mildew Cases

– Compare Safeway claim to:

• Claim to prevent mold and mildew stains.

• Claim to clean and remove mold and mildew stains.

• Claim to prevent tough odors.

• EPA has a fact sheet for cleaning products on its website.

Major Topics






Considerations for Compliance

Auditing

• Basic Truth – EPA does not recognize any

“audit privilege” created by state law.

– Audit reports will be admissible as evidence in any federal proceeding.

• Exception – Attorney-client privilege and attorney work product doctrines.

– If a consultant prepares the report in order to allow an attorney to provide legal advice, the report is protected from disclosure.


Auditing

• Running compliance audits through internal law departments provides a cost effective means of keeping reports confidential.

• Select an attorney whose role in the company is clearly legal.

– To the extent a lawyer functions in a business role, there is an argument no privilege exists.

– Using outside counsel eliminates this risk.


Auditing

• Maintain the confidentiality of compliance audit reports.

– Limit availability in document management system and distribution among employees.

– Extent of permissible distribution varies.

– Disclosure during transactional due diligence can waive privilege.

Major Topics






Vapor Intrusion at Brownfields

Sites

• Trend towards urban redevelopment commonly involves sites with environmental contamination.

• Certain types of groundwater contaminants produce gas that rises through the soil to the surface.

– Typically chlorinated solvents, dry-cleaning chemicals and gasoline.

– Result is indoor air quality problems.


Sites

• Many states follow EPA’s 2002 guidance on vapor intrusion.

– Lays out a multi-tiered process for evaluating whether groundwater contamination poses a vapor risk.

– Depending on site-specific factors, soil gas sampling and then indoor air sampling may be warranted.


Sites

• States are finding that the screening levels in the 2002 guidance are not conservative enough.

– Reopening closed sites to evaluate human health risk.

– NC has initiated a fundamental re-evaluation of its vapor intrusion program.

• Immediate indoor air sampling is not a good idea, though.

– Soil gas sampling is the better approach.

Major Topics






Disaster Planning

• Has been an issue recently in North

Carolina with the tornado outbreak.

• Environmental issue is disposal of materials in a store that are damaged or destroyed.

• Two major concerns:

– Products.

– Building and its fixtures.


• Product Disposal

– Examples – Pesticides, paint, CFL light bulbs.

– If these materials are in an area that’s unsafe to enter, building demo may cause releases.

– Depending on store configuration, spilled materials can enter storm drains and be released to surface waters.


• Building and Fixture Disposal

– Fluorescent lighting.

– Older buildings with asbestos.

– Lead-based paint.

• Regulatory problem – the mixture rule.

– Rule – if one mixes hazardous waste with non-hazardous waste, the entire mixture is now hazardous waste.


• Mixture Rule Problem

– Application of the rule is within the state’s regulatory agency’s discretion.

– Key is convincing the regulator you have not intentionally mixed hazardous and non-hazardous waste.

• Minimize the potential for additional releases after the event has concluded.


• There are a number of studies regarding debris disposal after Katrina.

• As a result, EPA has directed states to develop debris management plans, which include staging areas for different classes of materials.

• Private businesses are still responsible for disposing of their own debris, but understanding the local plan may help facilitate disposal and rebuilding.


• Post-Katrina Enforcement Cases

– Improper disposal of asbestos.

– Dumping of materials in unpermitted locations.

– Improper management of fluorescent light bulbs and ballasts.

• Key is understanding what you have in your store and how it needs to be managed ahead of time.

Major Topics






Sustainability in Retail

• EPA’s Definition of Sustainability – going beyond your regulatory obligations to protect the environment.

• Five Major Areas for Retail Industry

– Buildings and Infrastructure

– Facilities Management

– Transportation/Logistics/Supply Chain

– Merchandising (Packaging)

– Customer Programs


• Buildings and Infrastructure

– Advanced Refrigeration to avoid ozone depleting substances.

• Benefit of avoiding regulatory requirements under CAA, but ammonia-based systems have their own rules.

– Building materials and designs that limit energy use and use materials with lesser environmental impact.

• Leases should be written to allocate savings to entity that bears the cost.


• Smart Growth – use of brownfields properties for new stores to reduce sprawl.

• Green Infrastructure – design sites with less impervious surfaces to reduce pollutant loads on utilities and volume of stormwater discharge.


• Facilities Management

– Selecting boilers with greater energy efficiency ratings and potential for cogeneration.

– Limit amount of fats, oil and grease you discharge to sewer system.

– Landscaping to maximize pervious surface and minimize need for fertilizer and pesticide.


• Transportation and Supply Chain

– Encourage public transportation use among employees.

– Alternative fuels for fleet vehicles.


• Merchandising

– Life Cycle Analysis – concept of evaluating the entire life of a product

(from manufacture to ultimate disposal).

• Identify products with lower carbon footprint.

• Select offerings that limit use of hazardous chemicals during production.


• Merchandising

– Packaging

• Activist shareholder groups have been advocating shareholder resolutions to stop retailers from using PVC-based packaging.

• Problem of plastic bags.

– Supply Chain Management

• Selecting products whose life cycles have less environmental impact.

• Problem of enforcement of vendor contracts

(ex – Silly String Cases)


• Supply Chain Management

– Lacey Act Amendments of 2008

• Prohibits the import or distribution in commerce of any plant harvested in violation of federal, state or foreign law.

• Also applies to certain products containing plants; phased in over time.

• Again, the problem of controlling the sources of raw materials and enforcing contractual provisions.


• Consumer Programs

– E-Waste

• 20 States currently have programs requiring recycling of this material.

• Hazardous substances in electronics include: lead, cadmium, lithium, nickel

• Examples

– California treats it as state-only hazardous waste

– North Carolina requires manufacturers to establish recycling programs.

• Retailers can establish collection programs for their customers.

Contact Information

Sean M. Sullivan

Williams Mullen

301 Fayetteville Street, Suite 1700

Raleigh, NC 27601

(919) 981-4312 ssullivan@williamsmullen.com

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