Recent Changes to EPA Coal Ash Regulations - Regulatory and Insurance Coverage Implications
by Barry I. Buchman , Julie R. Domike , Suzanne Beaudette Murray , Adrian C. Azer
Published: January, 2019
Submission: January, 2019
Haynes and Boone, LLP Press
A new rule promulgated by the U.S. Environmental Protection Agency (“EPA”) governing the disposal of coal combustion residuals, also known as CCR or coal ash, raises the risk for civil claims and the need for insurance to cover them.1 The rule, which takes effect Aug. 29, 2018, revises regulations issued in 2015 and has the stated intent of providing utilities and states “more flexibility in how CCR is managed.”2 Although the revised regulations provide utilities significant benefits with regard to the processes and procedures required to manage coal ash, businesses may still be faced with enforcement actions and civil claims, including those brought by environmentalist groups under the citizen suit provisions of the Resource Conservation and Recovery Act (“RCRA”). Companies should ensure that they understand their existing and historical insurance policies and also that they have appropriate insurance in place going-forward to provide coverage if claims arise. This coverage may be available for a variety of environmental claims brought by citizen groups and is not limited to the coal-ash rule.
This alert addresses (1) the changes to the 2015 rules; (2) potential civil claims that may arise due to the regulatory changes; and (3) the potential availability of insurance coverage to protect utilities from the impact of such civil claims.
I. Overview of the EPA’s Revisions to the 2015 Regulations
Coal ash is an industrial waste created when coal is burned to produce electricity. The EPA promulgated rules regarding its disposal in 2015 in the wake of two disastrous events: a 2008 dam breach at the Tennessee Valley Authority's Kingston power plant that leaked over a billion gallons of coal ash, and a 2014 pipe breach at Duke Energy’s Dan River steam station that leaked nearly 40,000 tons of coal ash.
In response to industry concerns, the EPA finalized its first set of revisions to the 2015 rules on July 18, 2018. The revised rules:
Environmental activists have decried the 2018 rule amendments as an “indefensible gutting of our nation’s first-ever coal ash pollution control rule” that “opens the door for weakened monitoring and cleanup standards . . . .”5
II. Potential Civil Claims Related to Coal Ash
Although the 2018 rule amendments are generally industry-friendly, their promulgation does not mean that coal ash facilities can let down their guard. Catastrophic events, like those at the Kingston power plant and Dan River steam station, will attract state regulatory attention, and activists have shown themselves willing and able to fund lawsuits. Moreover, the law provides activist groups with several avenues to bring cases against coal ash disposal facilities. For instance, RCRA allows for citizen suits to enforce its standards, and the Fourth Circuit and Sixth Circuit are deciding whether to join the Ninth Circuit in finding that indirect discharges of coal ash through groundwater to the navigable waters of the United States are violations of the Clean Water Act. Similarly, common law nuisance claims can serve as useful vehicles for environmental lawsuits.
III. Insurance Coverage for Potential Civil Claims Related to Coal Ash
As noted, with the EPA’s easing of regulations, there is risk that environmental groups will take a more active role in pursuing civil claims for environmental contamination resulting from coal ash. Indeed, prior to the July 2018 revisions, environmental groups were actively pursuing companies to remediate disposal sites, address alleged groundwater contamination, remediate purported natural resource damages (“NRD”), and establish monitoring and sampling processes. This trend likely will increase with the EPA revisions.
Given this potential increase in suits and, correspondingly, potential liability, companies proactively should address their commercial insurance program to ensure that they can secure coverage to defray potential litigation costs and liabilities.
Commercial general liability (“CGL”) insurance policies and environmental liability insurance policies typically provide coverage for environmental contamination claims. Each of these policies may provide coverage for “property damage” claims, such as groundwater contamination, and certain of these policies may also provide coverage for bodily injury claims. Whether coverage is available may be subject to several coverage issues, including but not limited to:
Thus, companies should evaluate their coverage in light of the potential for increased claims and, when doing so, they should pay attention to historic policies that may provide coverage for such claims. More specifically, companies should take the following steps to put themselves in the best position to maximize coverage should the need for coverage arise:
A company’s insurance policies can be a very valuable corporate asset. Companies can maximize the value of that asset by addressing it proactively now rather than waiting until a “storm” arrives.
1 83 Fed. Reg. 36,435, 36,435 (July 30, 2018).
2 News Release, U.S. Environmental Protection Agency, EPA Finalizes First Amendments to the Coal Ash Disposal Regulations Providing Flexibilities for States and $30M in Annual Cost Savings (July 18, 2018). On August 21, 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion vacating parts of the 2015 rule for being too lenient, finding that EPA acted arbitrarily and capriciously and contrary to statutory requirements by “failing to require the closure of unlined surface impoundments, in classifying so-called ‘clay-lined’ impoundments as lined, and in exempting inactive surface impoundments at inactive power plants from regulation.” Utility Solid Waste Activities Grp. v. EPA, No. 15-1219, 5-1221, 15-1222, 15-1223, 15-1227, 15-1228, 15-1229, 2018 WL 4000476, at *26 (D.C. Cir. Aug. 21, 2018). Environmental groups are almost certain to challenge the 2018 rule, as well.
3 The new rules allow two types of alternative performance standards. One allows a state director (of a state with an approved coal ash permit program) or EPA (in states that do not have an approved coal ash permit program) to suspend groundwater monitoring requirements if there is evidence that there is no potential for migration of hazardous constituents to the uppermost aquifer during the active life of the unit and post closure care. The other allows issuance of technical certifications in lieu of a professional engineer.
4 EPA extended the closure deadline in two situations. One is where the facility has detected a statistically significant increase above a groundwater protection standard from an unlined surface impoundment. The other is where the unit is unable to comply with the location restriction regarding placement above the uppermost aquifer.
5 Press Release, Earthjustice, Trump Administration’s New Rule Weakens Toxic Coal Ash Pollution Safeguards: EPA announcement puts people at increased risk to cancer, heart disease, stroke, brain damage (July 18, 2018).
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