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Re: Reg-Fix and Certain Rule Authorized Wells Believed to Have
Lost Rule Authorization Under the Previous Rule
Folks:
This will acknowledge my telephone conversations last week with Ms. Pryor and Ms. Bannister concerning the above captioned matter.
On June 4, 1997, Region IV sent out seven (7) or more letters addressed to permit applicants covering wells previously erroneously believed to have lost rule authorization prior to the "clarification" of Reg-Fix. Said letters included a technical deficiency notice and a demand that the applicants "satisfactorily address" said technical deficiencies within sixty (60) days or Region IV intends to issue its public notice of intent to deny.
I have argued that the wells described above do not need permits, and can be addressed with far greater administrative efficiency as rule authorized wells. It is no exaggeration that the burden on the taxpayers will be thousands of dollars greater if Region IV continues on its present unnecessary course.
The purpose of this letter is to once again discuss this issue.
HISTORY
In the past, this office was very active as a consultant to area operators on EPA UIC compliance matters. In a time frame of five to ten (5-10) years ago, a number of operators retained this office to represent them when they "surrendered" to EPA for operating wells for which timely inventory submissions had not been made.
Handling these cases posed a serious problem because of the pre-Reg- Fix language at 40 CFR §144.26, "Any authorization under this subpart automatically terminates for any operator who fails to comply within the time specified ...." Through the efforts of this office, and a few sorely missed UIC enforcement personnel (Fred McManus and Michael Hollinger), a solution was crafted - EPA and each affected operator entered into an Administrative Order on Consent (AOC) containing a variety of compliance timetables, including the submission of a UIC permit application. The affected operators were allowed to continue operating the subject injection wells, and everybody was more or less happy. Unfortunately, processing some of the permit applications turned into an administrative nightmare; hence, a number of them have continued to lay around at Region IV, including the seven (7) addressed in the June 4, 1997 correspondence mentioned above.
REG-FIX
Reg-Fix did away with the automatic termination of rule authorization for failure to submit a timely inventory. I reasoned that the wells at issue must then still be rule authorized (in fact they were always rule authorized), and that permitting should no longer be necessary. (There is no controversy that the subject wells, used both before and after the magic date, June 25, 1984, are still rule authorized, only whether continuing the permitting process makes sense; even Region IV acknowledges that these wells remain rule authorized. See Mary Kay Lynch's letter of February 24, 1997, Page 2, Question No. 4.)
I first formally approached Region IV about this matter in two letters of December 22, 1993, copies of which are enclosed. The December 22, 1993 letter captioned "Reg-Fix" nicely summarizes my argument. Region IV responded by issuing a draft AOC to Taffy, Inc., which AOC did not require a permit application submission.
But Region IV changed its mind and stubbornly insisted this office was wrong and that permitting would be required. There ensued a six month long campaign to convince EPA headquarters that permitting for this subset of wells was a waste of agency resources. Selected letters are enclosed; only those that advance the argument originally set out in the December 22, 1993 letter are included, which letters are dated January 15, 1994, May 2, 1994, and May 25, 1994.
Finally, on July 6, 1994, EPA headquarters issued a Memorandum addressing this issue, a copy of which Memorandum is enclosed. In said Memorandum, EPA headquarters agrees to restructure 40 CFR §144.26 to specifically allow late inventory submissions, something that has not happened to date. This office addressed the amendment question in the May 25, 1994 letter mentioned above, and in an August 10, 1994 letter, a copy of which is enclosed (please see the enclosed May 25, 1994 letter for what I hope is a thoughtful discussion of the omission of specific language question).
Nevertheless, the July 6, 1994 headquarters Memorandum specifically authorizes the use of an AOC to address these wells, and contemplates the use of an already submitted permit application to satisfy the inventory requirement. There is little reason to debate whether EPA needs to promulgate a direct final rule change to 40 CFR §144.26; headquarters has committed to do so and has authorized the use of an AOC to cover everybody's rear-end until they get around to doing it. What is clear is that headquarters agrees that permitting these wells is a waste of resources.
Mr. Thomas J. Hansen called me the day the Memorandum arrived from Washington to congratulate me on prevailing in this long and heated debate!
There is an interesting enforcement case that bears mentioning here. This office represented [deleted] in a long and lingering case styled Docket Number 4-UICC-[deleted]; Mr. [deleted] was alleged to have failed to give the notice required by his UIC permit upon sale of the subject property to another operator. Mr. [deleted] had entered into an AOC very much like those discussed herein; he submitted a UIC permit application for wells now considered rule authorized after Reg-Fix and after being put through all sorts of torture he finally received a permit. There was no question that Mr. [deleted] was guilty of not giving the notice required by his UIC permit, but in his defense, I argued that he did not need the permit, should not have been required to obtain said permit for his rule authorized wells, and that he could not be prosecuted for failing to give notice pursuant to a permit he was improperly forced to obtain. Region IV agreed and dismissed the action against Mr. [deleted]!
REGION IV FLIP FLOPS
In a letter dated February 24, 1997, and signed by Mary Kay Lynch, Region IV states, "EPA disagrees with that position because, as set forth below, the only way to regain the right to inject, once lost, is by obtaining a permit." What is most noteworthy about said February 24, 1997 letter is its complete failure to mention the July 6, 1994 EPA headquarters Memorandum.
On February 27, 1997, I responded to Ms. Lynch's February 24, 1997 letter, a copy of the applicable portion of which letter is enclosed. Additional information was forwarded to Ms. Tarras on April 14, 1997, a copy of which letter is enclosed. To date, Region IV has not responded to either letter.
40 CFR §144.25
Ms. Lynch's February 24, 1997 letter contains the interesting statement that "... EPA is still justified in requiring a permit under 40 C.F.R. §144.25(a)(1) because the wells had lost the right to inject by failing to submit a timely inventory...." But 40 CFR §144.25(b) requires a specific notification procedure in such cases, and said procedure has not been followed in any of the cases under discussion. Further, until recently we all believed the subject wells had lost rule authorization, and hence we would all have believed that 40 CFR §144.25, a provision allowing the Director to require permits for rule authorized wells, would have been inapplicable to these wells.
Yes, Region IV could invoke 40 CFR §144.25 at this late date. To do so would be petty and vindictive, and would waste the resources of EPA and the affected operators. By the way, your respondents would be better off with 40 CFR §144.25 since injection would be prohibited only after the effective date of permit denial and not upon the mere publishing of a notice of intent to deny.
AOC PROBLEMS
The June 4, 1997 letters sent out to the various operators, with copies to this office, mention that each UIC permit application at issue was submitted pursuant to an AOC (a copy of a typical June 4, 1997 letter is enclosed). Said letters go on to say that the provisions of the AOC are binding upon the respondent, successors, and assigns, but that may not be true.
I have examined all the AOCs involved in the June 4, 1997 mailing except the one now allegedly applicable to [deleted] Oil Company (under no circumstances would this office represent Mr. [deleted]). In the examined AOCs, the one and only cited violation was the operation of injection well(s) without rule authorization or UIC permits (40 CFR §144.11). But these wells were and are rule authorized! (Reg-Fix was billed as a clarification, not a major rule making, hence we are compelled to view our previous belief that the subject wells lost rule authorization as an interpretative error. Besides, from a common sense standpoint, how can a well used both before and after the "magic date" of June 25, 1984, a well now unquestionably rule authorized, somehow not have been rule authorized before?)
This leaves us with AOCs without raison d'ętre. There must be a violation for there to be an AOC; EPA could have cited other violations, but it did not. I would respectfully argue that the subject AOCs are null, void, and unenforceable for failure to find a valid violation.
Some EPA personnel are fond of thinking of an AOC as a contract, something I have always regarded as wrong-minded. (It has been humorously observed that if EPA AOCs are contracts, they are all unenforceable because they are always entered into under duress.) Ms. Lynch's letter of February 24, 1997 states, "The agreement was that in exchange, EPA would issue an Administrative Order on Consent rather than Administrative Penalty Orders." But the AOCs at issue cite no violation for which a penalty could have been imposed (again, do not ask me why no other violations were cited). I am no contract expert, but it seems to me like a classic case of failure of consideration. Analyzing the subject AOCs as contracts, I would respectfully argue that said AOCs are unenforceable for failure of consideration.
However you look at it, I do not believe the AOCs at issue can stand as enforceable Orders (unless they are modified on consent). Accordingly, said AOCs should not be used as a justification to continue the unnecessary permitting of the subject rule authorized wells.
THE NIGHTMARE
So what is the big deal? The affected operators will spend many more hours and many more dollars completing the permitting process than if the subject wells are treated as the rule authorized injection wells they are. There are ongoing testing and reporting requirements under a permit that are not required for rule authorized wells. And oil leases with rule authorized wells are more valuable than leases with UIC permits (presumably because of purchaser fear of EPA). The list could go on and on.
On May 6, 1994, I prepared A Case Study of the C.W. Smith Lease Permit Application Process for the folks at headquarters. Washington later indicated that this case study was a major reason EPA headquarters finally issued a favorable determination on July 6, 1994. I have enclosed a copy of the case study, but for the sake of economy, the exhibits are omitted; if any of you wish all or any part of the exhibits, you need only ask.
Also enclosed is Mr. William Mann's June 4, 1997 Technical Deficiency Comments for the C.W. Smith permit application. You will note that Mr. [deleted], the current operator, must fill out a new EPA Form 7520-6. He must engage a laboratory to perform water analysis, a cost he would not ordinarily incur for a rule authorized well. He must submit a surface and subsurface schematic diagram, despite the fact that said requirement was previously waived due to the simple construction of the well. He is instructed to include copies of invoices, even though that issue has been previously addressed in exhaustive correspondence. Mr. Mann then requests a documented chronology posing a series of questions, all of which have been addressed in scores of pages of correspondence. Mr. Mann even questions a discrepancy between 4-1/2" casing and 4" casing; there is no such animal as 4" O.D. casing (there is a 4" O.D. tubing, but I have never seen it in Western Kentucky) - Mr. Mann knows or should know that when drillers mention 4" casing on historical logs in this area, they mean 4-1/2" O.D. casing, which is approximately 4" I.D.
Finally, Mr. Mann states that an increase in the amount of financial responsibility may be required. After the Hell EPA put the last operator through over the amount of the financials on this well, it is beyond my comprehension that Mr. Mann would even bring up the financial responsibility. It is important to understand that the C.W. Smith well sits in the midst of a sea of rule authorized wells, none of which has been bonded or MIT'd. The amount of resources EPA has expended on this little well is beyond all reason; stop this insanity now and regulate the C.W. Smith well as the rule authorized well that it is. EPA has more information about the C.W. Smith injection well than probably any other rule authorized well in Hancock County, Kentucky! Incidentally, [deleted] is a religious man for whom I have great respect. His wife was recently killed in a horrible automobile accident; he deserves to be treated fairly.
THE TAXPAYERS
There is no more compelling argument against the continued processing of permits for these rule authorized wells than the fact that it is a waste of taxpayer dollars. Forget euphemisms about "administrative efficiency" and "agency resources"; what we are really talking about is wasting the taxpayer's money.
I cannot begin to guess how many hundreds of dollars the June 4, 1997 mailings cost, but I can tell you that the postage alone was at least $22.57. Keeping these cases in permitting will create advertising costs and public notice costs that would not be incurred if the subject rule authorized injection wells were regulated as such, and this is just the tip of the iceberg in unnecessary costs to the taxpayer. If this were not so technical and arcane, this would be a story that belongs on network televisions's The Fleecing of America.
One of the six respondents in the June 4, 1997 mailing is related to U.S. Senator Wendell Ford. He has asked me to forward a copy of this letter to Senator Ford, but I declined to do so. I have always believed that my proposals to EPA should stand or fall on their technical and/or legal merits, but recent events make me question if that is any longer possible.
CONCLUSION
The injection wells at issue are rule authorized wells. There is no suggestion that any of the subject wells are causing environmental problems whatsoever. Rule authorization is no less restrictive than the permitting process, just less resource intensive for EPA and for the operators. There is no legal impediment to regulating these wells as rule authorized and getting them out of permitting; even EPA headquarters has given its blessing to this approach. The existing AOCs can be modified in the way contemplated by the headquarters Memorandum, though I believe even that is unnecessary (the AOCs are likely unenforceable in their present form, but that defect can also be remedied by agreed amendment and public notice will not even be necessary).
How can Region IV rationalize and defend wasteful, burdensome, and unnecessary continued permit processing for rule authorized wells that are causing no environmental problems? Please, please give the affected operators a break, and give me a break since I will probably have to do all or most of the paperwork!
Thank you.
Sincerely,
Syd H. Levine
President
SHL/SC:123/EPA/UIC-FIX.015
enclosures
Pc: Darlene R. Davis, Trial Attorney (with enclosures)
U.S. Department of Justice Environmental Enforcement Section
P.O. Box 7611
Washington, DC 20044
Bruce Kobelski (with enclosures)
Mail Stop 4606
U.S. Environmental Protection Agency
Regulatory Implementation Branch
401 M Street, SW
Washington, DC 20460
[Deleted for Wussiness Reasons]
Jane K. Mays
Kentucky Oil & Gas Association
3520 New Hartford Pike
Suite 403
Owensboro, KY 42303
[Several Addressees Deleted for Privacy Reasons]
Morris Levine, Attorney at Law
Gay Levine, Attorney at Law
Levine, Levine & Levine
Nashville, TN
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