oversight

Deep Injection Wells: EPA Needs to Involve Communities Earlier and Ensure That Financial Assurance Requirements Are Adequate

Published by the Government Accountability Office on 2003-06-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Honorable Lynn C.
             Woolsey, House of Representatives



June 2003
             DEEP INJECTION
             WELLS
             EPA Needs to Involve
             Communities Earlier
             and Ensure That
             Financial Assurance
             Requirements Are
             Adequate




GAO-03-761
                                                June 2003


                                                DEEP INJECTION WELLS

                                                EPA Needs to Involve Communities
Highlights of GAO-03-761, a report to           Earlier and Ensure That Financial
the Honorable Lynn C. Woolsey, House of
Representatives                                 Assurance Requirements Are Adequate



Billions of gallons of hazardous                Although EPA provides opportunities for public comment on proposed
liquid waste are injected into                  commercial Class I deep injection wells as required by regulations, these
underground wells each year.                    opportunities come late in the process, after a draft permit has been
These Class I hazardous deep                    prepared and this timing may limit the extent to which concerns are
injection wells are designed to                 addressed. EPA responds to all public comments, but it cannot deny a
inject waste into an area below the
lowermost underground source of
                                                permit on the basis of community concerns if all regulatory requirements
drinking water. EPA and the states              for protecting drinking water are met. However, earlier involvement could
grant permits to commercial                     give communities more time to contact appropriate state or local officials
operators to construct and operate              to address concerns that are not within the scope of EPA’s authority. In
these wells and must obtain public              Michigan, where EPA issues injection well permits, communities believe that
comments on the permits.                        their concerns are often not fully resolved; in some instances, communities
Communities often raise concerns                have filed legal actions and complaints to prevent well construction. In
about well safety and other                     contrast, the three states to which EPA has authorized responsibility for
matters. GAO examined the extent                issuing permits have enacted requirements for earlier and more public
to which EPA and the states                     involvement. Overall, they believe that early involvement better addresses
(1) address these community                     community concerns, mitigates controversial issues, and avoids litigation.
concerns, (2) consider
environmental justice issues, and
(3) ensure that financial assurances            EPA addresses environmental justice issues in two basic ways—first, as
adequately protect the taxpayer if              part of its process for deciding whether to issue a permit for well
bankruptcy occurs. GAO, among                   construction, and second, in response to specific civil rights complaints
other things, examined the permit               filed with the agency after permits are issued. EPA encourages its regional
process in the four states that have            offices issuing construction permits to determine if minority and low-income
commercial Class I wells.                       populations are disproportionately affected by a proposed well’s location.
                                                Individuals and communities may appeal EPA permit decisions with EPA’s
                                                Environmental Appeals Board or, for other permit decisions, file complaints
GAO recommends that EPA                         under Title VI of the Civil Rights Act with EPA’s Office of Civil Rights. Only
•  involve the public earlier in the            one community has filed complaints related to deep injection wells; these
   permitting process to allow                  complaints did not result in changes to the permit decisions. Court decisions
   more time for community                      have recently limited the basis for filing Title VI complaints, making the
   concerns to be addressed; and                process an unlikely avenue for changing permit decisions.
•  determine if the program’s
   financial assurance                          Current financial assurance requirements may not ensure that adequate
   requirements need to be                      resources are available to close a commercial deep injection well in the
   strengthened.                                event of bankruptcy or ceased operations. While only four sites have gone
                                                into bankruptcy or ceased operating since the program began in 1980; two
EPA did not agree with GAO’s
recommendations and stated that
                                                did not have adequate financial resources to plug and abandon wells and for
(1) public involvement is limited               the other two, financial assurance was not tested because other companies
by program regulations and (2)                  purchased and continued operating the wells. EPA has questioned the
financial assurance requirements                adequacy of some financial assurance requirements in other programs
are not deficient. GAO maintains                that are similar to those for Class I deep injection wells. EPA’s Office of
the recommendations are sound.                  Inspector General has reported that financial assurance requirements for
                                                another waste management program, which the requirements for deep
www.gao.gov/cgi-bin/getrpt?GAO-03-761.
                                                injection wells mirror, may not be adequate to close facilities; an EPA
To view the full product, including the scope   working group is also reviewing similar aspects of financial assurance
and methodology, click on the link above.       requirements for a different type of injection well for possible changes.
For more information, contact John B.
Stephenson at (202) 512-3841 or
stephensonj@gao.gov.
Contents


Letter                                                                                     1
               Results in Brief                                                            3
               Background                                                                  5
               Community Concerns Could Be More Comprehensively Addressed
                 Before Draft Permits Are Completed                                        9
               Environmental Justice Concerns Are Addressed during the
                 Permitting Process and in Response to Civil Rights Complaints           14
               Financial Assurance Requirements May Not Be Adequate for
                 Closing Wells                                                           17
               Conclusions                                                               22
               Recommendations for Executive Action                                      23
               Agency Comments                                                           23

Appendix I     Chronology of Events for the Construction of
               Deep Injection Wells by the Environmental
               Disposal Systems Company                                                  26



Appendix II    Scope and Methodology                                                     29



Appendix III   Comments from the Environmental Protection
               Agency                                                                    31



Appendix IV    GAO Contacts and Staff Acknowledgments                                    36



Table
               Table 1: Status of Title VI Complaints Filed with EPA’s OCR
                        (October 1,1993, through May 5, 2003)                            17


Figures
               Figure 1: Construction Design for a Class I Deep Injection Well             7
               Figure 2: UIC Deep Injection Well Permitting and Public Comment
                        Processes                                                        11



               Page i                                        GAO-03-761 Deep Injection Wells
List of Abbreviations

EAB               Environmental Appeals Board
EDS               Environmental Disposal Systems, Inc.
EPA               Environmental Protection Agency
MDEQ              Michigan Department of Environmental Quality
NAPA              National Academy of Public Administration
OCR               Office of Civil Rights
OIG               Office of Inspector General
RCRA              Resource Conservation and Recovery Act
RECAP             Romulus Environmentalists Care About People
SDWA              Safe Drinking Water Act
TCEQ              Texas Commission on Environmental Quality
UIC               Underground Injection Control



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Page ii                                                  GAO-03-761 Deep Injection Wells
United States General Accounting Office
Washington, DC 20548




                                   June 13, 2003

                                   The Honorable Lynn C. Woolsey
                                   House of Representatives

                                   Dear Ms. Woolsey:

                                   Billions of gallons of hazardous liquid waste are injected into underground
                                   wells each year. These wells, known as Class I deep injection wells, are
                                   built to contain hazardous waste—from the pharmaceutical, chemical
                                   manufacturing, and metalworking industries, among others—below the
                                   lowest underground source of drinking water. Class I deep injection wells
                                   may either be owned and used by a facility to handle the waste it generates
                                   itself (noncommercial wells) or may be wells operated by companies that
                                   accept waste from multiple facilities and may be far from any particular
                                   waste-generating site (commercial wells).1 Thirteen commercial wells
                                   operate in the United States; they are located in Louisiana, Ohio, and
                                   Texas. In addition, two commercial wells have been constructed in
                                   Michigan but are not yet operating. Under the Safe Drinking Water Act
                                   (SDWA), the Environmental Protection Agency (EPA) is responsible for
                                   establishing standards for and issuing permits for the construction and
                                   operation of these wells. EPA can authorize states to administer the
                                   program—giving them primacy—as long as the state requirements are at
                                   least as stringent as the federal requirements. EPA has granted primacy to
                                   Louisiana, Ohio, and Texas. Michigan has not applied for primacy and has
                                   no plans to do so because it does not believe it has enough wells to
                                   warrant devoting staff and resources to permitting and regulating them.

                                   In order to operate a commercial well that accepts hazardous waste, well
                                   owners need to obtain several different permits that establish conditions,
                                   including requirements under EPA regulations. First, under
                                   the Underground Injection Control (UIC) program, owners must obtain a
                                   construction permit, which, among other things, specifies how the well is
                                   to be constructed to prevent the injected waste from migrating to sources
                                   of drinking water. The wells must also be located in geologically suitable
                                   areas—areas that are not susceptible to earthquakes—to ensure that the



                                   1
                                    This report focuses only on commercial Class I wells that accept hazardous waste, which
                                   are of greater concern to communities.



                                   Page 1                                                  GAO-03-761 Deep Injection Wells
waste will not migrate. Second, under the Resource Conservation and
Recovery Act (RCRA), owners must obtain a permit to ensure that any
above-ground treatment and storage facilities can be operated safely;
owners frequently treat and store the waste on the surface before injecting
it below ground. Under RCRA, they must also demonstrate that injected
waste will be contained within a defined underground area. Finally,
owners must have a UIC operating permit from EPA or the state before
injecting any waste. Both UIC and RCRA regulations require EPA or the
state to obtain public comments before they issue permits.

According to a 2001 EPA study of the risks associated with Class I wells,
deep injection wells are relatively safe.2 Nonetheless, communities where
commercial wells are located have raised concerns about the hazards that
these wells may pose. In particular, they point out that the aboveground
activities at the well site, such as trucks that transport waste and
treatment and storage facilities that handle waste, increase the possibility
of accidental hazardous waste spills, noise, and odor pollution, and may
reduce property values.

Several grassroots and environmental organizations have also voiced
environmental justice concerns, charging that low-income, minority
communities are unfairly targeted as locations for hazardous facilities of
all types, including commercial deep injection wells. Executive
Order 12898, issued in 1994, directs federal agencies, as appropriate, to
identify and address the disproportionately high and adverse health and
environmental effects of its programs, policies, and activities on minority
and low-income populations. Although this order does not create a right to
judicial review, individuals who have environmental justice concerns may
file a petition for review with EPA’s Environmental Appeals Board, if EPA
is the involved party, or a Title VI complaint with EPA’s Office of Civil
Rights, if the involved party is a recipient of EPA financial assistance, such
as a state office.

Finally, EPA requires a Class I well owner or operator to establish
financial assurance to cover the estimated cost of the plugging and
abandonment of the well. Financial assurance can be provided in several
approved forms, such as trust funds or as surety bonds. Each year, the



2
 U.S. Environmental Protection Agency, Class I Underground Injection Control
Program: Study of the Risks Associated with Class I Underground Injection Wells
(Washington, D.C.: 2001).




Page 2                                                GAO-03-761 Deep Injection Wells
                   owner or operator must review the cost estimate on which the financial
                   assurance is based to determine whether it is still adequate to cover
                   anticipated costs due to inflation and make any needed changes.

                   You asked us to examine the extent to which EPA and the states
                   (1) address community concerns in permitting well construction,
                   (2) address environmental justice issues in the construction permit
                   process, and (3) ensure that financial assurances adequately protect the
                   taxpayers if an owner goes bankrupt. To address these issues, we, among
                   other things, examined the permitting process in the four states that have
                   commercial Class I deep injection wells: Louisiana, Michigan, Ohio, and
                   Texas. Because Michigan does not have primacy, EPA manages the
                   permitting process.


                   EPA requires opportunities for public comment on proposed commercial
Results in Brief   Class I deep injection wells during the permitting process, but these
                   opportunities come late in the process and, therefore, may limit the extent
                   to which community concerns are addressed. Specifically, for commercial
                   wells, EPA must issue a public notice that a draft construction permit has
                   been prepared; provide at least a 30-day comment period; hold public
                   hearings, if needed; and issue final permit decisions and responses to
                   public comments. However, EPA and the applicant may have worked
                   together for more than a year to draft the permit before EPA releases it for
                   public comment. Therefore, EPA and the well owner have already invested
                   extensively in the draft permit and may be reluctant to change it as a result
                   of community concerns. Furthermore, while EPA must respond to all
                   public comments and could alter the draft permit in response to some
                   community concerns under the Safe Drinking Water Act, EPA cannot deny
                   a permit on the basis of community concerns if proposed wells meet all of
                   the regulatory requirements. However, earlier public involvement would
                   allow more time for individuals to approach appropriate state or local
                   officials with their other concerns and potentially increase the likelihood
                   that these concerns would be addressed and avoid project delays. For
                   example, in Michigan, where EPA is the permitting authority, agency
                   officials closely adhered to public participation requirements for the two
                   wells under construction. However, community residents believed that
                   their concerns were not fully addressed and filed legal actions and
                   complaints to prevent the project’s construction. These actions have
                   delayed the project for many months. In contrast, the states with primacy
                   have recognized the need for greater public involvement early in the
                   permitting process. For example, Texas requires public involvement even
                   before the state and the owner draft the construction permit. As a result,


                   Page 3                                          GAO-03-761 Deep Injection Wells
according to the National Academy of Public Administration, states have
mitigated or avoided controversial issues and costly litigation surrounding
the permitting of commercial Class I deep injection wells. We are
recommending that the Administrator, EPA, involve the public earlier in
the permitting process to allow more time for community concerns to be
addressed.

EPA addresses environmental justice issues in two basic ways—first,
as part of its process for deciding whether to issue a permit for well
construction, and, second, in response to specific civil rights complaints
filed with the agency after permits are issued. While EPA has yet to issue
a national policy on environmental justice, it encourages regional offices
that issue construction permits to determine if minority and low-income
populations are disproportionately affected by a proposed well’s location.
Individuals and communities may appeal permit decisions with EPA’s
Environmental Appeals Board or file complaints under Title VI of the Civil
Rights Act with EPA’s Office of Civil Rights. Members of one community—
Romulus, Michigan—have challenged EPA’s approval of Class I deep
injection well permits on environmental justice grounds. EPA’s
Environmental Appeals Board denied the community’s petition for review
because it found no basis for review. EPA’s Office of Civil Rights also
denied the Title VI complaint because it did not find any discrimination in
violation of Title VI or EPA implementing regulations. Court decisions
have recently limited the basis for filing Title VI complaints, making the
process an unlikely avenue for changing permit decisions.

Current financial assurance requirements may not ensure adequate
resources to close a commercial deep injection well in the event of
bankruptcy or if the well ceases operations. According to EPA and state
officials, the owners of the 13 operating wells have provided financial
assurance, such as trust funds or surety bonds, that are sufficient to cover
the costs of the plugging and abandonment of a well. While only four sites
have gone into bankruptcy or have ceased operating since the program
began in 1980, two did not have adequate financial resources to plug and
abandon the wells; for the other two, financial assurance was not tested
because other companies purchased and continued operating the wells.
Both sites that did not have adequate financial resources involved unique
circumstances but demonstrate there is a potential burden to taxpayers if
financial assurance requirements are not adequate. In one case, the
insurance company that issued the surety bonds for the owner’s two wells
cancelled the bonds, leaving the company without financial assurance.
In 1997, citing several environmental problems and the owner’s lack of
cooperation with federal requirements, the state revoked the owner’s


Page 4                                          GAO-03-761 Deep Injection Wells
             UIC and RCRA permits. EPA assumed responsibility for this site under the
             Comprehensive Environmental Response, Compensation and Liability Act
             (Superfund), and is currently overseeing the cleanup of the site and
             identifying primary responsible parties to participate in conducting and
             funding the site’s remediation. In a second case, a company seeking a UIC
             construction permit allowed its financial assurance to expire as it tried
             to resolve issues resulting from the death of the company’s owner. The
             state is currently negotiating with the owners to determine who will pay
             for the closure. In March 2001, EPA’s Office of Inspector General reported
             that certain financial assurance requirements for RCRA facilities, which
             the deep injection well requirements mirror, may not adequately ensure
             sufficient resources to properly close facilities. An EPA working group is
             also reviewing similar aspects of financial assurance requirements for a
             different type of injection well for possible changes, but not Class I deep
             injection wells. We are recommending that the Administrator, EPA, review
             and, if warranted, strengthen financial assurance requirements.


             Disposing of wastewater through underground wells began in the 1930s,
Background   when oil companies started pumping brine produced from oil and gas
             production into porous rock formations underground. This disposal
             method is more cost effective than treating and reusing wastewater. This
             disposal method was increasingly used by the chemical and petrochemical
             industries in the 1960s and 1970s, and EPA raised concerns that injected
             waste could contaminate underground drinking water. Underground water
             supplies are used to provide about 50 percent of the public water in the
             United States and are vulnerable to contamination. The Safe Drinking
             Water Act (SDWA) of 1974 authorized EPA to regulate underground
             injection wells in order to protect drinking water sources. EPA published
             regulations establishing the Underground Injection Control (UIC) program
             in 1980, specifying safeguards to prevent injection wells from endangering
             underground sources of drinking water.

             The UIC program encompasses five classes of underground wells.
             Class I wells, which are the focus of this report, inject hazardous and
             nonhazardous waste from manufacturing and other sources below
             the lowermost underground source of drinking water located within a
             quarter mile of the well. Approximately 500 Class I wells operate
             nationwide, many concentrated in midwestern and southern states. The
             other four classes range from Class II wells involved in oil and natural gas
             production to Class V wells that include waste from agricultural runoff and
             septic systems.



             Page 5                                         GAO-03-761 Deep Injection Wells
    Of the 473 Class I deep injection wells that exist nationwide, only 13 wells
    are at commercial sites that accept and inject hazardous waste from
    various manufacturing facilities, according to the most recent EPA data
    (2001). Two more commercial wells have been constructed in Michigan
    and are awaiting final approval for operation. The other noncommercial
    Class I wells are owned by companies that use them exclusively to
    dispose of their own manufacturing waste. Because hazardous waste is
    injected into Class I wells, EPA imposes stringent technical requirements
    on the wells to protect drinking water supplies through both UIC and
    RCRA regulations.

    Class I hazardous well owners and operators must meet certain
    requirements to construct a well. For example, they must review the area
    to ensure that the site is geologically suitable. One purpose of this review
    is to ensure that other existing or abandoned wells nearby do not provide
    avenues for the injected waste to enter underground sources of
    drinking water.

    To obtain final approval to operate a deep injection well, owners and
    operators are required to, among other things

•   properly design the well to ensure that the waste will not migrate into an
    underground source of drinking water;
•   assure that injection pressure does not cause fractures in the injection
    zone or migration of fluids;
•   provide plans for closing the well and post-closure care;
•   demonstrate and maintain financial assurance (trust fund, bond, or other
    approved forms) to ensure that the well can be properly plugged and
    abandoned;
•   establish monitoring and reporting requirements; and
•   demonstrate that the injected waste will not migrate beyond the injection
    zone for 10,000 years, if otherwise prohibited hazardous waste will be
    injected into the well.

    Well owners must design and construct a well shaft that is made of three
    or more protective layers of pipe or tubing that go into the injection zone.
    Wastewater is injected through the innermost part of the constructed well
    shaft, referred to as the injection tubing. (See fig. 1.)




    Page 6                                          GAO-03-761 Deep Injection Wells
Figure 1: Construction Design for a Class I Deep Injection Well




Page 7                                               GAO-03-761 Deep Injection Wells
Owners of Class I injection wells must obtain RCRA permits if they plan
to treat and store waste before injecting it. These permits are for building
and operating treatment and storage facilities. RCRA prohibits the land
disposal of restricted hazardous waste unless EPA determines the
prohibition is not required in order to protect human health and the
environment for as long as the waste remains hazardous. Under UIC
program regulations, EPA requires owners to demonstrate, among other
things, that, to a reasonable degree of certainty, the restricted hazardous
waste will not migrate out of the injection zone for 10,000 years. EPA
determines compliance with this requirement through its computer
simulation models, which the owners use to enter their specific data to
demonstrate the movement of injected waste under certain geologic
conditions. If the owner successfully demonstrates that waste will not
migrate out of the injection zone, EPA will grant an exemption to the
RCRA regulation, sometimes referred to as a land ban petition or a
no-migration petition.

The permitting of deep injection wells can raise environmental justice
concerns within a community, and permit decisions may be challenged
based on environmental justice concerns. Executive Order 12898,
issued in 1994, directed federal agencies to incorporate environmental
justice as part of their missions. Agencies are to identify and address
disproportionately adverse human health or environmental effects on
minority or low-income populations of their programs, policies, or
activities. Title VI of the Civil Rights Act of 1964 prohibits discrimination
on the basis of race, color, or national origin in any program or activity
that receives federal funding; individuals may appeal permit decisions if
they believe the prohibited discrimination occurred. Section 601 of the act
prohibits intentional discrimination on the basis of race, color, or national
origin in programs or activities receiving federal financial assistance.
Section 602 provides federal departments or agencies with the authority
to issue rules or regulations implementing the objectives contained in
section 601.

To ensure that financial resources are available to close wells if they
cease operation, EPA requires financial assurance from owners under the
UIC and RCRA programs. Owners must provide financial assurance for
plugging and abandonment of wells and closing associated RCRA
treatment and storage facilities. For both the UIC and RCRA programs,
owners can provide financial assurance through approved methods such
as trust funds, surety bonds, letters of credit, or insurance. The amount of
financial assurance needed is based on the estimated cost of the plugging
and abandonment of the well or closing the treatment and storage facility.


Page 8                                          GAO-03-761 Deep Injection Wells
                     For example, the estimated cost for plugging and abandonment of one
                     well in Michigan was $25,000, while the estimate for another well in Ohio
                     was $250,000; the variation in cost was due to difference in the sizes and
                     depths of the two wells. Each year owners must also certify that the
                     financial assurance is adequate and make any necessary changes to the
                     type or amount of financial assurance.


                     Under EPA regulations, communities can raise concerns during the
Community Concerns   required public comment process for deep injection well permits after a
Could Be More        draft permit is issued. EPA bases final approvals on whether a proposed
                     well meets technical and safety requirements under its regulations and
Comprehensively      does not have authority under the Safe Drinking Water Act to deny a
Addressed Before     permit on the basis of other concerns. Earlier public involvement would
                     allow more time for individuals to approach appropriate state or local
Draft Permits        officials with any other concerns. When states are the permitting authority,
Are Completed        they provide more and earlier opportunities for obtaining community
                     concerns. The National Academy of Public Administration believes that
                     states can pay more attention to these concerns than EPA can and that
                     these actions mitigate or avoid controversial issues and possible litigation.




                     Page 9                                          GAO-03-761 Deep Injection Wells
EPA Completes Draft         EPA regional offices, or state offices for states with primacy, obtain
Permits Before Addressing   information about community concerns regarding UIC permits through
Public Concerns             public comment processes. These offices first request public comments
                            after working with a prospective well owner to complete a draft permit,
                            which may take as long as 2 years for a construction permit. When the
                            draft is complete, EPA or state officials establish a list of interested
                            parties—citizens and local government representatives—and mail a fact
                            sheet describing the proposed well.3 The public must be given at least
                            30 days from the date of the draft permit notice to submit written
                            comments or request a public hearing, in which case the hearing time and
                            place are also published in the local newspapers. Last, EPA or a state
                            office makes a final permit decision and prepares written responses to the
                            public comments. Figure 2 shows the permitting process, including
                            opportunities for public comment.4




                            3
                             For EPA-administered programs, the permit applicant must submit a list of all owners or
                            record of land within a quarter mile of the facility boundary, unless the area is populous
                            and the EPA Regional Administrator determines this is impractical.
                            4
                             40 CFR Part 124 and 40 CFR Parts 144, 146, and 148 set forth the public participation
                            process requirements and the permitting and operational requirements, respectively, for
                            the Underground Injection Control program.




                            Page 10                                                  GAO-03-761 Deep Injection Wells
Figure 2: UIC Deep Injection Well Permitting and Public Comment Processes




Page 11                                           GAO-03-761 Deep Injection Wells
Because the agency and the prospective well owner have already
expended time and resources to develop the draft permit, communities
have raised concerns that the opportunity for commenting on the
proposed construction permit is often too late in the process to have any
effect. EPA does not have authority under the Safe Drinking Water Act to
deny a permit if it meets technical and safety requirements, even if the
application raises other community concerns. We also believe that, after
this much investment, well owners may not be as willing to make changes
in their planned operations and communities may not have enough time to
contact appropriate state and local officials to have their nontechnical
concerns addressed.

Both EPA and the National Academy of Public Administration (NAPA)
have noted the importance of getting the public involved early in the
permitting process.5 For example, in January 2001, EPA reported that it is
important to involve the public early in its decision-making process
because stakeholders (such as owners or city officials) and the public
have perspectives that can greatly improve the quality of decision making.6
Similarly, in December 2001, NAPA raised concerns about how the public
has missed opportunities to provide timely input in the permitting process.
Without timely participation, the public is less able to affect important
decisions at the state and local level, such as site location.

Not providing an opportunity for early public involvement may result in
extensive community opposition to proposed wells. For example, the two
proposed wells in Romulus, Michigan generated extensive opposition.
Community concerns included issues such as possible damage to the
interstate highway as a result of increased traffic traveling to the wells.
EPA only has authority to base permitting decisions on SDWA
requirements and does not consider the impact of traffic on the interstate
highway or the safety of transporting hazardous waste to Class I facilities.
These particular wells have generated substantial public comment and
legal action by community members. In 1996, the applicant, Environmental


5
 National Academy of Public Administration, Environmental Justice in EPA Permitting:
Reducing Pollution in High-Risk Communities is Integral to the Agency’s Mission
(Washington, D.C.: December, 2001). The study was conducted at EPA’s request to
examine how environmental justice could be incorporated into EPA’s air, water, and waste
permitting programs.
6
 U.S. Environmental Protection Agency, Office of Policy Economics, and
Innovation, Stakeholder Involvement and Public Participation at the U.S. EPA
(Washington, D.C., 2001).




Page 12                                                GAO-03-761 Deep Injection Wells
                                Disposal Systems (EDS), applied for a construction permit. The public was
                                first notified of the draft permit 15 months later. After another 2 years, and
                                significant public comments, EPA issued the construction permit without
                                significant modifications. As of April 2003, EPA was still engaged in
                                resolving community concerns through public hearings relating to the no-
                                migration petition.


Some States Require             Recognizing the importance of public involvement in making decisions
Community Concerns to           that affect the environment, Texas, Ohio, and Louisiana have gone
Be Addressed Early in the       beyond the federal minimum public notice and comment requirements to
                                address community concerns. For example, the Texas Commission on
Permitting Process              Environmental Quality (TCEQ) must notify the public when it first
                                receives a completed permit application—unlike EPA, which requires
                                public notification after the permit is drafted. Texas’s process increases
                                the opportunity for the public to provide comments at a point when the
                                state can better address the comments. In addition, in making permitting
                                decisions, TCEQ must determine that the well is in the public interest,
                                considering the following issues:

                            •   compliance history of the applicant;
                            •   whether the applicant will maintain adequate insurance for bodily injury
                                and property damage caused by accidents, or will otherwise demonstrate
                                financial responsibility; and
                            •   whether there is a reasonably available practical, economic, and feasible
                                alternative to an injection well.

                                In addition, the well must not impair existing rights, including mineral
                                rights. If the well is not in an industrial area, the applicant must make a
                                reasonable effort to ensure that the burden on local law enforcement,
                                emergency medical or fire-fighting personnel, or public roadways will be
                                reasonably minimized or mitigated.

                                All three states have also enacted additional requirements to address
                                community concerns. For example, under its RCRA program, Texas
                                requires that new commercial hazardous waste management facilities,
                                including those associated with Class I deep injection wells, be more than
                                2,640 feet from an established residence, church, school, day care center,
                                surface water body used for a public drinking water supply, or public park.

                                States have also taken other steps to address community concerns. For
                                instance, for one commercial Class I deep injection well in Ohio, state
                                officials assisted a community in speaking directly with the prospective



                                Page 13                                          GAO-03-761 Deep Injection Wells
                         well owner. During these discussions, community residents raised
                         concerns about transporting waste under dangerous weather conditions
                         and the increased likelihood of spills. In response, the company agreed not
                         to transport waste to the well site during adverse weather conditions.


                         EPA addresses environmental justice issues during the process for
Environmental            deciding on a construction permit and when civil rights complaints are
Justice Concerns         filed with the agency after permits are issued. While EPA has yet to issue
                         a national policy on environmental justice, some regional offices have
Are Addressed            independently developed and implemented their own guidelines for
during the Permitting    considering environmental justice during their decision-making processes.
                         After permit decisions are made, individuals and communities may raise
Process and in           environmental justice issues by appealing permit decisions with EPA’s
Response to Civil        Environmental Appeals Board or filing complaints under Title VI of the
Rights Complaints        Civil Rights Act with OCR. Recent court decisions, however, have limited
                         the basis for filing these complaints, making the process an unlikely
                         avenue for changing permit decisions. EPA’s Title VI regulations and
                         administrative processes for Title VI complaints remain in effect.


EPA Regions Are          In 1995, in response to Executive Order 12898, EPA incorporated
Encouraged to Consider   environmental justice considerations into its approval process for
Environmental Justice    construction permits. Under EPA’s strategy, staff must integrate
                         environmental justice into every EPA program, policy, and activity. EPA’s
Issues for Proposed      Office of Environmental Justice oversees the implementation of
Well Sites               environmental justice, and it has drafted national guidance that will assist
                         EPA staff in evaluating potential environmental justice concerns and
                         taking actions to address them. To date, the national guidance has been
                         reviewed internally within EPA, but EPA has not yet published it for
                         comment in the Federal Register. In reviewing the draft guidance, EPA’s
                         Office of General Counsel raised a number of policy concerns that will be
                         resolved before the guidance is released for public comment. As of May
                         2003, Office of Environmental Justice officials could not say when the
                         guidance would be released for public comment.

                         In the absence of national EPA guidance on environmental justice,
                         EPA’s offices in regions V and VI have developed guidelines for evaluating
                         potential environmental justice considerations; these regions cover the
                         four states that have commercial Class I deep injection wells. Regional
                         officials said that environmental justice assessments are routinely being
                         performed for Class I deep injection wells, although the regional
                         guidelines only encourage EPA staff to conduct an assessment that


                         Page 14                                         GAO-03-761 Deep Injection Wells
                          considers demographic make up and the potential health risks that the site
                          might pose to area residents. For example, in assessing demographics for
                          issuing a permit for a facility, such as a waste treatment facility, staff in
                          EPA region V would determine whether the number of low-income and
                          minority residents living within a specific radius of the facility is greater
                          than or equal to two times the average low-income and minority
                          population in the state. If that were the case, EPA staff would conduct
                          community outreach efforts, such as holding public meetings or
                          workshops, to better understand and respond to community concerns.
                          Regional officials said they might decide that issuing a permit would
                          present additional risks to a community already affected by other
                          environmental sites and they would, therefore, impose special permit
                          requirements, such as limiting the amount of waste injected into wells or
                          requiring increased monitoring, to ensure safe operation. EPA region VI
                          has performed demographic analyses on all current Class I deep injection
                          wells and will perform them on any new Class I deep injection wells that
                          submit no-migration petition applications in the future.

                          Officials from the three states that have primacy for deep injection wells—
                          Louisiana, Ohio, and Texas—told us that they are not required under state
                          law to specifically consider environmental justice issues during permitting
                          processes. However, Title VI prohibits discrimination in any program that
                          receives federal funds. The state officials were not aware of any
                          communities that had raised environmental justice concerns.

Individuals Can Raise     Individuals or communities with environmental justice concerns may file
Environmental Justice     petitions with EPA’s Environmental Appeals Board (EAB) to review
Concerns through Civil    permit decisions or file complaints under Title VI of the Civil Rights Act
                          with EPA’s Office of Civil Rights (OCR). These complaints involve a broad
Rights Complaints Filed   range of facility permit decisions, not just deep injection wells. Members
with EPA                  of only one community—Romulus, Michigan—have challenged permit
                          decisions for a commercial Class I deep injection well on environmental
                          justice grounds. In 1998, two individuals filed petitions with EAB to review
                          EPA’s issuance of construction permits to Environmental Disposal
                          Systems (EDS). Among other things, the petitions claimed that (1) the
                          permits and EPA’s response to written comments were not provided in a
                          timely manner for public review to two libraries, (2) EDS should be
                          required to conduct a survey of the surrounding area to determine the
                          location of other deep injection wells because the Michigan Department of
                          Environmental Quality information was unreliable, and (3) the EPA
                          environmental justice demographic analysis was flawed because it used
                          data from a 2-mile radius instead of a 4-mile radius, which would have
                          included a larger minority population. In October 1998, the EAB concluded


                          Page 15                                         GAO-03-761 Deep Injection Wells
that the petitions did not provide a basis for review of the permit decision.
Specifically, the board found that the alleged delay in permit notification
and responses to comments did not affect the petitioner adversely because
EPA provided 6 extra days for public comments. Regarding the survey for
other wells, the EAB stated that the petitioner did not provide any support
for his claim that data from the Michigan Department of Environmental
Quality was unreliable. The EAB stated that the region did not rely only on
this data and that there was no indication that EPA’s conclusion was
erroneous. Lastly, regarding the use of the 2-mile radius for the
demographic analysis, the EAB deferred to the EPA region’s decision that
2 miles was an appropriate radius for the analysis, stating that determining
the radius is a highly technical judgment based on the probable dispersion
of pollutants.

Another Romulus citizen filed a Title VI complaint with EPA’s OCR,
which was accepted for review in December 2001, raising three issues
regarding Michigan’s RCRA permit decisions on the sites’ treatment and
storage facilities. (Michigan has primacy for RCRA.) Two of these issues
concerned procedural matters which OCR rejected. OCR dismissed the
third issue: that citizens of Romulus were disproportionately exposed to
pollution and other environmental dangers. OCR found that the facility
would not adversely impact the community because EPA had concluded
that the wells would not damage water, air, or soil quality, nor would they
increase noise pollution. Moreover, OCR found that the potential facility
impacts would not have a disparate effect on African-Americans for
Title VI purposes. A chronology of the events for the EDS site is presented
in appendix I.

Since 1992, in addition to the Romulus petition, EAB has received one
other petition involving environmental justice concerns related to a Class I
deep injection well. In that case, which involved a noncommercial well in
Michigan, individuals claimed that the well permits should be denied
because the area surrounding the site was already host to numerous
burdensome land uses and that the 2-mile area analyzed by EPA was
too small to allow for proper evaluation of the sociological, health, and
financial impacts. The board rejected these claims and denied review on
these issues, stating that the petitioner had failed to show that the permit
would not protect drinking water sources of populations within 2 miles
of the well site or that citizens at a greater distance would not
be protected. Since 1993, OCR has received 135 Title VI complaints—
including complaints not related to deep injection wells. Most of these
complaints—91—were rejected for investigation or dismissed. Table 1
shows the disposition of all Title VI complaints as of February 2003.


Page 16                                         GAO-03-761 Deep Injection Wells
                      Table 1: Status of Title VI Complaints Filed with EPA’s OCR (October 1,1993,
                      through May 5, 2003)

                          Status of reviews                                                     Number of cases
                          Pending
                          Under review for possible investigation/rejection/referral                            6
                          Accepted for investigation                                                           26
                          Suspended because complaint is part of other litigation                               7
                          Closed
                          Rejected for investigation or dismissed after acceptance                             94
                          Referred to another federal agency                                                    2
                          Informally resolved                                                                   2
                      Sources: EPA and GAO.




                      Recent court decisions have limited the basis for filing Title VI complaints,
                      making the process an unlikely avenue for challenging permit decisions.
                      In 2001, the Supreme Court ruled that individuals do not have a cause of
                      action for violations of disparate impact regulations—those regulations
                      which prohibit activities that are not intentionally discriminatory but
                      which, in fact, that have the effect of discriminating.7 Later in 2001, the
                      U.S. Court of Appeals for the Third Circuit, relying on the Supreme Court
                      decision, held that individuals could not challenge disparate impact
                      regulations and that Title VI only prohibits intentional discrimination.8 The
                      federal government, however, can still bring enforcement actions.


                      It is uncertain whether the financial assurance requirements for closing
Financial Assurance   deep injection wells can adequately provide the needed financing in cases
Requirements May      of owner bankruptcy or other events that force well closure. EPA and
                      state officials believe that financial assurance requirements are adequate
Not Be Adequate for   and would cover the closing costs for the 13 commercial wells currently
Closing Wells         in operation. While only four sites have ceased operation since the UIC
                      program began in 1980, two did not have adequate financial resources to
                      plug and abandon the wells, resulting in additional costs to taxpayers.
                      For two other sites, the financial assurance was not tested because
                      other companies purchased and continued operating the wells. EPA
                      has questioned the adequacy of similar aspects of financial assurance
                      requirements in other programs. In 2001, EPA’s Office of Inspector


                      7
                          Alexander v. Sandoval, 532 U.S. 275 (2001).
                      8
                          South Camden Citizens in Action v. New Jersey, DEP, 274 F.3d 771 (3rd Cir. 2001).




                      Page 17                                                      GAO-03-761 Deep Injection Wells
                            General stated that financial assurance requirements for RCRA facilities,
                            on which financial assurance requirements for deep injection wells were
                            based, needed improvement, and EPA is currently requesting public
                            comments on the Inspector General’s conclusions and recommendations.
                            EPA has also initiated an internal review of financial assurance
                            requirements for Class II oil and gas deep injection wells because of
                            concerns that aspects of current requirements, similar to aspects of the
                            Class I deep injection well requirements, may not be adequate.


Adequate Financial          When owners of commercial Class I wells have filed for bankruptcy or
Resources Have Not          ceased operating, they have not always had adequate financial resources
Always Been Available for   to cover the costs of plugging and abandonment of wells. Since 1980, when
                            the deep injection well program began, four owners have filed for
Plugging and                bankruptcy or ceased operating. In two cases, the adequacy of the
Abandonment of Deep         financial assurance was not tested because other companies purchased
Injection Wells             and continued operating the wells. The new owners, according to state
                            officials, provided adequate financial assurance for these two sites. Two
                            other sites did not have adequate financial resources to shut down the
                            wells. In one case, the owner did not have adequate financial assurances in
                            place as required. The second case, although no permit was granted and
                            thus the financial assurance requirements were not tested, demonstrates
                            the potential cost to the public if adequate financial resources are not
                            available. Both of these cases occurred in Texas.

Malone Services Company     Malone Services Company operated two wells under state-issued UIC and
Deep Injection Wells        RCRA permits. In 1983, to meet the UIC financial assurance requirements,
                            the company provided a surety bond as financial assurance for the wells.
                            In 1988, the insurance company that had issued the bond cancelled it,
                            leaving the company without financial assurance for the wells. In 1992, the
                            company submitted a new surety bond issued by a different insurance
                            company to meet its financial assurance requirements; however, the state
                            did not accept this assurance because the insurance company issuing the
                            bond was not an acceptable insurance provider.9 In 1997, citing several
                            environmental problems relating to UIC and RCRA requirements for
                            monitoring, testing, reporting, and financial assurance and the owner’s
                            lack of cooperation, the state revoked the company’s UIC and RCRA



                            9
                             40 CFR §144.63 states that at a minimum the insurer must be licensed to transact the
                            business of insurance, or eligible to provide insurance as an excess or surplus lines insurer,
                            in one or more states.




                            Page 18                                                    GAO-03-761 Deep Injection Wells
                      permits. In July 1998, the state attorney general filed a petition to put
                      Malone Services Company into involuntary bankruptcy. Although state
                      officials were not concerned that the injected waste would migrate outside
                      of the approved injection zone, they were concerned about aboveground
                      contamination from surface spills. The surface had become so highly
                      contaminated that the site was classified as a Superfund site in June 2001,
                      with EPA leading cleanup activities. As of May 2003, EPA is overseeing the
                      Superfund cleanup and is using the well to dispose of liquid waste as part
                      of the site cleanup. In addition, EPA is contacting the primary responsible
                      parties, including the owner and the companies that sent waste to the site,
                      to encourage their participation in conducting and funding the site
                      remediation, in lieu of reliance on federal funds.

Wastewater, Inc.,     In 1979, Wastewater, Inc., began converting a well originally used for oil
Deep Injection Well   and gas exploration to an injection well. This conversion, which was
                      conducted under the authority of Texas Department of Water Resources,
                      took place 1 year before the federal UIC program began and 3 years before
                      Texas obtained primacy for the program. When it received primacy,
                      Texas required the company to reapply for a new UIC well permit for
                      construction and operation so that the state could issue the permit based
                      on the recently enacted federal UIC regulations, including the requirement
                      to provide adequate financial assurance.10 The company submitted a UIC
                      permit application to the state in July 1982 and provided a letter of credit
                      for financial assurance in July 1983. However, Texas never approved the
                      1982 application because the company requested that the state suspend
                      the application process while it resolved issues resulting from the death
                      of the company’s owner. In 1992, the company asked the state to withdraw
                      its application. In April 1998, the letter of credit for financial assurance
                      expired, but the company had ceased operating.

                      In May 2000, the state issued an enforcement order requiring the company
                      to plug the well. As of May 2003, the company had not done so, because
                      officials from the company that was formed after the bankruptcy—Future
                      Environmental Systems—were still discussing with state officials the
                      possibility of applying for an operating permit and providing adequate
                      financial assurance. While the well needs to be closed for safety reasons,
                      it does not pose immediate environmental concerns because construction
                      was not completed and waste had not been injected into the well,



                      10
                        Rather than issuing both a construction permit and an operating permit, as EPA and
                      some states do, Texas issues a permit to “construct and operate.”




                      Page 19                                                 GAO-03-761 Deep Injection Wells
                            according to EPA and state officials. If the company does not provide
                            adequate financial assurance and obtain authorization to operate the
                            well, the state will try to compel the company to close the well and, if
                            unsuccessful, will use its own funds to close it.

                            EPA and state officials responsible for overseeing the 13 commercial
                            Class I wells currently in operation believe that the owners’ or operators’
                            financial assurances provide enough funds to close their wells in the event
                            of bankruptcy. Seven of these well owners or operators have provided
                            financial assurance through insurance policies, while the other wells rely
                            on other forms of financial assurance.


Uncertainties Exist about   Uncertainties about the adequacy of RCRA financial assurance
the Adequacy of Financial   requirements have been raised by EPA officials, and EPA’s Office of
Assurance Requirements      Inspector General (OIG) recommended changes to the requirements in
                            March 2001. UIC financial requirements are based on RCRA requirements
in Other Programs           and, therefore, the OIG recommendations are relevant to the UIC program.
                            According to the OIG, the risk associated with financial assurance
                            provided by insurance, surety bonds, and trust funds may be higher than
                            EPA initially estimated for its financial assurance regulations, and funds
                            may not be available when needed.11 Specifically, for state financial
                            assurance programs for RCRA facilities, insurance provided by captive
                            insurance companies may be inadequate for covering closure and
                            post-closure costs. Captive insurance companies are wholly owned
                            subsidiaries of the corporation they are insuring; if the parent company
                            experiences financial difficulty, state financial assurance programs can
                            have little confidence that the captive insurance company will provide the
                            funds needed to pay for closure. These insurance policies are also high
                            risk if they cannot be assigned to different owners when a RCRA facility is
                            sold. The OIG recommended that EPA issue guidance for state financial
                            assurance programs to reduce risks associated with insurance policies and
                            that EPA investigate complex insurance issues with states to determine
                            whether additional guidance is needed.

                            The OIG report also noted that state officials had difficulty determining
                            whether the dollar amounts provided for financial assurance were
                            adequate to cover all costs for closing facilities. Program officials



                            11
                             U.S. Environmental Protection Agency, Office of Inspector General, RCRA Financial
                            Assurance For Closure And Post-Closure, (Washington, D.C.: 2001).




                            Page 20                                               GAO-03-761 Deep Injection Wells
    reviewing financial assurance statements often rely on subjective
    judgment and are unaware of automated information available to assist in
    their reviews. This situation prompted the OIG to recommend that EPA
    help states obtain the automated information for reviewing cost estimates.

    In October 2001, responding to the OIG report, EPA requested public
    comments on the report’s conclusions.12 Specifically, EPA requested
    comments from the states, the insurance industry, and the regulated
    community on the need for additional guidance on insurance used as
    financial assurance for RCRA facilities. In addition, EPA requested
    comments on any additional requirements for insurers in general, such
    as a possible requirement that insurers have a minimum rating from
    commercial rating services. By requiring insurers to have ratings that
    reflect relatively strong financial conditions, EPA expects to reduce the
    risk to the agency or to a state if the insurer fails to provide the funding
    required for closing a facility. According to an EPA official, as of May 2003,
    the agency is continuing to review the public comments received and will
    then decide whether proposed changes to financial assurance
    requirements are needed. The agency has not set a specific time frame for
    proposing changes.

    In July 2002, EPA also formed a UIC work group to review the adequacy of
    financial assurance requirements for Class II oil- and gas-related injection
    wells, but not Class I deep injection wells because of their relatively small
    number. However, the concerns about adequacy are similar. The work
    group was formed because EPA officials recognized that the requirements,
    issued in 1984, might need updating and because regional offices were not
    implementing the requirements consistently. Specifically, the regional
    offices were not using a standard approach for calculating the plugging
    and abandonment costs, which posed problems for operators with
    permitted facilities in more than one EPA region. Officials also observed
    that under present economic conditions it is increasingly difficult for
    owners to meet the financial assurance requirements, but failure to do
    so risks contaminating underground drinking water sources. The work
    group is to

•   identify financial assurance alternatives to those currently in use,
•   develop guidance for providing consistency in calculating plugging and
    abandonment costs,


    12
         66 Fed. Reg. 52192 (Oct. 12, 2001).




    Page 21                                          GAO-03-761 Deep Injection Wells
              •   determine whether states are requiring adequate financial assurance for
                  plugging and abandonment of injection wells, and
              •   prepare possible modifications of the financial assurance language
                  contained in the SDWA.

                  The work group expects to complete all of its objectives by April 2004.


                  The public participation process EPA currently uses is not as effective
Conclusions       as it could be in addressing the broad range of community concerns
                  about Class I deep injection wells. Because EPA’s current requirements
                  call for the agency to notify the public after it drafts the permit, rather
                  than when it receives a permit application, we believe the process is
                  essentially too late to have a meaningful effect, and that it reduces public
                  confidence in the process. In contrast, when states involve the community
                  early, they have experienced better community relations—which EPA
                  believes is important and wants to achieve—and have avoided costly,
                  time-consuming delays.

                  The ultimate test of whether financial assurances are adequate is an
                  owner’s bankruptcy. If an owner declares bankruptcy and the financial
                  assurances are found to be inadequate, drinking water sources may be at
                  risk and the public may be required to bear the cost of closing a well.
                  Consequently, any uncertainties about the adequacy of financial
                  assurances need to be minimized. Both the potential burden to the
                  taxpayer if adequate financial resources are not available and the potential
                  problems pointed out by the OIG and by EPA’s own working group call for
                  action to review and improve these requirements to determine if
                  improvements are necessary.




                  Page 22                                         GAO-03-761 Deep Injection Wells
                      To allow more time for community concerns to be addressed, we
Recommendations for   recommend that the Administrator, EPA, involve communities earlier in
Executive Action      the permitting process for constructing a well.

                      Furthermore, to ensure that requirements are adequate to cover the costs
                      of plugging and abandonment of Class I hazardous deep injection wells
                      and thereby reducing the public’s financial risk, we recommend that
                      the Administrator, EPA, review and, if warranted, strengthen financial
                      assurance requirements for Class I hazardous deep injection wells. In so
                      doing, the Administrator should

                  •   consider the applicability of the Office of the Inspector General’s findings
                      and recommendations for RCRA financial assurance, and
                  •   consider the applicability of the results and recommendations of the
                      ongoing work group for Class II wells.


                      We provided a draft of this report to EPA for its review and comment. EPA
Agency Comments       did not agree with the report’s conclusions and recommendations for
                      improving the UIC program and stated that the report contained various
                      factual and technical errors. We continue to believe that our report is
                      accurate and that our recommendations are sound. We have made some
                      changes to clarify our findings.

                      EPA raised several principal objections to the report. First, EPA stated
                      that our report mischaracterizes its authority under the UIC program and
                      the relevant scope of public involvement and comment; to this end it
                      suggested that our report and recommendations attribute responsibilities
                      to the UIC program beyond the scope of the SDWA. It was not our intent
                      to attribute responsibilities to the UIC program beyond the scope of the
                      SDWA and we have made clarifications to reflect that some community
                      concerns are not within the scope of EPA’s authority. The report clearly
                      sets forth the public comment process that EPA follows and explains that
                      the agency cannot deny a permit on the basis of community concerns if
                      the permit applicant meet all regulatory requirements. While EPA does not
                      have authority to address certain nontechnical community concerns under
                      the SDWA, we believe that public involvement before the draft
                      construction permit is issued would allow more time for the community to
                      have its nontechnical concerns addressed at the state or local level. In
                      addition, nothing in the SDWA precludes EPA from involving communities
                      earlier in the permitting process, before draft construction permits are
                      issued. Indeed, involving the community earlier in the process is
                      consistent with, and in the spirit of, EPA’s policy stressing the importance
                      of early public involvement.




                      Page 23                                         GAO-03-761 Deep Injection Wells
Second, EPA stated that our report mistakenly implies a significant
deficiency in the financial assurance requirements for deep injection
wells and that this finding is inconsistent with a long history of success
of financial assurance provisions for Class I wells. We disagree that the
financial assurance requirements for deep injection wells have a long
history of success, and we believe there is sufficient evidence to suggest
a re-examination of these requirements. Our report describes instances
in which owners have failed to provide adequate financial resources
and demonstrates there is a potential burden to the taxpayer if financial
assurance requirements are not adequate. EPA further states that our
recommendation to review the financial assurance requirements
inappropriately relies on experiences from another program (RCRA).
We have clarified this section of our report to more clearly state that we
are in fact discussing financial assurance requirements for the RCRA
program. Nevertheless, we disagree that the lessons learned from the
RCRA financial assurance requirements are inapplicable to Class I
Hazardous deep injection wells. In the preamble to the final rule
promulgating the financial assurance requirements for Class I hazardous
deep injection wells, EPA stated that it had determined that most of the
RCRA financial assurance requirements should apply to Class I wells. EPA
noted that many wells have RCRA surface facilities that already must
comply with RCRA requirements and that wells are major facilities that
may require substantial resources to plug properly. We believe that this
reasoning still applies today, and that it is appropriate for EPA to consider
corresponding changes to the financial assurance requirements for Class I
hazardous deep injection wells. EPA further states that our discussion of
its financial assurance work group is misleading because the group is
examining an entirely different class of well. Our report acknowledges that
the EPA working group is examining the requirements for Class II oil and
gas wells, but we believe that certain aspects of those wells, such as a
standard method for calculating plugging and abandonment costs, may
also be applicable to Class I wells. We have clarified our recommendation
to state more directly that EPA should “consider” the results and
recommendations from the working group for Class I wells.

Finally, EPA stated that the report contains factual and technical errors
that it pointed out during the development of the report. We do not believe
this assertion is fair or accurate. In accordance with GAO’s normal
practice, based on oral comments received during our exit conference
with EPA officials we incorporated changes into the draft report. While
EPA may disagree with our interpretation of the facts, we are unaware of
any other instances in which EPA provided factual or technical comments
that we did not address. EPA’s comments and our detailed responses are
in appendix III.




Page 24                                         GAO-03-761 Deep Injection Wells
We conducted our review from May 2002 through May 2003 in accordance
with generally accepted government auditing standards. (See app. II for a
detailed description of our scope and methodology.)

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after the
date of this letter. At that time, we will send copies to other appropriate
congressional committees and the EPA Administrator. We will also make
copies available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov/.

Should you or your staff need further information, please contact me on
(202) 512-3841. Key contributors to this report are listed in appendix IV.

Sincerely yours,




John B. Stephenson
Director, Natural Resources
 and Environment




Page 25                                           GAO-03-761 Deep Injection Wells
                 Appendix I: Chronology of Events for the
Appendix I: Chronology of Events for the
                 Construction of Deep Injection Wells by the
                 Environmental Disposal Systems Company


Construction of Deep Injection Wells by the
Environmental Disposal Systems Company
                 Environmental Disposal Systems (EDS) is interested in constructing and
                 managing deep injection wells for treating and disposing of hazardous
                 wastewater from various industries, including, steel production, food
                 processing, automobile manufacturing, and oil and gas production. The
                 company initiated the process in 1990 by applying for two Class I deep
                 injection well construction permits. As of May 2003, EDS had not yet
                 started operating the wells due to a myriad of events that caused delays,
                 including relocating the well site, building a storage and treatment facility,
                 participating in several public hearings, and facing challenges to EPA’s
                 permit decisions filed with EPA’s Environmental Appeals Board and a
                 Title VI complaint filed with EPA’s Office of Civil Rights. EDS also needs a
                 RCRA operating permit from the state to begin hazardous waste
                 operations. EPA officials anticipate approving the no-migration petition in
                 mid-2003, and at that time Michigan’s Department of Environmental
                 Quality will consider the issuance of the RCRA operating license. The
                 following chronology details the significant events that occurred during
                 this lengthy process:

             •   1990—EDS applied to EPA for construction permits for two Class I deep
                 injection wells in Romulus, Michigan, which is located near the Detroit
                 Metropolitan Airport. City council members supported the wells’
                 construction, adopted a resolution welcoming EDS and, under an
                 agreement with EDS, planned to receive around $1 million in royalties
                 from EDS once the wells began operating.
             •   1991—In August 1991, the Romulus City Council passed a resolution
                 rescinding its earlier welcoming resolution to EDS. After obtaining
                 relatively few public comments on the draft construction permits, EPA
                 issued a final construction permit in October.
             •   1993—EDS had almost completed the construction of one well when
                 significant public outcry developed because of the well’s location within
                 the city. Concerned members of the community were represented by an
                 environmental group called Romulus Environmentalists Care About
                 People (RECAP). As a result of this concern, the city of Romulus filed a
                 lawsuit against EDS claiming that the wells were in an area that was not
                 properly zoned for business activity. The city of Romulus won a
                 preliminary injunction prohibiting any further activity by EDS and
                 staying any further court proceedings until the city had exhausted its
                 administrative remedies. Members of RECAP were elected to the
                 Romulus City Council. The well that was under construction has since
                 been plugged.
             •   1995—The local zoning board determined that the proposed well did
                 not fall within acceptable uses for the district in which it was to be
                 constructed. The board denied EDS’s request for a variance.



                 Page 26                                          GAO-03-761 Deep Injection Wells
    Appendix I: Chronology of Events for the
    Construction of Deep Injection Wells by the
    Environmental Disposal Systems Company




•   1996—The Wayne County Circuit Court affirmed both of the local zoning
    board’s decisions. The state of Michigan passed a law requiring that any
    company accepting commercial hazardous waste for disposal in an
    injection well have treatment and storage facilities on site that have been
    permitted by the Michigan Department of Environmental Quality (MDEQ).
    Under the new law, EDS would need a storage and treatment facility
    construction permit from Michigan’s Department of Environmental
    Quality (MDEQ) if it planned to construct and operate wells in Michigan.
    Also in 1996, because EDS was still interested in establishing its deep
    injection well business, EDS purchased additional land in Romulus near
    the Detroit Metropolitan Airport. In May, EDS applied to EPA for
    construction permits for two injection wells.
•   1997—EPA issued draft construction permits in August and accepted
    public comments from September through October.
•   1998—In March, after responding to a significant number of public
    comments on the draft construction permits, EPA issued permits
    for constructing the two wells. Members of the community raised
    environmental justice concerns, and two citizens filed appeals with EPA’s
    Environmental Appeals Board raising a number of concerns about the
    wells, including environmental justice concerns. The board denied review.
•   1999—EDS submitted its permit application to the state for the planned
    waste treatment and storage facilities for the wells. MDEQ officials found
    the application technically complete and arranged to obtain public
    comments on the draft permit. MDEQ referred the permit application to a
    site review board---a 10-member board charged with investigating and
    deliberating on the impact of the proposed facility on a local community.
    The Site Review Board held numerous open meetings and public hearings,
    receiving oral and written comments on many issues from local
    community officials, the public, EDS, and MDEQ. In March 2000, the board
    voted to recommend that the MDEQ deny the construction permit for
    several reasons, including an increase in traffic volumes, and the lack of
    need for the facility. The board did not find any fault with the technical
    aspects of the facility’s design or operation.
•   2000—During the Site Review Board’s deliberations, it was disclosed that
    the proposed storage and treatment facilities and wells were located in a
    protected wetlands area. EDS applied for a wetlands construction permit
    during the site review board process. The permit was issued by the MDEQ
    in June. The wetlands permit was challenged by the cities of Romulus and
    Taylor in a contested case hearing with MDEQ that was subsequently
    dropped.
•   2001—After determining that the Site Review Board did not provide a
    defensible basis for denial, the MDEQ issued a construction permit for the
    treatment and storage facility associated with the injection wells. The
    permit contained special conditions requiring EDS to mitigate the



    Page 27                                        GAO-03-761 Deep Injection Wells
    Appendix I: Chronology of Events for the
    Construction of Deep Injection Wells by the
    Environmental Disposal Systems Company




    legitimate concerns raised by the Site Review Board in its
    recommendation for denial, including limiting the traffic volume and
    adding an emergency access road. The cities of Romulus and Taylor and
    Wayne County appealed the permit decision to the Wayne County Circuit
    Court, arguing that the MDEQ should have followed the board’s
    recommendation, that the facility is not needed, and that the facility
    should not be allowed in a wetland. The circuit court affirmed the MDEQ
    decision. The case is currently under review by the Michigan Court of
    Appeals, and as of May 2003 no decision has been issued.
•   2002—A citizen filed a Title VI complaint with EPA’s Office of Civil Rights
    raising a number of issues, including the fact that the community was
    disproportionately exposed to pollution and other environmental dangers.
    EPA’s Office of Civil Rights investigated the complaint but did not find any
    violations of Title VI.
•   2003—In January and April public hearings were held on the EDS no-
    migration petition. Obtaining approval of this petition is one of the final
    steps before operations begin.




    Page 28                                        GAO-03-761 Deep Injection Wells
              Appendix II: Scope and Methodology
Appendix II: Scope and Methodology


              To determine the extent that EPA and states address community concerns
              in issuing permits for deep injection wells, we obtained information on the
              criteria and processes from agency officials in the Office of Water, UIC
              program, located in Washington, D.C., and from regional program officials
              located in Chicago, Illinois, and in Dallas, Texas. We obtained information
              on the criteria and processes from state program officials in the states
              that have commercial Class I deep injection wells currently operating or
              under construction (Louisiana, Michigan, Ohio, and Texas). Three of the
              states—Louisiana, Ohio, and Texas—have regulatory authority (primacy)
              for implementing the UIC programs in their states. In addition, we
              identified and reviewed the applicable federal and state regulations and
              other guidance that describe the criteria and processes for public notice
              and comment. Because owners of commercial Class I wells may have to
              obtain RCRA permits to construct and operate treatment and storage
              facilities associated with the operation of the wells, we discussed these
              requirements with the EPA and state officials and obtained supporting
              documentation describing RCRA requirements. To further understand the
              process for addressing community concerns, we obtained and analyzed
              information on how the process worked for individual wells that were
              approved for operation and for two wells under construction in the state
              of Michigan. We also obtained and reviewed reports published by EPA
              and NAPA that address the importance of involving citizens in the
              permitting process.

              In determining the extent that environmental justice issues are considered
              during the construction permit process, we reviewed the executive order
              on environmental justice issued in 1994 and Title VI of the Civil Rights Act
              of 1964. We obtained information from EPA officials in the Office of
              Environmental Justice and the Office of Civil Rights to determine how
              EPA has implemented the executive order and the status of implementing
              the environmental justice policy issued by the EPA’s Administrator.
              We obtained and reviewed several reports prepared for the Office of
              Environmental Justice that addressed how environmental justice could be
              incorporated within existing programs, including permitting decisions. In
              addition, we obtained and analyzed information on the number and status
              of environmental justice appeals and Title VI complaints filed with the
              agency, including those involving commercial Class I wells. We also
              analyzed recent court decisions that impact the basis for determining
              whether discrimination has occurred under Title VI. We interviewed
              officials from EPA’s Office of Water and regional UIC offices, as well as
              from the four states with commercial Class I deep injection wells in
              operation or under construction to determine how they have incorporated
              environmental justice practices into their permitting process. We also


              Page 29                                         GAO-03-761 Deep Injection Wells
Appendix II: Scope and Methodology




verified with the officials the number of environmental justice appeals or
Title VI complaints involving deep injection wells.

To determine the adequacy of financial assurances for providing funds
to properly shut down Class I wells if owners go bankrupt, we reviewed
federal and state regulations to determine the financial assurance
requirements. We obtained information on how financial assurance
regulations are implemented from EPA and state program officials and
reviewed documentation for Class I wells currently operating, as well as
for wells with owners in bankruptcy, to determine if the owners had
provided sufficient financial assurances. We also discussed with EPA
officials the efforts of an ongoing agency work group that is assessing the
adequacy of financial assurance requirements for injection wells and
reviewed documentation on the issues the group is addressing. Because
the UIC financial assurance requirements were based on RCRA financial
requirements, we obtained information on recent reviews and proposed
changes to the RCRA financial assurance requirements. Specifically, we
obtained and reviewed an EPA Office of Inspector General report on the
adequacy of RCRA financial assurance requirements and proposed agency
changes to the requirements.

We conducted our work from May 2002 through May 2003 in accordance
with generally accepted government auditing standards.




Page 30                                        GAO-03-761 Deep Injection Wells
                                      Appendix III: Comments from the
Appendix III: Comments from the       Environmental Protection Agency



Environmental Protection Agency

Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




                            Page 31                                     GAO-03-761 Deep Injection Wells
                           Appendix III: Comments from the
                           Environmental Protection Agency




See comment 1.




See comment 2.




See comment 3.




                 Page 32                                     GAO-03-761 Deep Injection Wells
                           Appendix III: Comments from the
                           Environmental Protection Agency




See comment 4.
See comment 5.




See comment 6.




                 Page 33                                     GAO-03-761 Deep Injection Wells
                 Appendix III: Comments from the
                 Environmental Protection Agency




                     1. We agree that EPA’s UIC regulations establish procedures for
GAO’s Comments          public involvement through public comment and hearings during
                        the permitting activities for Class I hazardous injection wells. We
                        have made changes to our report to further clarify EPA’s authority
                        and to explain that the agency does not have the authority to
                        address all community concerns. However, we believe that earlier
                        public involvement would allow communities a greater opportunity
                        to contact appropriate state and local officials regarding those
                        concerns not within EPA’s authority. No provisions in the SDWA
                        preclude EPA from involving communities earlier in the permitting
                        process, before draft construction permits are prepared. Involving
                        the community earlier is consistent with, and in the spirit of, EPA’s
                        policy stressing the importance of early public involvement.
                     2. It is not our intent to imply that the UIC program has authority and
                        responsibility for siting hazardous waste treatment and storage
                        facilities. Our report clearly states that these facilities are covered
                        under RCRA. We also did not intend to suggest that the UIC
                        program provide additional opportunities to address citizen
                        concerns in Michigan. Our report describes the opportunities
                        provided for public comment in Michigan, but it does not conclude
                        that additional opportunities should have been provided. It should
                        be noted, however, that EPA Region V program officials did
                        provide additional opportunities to address citizen concerns by
                        conducting a second hearing on the no-migration petition for the
                        well site in Romulus, Michigan.
                     3. We disagree with EPA that our characterization of the financial
                        assurance requirements is problematic and that the financial
                        assurance provisions for Class I wells have a long history of
                        success. We believe there is sufficient evidence to suggest a
                        reexamination of the financial assurance requirements. Our report
                        describes instances in which owners filed for bankruptcy and did
                        not have sufficient financial resources to close wells. While these
                        instances may be limited, they demonstrate there is a potential
                        burden to taxpayers if financial assurance requirements are
                        not adequate.
                     4. We do not agree that the discussion of problems with RCRA
                        financial assurance requirements is inadequate support for our
                        recommendation to examine UIC financial assurance
                        requirements. The UIC regulations were based on the RCRA
                        regulations and, with few exceptions, are almost identical.
                        Potential deficiencies with the RCRA requirements would also
                        apply to the UIC program.
                     5. We disagree with EPA’s statement that our discussion of the
                        financial assurance work group is misleading because the group is



                 Page 34                                          GAO-03-761 Deep Injection Wells
Appendix III: Comments from the
Environmental Protection Agency




       examining the requirements for a different class of well. Our report
       acknowledges that the working group is examining the
       requirements for Class II oil and gas wells, but it may develop
       information that is applicable to Class I injection wells. We have
       clarified our recommendation to state more directly that EPA
       should consider the group’s results and recommendations for Class
       I wells.
    6. We disagree that on several occasions EPA has pointed out factual
       errors during the development of our report that we did not
       address. In accordance with our normal practice, we made changes
       to the draft report based on comments received on a statement of
       facts provided during our final meeting with EPA. The agency also
       provided technical comments on the draft report. While EPA may
       disagree with our interpretation of the facts, we are unaware of any
       factual or technical comments that EPA provided and that we did
       not address.




Page 35                                        GAO-03-761 Deep Injection Wells
                  Appendix IV: GAO Contacts and Staff
Appendix IV: GAO Contacts and Staff
                  Acknowledgments



Acknowledgments

                  John B. Stephenson, (202) 512-3841
GAO Contacts      John Wanska, (312) 220-7628


                  In addition to the individuals named above, Mary Nugent and Kimberly
Acknowledgments   Clark made key contributions to the report. Important contributions were
                  also made by Carol Shulman and Amy Webbink.




(360225)          Page 36                                      GAO-03-761 Deep Injection Wells
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