Comment Log Display

VIA ELECTRONIC SUBMISSION

California Air Resources Board
Attn.: Executive Officer
1001 I Street
Sacramento, CA 95814

Re:       In re October 8, 2014 Preliminary Determination ODS
Destruction Clean Harbors Incineration Facility – Comments of First
Environment of California, Inc.

Dear Sir/Madam:

On behalf of First Environment of California, Inc. (“First
Environment”), we appreciate the opportunity to submit these
comments pertaining to the California Air Resources Board’s October
8, 2014 preliminary determination concerning the potential
invalidation of ODS offset credits generated as a result of
incineration of ODS at the Clean Harbors El Dorado facility.  

First Environment is concerned about the scope of the proposed
determination and its potential adverse impacts on the ARB
cap-and-trade offset program, the verification process, and
obligations of accredited verifiers.  Accordingly, First
Environment offers the following comments for the purpose of
advocating greater clarity and predictability in the offset
certification process.

First Environment’s knowledge, experience, and expertise in
greenhouse gas management is broadly recognized and acknowledged. 
First Environment was the first company approved to provide
greenhouse gas report certification services to members of the
California Climate Action Registry (“CCAR”).  The firm was also one
of the original companies to be recognized as a Technical
Assistance provider for CCAR participants.  First Environment is
accredited as a Validation/Verification Body (“VVB”) by the
American National Standards Institute (“ANSI”) and is approved to
perform verifications under the Verified Carbon Standard, Climate
Action Reserve, Chicago Climate Exchange, and the American Carbon
Registry.  First Environment is also a recognized Climate Action
Reserve and California Air Resources Board verification body for
multiple project types.  The firm has provided either verification
or consulting services for more than half of the ODS projects
registered under the Climate Action Reserve in addition to
verification services for a number of newly registered projects
under the ARB program.

In addition to being an accredited verifier under the ARB
cap-and-trade program, First Environment has provided
environmental, health and safety (“EHS”) compliance auditing
services to hundreds of industrial facilities.  It is commonly
understood within the audit community that large facilities such as
the Clean Harbors incineration complex at issue can be subject to
myriad EHS regulations, and accordingly, non-compliance situations
can occur at any time at any place within a large industrial
facility, many of these being relatively inconsequential paperwork
or minor regulatory discrepancies.  Consistent with the
professional standard of care for the environmental consulting
industry, it is virtually impossible for an auditor, much less a
verifier of offset project activities with a narrower scope, to
guarantee the absence of non-compliance situations at any point in
time, particularly those that are outside the scope of the
verification services.  A determination by the Executive Officer in
this matter that does not recognize the practical realities and
limitations of the verification process with regard to fixing a
point in time wherein environmental compliance is fully
accomplished would undermine the workability of the cap-and-trade
program and would be inconsistent with the offset program rules.

In the context of the ARB verification process, ARB’s cap-and-trade
regulations and the ODS Protocol require the verifier to review the
processes that relate to generation of offset credits.  That is,
the verifier examines the offset project activity.  The
determination under section 95985 whether an offset project is in
accordance with all local, state, or national environmental, health
and safety regulations is necessarily focused on, and limited to,
activities that are material to the creation of the offset credit
and within the scope of the offset project activity.  This is
reflected in section 95973(b) which provides that “an offset
project must also fulfill all local, regional, and national
environmental and health and safety laws and regulations that apply
based on the offset project location and that directly apply to the
offset project.” (Emphasis added).

Violations at a facility owned by a third-party service provider
such as the incineration facility at issue, and particularly
inspection reports, alleged violations, or inchoate enforcement
actions, that do not have a proximate nexus with the offset project
should not be considered for purposes of verification or ARB
invalidation review for several reasons.  First, it is not
practical for a verifier to determine whether a non-compliance
situation has occurred at other times, places or processes within
the facility of a third-party service provider.  Second, verifiers
should not be placed in the position of verifying conditions which
are not within the scope of the offset project itself and are
unknown or unable to be discovered through reasonable diligence
associated with the offset protocols.  Third, ARB’s authority to
invalidate offset credits under section 95985(c)(2) is similarly
limited to examination of the offset project activity.   

First Environment expresses no position on the merits of the
factual circumstances of the Clean Harbors El Dorado matter and has
no involvement with the projects subject to potential invalidation.
 However, in the context of ARB policy, it does not appear that the
Clean Harbors facility’s handling of byproducts from the
incineration process (saturator sludge), whether in fact in
compliance or non-compliance with RCRA waste handling requirements,
has any proximate connection to the offset project activities.  The
goal of the ODS offset project is to destroy the subject greenhouse
gas by chemically converting ODS into non-greenhouse gas products. 
The ODS Protocol at section 3.5 applies by its terms to “collection
or destruction activities.”  Certainly, the destruction and
incineration process itself is within the offset project scope. 
However, there is nothing currently in the cap-and-trade regulation
or ODS Protocol specifying that verification or invalidation
extends to byproduct handling that occurs subsequent to and
separate from the incineration process.  The only pertinent
language in the ODS Protocol refers to “exceedances of permitted
emissions limits,” which terminology relates to air emissions
regulation.  There does not appear to be any question in this
matter that the incinerator was operating properly and in
compliance with laws, nor any question that the ODS was actually
destroyed.  Indeed ARB notes that the offsets generated were in
fact “real, quantified and verified reductions.”  It is important
for ARB to consider that the brine produced at the El Dorado
facility is a quenching fluid and is not a chemical byproduct of
the dissociation of ODS compounds.  According to the record, the
spent brine was reclaimed for subsequent sale for Clean Harbor’s
benefit and not as a necessary step in the ODS destruction process.
 The brine or saturator sludge handling process or facility in
question would not be considered part of the “destruction facility”
within the meaning of section 3.5 of the ODS Protocol for purposes
of verification. 

First Environment is concerned with the breadth of language used in
the October 8, 2014 Preliminary Determination.  ARB’s proposed
expansion of the rule language to “other activities at the
facility” is unnecessarily broad and inconsistent with the
cap-and-trade rules as currently written.  The possible practical
consequence of ARB’s proposed interpretation for ODS project
verification would be that project operators would have to
commission a full EHS audit of the entire incineration facility on
a cradle-to-grave basis as part of the verification process in
order to comply with ARB’s demands.  Even then, given the dynamics
of the environmental regulatory arena, full environmental
compliance cannot be necessarily guaranteed or even temporally
linked to the time when the verification is conducted.  

As an analogy, it would not be warranted under the cap-and-trade
rules if ARB were to attempt to invalidate a forestry offset credit
where a third-party mechanic were to illegally dispose of oil from
trucks used in forest operations, or if offset credits from a
livestock methane project were invalidated because of some legal
violation elsewhere on the farm such as improperly applying
pesticides.  Any such violations associated with ancillary
activities should of course be corrected and would be subject to
enforcement by jurisdictional officials, but these activities are
not part of the verification process or within ARB’s invalidation
authority. 

The offset verification process should be confined to ensuring that
the ODS material was accurately accounted for, actually destroyed,
properly documented and that the incineration equipment was
operating properly to ensure destruction within required
parameters.  If this is done, the environmental integrity of the
offset credit is assured.  Although it is important that any
byproducts are properly handled, the regulation of other activities
is appropriately the responsibility of state regulatory officials
and relevant enforcement processes. The verification process cannot
extend beyond the offset project scope. 

Nor should verifiers be put in a position of second-guessing
regulatory positions asserted by relevant state or local regulatory
authorities.  This is particularly of concern in situations such as
the Clean Harbors matter, where reportedly facility operations were
condoned by the state regulatory authority and no final
determination of violation was extant during the relevant time
period of the offset project activities.  Moreover, because
out-of-state facilities participate in the ARB offsets program,
straying outside the offset project scope would raise potential
jurisdictional and possibly constitutional issues.  For example,
from the standpoint of interstate comity, it would be inappropriate
for California to attempt to impose some legal consequence for
alleged violations of waste handling rules in another state,
particularly where at the time of the verified activities in
question such allegations had not been confirmed through due
process.   

At a minimum, even if ARB were to expand the scope of project
verification, no invalidation of credits should occur due to rule
violations unless the credits were generated after the relevant
facility or operator’s receipt of a formal notice of violation or
similar official action from the relevant regulatory authority. 
Verifiers should not be asked to take into account potential
non-compliance situations unless such notice was disclosed by the
facility or otherwise became known to the verifier or project
operator.  ARB’s rules should at least provide project operators
the opportunity to protect themselves contractually by requiring
prompt notice from the service provider of any known or alleged
non-compliance, which they can do only if there is clarity
regarding the project scope.  

Finally, if ARB proceeds to expand the scope of verification and
invalidation liability as intimated in the Preliminary
Determination, such requirements should be applied only
prospectively.  ARB’s regulations at section 95985(c)(4)(A) provide
that “[a]n update to a Compliance Offset Protocol will not result
in an invalidation of ARB offset credits issued under a previous
version of the Compliance Offset Protocol.”  Moreover, as a matter
of California administrative law, a change in ARB’s interpretation
that results in additional substantive obligations on verifiers or
project operators must be the subject of rulemaking procedures
where, as here, the interpretation would materially alter the
current offset program.  

Again, First Environment greatly appreciates the opportunity to
submit these comments on ARB’s proposed action and is available to
discuss any of these issues at your convenience.
	

Respectfully submitted on behalf of First Environment of
California, Inc.
 
David M. (Max) Williamson


cc:  Dr. Tod Delaney, President, First Environment of California,
Inc.