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The ERTG posted a case study on the Salem Harbor Power Plant earlier. Now a follow up to the recent trends involving this real life risk at the local, state and national levels.
On November 3, 2009 the Conservation Law Foundation, a leading New England nonprofit advocate of environmental health and safety, held a public meeting to discuss the closure of the plant and the Salem News covered the story and the comments are very interesting (mostly disparaging the attempts to close the plant and the EPA).
A new cooling permit is under review by the EPA. When the plant's owner, Dominion, purchased the plant in 2005 the permit was in an "administratively extended status" due to a backlog at the EPA.
Again, this demonstrates environmental risk trends involve local (Conservation Law Foundation and the local citizens) and federal involvement to resolve the growing concern over the plant's future.
What are the solutions for energy company clients like Dominion? What about the local interest groups? Studies (environmental reports - pay attention Phase I people!) are needed (and have been produced). I know several larger firms on this site have such energy clients and a Phase I "what is a REC" is not the issue here! The resolution involves thinking!
See Dianne Croker's Blog: The Untouchables in Today's Employment Market for the approach to business in today's economy.
Well here is a difficult problem. Again, I am sure the stakeholders would appreciate a solution.
The Environmental Risk Trends group (ETRG) presents a challenging case study: The Salem (MA) Harbor Power Plant.
Purpose of Case Study: The purpose is multi-fold and includes the risk identification and evaluation of the power plant including the: interaction between local, state and federal regulations; lawsuits (toxic torts) and enforcement actions; stakeholders; financial implications to the stakeholders (stockholders, the community, the power plant), and ultimately, a recommended solution to the plant's future.
Creative Risk Solutions: The future of the power plant has been questioned at every level; local (City of Salem), state (Massachusetts: the governor & state reps) and federal (EPA). Multiple solutions have been proposed including:
- a redevelopment of the site (i.e. due diligence and remediation consultants - take notice) into multi-use commercial property;
- a cutting edge clean energy center where scientists, engineers and companies can develop a carbon free technologies; and
- retro-fitting the plant to produce other 'clean/renewable' energy sources including: biomass, waste paper or similar.
History: The plant is located on the waterfront in Salem Harbor in historic Salem, MA since 1951 and is one of the oldest plants in MA. Designed originally to produce electricity by burning coal; changed in 1969 to burn oil; changed back to mostly coal in mid-1980's under pressure from U.S. government citing our dependence on oil. Dubbed one of the "filthy-five" creating significant air and water pollution according to a study by: Harvard School of Public Health and Sullivan Environmental Consulting Firm. The study cites significant pollution and health effects within a 30 mile radius of the plant including: 53 premature deaths, 570 emergency room visits, 14,400 asthma attacks, 99,000 daily incidents of upper respiratory symptoms each year and a potential link to cancer for those living in the area.
Current Use: Coal and oil generating facility. Not operating a full capacity.
Pollution: Air and water. Contaminants: chromium, arsenic, mercury, nickel, lead, selenium, vanadium, manganese, carbon dioxide, sulfur dioxide, nitrogen oxide ...
Finance: Trillium Asset Management, a socially responsible investment firm, in 2004 worked with the United Methodist Church and Healthlink a local citizens group, to sponsor a shareholder proposal - calling for a company report on the economic risk and benefits associated with toxic emissions at the Salem Power Plant.
Lawsuits: In 2000 the CLF began lawsuit for cleanup of the waste site lagoons. The lawsuit would have been pursued as a citizen's suit under RCRA. The MADEP (not the EPA), the Conservation Law Foundation (CLF) and the Salem Power Plant came to a settlement.
Environmental Regulations: Federal Laws: Clean Air Act, Clean Water Act, RCRA; State Laws: Massachusetts' Green Communities Act, Global Warming Act and at the time (2001) DEP's "Filthy Five" regulations (which were more stringent than the Federal Clean Air Act) ...
Regulators: Federal = FERC, EPA, OSHA; State = MADEP, MADPS.
Interaction between State and Federal laws: While this case involved local, state and federal regulations and regulators - like most environmental risk issues - this case was ultimately addressed by the state (and local advocacy groups). The Federal EPA essentially handed off to MADEP the issue concerning Air Pollution. In response the MADEP (with assistance from local advocacy groups: CLF and Healthlink, passed more stringent regulations than the Federal government. Regarding the water contamination - again it was the CLF (environmental advocacy group) and the state that forced the issue of remediating the waste-water lagoons - not the EPA (i.e. not CERCLA or RCRA!).
Stakeholders: Local (City of Salem), State (MADEP, Governor) and Federal (EPA, FERC) regulators/governments; as well as local community Healthlink, and environmental advocacy group CLF.
ERT Group insight - 'the Solution': As I have advocated time and again - environmental risk solutions requires a 'totality of the circumstances' approach. Environmental service providers (consultants, attorneys, banks) cannot look with CERCLA blinders on in approaching complex environmental risk for clients (and the community it affects). The local community (and environmental advocacy groups) and the state will be the biggest players in the ultimate solution. NOT the federal government - EPA, CERCLA, RCRA, FERC, etc. It's time to recognize that the vast majority of environmental risk is handled at the local and state level and to stop falling back on federal regulations and evaluation of risk!
Development of the Site. If the site is redeveloped (regardless of future use) - a environmental consultants and engineers will be working very closely with a developer, bank (or other financial entity) on one side; and the immediate neighborhoods, city, environmental advocacy groups and the state on the other side. Does the proposed developer have the financing to back the development and remediation? Does the financial source have the comfort level with the collateral (currently a contamination, old power plant) to extend credit?
What is your Solution? The opportunity awaits your company ... Who do you approach? Dominion, Healthlink, the towns (Salem, Marblehead), the state? After 'choosing' a client - have you identified their end-goals?
Pre-Acquisition/Pre-development:
- Which other stakeholders do you approach first? Why?
- What law/regulations apply? HINT: MASSACHUSETTS!!!! [CERCLA and RCRA are applicable but will not govern this case]. This case, along with the vast majority of cases, are governed by state law!
- MA Brownfields legislation - liability exemptions? tax incentives?
- Developer - are they experienced in Brownfield development?
- Financing for (i) cleanup, (ii) development
- Insurance for cost overruns, future liability (cleanup and third party actions)
- Is there a possibility of indemnification from Dominion? or the DEP (Brownfield regulation).
Post-Acquisition/Development:
- Environmental regulatory compliance with institutional controls (maintenance);
- Asset management - See Trillium Asset Management above;
- Finance - cash flow to pay off investors = tenants and property owners (are 'secondary investors' going to be concerned about former use?)
I am sure Healthlink, the City of Salem, Marblehead, the state and Dominion would welcome your thoughts!
Ed
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