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

United States General Accounting Office:

GAO:

June 2003:

DEEP INJECTION WELLS:

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

GAO-03-761:

GAO Highlights:

Highlights of GAO-03-761, a report to the Honorable Lynn C. Woolsey, 
House of Representatives 

Why GAO Did This Study:

Billions of gallons of hazardous liquid waste are injected into 
underground wells each year. These Class I hazardous deep injection 
wells are designed to inject waste into an area below the lowermost 
underground source of drinking water. EPA and the states grant permits 
to commercial operators to construct and operate these wells and must 
obtain public comments on the permits. Communities often raise 
concerns about well safety and other matters. GAO examined the extent 
to which EPA and the states (1) address these community concerns, (2) 
consider environmental justice issues, and (3) ensure that financial 
assurances adequately protect the taxpayer if bankruptcy occurs. GAO, 
among other things, examined the permit process in the four states 
that have commercial Class I wells. 

What GAO Found:

Although EPA provides opportunities for public comment on proposed 
commercial Class I deep injection wells as required by regulations, 
these opportunities come late in the process, after a draft permit has 
been prepared and this timing may limit the extent to which concerns 
are addressed. EPA responds to all public comments, but it cannot deny 
a permit on the basis of community concerns if all regulatory 
requirements for protecting drinking water are met. However, earlier 
involvement could give communities more time to contact appropriate 
state or local officials to address concerns that are not within the 
scope of EPA’s authority. In Michigan, where EPA issues injection well 
permits, communities believe that their concerns are often not fully 
resolved; in some instances, communities have filed legal actions and 
complaints to prevent well construction. In contrast, the three states 
to which EPA has authorized responsibility for issuing permits have 
enacted requirements for earlier and more public involvement. Overall, 
they believe that early involvement better addresses community 
concerns, mitigates controversial issues, and avoids litigation.

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. EPA 
encourages its regional offices issuing construction permits to 
determine if minority and low-income 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 under Title VI of the Civil Rights Act with EPA’s Office of 
Civil Rights. Only one community has filed complaints related to deep 
injection wells; these complaints did not result in changes to the 
permit decisions. 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 that adequate 
resources are available to close a commercial deep injection well in 
the event of bankruptcy or ceased operations. While only four sites 
have gone into bankruptcy or ceased operating since the program began 
in 1980; two did not have adequate financial resources to plug and 
abandon wells and for the other two, financial assurance was not 
tested because other companies purchased and continued operating the 
wells. EPA has questioned the adequacy of some financial assurance 
requirements in other programs that are similar to those for Class I 
deep injection wells. EPA’s Office of Inspector General has reported 
that financial assurance requirements for another waste management 
program, which the requirements for deep injection wells mirror, may 
not be adequate to 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.

What GAO Recommends: 

GAO recommends that EPA

* involve the public earlier in the permitting process to allow more 
time for community concerns to be addressed; and 
* determine if the program’s financial assurance requirements need to 
be strengthened. 
 
EPA did not agree with GAO’s recommendations and stated that (1) 
public involvement is limited by program regulations and (2) financial 
assurance requirements are not deficient. GAO maintains the 
recommendations are sound.

www.gao.gov/cgi-bin/getrpt?GAO-03-761.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact John B. Stephenson at 
(202) 512-3841 or stephensonj@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Community Concerns Could Be More Comprehensively Addressed Before Draft 
Permits Are Completed:

Environmental Justice Concerns Are Addressed during the Permitting 
Process and in Response to Civil Rights Complaints:

Financial Assurance Requirements May Not Be Adequate for Closing Wells:

Conclusions:

Recommendations for Executive Action:

Agency Comments:

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

Appendix II: Scope and Methodology:

Appendix III: Comments from the Environmental Protection Agency:

Appendix IV: GAO Contacts and Staff Acknowledgments:

Table:

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

Figures:

Figure 1: Construction Design for a Class I Deep Injection Well:

Figure 2: UIC Deep Injection Well Permitting and Public Comment 
Processes:

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:

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).[Footnote 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 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.[Footnote 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 
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.

Results in Brief:

EPA requires opportunities for public comment on proposed commercial 
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, 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 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.

Background:

Disposing of wastewater through underground wells began in the 1930s, 
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.

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.):

Figure 1: Construction Design for a Class I Deep Injection Well:

[See PDF for image]

[End of figure]

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. 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.

Community Concerns Could Be More Comprehensively Addressed Before Draft 
Permits Are Completed:

Under EPA regulations, communities can raise concerns during the 
required public comment process for deep injection well permits after a 
draft permit is issued. EPA bases final approvals on whether a proposed 
well meets technical and safety requirements under its regulations and 
does not have authority under the Safe Drinking Water Act to deny a 
permit on the basis of other concerns. Earlier public involvement would 
allow more time for individuals to approach appropriate state or local 
officials with any other concerns. When states are the permitting 
authority, 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.

EPA Completes Draft Permits Before Addressing Public Concerns:

EPA regional offices, or state offices for states with primacy, obtain 
information about community concerns regarding UIC permits through 
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.[Footnote 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.[Footnote 4]

Figure 2: UIC Deep Injection Well Permitting and Public Comment 
Processes:

[See PDF for image]

[End of figure]

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.[Footnote 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.[Footnote 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 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 Community Concerns to Be Addressed Early in the 
Permitting Process:

Recognizing the importance of public involvement in making decisions 
that affect the environment, Texas, Ohio, and Louisiana have gone 
beyond the federal minimum public notice and comment requirements to 
address community concerns. For example, the Texas Commission on 
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 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.

Environmental Justice Concerns Are Addressed during the Permitting 
Process and in Response to Civil Rights Complaints:

EPA addresses environmental justice issues during the process for 
deciding on a construction permit and when civil rights complaints are 
filed with the agency after permits are issued. While EPA has yet to 
issue a national policy on environmental justice, some regional offices 
have independently developed and implemented their own guidelines for 
considering environmental justice during their decision-making 
processes. After permit decisions are made, individuals and communities 
may raise environmental justice issues by appealing permit decisions 
with EPA's Environmental Appeals Board or filing complaints under 
Title VI of the 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 Encouraged to Consider Environmental Justice Issues for 
Proposed Well Sites:

In 1995, in response to Executive Order 12898, EPA incorporated 
environmental justice considerations into its approval process for 
construction permits. Under EPA's strategy, staff must integrate 
environmental justice into every EPA program, policy, and activity. 
EPA's Office of Environmental Justice oversees the implementation of 
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 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 Environmental Justice Concerns through Civil 
Rights Complaints Filed with EPA:

Individuals or communities with environmental justice concerns may file 
petitions with EPA's Environmental Appeals Board (EAB) to review 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 range of facility permit decisions, not just deep injection 
wells. Members 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 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.

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

Status of reviews: Pending: Under review for possible investigation/
rejection/referral; Number of cases: 6.

Status of reviews: Pending: Accepted for investigation; Number of 
cases: 26.

Status of reviews: Pending: Suspended because complaint is part of 
other litigation; Number of cases: 7.


Status of reviews: Closed: Rejected for investigation or dismissed 
after acceptance; Number of cases: 94.

Status of reviews: Closed: Referred to another federal agency; Number 
of cases: 2.

Status of reviews: Closed: Informally resolved; Number of cases: 2.

Sources: EPA and GAO.

[End of table]

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.[Footnote 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.[Footnote 8] The 
federal government, however, can still bring enforcement actions.

Financial Assurance Requirements May Not Be Adequate for Closing Wells:

It is uncertain whether the financial assurance requirements for 
closing deep injection wells can adequately provide the needed 
financing in cases of owner bankruptcy or other events that force well 
closure. EPA and state officials believe that financial assurance 
requirements are adequate and would cover the closing costs for the 13 
commercial wells currently 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 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 Resources Have Not Always Been Available for 
Plugging and Abandonment of Deep Injection Wells:

When owners of commercial Class I wells have filed for bankruptcy or 
ceased operating, they have not always had adequate financial resources 
to cover the costs of plugging and abandonment of wells. Since 1980, 
when the deep injection well program began, four owners have filed for 
bankruptcy or ceased operating. In two cases, the adequacy of the 
financial assurance was not tested because other companies purchased 
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 Deep Injection Wells:

Malone Services Company operated two wells under state-issued UIC and 
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.[Footnote 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 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., Deep Injection Well:

In 1979, Wastewater, Inc., began converting a well originally used for 
oil 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.[Footnote 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, 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 the Adequacy of Financial 
Assurance Requirements in Other Programs:

Uncertainties about the adequacy of RCRA financial assurance 
requirements have been raised by EPA officials, and EPA's Office of 
Inspector General (OIG) recommended changes to the requirements in 
March 2001. UIC financial requirements are based on RCRA requirements 
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.[Footnote 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 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.[Footnote 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,

* 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.

Conclusions:

The public participation process EPA currently uses is not as effective 
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.

Recommendations for Executive Action:

To allow more time for community concerns to be addressed, we recommend 
that the Administrator, EPA, involve communities earlier in 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.

Agency Comments:

We provided a draft of this report to EPA for its review and comment. 
EPA 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.

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.

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:

Signed by John B. Stephenson: 

[End of section]

Appendix I: Chronology of Events for the 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.

* 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 
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.

[End of section]

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 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.

[End of section]

Appendix III: Comments from the Environmental Protection Agency:

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

See comment 1.

See comment 2.

See comment 3.

See comment 4.

See comment 5.

See comment 6.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY:
OFFICE OF WATER:
WASHINGTON, D.C. 20460 

MAY 22 2003:

John B. Stephenson:

Director, Natural Resources and Environment 
United States General Accounting Office 
Washington, DC 20543:

Dear Mr. Stephenson:

Thank you for the opportunity to review the General Accounting Office's 
(GAO) draft report: Deep Injection Wells - EPA Needs to Address 
Community Concerns Earlier and Strengthen Financial Assurance 
Requirements (GAO-03-761), dated May, 2003. The Environmental 
Protection Agency (EPA) has coordinated with your Office throughout the 
study. The Underground Injection Control (UIC) program is highly 
technical and certain aspects of the Class I hazardous waste injection 
well component of the program can be particularly controversial. The 
Agency has provided extensive material at your request and professional 
staff have been available for numerous meetings.

You provided the Agency a very brief period to review your final draft 
report. We have identified three major areas of concern with this 
report:

l. The report mischaracterizes EPA authority under the Underground 
Injection Control program and therefore the relevant scope of public 
involvement and comment opportunities.

2. The report implies a significant deficiency in the UIC financial 
assurance requirements for deep injection wells that does not exist.

3. The report continues to contain a number of mistakes and factual 
errors despite EPA providing GAO with corrections on several occasions.

Each of these will be discussed in detail below.

The Underground Injection Control program is a cornerstone in the 
protection of our nation's drinking water. It is one of our key source 
water contamination prevention programs in that regard. The Class I UIC 
deep well program, which is the focus of your study, constitutes only a 
small fraction of the estimated 650,000 to 800,000 injection wells in 
the United States. Since the mid-1980s, EPA, in conjunction with our 
state partners, has spent a considerable amount of time and resources 
in developing and implementing a safe and effective Class I hazardous 
waste well program. Reports completed by your Office in December 1994, 
as well as studies prepared by the Office of Water in 1991 and a March 
2001 study for Congress, have provided a favorable review of the manner 
in which the Class I UIC program is working to protect drinking water 
resources.

Our initial concern with the report involves your recommendation that 
EPA needs to involve the public earlier in the permitting process for 
commercial Class I deep injection wells to better address community 
concerns. As you are aware, permit applications for Class I hazardous 
waste injection wells, whether commercial or non-commercial, are 
reviewed in great detail by
EPA and primacy state agencies with respect to all technical matters. 
Operators of Class I hazardous injection wells must also get final 
approval by EPA for an exemption to Land Disposal Restrictions under 
the Hazardous and Solid Waste Amendment (HSWA) of 1984 to the Resource 
Conservation and Recovery Act (RCRA). UIC regulations establish clear 
procedures for extensive public involvement, through public comment and 
hearings, during these activities. The procedures are set forth in 
detail in the Code of Federal Regulations (40 CFR Part 124 - Procedures 
for Decision Making). However, as you know, the extent of these 
permitting activities and, therefore, the related public participation 
is limited to the scope of the Congressionally established program. 
Your report and recommendations attribute responsibilities to the 
federal UIC program beyond the scope which Congress assigned in the 
Safe Drinking Water Act (SDWA). Part of the confusion is generated by 
your intermingling the discussion of deep injection wells and hazardous 
waste surface treatment and storage facilities. On the federal level, 
the former is regulated by the SDWA UIC program while the latter is 
covered by RCRA. Thus, the UIC program addresses issues related to deep 
injection well permitting as it is authorized to do under the law, 
while the State of Michigan has separate responsibilities under RCRA 
that they follow as well.

The wording and recommendations of your report imply that the UIC 
program has authority and responsibility for the siting of hazardous 
waste treatment and storage facilities. In fact, the statutory mandate 
for the UIC program is the protection of Underground Sources of 
Drinking Water (USDW) from the subsurface emplacement of fluids. 
Congress did not provide the EPA UIC program with authority over 
surface siting of injection wells for reasons unrelated to the 
protection of USDWs. Your report suggests that the EPA UIC program 
provide additional opportunities for public involvement to address 
citizen concerns raised in Michigan about the location of hazardous 
treatment and storage facilities. The concerns cited in your report 
include noise, odor, traffic from trucks and potential impacts on 
property values. However, none of these are relevant to the 
Congressionally established mission of the UIC program. Rather, there 
are numerous other local, state and federal programs charged with 
considering these potential impacts. Your report nonetheless suggests 
these are within the scope of UIC authority. Your final report should 
correct this inaccuracy and avoid creating confusion. If your intent is 
to recommend to Congress that it should expand EPA's SDWA mandate to 
give it authority to control local siting and land use decisions, it 
should be stated more clearly. If that is your intent, I am concerned 
that such a step is unnecessary and that expanding the UIC program's 
authority may inappropriately interfere with state or local decision-
making. In the case of the Michigan UIC wells that is at the center of 
your report, EPA has, over the years, provided extensive and multiple 
opportunities for public coordination, input and formal comment.

GAO's finding that "...financial assurance requirements may not ensure 
that adequate resources are available to close a commercial deep 
injection well..." is also problematic. This finding is inconsistent 
with the long history of the success of financial assurance provisions 
for Class I wells in meeting their programmatic goals. It is also 
inconsistent with the specific examples contained in your report. Your 
extensive investigation found only two instances where there might be 
potential inadequacies in financial assurance for UIC Class I permits. 
Even in those two cases, your report finds there were "...unique 
circumstances..." in one of those cases, the well was never completed 
and there was never any injection of fluids. In the second case, you 
note that the state of Texas, which operates the program governing this 
well, does not have concerns about any threats from the injected 
wastes. Despite your recognition that these situations do not represent 
the program, you nonetheless suggest they constitute a potential 
program deficiency justifying new federal regulations. Rather than rely 
on the primary data of the strong record of financial assurance in the 
Class I UIC program, you attempt to support your recommendation by 
discussing the experience in an entirely separate program. Using 
exceptions as if they were the norm and tangential examples in place of 
the actual record of the program under examination is highly 
inappropriate. Your discussion of EPA's UIC financial assurance work 
group is also misleading. As we have explained, that group is examining 
the need to change the requirements for an entirely different class of 
well. That effort is based upon a concern that changing circumstances 
for small well operators may necessitate some fine tuning of 
requirements. The effort is targeted at that well type because of a 
best professional evaluation of evolving program needs for those wells. 
We have not seen a similar need for the hazardous deep injection wells. 
Your recommendation that this effort be expanded to include the Class I 
wells ignores our professional advice without explanation or 
justification. As noted above, EPA and the states have a demonstrated 
history of success in the important area of financial assurance and we 
will continue to ensure that permits appropriately address financial 
responsibility.

Finally, there are still various factual and technical errors, as we 
have pointed out during the development of the report, most recently in 
specific comments by an email message on May 22. We hope that you will 
address these issues to ensure the accuracy of your document. On future 
technical reports such as this, you may wish to consider the benefits 
of conducting an independent technical peer review as is generally done 
for comparable studies in most other Federal government organizations.

I hope these concerns can be addressed in your final report. I believe 
they will make it a stronger, clearer, more accurate and more 
informative document. If you choose not to address these comments, 
please include this letter in your final report.

If there are additional questions or if you wish further clarification 
of our comments, please contact William R. Diamond, Director, Drinking 
Water Protection Division, in the Office of Ground Water and Drinking 
Water, at (202) 564-3751. We look forward to working with you on this 
project and future reports concerning the quality of our nation's 
drinking water.

Sincerely,

G. Tracy Mehan, III 
Assistant Administrator:

Signed by Jane Moore for G Tracy Mehan, III 

GAO's Comments:

We agree that EPA's UIC regulations establish procedures for 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.

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.

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.

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.

We disagree with EPA's statement that our discussion of the financial 
assurance work group is misleading because the group is 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.

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.

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

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

Acknowledgments:

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

FOOTNOTES

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

[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).

[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.

[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).

[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).

[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.

[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."

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

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

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