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An e-mail from an Assistant Attorney General to Nash dated October 11 that warns the DEQ Deputy that the agreement he is seeking to negotiate is illegal

Mike Leffler - Attorney General's office handling the Dow issue
Robert Reichel - Attorney General's office - works with Mike Leffler
Art Nash - Michigan Department of Environmental Quality
(now handling the Dow issue for MDEQ leadership)

> >>> Robert Reichel 10/11/02 03:56PM >>>
Art,

You are welcome. Mike Leffler is out of the office today, but I have shared your note and request with him. He asked me to convey the following response.

Unfortunately, we cannot offer legally acceptable language to accomplish what is proposed in the draft order because it does not exist. Simply put, the very essence of the proposed order is illegal.

Although DEQ management and Dow's outside counsel, Mr. Robinson, have apparently been negotiating both the form and substance of the proposed Corrective Action Consent Order since August, DEQ first sought our legal advice and provided a draft of the document on the afternoon of October 1. As you know, you requested our immediate review to enable DEQ to release a draft Order, together with a draft Part 111 hazardous waste treatment facility operating license, for public comment beginning October 7.

As requested, we immediately reviewed the document. In his October 3 email to you, Mike Leffler clearly told you that the draft order is illegal and that DEQ lacks the legal authority to sign it. He explained that among other things, the order: 1) unlawfully purported to relieve Dow of certain liability to the state, 2) arbitrarily and illegally established certain "action levels" for dioxin in soils ten times greater than DEQ's existing statewide standards under Part 201 through processes not in compliance with Parts 111 and 201, 3) unlawfully delegated DEQ regulatory authority to private parties, and 4) illegally substituted "dispute resolution" procedures involving a de novo trial in Midland County Circuit Court for the administrative and judicial processes specified in applicable law.

Further, Mike's October 3 email emphasized that "the document is fatally flawed and the DEQ cannot legally bind itself in the way the agreement contemplates. While Mike said that we were willing to work with DEQ to assist in drafting a lawful agreement, he bluntly added that "any such agreement would have to be profoundly different from the one I received." I understand that Mike has also reiterated those concerns in a recent meeting with you.

DEQ presumably communicated our legal concerns to Dow, whose counsel, Mike Robinson then contacted us. In a series of recent communications, Mike Leffler and I have repeatedly explained to Mr. Robinson, at length, that the proposed Order (even as modified by Dow in drafts dated October 4 and October 9) was and remains fundamentally illegal. Those communications included a meeting on October 7, phone discussions on October 8, my emails to Mr. Robinson dated October 8 and 9, and a lengthy phone conversation with him on October 10. On every one of those occasions, we explained that the problem was not one of simply deleting or modifying certain language. Instead, we repeatedly told him that the basic scope and structure of the agreement were fatally flawed. However, only in the last conversation did he profess to understand the full nature of our legal objections. Shortly thereafter, we received your note.

I will once again summarize what we have previously told both you and Dow's counsel. For more than a decade, Dow has been and remains under an affirmative statutory obligation to perform corrective action for off-site as well as on-site releases of contaminants (including, but not limited to dioxin) from its Midland facility. Under Part 111's Rule 629, Dow is required to perform such corrective action as necessary to protect public health, safety, welfare and the environment. At a minimum, such corrective action must satisfy "environmental protection standards" that are established pursuant to Part 201.

As you well know, the only existing DEQ Part 201 cleanup standard for dioxin in residential soils (the subject of the proposed order) is 90 parts per trillion (ppt). Despite the urgings of Dow, DEQ has apparently decided not to increase that generic residential cleanup criterion in the still- pending revisions to the Part 201 Rules.

Consequently, the only other legal basis for establishing a cleanup criterion for dioxin in soils as contemplated in the draft Order is if the DEQ approves a remedial action plan pursuant to MCL 324.20120a(2) "based on site specific criteria that satisfy the applicable requirements of this part and the rules promulgated under this part." Those requirements include, among other things, "[a]ssuring the protection of public heath, safety welfare and the environment" as well as performing a site-specific risk assessment addressing all requirements of existing Part 201 Rule 717(2), particularly, the use of "best available information" as defined in Rule 701(d).

In addition, both Parts 111 and 201 impose upon DEQ the duty to itself determine that the statutory criteria of protectiveness, etc. are satisfied. DEQ may not lawfully delegate those statutory duties, either in whole or in part, to Dow or to a body of "independent" scientists, no matter how distinguished they may be.

Further, it is bedrock principle of administrative law that an agency may not exercise its statutory authority in an arbitrary or capricious manner. DEQ, like any other agency must instead proceed in an orderly, rational and deliberate fashion to consider all appropriate factors and information, and provide members of the public affected by its decisions meaningful notice and an opportunity to be heard.

Unfortunately, the course of action outlined in your note, and reflected in even the most recent Dow re-draft of the proposed order, utterly fails on all those counts and is therefore illegal.

To begin with, the so-called "interim action level" (a term that appears nowhere in the relevant laws and rules and was presumably invented for purposes of this Order) that you propose to establish either now or in the near future cannot possibly be justified as the legally required environmental protection standard established pursuant to Section 20120a(2). The 1000 ppt level, is not, as you suggest a cleanup standard established by either ATSDR or EPA. More important, it is clearly not a "site-specific" criterion developed in compliance with Part 201. Even Mike Robinson has conceded as much.

The alternative, but still unspecified interim action level (presumably something greater than 1000 ppt) mentioned in your note and still left blank (!) in Dow's last draft of the order apparently doesn't even exist yet. In any event, whatever number you propose to put there in the next few weeks cannot conceivably be defended as a site-specific criterion lawfully and rationally derived under Section 20120a (2). Your note misleadingly refers to "our initial calculation using Probabilistic Risk Assessment (PRA)." However, according to both Dow and your own staff, the only existing attempts to apply PRA to derive a cleanup standard for dioxin in residential soils are certain reports prepared by Dow's consultant, Exponent. As you well know, DEQ's own toxicologists have unanimously disagreed with Exponent's conclusions. More specifically, DEQ's own qualified experts have concluded that many of the critical inputs used by Dow for the risk assessment are not based upon best available scientific information, as DEQ's own rules require.

Morever, EPA has specifically advised you, in writing, that Exponent's work did not appear to follow the EPA guidance on PRA (upon which it purports to be based) and that numerous issues would need to be carefully evaluated, and publicly vetted, before PRA could properly be used to guide cleanup decisions at this site. EPA also emphasized that the process being followed by DEQ for review of the PRA was unrealistically short. It also offered to provide expert technical assistance to DEQ, an offer that to date, DEQ has apparently chosen to reject.

Instead, it appears from your note and our discussions with Dow's counsel, that DEQ management is still embarked on the course of hastily trying to lash together, over the next few days or weeks, a "corrective action" agreement with Dow while concurrently trying to create at least the appearance of a scientific and regulatory basis for its decision to relax, by at least ten times, in the Midland area DEQ's existing cleanup standard.

You should be aware that Dow's own counsel has told us that the negotiation of the proposed agreement is being driven by Dow's express desire to have the DEQ commit itself in writing, by the end of 2002, to an alternative cleanup standard for dioxin in Midland soils (and/or a narrowly circumscribed process for adjusting it in the future). Mr. Robinson explained that Dow is concerned that depending upon the results of the November gubernatorial election, future DEQ management may not be as receptive as the present administration to Dow's "scientific" and regulatory arguments. Further, it is clear that as a matter of legal strategy, Dow is anxious to position itself as having relied, to its detriment, on a particular DEQ regulatory decision, when, and if a future DEQ management seeks to require some different standard of corrective action.

Obviously, such political considerations and speculation have no place in our legal analysis, but you should be aware of the factual background against which DEQ's actions in this matter may be judged by others. Regardless of DEQ management's own actual motivations for attempting to immediately conclude a written agreement with Dow on these issues, many outside observers will inevitably draw the inference that the proposed agreement is an "11th hour " and "sweetheart deal." Frankly, we are at a loss to understand why the DEQ would want to unnecessarily subject itself to such criticism.

The suggestion in your note that DEQ wants to conclude this proposed agreement now "so that we can proceed on a course of action that will compel Dow to address the dioxin issue that has been lingering for over a decade" is puzzling. As noted above, Dow has been under an affirmative statutory duty to implement off-site corrective action for dioxin and any other contaminants for more than ten years. In that entire time, until you gave us the October 1 draft of a "Corrective Action Consent Order", and a late September draft operating license that briefly referred to off-site corrective action, DEQ has never sought legal assistance from this office to enforce such corrective action obligations against Dow. Indeed, to the best of our knowledge, until Dow initiated discussion earlier this year, there is no indication that DEQ even requested, let alone directed Dow to perform corrective action to address the off-site releases of dioxin that have been documented to exist since at least 1992.

In any event, as Mike Leffler has told you, we are ready to work with DEQ to take appropriate legal action to ensure that Dow promptly initiates corrective action in compliance with applicable law. Among other things, we are ready to assist your staff in drafting appropriate language to be included either in a draft operating license or an administrative order (either by consent or to be issued, unilaterally if necessary under MCL 324. 11151) that would require Dow to develop and implement , according to a specific schedule, DEQ- approved plans for remedial investigation to adequately characterize the extent of the off-site contamination and for cleanup/corrective action consistent with Parts 111 and 201. In fact, we have already discussed the inclusion of specific language for that purpose in the draft license.

Further, as Mike has also told you, and we told Dow, Dow is already free to either perform or fund whatever dioxin health effects or other scientific studies it believes are appropriate or useful. It does not need an order with you to do so. If DEQ wishes to enter an agreement with Dow wherein Dow agrees to perform or fund such studies and provide the results to DEQ, DEQ may do so to the extent allowed by law.

However, what DEQ cannot legally do, as contemplated by the proposed order, is to delegate its own regulatory authority to third parties and arbitrarily approve in advance a particular regulatory action based upon the results of the studies. DEQ cannot lawfully bargain away its continuing statutory duty under Parts 111and 201 to require corrective action/cleanup as needed to protect public health and the environment.

In sum, the course of action you propose is fundamentally illegal. We urge you to instead enforce Dow's corrective action obligations as provided by law and stand ready to work with you to that end.

>>> Arthur Nash 10/10/02 11:02AM >>> > Mike/Bob:

Thank you for continuing to review the proposed consent order in a timely manner. It would be helpful if you could offer specific language that you believe would be legally acceptable to allow the DEQ to enter into this Order providing for the setting of an initial interim action level (based on our initial calculation using Probabilistic Risk Assessment (PRA) or on ATSDR's/EPA's action level of 1000 ppt); the use of best available science to establish the appropriate bioavailability factor that will be used in a PRA calculation for the DEQ to determine and set a revised interim action level; and finally the mechanism to allow the DEQ to accept/approve a final action level based on the results of the proposed health study. We believe it is important to finalize this document so we can proceed on a course of action that will compel Dow to address the dioxin issue that has been lingering for over a decade.

Thank you.

Art >

>

> >>> Robert Reichel 10/09/02 03:59PM >>> > Mike- >

Confirming the voice mail that Mike Leffler and I left you this afternoon, we have reviewed the latest revised draft corrective action consent order that you sent us today. Based upon that review it is painfully apparent that you have chosen to largely ignore the substance of what Mike and I told you during our recent meeting and follow up phone call and email. Although the latest draft makes some minor changes to appear to address part of the most obvious legal problems we identified, the document as revised, remains fundamentally unlawful for the reasons we previously identified.

Under the circumstances, Mike and I see no useful purpose for proceeding with meeting we scheduled for 9 AM on the 10th. Please consider it canceled.

If and when Dow is prepared to discuss the fundamentally different approach to an agreement that we described, and provides language on that basis, it might make sense to proceed with a meeting.