HOUSTON LIGHTING & POWER COMPANY HOUSTON LIGHTING & POWER COMPANY, Re Proposed Amendments to Federal Water Pollution Control Act. Hon. LLOYD BENTSEN, U.S. Senate, Washington, D.C. DEAR LLOYD: We are greatly concerned about the July 2 Staff Print of proposed amendments to the Federal Water Pollution Control Act. We are of the opinion that a number of provisions in this proposed legislation would substantially threaten our plans to construct and operate additional generating units at Cedar Bayou. The purpose of this letter is not to discuss all of the objectionable features of the Staff Print. Instead, we enclose suggested amendments that would eliminate from the legislation those features most harmful to the electric power industry in general and to the Company in particular. The primary objection from the Company's standpoint is that opponents of new power plants could use the bill to delay or block construction and operation. One means of eliminating this problem would be to amend the Staff Print to create an exemption to permit construction of power plants. Such an amendment might be in the form of a clause like the following: "The provisions of this Act or any other Federal or state legislation notwithstanding, no person, including the Administrator, shall invoke the provisions of the Federal Water Pollution Control Act or any other legislation relating to water quality to delay or prevent the construction or operation of a steam electric generating plant, where the construction and operation of such plant has been determined by the Federal Power Commission to be necessary to insure the adequacy and reliability of all or part of the nation's electric power supply; provided, however, that the provisions of the Federal Water Pollution Control Act and other legislation may be invoked to regulate the mode and manner of operation of such plant after it is constructed." While the critical problem created by legislation like that proposed in the Staff Print is the potential delay or blockage of power plant construction, several specific provisions of the Staff Print would pose continuing operating problems for the Company. The first of these problems is found in Section 306 of the Staff Print. This section would require the EPA Administrator to promulgate national uniform standards of performance for newly constructed sources of water pollution. The definitions of the Staff Print make it clear that a uniform temperature standard for discharges would be required by this section for the entire nation. Such a requirement fails to acknowledge the different effects of thermal discharges on different bodies of water around the nation. One method of solving this problem would be to eliminate "steam electric power plants" from the categories of stationary sources for which uniform standards must be set. However, this might not prevent the Administrator from expanding the categories at some future date. As an alternative an amendment in the following form might be made: "In recognition of the fact that local conditions are very important in determining the effect of thermal discharges and of the fact that heated water is not in and of itself a pollutant, no uniform temperature standards for discharges shall be set by the Administrator." An alternative to the amendment discussed above would be to provide a specific standard in the legislation. Provision could be made for adjusting that standard. One such standard is that proposed by the Federal Water Pollution Control Administration in its 1968 "Green Book." That standard, with an added provision for amendment, would read as follows: ". . .; provided, however, the establishment of standards governing the addition of heat of artificial origin to inland, estuarine or coastal waters shall be subject to the following guidelines: (a) it shall be lawful to elevate the monthly means of maximum daily temperatures prevailing in the receiving waters by 4° Fahrenheit during the fall, winter and spring (September through May), or by 1.5° Fahrenheit during the summer (June through August), unless it be affirmatively established by a preponderance of the evidence that a lower elevation in temperature is necessary in order to prevent an unreasonable destruction of marine life; (b) north of Long Island and in the waters of the Pacific Northwest (north of California) summer limits shall apply July through September and fall, winter and spring limits shall apply October through June; (e) the rate of temperature change shall not exceed 1° Fahrenheit per hour except when due to natural phenomena; and (d) the specified temperature standards are to apply outside of established mixing zones which may contain 25% of the crosssectional area and/or volume of flow of the stream or estuary receiving the discharge unless it be affirmatively established by a preponderance of the evidence that a mixing zone containing a lesser percentage of the cross-sectional area of the receiving water is necessary in order to prevent an unreasonable destruction of marine life." The second problem of uniform standards is the unreasonable economic impact that might result from the requirements for such standards. Section 306(a)(1) states: "The term 'standard of performance' means a standard for the control of pollutants which reflects the greatest degree of effluent reduction which the Administrator determines to be achievable through application of the latest available control technology, processes, operating methods, or other alternatives, including, where practicable, a standard permitting no discharge of pollutants." Such standards would not take into account the economics of control technology. Nor would there be any study of the cost/benefit ratios for various processes. Some limits must be placed on such standards. The following sentence might be added to Section 306 (a) (1) : "In establishing standards the Administrator shall consider all relevant economic considerations and shall not adopt standards the cost of which bear no reasonable relationship to the benefits to be obtained by imposition of such standards." We are also concerned about the provisions of Section 505 for citizens' suits to enforce all aspects of the Federal Water Pollution Control Act and the programs instituted under the Act. If, in addition to having the EPA enforcing the Act, there are innumerable Federal judges also enforcing it, each adding his own personal flavor, we fear that chaos will result and that the power supply will be jeopardized. We appreciate your interest in this matter and would welcome the opportunity to furnish any additional information that would be helpful. Sincerely, CARL B. SHERMAN, President. PROPOSED AMENDMENT TO STAFF PRINT The following clause to be added to Section 303 (c) at page 20, line 37: "The provisions of this Act or any other Federal or state legislation notwithstanding, no person, including the Administrator, shall invoke the provisions of the Federal Water Pollution Control Act or any other legislation relating to water quality to delay or prevent the construction or operation of a steam electric generating plant, where the construction and operation of such plant has been determined by the Federal Power Commission to he necessary to ensure the adequacy and reliability of all or part of the nation's electric power supply; provided, however, that the provisions of the Federat Water Pollution Control Act and other legislation may be invoked to reg 1. late the mode and manner of operation of such plant after it is constructed " PROPOSED AMENDMENT TO STAFF PRINT The following clause to be added to Section 306 (b) (1) (B) at page 25, line 25: "...; provided, however, the establishment of standards governing the addition of heat of artificial origin to inland, estuarine or coastal waters shall be subject to the following guidelines: (a) it shall be lawful to elevate the monthly means of maximum daily temperatures prevailing in the receiving waters by 4° Fahrenheit during the fall, winter and spring (September through May), or by 1.5° Fahrenheit during the summer (June through August) unless it be affirmatively established by a preponderance of the evidence that a lower elevation in temperature is necessary in order to prevent an unreasonable destruction of marine life; (b) north of Long Island and in the waters of the Pacific Northwest (north of California) summer limits shall apply July through September and fall, winter and spring limits shall apply October through June; (c) the rate of temperature change shall not exceed 1° Fahrenheit per hour except when due to natural phenomena; and (d) the specified temperature standards are to apply outside of established mixing zones which may contain 25% of the cross-sectional area and/or volume of flow of the stream or estuary receiv ing the discharge unless it be affirmatively established by a preponderance of the evidence that a mixing zone containing a lesser percentage of the cross-sectional area of the receiving water is necessary in order to prevent an unreasonable destruction of marine life." PROPOSED AMENDMENT TO STAFF PRINT The following clause to be added to Section 306(b) (1) (B) at page 25, line 25: "In recognition of the fact that local conditions are very important in determining the effect of thermal discharges and of the fact that heated water is not in and of itself a pollutant, no uniform temperature standards for discharges shall be set by the Administrator." PROPOSED AMENDMENT TO STAFF PRINT The following clause to be added to Section 306 (a) (1) at page 24, line 15: "In establishing standards the Administrator shall consider all relevant economic considerations and shall not adopt standards the costs of which bear no reasonable relationship to the benefits to be obtained by imposition of such standards." CARL B. SHERMAN, President. LE BOEUF, LAMB, LEIBY & MACRAE (Underwriters at Lloyd's London) LEBOEUF, LAMB, LEIBY & MACRAE, Re Federal Water Pollution Control Amendments, Committee Print, July 2, 1971. Mr. LEON G. BILLING, Senate Committee on Public Works, New Senate Office Building, Washington, D.C. DEAR MR. BILLINGS: As requested of us at a meeting to which we were invited on June 30, 1971, and which was attended by you, Mr. Meyer, Mr. Jorling, and several others, we have canvassed the views of those of our clients, Underwriters at Lloyd's London, who would be affected by the financial responsibility provisions contained in Section 17 of the above-captioned amendments to the Federal Water Pollution Control Act,* as they relate to the discharge of hazardous substances. There follows our summary of the views expressed by them. 1. Extension of Act to Hazardous Substances.-Underwriters fully share the Committee's concern about the risk of harm to the environment that is created by the transportation of hazardous substances and they recognize the need for this legislation. Therefore, they support the extension of the provisions of the Water Quality Improvement Act of 1970 to include removable hazardous substances within the framework estbalished by that Act. You may recall, however, that the world insurance market had to marshal its resources fully to meet the financial responsibility requirements imposed on vessels by the 1970 Act. In view of the serious capacity problem which still exists in the insurance markets today, it is our clients' hope that the proposed Amendments would not go beyond the limits of mandatory financial responsibility established by the 1970 Act. 2. Liquidated Damages.-Subsection 312(b)(2) (C), to be added by Section 17(b) (5) of the Amendments, would make owners or operators of vessels and of onshore and offshore facilities liable to the United States, subject to defenses, for liquidated damages for the discharge of any hazardous substance which is determined not to be subject to removal. We understood that with respect to the discharge of such substances, the imposition of liability for liquidated damages is intended to be in lieu of liability for costs of removal under Section 312(f). Since the Act defines "removal" to include not only the actual removal of a substance but also the taking of any action which "may be necessary to minimize or mitigate damage to the public health or welfare" (Section 312(a) (9)), it is possible that the United States might incur removal costs with respect to the discharge of hazardous substances which have been designated as not subject to removal. In other words, the designation of a substance as not subject to removal would not preclude the United States from incurring removal costs. Thus, the proposed Amendments could be construed to expose to double liability persons who discharge a substance designated as not subject to removal: liability for liqui dated damages to the United States under Section 312(b)(2) (C) and liability to the United States for costs of removal under Section 312(f). In order to eliminate the possibility of such double liability, Section 312(b) (2) (C) might well be amended to make clear that the liability for liquidated damages imposed by that section is in lieu of liability for removal costs under Section 312 (f). With respect to insurability of "liquidated damages", it is Lloyd's Underwriters' opinion that there is no market for insurance of punitive damages of this kind. Traditional marine fines and penalties for customs offenses or breaches of port regulations are not considered punitive damages, and historically have All section references are to the Federal Water Pollution Control Act as proposed to be amended by the captioned Committee Print, unless stated otherwise. been considered the proper subject of marine insurance world-wide. Accordingly, there appears to be no purpose in amending the law further to require financial responsibility with respect to liquidated damages under Section 312 (p) (1). The above points are reflected in the following possible modifications of the applicable provisions: “312(b) (2) (C) The owner or operator of any vessel, onshore facility or offshore facility from which there is discharged any hazardous substance designated under subparagraph (A) and determined not subject to removal under subparagraph (B) shall be liable, subject to the defenses to liability provided under subsection (f), as appropriate, (i) for all loss or damage resulting from such discharge, and (ii) to the United States, in lieu of liabilities imposed by subsection (f), for liquidated damages at a rate of $ per barrel of such hazardous substance discharged." (Additions to Committee Print in italics.) "312(p) (1) Any vessel over 300 gross tons, including any barge of equivalent size, but not including any barge that is not self-propelled and that does not carry oil as cargo or fuel, using any port or place in the United States or the navigable waters of the United States for any purpose shall establish and maintain under regulations to be prescribed from time to time by the President, evidence of financial responsibility of $100 per gross ton, or $14,000,000 whichever is the lesser, to meet the liability to the United States which such vessel could be subjected under this section other than under subsection (b)(2) (C) . . ." (Additions to existing law in italics.) 3. Liability to Third Parties.-We note that clause (i) of Section 312 (b) (2) (C) would also impose unlimited liability, subject to certain defenses, for "all loss or damage resulting from [a] . . . discharge" of hazardous substances which have been determined not to be subject to removal. It appears that the insurance market capacity problem was recognized by not requiring evidence of financial responsibility with respect to these liabilities.* Underwriters concur in this judgment insofar as it relates to alleviating the present enormous demand on world insurance markets. However, they have no comment on, but leave to others who may be more directly affected, the question of the potential economic consequences of the imposition of unlimited liability. ... 4. Limits of Liability. We understand that the present limits of liability will be retained in Section 312(f). Unless the language of that Section is modified to make clear that the stated limits of liability are to apply on a per occurrence basis regardless of the number of substances discharged, liability far in excess of the stated limits of liability could result. Failing such clarification, owners, operators and their insurers could be subjected to a devastating exposure if more than one substance were spilled; this exposure might jeopardize the existing insurance program. The above goal might be accomplished by amending Seetion 312(f) by inserting: in subsection (1) "per discharge," after "$14,000,000"; in subsection (2) "per discharge," after "$8,000,000"; and in subsection (3) "per discharge," after "$8,000,000". To conform Section 312(g) to Section 312(f) as so amended, Section 312(g) might be amended by inserting: "per discharge," after "$14,000,000". Underwriters have instructed us to advise you that if they can be of any further assistance to feel free to call upon them. Sincerely yours, DONALD J. GREENE It is not clear whether liability under clause (i) of Section 312(b)(2)(C) for all loss or damage resulting from a discharge of hazardous substances determined not subject to removal would extend in favor of the United States, as well as in favor of third parties; or whether the sole remedy of the United States with respect to such discharges would be for liquidated damages under clause (i) of Section 312(b) (2) (C). This latter alternative is plainly more consistent with the liquidated damages concept. Whichever interpretation is correct, however, the modifications of Section 312 (p) (1) set out above would not require the showing of evidence of financial responsibility with respect to any of the liabilities imposed by Section 312 (b) (2) (C). |