Dirty Work

Lawmakers pledged to fix the state’s embattled Department of Environmental Quality during this session, but may be making a mess instead. So why isn’t DEQ Director Richard Opper speaking up?

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In fall 2005, the city of Missoula and a private developer initiated permitting with state and federal governments to transform the contaminated Champion logging yard into new urban infill. In three-and-a-half years, from the submittal of applications to final approval of soil reclamation on Feb. 9, project managers estimate construction crews were able to complete only four months of actual shovel work.

“You had a lot of different greasy spots on the earth,” says Chris Cerquone, engineering consultant for the cleanup. “Each one of those had their own little plan, their own little process and their own little reports to get closure.”

The plans, processes and reports, filed by the applicants with the Montana Department of Environmental Quality (DEQ), ate up the bulk of time. The cash-strapped state agency had just one person working through the mountain of paperwork required for the project.

Local government officials who regularly work with DEQ say grueling permitting delays are simply part of the reclamation business in Montana.

“There are some things that DEQ is struggling with and some of that’s resource-based. They don’t have a lot of funding,” says Missoula brownfields coordinator Kisha Schlegel.

Across the board, DEQ finds itself completely backlogged with permit applications piled onto a growing heap by the burgeoning state energy industries. Last summer, the release of a critical legislative audit highlighted an obvious lack of resources within the permitting division of DEQ and blamed the problem partly on agency leadership.

Although DEQ Director Richard Opper considers some of the audit’s conclusions unfair, he admits regulators were slow to react to perceived growth in certain natural extraction industries. Still, he asserts the main source of the permitting backlog remains DEQ’s woeful funding situation.

“DEQ is an agency that has been systematically starved of resources by a legislature that hates us,” Opper says. “We’ve been denied, denied, denied and then they hammer us for not getting permits out faster. The problem is a legacy of historic underfunding.”

Responding to particularly appalling delays in the approval of gravel pit operations, lawmakers on both sides of the aisle pledged to fix DEQ’s permitting division during the current legislative session. A truckload of proposed reform bills began appearing before the session started. The renewed interest, however, has failed to translate into a budget windfall for DEQ.

Anne Hedges, a lobbyist with the Montana Environmental Information Center (MEIC), believes the Republican-controlled 61st Legislature will intentionally starve DEQ to ensure failure.

“This legislature is toxic,” she says. “If the governor asks for more money so many of them will scream bloody murder that he’s bloating state government at the expense of the taxpayer.”

Reforming the gravel permitting process also proved a lesser concern to the 2009 Legislature. In February, lawmakers tabled bills strengthening DEQ’s regulatory powers over gravel pit operators by setting concrete standards for air and water quality. The proposed laws aimed to curb contention between communities and the opencut industry, as exemplified by the proposed Knife River pit in Lolo. A committee bill is still in the works that would put a tax in place to fund two more staffers for DEQ using a fee system proposed
by the Montana Contractors’ Association.

With gravel cast out of the center ring, legislators opted instead to promote state energy development by stripping down the permit and appeal processes for natural resources extraction and power generation. The most controversial bills promise to accelerate the authorization of major projects across a number of industries. Legislative attention seems keyed on one industry in particular—coal-fired power generation, which was thrust to the fore by the recent high-profile demise of the Highwood Generating Station near Great Falls.

DEQ—the state’s principal environmental regulator—would stand to lose much of its decision-making authority on major development projects if the GOP’s legislation succeeds. Yet, on nearly all issues of reform, including those related to Highwood, the agency remains deathly quiet on the legislative floor.

On Feb. 2, Southern Montana Electric cancelled its plans to build the Highwood Generating Station in rural Cascade County. The announcement concluded a three-year battle between would-be neighbors of the 250-megawatt coal plant and a coalition of four electric cooperatives, who ultimately failed to push the facility’s air quality permit past citizen appeals. The investment group eventually decided to build a natural gas plant instead (with just less than half the power capacity) and blamed environmentalists for scuttling its coal plans.

Not long after, Republican legislators used Southern’s tale of woe to stump for a series of bills stripping down the appeals process afforded state residents under the Montana Environmental Policy Act (MEPA). Southern testified at many of those legislative hearings complaining of environmental interests effectively wielding Montana’s onerous regulatory laws against Highwood.

“Our power plant has been the focus of unending litigation and changing permitting requirements,” Southern’s lobbyist, Candace Payne, told a House committee on Feb. 18. “An outside investor looking at our state would certainly recognize that the current permitting process in Montana is fraught with peril.”

The GOP’s most aggressive bills cover quite a bit of ground. Senate Bill 440, introduced by Kelly Gebhardt, R-Roundup, exempts air quality permits from MEPA. Conrad Republican Llew Jones’ House Bill 483 is one of two proposed laws removing various “choke points” from the review process by limiting who can appeal environmental decisions and when they can do it. Jumping the aisle, Butte Democrat Jim Keane drafted Senate Bill 417, which alters the language of conservation laws to prevent regulators from denying a permit based on environmental review.

All of the proposed legislation aims to disarm DEQ’s review process and the system of citizen oversight, and all of it enjoyed a momentum boost when Highwood foundered. The plant itself became the sacrificial lamb that furthered the deregulation cause.

Opper and DEQ have taken no official position on any of the bills, choosing instead to seek amendments behind the scenes. In an interview with the Independent, Opper defended the agency’s strategy, arguing too much DEQ presence would only further antagonize Republican lawmakers already fuming over Highwood. Although reluctant to address specific legislation, the director spoke in generalities about the air permitting process currently under fire in the Capitol. Fundamentally, Opper challenges the core belief that the air quality standards set by Montana are pushing energy development to Wyoming, Idaho and the Dakotas.

“I don’t think our air quality program is broken at all. Wyoming is always held up as this model of pro-development, but we’ve got tighter statutory timeframes than they do,” Opper says. “If the lege chose to shorten our timeframes, we would not be able to come out with a defensible permit because we wouldn’t be able to get the work done we need to put in to make sure the facility is going to protect public health and the environment. Nothing wastes time like a shortcut.”

Opper notes that it’s not just the DEQ’s permitting process that’s drawing fire, but also the citizen appeals that follow many agency decisions. Southern and legislators sympathetic to DEQ’s plight blame a group of local and national environmental groups for the problems inherent under MEPA and state permitting laws. They accuse MEIC, the Northern Plains Resource Council and other groups involved in litigation on development projects of using lawsuits to maliciously tie up plant permits until the financiers surrender.

MEIC largely discredited the GOP’s case with a February audit showing that of 1,210 air permits issued by DEQ, only six faced appeals and industry initiated half of those. Opponents of the deregulation agenda allege that Republicans just want undue reckoning for Highwood. Nevertheless, the bills limiting the appeals process passed their houses of origin by comfortable margins after minor amendments. Proposed legislation imposing time restrictions on DEQ permit review and weakening state environmental standards has been similarly successful.

Republicans admit the sheer number of appeals hardly appears overwhelming, but say one only has to look at the list of failed projects to see the intent of certain environmental groups.

“Yes, there’s not a ton relative to the number of permits out there, but there are some very well targeted appeals and litigation,” says Jones, the sponsor of HB 483. “And they seem to be fairly effective if your goal is preventing these plants from coming online.”

Whether an indicator or an anomaly, Highwood certainly succeeded in swinging some moderate opinion toward regulatory reform. Former Sen. J.D. Lynch of Butte supported MEPA and many of Montana’s environmental protection laws when first enacted, but considers Highwood’s defeat a clear abuse of the law’s intentions.

“When I voted for those in the 1970s or ’80s, I never imagined that they were going to be just used as tools to obstruct any progress in our state,” Lynch said during a Feb. 18 Senate committee hearing.

Environmentalists like Brianna Randall of the Clark Fork Coalition say Highwood’s failure overshadowed any attempt at making substantive policy. Many conservation groups lament that much of the GOP’s deregulation agenda will be hard to keep off the governor’s desk.

“Highwood created this perfect storm of fervor to fix the appeal process when really it doesn’t need to be fixed,” Randall says.

Though the entire affair transpired in plain sight, accounts of what happened to the Highwood Generating Station follow two very different storylines. Industry’s version takes place in a courtroom, while the litigant’s story describes a field on the high plains where co-op officials tried to sneak in a smoke-belching coal plant without drawing attention.

“The public did not know where this Highwood Generating Station was going to be located until after the environmental impact statement was published,” complains Art Dolman, a self-styled historic preservationist from Great Falls who says the proposed plant would have disturbed a pioneer portage road.

By any account, economic change in the coal industry dealt a serious blow to the financial viability of the plant under its original design. But the point of debate stems from whether countless obstructionist appeals of Southern’s permit applications effectively drove away potential investors.

“Even if you win the lawsuit, you lose the battle because the project is no longer feasible in a lot of cases,” argues Jason Toddhunter, who says the members of his organization, the Montana Logging Association, have been fighting “nuisance” lawsuits for decades. “A lot of times the litigants risk nothing through the Equal Access to Justice Act. We’re the ones who are risking everything.”

Several decades ago, Sen. Greg Hinkle, R-Thompson Falls, received a pink slip from the lumber mill where he worked—a product, he says, of frivolous lawsuits against the company by environmentalists. Now Hinkle wants to require anyone looking to throw the emergency brake on major development through the courts or Board of Environmental Review to post a substantial bond.

“I talked to many folks who are really upset at the fact that timber sales in our area would be stopped by different groups or individuals and that it didn’t cost them a whole lot to stop this natural resources development,” Hinkle said during the hearing for Senate Bill 288. “So I decided that if I was elected to this body that I would create a bill that would level the playing field.”

Hinkle’s law, if it passes the legislature, would put a financial obstacle in place to prevent frivolous appeals and lawsuits. Those protesting the development project and halting its progress would essentially surrender the bond if the appeal fails. Hinkle argues it’s only fair considering natural resources investors often commit millions of dollars to plans like Highwood only to watch their permits expire while the nuisance appeals keep coming.

“I think that trend needs to change,” he says. “There’s too many jobs at stake.”

Ironically, if passed, SB 288 will probably end up in court itself. Many environmental groups are already questioning the bill’s constitutionality. So much for stifling litigation.

“The state would be saying, ‘You have a right to a healthy environment, but you have to pay for it.’ I don’t think that’s constitutional,” says Matt Clifford, former staff attorney for the Clark Fork Coalition. “I don’t think the legislature cares if what it passes is constitutional. They just let the courts strike it down and then call the judges liberal.”

Environmentalists also strongly disagree that lawsuits against major projects like Highwood are ever cheap, easy or frivolous. Whether Highwood, the “poster child” of SB 288, to quote Southern’s own lobbyist, makes for an appropriate case study is another question altogether. Despite the numerous appeals of Highwood’s permits, not a single appellant actually sought an injunction on construction of the plant.

Tom Power, a natural resources economist at the University of Montana, doesn’t buy that citizen appeals or lawsuits actually felled Highwood. “It was an unusual combination of events, but the economics started eroding fairly quickly,” he explains.

According to Power, Highwood plans emerged at a time when north-central Montanans found themselves frustrated with the area’s dominant power utility, NorthWestern Energy. Taking advantage of newfound deregulation, he says, the coalition behind the proposed plant came up with an ambitious 250-megawatt facility to solve a relatively small power need. Highwood then—like many coal-fired power plants—struggled mightily to secure the necessary $790 million in financing with greater federal greenhouse gas regulation right around the corner.

“From a development point of view, the regulators are constantly upping the ante, but that’s the history of environmental protection,” Power says. “To blame the whole thing on environmental groups appealing things, and to take the right to legally appeal the actions of state environmental officers, just seems to be a wild overreach.”

As for the state environmental officers, DEQ took no position on Hinkle’s bill or other legislation designed to shorten timeframes on and restrict access to the appeals process. Opper says citizen appeals have often been instrumental in catching agency oversights, but recognizes the potential for abuse.

“The air quality permits are good for 18 months, so somebody can appeal and the clock still ticks. That gives appellants the ability to run out the clock,” Opper says. “Part of the tactic is to run out the clock. I mean, let’s be honest about that.”

In Hinkle’s hometown of Thompson Falls, a group of investors received a permit from DEQ in 2001 to build a coal- and wood waste-burning plant on the banks of the Clark Fork River. After securing the needed permit amendment, they instead built a coal plant with ramshackle boiler parts. The facility failed to meet emission standards and a $1.9 million fine issued by the agency in 2006 put the operation out of business.

On Feb. 6 of this year, DEQ issued a new permit to the plant’s new owners, who some Thompson Falls residents say hired the violators of the old permit to run the facility for them. DEQ responded that, by rule, it cannot take history into account when issuing permits to anyone. As long as the plant can meet emission thresholds in the future, Opper says, the past is irrelevant.

Area conservationists can’t help but wonder why the 2009 Legislature isn’t interested in that kind of regulatory reform. “I wish there were three strikes and you’re out for these guys as well,” says Cesar Hernandez, a local environmentalist.

Wayzata Investment Partners, the Minneapolis hedge fund that purchased the plant from its bankrupt founders, hung up twice when the Independent called to ask who was running the facility. A cursory search of the company revealed that the federal Securities Exchange Commission filed suit against Wayzata in February based on consumer claims of investment fraud.

“The law has not allowed DEQ to effectively take into account the environmental violation history—the bad actor status—of the plant and its owners. These guys could literally be the worst criminals in the world but when they come around to get a permit, DEQ is going to treat them like anybody else,” says Clifford, the former Clark Fork Coalition attorney who helped environmentalists fight the first permit in court. “DEQ hands permits out like candy to people who are frankly willing to violate them.”

When it comes to making changes to the laws that govern its practices, DEQ prefers a back seat, deferring to the logic that the visible presence of regulators in policymaking would ill serve environmental interests in Montana. In fact, the agency’s prime legislative agenda this session involves imposing fees on gravel pits to finance more permitting staff—something even industry supports. And, even on that issue, DEQ keeps out of sight.

“The way that we thought we’d be successful in getting more resources is to not have our name on the bill. It works like a charm so far,” Opper says.

From the agency’s standpoint, staffing remains the priority, especially as new avenues of natural resource development—like coalbed methane extraction—continue to grow. Still, the biggest burden on DEQ resources is gravel pits. Even with the recent construction slowdown, the expected surge in transportation spending under the federal stimulus promises a healthy amount of quarrying in 2009. Seen in that light, the proposed gravel-permitting fix currently before the legislature appears little more than a Band-Aid. Some wonder, considering the circumstances, why the agency isn’t more proactive on its own behalf.

“I listen to Opper and Opper says the industry is their client. I couldn’t disagree more,” Hedges says. “They are not a proactive group of individuals. Bureaucrats are cautious people by their very nature. They don’t want to be perceived as doing something new.

“You had so many years of [Govs. Marc] Racicot and [Judy] Martz where they weren’t allowed to be creative and where they weren’t allowed to be perceived as even remotely aggressive, and that became their mindset.”

Gov. Brian Schweitzer’s administration claims progress with DEQ, believing the agency has evolved since the governorships of Racicot and Martz. Citing one example, Opper says DEQ now strives to continually update the reclamation bonds on hard rock mines. By keeping better track of declining digs, Opper hopes to curb Montana’s sordid history of calving environmental disasters like the Zortman-Landusky gold mine and, of course, Libby.

But even on this front, the administrative changes seem a far cry from the new day Schweitzer promised in 2004. Case in point: An ongoing environmentalist lawsuit against the DEQ charges its reclamation bond on a soon-to-shutter silver mine near Troy won’t cover the cost of cleanup.

The Schweitzer administration still has plenty of time to make good on its promises to revitalize DEQ, but not without confronting the pro-development hoi polloi and, by extension, their Republican allies. Opper concedes that in many ways he simply can’t win.

“Nobody is ever going to be liked in this job,” he says, “because you’re either doing way too much or way too little.”


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