1. TEXAS AG INDUSTRIES ASSOCIATION Regulatory Compliance After the West Fertilizer Explosion Benjamin Rhem Jackson Walker L.L.P. brhem@jw.com 512-236-2012 Diana Rader W&M Environmental Group, Inc. drader@wh-m.com 512-493-9698

2. Texas City – 1947

3. Presentation Outline Public Reaction and Increased Scrutiny Regulatory Maze –Reporting –Handling –Environmental Compliance Recommendations Texas Audit Privilege Act

4. Headlines “Texas Fertilizer Plant Fell Through Regulatory Cracks”

5. Headlines “Hearing on West Fertilizer Explosion Shows Lack of Regulation and Coordination”

6. Headlines “Probe of Texas Fertilizer Plant Blast Finds Industry under Lax Regulation”

7. Increased Federal Scrutiny August 1, 2013 – President Obama signed an Executive Order to improve chemical facility safety and security –Within 90 days DHS, Labor Dept., and Dept. of Agriculture must develop list of potential regulatory and legislative proposals to improve chemical facility safety standards –Identify best practices –Improve Coordination with state and local authorities

8. Increased Federal Scrutiny EPA, OSHA, and the ATF issued a chemical advisory for ammonium nitrate –Not regulations, just recommendations –Focused primarily on safe handling and storage of higher density, solid pellets Avoid storage in confined spaces Utilize sprinkler systems and automatic fire detection systems Avoid storage close to dust producing organic materials (i.e., grains, seeds, sugar)

9. State Reaction “I think everyone in the agricultural community is going to take a real hard look at this. We definitely need to draw lessons from this.” - Tim Herrman, State Chemist “Through their elected officials, [Texans] clearly send the message of their comfort with the amount of oversight.” – Gov. Rick Perry

10. State Reaction “Texas might be better served by identifying those substances that are catastrophic in nature or have the potential for mass destruction, like ammonium nitrate in West, Texas – so that additional preventative measures may be taken.” – Special Report to the Texas House of Representatives Regarding West, Texas Disaster

11. Applicable Regulations Reporting –Tier II Reports Extremely Hazardous Substance – 500 pounds Hazardous Chemical – 10,000 pounds Exemption – “routine agricultural operations” or “fertilizers held for sale…to the ultimate consumer” –Chemical Facility Anti-Terrorism Standards Top screen threshold for ammonium nitrate: –2000 pounds when in fertilizer form (with a nitrogen concentration of 23% or greater) Upon review, DHS will determine if the facility is a “high risk” facility

12. Applicable Regulations Handling –U.S. Pipeline and Hazardous Material Safety Administration –EPA – Risk Management Plans –State Chemist

13. Applicable Regulations Environmental –Air Quality –Wastewater Discharge –Waste Disposal

14. Recommendations Evaluate Facility Risks Company Culture Insurance Emergency Management Plans Self-Audit

15. Texas Audit Privilege Act Legal Requirements –Notice of Audit –6 months to Complete Audit –Submit Voluntary Disclosures of Violations and Corrective Action Plan –6 months to complete Corrective Actions –Obtain immunity from penalties associated with violations of state laws that are voluntarily disclosed

16. Texas Audit Privilege Act Audit Process –Define the scope of the audit (air, water, waste, health & safety) –Step 1 – Review TCEQ records –Step 2 – Site visit, interviews, site records review –Step 3 – Letter report and Disclosure of Violations Table

17. Site Visit Facility tour Observe processes Incoming materials Material storage and handling Outgoing products and wastes Personnel interviews Records review

18. Typical Records Reviewed Permits, Authorizations, Registrations, Certifications (Air, Water & Waste) Plans – Stormwater, SPCC, Hazard Communication Plans Waste Manifests Inventory Records Shipping papers Inspection logs Material Safety Data Sheets (MSDS) Tier 2 reports TRI reports

20. Staying in Compliance Designate a person-in-charge, and train them Keep waste characterization documents Use manifests and document monthly waste generation Consistency Look for waste minimization opportunities Keep records current Manage your stormwater Use the Texas Audit Privilege Act

21. Questions If you ask me anything I don't know, I'm not going to answer. - Yogi Berra brhem@jw.com drader@wh-m.com