Data Center EH&S Transactions Managing EHS Risk

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1 Data Center EH&S Transactions Managing EHS Risk Gary Lucks JD CPEA ERM September 17, 2013 September 17,

2 Data Center EH&S Transactions Managing EHS Risk Gary Lucks JD, CPEA (office) (cell) 2

3 My Background Partner ERM EHS Performance & Assurance Practice Lead (NorCal) Environmental Attorney/Scientist Certified Professional Environmental Auditor State Bar Executive & Legislation Committees West Coast Audit Roundtable Legs/Regs Chair National Audit Roundtable 3

Environmental Auditor State Bar Executive & Legislation Committees

4 M&A Risk Management: Discussion Overview EH&S Entitlements/License to Operate Audit Privilege for Transactions Federal Trade Commission & Sustainability Reporting MOC & Ongoing EHS Compliance 4

5 EH&S Activities & Entitlements EH&S Activities: o Emission Units: generators, tanks, UPS, cooling towers o Resources: water supply, energy, etc. Permits & Licenses: Air Permitting/Compliance, SPCC plans, Water, EPCRA, Waste Management, Confined Space, Hot Work Permits, Lock Out/Tag Out, EHS training 5 5

etc. Permits & Licenses: Air Permitting/Compliance, SPCC plans, Water,

6 M&S EHS Entitlement/License to Operate Avoid Unnecessary Operating Restrictions Siting: For ambient cooling, attainment status Permits must meet Initial and Long-Term Compliance Long-Term Business Plans Need to be Considered - What If Development Evaluation! Is there a Co-Location Issue and/or Other Onsite Emission Sources (e.g., Boilers) EHS Legacy Compliance 6

Long-Term Business Plans Need to be Considered - What If Development Evaluation!

7 Air Permit Compliance Considerations Striking Best Balance Between Maximum Operating Capacity (hours limits) and Unnecessary Regulatory Burden and Cost Average Allowable Operating hrs./yr./gen. Much lower in Ozone Non-Attainment Areas and As Number of Generators Increase Construction Permit typically Initially good for only18 Months Permits Contain Numerous Initial/Ongoing Compliance Assurance Requirements: Typically to Ensure Emergency Use Classification, Minor Source Emission Status, & Proper Tier Certification 7

Much lower in Ozone Non-Attainment Areas and As Number of Generators Increase Construction Permit typically Initially good for

8 State/Location Variability Allowable Construction Before Permit Issuance Permitting Options and Compliance Flexibility Non-Attainment Status Stack Testing and/or Modeling Requirements 100 hrs./yr./gen. Testing Limit Variance and Demand Response Participation Initial and Ongoing Compliance Actions, Reporting; etc. Greenhouse Gas (GHG) and Sustainability Concerns 8

9 Critical State Differences Major Source Threshold (TPY) 25/ Generator Specific Emission Limits Rule (mmm) No No Default Usage Limit (hrs/yr/gen) 200/ Streamlined Permitting Options 1,2 GA NC SC No Permit Required (NPR) Process 322,000 gal/yr Exemption Registration or General Permit Air Dispersion Modeling No Maybe No/Yes Emergency Demand Response Program Use No/Yes Yes Yes Load Capacity Acceptance Yes Yes Uncertain 1. Recommended for True Minor Sources Only! 2. Significant Benefit as a Minor Source of Emissions (i.e., Emergency and Testing Use Only) 3. Ongoing Compliance Assurance Requirements Still All Apply! 9

Dispersion Modeling No Maybe No/Yes Emergency Demand Response Program Use No/Yes Yes Yes Load Capacity Acceptance Yes Yes Uncertain 1.

10 EPA s M&A Audit Privilege Allows new owners enhanced penalty mitigation prior to acquisition date Within 9 months of transaction closing, new owner must: Promptly disclose violations to EPA, OR Enter into an audit agreement with EPA 10

months of transaction closing, new owner must: Promptly

11 General Principals Applicable to All Green Claims Specificity is preferred over general Qualifications and Disclosures: should be sufficiently clear, prominent and understandable to prevent deception clarity of language type size and proximity to claim being qualified absence of contrary claims Distinction between benefits of Product, Package and Service: environmental claims should be presented in a way that makes clear whether the environmental attribute/benefit asserted refers to the product, packaging, a service or to a portion or component of the product, package or service Overstatement of Environmental Attribute: claim should not be presented in a way that overstates the environmental attribute, expressly or by implication Comparative Claims: should be presented in a manner that makes the basis for the comparison sufficiently clear; should be capable of substantiation 11

in a way that makes clear whether the environmental attribute/benefit asserted refers to the product, packaging, a service or to a portion or component of the product, package or service

12 Environmental Marketing General Benefit Claims No misrepresentation, directly or by implication, that a product/package/service offers a general environmental benefit, or that such product is: Compostable Degradable Recyclable Made from Recycled Content Renewable Energy Renewable Materials Non-Toxic Free-of Claims (e.g. free of Ozone-friendly Carbon Offsets Certifications and Seals of Approval Source Reduction Refillable 12

Degradable Recyclable Made from Recycled Content Renewable Energy Renewable Materials Non-Toxic Free-of

13 EHS Compliance Assurance Strategies Legal Registry: List all potentially applicable regulatory requirements and confirm exempt operations Program Descriptions of regulatory programs and requirements: to ensure that staff is familiar with specific compliance tasks and action items SOPs: addressing the who, what, when, and how of obligations to be accomplished throughout the year Roles and responsibilities: for implementing the compliance calendar Training program: to identify what environmental training is required for which types of employees, and when Updates: Module for gathering and implementing new regulatory developments Release reporting protocol: Addressing an approach to ensuring all appropriate agencies are notified in the event of a reportable chemical release Spill Management/Emergency Response: A functional strategy to cost-effectively manage potential chemical spills Dealing with Regulators: Protocol for Dealing with Regulators Compliance calendar: with brief descriptions of specific compliance tasks (permit renewals, monitoring frequencies, report submittals, training deadlines, etc.) and action items. EHSMIS: Enterprise information management system MOC: Management of change Program Self Inspections/Checklists: for multi-media environmental inspection checklists Third Party Auditing: Validate EH&S compliance CAPA: Corrective Action Preventive Action support and implementation 13

responsibilities: for implementing the compliance calendar Training program: to identify what environmental training is required for which types of employees, and when Updates: Module for gathering

14 Locations of ERM Offices & Partial Summary of Data Centers Projects 14

15 Questions? Gary Lucks JD, CPEA (office) (cell) 15

16 GARY LUCKS PARTNER, EHS PERFORMANCE AND ASSURANCE ENVIRONMENTAL RESOURCES MANAGEMENT (ERM) Mr. Gary Lucks JD, CPEA is a partner in ERM where he leads the EHS Performance and Assurance practice in Northern California where he advises clients on EHS compliance and sustainability strategies. He is a licensed attorney, a scientist, and a Certified Professional Environmental Auditor with over 29 years of environmental regulatory experience. Mr. Lucks specializes in environmental compliance auditing, EH&S compliance assurance and compliance counseling, and environmental training and permitting. Mr. Lucks has published extensively on environmental law, legislation, and policy. He coauthored a book entitled California Environmental Law and Policy: A Practical Guide (Solano Press) and is a regular contributor to the California Environmental Law Reporter. He also wrote the Environmental Auditing Chapter in the California Environmental Law and Land Use Treatise. He currently serves as an advisor to the Bay Area Air Quality Management District and served on the California State Bar Environmental Legislation Committee for over ten years. He also chairs the West Coast Auditing Roundtable. Mr. Lucks also co-founded the Sustainable Earth Initiative, a non-profit specializing in EMS and dedicated to helping public agencies improve their environmental performance. ERM has been helping companies carry out systematic audits of Environmental, Health & Safety (EH&S) programs and performance since ERM approaches all projects with a clear understanding of your business, and the economic impacts that EH&S issues can have on a company s bottom line and earnings. We assist clients all over the world who want to understand their liabilities and compliance obligations, act upon them and communicate their efforts to relevant audiences. ERM offers full-scope EH&S audits that address both regulatory compliance and associated management systems. ERM s goal is to help clients develop and maintain EH&S programs that not only ensure safety and compliance but also reduce risks and actively improve operational performance.

He is a licensed attorney, a scientist, and a Certified Professional Environmental Auditor with over 29 years of environmental regulatory experience. Mr.

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