### MEMORANDUM OF AGREEMENT

BETWEEN

THE STATE OF TENNESSEE

AND

THE UNITED STATES ENVI RONMENTAL PROTECTION

AGENCY

REGION 4

I. GENERAL

This Memorandum of Agreement ("Agreement" ) establishes policies, responsibilities, and procedures pursuant to 40 C.F.R. Part 145, for the State of Tennessee Underground Injection Control Program ("Stat e Program" or "UIC Program") for Class I, II, III, IV and V wells, as authorized by Part C of the Safe Drinking Water Act (Pub. L. 93-523 as amended by Pub. L. 95-190 and 96-502)("SDWA").

This Agreement is entered into by the Department of Environment and Conservation and signed by the Commissioner of the Depart ment of Environment and Conservation, (hereafter, "The State" or "Commissioner" ) with the United States Environmental Protection Agency, Region 4 and signed by th e Regional Administrator (hereafter, "EPA" or "Regional Administrator").

A. Lead Agency Responsibilities The lead agency, Tennessee Department of Environment and Conservation (hereafter, "TDEC"), which receives the a nnual program grant, as design ated by the Governor of the State, is also the lead agency to coordinate the State Program. This lead agency shall coordinate the State Program to facilitate communication between EPA and the State agencies having program responsibilities. Thes e responsibilities sha ll include, but not be limited to, the submission of grant applica tions, reporting and monitoring results and annual report requirements. The Departme nt of Environment and Conservation is responsible for and has the authority over all Cl ass I, II, III, IV and V injection wells. The Department is responsible for administering the State Program for the injection wells under its jurisdiction including, but not limited to, reports, permits, compliance monitoring and enforcement actions.

B. Review and ModificationsThis Agreement may be modified upon the initi ative of the State or EPA. Modifications must be in writing and mu st be signed by the Commissioner and the Regional

Administrator. Modifications become e ffective when signed by the Commissioner and the Regional Administrator. Modifications ma y be made to the effective date of this Agreement by addenda attached to this Agr eement and consecutively numbered, signed,

and dated.

C. Conformance with Laws and Regulations The State shall administer the UIC Program consistent with the State's submission for program approval, this Agreement, the SD WA, current Federal regulations and policy, promulgated minimum requirements, prioriti es established as part of the annually approved State UIC grant, and any separate working agreements which shall be entered into with the Regional Administrator as neces sary for the full administration of the UIC Program. For the purposes of this Paragra ph, "policy" shall cons titute officially transmitted, written EPA national or Region 4 guidance, interpretation or other policy related to the implementation of the UIC Program.

D. Responsibilities of Parties Each of the parties has responsibilities to a ssure that the UIC requirements are met. The parties agree to maintain a high level of cooperation and coordination between State and EPA staffs in a partnership to assure succe ssful and effective admi nistration of the UIC Program. In this partnership, the Regional Ad ministrator will provi de to the State on a continuing basis technical and polic y assistance on program matters.

The Regional Administrator is responsible for keeping the State apprised of the meaning and content of Federal guidelines, technica l standards, regulati ons, policy decisions, directives, and any other factors, which affect the UIC Program.

The strategies and prioritie s for issuance, compliance monitoring and enforcement of permits, and implementation of technical require ments shall be established in the State's program description, the annua l State/EPA Agreement, or in subsequent working agreements. If requested by either party, meetings will be scheduled at reasonable

intervals between the State and EPA to revi ew specific operating procedures, resolve problems, or discuss mutual concerns invol ving the administration of the UIC Program.

E. Sharing of Information The State shall promptly inform EPA of any proposed or pending modifications to laws, regulations, or guidelines, and any judicial decisions or ad ministrative actions which might affect the State Program and the State' s authority to administer the program. The State shall promptly inform EPA of any re source allocation changes (for example: personnel, budget, equipment, etc.), which might affect the State's ability to administer the program.

All information obtained or used in the admini stration of the State Pr ogram, including all UIC permit files, shall be available to EPA upon request without restriction. In the event EPA requests a complete set of copies of a file that is particularly voluminous, such thatcopying would require a significan t expenditure of State reso urces, the State may request

that EPA visit the State office to review th e file. Any information obtained from the State by EPA which is subject to a claim of confidentiality shall be treated by EPA in accordance with EPA regulations governing confidentiality (40 C.F.R. Part 2).

If the information has been submitted to th e State under a claim of confidentiality, the

State must submit that claim to EPA wh en providing EPA such information. Any information obtained from the State and subject to a claim of confidentiality will be

treated in accordance with 40 C.F.R. Part 2. If EPA obtains information from the State

that is not claimed to be c onfidential, EPA may make that information available to the public without further notice.

Whenever either party requests information concerning a specific injection operation and the requested information is available from th e files within reason as provided in II.A., that information will be provi ded within a reasonable time . In the event EPA requests information necessary to prevent or minimi ze endangerment to the public health or the environment, the State shall use its best e fforts to provide the information as soon as possible. If the requested information is not available, the party to whom the request was directed shall promptly notify the requester. The State shall allow EPA to routinely review State records, reports, and files rele vant to the administration and enforcement of the approved program.

EPA shall furnish to the State any new info rmation it receives which the State needs to implement the State Program, subject to EP A regulations governing confidentiality (40 C.F.R. Part 2).

F. Duty to Revise Program Within 270 days of any revisions or additions to any regulations of 40 C.F.R. Parts 124, 144, 145 or 146 issued under Section 1421 of th e SDWA, the State shall submit a notice to EPA showing that the State Program m eets the revised or added requirement.

G. Definition and Exemptions of USDW. The State agrees to define an "underground source of drinking water" (USDW) in a manner consistent with 40 C.F.R. §§144.1( g), 144.3 and 146.3 of the UIC regulations. The State further agrees to exempt "underg round sources of drinking water" only in conformance with 40 C.F.R. §§146.4 and 144.7 of the UIC regulations.

A USDW for purposes of the State Program unde r this Agreement shall be defined as an aquifer or portion thereof, which supplies wa ter for human consumption, or, in which the ground water contains fewer than 10,000 mg/l tota l dissolved solids (TDS ), and is not an exempted aquifer. An aquifer, or portion th ereof, may be exempted from protection by the Commissioner after public notice and opportunity for public hearing and upon final approval by the Administrator. An aquifer, or portion thereof, may be exempted if it does not currently serve as a source of drinking water and it cannot now and will not in the

future serve as a source of drinking water (as specified in 40 C.F.R. §146.4). Aquiferexemptions subsequent to program approval sh all be treated as program modifications (as specified in 40 C.F.R. §145.32).

H. Duration of Agreement This Agreement will remain in effect unt il such time as the primary enforcement responsibility is no longer delegated to the St ate, according to the provisions of 40 C.F.R. §§145.33 or 145.34.

I. General Provisions Nothing in this Agreement is intended to affect any UIC or program requirement, including any standards or prohi bitions, established by State or local law as long as the State or local requirements are not less st ringent than: (1) any set forth in the UIC regulations; or (2) other requirements or prohibitions established under the SDWA or applicable regulations.

Nothing in this Agreement shall be construed to limit the authority of the EPA to take action pursuant to Sections 1421, 1422, 1423, 1424, 1431 or other Sections of the

SDWA.

II. PERMITTING

A. General The State is responsible for expeditiously drafting, circulating, issuing, modifying, reissuing, and terminating UIC permits and shall do so in accordance with 40 C.F.R. §145.11. The Commissioner shall review and issue permits based on the permit

conditions of R61-87. Permits shall be issued which comply with applicable Federal and State requirements, including but not limited to procedures for public participation.

B. Transfer of Responsibility from EPA to the State The Regional Administrator shall transfer fr om EPA to the State any pending permit, application and any other information relevant to program operati on not already in the possession of the State Commissioner when the State assumes primacy for the program. Currently there are only Class II and V we lls authorized by EPA in Tennessee. Authorization includes both permits and au thorization by Rule. EPA will provide the State with a list of all injection wells in EPA’s inventory within three (3) months of program delegation.

(i) Class II wells. The State shall issue State Class II pe rmits to all Class II wells currently authorized to inject, within one (1) year after receipt of primary authority for implementation of the UIC Program. EPA will provide the State with documentation of the compliance status of all existing Class II wells within sixty (60) days after the State receives primar y authority for the UIC Program. In theevent a well is not in compliance, the State may opt to bring an enforcement action instead of issuing a permit. The St ate shall require each owner or operator to submit substitute financial responsibility documentation designating the State as the agency entitled to require use of the financial res ponsibility funds for plugging and abandonment of wells, prior to issuance of a new State permit. When the State permit is issued, EPA will terminate the existing permit and release any financial documents to the ow ner/operator. The State shall require successful Mechanical Integr ity Tests (MIT) on all well s that have not had an MIT in the previous five (5) years prior to issuing a State permit. EPA shall retain primary authority over any well involved in an active EPA enforcement

action until resolution of that action, after which the State may, if relevant, issue a State permit.

(ii) Class V wells. The State shall, within one (1) year after receipt of primary authority for implementation of the UIC Program, issu e permits, rule authorize or require cessation of injection into all Class V wells. EPA will provide the State with documentation of the compliance status of all inventoried Class V wells within sixty (60) days after the St ate receives primary authorit y for the UIC Program. In the event a well is not in compliance, the State may opt to bring an enforcement action instead of issuing a pe rmit or other authorization to inject. The State shall require each owner or operator to submit substitute financial responsibility documentation designating the State as the agency entitled to require use of the financial responsibility funds for plugging and abandonment of wells, prior to issuance of a new State permit or other auth orization to inject. EPA shall retain primary authority over any well involved in an active enforcement action until resolution of that action, after which th e State may, if relevant, issue a State permit or other authorization to inject.

C. Injection Fluid Characterization The State shall fully characterize injection flui ds in all UIC permits. The characterization shall include all possible sources of wast e for disposal in the injection well.

D. Compliance schedules and Reports The Commissioner agrees to establish compliance schedules in permits, where appropriate, and to require periodic reporting on complian ce with compliance schedules and other permit conditions.

III. COMPLIANCE MONITORING

A. General The State shall operate a timely and effective compliance monitoring information system to track compliance with permit conditions a nd program requirements. For purposes ofthis Agreement the term compliance monitoring shall refer to all efforts associated with assuring full compliance with UIC Program requirements.

B. Compliance Schedule The State agrees to maintain procedures to receive, evaluate, retain, and investigate all notices and reports that ar e required by permit compliance schedules and program regulations. These procedures shall also incl ude the necessary elements to investigate the failure of persons required to submit such not ices and reports. The State shall initiate appropriate compliance actions when required information is not received or when the reports are not submitted.

C. Review of Compliance Reports The State shall conduct a timely and substantiv e review of all such reports to determine compliance status. The State shall evaluate a system to determine if: (1) the reports required by permits and program regulations are submitted; (2) the submitted reports are complete and accurate; and (3) the permit cond itions and program requirements are met. The reports and notices shall be evaluated fo r compliance status in accordance with the State compliance program and the program requirements.

D. Inspection and Surveillance The Commissioner agrees to have inspection and surveillance procedures to determine compliance or noncompliance with the applicable requirements of the UIC Program. Surveys or other methods of surveillance shall be utilized to identify persons who have not complied with permit applications or other program requirements. Any compilations, index, or inventory obtained for such facilitie s or activities will be made available to the Regional Administrator upon request.

The Commissioner or designee shall conduct pe riodic inspections of the facilities and activities subject to regulatory requiremen ts. These compliance monitoring inspections shall be performed to assess compliance with all UIC permit conditions or UIC Program requirements and includes evaluating a fac ility's monitoring a nd reporting program. These inspections shall be conducted to dete rmine the compliance or noncompliance with the issued permits, verify the accuracy of the information submitted by permittees in reporting forms and monitoring da ta, and to verify the adequacy of sampling, monitoring and other methods to provide the informa tion. The State shall also investigate information obtained regarding violations of the applicable program requirements.

E. Information from the Public The Commissioner shall provide opportunity for the public to submit information on violations, and shall put into place procedures for receiving, investigating, and ensuring proper consideration of the information, and for responding to the public.

F. Authority to EnterThe State Commissioner (and other State offi cials) engaged in compliance monitoring and evaluation shall have the authority to ente r any site or premises subject to regulation, or to review and copy the records of releva nt program operations wh ere such records are kept.

G. Admissibility Any investigatory inspections initiated by the Commissioner shall be conducted, and monitoring and other information collected and maintained in a manner to provide evidence admissible in an enforcement proceeding or in court.

IV. ENFORCEMENT

A. General The State is responsible fo r taking timely and appropriate enforcement action against persons in violation of compliance schedules , technical requirements, permit conditions, and other UIC Program requirements. This includes violations detected by State or Federal inspections.

The State agrees to maintain a vigorous enforcement program, including a program to assess compliance by operators/owners of inje ction facilities, and to take timely and appropriate enforcement action in every cas e where such action is warranted. Where EPA finds that any person who is subject to an applicable requirement of the underground injection control program is violating such requirement, EPA shall so notify the State and the person viol ating such requirement. If the State has not commenced appropriate enforcement action beyond the th irtieth day after EPA’s notice, EPA may

issue an Administrative Order requiring the person to comply with the requirement or EPA may commence a civil action agai nst said person (Section 1423 SDWA).

B. Enforcement Mechanisms The State shall restrain immediately and effectively any pers on engaging in any unauthorized activity or operation which is endangering or causing damage to public health or the environment as applicable to the program requirements. The State agency administering the program shall also have the means to sue in court of competent jurisdiction to prohibit any threatened or continuing violation of any program requirement. Additionally, the State shall have the mechanism to assess or sue to recover in court civil penalties and criminal remedi es of sufficient magnitude to provide an effective deterrent to any threatened or cont inuing violation of a ny program requirement in accordance with 40 C.F.R. §145.13.

C. Emergency Situations

Injection practices endangering public health or the environment shall receive immediate attention. Notwithstanding S ection IV.A of this Agreement, should EPA receiveinformation that a contaminant which is present in or is likely to enter a public water system or an underground source of drinking water may present an imminent and substantial endangerment to the health of persons, and that appropriate State authorities have not acted to protect the health of such persons, EPA may take such actions as it deems appropriate to protect the health of such persons. To the extent EPA deems it practical in light of the immine nt endangerment, it will cons ult with the State regarding

the correctness of the information on which ac tion proposed to be taken is based and to ascertain what, if any, acti on the State is or will be taking (Section 1431 SDWA).

D. Public Participation The State shall provide for public particip ation in the State enforcement process by providing either: (1) the author ity which allows interventi on as a right by any citizen having an interest which is or may be advers ely affected in any ci vil or administrative

action to obtain remedies as specified in paragraph B above or (2) assurance ; that the State agency or enforcement authority will: (i ) investigate and provide written responses to all citizen complaints; (ii) not oppose intervention by any citizen when permissive intervention may be authorized by statutes, rule , or regulation; and (i ii) publish notice of and provide at least 30 days for public comm ent on any proposed settlement of a State enforcement action. Nothing in this Agreement shall affect EPA's authority or responsibility to take enforcement actions under Sections 1423 and 1431 of the SDWA.

E. Assessment of Fines The State shall seek to assess civil penaltie s in amounts appropriate to the violation as required by Tennessee Statutes. T.C.A 69- 3-115. Such penalties shall include a calculation and assessment of the economic benefit of non-compliance.

V. EPA OVERSIGHT

A. General

EPA shall oversee the State's administration of the UIC Program on a continuing basis to assure that such administration is consistent with this Agreement, the State UIC grant application, and all applicable requirements em bodied in current regu lations, policies and

federal law.

In addition to the specific oversight activities listed in this section, EPA may, from time to time, request, and the State shall subm it, specific information and provide access to files necessary for evaluating the Stat e's administration of the UIC Program.

B. Quarterly Noncompliance Reports The State shall submit to the Regional Admini strator quarterly noncompliance reports (as specified in 40 C.F.R. §144.8(a)) on major permittees in accordance with the following

schedule:

REPORT DUE TOQUARTER REGIONAL ADMINISTRATOR October, November, December due January 25 January, February, March due April 25 April, May, June due July 25 July, August, September due October 31

or as otherwise specified in the annual UIC grant workplan.

The State shall submit the noncompliance repo rts in the required format (40 C.F.R. §144.8(a)(1)) including the current status a nd outcome of any actions taken by the Commissioner against those w ho are not in compliance.

C. Annual Noncompliance Reports The State shall submit annual noncomplian ce reports (as specified in 40 C.F.R. §144.8(b)(1)) on nonmajor permittees. The period for annual reports shall be for the fiscal year ending September 30, with reports completed and available to the public no more than 30 days later.

D. Immediate Reporting on Noncompliance The Commissioner shall immediately notify th e Regional Administrator by telephone, or otherwise, of any major, imminent hazard to public health or the environment resulting from the endangerment of an underground sour ce of drinking water of the State by well injection.

E. Annual Program Report The State shall submit an annual program re port to the Regional Administrator in accordance with 40 C.F.R. §144.8(c)(2). This re port shall be for the fiscal year ending September 30, with the report completed and av ailable to the public no more than 30 days

later.

F. Review of Permits The State agrees to submit dr afts of all proposed Class I, II, III and V wells to the Regional Administrator for review prior to issue. The Regi onal Administrator agrees to complete EPA’s review within twenty (20) da ys of receipt or to advise the Commissioner within the same twenty (20) day period that additional review time is required. In the event that EPA comments on a draft permit, th e State shall make such changes as may be necessary to ensure that the permit is in comp liance with all federal requirements prior to issuance. In all cases the review shall be comp lete within thirty (30) days of receipt of the draft. In the event EPA does not submit comments to the State on a draft permit within thirty (30) days after receipt of the draft, EPA will be deemed to have assented to the draft permit conditions, and the State may issue the permit at its discretion.

G. Inspection and Surveillance by EPA The Regional Administrator may select facili ties and activities within the State for EPA inspection.H. Annual Performance Evaluation EPA shall conduct, at least annually, performa nce evaluations of the State Program using the State quarterly reports, annual noncompliance reports, program reports and other requested information to determine Stat e Program consistency with the program submission, SDWA and applicab le regulations, and applicab le guidance and policies. The review will not only include a review of financial expenditures, but reviews on program implementation, changes in the program description, and efforts toward progress on program elements.

EPA shall submit a summary of the evalua tion findings to the State outlining any deficiencies in program performance and making recommendations for improving State operations. The State shall have 15 working days from the date of receipt to concur with or comment on the findings and recommendations.

VI. SIGNATURES

AGREED TO this _____ day of ________________, 2004, a nd effective as of this date.

Department of Environment U.S. Environmental and Conservation Protection Agency

BY (Signatures on original 11/18/04) BY (Signatures on or iginal 10/20/04) Betsy L. Child J. I. Palmer, Jr. Commissioner Regional Administrator

Date DateS T ATE OF TE NNES S EE DEPARTM E NT OF E NVIRONM ENT AND CONSERVATION

Division of Water Supply

401 Church Str e et 6th Floor, L & C Tower Nashville, Tenn essee 37243-154 8 Telephone: (61 5 ) 532-0191 Fax: (615) 532- 0503

MEMORANDUM

TO: All Underground Injection Control employees, DWS enforcem ent staff

FROM: Scotty Sorrells UIC Coordinator

DAT E: Septem ber 17, 2004

SUBJECT: Special procedures on U nderground Inje ction Control Public Response to

Com p laints

The Division of W a ter Supply has applied to the United States Environm ental Protection Agency for prim acy in the Underground Inje ction Control (UIC) program. EPA raised questions about whether the state’s authorit y m e t all requirem e nts in regard to public participation and intervention. The applicable section of the federal rules, 40 CFR §145.13(d) (attached) sets out two alternatives. Under subsection (d)(1) the state statues and rules simply m eet certain stan dards. In EPA’s view our aut hority does not do this. Rather than prolong the argum ent, the Divisi on decided to agree to conduct business in

accordan ce with subsection (d)(2). There are th ree sub

- items in th at section. The first one says th e divis i on will inve stigate a ll co mp laints rec e ived f r om citizens reg a rding potential violations of the UIC rules and gi ve written responses. The following is the

Divisions S O P to m a ke sure that happens.

Upon receip t of a com p laint call the UIC staff will co llect inform ation as to the lo cation of the activity, the nature of the problem , a nd the person(s) involved in the activity. The

State will as resou r ces allow inves tig ate in a tim e ly m a nner and provide written responses

to all citiz en com p laints

Effective upon the signing of the M e m o randum of Agreem ent with EPA, all UIC c i tizen

com p laints handled by the Division of W a ter Supply shall confor m to this provision.DEPARTM E NT OF E NVIRONM ENT AND CONSERVATION

DIVISION OF WATE R SUPP LY

COMPLAI N T INVES T IGATION LOG

Date Receiv e d:_____________________________

Complainant: Name___________________________________________ Address___________________________________________

___________________________________________

___________________________________________ Phone___________________________________________

Complaint Against: Name__________________________________________ Address__________________________________________

__________________________________________

__________________________________________ Phone__________________________________________

Nature of Complaint:___________________________________________________

Date Investigated: _________________________________________

Investigator: _________________________________________

Result of In vestiga t ion: ___ NOV Issued Date___________ ___Warning Letter Issued Date___________ ___Advisement Letter Issued Date___________ ___Complaint Not Verifiable ___More In vestigation Needed ___Other______________________________________

______________________________________

Complainant Contacted: ___By Letter Date____________ ___In Person Date____________ ___By Telephone Date____________ ___Not Contacted

File Location:____________________________________________________________

Comments:_____________________________________________________________

________________________________________________________________________

________________________________________________________________________S T ATE OF TE NNES S EE DEPARTM E NT OF E NVIRONM ENT AND CONSERVATION

OFFICE OF GENERAL COUNSEL

401 Church Str e et 20th Floor, L & C Tower Nashville, Tenn essee 37243-15 48 Telephone: (61 5 ) 532-0131 Fax: (615) 532- 0145

MEMORANDUM

TO: All OGC At torneys, DWS enforcem ent staff

FROM: Joe Sanders, General Counsel

DAT E: Septem ber 17, 2004

SUBJECT: Special procedures on U nderground In jection Control Enforcem ent Cases

The Division of W a ter Supply has applied to the United States Environm ental Protection Agency for prim acy in the Underground Inje ction Control (UIC) program. EPA raised questions about whether the state’s authorit y m e t all requirem e nts in regard to public participation and intervention. The applicable section of the federal rules, 40 CFR §145.13(d) (attached) sets out two alternatives. Under subsection (d)(1) the state statues and rules simply m eet certain stan dards. In EPA’s view our aut hority does not do this. Rather than prolong the argum ent, the Divisi on decided to agree to conduct business in

accordan ce with subsection (d)(2). There are th ree sub

- items in th at section. The first one says th e divis i on will inve stigate a ll co mplaints rec e ived f r om citizens reg a rding potential violations of the UIC rules and give written responses. The Division is developing an SOP to make sure that happens.

The last two sub-item s in 40 CFR §145.13( d)(2 ) provide that the Divis i o n will:

Not oppose intervention by any citizen when perm issive intervention m a y be authorized by statute, rule, or regulation; and

Publish notice of and provide at l east 30 days for public comment on any proposed settlem e nt of a State enforcem ent action.

Effective upon the signing of the Mem o randum of Agree m ent with EPA, all UIC cases handled by the Office of General Counsel sh all confor m to those two provisions. The notice of any proposed settlem e nt shall be published on the T D EC we b site and sent to any persons who have requested receiving su ch notices and shall identify a person to

whom any c o mm ents shall be subm i tted.