High-Price Enforcement Case Shows Leaky Refrigeration Equipment Can Cost Millions

October 6th, 2014 Industry News

EPA recently announced another multi-million dollar settlement stemming from leaky refrigeration equipment. Washington-based Costco Wholesale Corp. has agreed to pay more than $2.3 million over the next three years to settle Clean Air Act violations related to the company’s refrigeration equipment at its warehouse facilities. The consent decree stems from an EPA investigation that found Costco failed to repair refrigeration equipment leaks and failed to keep records of refrigeration equipment repairs in accordance with EPA’s ozone depleting substance (ODS) regulations (40 CFR Part 82, Subpart F).

The settlement includes $335,000 in civil penalties for Clean Air Act violations. Additionally, Costco has agreed to take measures over the next three years to improve its refrigeration equipment management and leak detection systems, which EPA estimates will cost about $2 million. Specifically, Costco must replace or retrofit refrigeration equipment at 30 of its warehouse facilities to use non-ODS equipment, reduce corporate-wide leak rates by over 20 percent over the next three years, and install glycol secondary loop refrigeration systems and centrally monitored leak detection systems for all new warehouses. Additionally, the company will have to implement an EPA-approved refrigerant management plan.

As part of its refrigerant management plan, Costco will have to appoint a warehouse refrigerant representative at each facility subject to the settlement and at least two people at its corporate headquarters to serve as refrigerant compliance supervisors. Each person must fulfill a list of duties such as training, certification, monitoring, and reporting requirements to ensure Costco personnel and third party contractors comply with all applicable regulations and meet the settlement’s leak rate reduction goals. Additionally, the company has agreed to implement a system to monitor legislative and regulatory developments to ensure it stays on top of new requirements that apply to its refrigeration equipment. Failure to meet any of the deadlines and conditions included in the plan may lead to further penalties up to $150,000.

EPA’s refrigeration equipment regulations include service, leak repair, and disposal requirements for commercial refrigeration appliances that normally contain more than 50 pounds of refrigerant that consist of class I or class II ODS (40 CFR Part 82, Subpart F). Specifically, if a commercial refrigeration appliance has an annual leak rate over 35 percent, the appliance’s owner or operator has 30 days to either repair the leak or prepare a one-year retrofit or retirement plan for the leaking appliance, and complete all work in accordance with the plan within one year. To ensure companies can determine when leak repairs are required, the regulations require owners and operators to keep records documenting the date and type of service on the appliance, including the quantity of refrigerant added, and must maintain these records for at least three years. Violations of these requirements are subject to penalties up to $37,500 per violation per day.

The Costco settlement is consistent with a recent line of high profile ODS enforcement cases in the retail industry imposing high penalties, and mandating ongoing equipment and management system improvements. Notably, Safeway, the nation’s second largest grocery store chain, agreed to pay over $4.5 million to resolve similar ODS violations in 2013.

Understanding the complex regulatory environment is only half the battle when it comes to the logistical challenges of refrigerant management compliance. Dakota Software offers both comprehensive compliance management solutions as well as online tools for managing and maintaining refrigerant equipment. Contact us to learn more about Dakota’s refrigerant management solutions.