ENVIRONMENTAL COMPLIANCE: PITFALLS, NEW DEVELOPMENTS, AND BANDAGES
Craig A. Slater, Esq.
The Slater Law Firm, PLLC
500 Seneca Street, Suite 500
Buffalo, New York 14204
Environmental law has insinuated its way into all legal and business transactions and operations. Few business decisions are made these days where environmental issues are not or should not be considered. With many business and operation decisions, environmental issues are the paramount concerns. For good reason. Rife with strict liability statutes, environmental law can impose harsh, swift, and, often, inescapable liability. Retroactive, strict, and joint and several liability are legal terms with tremendous import in this legal arena: look out! As discussed below, the monetary consequences of an environmental misstep can be significant and, in some circumstances, can bankrupt a business. If you don’t pay attention to environmental issues, it will cost you and big. As a result of these risks and increased regulation and enforcement, all businesses must consider and institutionalize policies to avoid environmental liabilities.
There are many reasons why a company should attempt to avoid environmental liabilities. Many you have heard before; many are common sense. But it doesn’t hurt to go over them again. From the perspective of a seasoned environmental practitioner, the consequences of an unattended environmental problem are real and can be grave.
The “hard costs” associated with environmental liabilities (i.e., that money actually spent in cleaning up the mess) are generally large in scope. An inexpensive remediation will cost $50,000 while the top end can reach $50 million. How many routine operation glitches can cost the company this much? Not many and even fewer have the potential of so quickly becoming enormous and unmanageable.
Environmental problems, by their nature, are also uncertain and last a long time. If an environmental problem has been created, the actual impact upon the environment, as well as the necessary remediation for that problem, are usually unknown. The costs (or “price tag”) to “fix” the problem is, therefore, difficult to estimate or even cap and are contingent and long-term.
This presentation is intended to cover the costs of environmental non-compliance, , the art and consequences of criminal and civil environmental enforcement, and simply rules to follow to achieve environmental compliance.
II. THE PRICE FOR NONCOMPLIANCE
To properly incentivize those responsible for environmental compliance, a list of the apparent and “hidden” (but no less certain) costs associated with environmental compliance problems would be helpful.
* Bad publicity
* Bad for business/loss of customers
* Personal injury lawsuits
* Other unknown contingencies
* Go to jail
* Remediation costs
* Civil penalties
* Natural Resource damages
* Attorney’s fees
Non-compliance is very expensive.
III. ENVIRONMENTAL ENFORCEMENT
Although potential liability for the releases of toxic substances and hazardous wastes into the environment has existed in the past, rarely was this liability imposed with the swiftness and certainty that is common today. As public awareness of the dangers associated with exposure to toxic or hazardous substances and wastes has heightened over a course of time, legislation and governing regulations have also changed. Because of the significant changes in environmental laws, the increased enforcement of these laws, and the enormous costs associated with these environmental liabilities, all lawyers, environmental compliance officers, and corporate officers must have more than a passing familiarity with environmental risks and criminal and civil liabilities.
The primary reason a corporation complies with federal, state and local environmental laws and regulations are the penalties associated with non-compliance, i.e., deterrents. In the ’70’s and ’80’s, the fears of “getting caught” were nominal because the odds of being found in non-compliance were slim. Environmental enforcement was, at that time, lax as a result of insufficient resources, absence of trained inspectors, the uncertainty of the new regulations and statutes, and related legal challenges which may have created an impression of non-enforceability. For many years, therefore, regulated entities felt it was more cost-effective to ignore environmental regulations rather than comply.
Over a course of time, and through the pressure applied by the public, federal and state regulatory authorities have increasingly enforced, through criminal and civil proceedings, the labyrinth of state and federal environmental statutes and regulations. Governmental agencies are aggressively approaching new environmental enforcement initiatives with an attendant increase in penalties. Higher standards of care and knowledge are now routinely imposed under the new regulations with significant criminal and civil liability. Gone are the days, therefore, when criminal and civil enforcement of environmental laws are lax or ineffectual.
A. The Right of Inspection
Various environmental statutes authorize EPA and DEC to enter appropriate facilities, interview personnel, observe and evaluate equipment, review records and collect samples. Typically, an inspector may seek permission before conducting its inspections, however, the state and federal regulations routinely grant the inspector the right to conduct an inspection of the designated facilities for specific reasons without such permission.
The inspection generally results in the preparation of an inspection report which provides a narrative description of the inspection; identifies the documents reviewed; and identifies potential areas of violations. These reports ultimately become the basis of further regulatory enforcement or follow-up enforcement activities.
B. Consent Orders
The primary enforcement tool of both the EPA and DEC is the Consent Order or Consent Decree. A Consent Order or Consent Agreement can be entered into prior to an administrative proceeding, during the administrative proceeding, or subsequent to the filing of a civil action. A Consent Agreement or a Consent Decree is normally considered to be a “bridge” to bring the facility from non-compliance to compliance and constitutes both an administrative or judicial order and a contract between the regulatory agency and the facility or individual executing it. The Consent Order will outline steps needed to have the facility come into compliance. The Consent Orders typically are negotiated documents and will contain requirements regarding milestone dates for bringing the facility into compliance (i.e., designing and installing pollution control equipment, training or educating employees, clean-ups, etc.); civil penalties for past violations; stipulated penalties for failure to comply with the Consent Order provisions; and dispute resolution mechanisms.
In addition, companies or persons can be cited as “bad actors” for repeated non-compliance and prevented from receiving any further regulatory permits or federal or state contracts, loans and/or grants.
C. Administrative Actions
EPA and DEC also provide for the filing of administrative complaints in their adjudicatory system. The administrative action is filed and proceeds through an administrative law system outside the scope of the plenary court system, using non-judicial procedures. The procedures are usually governed by the Administrative Procedure Act. Administrative actions include notices of violation, warning letters, administrative compliance orders, administrative complaints, PRP letters, etc. These instruments identify violations and specify compliance dates and, if not met, will result in the filing of an administrative complaint.
D. Civil Actions
Civil actions by both the federal and state government are filed when compliance has not been successfully obtained through informal or administrative procedures. The New York State Attorney General’s Office will file lawsuits on behalf of the DEC and the United States Department of Justice will file them on behalf of the EPA. Civil actions are generally reserved for repeat violations, violations resulting in significant environmental or health risks, or for parties which fail to agree to regulatory conditions.
Civil complaints may seek civil recovery, civil penalties, and/or equitable relief as a result of:
1. Statutory or regulatory violations;
2. Statutory liability;
3. Natural resource damages;
4. Permit violations;
5. Consent Order violations; and
6. Any combination of the above.
The actions are brought on by a summons and complaint which may allege causes of action and statutory violations, civil penalties, restitution, public nuisance, violation of administrative order and equity (including injunction, mandamus and involuntary receivership, remediation, medical monitoring, etc.).
E. Criminal Prosecution
Criminal environmental enforcement initiatives have significantly increased over a number of years. Thus, increasingly we see higher numbers of indictments, more criminal prosecutions, and higher penalties subsequent to criminal enforcement. In addition, corporation officials and officers, are no longer immune from prosecution for the company’s or individual’s failure to comply with environmental laws. At the present time, laying the corporation at the criminal prosecutor’s feet often times is not enough to allow a responsible officer from escaping criminal sanctions.
Undoubtedly, criminal enforcement is the primary motivating factor for corporations and corporation executives to comply with environmental regulations. Obviously, criminal prosecutions and indictments and imposition of significant prison sentences receives substantial adverse publicity for the corporation and its executives. Those adverse publicity costs are only one item of the potential downside costs to an entity criminally prosecuted against. A corporation and/or corporation executive will also necessarily incur legal costs; be the subject of more intensive regulatory scrutiny on all levels of operations; will have to overcome the “black mark” on their record for any future permit applications; may have to explain any convictions to a financing lender; and will ultimately impact its business as its corporate vendors or customers may be unwilling to be associated with an environmental violator. There are many reasons, therefore, as to why a corporation or corporate official should comply with the law and avoid becoming the focus of a criminal investigation by an environmental regulatory agency.
EPA’s criminal enforcement program began in 1982 and, since then, has obtained in excess of 500 criminal indictments which have resulted in prison time exceeding 200 years.
Similarly, the State of New York has actively pursued environmental crime since 1983 and had significant criminal prosecution success.
IV. CORPORATE ENVIRONMENTAL POLICY: THE VALDEZ PRINCIPLES
A corporate environmental policy is generally considered to be a written statement which guides and institutionalizes the policy and direction of the company for handling its environmental affairs. The intent of a corporate environmental policy is to inform the staff and the public of the general principles the company intends to follow in conducting its business. Further, a corporate environmental establishes a code of environmentally conscious conduct for employees and acknowledges the company’s obligation and intent to comply with all applicable environmental laws and regulations.
Principle 1: The company, its employees, officers, and all staff members will comply with all environmental, health and safety, occupational, and product safety laws and regulations.
Principle 2: The company, its employees, officers, and all staff members shall endeavor to protect the health and safety of its employees, the community, and preserve environmental quality.
Principle 3: The company, its employees, officers, and all staff members will undertake all actions to minimize or control environmental pollution through the proper management of any hazardous or toxic substances or wastes encountered or generated through its business activities and develop internal standards and guidance memorandum designed to protect the environment.
Principle 4: The company, its employees, officers, and all staff members will recognize and respond to community concerns about hazardous or toxic substances or wastes and our operations.
Principle 5: The company, its employees, officers, and all staff members are encouraged and instructed to report promptly to all applicable corporate officials, any information regarding chemical-related health or environmental hazards. Appropriate corporate officials will recommend preventative or remediation, removal, or emergency measures to be taken in response to the same.
Principle 6: The company, its employees, officers, and all staff members will cooperate with any and all governmental agencies to undertake steps necessary to protect the environment and health and safety of its employees and the public and to respond to, if necessary, such environmental conditions.
Principle 7: The company, is committed to providing an environmentally safe workplace and requests the co-operation of all staff members in reducing and eliminating workplace or safety hazards.
Principle 8: The company is committed to providing a system for monitoring and provided accountability for this policy, a system to report all matters of environmental concern, and to assure the highest level of compliance with environmental health and safety requirements.
Principle 9: The company shall appoint an environmental compliance officer and coordinator who shall be responsible for implementing and communicating this policy, supervise training programs, continue the hazard communication program, and advise all staff members of the continuing environmental program initiatives developed and implemented by the company.
V. 10 EASY RULES TO AVOID ENVIRONMENTAL ENFORCEMENT
Rule One: Appoint an environmental compliance officer.
Rule Two: Establish a corporate commitment to compliance.
Rule Three: Conduct a self-audit.
Rule Four: Educate, communicate and cooperate.
Rule Five: Organize your documents.
Rule Six: Good housekeeping is important.
Rule Seven: Be good to thy neighbors.
Rule Eight: Be good to thy employees.
Rule Nine: Know your wastestream, your product, and don’t shortcut (you’ll pay later).
Rule Ten: Meeting with the regulator.
Preparation is the key to surviving an inspection. In some instances, the company will know in advance that an inspector will be visiting and the company will have the opportunity to correct compliance problems prior to the inspector’s arrival. More often, a company is faced with a surprise visit by an inspector. Establishing procedures for handling government inspections and following those procedures when an inspector arrives at the door will help assure that the inspector receives correct information about a facility and minimizes the risks that an inspector will find a violation. It should be clear to the inspector that the company’s policy is to comply with the law at all times.
A few basic rules regarding the actual inspection need repeating.
* Know who to notify when the inspector arrives.
* The compliance officer must accompany the regulator at all times.
* The regulator should never conduct the inspection alone.
* The inspector should not be allowed to wander throughout the facility.
* The regulator should be “steered” only to the areas identified during the entrance conference.
* Conduct the inspection only in the areas identified by the regulator during the entrance conference and in a fashion to avoid “areas of concern”.
* Avoid and discourage the regulator’s extemporaneous discussions with employees.
* The environmental compliance officer should respond to questions but not offer lengthy discourses of information: if the compliance officer finds himself or herself speaking at length, it is probably too long.
* Take split samples, duplicate photographs, keep a log of samples and photographs, and take detailed notes as to observations, remarks, etc.
* Prepare a memorandum outlining the inspection, conversation, and as many details regarding the inspection as possible.
* Do not take the regulator to areas where a spill or other emergency is in progress.
* Take detailed notes.
* Obtain a copy of any form used by the inspector during the inspection.
* Answer the inspector’s questions only when completely sure of the answer. A “no” answer is better than an inaccurate answer.
* Employees should never lie to a government regulator.
* Keep records of everything given to the inspector.
* Insist on an entrance and closing conference.
* Follow-up on the regulator’s advice and do it (he’ll be back)!
Remember, if he comes simply for a routine inspection, find out what he wants, treat him with respect, offer coffee, take notes, follow him and follow up. If he comes with a search warrant, call your lawyer.
Ex Officio Rule Eleven: Know experts now in your field who you may need in case you’re in trouble, i.e., keep your environmental attorney’s business card available.
Environmental compliance seems like a daunting task; reams of paper, tons of regulations, and blood-thirsty regulators. Break it into pieces; take it slow, but start now – like Mr. Goodwrench, it’ll only cost more later.
Forms of Contamination
Soil Surface/Subsurface (Spills)
Groundwater Shallow/Deep Bedrock
Subsurface Product Liquid & Non-Liquid Phase Contaminants (i.e.: oil or gasoline)
Surface Waters Water/Sediment
On-Site Product Waste Drums/Tanks/Containers/Culverts/
Building Insulation, Roofing, Flooring, Transformers, Lead Paint
Landfill/Fill Operation Waste, Garbage, C&D Waste, Sludges, Chemical or Oil Disposal
Common Sources of Contamination
Oil or Chemical Bulk Storage UST’s, ABT’s, Piping, Bins, Baghouses, etc…
Storage Areas Pads, RR Trucks, Lagoon Ponds
Drains Floor Drains, Sumps, Culverts, Sewers, Leach Fields, Surface Drains & Easements.
Disposal Areas Waste Piles, Weir Structures,
Buildings Transformers, ACBM (roof, floor, boilers, pipe wrap, etc…), Lead Paint, Drains, Sumps, Boilers, Vents, Labs, Storage Areas, Fueling Areas
Discharge Areas Vegetation, Drains, etc…
Fill Incinerator or Boiler Ash, Off-Site Fill, Sludge, Cinders