ENVIRONMENTAL LAW AND BUSINESS



Observers have called 1970 the "year of the environment." On April 22,1970, the first celebration of Earth Day took place. Also that year, the National Environmental Policy Act (NEPA) was passed by the U.S. Congress, the U.S. Environmental Protection Agency (EPA) was created, and the Occupational Safety and Health Administration (OSHA) was established. Various U.S. environmental laws predate 1970, but since that year, those laws have been developed extensively, and the enforcement of those laws has changed the way business "does business." Every business in this country is affected by environmental laws. On a daily basis most businesses deal with one or more environmental laws and the administrative agencies that enforce them. For example, businesses must inform and educate their employees about hazardous materials in the workplace as required by OSHA, and they must inform their communities about such materials on their premises pursuant to 1986 amendments to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA—the Superfund program) legislation. Businesses must apply for and adhere to permits from the federal EPA for their air emissions and their effluents discharged into waterways. Businesses generating hazardous wastes must comply with the EPA's manifest system (a record-keeping system), and the disposal of hazardous and nonhazardous waste is regulated extensively. Businesses are being required to clean up or pay for clean up of environmental contamination caused by their past acts and practices. Further, businesses are now being required to monitor their production methods and seek ways to prevent pollution. The list of the ways in which environmental law affects the daily operations of business goes on.

Therefore, for any businessperson, it is helpful to be familiar with the problems addressed by our environmental laws, the provisions of those laws, and the kinds of mechanisms and administrative agencies through which those environmental laws are enforced.

Environmental laws deal with myriad pollution problems. Pollution or contamination of the environment is found within the walls of factories and other business facilities as well outside the walls of those facilities. Environmental law deals with contamination of our air, surface waters, drinking water, groundwater, and land. Those affected include workers and their families as well as other members of their communities. And, as U.S. businesspeople increase their participation in a global marketplace, it is becoming increasingly clear that environmental contamination extends beyond local and regional concerns; its effects are international and even global. As illustrated along the U.S.-Mexican border, environmental contamination does not recognize political boundaries.

The United States is a "legalistic" society in that its people rely on its legal system to "do something" about injuries to individuals as well as social problems affecting large numbers of people. Thus, it is not surprising that individuals as well as groups of concerned citizens rely on our legal system to "do something" to compensate individuals who suffer harm due to exposure to environmental contamination (toxic substances), to provide a mechanism for clean up of environmental contamination, to protect citizens from exposure to toxic (hazardous) substances, and to prevent further contamination of the environment.

In recent decades, there has been an increase in what lawyers call "toxic tort" litigation. Toxic tort litigation refers to the use of tort law to seek compensation for illness, injury, or death resulting from exposure to hazardous substances or to seek an abatement of hazardous conditions. (Tort law includes causes of action such as negligence, trespass, nuisance, or strict liability for hazardous products or activities.) One well-known example is the Love Canal case. Love Canal is a community near Niagara Falls, New York, where beginning around 1970, families realized that they were suffering from unusually high rates of cancer and other illnesses as well as birth defects. Investigation revealed that the families' homes and even an elementary school for their children had been built on top of tons of chemical wastes that had been deposited in a ditch and covered over. In one of various legal responses to the disaster, the residents sued the Occidental Petroleum Corp. based on tort law and recovered millions of dollars in damages.

Love Canal was a well-publicized case revealing the extensive damage associated with hazardous waste from industrial disposal sites and industrial plants throughout the United States. But, the case was not unique. Other well-known toxic tort cases have arisen from such contamination in Wobum, Massachusetts; Times Beach, Missouri, and elsewhere. Thousands of cases have been brought against businesses based on similar, even if less extensive, contamination at hazardous waste disposal sites and industrial facilities throughout the United States.

Such cases are expensive for the businesses being sued as well as the plaintiffs bringing the suit, as is illustrated by the Wobum, Massachusetts, case. Parents of 18 children who contracted leukemia (plus one adult victim) became convinced that their disease could be traced to industrial solvents in the water supply. After years of investigation and months of trial (which was only partially completed), the case was settled. Defendant W.R. Grace & Co. said that it had spent $2.5 million in defense and investigation costs. Although an exact amount was not revealed to the public, the settlement paid by W.R. Grace & Co. was said to total $9 million to nine of the victims (and their survivors) with additional amounts going to other victims.

The Love Canal and Wobum, Massachusetts, toxic tort cases were heavily publicized by the news media. Public awareness was raised in the 1970s and 1980s by reports of numerous toxic tort cases and of contamination such as PCB in New York's Hudson River, and a pesticide (Kepone) that had been dumped into the James River near Hopewell, Virginia. Therefore, it is easy to see why the country has taken substantial steps during the past two decades to move away from the "reactive" approach of tort law, which is used to compensate victims after harm has occurred. A proactive approach to environmental problems through which future contamination is prevented and existing contaminated sites are cleaned up can save substantial amounts of money for businesses and society as a whole in the long run.

In recent decades society has relied increasingly on a statutory approach to environmental law. A statutory (or regulatory) approach to law represents a proactive approach in dealing with a set of specific societal problems. Administrative (or regulatory) agencies have been assigned many missions designed to deal with our environmental problems. Such an agency is created by Congress. Then, through statutes called "enabling legislation" the agency is charged with planning and creating regulations (or standards), and enforcing those standards. Thus, when in 1970 Congress created OSHA, the agency was charged with doing what is "reasonably necessary or appropriate to provide safe or healthful employment and places of employment." OSHA has created and enforces thousands of regulations designed to carry out that directive. Similarly, in 1976, Congress passed the Resource Conservation and Recovery Act (RCRA), assigning to the EPA the task of controlling solid waste management practices with the objective of protecting the public health. Pursuant to that enabling act and subsequent amendments to it, the EPA has established and currently enforces an extensive regulatory program controlling the activities of generators of waste, transporters of that waste, and owners or operators of waste disposal (storage) sites.

ADMINISTRATIVE AGENCIES

The federal EPA and its state counterparts are the primary enforcers of environmental laws in the United States. Each of the 50 states has an administrative agency that serves as a counterpart to the federal EPA. The state agency is often the primary environmental law-enforcing agency with which business deals on a daily basis.

It must be recognized, however, that environmental law is not exclusively the domain of the EPA. Various other administrative agencies, both state and federal, enforce laws that are related to the environment. Further, the EPA often coordinates its enforcement efforts with those of other administrative agencies whose missions complement or even overlap those of the EPA. Listed below are various federal administrative agencies that are engaged in such environmentally related missions.

MAJOR FEDERAL ADMINISTRATIVE AGENCIES THAT WORK WITH THE EPA.

  1. Agencies within the Department of Labor
    1. Occupational Safety and Health Administration: Regulates to protect health and safety of workers within workplaces. (Excludes mining.)
    2. Mine Safety and Health Administration: Regulates to protect health and safety of workers in mines and to protect public from hazards associated with mining.
  2. Agencies within the Department of the Interior
    1. Bureau of Land Management: Created in 1946. Manages federally owned lands, which total over 350 million acres. Manages resources on those lands including timber; oil, gas and minerals; rivers and lakes; plants, animals, and fish and their habitats.
    2. U.S. Fish and Wildlife Service: Manages the National Wildlife Refuge System which was created in 1983 and now includes at least 472 national wildlife refuge areas.
    3. National Park Service: Administers the U.S. National Parks, which cover more than 80 million acres.
  3. Agencies within the Department of Agriculture
    1. U.S. Forest Service: Manages wilderness areas covering 33.6 million acres. Makes decisions regarding use of resources for lumbering, mining, farming, and grazing.
  4. Agencies that Are Independent or within Other Government Organizations
    1. Council on Environmental Quality (CEQ): Oversees compliance with NEPA by agencies throughout federal government.
    2. Consumer Product Safety Commission: Charged with enforcement of various enabling acts designed to protect consumers. Includes responsibility for protecting consumers from toxic (hazardous) chemicals. Independent agency.
    3. Food and Drug Administration: Charged with enforcement of statutes designed to protect the public from harmful food or drugs. Works with the EPA to protect the public from hazards associated with pesticide residues in food. Independent agency.
    4. Nuclear Regulatory Commission: Regulates nuclear facilities and handling and disposal of nuclear materials.
    5. Federal Energy Regulatory Commission: Regulates dams and hydroelectric power. f. Federal Maritime Commission: Certifies that ships carrying oil and hazardous materials have ability to cover costs of any spills.
    6. Army Corps of Engineers: Regulates construction projects on navigable waters; coordinates administration of Superfund cleanups; engages in construction projects to protect wildlife on shorelines and in navigable waters; and other projects.
    7. National Institute for Occupational Safety and Health (NIOSH): Under jurisdiction of Centers for Disease Control and Prevention (CDC). Conducts research on effects of toxic substances on humans. Results of NIOSH research are used by OSHA, EPA, and other agencies.

KINDS OF REGULATION

One of the nation's first environmental laws was NEPA in 1970, which requires that all federal administrative agencies "consider" the environment by preparing an environmental impact statement (EIS) before undertaking any major action that is likely to have a significant effect on the environment. Although the utility of the EIS in protecting the environment has been debated by scholars in law and economics, the high ideals represented by NEPA have earned the statute the label, the" Environmental Magna Carta." Other statutes regulating the activities of business were passed in the 1970s soon after NEPA's enactment. A look at the history of environmental regulation in the United States reveals that various kinds of regulatory mechanisms have been developed and implemented over the past 25 years. Various kinds of regulation have been developed to deal with varying environmental concerns, ranging from clean up of past mistakes, to record keeping detailing where toxic wastes are being placed, to efforts to protect citizens from exposure to toxic materials being used daily in industry.

PROTECTING CITIZENS FROM EXPOSURE
TO TOXIC MATERIALS

One major area of concern is to protect workers and other citizens from toxic materials used by industry. In the 1970s, the majority of environmental regulation applied to business facilities could be described as "command and control" regulation. Such regulation, most of which is still in effect, consists of detailed standards set down by an administrative agency. For example, if a business applies for an emissions permit pursuant to the Clean Air Act or an effluent permit pursuant to the Clean Water Act, the EPA will base the terms of that permit on EPA regulations (standards) for that chemical. The permit will specify what can be emitted (e.g. benzene or perchlorethylene) and how much can be emitted. If a business exceeds the limits of its permit, it is subject to civil or criminal penalties.

Closely related to "command and control" regulation is the concept of "end of pipe" regulation. "End of pipe" regulation requires treatment of waste or pollutant just before it is emitted. For example, companies use "scrubbers" on smokestacks to reduce the amount of a pollutant emitted such as sulphur dioxide." End of pipe" regulation was relied on heavily during the 1970s and continues to be used extensively today.

During the 1980s, "command and control" regulations began to be supplemented by a new kind of regulation known as "right to know." In the early 1980s, workers advocated the adoption of worker right-to-know (RTK) laws. Such laws are designed to give workers access to information about the presence and identities of toxic chemicals in the workplace. Such laws were first enacted by various local and state governments. OSHA promulgated its Hazard Communication Standard (HCS), creating worker RTK across the nation in 1984, and by 1989 its coverage had been extended to protect workers in all public businesses. Following the example of workers, environmentalists began to advocate community right-to-know (RTK) laws during the 1980s. Such laws were first adopted in various states; community RTK on the federal level was created through the 1986 Superfund Amendments and Reauthorization Act. Such laws give citizens access to information about chemicals located on the premises of businesses in their communities.

Worker RTK and community RTK place duties on employers and businesses to provide information to workers and communities through documents called material safety data sheets (MSDS), which describe chemicals, their properties, and the hazards associated with their use. Further, the community RTK program requires that a business inventory toxic materials on its premises and document all releases into the environment of such materials. That information, in turn, is made available to citizens and various committees and regulatory bodies. Thus, RTK is primarily an information policy. Citizens including, but not limited to, workers may be able to make better-informed decisions about dealing with toxic (hazardous) materials in their workplaces and in their communities.

As a result of greater citizen awareness of the presence of toxic materials and the hazards they create, citizens in the 1990s demanded that more be done to reduce those hazards. In response to citizens' concerns, a third type of environmental laws regulating businesses' activities is being advocated and enacted in various states and on the federal level. Pollution prevention laws, which are also known as toxics use reduction laws, have been enacted in at least 26 states. In addition, Congress passed the Pollution Prevention Act of 1990, which is not as stringent as most of the state laws but takes some important steps to require pollution prevention. Pollution prevention statutes are designed to prompt business facilities to examine their production processes and change those processes and their products to reduce their use of toxic chemicals. Comprehensive state pollution prevention statutes include provisions imposing planning and reporting requirements on business facilities with respect to toxic chemicals used. Such statutes also cover: (1) protection of the proprietary interests of businesses; (2) worker and community involvement in planning processes; (3) technical assistance and research to assist business facilities and funding for such programs; and (4) enforcement mechanisms and penalties for noncompliance. The federal Pollution Prevention Act of 1990 provides matching grant money for state programs to assist businesses in reducing their use of toxic substances.

Because such programs are relatively new, their long-term effectiveness cannot yet be assessed. Yet, it is clear that such laws are causing some businesses, especially in the chemical industry, to examine their production practices carefully. Many firms, such as the E. I. du Pont de Nemours & Co., the 3M Company, and the Emerson Electric Company in North Carolina, are finding that toxics-use reduction makes good business sense. Elimination of wastes saves money immediately and will continue to save those companies money in the long run as the costs of meeting the increasingly more stringent requirements of command and control regulations rise.

OTHER KINDS OF REGULATION

There are other kinds of environmental regulation in addition to those described above. Laws such as the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Toxic Substances Control Act (TOSCA), regulate the manufacture of economic poisons and other chemicals. Such laws require approval and licensing by the EPA before a chemical product can be produced and marketed.

The Superfund program provides for programs to identify hazardous waste sites, evaluate and prioritize them, and clean up or contain hazardous wastes at such sites. Thus, it deals with "cleaning up" our past mistakes. The program relies on public funds, taxation of the chemical industry, and a polluter pays principle (collection of cleanup costs from those who contributed hazardous wastes to the site) as funding sources. A "Superfund" tax, which was a surtax imposed on all businesses earning $2 million or more expired at the end of 1995. Proposals to reinstate the tax have been made but have not been approved by Congress.

To prevent the creation of future Superfund sites, the RCRA requires licensing and close monitoring of hazardous waste generators, transporters, and disposal or treatment sites. The program uses a "Manifest" system that creates a "cradle to grave" written record of each and every batch of hazardous waste produced by a business facility in the United States.

THE 1990S

The EPA's relationship with businesses in the 1990s changed. During the 1990s, EPA regulators shifted their regulatory efforts in the civil area away from use of litigation in response to environmental damage to an approach that encourages working with businesses to encourage voluntary compliance and self-auditing. For example, in 1996 the EPA adopted a final policy providing for penalty reductions when a company discovers environmental law violations through self-auditing. The EPA has designed several different environmental management programs, including the XL Program, the Star Track Program, and the Environmental Leadership Program.

On the other hand, in the criminal area the EPA has referred increasing numbers of cases to the U.S. Department of Justice for prosecution of environmental crimes. During fiscal year 1997, the EPA assessed $169.3 million in criminal fines, which was more than double the amount assessed in 1996. EPA officials and state and local law enforcement officers have received increased training related to environmental crimes.

LOOKING AHEAD

As businesses enter the 21st century they will deal increasingly with the environmental laws of other countries and with the ramifications of international treaties dealing with both trade and the environment. For example, the environment was one of the major areas of public debate regarding the North American Free Trade Agreement (NAFrA) prior to its adoption. It took effect on January 1, 1994, but it was approved by the U.S. Congress only after the addition of an "Environmental Side Agreement." Former U.S. EPA Administrator William K. Reilly observed that it is "the most environmentally sensitive free trade agreement ever negotiated anywhere."

Expanded industrialization in (currently) underdeveloped countries resulting from such trade pacts is accompanied by serious concerns about the environmental effects of such industrialization. In 1994 such concerns were included in what is known as the Uruguay Round of negotiations regarding the General Agreement on Tariffs and Trade (GATT). (GATT was and is a set of rules. As of 1994, the World Trade Organization [WTO] was created to enforce GATT rules.) President Bill Clinton's administration has called for a future "Green Round" of GATT at which various environmental concerns would be addressed. Such concerns include the need for upward harmonization of health, safety, and environmental standards as well as the need to adopt dispute resolution processes that will result in rulings that are more protective of the environment than those currently in effect.

As businesses expand into other countries, they must conform to the laws of those countries. For example, as a result of Mexico's membership in the WTO (Mexico entered GATT in the late 1980s), coupled with increased investments by U.S. firms in Mexico pursuant to NAFrA, businesses must seek legal advice from Mexican environmental law specialists to ensure that their operations conform to Mexican law. Mexico has detailed environmental codes and regulations, and enforcement levels are increasing steadily.

Overall, consideration of the environment and adherence to environmental laws and regulations have become important in the day-to-day conduct of business in the United States and throughout the world. Businesses, workers, environmentalists, and government officials need to work together to find economically sound ways of reducing the amounts of toxic substances released into our environment.

[ Paulette L. Stenzel ]

FURTHER READING:

Kubasek, Nancy K., and Gary S. Silverman. Environmental Law. 2nd ed. Upper Saddle River, NJ: Prentice Hall, 1997.

Lachenmayr, Andrea, et al. "597 Environmental Crimes." American Criminal Law Review 35 (spring 1994): 599-671.

Stenzel, Paulette L. "The Crucial, Yet Difficult, Partnership between Science and Law in Litigation and Regulation Related to Toxic Substances." In Selected Readings on Business and the Law, 1994.

——. "Right to Act: Advancing the Common Interests of Labor and Environmentalists." Albany Law Review 57, 1-40.

——. "Toxics Use Reduction Legislation: An Important 'Next Step' After Right to Know." Utah Law Review (1991): 707-48.



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