Monday, June 15, 2009

Environmental Issues Can Arise In Everyday Life for Small Businesses

How much effort do you put into ensuring compliance with environmental laws? If you think they do not apply to your business or cannot become a risk to your operations, consider this story.

A small business came to me for help with a contract dispute. The business whose assets it was buying filed for bankruptcy before the deal was finished. A party’s bankruptcy can definitely ruin a good deal, but this one took some unusual turns. The bankrupt company had every intention of selling its assets to my client. It was so eager to liquidate, in fact, that the employees essentially loaded everything into trucks in one state and had it all delivered to my client a few states away.

It looked like the only thing left to resolve was payment. That is, until they opened the trucks on the receiving end. To their surprise, there were numerous unmarked barrels of unidentified substances in the trailers and no paperwork to explain them. If you know anything about federal or state laws that regulate hazardous chemicals, you have likely guessed where this is leading.

The Resource Conservation and Recovery Act (42 USC §6901, et seq.) was originally enacted in 1976 to address the growing consequences of municipal and industrial wastes that were causing increasing problems as industry evolved faster than the regulations. Both “hazardous” and “solid” (though not necessarily hazardous) wastes are carefully defined and regulated under different sections of the statute and different regulations.

The key part of RCRA is subtitle C, where Congress fashioned the “cradle to grave” concept to track regulated substances from the creation point until disposal. The Environmental Protection Agency [1] was charged with creating regulations[2] and procedures to accomplish this task.

The federal regulations that applied to those mystery barrels transported across state lines are discussed on the EPA site’s Manifest pages for Transporters. The Hazardous Waste Manifest System is a set of forms, reports, and procedures designed to seamlessly track hazardous waste from the time it leaves the generator facility where it was produced, until it reaches the off-site waste management facility that will store, treat, or dispose of the hazardous waste. The system allows the waste generator to verify that its waste has been properly delivered, and that no waste has been lost or unaccounted for in the process.

The RCRA "Bite"

The teeth in RCRA are in 42 U.S.C. § 6928: violators face civil penalties up to $25,000 per day for violating a compliance order as well as criminal fines of up to $50,000 per day or imprisonment up to two years for the first offense, double for a subsequent offense. If the violator is a person who knows at the time that his actions risk imminent danger of death or serious bodily injury to another person, the fines can go up to $250,000 and the prison sentence to 15 years. For a business so convicted, the fine can be $1 million. Note well that these penalties even apply to used oil that is not regulated under RCRA!

Armed with the information above, my client had a significant bargaining chip to use to bring the matter to a prompt, acceptable result. The seller had either knowingly transported or caused to be transported “without a manifest, any hazardous waste or any used oil not identified or listed as a hazardous waste under this subchapter required by regulations promulgated under this subchapter (or by a State in the case of a State program authorized under this subchapter) to be accompanied by a manifest.” (42 U.S.C. § 6928 (d)(5)) Compliance was simple—label the containers and list them on the truck’s manifest—but had not occurred. In disregarding those steps, the seller had thereby put my client into risk of sanctions had it not reported the incident.[3] Had the seller not violated RCRA, the matter may have been protracted in bankruptcy court for months longer and with uncertain results.

Environmental Law Compliance

So-called “environmental law” conjures images that most small businesses cannot envision for themselves. Yet, there is no minimum quantity rule that exempts those who produce, store, transport or dispose of regulated materials.[4] When in doubt, your business should request a manifest before accepting delivery of any substance that you are not certain is unregulated. If you do not know whether your activities are regulated by the RCRA, you should review widely-available online resources to confirm that any substances or materials you produce, including useable products, or discard are not covered.[5] Even though recycling can remove certain materials from the manifest system requirements, materials such as electronic components require special handling to protect the environment, waste disposal workers and your organization.

Compliance is relatively simple unless you are a hazardous waste disposal company or produce huge amounts of regulated wastes that you do not sell. Non-compliance can put you out of business.

[1] The EPA’s website has good resources for understanding which wastes are regulated, what to do in case of an accidental spill, and even a public database of documents and guidelines.

[2] The EPA’s Hazardous Waste Regulations page has links to federal regulations that make up the Hazardous Waste Management System. Regulations that govern non-hazardous wastes regulated under RCRA are described on a separate Non-hazardous Waste Regulations page.

[3] Most states with environmental regulations have mechanisms for voluntary reporting of discovered violations that provide a window for penalty-free remediation to regain compliance.

[4] To find RCRA compliance guidance on a state-by-state basis, use tools like the ones in this gateway from the Environmental Compliance Assistance Platform (a project of the National Center for Manufacturing Sciences (NCMS) with support from the U.S. EPA).

[5] For a better understanding of environmental regulations that may apply to your business, try the National Compliance Assistance Centers portal (also supported by EPA).

1 comment:

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