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A tale of tanks and banks; tighter regulations and stricter enforcement at both the federal and state levels have led to much of the growth in Indiana's environmental business.

A Tale of Tanks and Banks

As the president of Environmental Consultants Inc. in Clarksville, Robert E. Fuchs has seen his businesses change and grow rapidly during the past few years.

Environmental Consultants used to work primarily with the engineering and technical staffs of large companies that required laboratory work, Fuchs says. But these days, non-technical people requesting environmental site assessments are just as likely to get into contact with his firm.

Small-town bank chiefs and grocery store owners traditionally have not had to worry about environmental liability or the environmental impact of their businesses. But as a result of recently passed regulations and continuing litigation, more medium-sized and even mom-and-pop operations are turning toward the environmental services industry for assistance. Lenders are requiring assessments before approving loans for commercial and industrial projects. Large companies are deciding they'd rather be proactive today instead of reactive tomorrow, and now budget for environmental control.

In response to this growing demand, Indiana's environmental services industry is booming. Companies already involved in environmental work have grown like pumpkins in the fall, while new firms have sprouted like flowers in the spring. And despite recessionary fears, continued expansion is expected throughout the decade as environmental laws tighten and citizens become more concerned about saving the planet.

"the work 'environmentl' is the magic word of the '90s," says J.P. "Pete" McKay, sales and marketing manager for Williams, Beck and Hess Inc., a tank-lining company headquartered in Morgan County.

Tighter regulations and stricter enforcement at both the federal and state levels have led to much of the growth in the environmental business. The new regulations are designed to clean up past mistakes and prevent future ones, says William Beranek Jr., president of the Indiana Environmental Institute, a non-profit group that tracks state and local environmental rules.

Small businesses, which cannot afford their own environmental staffs, have been hit especially hard by the wave of regulations, Fuchs says. "It's sort of like if you want to compare it to the IRS and H&R Block. The regulations are so damn complex."

"the complexity of the regulations has significantly increased," agrees H. Stephen Nye, president of EIS Environmental Engineers Inc. in South Bend. "Where a facility may be in compliance today, it may be out of compliance tomorrow."

Of all the new rules approved in recent years, those affecting underground storage tanks probably have had the greatest impact, since they affect businesses and communities of all sizes. These comprehensive federal and state regulations set strict standards for the removal of old tanks and the materials used to fabricate new ones. Thus, tank owners have had to hire consultants to conduct assessments and monitor soil. And they are employing contractors to repair or replace leaky tanks, as well as to upgrade equipment to meet more stringent requirements.

Before these laws were passed, McKay says most of the calls he received were for emergency work. Now he estimates that 80 percent of his company's business is preventive maintenance. "There's more competition out there, but we are much busier than we were three or four years ago," he says.

Although the tank regulations affected insurance requirements, the environmental arena has not been a strong growth area for insurance carriers because of high liability, says Jacqueline A. Simmons, a partner in the Indianapolis law firm of Ice Miller Donadio & Ryan and chairman of the Indiana State Bar Association's environmental section. "I think they're stepping carefully before they enter those markets."

As regulations change, environmental officials want to be sure companies pay attention to the ones already on the books. At the end of November, the now-defunct C&M Plating Co. of Roanoke was slapped with a $250,000 fine for alleged violations of hazardous waste laws. Kathy Prosser, commissioner of the Indiana Department of Environmental Management, said at the time that she hoped to set a precedent by assessing the toughest criminal penalty allowed by law. Besides the quarter-million-dollar fine, state officials said they expected two officers of the company to be sentenced to a year of home detention.

The IDEM had accused the company of improperly storing and disposing of plating sludge, which contained hazardous levels of cyanide and cadmium. The waste reportedly ended up in the Roanoke sewer system and its sediment ponds, and the town has filed a civil lawsuit seeking more money to help clean up the contamination. The special prosecutor in the case says the IDEM frequently deals with such "everyday violations," and he therefore believes the harsh treatment of C&M will send a message to other companies.

New regulations and strict enforcement have been accompanied by increased litigation, which also has spurred industry growth. Today's major issue is the legal liability of banks and other lenders under the federal Comprehensive Environmental Response, Compensation and Liability Act--better known as the Superfund statute.

Last summer, a federal appeals court ruled that a lender was liable for cleanup costs even before it foreclosed or became the owner of a piece of property, Simmons explains. But in a separate case, another appeals court reached the opposite conclusion and said a lender is not liable until after it forecloses on commercial or industrial property.

Obviously, bankers are both scared and confused. Some joke that the simplest resolution to the problem is to stop lending money. But since that's not an option, the best they can do is require environmental assessments before they approve loans.

"The banking community and the Superfund regulations have created that assessment industry that did not exist before," says Douglas Zabonick, a senior project engineer with Alt & Witzig Engineering Inc., which is headquartered in Indianapolis.

"I've added another office just doing assessments for real-estate transactions," says Fuchs, who points out that on the West Coast, this issue also is being discussed in relationship to residential property. "It's a nightmare."

In addition to tanks and banks, environmental awareness also has played a part in the industry boom. Businesses are realizing that if they take action now, they may be able to avoid major cleanup bills or costly litigation in the future.

"You're seeing the generators in industry becoming a lot more conscious of the environment," says Candace Chudzik, community relations manager for Chemical Waste Management of Indiana Inc. in Fort Wayne. She says, for examples, some companies are treating industrial waste as they would hazardous waste, even though this is not required.

Although the environment is considered the watchword of the '90s, many companies have been involved in the environmental services industry for years. Newcomers to the field are more likely to target environmental work as a career from the start, says Greg Nethery, environmental services manager for Engineering & Testing Services Inc. in Indianapolis. But those who have been in the business for a while usually started out in other areas, such as geotechnical or civil engineering.

As the demand for new roads and bridges decreased, civil engineers had to shift their emphasis in order to survive, says Herb Hoover, director of marketing and sales for the environmental services division of Indianapolis-based ATEC Associates Inc., which was formed in 1958.

Alt & Witzig started out as a geotechnical engineering firm in 1976, Zabonick says. Because it owned drilling rigs, the company became involved in environmental projects as a subcontractor for the U.S. Environmental Protection Agency and its primary contractors.

For firms that have been around a while, the key word in recent years has been "growth." Zabonick says that three or four years ago, there were only two people in Alt & Witzig]s environmetal division. Now there are 16 people in multiple offices. Lex Venditti, vice president of Correct Maintenance Corp. in Portage, says that CMC's business essentially has doubled during a similar time period.

Asbestos work began to boom before the rest of the environmental services industry. Following a period of extremely rapid expansion, competition has tempered some of the growth within individual companies, says Jess Bedell, project manager for Specialty Systems Inc., which is headquartered in Indianapolis.

Competition also is increasing in other parts of the industry, as a mix of old and new businesses based both in Indiana and elsewhere vie for slices of the state's environmental pie. New firms have proliferated in the consulting field especially, which requires less capital than starting a lab or purchasing drilling equipment.

"I see a lot more environmental consultants out there today than, say, there were three years ago," Simmons, says. "We saw a lot of it when the underground storage tank regulations came into effect."

Many of these consulting firms have been formed by folks who've decided to go out on their own after working at larger companies, such as ATEC. "Over the last three years, that's been a big problem with us," Hoover admits.

Environmental Consultants' Fuchs is concerned that many of these new businesses don't have the necessary resources. "I think in-the-trench experience is what a lot of these firms are lacking," he says.

Becaue the industry has grown so rapidly, a labor shortage has developed. Plenty of people are available to fill entry-level positions, Zabonick says, but experienced environmental chemists, geologists and engineers can almost write their own tickets.

"The chemists, especially, are becoming journeymen," Fuchs says, because the EPA's methodology for laboratory testing demands three to five years of experience. He says businesses are lucky when they can keep an employee for three years.

Although it's difficult to predict which pieces of legislation will have the greatest impact on the environmental services industry in the '90s, continued growth is expected through the end of the century--but probably not at the breakneck speed that was typical in the past decade.

"I see a growth in the need for people who can help companies and communities meet the new water quality standards. I see air pollution control, especially hydrocarbon controls, as being strong," says Beranek of the Indiana Environmental Institute. "And then waste, waste management and recycling, as we increase the controls on water and air, that's going to generate more waste products."

A key to industry success will be a concept known as "pollution prevention," says Thomas T. Neltner, vice president of the non-profit Indiana Environmental Management Institute.

"There seems to be a division between air, water and land. There seems to be that split," Neltner says. In the future, however, he thinks businesses will take a multimedia approach and shift their emphasis as the regulations change.

In each of the three areas that Neltner mentions, growth is expected. But again, it's hard to pin down specifics. New amendments to the Clean Air Act, for example, are so lengthy and complex that no one knows what the true impact will be. "Nobody really understands what it's all about yet," says Nethery of Engineering and Testing Services.

McKay of Williams, Beck and Hess expects the tank business to start slowing down in about five years. In 10 years, he thinks the boom will be over. But during that time, his company plans to diversify.

The asbestos abatement industry will remain busy and also will undergo shifts, predicts Bedell of Specialty Systems. Now the emphasis is on schools. After that, it will move to commercial buildings. When commercial slows, there probably will be new rules in place for residential property.

Based on what's happening in California, Fuchs of Environmental Consultants Inc. thinks big issues in Indiana this decade will be toxic air and indoor air quality. In fact, Bruce Wallace, vice president of Alliance Environmental Cos. in Indianapolis, believes Americans will become as concerned about the indoor environment as they are about the outside environment. "The indoor issue is probably as big an issue at street level, at voter level, at constituent level, at union level, as the outdoor environmental issue."

Wallace points to a recent study showing that in newer, more air-tight, energy-efficient buildings, the illness absentee rate is about 50 percent higher than in older, less energy-efficient buildings. "We've solved one problem and created another."

Service will be a key in the '90s, says Fuchs, who expects to see businesses merge as the industry matures.

"I think we've seen the major growth occur already," says Hoover of ATEC, who expects smaller firms that haven't quite made it will go out of business or consolidate.

As new environmental laws are considered, there may be more of a balance between business and the environment, predicts Dennis Reed, vice president of marketing for Pollution Control Systems Inc. of Fort Wayne. "I think there may be more ground swell to inject pragmatism into the whole thing," he says. "There are some instances in which well-meaning regulations have been passed with what appears to be less-than-adequate thought about how it affects business as a whole. We could continue to regulate and regulate and regulate until we regulate business out of existence. Walden Pond would be nice, but we've all got to eat."
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Author:Pockrass, Steven
Publication:Indiana Business Magazine
Date:Feb 1, 1991
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