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Here's how: to avoid environmental liability.

"EPA Fine Closes Business"

"State Investigates Dumper"

"Clean Up Cost $3.2 Million, Battery Shop Closes Doors"

"EPA Searches Pulp Mill"

These newspaper headlines show what dozens of Alaskan businesses are discovering: Violating environmental laws can result in extensive liability. Penalties and fines are often only a small part of the overall expense. Paying consultants, clean-up contractors and/or the government's clean-up costs can take a chunk out of your bank account.

Environmental problems can mean liability to workers, neighboring property owners and others. This potential liability is often not covered by insurance and can be enormous. Criminal liability, including jail sentences, is becoming increasingly common.

For example, over the years, many Fairbanks firms disposed of used automobile and truck batteries with a particular battery shop. The land where that battery shop was located is now a Superfund site, and the federal Environmental Protection Agency is supervising cleanup. The cost so far is estimated to be $3.2 million, and 11 Fairbanks businesses have been asked to pay a total of $3 million and 15 other businesses have been asked to pay $69.25 for each battery they left at the site. The owner of the battery shop has closed the business and plans to build batteries in Siberia.

Businesses can take steps to limit these kinds of environmental liabilities. Avoiding environmental liability requires learning about the environmental laws that affect your business, complying with those laws, obtaining required permits and complying strictly with the terms of those permits. Property that is being purchased, leased or sold should be examined for environmental problems. And you should ensure that your employees and those you do business with strictly comply with environmental laws. There are costs involved, but the costs are worth the reduced risks of environmental liability.

Government Regulations and Restrictions. Environmental laws have blossomed since the early 1970s. In an effort to clean up the environment, the federal government has passed dozens of laws that regulate the discharges of pollution onto land and into air and water. There are restrictions on the use of dangerous insecticides such as DDT; more innocuous substances like paints are also regulated. Federal laws restrict the development of certain private land, require detailed record-keeping about the transport of hazardous materials, and provide for the disposition of medical wastes.

State and local governments have imposed a number of similar laws. The legislature tightened state laws regulating the discharge of oil and other similar materials in Alaska. Many local governments have laws designed to protect the environment.

Many of these laws alter normal expectations. For example, under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), a landowner can be responsible for the complete cost of cleaning up property, even if the contamination occurred before that owner acquired the property. Under the same law, a person who arranges with a disposal company to haul material away can be held responsible if the disposal company fails to properly handle the material. Alaska's similar state law is even broader, since it covers oil and petroleum products not covered by federal law.

Steps to Compliance. Faced with these laws, how can a small business hope to avoid environmental liability?

First, management must educate itself about the environmental laws that its business must follow. Frequently, government agencies have printed information that will help you understand the law, and may offer seminars or workshops. National and state trade associations regularly report on environmental issues, restrictions and laws affecting their members. If you feel that your trade association is not doing a good job in keeping you environmentally informed, suggest that it offer more environmental educational materials.

Other information sources include seminars offered by environmental consultants, law firms and related groups. Devoting a day or two to such a program can provide a wealth of environmental information. Make sure you choose one that addresses the needs of your business. Business periodicals that regularly feature special reports on the latest environmental developments also can help you stay informed.

If your business has unique methods or operations, you may need an experienced environmental consultant or attorney to review your business and advise you about relevant laws. Becoming and staying informed on environmental laws affecting your business is the first step to limiting your environmental liability.

Cost-Effective Compliance. Second, once you know the environmental issues that affect your business, look for cost-effective ways of complying. A great deal of research and development is taking place, and new techniques to address environmental problems are announced constantly. Sometimes modifying how you do things can reduce environmental harm. If you are using a dangerous chemical, perhaps a different one can serve the same purpose with less environmental risk. Many programs, like the Anchorage Chamber of Commerce Green Star Program, can help you make changes in your business to reduce environmental risk.

For certain businesses, small fixes are not enough; more expensive and elaborate changes must be made. If your company is in this situation, begin planning now to make those changes. Talk to consultants and regulators, and figure out the best solution for you. Addressing the problems early will give you time to research solutions, obtain adequate resources and make the necessary changes. Occasionally, limited government assistance is available for environmental compliance costs.

If your business needs specific permits to operate, plan ahead to get the permits and work closely and cooperatively with the regulating agency. Developing a good relationship with officials may mean better terms in your permit and more understanding when a problem arises.

When you are given a permit, follow it strictly. There is no surer way to risk environmental liability than to ignore the terms of a permit. Violating a permit can mean substantial fines, criminal penalties and loss of the permit -- meaning your business can no longer operate.

Property Transactions. Third, when you buy, sell or lease property, investigate to see if the property is or has ever been contaminated. And remember, the owner or operator of a site is liable for any contamination on the site. If the contamination remains on the site, learn how big the problem is and investigate the costs of cleaning it up. You may need to reconsider the purchase of the particular site, reduction of the purchase price, or modification of the contract to provide you with more protection.

If you are selling property, an environmental investigation can define the extent of a problem, and may be helpful in limiting your liability in the future if subsequent owners pollute the site. Of course, if you discover an unknown contamination problem, the value of your land will decrease substantially.

Virtually all land transactions now involve an environmental assessment. Make sure that the assessment is careful and thorough enough to detect the contamination.

Adopt Environmental Compliance. Fourth, require your employees to conduct your business in an environmentally safe way. This is perhaps the most effective measure you can take to limit environmental liability. Make sure your employees know and follow a few basic rules. For example:

* Do not dump oil, gasoline, chemicals and solvents on the ground or pour them down drains.

* Avoid open burning except with a specific permit.

* Store and handle any chemicals and dangerous or toxic substances carefully.

* Keep work sites clean and neat. Remove abandoned vehicles, drums and containers.

* Dispose of trash and garbage properly.

* Use adequate safety gear when handling hazardous materials. Don't let the material blow or drift into the air or water.

In addition, you may want to consider adopting an environmental policy or making a series of specific environmental rules for your company. When your employees know the environmental issues affecting your company, they may suggest other ways to reduce your environmental risks. All your employees should understand that not complying with environmental laws and rules will be grounds for disciplinary action. Monitor all your business activities regularly to make sure they are environmentally sound.

Make Sure Your Contractors Comply With the Laws. Fifth, insure that other business you work with comply with relevant laws. If you provide material to someone to dispose of, make sure that they will handle the material in accordance with the law. Ask your suppliers to make sure any material they give you is transported legally. Your contracts with suppliers and contractors should incorporate provisions requiring that they comply with all relevant environmental laws and limiting your liability if they do not.

You may also want to devote some of your company's resources to changing laws and regulations to provide for the most realistic and cost-effective ways of addressing environmental concerns.

Complying with current environmental laws is often time-consuming and expensive, but compliance now will help to avoid liability later. And it may help your bottom line in other ways. Consumers are increasingly sensitive to environmental problems, and many businesses have found it beneficial to stress environmental concern and awareness in their public relations. Being "green" may not only avoid liability, it may get you more customers.

Timothy A. McKeever is a partner with Faulkner, Banfield, Doogan & Holmes, an Anchorage law firm with branch offices in Juneau and Seattle.

Environmental Liability -- Are You At Risk?

Your business could face unexpected environmental liability if you:

* Handle medical waste.

* Own a building with electrical transformers containing PCBs.

* Repair and maintain motor vehicles.

* Do electroplating and other metal manufacturing and fabrication.

* Operate printing and reproduction equipment.

* Do dry cleaning and laundering.

* Provide photographic processing and printing.

* Operate laboratories.

* Build or do road work, construction or remodeling.

* Provide home or industrial pest control.

* Manufacture or process chemicals.

* Manufacture or formulate pesticides.

* Manufacture, dye or chemically treat textiles or cloth.

* Preserve wood, use paints, thinners or solvents.

* Chemically treat lawns or gardens.

* Manufacture or process cosmetics.

* Own or lease commercial property which has ever used any of the above.

* Have ever transported or disposed of any waste from a business doing the above.
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:McKeever, Timothy
Publication:Alaska Business Monthly
Date:Apr 1, 1993
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