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Planning for the cost of clean air.

Planning for the Cost Of Clean Air

The enactment of the Clean Air Act Amendments of 1990 marked the culmination of 13 years of political compromise and debate between the business and environmental communities. Designed to restore and preserve air quality throughout the United States, the Amendments impose substantial burdens on business to dramatically reduce air emissions over the next decade. They also impose draconian civil and criminal penalties for non-compliance.

As regulations are phased in, and federal and state enforcement increases, companies will be forced to give the Amendments a greater amount of their attention and budget. Companies whose operations produce air emissions should begin now to develop the economic, technical, legal, and political strategies necessary to cope with the onslaught of federal regulation.

The Amendments approach the air pollution problem from several directions simultaneously. States are instructed to develop implementation plans to achieve air quality standards. So long as overall standards are met, it is left to the discretion of individual states to target specific sources of air pollution (industrial, motor vehicle) and to set requirements for the reduction of emissions for each source.

Thus, the U.S. Congress has transferred the course of political compromise to each of the 50 states which, in turn, will single out sources to restrict. Companies will surely want to make their voices heard in state capitols, as this process takes place over the next two years.

The Amendments also specifically list 189 hazardous air pollutants and require the Environmental Protection Agency (EPA) to list the sources of these pollutants and regulate them in accordance with a strict timetable. Sources of volatile organic compounds will be among the first to be regulated.

The term "maximum achievable control technology," or "MACT," will soon be heard in corporate boardrooms, as the EPA seeks to balance health effects, costs of compliance, and other factors to develop the specific MACT standards for sources of air emissions. Since the stringency of the standards will affect the cost of compliance, companies have a strong interest in monitoring the EPA's progress in accumulating data on the cost of compliance and potential health effects. Absent balanced input from the business and environmental communities, standards may be imposed that require pollution controls or process changes that are impossible for many companies to afford. Under the Amendments, most sources of air emissions now will be required to obtain a state permit. Those states already operating air permit programs will have to strengthen them to comply with the Amendments. Companies must submit monitoring reports which, if they reveal permit violations, can be used as a basis for government or citizen enforcement actions.

Conversely, compliance with a parameter expressly set forth in a permit is a defense to an enforcement action based upon that parameter. Thus, a company that heretofore took comfort in lack of regulation may wish to obtain a permit containing as many parameters as possible.

Risking a felony

The enhanced enforcement provision of the Amendments are of particular importance to management. In addition to subjecting a company to substantial civil penalties, intentional violations of the Act by management are now felonies. Since management must sign permit compliance reports, management is faced with either revealing permit violations and subjecting the company to penalties, or risking a felony prosecution for intentional misstatements.

This structure puts a premium on compliance. In order to comply, many companies will choose to perform "environmental audits," a review by in-house or external experts, to uncover deficiencies at the earliest opportunity. The legislative history of the Amendments reflects Congressional intent that criminal penalties not be applied where a person, acting in good faith, conducts an internal audit that uncovers noncompliance, promptly reports the results of the audit, and promptly acts to correct the deficiencies.

Companies would be well advised to plan ahead for the upcoming regulations. Potential future changes to a facility should be examined for their impact on emissions reduction plans and acceptable permit limitations. The modified facility will be required to meet standards and permit limits. Consideration should also be given to participating in the state process for establishing source limitations and the federal regulatory process for establishing emission (MACT) standards. Present involvement may lessen future costs.

An audit can help

An environmental audit can help a company examine and assess all sources of emissions. Based upon these results, a company then can plan for emission reductions, analyze how quickly such reductions are achievable and at what cost, and determine what permit limitations would be liveable on either a source-by-source or facility-wide basis. Incidently, if substantial reductions are achieved promptly, the Amendments reward such actions by deferring the need to comply with new MACT standards. For some companies, this deferral may result in large financial savings.

Finally, an ongoing environmental audit process should be established under the control of a designated management official with periodic reports to senior management on the results and necessary corrective action. Audits and good faith responses to audit findings lessen the risk that any violation will result in onerous civil penalties or in criminal prosecution.

Significantly, for a company that will be required to reduce air emissions substantially, planning ahead for the new clean air requirements may be essential to the company's survival.

Kenneth J. Warren is a Partner in the Bala Cynwyd, Pa., firm of Manko, Gold & Katcher, which concentrates in the practice of environmental and land use law. He directs the firm's environmental litigation practice.
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Title Annotation:Chairman's Agenda: Managing Environmental Responsibility
Author:Warren, Kenneth J.
Publication:Directors & Boards
Date:Jun 22, 1991
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