What Does It Mean for Your Business?

Last November's election was a stately affair. While Americans decided who should occupy the White House for the next four years and which party should control Congress for the next two, the election also reminded Americans that within our governing system, states and local governments retain equal, if not greater, control in the nation's course of action, especially on key issues like the environment.

According to recent polls and opinions, last November's elections sent a message to both federal and state government. It was a message that voters still carry the environment in high regard. In fact, a national poll on the eve of the election showed 85 percent of the respondents considered a candidate's stand on the environmental issues reason enough to warrant, or lose, their votes.

If there is one priority that everyone - whether in government, industry or the general population -- agrees on, it is that some of the nation's most important environmental issues are long overdue for some reform activity. For instance, the reform of the federal Superfund program has attracted the most attention and unfortunately, the most inaction. There are a host of other national issues which need and deserve serious consideration as well, including brownfields redevelopment, facilitating cleanups of contaminated property, the future funding and authority of the U.S. Environmental Protection Agency, clean air and clean water.

Clearly, the previous election demonstrated that if the President and Congress cannot get their acts together, there are fifty alternative sources for legislative and regulatory solutions ready and willing to expand their spheres of influence.

More Power to the States

What has changed in the last few years, and what will continue to change, is that the states have become more accountable and more actively responsible for determining their own fate, and they have willingly accepted this new challenge.

There are three dynamics at work here: As the federal government shrinks, so do the funds it has to work with; federal agencies have acknowledged their inability to properly administer programs from Washington and are pushing that authority down to the states; and, competing with each other for jobs, economic development and general prosperity, the states are working a little harder to prove they are better than their neighbors.

No area will be more impacted by these developments than the environment, and no area stands to benefit as much. The EPA is the best example of how states' rights are growing and how one federal agency is granting to the states authority it formerly coveted.

For example, voluntary cleanup laws encouraging the remediation of contaminated sites are now in place in almost three dozen states. Federal enforcement of cleanup standards has also been relaxed as states have been given the authority to sign off on completed cleanups. Voluntary cleanup programs directly address the problems of contaminated industrial sites by eliminating many of the procedural and economic stumbling blocks that otherwise might exist. These programs provide clear cleanup procedures and standards, state agency oversight, review and sign-off for parties who voluntarily clean up contaminated sites and protection from unknown future liabilities.

Many state programs also include tax abatement or other financing incentives to mitigate the cost of cleanup. In addition, states have also established grant or loan programs that will pay for environmental assessments of sites, or in some cases, the cleanup project itself.

What Are The States Up To?

In last November's elections, 14 states carried a total of 34 environmental initiatives and bond issues on their ballots. Among these initiatives were key votes on California's $995 million Proposition 204 to pay for environmental protection and New York's $1.75 billion bond to cover environmental cleanups.

In New Jersey, the passage of a state constitutional amendment earmarked four percent of corporate income tax to clean up hazardous waste sites and pay for environmental initiatives. The measure is expected to annually generate approximately $48 million which will be used for cleanup of hazardous waste sites and contaminated water supplies, upgrades, and cleanup of underground storage tanks. Other uses of the funds will target water quality monitoring, watershed planning and non-point source pollution projects.

Elsewhere, with the EPA's tacit approval, more than two dozen states have now implemented laws or regulations that provide a privilege against prosecution for companies who voluntarily undertake an environmental audit of their facilities. Periodic audits of company operations are a wise risk management tool used to ensure regulatory compliance and adherence to sound environmental practices. States are offering companies the added incentive to perform these audits without the fear of prosecutions for environmental problems or information possibly uncovered during an environmental audit.

The States, Brownfields and Business Opportunities

An area which has captured the attention and commitment of state governments is the redevelopment of industrial sites, also known as Brownfields. EPA Administrator Carol Browner recognized that environmental cleanup is a building block to economic redevelopment, not a stumbling block. By the end of 1997, almost 100 brownfields redevelopment grants will have been given by the EPA to cities and states to help them develop their own brownfields programs.

While the EPA is counting on the brownfields program to result in urban economic developments, local and state governments have quickly jumped on the brownfields bandwagon, seeking new ways to help the business community increase jobs and improve the economy. What's more, the desire of cities to add to their tax base and create jobs within the city limits is surpassed only by the desire of industry to remediate and redevelop abandoned or contaminated sites. The reason? Many of these former industrial sites are located in inner cities with a strong employee base, are near a preexisting transportation structure, and are in close proximity to major markets.

In the past, obstacles to redevelopment included the risk to potential purchasers under the Comprehensive Environmental, Response, Compensation and Liability Act of 1980 (CERCLA) which can hold current owners liable for contamination caused by prior owners. In addition, financing institutions can sometimes be caught in CERCLA's net and have avoided financing redevelopment projects. Unrealistic or varying cleanup standards and a concern over future environmental liability after a cleanup keep businesses from taking on brownfields projects.

State government goals in the brownfields redevelopment trend include conservation of available green space, creation of new employment opportunities, increased tax base and revitalization of new life into the inner cities, and at the same time, reduction of environmental health problems.

Today's Brownfields initiatives are offering states and their local businesses a common sense approach to provide a cost effective way to redevelop abandoned, contaminated property and return it to productive community and business use. The states' increased role in these initiatives is spurring opportunities for businesses to take advantage of these changing regulations and develop new facilities and distribution locations.

As a result of these innovative actions of city and state, and the continued involvement of the federal government, business and industry stand to benefit significantly from acquiring and redeveloping brownfields.

Managing Business Risks

For businesses, state control of environmental protection can mean many different things, depending on your resident state. It is clear, however, that many states are listening to their resident companies to develop regulations, guidelines and programs that work with the needs of business while protecting the environment and health of their residents and their workforce. It is also quite evident that despite the increased cooperation and partnering of state and industry in environmental protection, it is in the best interest of business to proactively manage environmental exposures with a comprehensive risk management program.

New initiative or not, how a company protects itself as it embarks on the business opportunities resulting from these regulatory changes is important. Significant strides have recently been made by an increasingly more sophisticated environmental risk management market. Environmental risk management services, including environmental insurance, risk assessment and environmental auditing services, are offering businesses a variety of available products addressing businesses' environmental risks.

We continue to hope that environmental issues do not once again become political footballs that are punted back and forth without any scoring. As companies move forward with their business plans, it is wise to be wary of the political developments impacting their bottom line.