Say you have fallen out of compliance with an environmental or safety regulation. You’re familiar with the penalties and are willing to pay—but it doesn’t stop there. As an environment, health, and safety (EHS) professional, you are going to have to explain what costs so much. Today we will examine the true costs of environmental noncompliance and a recent example of how falling out of compliance can be so costly. Tomorrow we will look at the how one employer recently paid the price for retaliating against a whistleblower.
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SEP: A Hefty Noncompliance Acronym
If you have violated an environmental regulation, under the U.S. Environmental Protection Agency’s (EPA) supplemental environmental project (SEP) program, you may “voluntarily agree” to undertake an environmentally beneficial project related to the violation in exchange for mitigation of the penalty to be paid. However, SEPs can be enormously costly and cannot be part of the costs of bringing your facility back into compliance—you still have to pay for that. So all together, you have the cash penalty, the SEP costs, the costs to bring your facility up to speed, and other ancillary costs.
Let’s look at a recent example.
Alleged Violations
J.S.B. Industries, Inc. (doing business as Muffin Town), a wholesale bakery and distribution company with facilities in Chelsea and Lawrence, Massachusetts, allegedly violated the General Duty Clause (GDC) of the Clean Air Act (CAA), hazardous chemical reporting requirements of the Emergency Planning and Community Right-to-Know Act (EPCRA), and chemical release notification requirements of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
According to the EPA, approximately 2,000 pounds of anhydrous ammonia was accidentally released from a refrigeration system at one of the facilities. The EPA determined that J.S.B. violated the GDC because it failed to identify chemical hazards that could result from the accidental release of anhydrous ammonia, failed to design and maintain the facility in a safe manner by taking action to prevent accidental releases of anhydrous ammonia, and failed to take steps to minimize the consequences of any accidental release that did occur.
In addition, J.S.B. allegedly violated CERCLA by not promptly notifying the National Response Center of the anhydrous ammonia release.
J.S.B. allegedly violated EPCRA chemical inventory reporting requirements at the other facility by not submitting a safety data sheet (SDS) for sulfuric acid or a list of hazardous chemicals including sulfuric acid to local authorities both initially and then annually for 2 years.
Costs
Civil penalty. J.S.B. must pay a civil penalty of $156,000 with interest accruing from the day the Consent Decree was lodged.
SEP. The company must spend at least $119,000 in emergency response equipment for the towns of Chelsea and Lawrence and must pay for delivery costs within 120 days of the effective date of the Consent Decree. In addition, J.S.B. must invest time and resources in ensuring that the equipment is new (i.e., not used, refurbished, rebuilt) and in good working order per manufacturer instructions.
Under the terms of the Consent Decree, J.S.B. cannot receive any help or reimbursement for the SEP and cannot receive any credit for it in any other enforcement action. To add insult to injury, J.S.B. must not deduct any costs related to the SEP from federal income taxes. If the company does not meet the SEP deadlines, it is subject to penalties of up to $1,500 per day per violation. If J.S.B. fails to complete the SEP or stops working on the SEP, the penalty will be $200,000.
Compliance costs. J.S.B. must also pay the costs related to coming into compliance for the production, storage, and distribution of baked goods. These include setting up the processes for reporting releases under CERCLA and the annual EPCRA reporting requirements. J.S.B. must also ensure that it is are in compliance with the chemical accident and prevention provisions of the GDC. Although J.S.B. continues to use sulfuric acid (a regulated chemical) in heavy equipment batteries at its facilities, it did spend the money to remove the ammonia-based refrigeration system at one location and replaced it with a nitrogen-based unit, which is considered a less inherently dangerous technology.
Attorneys’ fees. In addition to the penalty, SEP, and compliance costs, J.S.B. has its own attorneys’ fees and may also be subject to attorneys’ fees and other costs the EPA incurs for actions the Agency takes if the company defaults on any of its penalty payments.
As noted, noncompliance with EPA regulations can be costly. Tune in to tomorrow’s Advisor for a look at a case where an employer paid a hefty sum by for violating whistleblower provisions that are enforced by the Occupational Safety and Health Administration (OSHA).