Environmental liability can pose a significant danger to any business, with enforcement penalties and clean-up costs reaching into the hundreds of thousands, if not millions, of dollars, but family-owned businesses may be especially at risk if they are not well-equipped to comply with environmental regulations and assess potential environmental risks.
There are a few steps family-owned businesses can take to help avoid costly environmental liability:
1. Always perform a Phase 1 Environmental Site Assessment before purchasing property.
A Phase 1 Environmental Site Assessment (or “Phase 1”), following the ASTM standards, should be performed before your family business purchases a piece of property. This site assessment will help to determine if the site in question is potentially contaminated and assess other environmental risks associated with the property. Even if a Phase 1 has been conducted on the property in the past, it is good practice to request a new assessment, as the Phase 1 should be less than one year old at the time of acquisition of the property and certain sections of the Phase 1 may need to be updated if more than 180 days old.
Not only is a Phase 1 an important information-gathering exercise, it can also shield you from certain types of liability in the future. Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), otherwise known as “Superfund,” liability for environmental contamination can be imposed on any current owner or operator of a contaminated property, even if the contamination at issue was not attributable to their actions. However, an owner can avoid liability under CERCLA through the Innocent Landowner Defense or Bona Fide Prospective Purchaser Defense. Both of these defenses require that the owner, at the time of purchase, undertook “all appropriate inquiries” before taking title to the property.
A properly conducted Phase 1, demonstrating that there was no contamination found on the property at the time of acquisition, is sufficient evidence to prove that the owner took “all appropriate inquiries” before taking title. If a statutorily compliant Phase 1 was not completed before the owner took title to the contaminated property, these defenses cannot be utilized and business owners may find themselves facing steep clean-up costs.
2. Voluntarily disclose and promptly correct environmental violations.
Another tool at your disposal to avoid costly environmental liability is EPA’s eDisclosure process. Under EPA’s eDisclosure policy, regulated entities are encouraged to “voluntarily discover, promptly disclose, expeditiously correct, and take steps to prevent recurrence of environmental violations.” Using the online eDisclosure system, businesses can easily disclose and resolve civil violations. If all of EPA’s conditions under the self-disclosure policy are met, certain penalties will be waived by the EPA.
To fall within the scope of this policy, a family-owned business must: (1) Register in the eDisclosure system, (2) self-disclose within 21 days of discovering a violation, and (3) submit an online Compliance Certification, describing how noncompliance was corrected, within 60 days of submitting the initial online Audit Policy disclosure (or within 90 days if qualified to submit a Small Business Compliance Policy disclosure). While it might seem counter-intuitive to disclose your company’s own violations to EPA, the eDisclosure policy ensures that voluntary disclosure, accompanied by prompt correction of the violation, will result in little or no penalty—a boon to the regulated and the regulator alike.
3. Take advantage of free resources to ensure compliance with environmental regulations.
A number of excellent free resources are available to assist businesses in complying with complicated environmental laws. The Small Business Environmental Assistance Program provides an email and telephone hotline that certain businesses can use to get quick answers to their environmental questions. This program also provides information on industry trade associations that can provide businesses with information and assistance in complying with environmental regulations that affect their industry. Each state also has a Small Business Compliance Assistance Program and contact person to aid in compliance with state regulations. Finally, the EPA compiles information on Compliance Assistance Centers, categorized by industry, that helps businesses understand and comply with environmental laws. By utilizing these resources, family-owned businesses can lower the risk of noncompliance and environmental liability at little to no cost.