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Environmental Issues and the Law RAGNA HENRICHS Johnson & Gibbs, P.C., 1001 Fannin Street, 1200 First City Tower, Houston, TX 77002-6778

Environmental Issues and the Law RAGNA HENRICHS Johnson & Gibbs, P.C., 1001 Fannin Street, 1200 First City Tower, Houston, TX 77002-6778

Proc. Nati. Acad. Sci. USA Vol. 89, pp. 856-859, February 1992 Colloquium Paper

This paper was presented at a colloquium entitled "IIndustrial ," organized by C. Kumar N. Patel, held May 20 and 21, 1991, at the National Academy of , Washington, DC. and the RAGNA HENRICHS Johnson & Gibbs, P.C., 1001 Fannin Street, 1200 First City Tower, Houston, TX 77002-6778

ABSTRACT This report first briefly reviews the history viduals or . As such, it wasn't particularly respon- and lessons learned from our regarding protection of sive to the problem of . Some legislation, such as our environment. Then, these lessons are combined with the Rivers and Harbors Act of 1899 (1), had been enacted, but principles of general to suggest avenues for this legislation was generally insufficient for addressing the of . Even though the law has enormous problems that attended the rapid development of important limitations, it can be used as a tool to identify our industrial society. Public alarm finally led to a spate of national goals and to promote their achievement by means of responsive legislation at the federal level. incentives or sanctions. Beginning in 1969, the legal framework governing the environment experienced a revolution. In that year, Con- Modern societies depend upon effective legal systems to gress passed the National Act (NEPA) satisfy numerous social needs. The American legal system, (2), which for the first time required formal consideration of for example, attempts, among other things, to define the environmental consequences of certain major actions, rights, to enable its citizens to redress their wrongs, to uphold such as building nuclear power plants and granting federal made in the marketplace, and to protect its citizens offshore leases for oil production. An important feature of from harm. In addition, the American legal system, coexist- NEPA is that the required environmental review must take ing as it does with a free-market economy, spends a signif- place before the action (e.g., the construction of the nuclear icant portion of its resources addressing the problem of power plant or the grant of the offshore lease) is taken. Thus, economic externalities. NEPA pioneered a system of advance planning to address Externalities are those costs and benefits, generated by environmental consequences of major actions undertaken individual decision makers in our society, that primarily directly (offshore leases) or licensed (nuclear power plants) affect third persons. Environmental is the classic by the federal government. The concept of such advance example of a negative or external cost. Whenever planning for environmental consequences has been extended products of production processes are discharged into through enactment of numerous "little NEPAs" in various the public environment, their treatment (or lack thereof) is states. As a result of NEPA and the state little NEPAs, transformed from a cost to the producer to a cost to society.* development in environmentally sensitive habitats is less Much of our environmental legislation, therefore, has been likely, project proposals often include mitigation measures to directed toward redistributing these costs back to producers, minimize adverse environmental impacts, and environmental so that they, rather than society, take responsibility for the consequences are now joined with engineering and economic consequences of their actions. considerations for purposes of determining whether, where, Because the problem of externalities spans the fields of and how certain projects are to be developed. and has also been encouraged by the both industrial ecology and environmental management series ofenvironmental permit programs enacted by Congress because the regulation of our environment represents one of the revolution our first (and grandest) attempts to solve this type ofproblem, in swift succession as the next phase of legal in the field ofindustrial would affecting the environment. The Clean Air Act (CAA) (3) was prospective legislators ecology enacted in 1970, the (CWA) (4) was enacted do well to review the history of . In this Act way, past mistakes can be avoided and past successes can be in 1972, and the Resource Conservation and Recovery repeated. (RCRA) (5) was enacted in 1976, to regulate pollution of the Floating sewage, fiery rivers, and disintegrating buildings air, water, and land, respectively. Each one of these on our environ- addresses a particular environmental problem by defining the were the public images of industry's impact scope of the 's applicability and then by determining ment. In an effort to encourage more environment-friendly Each in the 1960s to our who shall be responsible for addressing the problem. industry, regulators late began develop statute also develops a solution to the problem. environmental law. That development reflects our primary The chief mechanism contained in these statutes experience in using the law as a tool to promote newly defined regulatory how the law be is the permit program. Permit programs prohibit any emission goals in this area and illustrates may brought or discharge of a or any treatment, storage, or to bear on the topic of industrial ecology. disposal of a , except in compliance with a Some 20 years ago, there was little law that directly the addressed the environment. Rather, the law governing envi- permit.t By means ofstandards developed under statutes, that permits place limits on the amount of that can be ronmental concerns was largely the same the environment. The standards used to deter- governs other types of injury and damage. It focused on released into recovery of damages for specific instances of intentional or negligent wrongdoing that resulted in harm to specific indi- *Positive externalities, or external benefits, exist as well. For example, whenever a producer employs processes that are cleaner than necessary to efficiently produce the product, all of society The publication costs of this article were defrayed in part by page charge benefits, even though the public at large didn't pay for the benefit. payment. This article must therefore be hereby marked "advertisement" The producer alone absorbed the cost. in accordance with 18 U.S.C. §1734 solely to indicate this fact. tEach act authorizes some exemptions from the general prohibition. 856 Downloaded by guest on October 2, 2021 Colloquium Paper: Henrichs Proc. Natl. Acad. Sci. USA 89 (1992) 857 mine permit limits are developed in rule-making proceedings greater understanding and consensus regarding the elimination conducted according to directives of each act and are either of the obvious environmental problems than exists today on technology-based or health-based. Generally, permits re- the subject of toxics, perhaps because those earlier problems quire permittees to monitor their compliance with the permit were so obvious (recall, e.g., the fiery rivers and floating limits and to report monitoring results to the regulatory sewage). agency. Failure to have a required permit and noncompliance In contemporary attempts to define what, if any, level of with permit limits are statutory violations that are enforce- toxicity is acceptable, there is also a serious problem of able by the regulatory agencies and, in some instances, by communication with the public. The questions of "what is citizens. harmful?" and "how should harmful substances, or poten- These statutes, and other similar statutes, regulate opera- tially harmful substances, be regulated?" are very emotional tions. Since pollution-generating operations cannot be con- issues in permit proceedings and other environmental adju- ducted except with, and in compliance with, a permit, permit dications. Today, an unfamiliar chemical name, or such a programs have resulted in significant advance planning to name attached to a measurable detection of the substance, address environmental concerns. creates fear in the public. It is not necessarily a logical The introduction ofadvance planning was but one element fear-not a fear resulting from an understanding of what the of the revolution in the legal framework governing the material is and how it will affect either the individual or the environment. The series of new also assigned clear environment-but afear that results from the aforementioned responsibility for compliance and established sanctions for lack of understanding. On a scientific basis, perhaps such a failure to comply. The obligation to have a permit and to meet fear could be dismissed because it is not supported by facts. its requirements established responsibility in the permittee. Under these circumstances, a scientist would probably con- To apply a sanction for unacceptable conduct, the enforcer clude that such afear is illogical and ignorant and has no place no longer needed to establish that pollution resulted in a in a rational system. However, politically, such a position is specific harm or damage, nor was he required to find the wrong. specific "cause" of a harm or damage. Under this new The problems of understanding and communication are system, a system wherein the permit constituted a public vividly demonstrated during regulatory determinations, determination of both responsibility and acceptable conduct, which today are often motivated by public perceptions and sanctions could easily be applied to violations of the permit, the public's concept of what should be regulated and pro- regardless of whether harm resulted. tected. With respect to toxics, the public has discovered that In 1980, with the advent of the Comprehensive, Environ- adetermination regarding a safe level ofa chemical substance mental Response, Compensation and Liability Act (CER- is no longer simply a matter ofcomparing the quantity ofthat CLA or ) (6), Congress used the concept of as- chemical to a clearly stated, quantitative regulatory standard signment ofclear responsibility to create a system for cleanup (e.g., vinyl chloride at 2 parts per billion). Instead, decisions of past contamination. Under CERCLA, without regard to may be based on a assessment where risk is no longer fault, any person who is in a statutorily defined relationship measured in terms of quantity of the substance, but instead to the contaminated site is responsible for its cleanup. in terms of potential cancer deaths. To the technical and The legal framework described above instituted a new scientific communities, these approaches represent different approach to environmental regulation and established regu- ways to say the same thing. To the public, the statements latory direction. Implementation of the policy, however, was carry considerably different emotional weight and the emo- dependent on scientific and technological data and decision tional overtones interfere with the degree of communication making, much of which had not yet been developed at the and understanding needed to address the issues. time the legal framework was put into place. As a result, the Because the essence of environmental pollution is the legal "solution" was proceeding before the factual informa- transfer (or "dumping") of cleanup costs to society, envi- tion was fully available. ronmental laws generally begin at the plant boundary. That At first, progress was possible despite the lag in scientific is, they have generally applied to activity that surrounds the knowledge and technology because the problems were im- outside of a or production facility. The focus mense and obvious. The public was concerned about fiery has been away from determining what a particular facility's rivers, floating sewage, and that was rotting process must be, the nature ofa product to be made, and how buildings and causing statutes to fall off their pedestals. much product is manufactured. Congress has been generally The fiery rivers are now gone, and some ofthe other more reluctant to curb the market system, and it has been consid- obvious problems are not seen very often. Though legal ered sufficient to begin regulation at the perimeter of the solutions still precede technology (and this continues to facility. To the extent industry affects those in the environ- present certain problems), technological barriers today rep- ment beyond the facility with its emissions, discharges, spills, resent only half the battle. Our most difficult contemporary and waste disposal, the present system controls, or attempts environmental problems are frequently those that, though to control, the pollution. There are exceptions; in particular, equally significant, are perhaps less visible and less concrete. regulation ofthe work place has been instituted to protect the As an example, one current legislative struggle is with the health and safety of workers. Further, some environmental concept of toxicity. regulation extends inside the plant door. As a general matter, Though our legal framework is broad enough to encompass however, it seldom mandates process or product. the regulation of toxic substances, the substantive debate When our present environmental laws were enacted, in- spans several planes simultaneously, including the political dustry fought hard to keep the regulators away from the plane. A particularly challenging initial problem is public manufacturing lines. Product and process as primary ele- understanding ofthese substances. The very word "toxic" or ments of competition were considered proprietary and invi- "hazardous" triggers a public reaction without reference to olate. Concerns about industrial espionage and loss of trade the quantity of the material, the nature of its effects, or any secrets carried decisive weight and doubtless would be of other equally fundamental issues. Toxics are such a volatile considerable influence even now. Likely the greatest imped- issue in the public psyche that scientific distinctions often iment to enactment of an environmental permit program carry little weight, and the regulation of these substances is designed to assure industrial ecology would be fear of the transformed into an issue of public perception. In our demo- anticompetitive impact. With this in mind, a permit program cratic system of government, these public perceptions are not may not be a politically acceptable mechanism for assuring only critical, they are decisional. In the 1970s, there was a commitment to a system of industrial ecology. Downloaded by guest on October 2, 2021 858 Colloquium Paper: Henrichs Proc. Natl. Acad. Sci. USA 89 (1992) However, apart from all the baggage of a permit program, They have been used largely to encourage states and local the law can still be used to serve several purposes without government to take over administration and enforcement of invading the internal processes of industry. It can define the permit programs delegated to the states. Although incentives subject matter, determine action requirements, and apply have not been used extensively, when applied, they are universal motivating forces to assure compliance with the effective. There are indications, however, that future Envi- program desired. ronmental Protection Agency regulatory schemes may in- Industrial ecology is a new and undefined area ofendeavor. clude economic incentives (7). Incentives reflect legislative If it is to be addressed from a legal perspective, it will require and policy judgments. They are not determinations of mo- a definition of the scope of the industrial sector to which the rality or of whether conduct is right or wrong. Therefore, they concept applies, a determination of goals to be addressed by involve a much simpler system for enforcement. Two exam- the endeavor, selection ofacceptable mechanisms for achiev- ples may be helpful. ing the goals, and institution of incentives or sanctions to During the 1980s, New York State imposed a fee on assure universal commitment to following the selected path. hazardous waste transactions. The fee was intended to gen- To assure commitment toward a policy to establish industrial erate revenue, and a budget line item for the revenue was ecology as a norm, the law can be used as a tool to identify based on the volume of such hazardous waste transactions in and define consistent national goals and promote their previous years. The transactions were well documented by achievement. Its strictures create economic incentives and manifest information collected under RCRA. The program penalties and may even create a market, albeit artificial at involved use of the manifest information to calculate the least at the outset, conducive to achieving the desired goals. volume of waste and of a volume-related fee on use as a tool. imposition There are important limitations on of the law the The State found its revenue was to national bound- generator. projection First, its effectiveness is largely limited overestimated even it was based on aries. to be an effective tool-that to be enforce- vastly though past Further, is, manifest information and a rate of industrial able-the law must have clearly and specifically identified continuing provisions. When this need for specificity is joined with activity. The revenue projection fell short because the reg- developing technology, the law commonly finds itself lagging ulated community immediately changed its conduct in reac- significantly behind the development of technology. In ad- tion to the economic incentive. There was increased recy- dition, the law is a product of our democratic society and is cling and substantial changes occurred in the use of raw a creature of compromise. As such, it may not reflect the best materials. The fee did not eliminate the existence of hazard- either in terms of goals or mechanisms to achieve those goals. ous waste in New York State but had a significant and Its choices in regard to and technology are generally immediate impact on the volume generated. conservative and give great, if not exclusive, weight to Another type of incentive can be found in a program area. proven information. The law, therefore, provides a very As an example, the stringent regulation of hazardous powerful and effective tool for achieving goals, but its has made it very difficult and very expensive to dispose of limitations must also be recognized. certain material that previously had been considered of no In considering future approaches for regulating the envi- economic consequence. The cost of proper disposal of haz- ronmental system, attention should be given to the motivat- ardous waste, both the direct cost ofdisposal and the potential ing forces included in our laws. Generally, these include future cleanup liability related to it, is now sufficiently high to alternatives in the form of a carrot and a stick, or incentives result in at least two possibilities for change of conduct. First, and sanctions. Our experience with these motivating forces a generator may self-regulate its volume of waste produced. as used to date provides guidance for the selection of an This reaction is the same as that to the fee discussed above. approach in future regulation. Here, the economic incentive is not in the form of a fee, but The major motivating force imposed by the law for conduct an increased cost of doing business. In addition to increasing that violates its standards is the sanction. Sanctions come in cost, however, the regulation has also created an opportunity the form of several types of enforcement actions including for third-party economic gain. of certain hazardous penalties and fines, jail time, and or agency orders to wastes has become a profitable business opportunity. Previ- comply. A public sanction is intended (i) to cost money and (ii) ously, recycling of many wastes was not economically com- to represent a public with respect to the morality of petitive with use of virgin materials. This changed when the the conduct addressed. The growth of and interest in appli- regulatory program created an artificial market. Now the cation of the as a tool is powerful of the comparison of the profitability of some recycled products is public's view ofthe moraljudgment related to the misconduct. measured not in competition with virgin product, but rather in As a practical matter, enforcement itself is not the key competition with cost of disposal. Recycling is viable today sanction; it is the fear of enforcement. From a statistical and the economic incentive stems from the stringent regulation perspective, enforcement actions are merely a check to of the waste. assure that the self-motivating factors that result in compli- An important element related to both sanctions and incen- ance will be at work. The system of environmental enforce- tives is the certainty with which they can be applied. Wher- ment can be compared to enforcement under the internal ever reasonable, the law attempts to provide certainty in the revenue system. Compliance is self-generated for the most measure of conduct. Certainty results from clear definitions, part. Sanctions are applied to only a few facilities because of with minimal reliance on judgment and subjective consider- limited agency and other government enforcement person- ations. nel. Environmental enforcement requires a significant invest- The failure to provide certain standards of conduct results ment of both technical and legal time and is very costly. In the in two costs to society. (i) Whenever there is an alleged environmental area, enforcement actions are complicated. It violation, the legal process is delayed as the litigants pro- is often necessary to take samples, do testing, and ensure that pound and the resolve disparate interpretations of the the testing is quality-controlled to serve as reliable evidence. . (ii) Without such certainty, there is delay and The government must carry the burden of that a additional cost for decision makers attempting to comply. violation has in fact taken place. As a result, enforcement in Finally, with certainty, as in the case of CERCLA liability, this area is sporadic. The publicity about enforcement actions responsive action follows. Whether the judgments made in is a far greater deterrent than the actual enforcement actions. imposing that certainty are right or wrong can be discussed The other type of motivating force the law considers is the in the political halls, but, in the meantime, the system incentive. Our present laws are not generous with incentives. generates responsive action. Downloaded by guest on October 2, 2021 Colloquium Paper: Henrichs Proc. Natl. Acad. Sci. USA 89 (1992) 859

In conclusion, in formulating a legal tool to encourage 3. Clean Air Act (1970) 42 U.S.C. §§ 7401 et seq. industrial ecology, we can learn from our experience with 4. Clean Water Act (1972) 33 U.S.C. §§ 1251 et seq. environmental law. Based on such experience, the use of 5. Resource Conservation and Recovery Act (1976) 42 U.S.C. §§ incentives to achieve clearly defined goals appears to offer 6901 et seq. the greatest opportunity to meet our targets and yet offers the 6. Comprehensive, Environmental Response, Compensation and least intrusion into the operating plant's domain. Liability Act (1980) 42 U.S.C. §§ 9601 et seq. 7. U.S. Agency Economic Incentives 1. Rivers and Harbors Act (1899) Chap. 425, 30 Stat. 1151. Task Force (1991) Economic Incentives: Options for Environ- 2. National Environmental Policy Act (1969) 42 U.S.C. §§ 4321 et mental Protection (U.S. Environ. Protec. Agency, Washing- seq. ton). Downloaded by guest on October 2, 2021

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