Regulatory Developments, Special Topics in Environmental Management

The Patchwork of Regulations Surrounding Environmental Compliance

For those who prefer to read rather than listen, check out this transcript of a recent episode of our EHS on Tap podcast, wherein we’re talking with Ian Cohen, Product Marketing Manager for Cority’s Safety, Environmental, and Sustainability Solutions, about the complex array of federal and state environmental regulations (and deregulations) shaping today’s compliance landscape.

EPA Headquarters

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This episode was originally released on March 28, 2019, and you can listen to the full audio here.

Justin Scace: Hello, everyone, and welcome to EHS on Tap. I’m your host, Justin Scace, senior editor of the EHS Daily Advisor and Safety Decisions magazine. Today’s regulatory landscape can be confusing, to say the least, for environment, health, and safety professionals, especially when it comes to environmental compliance. The Trump administration has pursued an overall deregulatory agenda at the federal level, while emphasizing compliance assistance over enforcement. However, this is at the same time that more stringent regulations are being introduced by many individual states. Also, many large companies have already begun compliance efforts (and spent a lot of money) to address rules that are now facing revision or replacement proposals. It’s all resulted in a complex patchwork of regulations. So, what’s an EHS manager to do?

Fortunately, in today’s episode, sponsored by Cority, our guest can provide some insight and help us sort through the issues. Joining us today for our discussion is Ian Cohen, product marketing manager for Cority’s safety, environmental, and sustainability solutions, where he works to deliver products to the market that are designed to meet clients’ needs in an ever-changing regulatory environment. Ian previously served as environmental product manager at Cority, and prior to joining Cority, Ian was an environmental specialist at Florida Power & Light Company, where he served as the project and program lead for the company’s enterprisewide environmental compliance management system. Ian was also a member of Florida Power & Light’s sustainability lead team and supported annual reporting in a myriad of sustainability projects.

Ian holds a master’s in environment science and a bachelor’s in biology, both from the University of Tennessee at Chattanooga, and his research has been published in the peer-reviewed journals Annals of Botany and Zoologica Scripta. So, Ian, thank you very much for joining us today on EHS on Tap!

Ian Cohen: Hey, Justin. Thanks for having me. Really appreciate the opportunity to join you.

Justin Scace: We’re very glad to have you here. So, let’s get started. In 2018, we saw some really big changes at the EPA. Proposed replacements for the Clean Power Plan and Waters of the United States rule, revisions to regulations that would benefit the coal industry, and an overall move toward deregulation. Now, in 2019, we’re starting out on a little bit of a different foot with a change in EPA administration, the appointment of Andrew Wheeler, and with a Democratic-majority House. So, will 2019 be a different year? Will rollbacks continue?

Ian Cohen: That’s a loaded question there, Justin. I’ll start off with, will 2019 be a different year?

Justin Scace: Haha, sure.

Ian Cohen: Outside of the change in 2018 to 2019, I can tell you, I don’t have a crystal ball, but I really do think that 2019 will look a lot like the latter half of 2018, when Andrew Wheeler took over as acting EPA administrator. I think Mr. Wheeler will probably be confirmed by the Senate in the not-too-distant future. It only takes a simple majority to confirm presidential nominees at this point. I have heard inklings that there may be some Republicans that may jump ship, but at this point in time, I don’t see them getting 51 senators to not confirm him.

We all know that Mr. Wheeler was a former lobbyist and a lawyer for Murray Energy, and he made plenty of comments on the record about air emission regulations and his disfavor for some that are on the books. He’s also worked at the EPA in the first Bush administration, so I really do expect that he’ll be a whole lot more successful than Scott Pruitt was, because he really understands the technical hurdles to rolling back regulations better, and he’s also keen on complying with the Administrative Procedural Act, so that the courts don’t use a technicality to invalidate those rollbacks.

That said, the new Democratic House does throw a bit of a wrinkle into the mix. They made it clear that they are not going to hesitate to use their oversight role, and they’ve also proposed the Green New Deal, so I expect that EPA officials will be spending a whole lot of time up on Capitol Hill, actually more than they did in ‘17 or ‘18. So I know the House Energy and Commerce Committee, which is actually chaired by the New Jersey representative Frank Pallone, they’ve held hearings regarding what appears to be lax enforcement by the EPA.

And the second part of your question, will rollbacks continue? I don’t see any reason why they wouldn’t. There’s nothing in the EPA’s agenda that suggests otherwise, but it’s important to remember that in order to repeal existing regulations, the Trump administration actually has to convince the courts that there are sound legal reasons to ignore all of the work that was done to promulgate those regulations in the first place. And the EPA actually required agencies to demonstrate that the rules are not arbitrary and capricious, which has been used to actually invalidate some of the rollbacks the were done early on in the administration. So, you know, that co-equal branch of government that is the judiciary will have a lot to say about the rollbacks that are pending, and the rollbacks that have yet to come.

And many of those rollbacks that EPA’s proposed are already tied up in court. So, in ‘19 and ‘20, EPA is going to be spending a whole lot of time defending these rollbacks, including Waters of the U.S., the new Clean Power Plan replacement. And really where Trump has been successful, or where the administration has been successful, is regulations related to the use of public lands. So we’ve seen expansion of mining and oil and gas exploration, logging on federal lands, and this is really no small feat, of course. We do know that that has potential impacts, both positive and negative. From an economic perspective, it’s positive. From an environment perspective, it could be very negative, if not done well.

But EPA’s also been successful in changing the scope of proposed regulations, and I think that’s probably likely to continue over the next few years that we have with this administration.

Balancing environmental enforcement and business

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Justin Scace: Okay. So, you mentioned enforcement just a little while ago. So, in the past two years, we’ve seen enforcement at the federal level drop significantly. Criminal convictions are down, and civil penalty amounts are at levels not seen since around 1994. Now, the Trump administration says that this is a result of more compliance assistance than financial penalty, and the level of environmental protection in the US has not wavered. Of course, opponents tell a very different story. But from a company’s standpoint, a business standpoint, the big question is, is EPA enforcing the currently in-force regulations? What’s the level of risk for enforcement for noncompliance?

Ian Cohen: I think first, it’s important to note that this trend of lower enforcement rates actually started late in Obama’s second term, and the administration at that time actually blamed the climbing budgets due to congressional austerity measures that were put in place by the Republican-controlled Congress at that time. So under both Trump and Obama, the EPA has actually stressed that it’s prioritizing more complex, high-impact cases.

What’s not clear to me, and I’m betting I’m not alone in this, is what qualifies as complex and high-impact. So you’ve got VW and Fiat emissions scandals. Those would certainly seem to qualify as complex and high-impact, and those penalties from those two cases, certainly massive in nature.

There was a recent report talking about the drop in fines and penalties, and when that report came out regarding enforcement actions, a spokesperson for the EPA said that it is increasing the deterrent effect of enforcement programs through criminal enforcement actions to address the most egregious cases. I guess my question back to EPA is, who is defining what the most egregious cases are? What’s the threshold for egregiousness? Is it the same as complex and high-impact? I just don’t know the answer to that.

I read several other reports that not only was enforcement substantially down, but also on-site visits and inspections are down too. That’s a big risk, obviously, because now you’re looking at that audit component that is supposed to catch people before things get really, really bad. So it also means that the risks of being caught by a regulator and subsequently fined or penalized appear to be lower than at any time in the last two decades. A little bit concerning, I’m sure, for many folks out there.

I actually read another report by the Environmental Data & Governance Initiative, which found anecdotal evidence based on a number of interviews with current and former EPA employees that the agency under Trump is really using lax enforcement as a way of rolling back regulations. So they’re not actually going through the rollback process, they’re just not showing up and enforcing the rules. And if this is true, I would argue that this is a major violation of federal environmental laws and EPA’s overall mandate.

And with that said, I guess the risk of EPA enforcement actions are exceedingly low at this point. At least it appears like that on paper. A lot of these enforcement cases are still pending, are going to drag on through the appeals process. I don’t want… To be clear to the people who are listening to this, no company should cut corners when it comes to environment regulations, because there’s a whole host of other risks associated with that.

Justin Scace: Right.

Ian Cohen: Reputation, financial losses. So it’s not a good idea to even consider that just because somebody’s not looking at you, because we live in a 24/7-hour media cycle. People are always watching, at the end of the day.

Justin Scace: Absolutely.

Ian Cohen: And the last thing I wanted to say on this is, is that it’s also important to remember that a lot of the programs that EPA administers are run by state environmental agencies, so I think we’ll start to see some states, primarily those with large enough budgets and Democratic leadership, potentially be a bit more aggressive when it comes to that enforcement action.

Justin Scace: Great. Actually I’m glad you mentioned that, because that was the next thing that I wanted to ask you about. So, with EPA not as active in establishing new regulations, it seems like many states, they appear to be picking up the slack, so what are the regulatory trends at the state level now, and how will they affect businesses?

Ian Cohen: What I’m seeing is the trends are, they vary widely by state. States, again, with those Democratic legislatures or especially governors, they’re much more apt to act in the face of a weaker EPA, if you will. So, California is a perfect, perfect example, right. They’re moving ahead with trying to protect the Waters of the State that may lose those protections under the EPA’s replacement for the Waters of the U.S. rule. You’ve got several governors that have announced plans to combat climate change and introduce renewable energy in their states. You’ve got fuel efficiency standards which are a hot-button issue as the White House and California broke off negotiations just a few weeks ago.

California and sixteen states have sued the federal government over the possibility that EPA will rescind California’s waiver to set more stringent fuel standards, and I think the federal courts could potentially be jammed up with quite a few Tenth Amendment claims from states if there’s any moves by the administration or congress to limit their ability to enforce or promulgate environmental regulations. So, I think we’re still early in the process. From a business perspective, it just means uncertainty.

Justin Scace: Right.

Ian Cohen: “How do I comply with regulations if they’re on hold? Or if this state’s doing something, what about my business? Does it change the math around my facilities that I operate in one state versus another? Do I relocate those operations or close those down?” I think that’s going to be a big question for a lot of companies, at the end of the day.

Justin Scace: Yeah, absolutely. So, from a business perspective, let’s talk some dollars and cents now. So, most industry-leading companies are proactive in compliance and many have already spent a bunch of money on programs created in anticipation of complying with upcoming rules. So, even if these rules end up being rolled back, would it end up costing these companies even more to put the brakes on their efforts? And with potential changes in the political agenda over the next decade, what should companies be doing to prepare for this sort of uncertain, changing regulatory landscape?

Ian Cohen: Yeah. So, I’ll address the first part of your question in terms of, would it end up costing these companies even more?

Justin Scace: Yeah.

Ian Cohen: It really depends on the type of company and where they are in the implementation phase. It can become a really complex cost-benefit analysis for companies who are trying to put in air pollution controls or they’ve got to rerun their… They’re trying to figure out what to do with their wastewater.

I’ll give you an example. I worked at a regulated utility for five years, as you mentioned in the opening, and we had clauses in our rates that enabled us to collect money on customer bills for environmental regulatory compliance over a certain period of time.

So, let’s say that the mercury air toxics rule gets rolled back, which EPA has looked at, discussed at doing. And I’m a rate-regulated utility that has made upgrades to my air emission equipment to comply with MATS, right?

Justin Scace: Right.

Ian Cohen: Do I now have to credit back the money to customers paid to me to comply with regulations that are no longer applicable? These investments were all in the tens of millions of dollars.

Justin Scace: Right.

Ian Cohen: Can you imagine having to tell shareholders that the costs are now considered imprudent and that the money has to be refunded? And this is something that is actually being discussed at the public service or public utility commission, depending on the state, in how that regulatory oversight may be for pricing your energy happens. This is actually being discussed, whether or not they would have to refund that money.

Same thing goes for ash ponds. If I own a coal plant that has coal ash ponds, what… What, ash handling, right? Do I keep digging them or do I stop?

Justin Scace: Right.

Ian Cohen: To add complexity, EPA has given states more oversight and flexibility when it comes to regulating coal ash disposal, so how do I comply with all of these things, and where do I spend my money? What’s the best utilization of that money, depending on if I’m rate-regulated or if I’m a shareholder or own the utility or any shareholder-owned company at all, where do I tell my shareholders that the risks are and that we’re going to manage those at the end of the day? So, it’s quite a confusing landscape at this point in time.

Justin Scace: No, definitely. So, any tips how to prepare for these changes?

Ian Cohen: Yeah. I mean, the best thing is obviously to stay on top of the regulations that are out there. What’s been proposed, where are they in the rollbacks. Work with the regulators and the states. Everybody in the industry works with regulators to help craft good regulations, right? We always want good regulations. Nobody wants overly onerous or burdensome regulations that don’t actually produce results.

Justin Scace: Right.

Ian Cohen: So, it’s really working with the stakeholders in those areas to make sure that everybody is on the same page, that the benefits don’t outweigh the costs and the costs don’t outweigh the benefits, and everybody feels like they won a little bit, right? We all want to come away with a little bit of a win. But also, then, what’s right? Do the right thing.

Justin Scace: Right.

Ian Cohen: That was something that I learned at both my… At a couple other jobs. Do the right thing. Does it make sense to continue to run your business in the way that you’re running it today, or do you want to look ahead and be a little bit more proactive in that respect?

Justin Scace: Absolutely. So, sort of connected to that, companies also need to be aware of the reputational costs. Nobody wants to be known as a polluter. So, how does reputation and branding come into play in this sort of regulatory environment?

Ian Cohen: Some might argue that there is no such thing as bad publicity, but I’m pretty confident saying that no business wants to be seen as a polluter.

Justin Scace: Right.

Ian Cohen: How many billions of dollars has BP had to spend to rehab their image after the Deepwater Horizon incident, right?

Justin Scace: Right. Right.

Ian Cohen: I’m hopeful that companies won’t use lack regulation, lack of regulatory oversight, as a defense for polluting. We’ll find out, I guess, over time. I do find it interesting that there is a huge push from the investment community to get companies to address their environment risks, such as climate change, water supply risk, hazardous chemicals. And these investors aren’t just asking companies about their own operations. They want to know about their supply chain. And these are not small investors, right. These are institutional investors with hundreds of millions of dollars or billions of dollars of assets under management.

Justin Scace: Right.

Energy infrastructure

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Ian Cohen: So, they’re really pushing companies to drive these things. I was actually reading an article the other day in which investors are pushing fast food companies to reduce their climate risks and water risk within their supply chain. So, this isn’t going away. This is definitely something that’s here to stay. And those reputational costs, they can be exceedingly high in the long term for companies that aren’t seen as sustainable, environmentally responsible, socially responsible, at the end of the day.

Justin Scace: Right. So, in relation to these reputational concerns, do you think some companies are choosing to take their efforts just beyond compliance, just on their own?

Ian Cohen: Absolutely, and I think it’s more than some. I think it’s a lot. I think it’s many. There’s really a host of them that have gone above and beyond the compliance model. These sustainability leaders have found that the benefits outweigh the investment costs, and really leading to better returns in their business.

Just a great example out there is Unilever. They announced recently that its Sustainable Living brand reported its fourth consecutive year of growth.

Justin Scace: Oh, wow.

Ian Cohen: Yeah. It grew 46% faster than the rest of the business in 2018. So, in parallel, performance at that point in time… You know, there’s also, consumers and investors, they’re driving this shift in the way businesses act. There was a 2017 communication CSR study by Cone, if you’re familiar with them, that found that 63% of Americans are hopeful businesses will take the lead and drive social and environmental change.

So, in the absence of government regulations, there is a movement afoot within just the broader community of humanity at this point in time. That same study that Cone did, they found that 76% of Americans said they expect companies just to support and address related climate change issues. So, we know the administration has left the Paris Climate Change, but Paris hasn’t left the American consciousness at this point.

Justin Scace: Right.

Ian Cohen: I think we’re going to continue to see this. I know we’ve had a number of folks pledge money to this, Bloomberg pledged fairly large sum of money to help cities and states address climate change. So, we’re going to continue to see folks step up to the plate.

Justin Scace: Great. So, back to the sort of compliance side of things. So, between knowing what rules are in effect across all of your facilities, if you’re a multi-facility employer, multi-state employer, plus keeping an eye on the potential costs of compliance or enforcement, this is all just a lot for EHS managers to keep track of. So, Ian, what strategy should these EHS managers pursue, and how can maybe technology help?

Ian Cohen: Yeah, Justin. It is quite a lot to keep up with, and thankfully there are several companies that do a really good job helping businesses stay apprised of the legislative and regulatory developments across the globe, as well as understanding what they need to do to comply with existing regulations.

With regards to the development of regulations or legislation, once these bills become law, that’s when companies need to know how to comply, and technology can really help in this area by centralizing and standardizing this information for end users who may have a limited or no EHS background or experience at that time, so that they know what they need to do to be in compliance. “So, I need to go do an inspection. Is there a report due to an agency? Do I need to be collecting certain pieces of data? Is there training requirements for other employees?”

So, those are important factors to keep in mind, and that’s something that technology can really help with. It’s also important to understand that that regulatory content can be leveraged in a solution like Cority, so that users can audit against these requirements, set up team tasks or inspections, ensure key compliance requirements or obligations are being met, and the company really is maintaining their compliance. It would be nice, if a regulator does show up, to be able to say, “Here is all of this. This is how you audit us, is through our solution.”

Justin Scace: Right.

Ian Cohen: Right. And it really does give users at the company a holistic view of the regulatory requirements, so that they can properly manage all of the risks associated with their operations. And it provides end users who are completing these tasks and inspections and other key functions an understanding of why they’re doing this work, so that they’re not just kind of checking the box. So it can help build and strengthen a culture of compliance within your organization.

Lastly, leveraging technology, companies can also start to go beyond that compliance realm. They can leverage data to track and trend key EHS programs and processes and start to ask questions about the operational developmental side of the business, and see if there are more environmentally or socially responsible ways to produce their products or generate energy, in the case of utilities, rather than relying on the old way of doing things all the time. So, they’ve got more data than they’ve ever had before, EHS professionals do, to really insert themselves into the conversation.

Justin Scace: That’s great. So, as you mentioned before, your company, Cority, is a leading provider of these types of EHS technologies. Now, before we sign off, would you like to share anything else with our audience about what sets Cority apart from other EHS technology providers on the market?

Ian Cohen: Well, first off, let me thank you for the opportunity today to speak on an array of topics related to environmental compliance.

Justin Scace: Yeah, you’re very welcome.

Ian Cohen: It’s been a great discussion, and I hope the listeners find this informative. With that said, I’ll try not to sound too salesy. I’ll make two quick points. So, one, we view our relationship with our clients as a partnership, so we are always listening and learning from them as much as they are learning and listening from us. So, we know we don’t know everything and EHSQ is always evolving, so it’s imperative that we have this exchange of ideas with our clients in order to develop and deliver the most comprehensive applications out there.

Lastly, I think what separates Cority from the other players in that space is our EHSQ subject matter expertise, it’s found throughout our organization. It really helps our clients maximize the value of their technology investments, and nearly half the company has worked in the industry as an environmental health or safety professional, so we have really deep domain experience.

Justin Scace: Right.

Ian Cohen: And it enables us to really help companies understand how technology can deliver value for their organization, as well as actually make those deliveries through our technology solutions at the end of the day.

Justin Scace: Well, that’s great. Yeah, this is certainly a complex issue, and we really appreciate you sharing your expertise. Thank you again, Ian, for taking the time to join us today on EHS on Tap!

Ian Cohen: Thank you, Justin. We really do appreciate it, once again.

Justin Scace: You’re very welcome. And we also want to thank Cority for sponsoring today’s episode of EHS on Tap. And to our listeners, be sure to keep an eye out for new episodes of the podcast and keep reading the EHS Daily Advisor to stay on top of your safety and environmental compliance obligations, get the latest and best practices, and keep your finger on the pulse of all things related to the EHS industry. Until next time, this is Justin Scace for EHS on Tap.

Ian CohenIan Cohen is Product Marketing Manager for Cority’s Safety, Environmental, and Sustainability solutions. Ian previously served as Environmental Product manager at Cority, and prior to joining Cority, Ian was an environmental specialist at Florida Power & Light Company, where he served as the project and program lead for the company’s enterprise-wide environmental compliance management system. Ian was also a member of Florida Power & Light’s sustainability lead team and supported annual reporting and a myriad of sustainability projects. Ian holds a Master’s in Environmental Science and a bachelor’s in Biology, both from the University of Tennessee at Chattanooga, and his research has been published in the peer-reviewed journals Annals of Botany and Zoologica Scripta.