Environmental
&
Regulatory Issues
Pay Up or
Shut Down?
Environmental regulators are revising penalty procedures,
leading business people to fear that a crackdown is coming
Chart: How
the state rates in compliance with 14 areas of environmental laws
By Steve Tuttle
Having
been down that road before, Kenly Town Manager Edison Temple (above)
knew exactly what he would do when the state inspector informed him
last summer that the town was being fined $3,600 for permit violations
at its wastewater treatment plant. First, he would get mad. And then
he would pull out the town’s budget and try to find a line item with
a little surplus so he could write a check and pay the fine.
It was the second time in
two years that the Johnston County community of around 2,000 residents
had been fined for problems at its sewage treatment plant. Last time,
Temple appealed the fine and, after much effort, received some relief.
This time he would just pay up and move on.
“They came here two years
ago inspecting the sewer plant and found that on one day we had
discharged more into the (Little River) than we were allowed — not
raw sewage, just more treated effluent that we were permitted to
discharge. That fine was $1,200. I appealed that one, but I had to
write three letters and then I had to spend a half-day up in Raleigh
for a hearing (before the Office of Administrative Hearings). I fought
that one all the way through the process and they reduced it by half,
to $600.
“This last time, what they
got me for was not checking grease from the discharge five times a
week. I was doing it three times a week. But I’m now following all
my requirements even though it increased my lab fees by $5,000 a
year.”
Temple says he knows that
protecting the environment is vitally important. “If we’re
polluting the river, then rap our knuckles because we deserve it,”
he says. But he, like many city officials, also knows that every
dollar the town pays in fines for violating environmental rules is one
dollar less it can afford to spend on upgrading its treatment plant.
“Small towns need help, we don’t need fines,” he insisted.
Just how hard-nosed the
state should be in issuing such fines for violations of environmental
laws — and how aggressive it should be in collecting those fines —
is a major issue now being debated within the N.C. Department of
Environment and Natural Resources (DENR). It’s a complicated
question, given the department’s wide range of regulatory
activities. Its 14 agencies keep tabs on all municipal sewer plants
across the state as well as thousands of businesses and industries
which hold DENR-issued permits allowing them to discharge emissions
into the air, water or soil. And DENR’s regulatory reach keeps
growing; it recently was given oversight over tanning salons.
The word on the street is
that DENR is preparing for a major crackdown against violators of
environmental laws. The department has been the target of much media
criticism that it doesn’t rigorously enforce environmental laws and
that violators frequently end up paying only a fraction of their
fines. Gov. Mike Easley also has directed DENR to implement a “truth
in penalties” policy for polluters.
Reacting to the criticism
and the governor’s directive, DENR recently completed a bottoms-up
review of its procedures for assessing and collecting fines, the first
time the department has undertaken such a wholesale examination of its
regulatory operations. In mid-November DENR released a report that
compiles voluminous statistics about who it fines, for what offenses,
and how much is eventually paid to settle the violations. The report
looks at data from calendar year 2000, the most recent one for which
the department has complete statistics.
In an interview, DENR
Assistant Secretary for Planning and Policy Robin Smith says that at
this point the agency only is attempting to understand a complex set
of facts and statistics. She said that the November report is an
important first step in what will likely be a long policy revision
process. At bottom, though, she said the department’s
self-examination attempts to answer a simple question. “We’ve had
questions over the past few years about how penalties are assessed,
and once they are assessed how they are reviewed, why they’re
reviewed and why there are settlements for lower level of penalties in
some cases,” Smith says.
Smith says that it’s true
that the emphasis at DENR now is on “closing the gap between
assessments and collections.” But she hastened to add that, at this
point, DENR doesn’t know for sure that the only way to achieve that
goal is to issue bigger fines and then collect the full amount due.
But many business people
believe that’s exactly what DENR’s planning to do, pointing to one
sentence in the report that says in the future “willful and
egregious misconduct will be dealt with in a tough, coordinated
fashion that takes full advantage of civil penalties and other
authority available.”
How
DENR Does Its Job
According to the DENR
report, in 2000 the department was responsible for regulating more
than 96,000 sites and actually conducted more than 54,000 inspections.
It discovered 2,010 violations of environmental laws as a result of
those inspections and levied roughly $6.1 million in fines, or civil
penalty assessments as the department calls them. But by the end of
that year the department had collected just $1.7 million of those
fines. Given the appeals process, it’s likely that more has been
collected since the end of 2000, but DENR doesn’t know because it
doesn’t have a uniform system for tracking collections. All fines
collected are remitted by DENR to the state Public School Technology
Fund.
State statutes give DENR’s
various agencies some leeway in determining the initial amount of a
fine and any penalties that may be assessed on top of the fine. As the
report states, “differences between penalty assessments and resolved
penalty amounts vary between programs. Some programs assess penalties
frequently using lower dollar amounts while other programs use
penalties sparingly but assess high penalties when needed.”
Some DENR programs consider
the actual degree of harm caused by an apparent violation when
determining the amount of the fine; others have the latitude by state
law or regulation to consider the potential degree of harm. Some DENR
inspectors, such as those in the hazardous waste and underground
storage tank programs, determine the amount of fines using a
“penalty matrix” that requires the inspector to decide whether the
violation was major, moderate or minor. Other regulatory programs,
including DENR’s air quality regulatory arm, rely on a “penalty
tree” to determine the amount of a fine. In those cases, the amount
of a fine can be raised or lowered — rising up or down the tree —
depending on aggravating or mitigating factors.
Also, DENR officials don’t
simply pick names out of a hat when determining who to inspect. Each
regulatory arm of the department plans inspection activities annually,
focusing on “sectors” that are likely to have difficulty complying
with new or revised environmental laws. Sectors are identifiable
groups with common business practices that are likely to be subject to
the same environmental requirements. Textile manufacturers, dry
cleaners and dairy farms are examples of sectors.
The level of compliance with
environmental laws, as determined from the inspections, ranges from a
low of 64 percent in air quality to a high of 98 percent in
groundwater (see chart, page 38). But “lower compliance rates are
not necessarily a concern,” the DENR report states. It’s to be
expected that Division of Air Quality (DAQ) inspectors turn up
relatively more violations because those inspections are targeted
rather than random. DAQ personnel use computer software that helps
them locate places where they can expect to find violations, according
to the report.
On the other hand, very high
compliance rates also aren’t a reliable measurement, the report
cautions. For example, the Shellfish Sanitation Section reports a 100
percent compliance rate among the seafood dealers it inspects. But
when a DENR inspector discovers bad clams at a seafood dealer, he
doesn’t issue a fine; because of the immediate danger to the public
health, he revokes the dealer’s certification, in effect shutting
down the business. Thus, it can truthfully be stated that 100 percent
of seafood dealers holding DENR certifications are in compliance with
all environmental laws.
Finally, the report
discloses that DENR can be achingly slow in processing its paperwork.
On average, it takes 16 days from the time an inspector finds a
problem until the agency actually informs the permit holder of the
problem by issuing a notice of violation. Once DENR issues a notice of
violation, it usually takes another 144 days before it determines the
exact amount of the fine.
The worst delays were in
hazardous waste, where there was an average 328 days between the time
a notice of violation was issued until the penalty was assessed. In
one case, it took 2,212 days, the report states.
Bad
Cop, Good Compliance?
The central question
pervading the DENR report is whether increased enforcement activities
– more inspections, greater fines – will lead directly to higher
levels of compliance with environmental laws. One case study examined
in the report seem to imply that the mere threat of stepped-up
inspections is enough to produce greater compliance, although people
inside and outside DENR say it’s not that simple.
For example, the report
notes that in July 1998 the Division of Water Quality decided to
ratchet up enforcement against permit holders who discharge treated
effluent into surface waters of the state, a group that includes sewer
plants as well as hundreds of factories and farms. The goal of the
initiative was to raise the level of compliance by increasing
enforcement activities. DENR didn’t launch the initiative in secret;
in fact, it broadcast the news throughout the state through three mass
mailings to permit holders.
But before the enforcement
initiative actually got underway, the level of compliance began rising
and continued rising over the next three years as the crackdown slowly
took effect. Sewer plant spills fell from around 100 million gallons
in 1998 to below 40 million gallons in 2000, with the bulk of the
decline occurring well ahead of the increase in inspections.
Did the improvement result
from greater enforcement of the laws or because the permit holders
knew the DENR inspectors were coming? Ellis Hankins, executive
director of the N.C. League of Municipalities, thinks it was the
latter. “I would like to think that public officials who are
responsible for system operations simply became more aware of the need
to comply and took steps to make it happen,” Hankins says. “Much
of it was just public awareness.”
DENR officials say they
don’t care whether it takes more PR or more penalties to achieve
greater compliance with environmental laws. As the report states,
“as a matter of principle and as a matter of act, DENR’s interest
in penalties is not to generate revenue, but rather to change the
behavior of regulated persons who violate environmental laws.”
What the department
apparently needs to focus on now, as the report makes brutally clear,
is improving its information management systems so it can better
understand the facts. “Determining compliance rates accurately
requires a certain method of data collection that is not currently
used in the department,” the report concedes.
The report notes in
conclusion that “the department has begun strengthening information
systems to facilitate better internal decision-making and to inform
our constituents of enforcement and compliance related activities.
Existing data systems are not yet integrated and only minimally
support DENR’s information needs for program planning,
decision-making and communication.”
Once it has that modern
technological infrastructure in place, DENR might be better equipped
to focus on critical cases and to be able to distinguish between
shades of gray in compliance. That would be a welcomed development in
places like Kenly. “Look, we have just a small treatment plant here,
but the permit we have requires us to meet the same rules as Raleigh
does,” says Temple, the Kenly town manager. “Now, you tell me why
that is?”
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