Category Archives: environment

Don’t Let Funding for Our Water System Become a Pipe Dream

By Bill DiCroce, President & CEO, Veolia North America

During the campaign, President Trump frequently described a $1 trillion plan in infrastructure investments to fix crumbling roads, bridges, and airports while creating good-paying jobs. Transportation Secretary Elaine Chao also recently outlined several priorities for an upgrade to the country’s infrastructure, suggesting the administration may announce a plan sooner rather than later.

Given the Trump administration’s intention to deliver its first full-year budget to Congress this week, and with apparent plans to deal with infrastructure in a separate bill, we in the water industry want to underscore how important it is to include water and wastewater initiatives in both conversations.

Water issues once seemed a distant concern to Americans, but today we are grappling with myriad crises — from chronic droughts in the West to fast-growing metropolises in the Sunbelt unable to meet surging demand and clean drinking water challenges. Perhaps more important, as our water mains, pipes and overall systems grow older — many were first built in the early 20th century — the bill for replacing or repairing them could approach $270 billion, according to the latest estimate from the Environmental Protection Agency.

Our ability to provide safe, reliable and cost-effective water and sewer services is vital to the U.S. economy. Clean water is a valuable national asset that can attract new investment in manufacturing, research and development and can help differentiate the U.S. in the world economy. How we manage our water resources is of great strategic importance to every citizen. This investment in our infrastructure is vital to growth, and the federal government needs to play a key role in making those investments.

The president has previously said he may favor tripling the funding for the Clean Water State Revolving Fund, a loan assistance authority for addressing wastewater needs that has proven vital to jump-starting key projects. He has also shown support for the Drinking Water State Revolving Fund, a federal-state partnership to help ensure safe drinking water.

These are both strong starting points — as is this month’s announcement that the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA) program will provide $1 billion in credit to finance over $2 billion in water infrastructure investments — but a longer-term, more comprehensive infrastructure bill is necessary to repair and replace America’s many aging water and wastewater systems.

Investment is also needed for training. About one-third of the current water workforce is eligible for retirement, a phenomenon that will slow our efforts to modernize infrastructure and could lead to dangerous quality control issues. State and local governments must work with the private sector, trade schools, community colleges and universities to close this emerging skills gap.

Not only are these jobs important for our water quality and safety, they’re economic drivers. According to a study from the Value of Water Coalition, for every $1 million earmarked for water projects, upwards of 15 jobs are created, either to support water infrastructure design and construction directly, or in related industries.

And here’s the thing about water-related jobs — they can’t be exported or outsourced overseas. These employees work right here, in cities and towns across America.

While healthcare, tax reform and the budget dominate the congressional agenda, we believe it is critical that they find the time to take up water-related issues. Creating incentive programs such as tax credits to facilitate water reuse projects, co-digestion and resource recovery would strengthen already existing sustainability efforts.

Supporting private investment in water and wastewater infrastructure would go a long way to supplement any legislation passed by Congress. Finding the right regulatory balance would encourage innovation by providing incentives for new private investment in green infrastructure and energy derived from the wastewater treatment process.

The American water industry — both the public and private sector — delivers safe, clean water to homes, schools, farms and businesses in cities and towns across the U.S. each day. But the burgeoning infrastructure crisis casts doubt on our collective ability to deliver.

It’s time for all of us to come together — private companies and local officials, state and federal governments — to make water part of our national infrastructure renewal.

 

This piece was originally posted as an op-ed for The Hill. That article can be found here.

Latest Episode of the Kleinman Center’s Energy Policy Now Podcast, Featuring Andrew Light

Submitted by Andy Stone, Communications Manager, Kleinman Center for Energy Policy

The new episode is a conversation with a former State Department climate negotiator who was involved in the Paris climate deal.  He discusses the current White House debate around Paris, and the implications for global climate cooperation if the U.S. backs out.

The Trump administration has offered conflicting messages on its intention to remain a party to the 2015 Paris Climate Accord.  The question of U.S. involvement reaches a climax this week as senior advisers to the President hash out the administration’s path forward, with potentially far reaching implications for the climate deal, and for the United States’ role as a steady leader in global diplomacy.

In the latest episode of the Kleinman Center for Energy Policy’s Energy Policy Now podcast, former State Department climate negotiator Andrew Light discusses the battle in the White House over Paris, and the fate of the accord without U.S. leadership.  Light, a recent visiting scholar to the Kleinman Center, examines whether it will be possible for the U.S. to meaningfully “maintain its seat at the table” of climate dialogue even as it pulls back from global climate efforts.

Light also provides insights into the negotiations leading to the Paris climate deal, and the unique political environment in the U.S. and abroad that made the agreement possible.  Light is a Distinguished Senior Fellow in the Global Climate Program at the World Resources Institute and Director of the Institute for Philosophy and Public Policy at George Mason University.

Simple Solution, Big Impact: #UsedCups

Submitted by IGEL Corporate Advisory Board Member Rubicon Global

Rubicon

As Earth Day approaches on April 22, multinational corporations, governments, nonprofits and NGOs – as well as the United Nations’ Sustainable Development Goals – continue working fast and furiously to tackle monumental challenges. It’s clear we must establish a more circular economy for the long term well-being of not only the plant, but also business and even society as a whole.

There are big challenges ahead, and in many ways Earth Day serves as a reminder of this. But what can one individual, one organization, even one country do to make a dent in these monumental challenges? At Rubicon, we’ve learned that in order to really make a difference we need to start by doing something manageable and specific. For us, it’s keeping waste out of landfills.

Did you know reuse and recycling is currently the top action society can do today to simultaneously improve the environment, the economy, sustainable manufacturing and to prevent waste from going into oceans?

We know that Americans throw away 25 billion Styrofoam coffee cups and 58 billion paper cups annually. These cups are not recycled, most are not recyclable, and yet we keep using them over and over because many aren’t aware of the environmental impact.

What if this year in honor of Earth Day we keep it simple and simply remember to save #UsedCups?

Think about what you drink out of every day, at home, at work and on the go. Do you opt for the reusable coffee mug or a single-use disposable cup? If you must choose single-use, do you recycle or compost it afterward? These are questions very few people think about on a daily basis, but if people did, they could have a profound positive impact on the environment.

So help us change this bad habit that we’ve developed as a society. We invite you to join us in raising awareness about cup-use and get others to do the same this Earth Day.

Post about your beautiful reusable cups on Instagram, Twitter or Facebook with #UsedCups between now and April 19th and be entered to win two 3-day passes to Sweetwater 420 Fest in Atlanta or an Apple Watch Series 2.

Every reusable beverage container counts. Reusable water bottles, ceramic coffee mugs, perhaps even a sippy cup. Every cup reused or recycled is one less cup in the landfill, so go ahead, show us your #UsedCups!

 

Learn more about the #UsedCups campaign, and follow Rubicon on Instagram, Twitter and Facebook.

U.S. Environmental Regulatory Trends: Past, Present and Future

By Larry Cahill, CPEA, Wharton IGEL Alumni Advisory Group member

“The care of human life and happiness, and not their destruction, is the first and only object of good government.”  Thomas Jefferson

 

Thomas Jefferson was a very smart man.  Perhaps though, his view of the purpose of government has been lost over time.  Recently there has been much discussion on the economic damages inflicted by the federal government related to the regulatory burden that industry faces in the United States.  Although these discussions are not solely limited to environmental regulatory burdens, many do believe that the pendulum has swung too far in controlling industrial operations and their air, water, and waste discharges.  I am not one of those individuals.  Yes, the Cuyahoga River in Cleveland no longer catches fire.  And Pittsburgh’s success as a city is no longer defined by the smoke being emitted from the stacks of its steel industry plants.  And the hidden Love Canal surprises are hopefully behind us.  Yet, there continues to be noteworthy cases of major environmental incidents and non-compliances across the nation. The 2015 Volkswagen “clean diesel” scandal is only one of many.  Did you know that every single year for the past 20 years the U.S. Department of Justice has charged some 200 to 300 individuals with committing environmental crimes?  That might not seem like many but in total these are criminal charges against over 5,000 individuals, not simply civil charges for exceeding permit limits or discharge standards.

One could logically ask the question – Where does the U.S. stand today with regard to environmental regulations and enforcement as the country experiences a new presidential administration with an uncertain regulatory philosophy and strategy?  Are we indeed better off and is it time to take the foot off the gas or is there still much work that needs to be done?  Recent regulatory and enforcement data released by the U.S. EPA help us to better understand where we are presently as a country and where we might be headed.

Environmental Laws: The Historical Setting

The First Earth Day occurred on April 22, 1970 in the midst of a nationwide college campus strike protesting the Vietnam War.  Protests in the streets all over the land.  Hmmm… Sound familiar?  That year of 1970 became a springboard for the passing of major federal environmental laws in the U.S.  As shown in Table 1, in the next two decades, some 12 critically important environmental, health and safety laws were passed.  Interestingly enough, eleven of the twelve were authorized and signed by Republican presidents; a legacy that is sometimes forgotten or ignored.  Each law, of course, required the creation of regulations to accomplish the stated goals.  And indeed that has occurred.

TABLE 1:  Major U.S. Federal Environmental Legislation (1969-1986)

No.

Year Title

Signing President

1. 1969 National Environmental Policy Act (NEPA) Nixon (R)
2. 1970 Clean Air Act (CAA) Nixon (R)
3. 1970 Occupational Safety and Health Act (OSHA) Nixon (R)
4. 1972 Federal Water Pollution Control Act (FWPCA) Nixon (R)
5. 1972 Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) Nixon (R)
6. 1972 Noise Control Act (NCA) Nixon (R)
7. 1973 Endangered Species Act (ESA) Nixon (R)
8. 1974 Safe Drinking Water Act (SDWA) Ford (R)
9. 1976 Resource Conservation and Recovery Act (RCRA) Ford (R)
10. 1976 Toxic Substances Control Act (TSCA) Ford (R)
11. 1980 Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) Carter (D)
12. 1986 Emergency Planning and Community Right-to-Know Act (EPCRA) Reagan (R)

 

Environmental Regulations: The Current Setting

All federal regulations, including those created by the EPA, are codified in the Code of Federal Regulations (CFR), published annually by the Government Printing Office.  That is, each year the CFR is released to the public and it contains all current and updated regulations effective on July 1st of that year.  The individual volumes for each year are usually available in January or February of the following year.  The EPA is responsible for the 37 volumes of Title 40 of that Code.  By early 2017 the EPA had released the 2016 CFRs effective July 1, 2016.  The total page count for EPA’s Title 40 regulations in 2016 was 27,074, the most on record. (See Figure 1) Combined with OSHA’s 3,096 pages in Title 29 there were, for the first time, over 30,000 pages in total, with EPA regulations accounting for 90% of that total.

In taking a closer look at the data, some interesting additional facts emerge.  For example:

  • Recent Growth.  There was an approximately 800 page, or 3%, increase in the number of pages in Title 40 in 2016.  This increase was almost twice as large as the total page count in 1972, the first year of regulatory codification.
  • Distribution by Media.  Approximately 66% of the pages in Title 40 are devoted to Clean Air Act regulations.  This represents roughly 17,750 pages, meaning that the Clean Air Act alone has almost six times as many pages of regulations than all of OSHA’s Title 29 Code.
FIGURE 1: Growth of U.S. EPA Regulations (1972-2016)

Fig1

  • Comparison with the U.S. Tax Code.  By comparison, the 30 thousand pages of EHS regulations is only about 40% of the total page count of ~75,000 pages in the federal tax code.
  • Comparison with the Dow.  Interestingly, if one does the calculations for the 1972-2016 period, there is a 95% statistical correlation between the growth of environmental regulations and the growth of the Dow Jones Industrial Average (DJIA).  Granted this is some outside-the-box thinking, but could this mean that regulatory growth is good for the economy!?

Will Environmental Regulations Continue to Grow?

Will the growth of federal environmental regulations continue or has it peaked?  One way to anticipate the answer to the regulatory growth question is to take a look at the Agency’s Semi-Annual Regulatory Agenda, which was last released on November 17, 2016 (as part of the Executive Branch’s Unified Agenda) in the Federal Register.  This is a spring and fall requirement for all regulatory agencies[i].  In November the EPA listed 203 additional regulations (not pages, but individual regulations) that either had been recently promulgated (but not yet codified) or were under development.

Eventually, all of these new regulations will be added to Title 40, continuing the growth, unless there is a concerted effort to halt the regulatory development process; more on that later in this chapter.  It is very interesting to note, as depicted in Figure 2, that each of EPA’s Semi-Annual Regulatory Agendas from 1999 to 2011 listed somewhere between 350 and 450 regulations under development, a consistency that is stunning.  This means that for over a decade, there were always around 400 regulations under development on the docket.  Interestingly, there has been a dramatic reduction in the number of regulations listed to roughly 200 from years 2012 to 2016.  Maybe the regulatory pipeline is beginning to empty.

FIGURE 2: EPA Semi-Annual Regulatory Agenda Trends

Fig2

Yes, there are still regulatory gaps

In spite of the fact that there are now over 27 thousand pages of federal environmental regulations, there remain some additional risks and vulnerabilities that have yet to be addressed appropriately at the federal level.  Three of those that have surfaced on environmental audits of industrial facilities over the past 30 years are:

  • Water Storage Tanks. For large firewater and other water supply above-ground storage tanks, there is no requirement for tank integrity testing or secondary containment protections.  These tanks are often located adjacent to electrical substations and transformers in utility areas where a tank breach could short out the entire electrical system of the site and possibly the surrounding community.  And history tells us that large volumes of unexpected water releases can do considerable damage to facility equipment.  In 2011 a tsunami disabled the backup generators at the Fukushima, Japan nuclear power plant resulting in a meltdown of three nuclear reactors.  One global consumer products company has recognized this water storage issue as an unacceptable risk and has developed a corporate standard that requires secondary containment for all above ground storage tanks worldwide.
  • Hazardous Waste Storage.  Hazardous waste stored at 90-day accumulation areas require only that drums and containers be labeled, physically intact, and inspected weekly.  Surprisingly there is no federal requirement that containers be placed on an impervious surface incorporating secondary containment protections.  Thus, a pretty much unlimited amount of containers and drums holding hazardous waste can be stored directly on the ground for up to 3 months at these locations. Several states, including Massachusetts, have recognized this as a gap and require additional protections such as secondary containment for accumulations areas.
  • Accidental Discharges of Hazardous Substances.  Spill Prevention, Control and Countermeasure (SPCC) Planning requirements promulgated under Section 112.7 of the Clean Water Act regulations are designed to prevent the accidental release of only oil-containing substances into the nation’s waters.  Facilities subject to the regulations must develop an SPCC Plan that is certified by a Professional Engineer and must provide appropriate containment and/or diversionary structures or equipment to prevent a discharge of oil. New Jersey is one state that has recognized that regulating only oil in this way is a gap and has promulgated Discharge Prevention, Containment and Countermeasure (DPCC) regulations that cover not only oil but numerous other hazardous substances.

There are certainly other gaps as well and also existing regulations that require additional clarification.  A great example of the need for clarification are the “weekly”, “monthly”, and “annual” requirements found in many environmental regulations.  Be assured that there have been many lively discussions among site staff, regulators and auditors over whether “annual” means every 12 months or once a year.  There is a big difference in the two interpretations.

U.S. EPA Enforcement Activity Remains Substantial

The EPA has had a substantial enforcement program throughout its history.  EPA’s current Enforcement budget is approximately 10% of its total $8.1 billion budget and, for comparison purposes, is 35% more than the entire budget of the Occupational Safety and Health Administration (OSHA).  On December 19th, the EPA released its enforcement results for fiscal year 2016, which ended on September 30, 2016.[ii]  Included in those results were data on administrative, civil judicial penalties, and criminal fines assessed.

As shown in Figure 3, EPA issued $5.8 billion in civil and criminal penalties in FY2016, the most ever in history.  However, the great majority of the penalties issued were due to a $5.6 billion settlement with BP Exploration & Production for Clean Water Act violations stemming from the April 20, 2010 Deepwater Horizon blowout and subsequent oil spill.  Note further that the 2013 penalty amount of approximately $2.6 billion was impacted significantly by billion dollar penalties against Transocean and BP, again for the Deepwater Horizon incident.

FIGURE 3: U.S. EPA Enforcement Penalty Trends

Fig3

Notwithstanding the two Deepwater Horizon enforcement actions in 2013 and 2016, on average, over the past ten years the EPA has issued approximately $200 million in civil and criminal monetary penalties each year.  This should be viewed together with the over 5,000 individuals that have been charged with environmental crimes by the DOJ over the past 20 years.  These numbers are not inconsequential.  And with almost a billion dollars being spent annually by EPA on enforcement, environmental noncompliance remains a serious issue, unmatched by any other country.  As EPA has stated in its FY 2013 OECA National Program Manager Guidance, we will “aggressively go after pollution problems that make a difference in communities.  EPA will use vigorous civil and criminal enforcement that targets the most serious water, air and chemical hazards, as well as advance environmental justice by protecting vulnerable communities”.[iii]

The Cautionary Tale of December 2016

So where does that leave us?  Should there be a continuing emphasis on environmental regulatory compliance and enforcement or should we indeed take the foot off the gas as some would propose.  Well, if the fortnight in the middle of December 2016 tells us anything, this is not the time to ease up.  Take note of the following headlines taken from that very short period:

  • DuPont agrees to pay $50 million in natural resource damages to resolve claims stemming from the release of mercury in the 1930’s and 1940’s from its Waynesboro, VA plant (December 16th).
  • Michigan’s Attorney General brings more criminal charges over the Flint, Michigan water crisis, including felony charges against two former state appointees and two former city officials (December 20th).
  • Volkswagen reaches $1 billion deal with the USDOJ and California in the ongoing diesel emissions scandal (December 21st).
  • A federal jury finds DuPont liable for $2 million in compensatory damages for an individual’s cancer stemming from the dumping of Teflon manufacturing chemicals (C8) into the Ohio River. An additional 3,500 cases are pending (December 21st).
  • Shell Oil will pay $22 million to the city of Clovis, California for chemical (TCP) found in drinking water supply (December 27th).

Frankly, it’s hard to believe that all five of these incidents occurred over a two-week period in the last month of 2016.  They suggest that the U.S. is nowhere near where it needs to be with respect to the environment.  Continuing oversight is needed and both public and private sector institutions need to be held accountable for meeting, if not exceeding, regulatory requirements.

What Might Change

During the 2016 presidential campaign and now with the new Trump Administration in place concern has been expressed over the regulatory burden placed on U.S. industry and the regulated community in general.    It should be noted that this concern is nothing new.  For example, on January 18, 2011 President Obama issued Executive Order 13563, “Improving Regulation and Regulatory Review”.  The Order required a government-wide review of existing rules “to remove outdated regulations that stifle job creation and make our economy less competitive.  It’s a review that will help bring order to regulations that have become a patchwork of overlapping rules…”[iv]  In response to President Obama’s Executive Order, EPA created the Regulatory Development and Retrospective Review Tracker (Reg DaRRT), which provides information on the status of EPA’s priority rulemakings, as well as information on the status of retrospective reviews of existing regulations.  One positive outcome of the Executive Order was the July 31, 2013 issuance of a final EPA rule on solvent-contaminated wipes that reduced the regulatory burden on tens of thousands of facilities using these wipes routinely.

What is different today is the approach that is being proposed by the current Administration.  President Trump has said numerous times that his goal is to eliminate as many as 75% of all existing federal regulations.  The first step in that effort was the January 30, 2017 issuance of an Executive Order: “Reducing Regulation and Controlling Regulatory Costs.”  This Order calls for every “one new regulation issued, at least two prior regulations be identified for elimination with the goal of zero incremental costs.”  As with most Executive Orders further guidance will be required and the Director of the Office of Management and Budget is required to develop that guidance.  In fact, on February 2, 2017 the White House issued guidance stating that the Order would only apply to “significant” regulations, as defined in Executive Order: “Regulatory Planning and Review”, issued by the Clinton Administration in 1993.  Significant regulations are those imposing an annual economic cost ≥$100 million.  The Director must also identify the total amount of incremental costs that will be allowed for each agency for each fiscal year.

This “one in, two out” approach, if enacted as stated, obviously will have significant impacts on federal rulemaking within all agencies including the EPA.  As stated previously, the EPA in its November 2016 Semi-Annual Regulatory Agenda listed 203 new regulations under development or review.  Will this mean that if all of these regulations are put forward that over 400 other, existing regulations must be eliminated?  As arbitrary as this sounds, the answer today is yes.

Another potential impact caused by the Executive Order would come from the new chemical requirements in the Frank R. Lautenberg Chemical Safety for the 21st Century Act signed into law on June 22, 2016.  The Act requires that the EPA evaluate and communicate the risks of existing chemicals from the current inventory of 83,000 chemicals in use in the U.S.  The first 10 chemicals were identified on November 29, 2016 and include asbestos, carbon tetrachloride, methylene chloride, and trichloroethylene.  If an assessment determines that a chemical poses an unreasonable risk the Agency must mitigate that risk within two years.  Further, for each risk evaluation completed, another must be initiated with at least 20 ongoing evaluations being conducted by the end of 2019.  Does this mean that any resultant rule addressing mitigations for a particular high-risk chemical cannot be promulgated unless two other unrelated rules are eliminated?  This seems rather arbitrary as well.  Perhaps in this and other cases the “significant regulation” threshold will have a moderating impact and the effects will not be as severe as expected.

Another regulatory reform initiative taking place but receiving considerably less attention is the use of the Congressional Review Act enacted in 1996, which allows lawmakers to take certain actions for those laws enacted during the waning days of an administration.  The Congress has already used this power to rescind EPA’s Stream Protection Rule promulgated in December 2016, which sought to protect the nation’s waterways from debris generated by coal surface mining activities.  Congress is also attempting to rescind the EPA’s revised Accidental Release Prevention Requirements contained in its Risk Management Program final rule issued on January 13, 2017.  A bill to rescind the rule has been introduced in the House as of this writing.  Historically, the Congressional Review Act has been used sparingly but this has not been the case in early 2017.

In sum, there is strong evidence that significant regulatory reform is ahead driven by a Republican Congress and Presidency.  One can only hope that logic will prevail and that protection of human health and the environment will continue as a fundamental goal for the nation.

Why the EPA’s Mission Remains Critically Important

With good reason President Nixon created the EPA in 1970.  The Agency’s basic mission is to protect human health and the environment.  This is accomplished with an $8 billion budget and 15,000 full time equivalent staff.  Although it often is not evident in our daily lives, we have all been impacted in a positive way by the Agency’s efforts and programs.  Consider if you will the scope of the Agency’s oversight and responsibilities:

  • Nationwide Facility Coverage.  Over 800,000 facilities in the U.S. generate air emissions, wastewater, and hazardous waste at a level sufficient to require regulatory oversight through mechanisms such as Title V air permits, NPDES wastewater discharge permits, and/or hazardous waste generation and disposal requirements.  That’s an average of 16,000 facilities per state where there is regulatory oversight and controls over the release of pollutants.
  • Hazardous Waste Generation.  There are over 26,000 large quantity hazardous waste generators in the U.S., generating over 33 million tons of hazardous waste annually.  These generators are required to manage the wastes properly and report to the EPA every other year on their activities.
  • Toxic Releases.  There are over 22,000 facilities in the U.S. that release listed toxic chemicals at a sufficient level to require reporting under the Toxics Release Inventory (TRI) requirements of the Emergency Planning and Community Right-to-Know Act.  Over 3.3 billion pounds of toxics were released nationally in 2015.  TRI reporting has resulted in a better understanding of pollutants in our environment and has driven a reduction over time of releases.
  • Superfund Sites.  As a result of the 1980 passage of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) some 1,188 “Superfund” sites have been cleaned up as of November 30, 2016.  However, there remain 1,337 National Priorities List (NPL) Superfund sites yet to be cleaned up.
  • Toxic Chemicals.  There are 85,000 chemicals inventoried and regulated under the Toxics Substances Control Act.  These include materials containing asbestos and PCB’s, which were considered “miracle” products when first produced.  Very few of the inventoried chemicals have undergone meaningful risk assessments to determine hazards posed to human health or the environment.  The Frank R. Lautenberg Chemical Safety for the 21st Century Act signed into law on June 22, 2016 contains provisions to assure that these assessments are conducted.

It is important to note that, save for the Superfund sites, all of the chemicals, wastes, releases, and discharges discussed above are being managed in compliance with existing environmental regulations.  Do we really want to eliminate 75% of these regulations resulting in fewer controls over discharges and releases?

Closure

The future of environmental regulation in the U.S. is cloudy indeed.  It is really too soon to tell exactly what might be the impact of President Trump’s Executive Order and other pending regulatory reform initiatives.  It would be prudent to keep a close watch…

 

[i] The Regulatory Flexibility Act and Executive Order 12,866 require Spring and Fall Regulatory Agendas.

[ii] U.S. Environmental Protection Agency, “Fiscal Year 2016 EPA Enforcement and Compliance Annual Results,” Office of Enforcement and Compliance Assurance, December 19, 2016.

[iii] U.S. Environmental Protection Agency, FY 2013 Office of Enforcement and Compliance Assurance (OECA), National Program Manager (NPM) Guidance, April 30, 2012, p. 6.

[iv] Obama, Barak, “Toward a 21st-Century Regulatory System”, Wall Street Journal, January 18, 2011.

Kleinman Cetner’s Energy Now Podcast – The Many Fronts of Trump’s Environmental Deregulation Effort

Submitted by Andy Stone, Communications Manager, Kleinman Center for Energy Policy

President Trump is moving forward with his campaign pledge to roll back environmental protections, most notably with his late March executive order instructing EPA administrator Scott Pruitt to withdraw the Clean Power Plan.  In the latest episode of the Kleinman Center for Energy Policy’s podcast series, Energy Policy Now, Penn law professor Cary Coglianese takes a look at the multiple legal and political tools the Trump administration is using to reduce protections, including executive orders, defunding of agencies with environmental oversight, and use of the previously obscure Congressional Review Act.   Coglianese lays out the challenges each strategy will face, and the potential for regulations to be rolled back or to endure.

 

Closely tied to the issue of climate change is the economic outlook of the electric utility industry, which is increasingly tasked with the role of enabling the transition to clean power, yet will face lower electricity demand as a result.  In a second new episode, former Pennsylvania Consumer Advocate Sonny Popowsky takes a look at the challenge that distributed energy presents to electric utilities’ profitability.  Popowsky, who is an advisory board member of the Kleinman Center, also explores the costs to consumers that could result from efforts to balance the growth of rooftop solar, energy efficiency and related technologies with the need to maintain a power grid that equitably serves all.

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Managing Transactional Risks in Contaminated Property Cleanups and Redevelopments

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By Dean Jeffert Telego, Owner & President, RTM Communications, Inc.

Managing environmental and financial risk effectively is challenging for all types of corporate and real estate deals from the portfolio to one- off commercial or industrial property transactions.  The environmental risk and liability concerns that arise, from Mergers & Acquisitions to the legacy liabilities associated with the redevelopment of brownfield sites require the use of bullet proof legal tactics, deal strategies that can bracket and or transfer the environmental risks, and the financial tools, such as environmental insurance to close the deal.  In fact, one of the recent trends in corporate transactions is the terms return of capacity and appetite for calculated risk taking by the Property and Casualty (P&C) carriers.  They are providing broader terms and creative manuscripting of environmental insurance such as Pollution Legal Liability (PLL) insurance, to leverage larger and more complex the transaction – whether the deal is a liability buyout or facilitating the closing of a brownfield transaction and its redevelopment.  The transactions are larger in financial terms and the insurance coverage capacity provided is greater.

Real estate market trends are very favorable driving contaminated property transactions toward cleanup and sustainable redevelopment.  Over the past several years, corporate surplus properties have been turning over, influenced by improved economic fundamentals.  There is a surplus of corporate cash on the sidelines along with institutional and foreign sovereign monies looking for higher yields and investing in U.S. real property.  Some focus on brownfield transactions where there are complex infill properties for affordable housing, waterfront, port terminal activity as well as big box store redevelopment.  There is also wide spread construction that is replacing shuttered malls with high end vertical development.

That said, according to a Citizen Commercial Banking report, commercial and industrial property selling activity for 2017 is ramping up. But middle-market decision makers note that valuations may not hold for much longer coupled with unquantifiable economic uncertainty centered on deregulation and tax reform among other externalities, and these phenomenon are further driving market dynamics. The commercial lending markets have seen the slowest increase in construction lending since 2014.  According to a February 8th 2017 Wall Street Journal article, some prominent real-estate investors are reducing their holdings and getting more selective about new deals due to their uncertainty about future market growth after eight years of a bull market.  Asset managers at endowments and pension funds and some private-equity firms are selling more assets and shifting to less risky strategies.  The demand for property may be starting to flag.  Commercial real estate deal volume decreased by $58.3 billion or 11% in 2016 according to Real capital Analytics.

With this mixed news, how does this all portend for contaminated property and brownfield transactional business and site cleanups and redevelopment activities?

Infrastructure is key term to winning Trump administration’s support for brownfield cleanups and redevelopments.  Couch the funding in terms of infrastructure development.  With the past administration, there had been increase cooperation from regulators especially at the state level with the focus on risk-based cleanups and cooperation with the community toward redevelopment.  With the Trump administration we are in a wait and see period relative to the impact to the brownfield cleanups and redevelopment activity that are historically supported by EPA grant monies.  Under a proposal from the Office of management and Budget, the EPA could find its grants to states cut by as much as 30%.  The impact of environmental deregulation and cutbacks in EPA appropriations and staff by 20% to 25% are proposals that would have a material effect on site investigations, cleanups and redevelopment activities leaving funding support to be sought from the private sector.

Environmental risk can impact the success of closing the transaction, valuation of the assets, and the transfer of legacy liabilities. It takes creative funding, the bracketing of environmental risk using rigorous and alternative due diligence and remedial alternatives, and deal structuring techniques grounded in  risk management strategies to assure that the redevelopment or reuse or successful disposition of the surplus or stranded asset(s) can be successfully implemented.

This RTM conference zeroes in on the effect environmental risk has on deal flow and the management of  commercial, industrial and government property types.  We will get into the business tactics and strategies for reducing the uncertainty caused by environmental risk and closing the deals employing creative environmental risk financing and management approaches.  The Conference will also delve into the enhanced value environmental insurance and liability management strategies are bringing to leveraging the M&A activity and the purchasing and disposition of corporate assets and contaminated real estate.

Key presentations will cover:

  • Environmental liability management strategies for successfully transferring corporate surplus properties and closing M&A transactions,
  • Emerging contaminants and new regulatory challenges confronting the financial services industries and property owners/developers,
  • Accelerated transfer of redevelopment and legacy sites into beneficial reuse,
  • Environmental and M&A Buyer – Side insurance leveraging private equity transactions,
  • Creative application of public/private brownfield financings,
  • Extreme weather, climate change and Green Bonds effect on commercial/industrial properties

Energy Policy Now Podcast – How U.S. LNG is Changing the Global Gas Market

Submitted by Andy Stone, Communications Manager, Kleinman Center for Energy Policy

In 2016 the first shipments of US LNG left from a terminal on the Gulf Coast, opening a new frontier of opportunity for the US natural gas industry and, on an international scale, contributing to the development of a truly global gas market. This globalizing market is eroding traditional buyer-seller relationships, including those of the U.S. and its allies, with implications for political balance.

In the latest episode of the Kleinman Center’s Energy Policy Now podcast, Kleinman Senior Fellow Dr. Anna Mikulska explores the geopolitical implications of a global natural gas market, and potential impact or U.S. foreign relations and policy.

In addition to her work with the Kleinman Center, Dr. Mikulska is a nonresident scholar in energy studies at the Baker Institute for Energy Studies at Rice University. Her research centers around European energy markets and energy policy.

Progress on Sustainability Initiatives at Major Consumer Product Companies (Part 1)

Submitted by Rekha Menon-Varma (WG ’06), Managing Partner, Vertaeon LLC

vertaeon-logo

Leading consumer product companies have embraced corporate sustainability, from setting mid to long term goals to driving alignment with business objectives. In addition to resource scarcity, increasing regulations, and ever expanding global supply chains, these companies also face changing consumer expectations. A decade ago, I was debating aspects of profit maximization, considering all stakeholders rights and the conflicts (in interests) it could bring about, at our business law class at Wharton. Today, leaders like Unilever, Nestle and Coca-Cola have demonstrated how to strike the right balance in implementing Sustainability initiatives.

Here at Vertaeon, our focus on sustainability strategy, resources and supply chain made us curious about goal-setting in consumer product companies (CPG). Sustainability goals in leading CPG companies ranged from operational (reducing/managing resource consumption, emissions, safe workplace) to supply chain (sustainable sourcing and reducing waste and carbon footprint of supply chain) to social impact. There has also been discussions and actions on business model and product innovation. However, as Clayton Christensen put it in a recent conversation* success in business model innovation is not easy even for leaders. Balancing innovation with social and environmental drivers make it even more complex to design and implement.

Being focused on data analytics and having experienced the power of data in ensuring successful Sustainability initiatives, we went searching for consolidated data on Sustainability goals at CPG companies and found it on Andrew Winston’s Pivot Goals site**. As a first pass, we looked at three sub-sectors including Food, Beverage, and Household and Personal Care. Within these, we assessed fifteen companies and fourteen KPIs including: Climate, Energy, Renewable, Fuel, Air, GHG, Water, Waste, Forest, Safety, Packaging, Food & Ag, Products and Distribution.

Our goal was to identify past focus areas and undertake some level of sector and company benchmarking and gap identification that could (a) yield higher visibility into goal-setting and (b) identify improvement options. For analysis purposes, each goal was reduced to the main message and assigned to one of four buckets/goal areas, categorized by Vertaeon, as Operations, Supply Chain, Products and Community. Progress along these four broad buckets is the primary focus of this analysis. In total, we assessed 19 goal types, 12 focus areas and 155 goals. Considering, ‘what’s measured is managed’, we also split goals with specific targets and progress from those with No Reported Change. Community bucket showed up mainly under ‘no reported change’. (Ref: Charts 2 & 3).

[For detailed analytics related to peer benchmarking and company performance, please contact us at http://www.vertaeon.com]

Key Findings

Operational goals lead the way:

It is no surprise that companies focused on their operations. 51% of the goals are related to reduction targets; GHG (11%), energy (9%), water (10%) and waste (14%) combined with improving recycling (5%), safety and renewable energy. Traditionally, reduction goals have been viewed as cost reduction opportunities; however, as CPG customers, retailers and consumers, demand more from their supply chain, operational initiatives will continue to stay at the forefront of sustainability. Vertaeon’s Integrated Analytics™ platform provides opportunities to further leverage, through in-depth analytics, the operational data collected as part of these initiatives to identify actionable operational improvements.

Supply chain offers new KPI opportunities:

Sustainable sourcing leads overall goals; however, this can be attributed to high coverage by Unilever and P&G (20/27 or 74%). Supply chain goals currently under focus in the CPG sector are improving sustainable sourcing (17%), reducing GHG emissions in supply chain (6%) and transportation (2%). This analysis indicates a vital need for more players to adapt goals/KPIs in the areas of reducing GHG and Carbon footprints, reducing packaging waste and improving sustainable sourcing of raw materials and packaging along the supply chain.

CHART 1

chart-1

Product goals as prevalent as supply chain goals (Ref: Chart 2):

While leading players such as Unilever, Nestle, Coca-Cola & Pepsi have embarked on product nutrition and sustainability goals, overall there is still considerable room for improving product sustainability within these consumer sectors. Here again, we will see more KPIs as consumers demand higher levels of nutrition and impact labeling. Current product goals focus on health & wellness (13%) and packaging (6%).

CHART 2

chart-2

Goals with no reported change (Ref: Chart 3):

The Community section leads the pack here with goals in community (13%), water availability (9%) and health & wellness (6%). This offers opportunities to set specific targets and monitoring for community and social impact and assess investment priorities as well as impact. Other notable ‘no change’ goals came up in Water (Operations), Food & Ag (Supply Chain) and Health & Wellness (Products). This could suggest there is room for setting additional targets and subsequently monitoring changes here as well.

CHART 3

chart-3

In Conclusion

This preliminary assessment of Sustainability goal-setting and currently reported goals at leading CPG companies indicate a primary focus on Operational goals. While Product and Supply chain goals are increasingly becoming part of sustainability initiatives at the leading companies, there is room for further adoption in this sector. The focus on Operational goals presents the unique opportunity for companies to leverage the operational data collected as part of goal-tracking to identify opportunities for improvement. As mentioned at the outset, the heterogeneity in consumer expectations has not yet fully translated to goal-setting or reporting. A recent publication by NC State University*** found that consumers see other dimensions (e.g. risk & compliance, social justice) of interest than those put forth by the GRI framework, thereby suggesting a disconnect between corporate sustainability reporting and stakeholder views and interests. Understanding of consumer demographics and preferences via segmentation and translating insights to product and engagement strategies can address this.

Blog Contributors: Danielle Boccelli, Data Analyst, Vertaeon LLC & Vipin Varma (WG’11, IGEL Alumni Advisory Board), Co-Founder, Vertaeon LLC

*Building a business creation engine, MIT Sloan Webinar, January 2017 **www.pivotgoals.com, A. Winston in collaboration with Jeff Gowdy                          ***Study finds current corporate sustainability reporting misses the mark, M. Bradford et al., NC State University, January 2017

Education and the Sustainability Professional of the Future

By Neelam Ferrari

Many of my posts talk about the numerous global issues that are related to sustainability, and more particularly, how these important topics relate to human health and nutrition. As food and nutrition security will likely become defining societal issues over the coming decades, and we see no slowdown in the evolution of technological progress, the demands of sustainability professionals working in fields related to these topics need to be responsive to emerging global trends. These trends include not only environmental components, but also encompass changes in business, socioeconomics, technology and culture. When we hear the term sustainability, we often immediately focus on the environment and natural resources. While this is appropriate, it is only a piece of the broader puzzle. The definition, and the acknowledgement of topics related to sustainability encompasses perspectives from many different fields ranging from finance to medicine. Therefore, the foundation education for future sustainability professionals must embrace a multidisciplinary approach, while also emphasizing depth in one or more of the related components.

I can think about this from my own perspective as I will be entering college in the fall. After college, I plan to embark on a career in medicine. However, I plan to do more than practice in a clinical setting. In addition to working directly with patients, I also want to work to address some of the issues that are at the root of the development of disease, and I believe that many of these issues can be addressed through the lens of sustainability. Some of these sustainability/health issues center around access to a clean and plentiful water supply; this brings in the perspective of science and engineering. Others relate to food and nutrition, which can include genetics, biotechnology and education. In addition, we can connect some diseases to the lack of access to markets, which includes knowledge of economics, politics and business. From these high level examples, it is clear to me that while my primary education will focus on medicine and biotechnology, I will also need to develop a foundation in other contributing fields that are part of the sustainability spectrum.

The United Nations Sustainable Development Platform has been a leader in highlighting the importance of education in meeting sustainability goals. Further, education has been selected as one of the priority areas to help advance their agenda. As we broaden our definition of what a sustainability professional is, we can start to see that no matter what your primary occupation might be, a sustainability emphasis can be incorporated into your job and this is important in truly making effective strides towards addressing global problems. Core curriculum emphasizing sustainability subjects is a start, and supplementing this with ties to the business world, such as those developed at Wharton IGEL at Penn, Columbia’s The Earth Institute, and the NYU Stern Center for Sustainability, are great examples that other institutes can emulate.