Voluntary Environmental Audits
Can Pay Large Dividends
by Richard M. Walka, Senior Vice President, Environmental Remediation & Multimedia Compliance
Understanding potential environmental liabilities allows a company to avoid future costs and embarrassment. These liabilities can include adherence to regulatory requirements, as well as adverse effects on facility employees, neighboring properties and individuals, and future property users. The United States Environmental Protection Agency (USEPA) recognizing the enormous magnitude of the effort it would take to manage these potential risks in the usual regulatory manner, has developed an alternate approach which rewards those who voluntarily seek out and eliminate/minimize or mitigate their liabilities with substantial reduction and, in some cases, elimination of penalties. The process of identifying these potential risks/liabilities defines an “Environmental Audit.”
An environmental audit will typically include a review of current manufacturing, handling, storage and disposal practices and comparison with existing, as well as potentially required permits and practices. It can also include analysis of the building infrastructure, such as water supply and plumbing, heating and ventilating, and construction materials, for potential environmental hazards. Depending on the current use and historic uses, an evaluation of the soil, air and water at and surrounding the site may be conducted.
Environmental audits need not be cumbersome, expensive undertakings. They are usually performed in a confidential manner and, in many cases, will cost less than $10,000. They do not make decisions for the company concerning follow-up actions. They simply provide management with the information necessary for informed and cost-efficient decision making. They also provide the additional benefit of providing the first step in the brownfields assessment process, potentially leading to improved site use. For publicly traded companies, the audit is an important component in complying with the requirements of the “Sarbanes-Oxley Act of 2002,” administered by the Securities and Exchange Commission which requires publicly traded companies to engage independent auditors to provide assessment of liabilities, including those that are environmental.
Why perform a voluntary environmental audit? Is it simply another of those avoidable business expenses that eat into profits and distract management attention from the more important business matters? These questions will undoubtedly cross the mind of many business people more than once.
An environmental audit generally consists of a comprehensive review of the potential on-site and off-site environmental liabilities posed by a facility and its operations. These liabilities have the potential to cover a broad range of issues including the identification of noncompliance with environmental permit requirements, on- and off-site subsurface contamination, above and underground storage tank management, and product and waste materials handling and disposal practices. In some cases, the audit can extend to the operation of heating and ventilating systems, an analysis of building materials including lead paint and asbestos containing materials, as well as an analysis and review of historic practices which may have affected the environment at and adjacent to the facility.
The audit can include one facility location or a number of locations where a company’s holdings include multiple sites. While difficult to estimate, site unseen, the cost of a typical audit for a facility of average complexity usually will range from $8,000 to $12,000.
The audit is performed in a logical step by step approach utilizing technical staff possessing extensive experience in the identification of environmental concerns. Typically, the audit is initiated by conducting a review of existing information, including records, reports, permits, discharge/emission monitoring records, inspection and maintenance logs and reports, and site plans and drawings.
Following completion of the information review, an on-site visit of the facility is conducted. A site inspection including discussions with select employees and a review of documents present at the facility is included.
Based on the findings of the preceding, the federal, state and local environmental regulations and guidelines which are applicable to the facility are identified and the status of compliance with respect to the operation of the facility is completed.
The resulting confidential work product will include a summary of these determinations of the status of compliance with each applicable regulatory requirement. Where potential problems are identified, they are highlighted with alternatives for their solution offered. In some cases, additional assessment, including limited sampling and analysis, may be required.
With this understanding of the very basic elements of an environmental audit and how it is performed, let us now return to the initial question, “Why perform a Voluntary Environmental Audit?”
Over the past 20 years, as the landmark environmental statutes, such as the Clean Water Act, Clean Air Act, and Resource Conservation and Recovery Act, have dealt with most of the larger, more obvious environmental problems, there has been a growing recognition of the significance of multiple, cross media, environmental impacts from facilities. These impacts, when assessed individually, may not appear significant, however, when viewed in the whole of the industrial sector of which the facility is a part, with consideration of potential synergistic impacts, their affects can be large. This has caused environmental agencies to focus more of their attention on multimedia pollution from facilities. However, if regulatory agencies were to adopt a large scale approach to conducting these multimedia facility reviews using their own means exclusively, it would overwhelm their resources.
Recognizing the high value of a multimedia approach, the agencies have determined that it is in the interest of the environment to take steps to expedite this change in focus. They have developed a strategy for the accomplishment of multimedia facility reviews, which is a hybrid of the traditional command and control method, and have moved toward a newer incentive-motivated voluntary approach. The strategy they have devised provides significant incentives for a company to voluntarily conduct an environmental audit and take appropriate corrective actions where problems are noted while, at the same time, continuing the traditional review and inspection of facilities that are not providing voluntary audit reporting. Where violations are found by the regulatory agency, enforcement generally will occur in the usual aggressive manner. On the other hand, for facilities performing voluntarily, with no prior regulatory involvement, incentives are offered, including significant reduction and, in some cases, total elimination of penalties normally due for noncompliance with environmental regulations.
Performance of the audit in a voluntary manner is a wise choice. It will provide a company with the information necessary for its management to make decisions in an informed manner. The audit itself is confidential and, while suggestions may be offered, it does not commit the company to any further action. It will, in an unobtrusive manner, allow a company to fully understand its environmental liabilities, evaluate various alternatives for managing them, and take action as its management desires. Voluntarily performing an environmental audit will allow a company to actively manage, avoid, minimize and mitigate problems saving time, money and, perhaps most importantly, damage to its reputation.
Other benefits of performing an environmental audit relate to potential brownfields redevelopment and the requirements of the Sarbanes-Oxley Act of 2002.
Brownfields are real properties which may have depressed development potential due to the presence or perceived presence of contamination from current or historic uses. By evaluating these properties and determining if cleanup action is required based upon potential future use, management will be better equipped to decide on a plan to proceed with the development of these properties in an economically beneficial manner.
The “Sarbanes-Oxley Act of 2002” has, as one of its requirements, the obligation that publicly traded companies engage independent auditors for the purpose of providing full, unbiased assessments of financially significant assets and liabilities. Included in the definition of “liabilities” are material costs of compliance with environmental statutes and regulations associated with current operations, as well as cleanups required as a result of past practices.
Dvirka and Bartilucci Consulting Engineers (D&B), headquartered in Woodbury, New York, is an ENR Top 200 Environmental Firm and Top 500 Design Firm with a staff that includes engineers, scientists and administrative personnel. The firm also has offices in White Plains and East Syracuse, New York; South Plainfield, New Jersey; and Trevose, Pennsylvania.
The firm’s expertise includes wastewater treatment, water treatment and supply, industrial waste treatment, solid waste management, groundwater management, air toxics management, multimedia compliance audits, Phase I and Phase II Site Assessments, and all aspects of hazardous waste management.
D&B offers comprehensive multimedia environmental audit and environmental compliance and permitting services to a large array of industrial, commercial, institutional and municipal clients covering their varied small, medium and large size facilities.
Over the last 15 years, the firm’s multimedia compliance audit experience has grown and expanded in support of a broad spectrum of commercial and industrial sectors, including pharmaceutical, semiconductor and microelectronics, commuter/freight railroad transportation, electric and gas utilities, research facilities, colleges and universities, and hospitals and healthcare facilities.
The multimedia environmental compliance team draws upon the expertise of several engineering disciplines and environmental experts with necessary support staff. Each member of the multimedia team has extensive compliance experience, combined with engineering, scientific and project management qualifications in specific environmental media. In addition, certain managers and senior staff within the firm have prior regulatory agency experience as hazardous waste, solid waste and wastewater program compliance inspectors and permit managers.
Working together with facility staff, a complete and systematic review of standard operating practices, corporate policies, permit conditions, applicable regulations and operating records is undertaken. In addition, a thorough facility inspection and review of all waste generation and handling processes and operations is conducted. The audit team then completes a systematic determination of the status of compliance of the facility with federal, state and local regulatory requirements, as appropriate. When needed, recommendations for corrective action ranging from procedural or programmatic changes including a new or modified Standard Operating Procedure, to the development of a Hazardous Waste Management Plan, or the design and implementation of improved above/underground storage tank systems are presented, along with engineering cost estimates.
Whether you are investigating ways to lower your facility’s risk of noncompliance, looking for increased certainty that environmental risks do not exist at your facility, or interested in establishing an environmental policy aimed at improved environmental compliance by instituting a more formal environmental audit program conducted by a third party, D&B can help.
For additional information or a confidential no-cost consultation, please contact Richard M. Walka, Senior Vice President, at (516) 364-9890 x 3006.