Software Club 210: Light Red/Club_Software_210_Light_Red_Micro_Star_1997.iso/sba/f402.sbe

Text File | 1997-01-01 | 17KB | 354 lines

@332 CHAP 9

        ┌──────────────────────────────────────────────┐
        │  ENVIRONMENTAL LAWS AFFECTING YOUR BUSINESS  │
        └──────────────────────────────────────────────┘

As the world becomes an ever more crowded place, and as the
damaging effects on our environment of two centuries of
unrestrained industrial development have become more apparent
in recent years, our political attempts to remedy or
ameliorate these problems, particularly problems of pollution
and toxic emissions, have resulted in a flood of legislation,
regulations and litigation involving environmental matters.
While this is certainly all to the good in the larger sense,
some of the immediate and unfortunate effects of many of
these new environmental restrictions (and the harsh penalties
for even unintentional violations) have been to create
another whole layer of very intrusive, frightfully complex
and often conflicting government regulations on business,
plus a virtual minefield of legal exposure for businesses
of all sizes.

For small businesses, most of which do not have in-house
legal staffs and can hardly afford the large legal fees
needed for professional guidance through this maze of
regulations, the effect of the growing body of environmental
laws will be especially harsh.  Small businesses are also
disproportionately affected by the heavy costs of complying
with various mandated emissions requirements, which often
require large capital expenditures for sophisticated new
pollution control equipment.

While we cannot, in this brief space, do much more than
scratch the surface of the environmental law exposure and
increased operational complexities most firms are going to
be faced with from now on, we have outlined below some of
the main problem areas that we feel that a small business
owner needs to be at least passingly familiar with.  We
also provide below a capsule description of most of the
major areas of federal environmental law that may apply to
your business now, or at some time in the future.


THE REAL ESTATE TIME BOMB

Perhaps the most pervasive of the environmental laws, with
the most devastating potential consequences for the unwary,
are the environmental cleanup laws, and the legal liability
that these laws attach to real estate that has been
contaminated by hazardous substances.  The main laws that
apply here are the Comprehensive Environmental Response
Compensation and Recovery Act  (CERCLA or Superfund -- 42
U.S.C.A. Sec. 9601 et seq.), and the Resource Conservation
and Recovery Act (RCRA -- 42 U.S.C.A. Sec. 6901, et seq.).

CERCLA and the RCRA apply to virtually every real estate
transaction.  While RCRA applies primarily to currently
generated hazardous waste, including limits on creation of
waste and requirements for disposing of it, CERCLA (or the
Superfund law) is more focused on cleaning up hazardous
substances that have been spilled or dumped in the past.

CERCLA (OR SUPERFUND) LIABILITY.  CERCLA deals with all
kinds of pollution:  air, surface water, ground water and
soil pollution.  It covers virtually every type of "hazardous
substance" (not necessarily "waste"), as defined under
CERCLA, the Clean Water Act, the Clean Air Act, or the Toxic
Substances Control Act, with the major exceptions of
petroleum and certain petroleum derivatives.  The main
thrust of CERCLA is to impose liability on private owners
of property to clean up hazardous wastes that they have
either created or that they have "inherited" from prior
owners, if the property in question was already contaminated
when it was acquired.

In short, even if you were not responsible for creating
a contamination problem, if you acquire real estate that
is already contaminated, and it later becomes apparent
that there has been a spill or dumping that requires an
environmental cleanup, possibly at astronomical cost, YOU ARE
LIABLE for the costs of the cleanup, if you are the current
owner.  Doesn't seem very fair does it?  Welcome to the
1990s.

And worse yet, you can't simply walk away from the property
and let the government take it, in lieu of paying the
cleanup costs.  You (or your corporation), once you become
an owner of the property, are the responsible party, and
may be held liable for costs that exceed the value of the
property many times over.  Note that you may even become
liable somewhere down the road if you buy a business (an
existing corporation, for instance), if that business once
owned contaminated property, and the government eventually
institutes environmental proceedings against the current
property owner, who then sues all the prior legal owners of
the property (including your corporation) for indemnity.

Of course, you may be able to sue the prior owner or anyone
in the chain of prior owners for indemnification, and if
they are still in existence and can be found, and if they
have deep enough pockets, you might even be lucky enough to
recover some or all of the costs from them.  However, since
that is a pretty slim thread upon which to hang your
financial survival, you need to take precautions up front,
before acquiring any real property, to protect yourself from
possible environmental liability for cleanup under CERCLA.


WHAT CAN YOU DO TO PROTECT YOURSELF FROM ENVIRONMENTAL
CLEANUP LIABILITY?  There are no foolproof answers, other
than to refrain from acquiring any real estate or from
buying an existing business or corporation.  However, the
following are some things you can and should do to reduce
your risk in any such acquisition:

    .  Exercise considerable diligence concerning the
       current condition and past uses of any real estate
       involved in a transaction.  Also, if buying an
       existing corporation, you need to find out what
       properties it owned in the past, and to be
       concerned whether any such properties may have
       been contaminated by hazardous substances.

    . Be particularly wary of any sites that have been
      used as gas stations, landfill areas, or as the
      locations of dry cleaners, chemical or other
      industrial production processes, or for battery
      production, recycling, or metal plating.  Be
      extremely cautious if the site contains underground
      storage tanks.

    . Consider retaining an environmental audit firm to do
      detailed site inspections and evaluations to determine
      if there may be a contamination problem.

    . In a business or real estate purchase agreement,
      require written representations and warranties about
      the site from the seller, and include provisions under
      which they will indemnify you if there is a problem.
      (And be mindful of the seller's financial viability,
      in case you should be forced to seek indemnity from
      them.  A promise isn't worth the paper it's written
      on, if the seller doesn't have the financial
      wherewithal to make good on it.)

Note that, while there is such thing under the Superfund
law as the "innocent purchaser" defense, you must be able
to demonstrate that you made "appropriate inquiry" before
acquiring the property, to determine if there was a
pre-existing contamination problem.  There is little guidance
in the law at this point as to what constitutes an
"appropriate inquiry," so perhaps you should not expect
to escape liability under that rule.  The best defense is
to avoid purchasing property that is contaminated, by
taking the steps outlined above.  Even if such steps fail
to discover a lurking environmental problem, you should
at least have a much stronger argument to make under the
"innocent purchaser" defense if you have done a "due
diligence" survey and had an environmental audit performed
by a reputable environmental consulting firm.

RCRA REQUIREMENTS.  RCRA contains a comprehensive
set of rules for managing hazardous wastes (including
petroleum-based substances), regulating those who generate
hazardous wastes, transport them, and store, treat or
dispose of them.  Penalties for violations include mone