Pollution Limits and Polluters' Efforts to Comply

The Role of Government Monitoring and Enforcement

Dietrich H. Earnhart, Robert L. Glicksman

• Éditeur: Stanford Economics and Finance
• Année: 2011
• ISBN:
  9780804777605
• Édition: 1
• Sujet: Volkswirtschaftslehre
• Sous-sujet: Umweltökonomie

This book integrates the fields of economics and law to empirically examine compliance with regulatory obligations under the Clean Water Act (CWA). It examines four dimensions of federal water pollution control policy in the United States: limits imposed on industrial facilities' pollution discharges; facilities' efforts to comply with pollution limits, identified as "environmental behavior"; facilities' success at controlling their discharges to comply with pollution limits, identified as "environmental performance"; and regulators' efforts to induce compliance via inspections and enforcement actions, identified as "government interventions."

The authors gather and analyze data on environmental performance and government interventions from Environmental Protection Agency (EPA) databases, and data on environmental behavior gathered from their own survey of all 1, 612 chemical manufacturing facilities permitted to discharge wastewater in 2002. By analyzing links between critical elements in the puzzle of enforcement of and compliance with environmental protection laws, the text speaks to several important, policy-relevant research questions: Do government interventions help induce better environmental behavior and/or better environmental performance? Do tighter pollution limits improve environmental behavior and/or performance? And, does better environmental behavior lead to better environmental performance?

CHAPTER ONE

Introduction

1.1. THE PROMISE AND PITFALLS OF THE CLEAN WATER ACT

In 1972, Congress adopted one of the nation’s landmark environmental laws, the Federal Water Pollution Control Act Amendments, now known as the Clean Water Act. Passage was prompted by concern over the egregious state of the quality of the nation’s coastal waters, rivers, lakes, and streams, some of which were so contaminated by industrial chemicals that they caught fire. Others were befouled with oil from events such as the Santa Barbara, California, oil spill in January 1969, which produced images on television news broadcasts of oil slicks and oilsoaked birds and marine mammals. The new law sought to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters” by establishing a goal of eliminating the discharge of pollutants into navigable waters by 1985.

That lofty goal was obviously not achieved by the target date and is still little more than a distant and perhaps impossible dream. There is little question, however, that over the nearly four decades since the enactment of the Clean Water Act, enormous progress has been made in cleaning up the nation’s waters. The quality of major rivers such as the Hudson and the Potomac has improved sufficiently to allow recreational uses that most would not have dared to pursue in the late 1960s and early 1970s. Few would dispute the notion that the Clean Water Act has been an enormously successful pollution abatement initiative.

Yet, as the first decade of the twenty-first century approached an end, and with the fortieth anniversary of the Clean Water Act on the horizon, trouble was brewing. From many quarters, disturbing reports of failures to enforce the law streamed in. In a lead editorial published late in 2009, the New York Times wrote that “even its staunchest allies agree than the act has grown old and fallen well short of its goals, crippled by uneven and sometimes nonexistent enforcement by state and federal agencies” (New York Times, 2009).

The newspaper’s concern was triggered by investigative reports from the paper’s own reporters. In an exposé published in September 2009, the Times reported that more than five hundred thousand known violations of the Clean Water Act had occurred during the period 2004–2007 by more than twenty-three thousand facilities, according to records submitted by the polluters themselves. Those figures likely underestimated the scale of the problem because some facilities engaged in illegal discharges fail to inform the government of these violations. According to environmental groups, the number of Clean Water Act violations had increased significantly in recent years. The Times reported that the number of facilities violating the Clean Water Act increased by more than 16 percent between 2004 and 2007. Worse, about 60 percent of the violations qualified as “significant,” a term used to identify violations posing the highest public health or environmental risks (Duhigg, 2009).

The occurrence of frequent violations was bad enough news in itself, but that was only part of the disturbing story. According to the Times, fewer than 3 percent of Clean Water Act violations during the period investigated by the paper resulted in fines or other significant punishments by state officials; moreover, the federal Environmental Protection Agency (EPA) did little to press the states to take their enforcement responsibilities more seriously or to step into the breach created by inadequate state enforcement. State officials blamed the absence of vigorous enforcement despite high rates of regulatory noncompliance on increased workloads and dwindling resources: state enforcement budgets remained essentially flat when adjusted for inflation even though the number of regulated facilities more than doubled in the previous ten years. The Times concluded that state regulators often lacked the ability or training to levy fines large enough to deter polluters. Even though EPA acknowledged the problem, it hesitated to pressure the states to do better, partly because of its reluctance to risk putting stress on its relationships with state enforcement officials and partly because it lacked a consistent national oversight strategy (Duhigg, 2009).

Other contemporaneous accounts were consistent with the Times’ findings. In testimony given before Congress the month after the Times story appeared, the U.S. Government Accountability Office (GAO) noted that while overall funding for carrying out enforcement activities in EPA’s regional offices and in states authorized to issue and enforce Clean Water Act permits had increased from fiscal year 1997 through fiscal year 2006, those increases failed to keep pace with inflation and the agencies’ increased enforcement responsibilities. More specifically, funding to EPA regional offices increased from $288 million in fiscal year 1997 to $322 million in fiscal year 2006 but declined in real terms by 8 percent over that period. The decline in funding was reflected in a decrease in full-time employees in many of EPA’s regional offices. Essentially, both EPA and state officials felt overwhelmed by increased responsibilities and declining resources to meet them. The GAO concluded that “our work over the past 9 years has shown that the Clean Water Act has significantly increased EPA’s and the states’ enforcement responsibilities, available resources have not kept pace with these increased needs, and actions are needed to further strengthen the enforcement program” (GAO, 2009, p. 14). Among the specific consequences of the collapse of effective enforcement described by the GAO was a decline in the value of injunctive relief, which for purposes of its report the GAO defined as the monetary value of future investments necessary for an alleged violator to come into compliance. Reviewing EPA’s assessed penalties from fiscal year 1998 to fiscal year 2007, the GAO found that total inflation-adjusted penalties declined from approximately $240.6 million in fiscal year 1998 to only $137.7 million in 2007 (GAO, 2009).

In the face of these troubling depictions of the state of Clean Water Act compliance and enforcement, EPA released a Clean Water Act Enforcement Action Plan in October 2009. The plan concedes forthrightly that Clean Water Act “violations are still too widespread, and enforcement too uneven” (EPA, 2009, p. i). It finds that “many of the nation’s waters are not meeting water quality standards, and the threat to drinking water sources is growing” (p. i). Although EPA found that some states had strong water-quality protection and enforcement programs, compliance and enforcement vigor were uneven. Like the Times, EPA found unacceptably high rates of significant noncompliance—about 24 percent among the nation’s largest direct-discharge facilities. EPA data reveal even higher rates (about 45 percent) of serious noncompliance (which the GAO equated with EPA’s concept of “significant noncompliance”) at smaller facilities that submit discharge-monitoring reports. Yet, according to EPA, the states reported taking enforcement action against fewer than 6 percent of these smaller facilities (EPA, 2009).

The absence of consistent enforcement by EPA and the states created an unlevel playing field for businesses complying with the law and for citizens seeking protection against the health and environmental risks posed by unlawful water-pollution discharges. The action plan pronounced that effective enforcement programs create incentives for compliance by penalizing those who do not follow the law. They establish a level playing field between those members of the regulated community who comply and those who do not. Enforcement ensures fair treatment—companies that compete against each other should not face wide disparities in treatment across the country, such as mandatory minimum penalties for a violation in one state and no enforcement in another. Ultimately, enforcement is critical to ensure that the public receives the services and protections promised by our laws. Unfortunately, data shows us that we are not getting the compliance envisioned by our laws to protect clean water (EPA, 2009, p. 6).

EPA’s assessment of the state of Clean Water Act compliance and enforcement led it to conclude that new approaches were needed to revamp its enforcement program so that EPA and the states would focus their enforcement efforts on the Clean Water Act violations that posed the biggest threats to water quality and public health, including a reinvigoration of both civil and criminal enforcement against traditional end-of-pipe pollution. Testifying before Congress at the same hearings at which the GAO appeared, EPA administrator Lisa Jackson announced the formulation of the new action plan, proclaiming that “the time is long overdue for E.P.A. to re-examine its approach to Clean Water Act enforcement” and that EPA’s goal was to “develop more innovative approaches to target enforcement to the most serious violations and the most significant sources” (Duhigg, 2009).

1.2. CONTRIBUTION OF THE PRESENT STUDY

This book seeks to provide insights into the impacts of Clean Water Act enforcement on both performance and behavior by facilities regulated under the statute. In doing so, its goals include providing information to EPA and the states responsible for implementing and enforcing the Clean Water Act. We anticipate that the information may assist them in fashioning the kind of innovative and effective enforcement programs that EPA administrator Jackson has identified as necessary for providing the fair treatment of regulated facilities, effective public health and environmental protection, and achievement of the goals and promise that the Clean Water Act staked out in 1972.

The analysis in this book is based on information on Clean Water Act enforcement that relates to the same period of time analyzed by the GAO testimony and EPA Clean Water Act Enforcement Plan released in October 2009. In particular, the data we analyze here measure facility discharges and enforcement actions taken during the period 1999 to 2003. The study focuses on discharges by, enforcement actions taken against, and inspections conducted of discharging facilities in the chemical industry, one of the most significant industries regulated by the Clean Water Act and one that on occasion EPA has designated as a priority industrial sector. We believe that these aspects of the chemical industry make it a valuable focus of an empirical analysis of the relationships among the imposition and enforcement of discharge limits under the Clean Water Act and environmental behavior and performance, notwithstanding the possibility that operation and compliance practices differ among the various industries regulated under the act.¹

The book examines several broad research questions. These questions ask what the variations are in the discharge limits that apply to discharging facilities with wastewater permits; what actions discharging facilities are taking to comply with their discharge limits; what outcomes (in terms of discharges and compliance) result from various forms of environmental behavior; and what steps federal and state regulators are taking to induce compliance with discharge limits. We seek to ascertain whether different forms of enforcement actions and inspections help to induce better environmental behavior or better environmental performance by regulated facilities. We also assess how discharge limits affect environmental behavior and performance and how environmental behavior affects environmental performance.

Our goal in analyzing these issues with respect to facilities in the chemical industry is to provide information that may be useful to environmental policy makers in both the federal and state governments in designing regulatory and enforcement programs that induce improvements in environmental performance and desirable changes in behavior by regulated facilities. By studying the impact of past regulatory activity—crafting discharge limits for polluting facilities in the chemical industry and pursuing enforcement actions against facilities alleged to have violated their regulatory obligations under the Clean Water Act—we should be able to provide useful information so that policy makers may be able to maximize the degree to which regulatory expenditures create the greatest degree of improvements in environmental compliance.

Although other empirical studies cited throughout this book assess the impacts of certain regulatory decisions on environmental performance and behavior, we are not aware of any empirical study that engages in the kind of sweeping evaluation of a broad range of regulatory actions on an important polluting industry that we undertake in this book. Further, the fact that the data surveyed and analyzed here derive from the very period that both EPA and the GAO have pointed to as evidence of the failure of past federal and state enforcement approaches affords us a unique opportunity to determine the extent to which particular kinds of regulatory and enforcement efforts have succeeded or contributed to past enforcement failures.

1.3. PROVISIONS OF THE CLEAN WATER ACT

The Clean Water Act announces as its ultimate goal the elimination of all discharges of pollution to the nation’s waterways and as an interim goal the achievement of fishable, swimmable waters. The principal legal tool for achieving these goals is a provision that makes it unlawful to discharge pollutants into waters of the United States without a permit. The Clean Water Act creates two permit programs, only one of which is relevant to this book. That program is the National Pollutant Discharge Elimination System, or NPDES, permit program. This program is administered by states that EPA has authorized to issue individual discharge permits for point sources of pollution, or by EPA itself in states that have not been so authorized. Point sources are those that discharge pollutants through discrete conveyances, such as pipes, rather than through diffuse runoff. The second permit program is called the Section 404, or dredge-and-fill, permit program, which deals with the discharge of dredged or fill material, primarily to wetlands. Industrial pollutant discharges, such as the discharges of total suspended solids and biological-oxygen-demanding material by chemical industry facilities, which are the focus of this book, do not implicate the Section 404 program. Therefore, we do not discuss this second program further.

The Clean Water Act requires that a permit impose discharge limits on regulated sources. These limits restrict the quantity or concentration of pollutants that sources may discharge into the nation’s waterways. EPA issues regulations that contain effluent limitation guidelines that apply to entire industrial categories of sources. These limitations are based on the degree of pollution reduction that EPA determines is achievable through the use of technology that is available to the industry concerned. Permit-issuing agencies use the regulatory limitations as the starting point for determining the discharge limits to impose on individual point sources applying for a wastewater discharge permit. Those discharge limits may differ from the regulatory limitations for any number of reasons (which Chapter 4 describes in more detail). The Clean Water Act allows the states to impose discharge limits that are more stringent t...