Tag Archives: loss avoidance

Business Continuity Strains Under Combination of Flooding, Dodd-Frank

After the devastating tsunami in Japan early in 2011, we began exploring the interrelationship of green/ethical procurement (such as conflict minerals) with business continuity/disaster recovery planning.

Now, an article from leading electronics supplier Digi-Key states that lead times are delayed up to almost 6 months for a significant amount of the world’s production of tantalum capacitors as a result of the flooding in Thailand, combined with raw material supply impacts of conflict minerals laws/policies.   Of course, higher prices are also expected.  “Combine those two things together and that put a big strain on the supply of raw materials in the market as well as pricing,” said Joe Porter, vice president tantalum product marketing at Kemet Corp. based in Greenville, S.C.

We continue to believe that significant opportunities exist for business continuity/disaster recovery planning efforts to incorporate growing green/ethical procurement initiatives.  Robust sustainability risk assessment exercises are essential in identifying relevant gaps and areas for improvement.  Feel free to contact us for more information about how we can help.

In Tampa, a Mining Company Shutdown Highlights Business Interruption Risk from Environmental Issues

In Tampa Bay, an all-to-real demonstration is playing out of the trickle-down economic impact of a company operation being shut down for environmental reasons.  The Tampa Bay Business Journal reported this story.

The Mosaic Co. is a publicly-traded company with over $6billion in annual revenue reported last fiscal year.  Mosaic mines phosphate ore.  The company has been mining in Polk County since 1995 and recently filed for an expansion of operations to access reserves in Hardee County.  These ore reserves represent about 10 years of active mining operations.

The Sierra Club, along with other NGOs challenged the issuance of a federal permit that would allow Mosaic to expand, alleging that the expanded operations would cause environmental damage to the headwaters of the Peace River and other streams that drain into the Charlotte Harbor estuary.

On July 30, in response to the challenge

U.S. District Judge Henry Lee Adams Jr. in Jacksonville issued a preliminary injunction against the expansion, saying the Army Corps had failed to adequately explore alternative plans that would cause less environmental damage to the area.

The article reports that, if the Mosaic expansion does not move forward, the economic impact would be dramatic.

At least 18 companies that do business with Mosaic would be out at minimum of $80 million in combined annual revenue, and about 400 of their employees would lose their jobs, in addition to the 221 Mosaic workers who would be laid off …

“If Mosaic is prohibited from further mining, it will mean that Bul-Hed Corporation would cease to exist sometime in the near future,” Ronnie Hedrick, president, said in a court filing.

Mosaic has estimated it would lose $250 million to $300 million in operating earnings in a worst-case scenario.  In its fiscal year ended May 31, Mosaic had earnings of $1.75 billion before interest, taxes, depreciation and amortization on net sales of $6.76 billion.

Business Interruption Planning

The company’s most recent 10-Q (Item 1A – Risk Factors), filed April 1, 2010, did  disclose this potential risk:

Expansion of our operations also is predicated upon securing the necessary environmental or other permits or approvals. Over the next several years, we and our subsidiaries will be continuing our efforts to obtain permits in support of our anticipated Florida mining operations at certain of our properties. In Florida, local community participation has become an important factor in the permitting process for mining companies, and various local counties and other parties in Florida have in the past and continue to file lawsuits challenging the issuance of some of the permits we require. In fiscal 2009 environmental groups for the first time filed a lawsuit in federal court against the U.S. Army Corps of Engineers with respect to its issuance of a federal wetlands permit and similar lawsuits could be brought in the future. A denial of, or delay in issuing, these permits or the issuance of permits with cost-prohibitive conditions could prevent us from mining at these properties and thereby have a material adverse effect on our business, financial condition or results of operations.

Even so, how should the company – and its business partners – respond to such a risk?  And did business partners understand, assess and plan for such a contingency?  In many discussions we have had with clients about potential shut downs, it is common for companies to plan production volume shifts across other operating locations to make up for the lost volume and continue operating.  In Mosaic’s case, however, the article states:

Although Mosaic has four other mines in Florida, their output would not offset the impact of a shutdown at South Fort Meade, the company said.

Even where a company has the physical capacity at other locations to make up for lost production at one plant, environmental restrictions may not allow timely production increases at others.  Wastewater and air permits typically contain conditions limiting production.  These limits can take various forms:

  • Direct limits.  For example, plant operating hours or volume; emissions limits for production equipment or material use; wastewater flow or contaminant concentration limits.
  • Indirect restrictions.  For example, fuel use or emissions limits on supporting equipment such as generators or boilers; wastewater treatment capacity/retention time for adequate treatment.

Suppliers, contractors and vendors may attempt to recover losses from Mosaic through the contractual obligations in place between the parties.  However, in this case, Mosaic has notified at least some of their business partners that this is a “force majeure” event – an extraordinary circumstance beyond their control – which releases Mosiac from contractual obligations.

Has your company evaluated/assessed the myriad business continuity risks associated with environmental matters in your supply chain?  And what contingency plans do you have in place to protect yourself?

The Elm Group International, LLC Gives Away an Environmental Audit

The Elm Group International, LLC is accepting entries for a drawing to win an environmental compliance audit priced at $1.00 fixed rate for labor fees.  The contest winner gets 5 consecutive days of one Elm staff member’s time to conduct an environmental compliance audit in the U.S – for $1.00 in labor cost.  The rules and limitations (posted in the entry form) set forth the details of this offer.

Patrick Doyle, founder of Elm:  “Elm has been financially successful ever since its founding in 2003.  Even in the midst of the worst global economic collapse since the 1930s, Elm posted record revenues in 2009.  In light of that, we wanted to have some fun in 2010.  Part of that was investing in new technology such as the iPad, which proved to be very successful in the field.  This give-away is another opportunity for us to have fun, while also providing real benefit to the winner.”

“There is a bit of a thrill in this for us,” said Lawrence Heim of Elm’s Georgia operations.  “We certainly don’t know what type of company or site will win and I have no idea where I will be traveling to for this assignment.”

“I am not sure if anything like this has been done before.  We had some initial trepidation about the idea, but our enthusiasm and excitement won over,” according to Robert Bray of Elm’s California operations, who just completed his tenure as the President of The Auditing Roundtable.  “And we have the chance to help a company with their environmental management costs.  Everyone wins.”

Click here to complete the entry form.

More Delays in SPCC Rule

EPA announced it is proposing yet another delay in the implementation of the “new” SPCC regulations, originally published in 2001.

EPA states:

Types of facilities that may be eligible for the proposed one year extension:

Oil production, farms, electric utility plants, petroleum refining and related industries, chemical manufacturing, food manufacturing, manufacturing facilities using and storing animal fats and vegetable oils, metal and other manufacturing, real estate rental and leasing, retail trade, contract construction, wholesale trade, other commercial, transportation, arts entertainment & recreation, other services (except public administration), petroleum bulk stations and terminals, education, hospitals & other health care, accommodation and food services, fuel oil dealers, gasoline stations, information finance and insurance, mining, warehousing and storage, religious organizations, military installations, and government facilities.

In summary, the proposed rule would:

  • Extend the date by which the owners or operators of certain facilities must prepare or amend and implement an SPCC plan by one year to November 10, 2011
  • Delay the compliance date for facilities with milk containers that are constructed according to the current applicable 3-A sanitary standards, and subject to the current applicable grade “A” pasteurized milk ordinance (PMO) or a state dairy regulatory requirement equivalent to the current applicable PMO until one year after EPA finalizes a rule for these facilities.
  • Maintain the current November 10, 2010 compliance date for drilling, production and workover facilities that are offshore or that have an offshore component, and for onshore facilities required to have and submit FRPs
  • Reconcile the proposed compliance dates for new production facilities

The proposed amendments do not remove the regulatory requirement for owners or operators of facilities in operation before August 16, 2002 (other than facilities with milk containers described above), to maintain and continue implementing an SPCC plan in accordance with the SPCC regulations then in effect.  EPA is seeking comment on whether a shorter extension period (6 to 9 months) is warranted for facilities rather than the proposed one year extension. In considering a shorter compliance extension period, we request comments on the criteria to consider, such as discharge history, size and type of facility, potential risk posed, and ability to come into compliance.

More information on the proposed rule:  http://www.epa.gov/emergencies/content/spcc/index.htm

ESH/IT

Doubtful that the acronym would make it past any corporate review, but the linkage between ESH risk and IT management is real.  There have been plenty of reports on energy consumption by IT hardware, e-waste disposal concerns and chemical/metals content of electronics.

But what has not seen much attention is the potential ESH risk posed from internet security breaches.

Internet security breaches?  A risk to environmental, health and safety?

There has been a tremendous growth in computer-based operational controls in manufacturing and process lines.  These computer systems can – and sometimes do – control activities such as chemical mixing, fuel flow, exhaust venting and pollution control equipment operation.  If these computer systems were to become controlled through unauthorized remote access (in other words, a hacker), a great deal of damage could result.

Here are a few scenarios that actually happened.

  • During an IT security test, the “hacker” – a paid consultant in this case – found a way to control the fuel flow to a power generator.  The “hacker” ended up running the generator far beyond safety limits, causing it to overheat and start a fire.  Fortunately, this was done under controlled circumstances so no one was hurt, no collateral property damage was incurred and there were no environmental violations.  If such a situation were to happen during third shift in a remote area of the plant (where generators are commonly located because of the noise), the result would likely be far different.
  • A friend of ours in the IT security business recently told a story of an engagement his company was doing for a manufacturer.  During the project, they found some strange coding in the computer system that didn’t seem to make sense.  Our friend’s company brought this to the client’s attention, who determined that this code controlled critical pressure relief valving in the plant.  The code appeared to have been secretly embedded in software that had been developed by contractor hired by the plant but who was located in a country with ties to several terrorist organizations.

Information technology security certainly impacts more than credit cards and personal data theft.  Breaches in safeguards on process control systems can result in significant EHS events – whether intentional or accidental.

Conflict Mineral Law Signed as Part of Wall Street Reform Legislation

In case you missed it, the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law yesterday by President Obama also included new auditing and disclosure requirements for companies who use certain ores/minerals in their products.

The requirements apply to certain materials that originate from the Democratic Republic of the Congo – called “conflict minerals”.  These are defined as columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

The text of the new legislation that was included in the Dodd-Frank bill signed into law is below.

SEC. 1502. CONFLICT MINERALS.

(a) SENSE OF CONGRESS ON EXPLOITATION AND TRADE OF CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.

It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein, warranting the provisions of section 13(p) of the Securities Exchange Act of 1934, as added by subsection (b).

(b) DISCLOSURE RELATING TO CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.

Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as amended by this Act, is amended by adding at the end the following new subsection:

‘‘(p) DISCLOSURES RELATING TO CONFLICT MINERALS ORIGINATING IN THE DEMOCRATIC REPUBLIC OF THE CONGO.

‘‘(1) REGULATIONS.

‘(A) IN GENERAL.

Not later than 270 days after the date of the enactment of this subsection, the Commission shall promulgate regulations requiring any person described in paragraph (2) to disclose annually, beginning with the person’s first full fiscal year that begins after the date of promulgation of such regulations, whether conflict minerals that are necessary as described in paragraph (2)(B), in the year for which such reporting is required, did originate in the Democratic Republic of the Congo or an adjoining country and, in cases in which such conflict minerals did originate in any such country, submit to the Commission a report that includes, with respect to the period covered by the report

‘‘(i) a description of the measures taken by the person to exercise due diligence on the source and chain of custody of such minerals, which measures shall include an independent private sector audit of such report submitted through the Commission that is conducted in accordance with standards established by the Comptroller General of the United States, in accordance with rules promulgated by the Commission, in consultation with the Secretary of State; and

‘‘(ii) a description of the products manufactured or contracted to be manufactured that are not DRC conflict free (‘DRC conflict free’ is defined to mean the products that do not contain minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country), the entity that conducted the independent private sector audit in accordance with clause (i), the facilities used to process the conflict minerals, the country of origin of the conflict minerals, and the efforts to determine the mine or location of origin with the greatest possible specificity.

‘‘(B) CERTIFICATION. The person submitting a report under subparagraph (A) shall certify the audit described in clause (i) of such subparagraph that is included in such report. Such a certified audit shall constitute a critical component of due diligence in establishing the source and chain of custody of such minerals.

‘‘(C) UNRELIABLE DETERMINATION. If a report required to be submitted by a person under subparagraph (A) relies on a determination of an independent private sector audit, as described under subparagraph (A)(i), or other due diligence processes previously determined by the Commission to be unreliable, the report shall not satisfy the requirements of the regulations promulgated under subparagraph (A)(i).

‘‘(D) DRC CONFLICT FREE.  For purposes of this paragraph, a product may be labeled as ‘DRC conflict free’ if the product does not contain conflict minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country.

‘‘(E) INFORMATION AVAILABLE TO THE PUBLIC.  Each person described under paragraph (2) shall make available to the public on the Internet website of such person the information disclosed by such person under subparagraph (A).

‘‘(2) PERSON DESCRIBED.  A person is described in this paragraph if

‘‘(A) the person is required to file reports with the Commission pursuant to paragraph (1)(A); and

‘‘(B) conflict minerals are necessary to the functionality or production of a product manufactured by such person.

‘‘(3) REVISIONS AND WAIVERS. The Commission shall revise or temporarily waive the requirements described in paragraph (1) if the President transmits to the Commission a determination that

‘‘(A) such revision or waiver is in the national security interest of the United States and the President includes the reasons therefor; and

‘‘(B) establishes a date, not later than 2 years after the initial publication of such exemption, on which such exemption shall expire.

‘‘(4) TERMINATION OF DISCLOSURE REQUIREMENTS.  The requirements of paragraph (1) shall terminate on the date on which the President determines and certifies to the appropriate congressional committees, but in no case earlier than the date that is one day after the end of the 5-year period beginning on the date of the enactment of this subsection, that no armed groups continue to be directly involved and benefitting from commercial activity involving conflict minerals.

‘‘(5) DEFINITIONS.  For purposes of this subsection, the terms ‘adjoining country’, ‘appropriate congressional committees’, ‘armed group’, and ‘conflict mineral’ have the meaning given those terms under section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.’’.

(c) STRATEGY AND MAP TO ADDRESS LINKAGES BETWEEN CONFLICT MINERALS AND ARMED GROUPS.

(1) STRATEGY.

(A) IN GENERAL.  Not later than 180 days after the date of the enactment of this Act, the Secretary of State, in consultation with the Administrator of the United States Agency for International Development, shall submit to the appropriate congressional committees a strategy to address the linkages between human rights abuses, armed groups, mining of conflict minerals, and commercial products.

(B) CONTENTS.  The strategy required by subparagraph (A) shall include the following:

(i) A plan to promote peace and security in the Democratic Republic of the Congo by supporting efforts of the Government of the Democratic Republic of the Congo, including the Ministry of Mines and other relevant agencies, adjoining countries, and the international community, in particular the United Nations Group of Experts on the Democratic Republic of Congo, to

(I) monitor and stop commercial activities involving the natural resources of the Democratic Republic of the Congo that contribute to the activi- ties of armed groups and human rights violations in the Democratic Republic of the Congo; and

(II) develop stronger governance and economic institutions that can facilitate and improve transparency in the cross-border trade involving the natural resources of the Democratic Republic of the Congo to reduce exploitation by armed groups and promote local and regional development.

(ii) A plan to provide guidance to commercial entities seeking to exercise due diligence on and formalize the origin and chain of custody of conflict minerals used in their products and on their suppliers to ensure that conflict minerals used in the products of such suppliers do not directly or indirectly finance armed conflict or result in labor or human rights violations.

(iii) A description of punitive measures that could be taken against individuals or entities whose commercial activities are supporting armed groups and human rights violations in the Democratic Republic of the Congo.

(2) MAP.

(A) IN GENERAL.  Not later than 180 days after the date of the enactment of this Act, the Secretary of State shall, in accordance with the recommendation of the United Nations Group of Experts on the Democratic Republic of the Congo in their December 2008 report

(i) produce a map of mineral-rich zones, trade routes, and areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries based on data from multiple sources, including

(I) the United Nations Group of Experts on the Democratic Republic of the Congo;

(II) the Government of the Democratic Republic of the Congo, the governments of adjoining countries, and the governments of other Member States of the United Nations; and

(III) local and international nongovernmental organizations;

(ii) make such map available to the public; and

(iii) provide to the appropriate congressional committees an explanatory note describing the sources of information from which such map is based and the identification, where possible, of the armed groups or other forces in control of the mines depicted.

(B) DESIGNATION.  The map required under subparagraph (A) shall be known as the ‘‘Conflict Minerals Map’’, and mines located in areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries, as depicted on such Conflict Minerals Map, shall be known as ‘‘Conflict Zone Mines’’.

(C) UPDATES.  The Secretary of State shall update the map required under subparagraph (A) not less frequently than once every 180 days until the date on which the disclosure requirements under paragraph (1) of section 13(p) of the Securities Exchange Act of 1934, as added by subsection (b), terminate in accordance with the provisions of paragraph (4) of such section 13(p).

(D) PUBLICATION IN FEDERAL REGISTER.  The Secretary of State shall add minerals to the list of minerals in the definition of conflict minerals under section 1502, as appropriate. The Secretary shall publish in the Federal Register notice of intent to declare a mineral as a conflict mineral included in such definition not later than one year before such declaration.

(d) REPORTS.

(1) BASELINE REPORT.  Not later than 1 year after the date of the enactment of this Act and annually thereafter until the termination of the disclosure requirements under section 13(p) of the Securities Exchange Act of 1934, the Comptroller General of the United States shall submit to appropriate congressional committees a report that includes an assessment of the rate of sexual- and gender-based violence in war-torn areas of the Democratic Republic of the Congo and adjoining countries.

(2) REGULAR REPORT ON EFFECTIVENESS.  Not later than 2 years after the date of the enactment of this Act and annually thereafter, the Comptroller General of the United States shall submit to the appropriate congressional committees a report that includes the following:

(A) An assessment of the effectiveness of section 13(p) of the Securities Exchange Act of 1934, as added by subsection (b), in promoting peace and security in the Democratic Republic of the Congo and adjoining countries.

(B) A description of issues encountered by the Securities and Exchange Commission in carrying out the provisions of such section 13(p).

(C)(i) A general review of persons described in clause (ii) and whether information is publicly available about

(I) the use of conflict minerals by such persons; and

(II) whether such conflict minerals originate from the Democratic Republic of the Congo or an adjoining country.

(ii) A person is described in this clause if

(I) the person is not required to file reports with the Securities and Exchange Commission pursuant to section 13(p)(1)(A) of the Securities Exchange Act of 1934, as added by subsection (b); and

(II) conflict minerals are necessary to the functionality or production of a product manufactured by such person.

(3) REPORT ON PRIVATE SECTOR AUDITING.  Not later than 30 months after the date of the enactment of this Act, and annually thereafter, the Secretary of Commerce shall submit to the appropriate congressional committees a report that includes the following:

(A) An assessment of the accuracy of the independent private sector audits and other due diligence processes described under section 13(p) of the Securities Exchange Act of 1934.

(B) Recommendations for the processes used to carry out such audits, including ways to

(i) improve the accuracy of such audits; and

(ii) establish standards of best practices.

(C) A listing of all known conflict mineral processing facilities worldwide.

(e) DEFINITIONS.  For purposes of this section:

(1) ADJOINING COUNTRY.  The term ‘‘adjoining country’’, with respect to the Democratic Republic of the Congo, means a country that shares an internationally recognized border with the Democratic Republic of the Congo.

(2) APPROPRIATE CONGRESSIONAL COMMITTEES.  The term ‘‘appropriate congressional committees’’ means

(A) the Committee on Appropriations, the Committee on Foreign Affairs, the Committee on Ways and Means, and the Committee on Financial Services of the House of Representatives; and

(B) the Committee on Appropriations, the Committee on Foreign Relations, the Committee on Finance, and the Committee on Banking, Housing, and Urban Affairs of the Senate.

(3) ARMED GROUP.  The term ‘‘armed group’’ means an armed group that is identified as perpetrators of serious human rights abuses in the annual Country Reports on Human Rights Practices under sections 116(d) and 502B(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2151n(d) and 2304(b)) relating to the Democratic Republic of the Congo or an adjoining country.

(4) CONFLICT MINERAL.  The term ‘‘conflict mineral’’ means—

(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or

(B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

(5) UNDER THE CONTROL OF ARMED GROUPS. The term ‘‘under the control of armed groups’’ means areas within the Democratic Republic of the Congo or adjoining countries in which armed groups

(A) physically control mines or force labor of civilians to mine, transport, or sell conflict minerals;

(B) tax, extort, or control any part of trade routes for conflict minerals, including the entire trade route from a Conflict Zone Mine to the point of export from the Democratic Republic of the Congo or an adjoining country; or

(C) tax, extort, or control trading facilities, in whole or in part, including the point of export from the Democratic Republic of the Congo or an adjoining country.

“Absolutely Safe”

Those of us from the South know the old joke: What does a redneck say before he goes in a hospital?  Answer:  “Hey Bubba – watch this…”

Funny.  But what isn’t so funny is that Russia has actually launched a barge that is intended to be the foundation for a floating nuclear power plant.  And the head of the Russian nuclear regulatory agency has called the floating power plant “absolutely safe.”

They must have hired Neptune, Poseidon, Zeus, Jupiter – and their entire mythological posses – to participate in their risk assessment and control program.  That’s impressive.

Read the article from Reuters.

Perhaps senior level officials from Russia nuclear regulatory agency should come spend a summer in the south with Bubba and his friends.  So what does a Russian nuclear agency official say before he creates a nuclear disaster?  “Hey Comrade – its absolutely safe”.

NY State Pension Sues BP for Stock Price Drop Following Spill

Here is an interesting excerpt from a Reuters piece published yesterday:

New York state’s pension fund plans to sue BP Plc to recover losses from the drop in the company’s stock price following the worst oil spill in U.S. history, state Comptroller Thomas DiNapoli said on Wednesday.

DiNapoli said the fund owned more than 19 million shares when the Deepwater Horizon rig exploded in the Gulf of Mexico in April.

“BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we’re going to hold it accountable,” said the Democratic comptroller, who will stand for election in November in the race for New York comptroller.

The Pension’s action – and it stated basis for the lawsuit – is dramatic evidence of the risk companies can face from shareholder activism in light of EHS matters.  It further supports what BusinessWeek reported last week about the likely increased in shareholder demands related to EHS management and disclosure.

When It Spills, It Pours

In years past, we have seen a small – but growing – amount of shareholder activism in publicly traded companies concerning sustainability and environmental matters.  Several Fortune 500 companies have faced and defeated these attempts at requiring greater environmental risk assessment and disclosure.

2010 looks to be dramatically different.

Setting the stage in 2008, TVA experiences a catastrophic failure of an ash pond in Tennessee that also prompts EPA to initiate their own risk assessment of similar ash ponds across the country.

Then, SEC published its Interpretive Guidance on climate risk assessment/disclosure that is effective beginning this year.

On the H&S front, Massey Energy faces a mine disaster that claims 29 lives and raises the profile of MSHA enforcement gaps.

Now, BusinessWeek reports that investor groups are gearing up to require far more information and disclosure from the companies they invest in.  Some highlights of the article:

In the past, demands for risk disclosure tended to be viewed as hypothetical. In light of the Gulf disaster, [Robert Graham, founder and head of the environmental law practice at Chicago-based Jenner & Block] predicts that requests for such information will become more mainstream. “These issues are real and this disaster dramatically demonstrates how they impact a company’s balance sheet,” he says.

Companies will be pressed by shareholders to disclose more information about safety practices, the kinds of fail-safe mechanisms they have in place for high-risk operations, and their plans and prospects. Companies will have to reconsider the insurance they’ve arranged to better gauge how much and what kinds of coverage they need to cover potential risks. They’ll also need to figure out how much cash to set aside in reserve to cover unforeseen incidents that may cause environmental damage, he says. Shareholders will also start to insist on viewing companies’ safety records, including any sanctions received from federal or state agencies regarding their operations.

If your company is not already in the process of evaluating how to define and assess environmental matters in the context of “risk” rather than “compliance” or “management systems”, then you are probably behind.

EPA is Still Messing with Texas

In the wake of EPA Region 6’s recent decision to overturn TCEQ-issued air permits for 40 companies, EPA fired another shot at The Alamo.  The EPA is offering Texas companies with the approximately 130 affected air permits the opportunity to have third party audits conducted with a promise of enforcement leniency in exchange.  The pre-publication version of the announcement is posted at EPA Region 6 website here, as well as the 30-page agreement that audit participants must execute with EPA.

Noteworthy aspects of the agreement include:

–       Highly prescriptive requirements for third party auditor independence and report certification

–       Detailed requirements for the scope of the audit

–       Audit report content, format and submission requirements – including taxonomy for supporting document attachments

–       Mandates and specifications for emissions-related Community Projects to be entered into by the audit participant and approved by EPA

–       Separate specifications for the NSR portion of the audit and related report

–       The model Consent Agreement and Final Order (CAFO)

Companies interested in participating in the audit program should conduct a thorough review – with legal counsel – of the language contained in the agreement and CAFO documents.  Although we at Elm are not lawyers and do not dispense legal advice, these documents do not appear to provide protection against fines and penalties.